TIDMAIF TIDMAIFZ
Acorn Income Fund Limited
LEI 213800UAZN7G46AHQM67
Half-yearly Condensed Report (unaudited)
For the Six Months Ended 30 June 2021
(Classified Regulated Information, under DTR 6 Annex 1 section 1.2)
The Company has today, in accordance with DTR 6.3.5, released its Half-yearly
Condensed Report (unaudited) for the six months ended 30 June 2021.The Report
will shortly be available via the Investment Manager's website https://
www.premierfunds.co.uk/investors/investments/investment-trusts/
acorn-income-fund and will also be available for inspection online at
www.morningstar.co.uk/uk/NSM website.
Investment Objectives and Policy
Investment Objectives
The investment objective and policy of Acorn Income Fund Limited (the "Company"
or "Acorn") is to provide shareholders with high income and the opportunity for
capital growth.
The Company's assets predominantly comprise investments in equities and fixed
interest securities in order to achieve its investment objective. The Company's
investments are held in two portfolios. Approximately 70% to 80% of the
Company's assets are invested in smaller capitalised United Kingdom companies,
admitted to the Official List of the Financial Conduct Authority (the "FCA")
and traded on the main market of the London Stock Exchange (the "LSE") or
traded on the Alternative Investment Market ("AIM") at the time of investment
(the "Smaller Companies Portfolio"). The Company also aims to enhance income
for Ordinary Shareholders by investing approximately 20% to 30% of the
Company's assets in high yielding instruments which are predominantly fixed
interest securities but may include up to 15% of the Company's overall
portfolio (measured at the time of acquisition) in high yielding investment
company shares (the "Income Portfolio").
The proportion of the overall portfolio held in the Smaller Companies Portfolio
and the Income Portfolio varies from day to day as the market prices of
investments move. The Directors retain discretion to transfer funds from one
portfolio to the other and generally expect between 70% to 80% of the
investments to be held in the Smaller Companies Portfolio.
While the Company's investment policy is to spread risk by maintaining
diversified portfolios, there are no restrictions on the proportions of either
of the portfolios which may be invested in any one geographical area, asset
class or industry sector. However, not more than 7.5% of the Company's gross
assets may be invested in securities issued by any one company as at the time
of investment, save that (i) in respect of the Income Portfolio only,
investments may be made in other investment funds subject only to the
restriction set out in paragraph (c) of the section headed "Investment
Restrictions" below; and (ii) in respect of the Smaller Companies Portfolio
only, provided that not more than 10% of the Company's gross assets are
invested in securities issued by any one company at any time, with Board
approval the 7.5% limit may be exceeded on a short term basis where a company
whose securities form part of the Smaller Companies Portfolio issues new
securities (for example by way of a rights issue).
The Company's capital structure is such that the underlying value of assets
attributable to the Ordinary Shares is geared relative to the rising capital
entitlements of the Preference Shares ("ZDP Shares"). The Company's gearing
policy is not to employ any further gearing through long-term bank borrowing.
Save with the prior sanction of ZDP Shareholders, the Company will incur no
indebtedness other than short term borrowings in the normal course of business,
such as to settle share trades or borrowings to finance the redemption of the
ZDP Shares.
Investment Restrictions
For so long as required by the LSE Listing Rules in relation to closed-ended
investment companies, the Company has adopted the following investment and
other restrictions:
a) the Company will at all times invest and manage its assets in a way which
is consistent with its objective of spreading investment risk and in accordance
with its published investment policy;
b) the Company will not conduct any significant trading activity; and
c) not more than 10% in aggregate of the value of the total assets of the
Company at the time the investment is made will be invested in other listed
closed-ended investment funds. The Listing Rules provide an exception to this
restriction to the extent that those investment funds which have stated
investment policies to invest no more than 15% of their total assets in other
listed closed-ended investment companies.
Derivatives
The Company may invest in derivatives, money market instruments and currency
instruments including contracts for difference, futures, forwards and options.
These investments may be used for hedging positions against movements in, for
example, equity markets, currencies and interest rates, for investment purposes
and for efficient portfolio management. The Company's use of such instruments
for investment purposes is limited to 5 per cent of the total assets of the
Company. The Company will not use such instruments to engage in any significant
trading activity. The Company will not maintain derivative positions should the
total underlying exposure of these positions (excluding any currency hedges)
exceed one times adjusted total capital and reserves.
Dividend Policy
The Company's policy is to provide Ordinary Shareholders with a high income
relative to the average dividend yield of the UK Smaller Companies comprised in
the Numis Smaller Companies Index ex Investment Companies. The Company aims to
pay a regular quarterly dividend in March, June, September and December. It is
intended to distribute substantially all of the Company's net income after
expenses and taxation; however, the Company may retain a proportion of the
Company's income in each year as a revenue reserve to assist in providing long
term stability in dividend distributions. Dividends may be paid to holders of
Ordinary Shares whenever the financial position of the Company, in the opinion
of the Directors, justifies such payment, subject to the Company being able to
satisfy the solvency test, as defined under The Companies (Guernsey) Law, 2008.
The Board is alert to the potential for new share issuance to dilute earnings
and accordingly will have regard to the size and timing of new share issues.
The ZDP Shares do not carry a right to a dividend.
Proposed Restructure
On 1 September 2021 the Board announced a scheme of reconstruction offering a
rollover into the Unicorn UK Income Fund or a cash exit. These proposals, which
will involve putting the Company into voluntary liquidation and the early
redemption of the ZDP shares, will be put to shareholders at General Meetings
in or around October 2021.
Performance Summary
for the period ended 30 June 2021
30/06/2021 31/12/2020 % change/
return
Total Return Performance*
Total Return on Gross Assets* 14.45%
Numis Smaller Companies (Ex Investment Companies) 27,143.31 23,117.10 17.42%
Index
FTSE All Share Index 7,852.35 7,068.59 11.09%
FTSE Small Cap (Ex Investment Companies) Index 10,424.11 8,108.86 28.55%
Share Price and NAV Returns
Ordinary Shares
Share Price 352.00p 322.50p 9.15%
NAV** 426.32p 360.21p 18.35%
IFRS NAV# 426.30p 360.17p 18.36%
Total Return on Net Assets** 22.04%
Ordinary Share Price Total Return* 12.82%
Discount (-) to NAV on Ordinary Shares** -17.43% -10.47%
ZDP Shares
Share Price 161.50p 157.00p 2.87%
NAV** 163.05p 160.02p 1.89%
IFRS NAV# 163.06p 160.05p 1.88%
Discount (-) Premium (+) to NAV on ZDP Shares** -0.96% -1.89%
Package Discount (-) to
NAV Combined Ordinary and ZDP Shares -11.84% -7.26%
6 months 6 months to % change
to 30/6/ 30/6/2020
2021
Dividends and Earnings
Revenue Return per Ordinary Share 7.74p 4.57p 69.37%
Dividends Declared per Ordinary Share 11.50p 11.50p 0.00%
* assumes dividends reinvested
** calculated in accordance with the Articles
# calculated in accordance with International Financial Reporting Standards
Sources: Index data: Bloomberg, Total return on gross and net assets, PFM, JP
Morgan Cazenove
Company Summary
History
The Company was incorporated on 5 January 1999 and commenced its activities on
11 February 1999. The portfolio is divided into two sub portfolios, a Smaller
Companies Portfolio representing approximately 70% to 80% of the total with the
balance invested in an Income Portfolio investing in fixed income securities,
investment company shares and structured investments. The Company has always
been leveraged, initially through bank debt and now through Zero Dividend
Preference ("ZDP") Shares. In December 2016, shareholders approved the
extension of the ZDP Shares setting a new redemption date of 28 February 2022.
Capital Structure
Zero Dividend Preference Share (1p each)
21,230,989 (excluding treasury shares)
The ZDP Shares will have a final capital entitlement of 167.2 pence per ZDP
Share on 28 February 2022 following the extension of the life of the existing
shares from 31 January 2017, subject to there being sufficient capital in the
Company. The ZDP Shares are not entitled to any dividends. ZDP Shareholders
rank ahead of the Ordinary Shareholders in regards to rights as to capital. The
ZDP Shareholders have the right to receive notice of all General Meetings of
the Company, but do not have the right to attend or vote unless the business of
the meeting involves an alteration of the rights attached to the ZDP Shares, in
which case the holders of ZDP Shares can attend and vote.
Ordinary Shares (1p each)
15,816,687 (excluding treasury shares)
The Ordinary Shares, excluding treasury shares, are entitled to participate in
all dividends and distributions of the Company. On a winding-up, holders of
Ordinary Shares are entitled to participate in the distribution and the holders
of Ordinary Shares are entitled to receive notice of and attend and vote at all
General Meetings of the Company.
Treasury Shares
As at 30 June 2021, there were 1,325,972 Ordinary and 1,779,873 ZDP Shares held
in treasury.
Shareholder Funds
£67.43 million as at 30 June 2021 (calculated in accordance with IFRS)
£67.43 million as at 30 June 2021 (calculated in accordance with the articles)
Market Capitalisation of the Ordinary Shares
£56 million as at 30 June 2021
Company Details
The Board
The Board consists of three independent non-executive directors (the
"Directors"), Nigel Ward (Chairman), David Warr and Sharon Parr. Nigel
Sidebottom is not considered independent by virtue of his recent employment
with the Premier Miton Group PLC (the parent company of the Investment
Manager).
Investment Manager
Premier Asset Management (Guernsey) Limited ("PAMG"), is a subsidiary of
Premier Miton Group PLC ("PMG"). PMG had approximately £13.6bn of funds under
management as at 30 June 2021. PAMG is licensed under the provisions of the
Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended, by the
Guernsey Financial Services Commission to carry on controlled investment
business.
Investment Advisers
Premier Fund Managers Limited ("PFM") - the Company's Income Portfolio is
managed by Chun Lee and Robin Willis.
Unicorn Asset Management Limited ("Unicorn") - the Company's Smaller Companies
Portfolio is managed by Simon Moon and Fraser Mackersie.
Secretary/Administrator
Northern Trust International Fund Administration Services (Guernsey) Limited.
Corporate Broker
Singer Capital Markets.
Management Fee
0.7% per annum (Total Assets) charged 75% to capital and 25% to revenue.
Minimum annual management fee £100,000.
In addition, a performance fee is payable at the year-end if the target set out
on Note 4 is achieved. This is charged 100% to capital.
Registrar
JTC Registrars Limited
Financial Calendar
Company's year end 31 December
Annual results announced April
Company's half year end 30 June
Annual General Meeting October 2021
Half-year results announced September
Dividend payments At the end of March, June, September
and December
Company website
www.acornincome.co.uk
Chairman's Statement and Interim Management Report
30 June 2021
Dear Shareholder
The Company's Investment Advisers have reported at length elsewhere in this
Report and as I would like to spend some time commenting on the Strategic
Review I will restrict my comments about performance simply to the headlines
numbers, as follows:
Over the past six months, Acorn shareholders have seen a total return on gross
assets, which measures the return on the portfolio including all income and
costs, of 14.5%, and a total return on net assets of 22.0%, the gearing effect
of the Zero Dividend Preference Shares having worked in favour of the ordinary
shareholders during the period. These moves compare to a total return from the
Numis Smaller Companies (ex-Investment Companies) Index, of 17.4% and from the
FTSE All Share Index, of 11.1%. I commend our Investment Advisers for their
contribution.
However, despite a robust performance from the underlying portfolio, the
ordinary share discount has not tightened as the Board would have hoped,
widening from 10.5% at 31st December 2020 to 17.6% as at 30th June 2021. Since
the period-end the discount has remained becalmed in the high teens. This
highlights the hurdles that the Company has faced over the past few years and
it is right that I should address the matter in detail.
Almost twelve months ago the challenges faced by the Company, including
sub-scale size, limited liquidity, split-cap and dual portfolio structure, and
likely future cut in dividends, led the Board to conclude that the Company
could not viably continue in its present form. With a discontinuation vote
scheduled for August 2021, and no obvious prospect of growing assets under
management, there was a need to bring about change. After an extensive process,
and after consultation with some shareholders, the Board ultimately concluded
that the optimum outcome was to recommend a scheme of reconstruction offering a
rollover into the Unicorn UK Income Fund or a cash exit. These proposals, which
will involve placing the Company into voluntary liquidation, and early
redemption of ZDP shares, were announced on 1 September and will likely be put
to shareholders at General Meetings during October.
Having served on the Acorn board since 2011, the last two years as Chairman, I
cannot help but feel a degree of sadness that a Trust with over twenty years
history is reaching the end of its life. However, at the start of the strategic
review the Board recognised that allowing the Company to limp along for another
five years was unacceptable. We have constantly reminded ourselves that every
decision had to be in shareholders' best interests and I believe this outcome
will achieve that aim.
Thank you for your support as an investor in our Company over the years and I
trust you will approve the measures proposed at the forthcoming meetings.
Nigel Ward
Chairman
Statement of Principal Risks and Uncertainties
30 June 2021
The principal risks assessed by the Board relating to the Company were
disclosed in the Annual Report and Audited Financial Statements for the year
ended 31 December 2020. The principal risks disclosed include Coronavirus risk,
market price risk, credit risk, liquidity risk, foreign currency risk and
reinvestment risk. A detailed explanation can be found in the annual report.
The Board and Portfolio Manager do not consider these risks to have changed and
remain relevant for the remaining six months of the financial year.
Coronavirus Risk
Coronavirus ("COVID-19") continues to be considered as a significant risk.
The Board has continued to monitor the development of the COVID-19 outbreak and
has considered the impact it has had to date and will continue to have on the
future of the Company and the performance of the Smaller Companies Portfolio
and Income Portfolio (the "Portfolios"). Notwithstanding the impact the
outbreak has already had on the Company's share price and NAV performance,
there remains continued uncertainty about the development and scale of the
COVID-19 outbreak particularly in relation to the length and extent of the
impact of social distancing restrictions and the impact on the economy in
general.
From an operational perspective, the Company uses a number of service
providers. These providers have established, documented and regularly tested
Business Resilience Policies in place, to cover various scenarios whereby staff
cannot turn up for work at the designated office and conduct business as usual.
Since the COVID-19 pandemic outbreak, service providers have deployed these
alternative working policies to good effect, thus ensuring continued business
service.
Market Price Risk
Since the Company invests in financial instruments, market price risk is
inherent in these investments. In order to minimise this risk, a detailed
analysis of the risk/reward relationship of each investee company is undertaken
by the Investment Advisers prior to making investments.
Credit Risk
The investment portfolio is comprised of equities and bonds which expose the
Company to credit risk, being the risk that a counterparty will default on its
contractual obligations resulting in financial loss to the Company.
Liquidity Risk
Liquidity risk is the risk that the Company will encounter difficulties in
meeting its obligations associated with its financial liabilities that are
settled by delivery of cash or another financial asset. Some of the Company's
investments in smaller company equities and in certain bond issues may have
relatively low levels of daily turnover such that it might take several days or
even weeks to sell a holding into the market.
Foreign Currency Risk
Foreign currency risk is the risk that the value of a financial instrument will
fluctuate due to changes in foreign exchange rates. The majority of the
Company's assets and liabilities are denominated in sterling. However, some of
the investments in the Income Portfolio may be currencies. Generally, these
exposures are hedged denominated in foreign back to sterling and there is
unlikely to be any significant direct currency risk.
Interest Rate Risk
The Company's investment portfolios, particularly the Income Portfolio, include
investments bearing interest at fixed rates. Generally when interest rates rise
the market prices of fixed interest securities fall and when interest rates
fall the prices of fixed interest securities rise. The Company will therefore
be exposed to movements in interest rates. The Company has fixed rate leverage
through its ZDP Shares. In January 2017, the redemption date of the Company's
ZDP Shares was extended to 28 February 2022 at a rate of 3.85% per annum.
Replacing this leverage in 2022 might involve the Company paying a higher
accrual rate on an issue of new ZDP Shares if interest rates have risen.
Discount Volatility
Being a closed-end fund, the Company's shares may trade at a discount or
premium to their NAV. The magnitude of this discount or premium fluctuates
daily and can vary significantly. Thus, for a given period of time, it is
possible that the market price could decrease despite an increase in the
Company's NAV.
The Directors review the discount levels regularly. The Investment Advisers
actively communicate with the Company's major shareholders and potential new
investors, with the aim of managing discount levels.
Related Parties
Related party balances and transactions are disclosed in note 14 of these
Unaudited Condensed Interim Financial Statements.
Going concern
In accordance with Article 53.1 of the Articles of Incorporation of the
Company shareholders are to be given the opportunity to vote in favour of, the
discontinuation of the Company. As this opportunity was last presented to
shareholders on 26 September 2016, the next discontinuation resolution was to
be proposed at the Annual General Meeting in 2021.
On 1 September 2021 the Board announced that it was proposing a scheme of
reconstruction which would ultimately involve the roll over of all or part of
the assets into another vehicle or a cash distribution on liquidation of the
Company.
These proposals will be put to shareholders for voting in General Meeting as
soon as practicable.
As a result of these proposals, and the expectation that the Company will be
placed into voluntary liquidation in or around October 2021, these Interim
Financial Statements for the period to 30 June 2021 have been prepared on a
break-up basis reflecting this intention. As a result, all assets are
classified as current and are stated at their estimated recoverable amounts and
all creditors are classified as falling due within one year. As the assets of
the Company are already stated at amounts which approximate their fair value
this has not resulted in any adjustment to the Net Asset Value of the Company
and the Directors believe that fair value equates to recoverable amounts. A
provision towards certain costs associated with the scheme of reconstruction
has been included within these Interim Financial Statements.
For the avoidance of doubt this scheme of reconstruction and ultimate
liquidation is subject to shareholder vote. The Directors have made the
assumption that the scheme of reconstruction will be approved and the Company
will ultimately be placed into voluntary liquidation.
Responsibility Statement
For the period from 1 January 2021 to 30 June 2021
The Directors are responsible for preparing the Unaudited Half-yearly Financial
Report (the "Unaudited Condensed Interim Financial Statements"), which has not
been audited or reviewed by an independent auditor, and confirm that to the
best of their knowledge:
· the Unaudited Condensed Interim Financial Statements have been prepared
in accordance with International Accounting Standard (IAS) 34, Interim
Financial Reporting;
· the interim management report includes a fair review of the information
required by:
a. DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication
of important events that have occurred during the first six months of the
financial year and their impact on the Unaudited Condensed Interim Financial
Statements; and a description of the principal risks and uncertainties for the
remaining six months of the year; and
b. DTR 4.2.8R of the Disclosure and Transparency Rules, being related party
transactions that have taken place in the first six months of the current
financial year and that have materially affected the financial position or
performance of the entity during that period; and any changes in the related
party transactions described in the last annual report that could do so.
Signed on behalf of the Board by:
Nigel Ward
Chairman
16 September 2021
Investment Advisers' Report
The Smaller Companies Portfolio
Period to 30 June 2021
During the six month period to 30 June 2021 the Smaller Companies portfolio
generated a total return of +19.0%, before expenses, ahead of the +17.4% total
return of the Numis Smaller Companies Index (Ex Investment Companies).
Investing in UK smaller companies has required extreme patience and fortitude
over the last five years. Since the 2016 Brexit referendum there has been
significant uncertainty hanging over the prospects of the country's economic
future. In the face of this, asset allocation to the UK fell to exceptionally
low levels, the net effect of which was significant outflows from UK assets.
Sterling fell to and stayed at historically low levels against other major
currencies and smaller, more domestically focussed, companies
disproportionately bore the brunt of this headwind. Over this period allocators
have preferred relatively expensive growth companies to value/yield stocks and
the rest of the world to the UK. Although this environment has been difficult
to navigate, it has offered opportunities to populate a portfolio of high
quality companies, sitting at attractive valuations, which now face a brighter
future than they have at any point in the last five years.
As we commented in our annual review of 2020, the last minute Brexit deal
removed the significant risk that has been integral to net fund flows out of
the UK and we looked forward with clarity, confidence, and optimism. Combined
with recovering Sterling and the successful vaccine role out we still feel a
sustained economic and equity recovery is in train. In such circumstances
smaller companies tend to capture more of the upside - a trend which has been
clearly evident in the first half of the year.
As expected, portfolio turnover during the period was very low with just one
disposal and no new additions. On a rolling twelve month basis there have been
three additions and two disposals, ending the period with 43 holdings. As
outlined in previous reports a number of changes were made in the first half of
2020 to take advantage of the attractive valuations created by the market
volatility, to ensure income generation remained robust, and to position the
portfolio to benefit from some of the likely improving conditions outlined
above. This activity successfully positioned the portfolio for a prolonged
period of economic recovery and the need for changes since has been
significantly lower. The only holding exited during the period was Hill and
Smith, an excellent company which has performed very well in the portfolio for
a number of years but has ultimately suffered yield compression after a number
of years of strong share price appreciation.
The portfolio delivered both strong capital growth and excellent recovery in
dividend payments in the first half of the year. Following an initial recovery
in many of the more speculative areas of the small cap market in the second
half of 2020 - areas which rarely meet our strict investment criteria - it is
pleasing to outperform the benchmark during the first half of the current year.
The strong performance was driven by the significant contributions from a large
number of our high quality, long standing investments.
In keeping with our long term investment approach, Industrials remained the
largest sector in the portfolio with an average weight of 33% during the
period. A number of companies within this group performed strongly in the first
six months of the year, including significant contributions from Somero
(194bps), Alumasc (179bps), Wincanton (160bps) and Braemar Shipping (152bps).
Industrials generated an average total return of 33%, adding 1045bps to
absolute portfolio performance and a meaningful relative contribution. Despite
this strong period of performance we believe there remains significant recovery
potential within our industrial holdings.
Another notable sector contribution came from Financials, the second largest
sector with an average weight of 30%, which added 347bps to performance. Polar
Capital and Liontrust were the best performers in the group, adding 87bps and
64bps respectively.
The third largest sector contribution came from Consumer Staples and was driven
by just two companies, with both Warpaint (204bps) and Devro (56bps) starting
the year strongly. The largest negative relative contribution to performance
came from an underweight position in Consumer Discretionary - despite our
sector constituents recording an average positive total return of 18%. Whilst
there has clearly been strong capital recovery in the sector during the first
half of the year opportunities which meet our strict income driven criteria
remain limited.
In the last full year report we spoke of the dividend resilience of the Smaller
Companies portfolio. It is pleasing to report that the portfolio received
dividend income for H1 that was up 93% compared to H1 last year and down just
19% compared to the same period in 2019, this a far more resilient picture than
the broader UK Market which has only recovered 16% from 2020 and is down 31% on
2019. Within the UK Market Small and Mid-Cap dividends were hit particularly
hard in 2020, making the outturn for 2020 and subsequent recovery of the
smaller companies' portfolio income in 2021 even more satisfying.
Whilst it is pleasing to see the strong performance from the Smaller Companies
portfolio (and small companies in general) it is important to emphasise that we
feel this is the beginning of a 'game of catch up' and that the portfolio still
has much further to go following the now-lifted headwinds talked about in
previous reports and the opening paragraphs. The portfolio is populated by well
capitalised, well managed, market leading, high quality companies which are in
an enhanced position to take advantage of opportunities over the recovery and
benefit disproportionately on the upside.
Fraser Mackersie and Simon Moon
Unicorn Asset Management Limited
The Income Portfolio
For much of the first half of the year, the global economic recovery has
focussed market attention on inflation. Much of the period has seen inflation
data in developed markets such as the US and UK show strong year-on-year gains
as demand from the reopening of economies, lingering supply chain bottlenecks
and the moves in commodities have exerted strong upward price pressures. This
has driven a debate over whether price pressures are transitory or part of a
longer term trend. Distortions generated in areas such as the leap in used car
sale values have to be taken alongside evidence of the need to raise wages to
attract workers back to certain industries. For a more sustained inflationary
outlook, we would look for wage rises working their way into the wider economy
and for excess savings to find their way back into the real economy however it
might be some time until we can identify the true persistence of the trend.
The potential for more sustained inflation saw a material rise in yields over
much of the period as investors sought compensation for the risk of having
future income eroded, especially as central banks such as the U.S Federal
Reserve (the "Fed") appeared to indicate that they were prepared to let the
economy run "hot" in order to achieve full employment. However the tone and
direction for yields have recently taken a turn as the Fed, pressured by strong
data and further fiscal stimulus, surprised markets by turning more hawkish and
implying it may raise rates sooner than anticipated. The potential refocus on
limiting inflationary pressures was soon joined by rising fears about the
strength of the recovery as the COVID-19 delta variant threatens to postpone a
full reopening of the global economy, whilst also exacerbating the supply side
disruptions already being felt. Again, it appears too early to tell which
narrative will turn out to be true and so we remain cautious to potential risks
stemming from changes in the growth outlook, the durability of inflation and
changes to central bank policies. We are running at a lower duration
sensitivity than a bond index whilst also diversifying into alternatives which
look to offer better risk-return characteristics. Within the Sterling corporate
bond market, we continue to participate in new issues where we see attractive
discounts compared with existing bonds for favoured issuers. We are being
selective in companies which we either see as being able to continue improving
their valuations or have the resilience to withstand any shocks to the market
which may arise from a weaker or more prolonged recovery than expected or the
tapering of supportive central bank policies.
Easy monetary policy has kept government rates low in a historical context and
fiscal policy and the hunt for yield have kept funding costs low for
corporates. This means that while fundamentals have been very supportive for
credit, valuations feel rich given the uncertainties and we endeavour to avoid
complacency.
Chun Lee and Robin Willis
Premier Fund Managers Limited
Schedule of Principal Investments
as at 30 June 2021
Percentage of
Position Company Market Value £ Percentage Total Assets
'000 of Portfolio 2021
Smaller Companies Portfolio
1 Polar Capital Holdings plc 3,735,000 4.51 3.65
2 Somero Enterprises Inc 3,600,000 4.35 3.51
3 Sabre Insurance Group plc 3,289,500 3.97 3.21
4 Telecom Plus plc 2,953,600 3.57 2.88
5 Chesnara plc 2,782,500 3.36 2.72
6 Ocean Wilsons Holdings Limited 2,675,000 3.23 2.61
7 Vesuvius plc 2,637,500 3.18 2.57
8 Warpaint London plc 2,625,000 3.17 2.56
9 Numis Corporation plc 2,586,459 3.12 2.52
10 Severfield plc 2,567,500 3.10 2.51
11 Primary Health Properties plc 2,537,700 3.06 2.48
12 Alumasc Group plc 2,210,000 2.67 2.16
13 Braemar Shipping Services plc 2,100,000 2.54 2.05
14 Wincanton plc 2,085,250 2.52 2.03
15 Goodwin plc 2,080,500 2.51 2.03
16 Epwin Group plc 2,037,000 2.46 1.99
17 Brewin Dolphin Holdings plc 2,015,500 2.43 1.97
18 Regional REIT Limited 1,973,409 2.38 1.93
19 STV Group plc 1,968,943 2.38 1.92
20 XPS Pensions Group plc 1,904,000 2.30 1.86
TOTAL 50,364,361 60.81 49.16
Income Portfolio
1 APQ Global Limited 3.5% CULS 30/09/ 696,870 4.01 0.68
2024
2 AT&T 2.9% 04/12/2026 541,020 3.12 0.53
3 Citigroup 1.75% 23/10/2026 511,539 2.95 0.50
4 Verizon Communications 1.875% 19/09/ 504,560 2.91 0.49
2030
5 Goldman Sachs Group F2V 16/12/2025 452,721 2.61 0.44
6 GS Group 3.125% 25/07/2029 443,840 2.56 0.43
7 France Telecom 8.125% 2028 439,663 2.53 0.43
8 Wells Fargo 2.5% 02/05/2029 423,130 2.44 0.41
9 Barclays 3.125% 17/01/2024 421,684 2.43 0.41
10 HSBC Holdings 2.256% FRN 13/11/2026 415,230 2.39 0.41
11 SSE plc 3.75% FRN PERP 412,646 2.38 0.40
12 Lloyds Bank 1.75% 11/07/2024 410,490 2.36 0.40
13 Banco Santander SA 1.50% 14/04/2026 401,504 2.31 0.39
14 Real Estate Investors plc 383,432 2.21 0.37
15 Burford Capital 6.5% 19/08/2022 376,853 2.17 0.37
16 Electricite De Franc F2V 6.00% 31/12/ 335,100 1.93 0.33
2049
17 Just Group plc 9.00% 10/26/2026 330,894 1.91 0.33
18 JPMorgan Chase F2F 1.00% 28/04/2026 330,127 1.90 0.32
19 Paragon Treasury P 2.00% 07/05/2036 326,940 1.88 0.32
20 HSBC Holdings F2F 3.00% 29/05/2030 323,700 1.86 0.32
TOTAL 8,481,943 48.86 8.28
As at 31 December 2020
Percentage of
Position Company Market Value £ Percentage Total Assets
'000 of Portfolio 2020
Smaller Companies Portfolio
1 Polar Capital Holdings plc 3,252,400 4.69 3.57
2 Sabre Insurance Group plc 2,917,075 4.21 3.20
3 Telecom Plus plc 2,868,000 4.14 3.14
4 Chesnara plc 2,798,150 4.04 3.07
5 Primary Health Properties plc 2,667,000 3.85 2.92
6 Numis Corporation plc 2,493,750 3.60 2.73
7 Severfield plc 2,163,800 3.12 2.37
8 Goodwin plc 2,107,000 3.04 2.31
9 Somero Enterprises Inc 2,039,713 2.94 2.24
10 Ocean Wilsons Holdings Limited 2,012,750 2.90 2.21
11 Clipper Logistics plc 1,820,800 2.63 2.00
12 Brewin Dolphin Holdings plc 1,769,000 2.55 1.94
13 Epwin Group plc 1,765,400 2.55 1.94
14 FDM Group Holdings plc 1,764,680 2.55 1.93
15 Regional Reit Limited 1,764,386 2.55 1.93
16 XPS Pensions Group plc 1,748,250 2.52 1.92
17 James Halstead plc 1,659,200 2.39 1.82
18 Wincanton plc 1,631,846 2.35 1.79
19 Boot (Henry) plc 1,606,500 2.32 1.76
20 STV Group plc 1,604,159 2.31 1.76
TOTAL 42,453,859 61.25 46.55
Income Portfolio
1 Pershing Square Holdings 5.50% 15/07/ 772,559 3.73 0.85
2022
2 Value & Income Trust 11.00% 31/03/ 733,575 3.54 0.80
2021
3 APQ Global Limited 3.5% CULS 30/09/ 696,870 3.37 0.76
2024
4 Credit Suisse Group 2.75% 08/08/2025 654,577 3.16 0.72
5 AT&T 2.9% 04/12/2026 554,276 2.68 0.61
6 Verizon Communications 1.875% 19/09/ 535,380 2.59 0.59
2030
7 Citigroup 1.75% 23/10/2026 526,522 2.54 0.58
8 UK Municipal Bonds Agency 1.625% 26/ 522,141 2.52 0.57
08/2060
9 GS Group 3.125% 25/07/2029 467,796 2.26 0.51
10 RM plc ZDP 465,400 2.25 0.51
11 France Telecom 8.125% 2028 463,188 2.24 0.51
12 British American Tobacco plc 4% 04/09 459,454 2.22 0.50
/2026
13 Wells Fargo 2.5% 02/05/2029 441,267 2.13 0.48
14 HSBC Holdings 2.256% FRN 13/11/2026 425,932 2.06 0.47
15 Barclays 3.125% 17/01/2024 425,386 2.06 0.47
16 US 0.875% IL Treasury 2047 424,170 2.05 0.47
17 Karbon Homes Ltd 3.375% 15/11/2047 420,740 2.03 0.46
18 Lloyds Bank 1.75% 11/07/2024 413,215 2.00 0.45
19 SSE plc 3.75% FRN PERP 412,668 1.99 0.45
20 Morrison Supermarket 4.75% 04/07/2029 383,097 1.85 0.42
TOTAL 10,198,213 49.27 11.18
Viability Statement
For the period ended 30 June 2021
In accordance with the UK Corporate Governance Code, published by the Financial
Reporting Council (the "Code"), the Directors have assessed the viability of
the Company over a three-year period, taking into account the Company's
position at 30 June 2021.
As mentioned in the going concern section, the Directors have the expectation
that the Company will be placed into voluntary liquidation in or around October
2021 and as a result, these Interim Financial Statements for the period to 30
June 2021 have been prepared on a break-up basis, reflecting this intention.
A period of three years has still been chosen for the purposes of viability as
the scheme of reconstruction and ultimate voluntary liquidation of the Company
remains subject to a shareholder vote.
The Board has also considered the Company's other principal risks and
uncertainties in particular:
(i) the Company's ability to repay the final capital entitlement of the ZDP
Shares on either the date of reconstruction or on 28 February 2022 whichever is
the later;
(ii) any potential falls in value of the Company's investment portfolio; and
(iii) the potential impact of COVID-19.
The Directors have also considered the Company's income and expenditure
projections taking into account the fact that the Company's investments
principally comprise liquid securities listed on recognised stock exchanges and
are satisfied that the Company has sufficient cash and liquid assets to be able
to meet its liabilities as they fall due and to continue in operation on a
solvent basis to June 2024, regardless of whether the scheme of reconstruction
is approved and the Company is placed into voluntary liquidation.
Condensed Statement of Comprehensive Income (unaudited)
For the period ended 30 June 2021
Period ended Period ended
30 June 2021 30 June 2020
Revenue Capital Total Total
Notes GBP GBP GBP GBP
Net gains/(losses) on financial 8 - 11,978,052 11,978,052 (23,379,166)
assets designated as at fair value
through profit or loss
Gains/(losses) on derivative - 27,486 27,486 (263,264)
financial instruments
Investment income 3 1,663,614 - 1,663,614 1,048,112
Foreign exchange gains/(losses) 4 211 (13,076) (12,865) (37,443)
Total income and gains/(losses) 1,663,825 11,992,462 13,656,287 (22,631,761)
Expenses 4 (440,099) (298,559) (738,658) (633,961)
Return/(loss) on ordinary 1,223,726 11,693,903 12,917,629 (23,265,722)
activities before finance costs and
taxation
Interest payable and similar 5 - (640,185) (640,185) (619,728)
charges
Return/(loss) on ordinary 1,223,726 11,053,718 12,277,444 (23,885,450)
activities before taxation
Taxation on ordinary activities - - - -
Other comprehensive income - - - -
Total comprehensive income/(loss) 1,223,726 11,053,718 12,277,444 (23,885,450)
for the period attributable to
Ordinary Shareholders
Pence Pence Pence Pence
Return/(loss) per Ordinary Share 7 7.74 69.89 77.63 (151.01)
Dividend per Ordinary Share 6 11.50 - 11.50 11.50
Return per ZDP Share 7 - 3.02 3.02 2.92
The supplementary revenue return and capital return columns have been prepared
in accordance with the Statement of Recommended Practice ("SORP") issued by the
AIC.
In arriving at the results for the financial period, all amounts above related
to continuing operations. No operations were acquired or discontinued in the
period.
The Notes to the Condensed Financial Statements form an integral part of the
Unaudited Condensed Interim Financial Statements.
Condensed Statement of Financial Position (unaudited)
As at 30 June 2021
30 June 2021 31 December
2020
Notes GBP GBP
CURRENT ASSETS
Financial assets designated as at fair value 8 100,185,567 90,003,736
through profit or loss
Receivables 9 337,642 458,353
Cash and cash equivalents 1,917,289 609,466
Derivative financial instruments - 132,269
TOTAL ASSETS 102,440,498 91,203,824
CURRENT LIABILITIES
Derivative financial instruments 7,734 -
Payables - due within one year 10 387,364 257,133
ZDP Shares 11 34,619,589 33,979,404
TOTAL LIABILITIES 35,014,687 68,215,941
NET ASSETS 67,425,811 22,987,883
EQUITY
Share capital and premium 12 27,420,824 27,420,824
Revenue reserve 1,359,254 1,954,448
Capital reserve 33,425,895 22,372,177
Other reserves 13 5,219,838 5,219,838
TOTAL EQUITY 67,425,811 56,967,287
Pence Pence
Net asset value per Ordinary Share (per Articles) 426.32* 360.21
Net asset value per Ordinary Share (per IFRS) 426.30 360.17
Net asset value per ZDP Share (per Articles) 163.05 160.02
Net asset value per ZDP Share (per IFRS) 163.06 160.05
*The difference between the NAV shown above and the published NAV is due to the
accrual in these interim financial statements of certain costs of
restructuring.
The Unaudited Condensed Interim Financial Statements were approved by the Board
of Directors and authorised for issue on 16 September 2021 and signed on its
behalf by:
Nigel Ward
Chairman
The Notes to the Condensed Financial Statements form an integral part of the
Unaudited Condensed Interim Financial Statements.
Condensed Statement of Cash Flows (unaudited)
For the period ended 30 June 2021
Period ended Period ended
30 June 2021 30 June 2020
Notes GBP GBP
Operating activities
Return/(loss) on ordinary activities before taxation 12,277,444 (23,885,450)
Net (gains)/losses on financial assets designated as at 8 (11,978,052) 23,379,166
fair value through profit or loss
Dividend income 3 (1,465,808) (821,184)
Interest income 3 (197,806) (226,928)
Interest expense 5 640,185 619,728
Decrease in derivative financial assets 132,269 158,013
Increase in derivative financial liabilities 7,734 19,584
Increase/(decrease) in payables and appropriations 10 130,231 (45,296)
excluding amount due to brokers
Increase in receivables excluding accrued investment 9 (6,433) (9,790)
income and due from brokers
Net cash flow used in operating activities before (460,236) (812,157)
investment income
Investment income received 1,792,614 1,183,957
Net cash flow from operating activities before taxation 1,332,378 371,800
Tax paid - -
Net cash flow from operating activities 1,332,378 371,800
Investing activities
Purchase of financial assets designated at fair value (12,953,049) (15,233,430)
through profit or loss
Sale of financial assets designated at fair value 14,747,414 15,803,301
through profit or loss
Net cash flow from investing activities 1,794,365 569,871
Financing activities
Equity dividends paid 6 (1,818,920) (1,818,920)
Net cash flow used in financing activities (1,818,920) (1,818,920)
Increase/(decrease) in cash and cash equivalents 1,307,823 (877,249)
Cash and cash equivalents at beginning of period 609,466 2,324,683
Cash and cash equivalents at end of period 1,917,289 1,447,434
The Notes to the Condensed Financial Statements form an integral part of the
Unaudited Condensed Interim Financial Statements.
Condensed Statement of Changes in Equity (unaudited)
As at 30 June 2021
Share Capital Revenue Capital Other Total
and Premium Reserve Reserve Reserves
30 June 2021 30 June 2021 30 June 2021 30 June 30 June 2021
2021
Note GBP GBP GBP GBP GBP
Balances as at 27,420,824 1,954,448 22,372,177 5,219,838 56,967,287
1 January 2021
Total - 1,223,726 11,053,718 - 12,277,444
comprehensive
income for the
period
attributable to
Ordinary
Shareholders
Dividends 6 - (1,818,920) - - (1,818,920)
Balances as at 27,420,824 1,359,254 33,425,895 5,219,838 67,329,311
30 June 2021
Share Capital Revenue Capital Other Total
and Premium Reserve Reserve Reserves
30 June 2020 30 June 2020 30 June 2020 30 June 30 June 2020
2020
GBP GBP GBP GBP GBP
Balances as at 27,420,824 3,417,227 37,705,938 5,219,838 73,763,827
1 January 2020
Total - 722,804 (24,608,253) - (23,885,449)
comprehensive
income/(loss)
for the period
attributable to
Ordinary
Shareholders
Dividends 6 - (1,818,920) - - (1,818,920)
Balances as at 27,420,824 2,321,111 13,097,685 5,219,838 48,059,458
30 June 2020
The Notes to the Condensed Financial Statements form an integral part of the
Unaudited Condensed Interim Financial Statements.
Notes to the Condensed Financial Statements (unaudited)
For the period ended 30 June 2021
1. ACCOUNTING POLICIES
(a) Basis of Preparation
The for the six months ended 30 June 2021 have been prepared in accordance with
IAS 34 "Interim Financial Reporting" as adopted by the European Union ("EU"),
the AIC's SORP (as revised in January 2017) and applicable legal and regulatory
requirements of the Companies (Guernsey) Law, 2008.
The Unaudited Condensed Interim Financial Statements do not include all the
information and disclosures in the Annual Financial Statements and should be
read in conjunction with the Company's Annual Report and Audited Financial
Statements for the year ended 31 December 2020.
The accounting policies and methods of computation followed in these Unaudited
Condensed Interim Financial Statements are consistent with those of the latest
Annual Audited Financial Statement for the year ended 31 December 2020 which
were prepared in accordance with International Financial Reporting Standards
("IFRS") as adopted by the EU.
Given the expectation that the Company will be placed into voluntary
liquidation in or around October 2021, these Interim Financial Statements for
the period to 30 June 2021 have been prepared on a break-up basis. As a result,
all assets are classified as current and are stated at their estimated
recoverable amounts and all creditors are classified as falling due within one
year. As the assets of the Company are already stated at amounts which
approximate their fair value this has not resulted in any adjustment to the Net
Asset Value of the Company and the Directors believe that fair value equates to
recoverable amounts. A provision towards certain costs associated with the
scheme of reconstruction has been included within these Interim Financial
Statements.
(b) Presentation of Information
The Unaudited Condensed Interim Financial Statements have been prepared on a
break-up basis. As a result, all assets are classified as current and are
stated at their estimated recoverable amounts and all creditors are classified
as falling due within one year.
In order to better reflect the activities of an Investment Company and in
accordance with the guidance issued by the Association of the Investment
Companies ("AIC"), supplementary information which analyses the Condensed
Statement of Comprehensive Income between items of capital and revenue nature
has been presented within the Condensed Statement of Comprehensive Income.
2 OPERATING SEGMENTS
The Company has two reportable segments, being the Income Portfolio and the
Smaller Companies Portfolio. Each of these portfolios is managed separately as
they entail different investment objectives and strategies and contain
investments in different products.
For each of the portfolios, the Board reviews internal management reports on a
quarterly basis. The objectives and principal investment products of the
respective reportable segments are as follows:
Investment objectives and principal investments products
Income Portfolio To enhance income and control risk by investing in fixed
interest securities, including convertible securities,
structured investments across a range of asset classes,
shares of other investment companies, including property
investment companies, and open-ended fixed interest funds.
Small Companies Portfolio To maximise income and capital growth through investments in
smaller capitalised UK companies.
Information regarding the results of each reportable segment follows.
Performance is measured based on the change in value of each portfolio, as
included in the internal management reports that are reviewed by the Board.
Segmental information is measured on the same basis as that used in the
preparation of the Company's Unaudited Condensed Interim Financial Statements.
Smaller
Income Companies
Portfolio Portfolio Unallocated Total
GBP GBP GBP GBP
30 June 2021
External revenues:
Net (losses)/gains on financial assets (244,107) 12,222,159 - 11,978,052
designated as at fair value through profit
or loss
Gains on derivative financial instruments 27,486 - - 27,486
Investment income:
Dividend income 65,620 1,400,188 - 1,465,808
Bond income 197,806 - - 197,806
Foreign exchange loss - - (12,865) (12,865)
Total income/(losses) 46,805 13,622,347 (12,865) 13,656,287
Expenses - - (738,658) (835,158)
Interest payable and similar charges - - (640,185) (640,185)
Total comprehensive income/(loss) for the 46,805 13,622,347 (1,391,708) 12,277,444
period attributable to shareholders
Smaller
Income Companies
Portfolio Portfolio Unallocated Total
GBP GBP GBP GBP
30 June 2021
Financial assets designated as at fair 17,359,471 82,826,096 - 100,185,567
value through profit or loss
Receivables 308,351 29,291 - 337,642
Cash and cash equivalents 3,221,510 (1,304,221) - 1,917,289
Total assets 20,889,332 81,551,166 - 102,440,498
Derivative financial 7,734 - - 7,734
instruments
Payables - - 35,006,953 35,006,953
Total current 7,734 - 35,006,953 35,006,953
liabilities
Smaller
Income Companies
Portfolio Portfolio Unallocated Total
GBP GBP GBP GBP
30 June 2020
External revenues:
Net losses on financial assets (188,583) (23,190,583) - (23,379,166)
designated as at fair value through
profit or loss
Losses on derivative financial (263,264) - - (263,264)
instruments
Investment income:
Dividend income 73,882 747,302 - 821,184
Bond income 226,928 - - 226,928
Total (151,037) (22,443,281) - (22,594,318)
losses
Expenses - - (671,404) (671,404)
Interest payable and similar - - (619,728) (619,728)
charges
Total comprehensive loss for the year (151,037) (22,443,281) (1,291,132) (23,885,450)
attributable to shareholders
Smaller
Income Companies
Portfolio Portfolio Unallocated Total
GBP GBP GBP GBP
30 June 2020
Financial assets designated as at 19,318,940 61,061,781 - 80,380,721
fair value through profit or loss
Receivables 322,622 14,580 - 337,202
Derivative financial instruments 28,440 - - 28,440
Cash and cash equivalents 1,696,763 (249,329) - 1,447,434
Total assets 21,366,765 60,827,032 - 82,193,797
Derivative financial instruments 26,245 - - 26,245
Payables - - 767,259 767,259
Total current 26,245 - 767,259 793,504
liabilities
Geographical Information
In presenting information on the basis of geographical segments, segment
revenue and segment assets are based on the domicile countries of the investees
and counterparties to derivative transactions. The table below excludes net
gains on financial assets designated as at fair value through profit or loss
and gains or losses on derivative instruments.
Other Rest of
UK Guernsey Europe the Total
world
GBP GBP GBP GBP GBP
30 June 2021
External revenues
Total Revenue 1,314,508 29,499 35,567 284,040 1,663,614
Other Rest of
UK Guernsey Europe the Total
world
GBP GBP GBP GBP GBP
30 June 2020
External revenues
Total Revenue 871,327 52,409 31,653 92,723 1,048,112
The Company did not hold any non-current assets during the period other than
financial instruments (30 June 2020: £nil).
Major Customers
The Company regards its shareholders as customers. As at the period ended 30
June 2021, the Company had no shareholders with a holding greater than 10%. (30
June 2020: nil).
3 INVESTMENT INCOME
Period ended Period ended
30 June 2021 30 June 2020
GBP GBP
Dividend 1,465,808 821,184
income
Bond income 197,806 226,928
1,663,614 1,048,112
4 EXPENSES
Period ended 30 June 2021 Period ended 30 June 2020
Revenue Capital Total Revenue Capital Total
GBP GBP GBP GBP GBP GBP
Manager's fee* 84,444 253,332 337,776 76,028 228,083 304,111
Administrator's 41,655 - 41,655 42,545 - 42,545
fee**
Registrar's fee 16,956 - 16,956 22,719 - 22,719
Directors' fees 73,750 - 73,750 71,781 - 71,781
Custody fees 12,461 - 12,461 12,388 - 12,388
Audit 18,352 - 18,352 18,473 - 18,473
fees
Restructuring 113,500 - 113,500 - - -
costs
Directors' and 2,512 - 2,512 2,820 - 2,820
Officers' insurance
Annual 12,050 - 12,050 15,463 - 15,463
fees
Commissions and charges - 45,227 45,227 - 78,399 78,399
paid
Legal and professional 27,604 - 27,604 10,043 - 10,043
fees
Broker 9,937 - 9,937 23,763 - 23,763
fees
Bank interest 296 - 296 2,849 - 2,849
Sundry costs 26,582 - 26,582 28,607 - 28,607
(Gains)/loss on foreign (211) 13,076 12,865 (2,170) 39,613 37,443
exchange
439,888 311,635 751,523 325,309 346,095 671,404
Manager's Fee
*The Company has entered into a Management Agreement with Premier Asset
Management (Guernsey) Limited, a wholly-owned, Guernsey incorporated subsidiary
of Premier Miton Group PLC. The Investment Manager receives a management fee of
0.7% per annum of total assets (subject to a minimum of £100,000) calculated
monthly and payable quarterly in arrears, out of which it pays fees to the
Investment Advisers. The Investment Manager is also paid a shareholder
communication and support fee of £3,100, annually. The Company has entered into
an agreement with the Investment Manager for the provision of AIFM reporting
services for a fee of £19,450 per annum from 1 September 2017. Notice of
termination was served on 13 April 2021 and the Management Agreement will be
terminated effective 13 October 2021.
Performance Fee
The Investment Manager is also entitled to a performance fee equal to 15% of
any excess of the NAV per Ordinary Share (together with any dividends paid)
over the higher of the first benchmark or the second benchmark. The first
benchmark is the NAV per share immediately following the tender in January 2007
increasing at 10% per annum compound. The second benchmark is the highest NAV
per Ordinary Share as of the last calculation day in any preceding financial
period commencing after completion of the tender in January 2007 in respect of
which a performance fee has been paid compounded at 10% per annum. A
performance fee amounting to £nil was accrued for the period ended 30 June 2021
(31 December 2020: £nil).
Administrator's Fee
**The Company entered into an Administration Agreement with Northern Trust
International Fund Administration Services (Guernsey) Limited on 1 April 2015.
The Company shall pay the Administrator a fee of 12 basis points per annum on
the net assets between £0 - £100 million, 10 basis points per annum on the net
assets between £100 million - £150 million and 8 basis points per annum on the
net assets over £150 million subject to a minimum of £7,000 per month. The
Administration Agreement may be terminated by either party on ninety days
notice.
Restructuring costs
As noted in the Statement of Principal Risks and Uncertainties under going
concern, a provision has been made for certain restructuring costs.
5 INTEREST PAYABLE AND SIMILAR CHARGES
Period ended 30 June 2021
Revenue Capital Total
GBP GBP GBP
Appropriation in respect of ZDP Shares - 640,185 640,185
- 640,185 640,185
Period ended 30 June 2020
Revenue Capital Total
GBP GBP GBP
Appropriation in respect of ZDP Shares - 619,728 619,728
- 619,728 619,728
6 DIVIDS IN RESPECT OF ORDINARY SHARE
Period ended Period ended
30 June 2021 30 June 2020
Pence Pence
GBP per share GBP per share
First interim 909,460 5.75 909,460 5.75
payment
Second interim 909,460 5.75 909,460 5.75
payment
1,818,920 11.50 1,818,920 11.50
Further details on the Company's dividend policy can be found on Investment
Objectives and Policy.
7 EARNINGS PER SHARE
Ordinary Shares
The total gain per Ordinary Share (per IFRS) is based on the total return on
ordinary activities for the period attributable to Ordinary Shareholders of £
12,277,444 (30 June 2020: loss of £23,885,450) and on 15,816,687 (30 June 2020:
15,816,687) shares, being the weighted average number of shares in issue during
the period. There are no dilutive instruments and therefore basic and diluted
gains per share are identical.
The revenue return per Ordinary Share (per IFRS) is based on the revenue return
on ordinary activities for the period attributable to Ordinary Shareholders of
£ 1,223,726 (30 June 2020 revenue return of: £722,804) and on 15,816,687 (30
June 2020: 15,816,687) shares, being the weighted average number of shares in
issue during the period. There are no dilutive instruments and therefore basic
and diluted gains per share are identical.
The capital gain per Ordinary Share (per IFRS) is based on the capital return
on ordinary activities for the period attributable to Ordinary Shareholders of
£11,053,718 (30 June 2020: capital loss of £24,608,253) and on 15,816,687 (30
June 2020: 15,816,687) shares, being the weighted average number of shares in
issue during the period. There are no dilutive instruments and therefore basic
and diluted gains per share are identical.
ZDP Shares
The return per ZDP Share is based on the appropriation in respect of ZDP
Shares, the amortisation of ZDP Share issue costs and ZDP Share issue costs
totalling £640,185 (30 June 2020: £619,728) and on 21,230,989 (30 June 2020:
21,230,989) shares, being the weighted average number of ZDP Shares in issue
during the period.
8 FINANCIAL ASSETS DESIGNATED AS AT FAIR VALUE THROUGH PROFIT OR
LOSS
30 June 2021 31 December 2020
GBP GBP
INVESTMENTS
Opening portfolio cost 86,657,800 87,991,361
Purchases at cost 12,953,049 25,538,145
Sales
- proceeds (14,749,270) (25,806,486)
- realised gains on 3,207,197 6,229,665
sales
- realised losses on (1,019,648) (7,294,885)
sales
Closing book cost 87,049,128 86,657,800
Unrealised appreciation on 18,112,924 12,291,265
investments
Unrealised depreciation on (4,976,485) (8,945,329)
investments
Fair value 100,185,567 90,003,736
Realised gains on sales 3,207,197 6,229,665
Realised losses on (1,019,648) (7,294,885)
sales
Increase/(decrease) in unrealised appreciation on 5,821,659 (8,211,921)
investments
Decrease/(increase) in unrealised depreciation on 3,968,844 (4,239,264)
investments
Net gains/(losses) on financial assets designated as at 11,978,052 (13,516,405)
fair value through profit or loss
As at 30 June 2021, the closing fair value of investments comprises £82,826,097
(31 December 2020: £69,305,528) of Smaller Companies Portfolio, £17,359,470 (31
December 2020: £20,698,208) of Income Portfolio.
IFRS 13 requires the fair value of investments to be disclosed by the source of
inputs using a three-level hierarchy as detailed below:
Quoted prices (unadjusted) in active markets for identical assets or
liabilities (Level 1);
Inputs other than quoted prices included in Level 1 that are observable for the
asset or liability, either directly (as prices) or indirectly (derived from
prices) (Level 2); and
Inputs for the asset or liability that are not based on observable market data
(unobservable inputs) (Level 3).
Details of the value of each classification are listed in the table below.
Values are based on the market value of the investments as at the reporting
date:
Financial Assets Designated as at Fair Value Through Profit or Loss
30 June 30 June 31 Dec 31 Dec
2021 2021 2020 2020
Market Market Market Market
value value value value
% GBP % GBP
Level 1 85.20 85,359,732 81.36 73,221,136
Level 2 14.10 14,128,965 17.87 16,085,730
Level 3 0.70 696,870 0.77 696,870
Total 100.00 100,185,567 100.00 90,003,736
Bonds and structured investments are priced by reference to market quotations
which incorporate assessment of yield, maturity and the instrument's terms and
conditions.
APQ Global Limited 3.5% CULS 30/09/2024 is held at level 3 due to low
liquidity. The value of this investment is currently derived by adjusting the
latest available broker price and applying a 10% discount to reflect the lack
of liquidity in this investment. The unadjusted market value of the investment
is GBP 774,300. The discount of 10% represents a reduction in value of GBP
77,430. If the discount were to be increased or decreased to 25% the value of
APQ Global Limited 3.5% CULS 30/09/2024 would increase or decrease by GBP
193,575.
Derivative Financial Assets and Liabilities Designated as at Fair Value Through
Profit or Loss
30 June 30 June 31 Dec 31 Dec
2021 2021 2020 2020
Market Market Market Market
value value value value
% GBP % GBP
Level 1 derivative financial assets - - - -
Level 2 derivative financial assets - - 0.15 132,269
Level 2 derivative financial (0.01) (7,734) - -
liabilities
It is the Company's policy to recognise all the transfers into the levels and
transfers out of the levels at the end of the reporting year. Transfers into
each level shall be disclosed and discussed separately from transfers of each
level.
The derivative financial instruments held by the Company have been classified
as Level 1 and 2. This is in accordance with the fair value hierarchy. The
Company uses widely recognised valuation models for determining fair value of
derivative financial instruments that use only observable market data and
require little management judgement and estimation.
9 RECEIVABLES
30 June 31 December
2021 2020
GBP GBP
Due from 15,544 13,688
brokers
Prepayments 13,747 7,314
Accrued investment 308,351 437,351
income
337,642 458,353
10 PAYABLES
30 June 31 December
2021 2020
GBP GBP
Accrued 210,079 104,284
expenses
Trade 177,285 152,849
creditors
387,364 257,133
11 ZDP SHARES
30 June 31 December
2021 2020
GBP GBP
ZDP Share entitlement 34,619,589 33,979,404
The above entitlement comprises the following:
21,230,989 ZDP Shares issued to date up to 30 Jun 2021 22,831,682 -
21,230,989 ZDP Shares issued to date up to 31 Dec 2020 - 22,831,682
ZDP Premium (3,257) (5,680)
Appropriation in respect of ZDP 11,787,907 11,147,722
Shares
ZDP value (calculated in accordance with the Articles) 34,616,332 33,973,724
Add back ZDP Premium 3,257 5,680
ZDP value (calculated in accordance 34,619,589 33,979,404
with IFRS)
The fair value of the ZDP Shares as at 30 June 2021 was £34,288,047 (31
December 2020: £33,332,653). The ZDP Shares are classified under Level 1 based
on unadjusted quoted prices in active markets. Since valuations are based on
quoted prices that are readily and regularly available in an active market, the
valuation does not entail a significant degree of judgement (2020: Level 1).
A Continuation Offer proposal to ZDP Shareholders was published in November
2016, whereby such holders were given an opportunity to either receive their
2017 Final Capital Entitlement of 138p or to continue their investment in the
existing ZDP Shares. Shareholders approved the scheme and 91.4% of ZDP
Shareholders elected to remain invested.
Following the proposals, 19,523,014 ZDP Shares were elected for the
Continuation Offer with a further 1,842,207 New ZDP Shares being issued through
an Initial Placing at 140.0p which represented a premium of 1.4% to the opening
NAV per New ZDP Share.
1,834,160 ZDP Shares were elected for Redemption at their 2017 Final Capital
Entitlement of 138p.
ZDP Shares carry no entitlement to income distributions to be made by the
Company. The ZDP Shares will not pay dividends but have a final capital
entitlement at the end of their life on 28 February 2022 of 167.2 pence
following the extension of the life of the existing ZDP Shares from 31 January
2017.
It should be noted that the predetermined capital entitlement of a ZDP Share is
not guaranteed and is dependent upon the Company's gross assets being
sufficient on 28 February 2022 to meet the final capital entitlement of ZDP
Shares.
Under the Articles of Incorporation, the Company is obliged to redeem all of
the ZDP Shares on 28 February 2022 (if such redemption has not already been
effected).
The number of authorised ZDP Shares is 50,000,000. The number of issued ZDP
Shares is 21,230,989 (31 December 2020: 21,230,989). The non-amortisation of
the ZDP Shares in line with the Articles has the effect of increasing the NAV
per Ordinary Share by 0.10 pence.
12 SHARE CAPITAL AND PREMIUM
Authorised GBP GBP
Ordinary Shares of 1p each unlimited unlimited
30 June 31 December
2021 2020
Number of Number of
Issued Shares Shares
Number of shares in issue at the start of the 15,816,687 15,816,687
period/year
Number of shares in issue at the end of the 15,816,687 15,816,687
period/year
Issued and fully paid capital at the end of the £196,606 £196,606
period/year
Share Share Premium Total Total
Capital
30 June 30 June 2021 30 June 31 December
2021 2021 2020
GBP GBP GBP GBP
Opening share capital and 196,606 27,224,218 27,420,824 27,420,824
premium
Closing share capital and 196,606 27,224,218 27,420,824 27,420,824
premium
The Ordinary Shares (excluding treasury shares) are entitled to participate in
all dividends and distributions of the Company. On a winding-up holders of
Ordinary Shares are entitled to participate in the distribution and the holders
of Ordinary Shares are entitled to receive notice of and attend and vote at all
General Meetings of the Company.
The issued and fully paid capital as at 30 June 2021 was £196,606 (31 December
2020: £196,606).
13 OTHER RESERVES
TREASURY RESERVE
30 June 31 December
2021 2020
GBP GBP
Balance as at the beginning of the period/year (4,780,162) (4,780,162)
Balance as at the end of the period/year (4,780,162) (4,780,162)
The other reserves presented on the Statement of Financial Position comprise
the treasury reserve of (£4,780,162) and special reserve of £10,000,000
totalling £5,219,838.
ORDINARY SHARES HELD IN TREASURY
30 June 31 December
2021 2020
No. No. Shares
Shares
Balance as at the beginning of the period/year 1,325,972 1,325,972
Balance as at the end of the period/year 1,325,972 1,325,972
A Special reserve of £10,000,000 was created on the cancellation of part of the
Company's Share premium account.
14 RELATED PARTIES
Premier Asset Management (Guernsey) Limited is the Company's Investment Manager
and operates under the terms of the Management Agreement in force which
delegates its authority over the Company's investment portfolios.
£337,776 (30 June 2020: £304,111) of costs were incurred by the Company with
this related party in the period, of which £177,285 (31 December 2020: £
152,849) was due to this related party as at 30 June 2021.
During the period ended 30 June 2021, £nil (30 June 2020: £nil) was charged as
performance fees of which, £nil (31 December 2020: £nil) remained payable at
period end.
The Directors' remuneration is disclosed in Note 4.
David Warr holds 63,000 (31 December 2020: 63,000) Ordinary Shares in the
capital of the Company, which represents an interest of 0.40% (31 December
2020: 0.40%) of the Company's Ordinary Shares in issue as at 30 June 2021.
Nigel Sidebottom holds 4,366 (31 December 2020: 4,366) Ordinary Shares in the
capital of the Company, which represented an interest of 0.03% (31 December
2020: 0.03%) of the Company's Ordinary Shares in issue as at 30 June 2021, and
5,205 (31 December 2020: 5,205) ZDP Shares in the capital of the Company, which
represented an interest of 0.02% (31 December 2020: 0.02%) of the Company's ZDP
Shares in issue as at 30 June 2021.
Nigel Ward holds 7,000 Ordinary Shares in the capital of the Company, via a
nominee account (31 December 2020: 7,000). This represents an interest of 0.04%
(31 December 2020: 0.04%), and 10,000 (31 December 2020: 10,000) ZDP Shares in
the capital of the Company, which represented an interest of 0.05% (31 December
2020: 0.05%) of the Company's ZDP Shares in issue as at 30 June 2021.
As at 30 June 2021, employees of the Investment Manager held interest in 13,890
Ordinary Shares of the Company representing 0.09% of the issued share capital.
15 SUBSEQUENT EVENTS
These Unaudited Condensed Interim Financial Statements were approved for issue
by the Board on 16 September 2021. Subsequent events have been evaluated until
this date.
A dividend of 5.75p was declared on 10 August 2021 and is expected to be paid
to ordinary shareholders on 30 September 2021.
As at 10 September 2021 the published NAV per Ordinary Share for the Company
was 449.09p. This represents an increase of 5.17% from 30 June 2021 published
NAV of 427.03p.
On 1 September 2021 the Board announced a scheme of reconstruction offering a
rollover into the Unicorn UK Income Fund or a cash exit. These proposals, which
will involve putting the Company into voluntary liquidation and the early
redemption of the ZDP shares, will be put to shareholders at General Meetings
in or around October 2021.
Directors, Advisers and Contacts
Directors Corporate Broker
John Nigel Ward (Chairman) N+1 Singer Advisory LLP
David John Warr One Bartholomew Lane
Nigel Sidebottom London
Sharon Parr EC2N 2AX
Tel: 0207 4963000
Shareholders are welcome to contact the (appointed 1 August 2020)
Chairman directly by emailing at:
Acorn_Income_Fund_Limited@ntrs.com
Investment Manager Numis Securities Limited
Premier Asset Management (Guernsey) Limited 10 Paternoster Square
PO Box 255 London
Trafalgar Court EC4M 7LT
Les Banques Tel: 0207 2601000
St Peter Port (until 31 July 2020)
Guernsey
GY1 3QL
Tel: 01483 400430
Contact: Claire Long
Investment Adviser - Smaller Companies Independent Auditor
Portfolio KPMG Channel Islands Limited
Unicorn Asset Management Limited Glategny Court
Preacher's Court Glategny Esplanade
The Charterhouse St Peter Port
Charterhouse Square Guernsey
London GY1 1WR
EC1M 6AU
Tel: 0207 2530889
Contact: Simon Moon
Investment Adviser - Income Portfolio Registrar
Premier Fund Managers Limited JTC Registrars Limited
Eastgate Court PO Box 156
High Street Ground Floor
Guildford Dorey Court
GU1 3DE Admiral Park
Tel: 01483 400430 St Peter Port
Contact: Claire Long Guernsey
GY1 4EU
Tel: 01481 702400
Email: registrars@jtcgroup.com
Administrator and Secretary Company's Registered Office
Northern Trust International Fund PO Box 255
Administration Services (Guernsey) Limited Trafalgar Court
PO Box 255 Les Banques
Trafalgar Court St Peter Port
Les Banques Guernsey
St Peter Port GY1 3QL
Guernsey
GY1 3QL
Email: Team_Acorn@ntrs.com
Custodian Company Details
Northern Trust (Guernsey) Limited Company Number: 34778
PO Box 71 GIIN Number: CY0IXM.99999.SL.831
Trafalgar Court
Les Banques Ordinary Shares
St Peter Port ISIN: GB0004829437
Guernsey Ticker: AIF
GY1 3DA ZDP Shares
ISIN: GGOOBYMJ7X48
Ticker: AIFZ
END
(END) Dow Jones Newswires
September 17, 2021 02:00 ET (06:00 GMT)
Grafico Azioni Acorn Income Fund Ld (LSE:AIF)
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Da Dic 2024 a Gen 2025
Grafico Azioni Acorn Income Fund Ld (LSE:AIF)
Storico
Da Gen 2024 a Gen 2025
