Acorn Income Fund Limited
LEI 213800UAZN7G46AHQM67
The following replaces the RNS
'Half-year Report' announcement released on 17 August 2020 at 11:30.
A typographical error has been identified in the Half-yearly
Condensed Report which was released on 17 August and to correct
this, the Company is re-releasing the Half-yearly Condensed Report
below. The only amendment to the below as follows:
The Chairman’s Statement and Interim Management Report stated
“During the period the Board took the opportunity to review its
corporate broking arrangements, and after conducting a
comprehensive search process, has decided to move the brokership of
Acorn from Numis Securities to N+1 Singer with effect from [date].”
and should instead have stated “During the period the Board took
the opportunity to review its corporate broking arrangements, and
after conducting a comprehensive search process, has decided to
move the brokership of Acorn from Numis Securities to N+1 Singer
with effect from 1 August 2020.”
Half-yearly Condensed Report
(unaudited)
For the Six Months Ended 30 June 2020
(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 2020. 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 also 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 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 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:
- 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;
- the Company will not conduct any significant trading activity;
and
- 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.
Performance Summary
for the period ended 30 June
2020
|
30/06/2020 |
31/12/2019 |
% change/
return |
Total Return
Performance* |
|
|
|
Total Return on Gross
Assets*## |
|
|
-21.88% |
Numis Smaller
Companies (Ex Investment Companies) Index |
18,122.90 |
24,153.03 |
-24.97% |
FTSE All Share
Index |
6,465.24 |
7,837.96 |
-17.51% |
FTSE Small Cap (Ex
Investment Companies) Index |
6,310.14 |
7,977.20 |
-20.90% |
Share Price and NAV
Returns |
|
|
|
Ordinary
Shares |
|
|
|
Share Price |
250.00p |
406.00p |
-38.42% |
NAV** |
303.90p |
466.43p |
-34.85% |
IFRS
NAV# |
303.85p |
466.37p |
-34.85% |
Total Return on Net
Assets** |
|
|
-32.43% |
Ordinary Share Price
Total Return* |
|
|
-35.95% |
Discount (-) to NAV on
Ordinary Shares** |
-17.74% |
-12.96% |
|
ZDP Shares |
|
|
|
Share Price |
152.50p |
155.50p |
-1.93% |
NAV** |
157.00p |
154.07p |
1.90% |
IFRS
NAV# |
157.04p |
154.12p |
1.89% |
Premium (+) to NAV on
ZDP Shares** |
-2.87% |
+0.93% |
|
Cover on ZDP
Shares |
2.15:1 |
|
|
Package Discount (-)
to |
|
|
|
NAV Combined Ordinary
and ZDP Shares |
-11.65% |
-8.69% |
|
|
6 months to 30/6/2020 |
6 months to 30/6/2019 |
% change/ return |
|
Dividends and
Earnings |
|
|
|
Revenue Return per
Ordinary Share |
4.57p |
11.16p |
-59.05% |
Dividends Declared per
Ordinary Share |
11.50p |
10.40p |
10.58% |
* assumes dividends reinvested
** calculated in accordance with the Articles
# calculated in accordance with International Financial
Reporting Standards
## adjusted for share buybacks
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 2020, there were
1,325,972 Ordinary and 1,779,873 ZDP Shares held in treasury.
Shareholder Funds
£48.06 million as at 30 June 2020
(calculated in accordance with IFRS)
£48.07 million as at 30 June 2020
(calculated in accordance with the articles)
Market Capitalisation of the Ordinary Shares
£39.54 million as at 30 June
2020
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 £10.3bn of funds under management as at 30 June 2020. 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
N+1 Singer Advisory LLP (“N+1 Singer”).
(appointed 1 August 2020)
Numis Securities Limited (“Numis”).
(until 31 July 2020)
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
March/April
Company’s half year
end
30 June
Annual General
Meeting
11 August 2020
Half-year results announced
August
Dividend payments
At the end of March, June, September and December
Company Website
https://www.premierfunds.co.uk /acorn-income-fund-limited
Chairman’s Statement and Interim
Management Report
for the period ended 30 June
2020
Dear Shareholder
The first half of 2020 has seen events unfold in a manner that
would not have seemed possible at the end of 2019, when December’s
decisive election outcome provided a welcome year end boost to the
UK stock market. The outbreak of the global COVID-19 pandemic
during February and March has led to a reduction in output, driving
up unemployment and putting pressure on the finances of many
companies. The combined effects of these will almost inevitably tip
the global economy into recession, expectations of which resulted
in major setbacks in investment markets around the world.
Against these unprecedented market moves, it will not come as a
surprise to shareholders that the total return on Acorn’s gross
assets, which measures the return on the portfolio including all
income and costs, was also down sharply, by 21.9%. In the case of
the total return on net assets, the drop was exacerbated by the
gearing effect of the Zero Dividend Preference Shares, and was down
by 34.9% as a result. These moves compare to a fall in total return
from the Numis Smaller Companies (ex-Investment Companies) Index,
of 25.0% and in the FTSE All Share Index, which recorded a drop in
total return of 17.5%. The positive difference in return between
the gross assets of the fund and that of the Numis Index may be at
least partly explained by the allocation of a proportion of assets
to fixed income, which, as might be expected, proved more resilient
during this period of turmoil.
However, as covered in more detail below, the market appeared to
give little credit to this more robust element of the portfolio,
with the ordinary share price total return falling further than net
assets, down 38.4% over the period. This reflects the fact that the
discount (the difference between the value of the assets and the
share price) widened from 13.0% as at 31st
December 2019 to 17.7% as at 30th
June 2020.
Discount Management
The Board is alert to the extent to which the discount on the
ordinary shares has widened over the past six months. This is in
part linked to the bid-offer spread on the ordinary shares (the
difference in price at which investors can buy and sell shares, as
quoted by the market) as a wide spread may discourage investors
from buying and selling. This is turn can lead to a reduction in
trading volumes, and means that potential buyers are unable or
unwilling to acquire stock and thereby help to narrow the
discount.
Liquidity in the investment trust sector has, in common with the
wider stock market, been impacted over the past few months by
concerns around the economic impact of COVID-19. Market makers’
access to capital has been restricted, which has meant that the
normal market size in which they are prepared to deal has reduced.
Although capital is starting to come back into the sector, Acorn,
in common with other smaller trusts which are tightly held, has yet
to see this filter through.
During the period the Board took the opportunity to review its
corporate broking arrangements, and after conducting a
comprehensive search process, has decided to move the brokership of
Acorn from Numis Securities to N+1 Singer with effect from
1 August 2020. The Board has been
encouraged by the emphasis within N+1 Singer’s proposals both to
narrow the dealing spread and to keep the discount narrow, and look
forward to a close working relationship with them.
Asset Allocation
At the end of 2019, the allocation to Smaller Companies stood at
80%, with the remainder invested in the Income Portfolio. The falls
in equity markets in response to the pandemic resulted in a drop in
the weighting to smaller companies. At the beginning of May,
following discussions with the Investment Advisers, the Board opted
to put in place some downside protection to guard against the
possibility of a further downturn in markets, in the form of a
listed PUT option on the FTSE 100 Index. It was felt that it would
be inconsistent to increase the weighting to equities while
maintaining such a position, and as a result the decision was taken
to revert to a 75% allocation to Smaller Companies and 25% to the
Income Portfolio. The Board is unconvinced that the recovery in
equity markets during the second quarter of the year fully reflects
the ongoing impact of the pandemic and will therefore continue to
keep under review both the asset allocation and need for downside
protection.
Earnings and Dividends
In February Acorn announced its first quarterly dividend for
2020 of 5.75p a share, a 10.6% increase over the corresponding
dividend in the previous year. A second interim dividend of 5.75p
was declared at the end of April, maintaining the level of increase
set with the first interim dividend. The third interim dividend of
5.75p was declared following the approval of this report for
payment 30 September 2020. The
Board is mindful of the impact that the COVID-19 pandemic has had
on the earnings of many UK companies, which has led some to reduce
or even cancel dividend payments. It was felt, however, that
Acorn’s 2019 year-end revenue reserves of 1.04 times the total
dividends paid in 2019 provided a level of support sufficient to
enable the increase in the first dividend to be maintained for at
least the second and third payment. Revenue earnings in the first
half were 4.57 pence per ordinary
share which compares with the 11.16
pence generated in the first six months of 2019.
Zero Dividend Preference Shares
The price of the ZDP shares fell by 1.9% over the six month
period, ending the half year at 152.50p, which represented a
discount of 2.9% to NAV. As a result of the sharp fall in gross
assets, the asset cover at the year-end stood at 2.2x, well above
the hurdle needed to cover repayment of the ZDPs at maturity in
February 2022. The yield to maturity
was (5.68%). The number of ZDPs in issue remains unchanged at
21,230,989.
Outlook
The global economy undoubtedly faces considerable challenges for
the remainder of 2020 and beyond. However, the focus of the
Investment Advisers remains on selecting smaller companies with
robust dividend growth prospects, backed up by strong balance
sheets, supported by a weighting to fixed income which should
provide an additional degree of resilience during this period of
uncertainty. Shareholders will be aware that this portion of the
portfolio is not restricted to traditional fixed interest
securities, but also has the flexibility to invest in alternative
investment classes which offer both diversification benefits and
attractive income generation characteristics of their own.
Contact with shareholders
The Board welcomes contact with shareholders, and I would
encourage you to get in touch with me directly via the email
address acorn_income_fund_limited@ntrs.com if you have any
questions. Further information on the Company, including
factsheets, may be found at
www.premierfunds.co.uk/acorn-income-fund-limited.
Thank you for your ongoing support as an investor in our
Company.
Nigel
Ward
Chairman
Statement of Principal and Emerging
Risks and Uncertainties
30 June 2020
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
2019. The principal risks disclosed include COVID-19, market
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.
COVID-19
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 Portfolio. 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 Resiliency Policies in place, to cover
various possible scenarios whereby staff cannot be present at the
designated office and conduct business as usual. Since the COVID-19
pandemic outbreak, service providers have deployed these
alternative working policies to ensure continued business
service.
Market Price Risk
Market price risk is the risk associated with changes in market
prices including spreads, interest rates, economic uncertainty,
changes in laws and national and international political
circumstances.
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 that the Company does not have sufficient cash
resources to meet obligations, including the dividend target as
they fall due or can only do so on terms that are materially
disadvantageous.
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 denominated in foreign currencies.
Generally, these exposures are hedged 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 Net Asset Value (“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.
Brexit
The United Kingdom’s vote to leave the European Union has
introduced new uncertainties and instability into the financial
markets. As the process of a major country leaving the EU has no
precedent, the Board and the Investment Manager expect an ongoing
period of market uncertainty as the implications are processed.
Related Parties
Related party balances and transactions are disclosed in note 14
of these Unaudited Condensed Interim Financial Statements.
Going Concern
The Directors are required to satisfy themselves that it is
reasonable to assume that the Company is a going concern and to
identify any material uncertainties to the Company’s ability to
continue as a going concern for at least 12 months from the date of
approving the Unaudited Condensed Interim Financial Statements.
In accordance with Article 53.1 of the Articles of incorporation
of the Company, shareholders are to be given the opportunity to
vote for the discontinuance of the Company. This opportunity was
last presented to the shareholders on 26
September 2016, with the next discontinuation resolution to
be proposed again at the Annual General Meeting in 2021. Should the
shareholders vote not to pass the continuation vote the Directors
would be obliged to follow the provisions in the Articles of
Incorporation and put forward proposals to the effect that the
Company would be wound up, liquidated, reorganised, unitised or to
find some other suitable solution that would be satisfactory to the
shareholders.
Notwithstanding the above, the Board continues to believe that
it is appropriate to adopt the going concern basis in preparing the
Unaudited Condensed Interim Financial Statements in view of its
holdings in cash and cash equivalents and certain more liquid
investments within the portfolios and the income deriving from
those investments, meaning the Company has adequate financial
resources to meet its liabilities as they fall due. This assessment
has been made in conjunction with the Viability Statement.
Responsibility Statement
For the period from 1 January 2020
to 30 June 2020
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
17 August 2020
Investment Advisers’ Report
The Smaller Companies Portfolio
for the period ended 30 June
2020
During the six month period to 30 June
2020 the Smaller Companies portfolio generated a total
return of -26.6%, before expenses (-2660 basis points), marginally
behind the -25.0% total return of the Numis Smaller Companies Index
(Ex Investment Companies).
We entered the current year with confidence – the domestic
political backdrop had started to stabilise following the
definitive general election result and progress finally appeared to
be being made in the Brexit process. The portfolio also entered the
year in solid shape following the strong operational performance of
our investee companies in 2019 which drove strong capital growth
and income generation. The emergence of the COVID-19 pandemic in
the early part of the year rapidly and severely changed the outlook
for equities globally. As governments looked to contain the virus
unprecedented restrictions on activity were implemented with
significant negative implications for the global economy. The sheer
speed and depth of the fall set this period apart from previous
market contractions.
These events clearly had a significant negative impact on UK
equities, with UK Small and Mid-caps underperforming their larger
quoted peers, as is often the case during more volatile periods.
The Smaller Companies Portfolio followed a similar trend and
performed broadly in line with the NSCI (ex-IT) during the
period.
With companies and economies facing a highly uncertain future
during an indefinite period of restricted activity it is no
surprise that dividend payments came under pressure, with
management teams looking to protect even the strongest of balance
sheets and conserve cash. The Smaller Companies Portfolio was not
immune to this dynamic although in recent weeks we have been
encouraged by the dividend progression as confidence slowly starts
to rebuild.
It is also worth noting that due to the unique nature of the
virus threat some companies and sectors have fared far better than
others, the dynamics of which are also outlined below.
The market turmoil made for a busy period of trading with ten
disposals and five new additions, reducing the total number of
holdings in the portfolio by five to 42.Just over two thirds of
this trading activity was in direct response to the changing market
dynamics presented by the pandemic.
Given the nature of the pandemic and the subsequent government
intervention it is sectors and themes rather than individual
companies which provide the greatest insight into activity and
performance during the period. The managers took action early in
the pandemic to identify and assess the threat to those companies
within the portfolio that had increased end market risk and those
with levels of debt which could become difficult to service in
prolonged period of lower economic activity. The leisure sector was
particularly hard hit as operators were forced to close their doors
to the public, effectively cutting their revenue to zero. Our only
holding with a high street presence was hit by the same dynamic. We
quickly exited two of these holdings, Cineworld (-156bps) and Card
Factory (-111bps), which had a combination of a drastically
diminished outlook and levels of debt which we felt could become
burdensome during an extended period of restricted trading. RPS
(-126bps) was also exited on similar concerns. All three of these
companies have subsequently cut their dividend. Two of the other
main detractors of performance came from Secure Trust Bank
(-172bps) and Hollywood Bowl (-135bps); we retain a meaningful
holding in both of these companies as we view them as well
capitalised, well managed, high quality operators in their
respective fields which we believe will recover in time.
Only a handful of companies made a positive contribution, one of
which is worth highlighting: Numis (+40bps), the small and mid-cap
brokerage benefited from the market volatility and uncertain
outlook through very high trading volumes in its execution division
and heightened fund raising activity for its corporate clients.
One positive from the market volatility in the period was the
opportunity to add high quality companies at attractive entry
points. Liontrust, a fund management business, Trifast, a
manufacturer of industrial fasteners, and Emis, a supplier of
software to the health services, were all added at attractive
levels and two of which have already contributed to the dividend
income this year. Prior to the tumult of March our trading activity
was pretty standard, holdings in three companies were exited and
one added, all on valuation grounds. The disposals were Flowtech,
Marshalls, and LondonMetric (which was later added back in to the
portfolio at a lower price); and Topps Tiles was the addition.
Following a volatile and highly unusual period we remain
confident in the long term prospects for our portfolio of well
capitalised, well managed, market leading businesses. We make no
changes to our successful investment process but continue to assess
the longer term implications of the pandemic which will undoubtedly
create a number of permanent and significant changes across a
variety of sectors. Dividend payments have been reduced materially
in the UK in the early part of the year and will take time to
rebuild to prior levels. Within the portfolio we take confidence
from the strength of the balance sheets, the robust nature of the
end markets and our investee companies’ unchanged commitment to pay
meaningful dividends to shareholders.
This has been an incredibly challenging period for our investors
but we remain confident the portfolio is well placed to survive the
current period of uncertainty and participate fully in the
recovery.
Fraser
Mackersie and Simon Moon
Unicorn Asset Management Limited
The Income Portfolio
Risk assets have staged a remarkable recovery from their lows in
March following an unprecedented combination of large monetary and
fiscal stimulus from global central banks. Corporate bonds in
particular have received the most explicit central bank policy
support with quantitative easing programmes actively buying,
helping to maintain liquidity and to keep borrowing costs low in
investment grade bonds. Meanwhile the fall in global interest rates
and government bond yields has forced investors back into assets
which were being indiscriminatingly abandoned merely a few months
ago. However while some pockets of the bond market overreacted in
March, it has arguably been too optimistic in its interpretation of
the recovery. We favour bonds from large, well-capitalised banks
which are important conduits for central bank policy and much
better placed to weather the downturn than many other businesses.
Outside the banking sector we like the relative resilience offered
by areas such as supermarkets, telecoms and utilities, all
supplying services which continue to be in demand. The more
conservative management strategies being put in place in response
to the pandemic should also mean that high quality investment grade
companies prove to be a more stable and reliable source of income
as discretionary equity dividends are cut in favour of maintaining
contractual bond coupons.
The frenzied hunt for yield has also enabled global corporate
bond issuance to hit record levels as companies look to take
advantage of the yield-hungry environment and build liquidity
buffers against the inevitable downturn. Issuance in
sterling-denominated corporate bonds has however been much smaller
in scale than the US Dollar and Euro markets, and deals have not
looked as attractive. However we have bought a few issues which
were attractively priced relative to the market and to existing
bonds issued by those companies.
Given the supportive technical backdrop, financial markets have
been predominately focussed on the benefits of massive stimulus and
less so on the risk to growth from the fallout of the pandemic,
even as the US fails to control its infection rate. The second
quarter reporting season could therefore lead to a further
weakening of credit metrics leading to more downgrades from credit
rating agencies. While being respectful of the rally we also remain
cautious given the worsening economic fundamentals which could lead
to renewed volatility especially as the geopolitical tensions that
were worrying markets before the pandemic - such as U.S –
China trade relations and Brexit -
are rising again, presenting threats to global trade as economies
attempt to recover.
We continue to endeavour to target a more absolute return
profile across fixed income and alternative investments and manage
the portfolio fluidly as the environment evolves. During March a
number of the alternative strategies provided considerable
diversification benefits but the indiscriminate nature of the
sell-off did lead to some of the investment company positions to
trade on wide discounts to NAV. While there has been significant
reversion since then, the potential for further recovery
remains.
With interest rates set to stay low for a considerable time we
have grown less concerned about taking duration risk in bonds
issued by higher quality issuers although there is some uncertainty
over what impact the current easing policies could have on future
inflation which is clearly a risk for all fixed income
instruments.
Chun
Lee and Robin Willis
Premier Fund Managers Limited
Schedule of Principal Investments
as at 30 June 2020
|
|
|
|
Percentage of Total Assets 2020 |
Position |
Company |
Market
Value £’000 |
Percentage of Portfolio |
Smaller
Companies Portfolio |
|
|
|
1 |
Telecom Plus
plc |
3,270,600 |
5.36 |
3.98 |
2 |
Numis
Corporation plc |
3,090,000 |
5.06 |
3.76 |
3 |
Polar Capital
Holdings plc |
2,886,500 |
4.73 |
3.51 |
4 |
Primary Health
Properties plc |
2,815,200 |
4.61 |
3.43 |
5 |
Sabre Insurance
Group plc |
2,627,684 |
4.30 |
3.20 |
6 |
Chesnara
plc |
2,422,500 |
3.97 |
2.95 |
7 |
Goodwin plc |
2,408,000 |
3.94 |
2.93 |
8 |
James Halstead
plc |
2,004,600 |
3.28 |
2.44 |
9 |
Severfield
plc |
1,759,659 |
2.88 |
2.14 |
10 |
Brewin Dolphin
Holdings plc |
1,615,100 |
2.65 |
1.96 |
11 |
Boot (Henry)
plc |
1,575,000 |
2.58 |
1.92 |
12 |
Somero
Enterprises Inc |
1,561,227 |
2.56 |
1.90 |
13 |
Hill & Smith
Holdings plc |
1,555,000 |
2.55 |
1.89 |
14 |
Regional REIT
Limited |
1,540,853 |
2.52 |
1.87 |
15 |
XPS Pensions
Group plc |
1,498,500 |
2.45 |
1.82 |
16 |
Castings
plc |
1,494,000 |
2.45 |
1.82 |
17 |
Ocean Wilsons
Holdings Limited |
1,485,000 |
2.43 |
1.81 |
18 |
FDM Group
Holdings plc |
1,483,350 |
2.43 |
1.80 |
19 |
Clipper
Logistics plc |
1,475,000 |
2.42 |
1.79 |
20 |
Iomart Group
plc |
1,435,000 |
2.35 |
1.75 |
TOTAL |
|
40,002,773 |
65.52 |
48.67 |
|
|
|
|
|
Income
Portfolio |
|
|
|
1 |
Pershing Square
Holdings Limited |
986,889 |
5.11 |
1.20 |
2 |
Pershing Square
Holdings 5.50% 15/07/2022 |
853,796 |
4.42 |
1.04 |
3 |
APQ Global
Limited 3.5% CULS 30/09/2024 |
774,300 |
4.01 |
0.94 |
4 |
Value &
Income Trust 11.00% 31/03/2021 |
733,607 |
3.80 |
0.89 |
5 |
Credit Suisse
Group 2.75% 08/08/2025 |
632,310 |
3.27 |
0.77 |
6 |
Deutsche Bank
0.0025% 29/10/2020 |
599,007 |
3.10 |
0.73 |
7 |
AT&T 2.9%
04/12/2026 |
540,750 |
2.80 |
0.66 |
8 |
Citigroup 1.75%
23/10/26 |
507,979 |
2.63 |
0.62 |
9 |
RM plc ZDP |
465,400 |
2.41 |
0.57 |
10 |
J Sainsbury 6.5%
PERP |
450,180 |
2.33 |
0.55 |
11 |
British American
Tobacco plc 4% 04/09/2026 |
446,816 |
2.31 |
0.54 |
12 |
GS Group 3.125%
25/07/2029 |
441,456 |
2.29 |
0.54 |
13 |
US 0.875% IL
Treasury 2047 |
438,001 |
2.27 |
0.53 |
14 |
Barclays 3.125%
17/01/2024 |
415,796 |
2.15 |
0.51 |
15 |
HSBC Holdings
2.256% FRN 13/11/2026 |
405,925 |
2.10 |
0.49 |
16 |
Lloyds Bank
1.75% 11/07/2024 |
405,242 |
2.10 |
0.49 |
17 |
US 2.375%
Treasury Note 2029 |
373,604 |
1.93 |
0.45 |
18 |
Lloyds Bank plc
9.625% 06/40/2023 |
358,960 |
1.86 |
0.44 |
19 |
Real Estate
Investors plc |
347,956 |
1.80 |
0.42 |
20 |
Burford Capital
6.5% 2022 |
335,795 |
1.74 |
0.41 |
TOTAL |
|
10,513,769 |
54.43 |
12.79 |
As at 31 December 2019
|
|
|
|
Percentage of Total Assets 2019 |
Position |
Company |
Market
Value £’000 |
Percentage of Portfolio |
Smaller
Companies Portfolio |
|
|
|
1 |
Telecom Plus plc |
3,073,783 |
3.70 |
2.88 |
2 |
Hollywood Bowl Group
plc |
2,565,000 |
3.08 |
2.40 |
3 |
Severfield plc |
2,536,335 |
3.05 |
2.38 |
4 |
Secure Trust Bank
plc |
2,528,000 |
3.04 |
2.37 |
5 |
Regional REIT
Limited |
2,399,840 |
2.89 |
2.25 |
6 |
4imprint Group
plc |
2,315,975 |
2.78 |
2.17 |
7 |
Numis Corporation
plc |
2,304,900 |
2.77 |
2.16 |
8 |
FDM Group Holdings
plc |
2,295,480 |
2.76 |
2.15 |
9 |
Polar Capital Holdings
plc |
2,224,800 |
2.68 |
2.08 |
10 |
Goodwin plc |
2,190,300 |
2.63 |
2.05 |
11 |
Brewin Dolphin
Holdings plc |
2,188,900 |
2.63 |
2.05 |
12 |
Ocean Wilsons Holdings
Limited |
2,182,500 |
2.62 |
2.04 |
13 |
Wincanton plc |
2,126,781 |
2.56 |
1.99 |
14 |
Macfarlane Group
plc |
2,110,000 |
2.54 |
1.98 |
15 |
James Halstead
plc |
2,098,200 |
2.52 |
1.96 |
16 |
DiscoverIE Group
plc |
2,093,442 |
2.52 |
1.96 |
17 |
Somero Enterprises
Inc |
2,025,000 |
2.43 |
1.90 |
18 |
Clipper Logistics
plc |
1,998,500 |
2.40 |
1.87 |
19 |
Epwin Group plc |
1,984,875 |
2.39 |
1.86 |
20 |
Primary Health
Properties plc |
1,917,600 |
2.31 |
1.80 |
TOTAL |
|
45,160,211 |
54.30 |
42.30 |
|
|
|
|
|
Income
Portfolio |
|
|
|
1 |
Pershing Square
Holdings Limited |
850,651 |
4.13 |
0.80 |
2 |
Value & Income
Trust 11.00% 31/03/2021 |
805,588 |
3.91 |
0.75 |
3 |
Pershing Square
Holdings 5.50% 15/07/2022 |
797,698 |
3.87 |
0.75 |
4 |
APQ Global Limited
3.5% CULS 30/09/2024 |
792,100 |
3.84 |
0.74 |
5 |
Real Estate Investors
plc |
715,000 |
3.47 |
0.67 |
6 |
Credit Suisse Group
2.75% 08/08/2025 |
629,866 |
3.05 |
0.59 |
7 |
Santander UK
1.875%17/02/2020 |
600,673 |
2.91 |
0.56 |
8 |
AT&T 2.9%
04/12/2026 |
528,269 |
2.56 |
0.49 |
9 |
Citigroup 1.75%
23/10/26 |
497,838 |
2.41 |
0.47 |
10 |
British Land White
0.00% |
496,580 |
2.41 |
0.47 |
11 |
Supermarket Income
REIT plc |
490,500 |
2.38 |
0.46 |
12 |
RM plc ZDP |
465,400 |
2.26 |
0.44 |
13 |
J Sainsbury 6.5%
PERP |
461,886 |
2.24 |
0.43 |
14 |
Deutsche Bank 0.0025%
29/10/2020 |
446,821 |
2.17 |
0.42 |
15 |
British American
Tobacco plc 4% 04/09/2026 |
439,701 |
2.13 |
0.41 |
16 |
GS Group 3.125%
25/07/2029 |
431,551 |
2.09 |
0.40 |
17 |
Barclays 3.125%
17/01/2024 |
419,972 |
2.04 |
0.39 |
18 |
HSBC Holdings 2.256%
FRN 13/11/2026 |
405,897 |
1.97 |
0.38 |
19 |
Lloyds Bank 1.75%
11/07/2024 |
403,189 |
1.96 |
0.38 |
20 |
Lloyds Bank plc 9.625%
06/04/2023 |
373,350 |
1.81 |
0.35 |
TOTAL |
|
11,052,530 |
53.61 |
10.35 |
Viability Statement
For the period ended 30 June
2020
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 2020.
A period of three years has been chosen for the purposes of the
assessment of viability as the Board believes that this reflects a
suitable time horizon for reviewing the Company’s circumstances and
strategy, taking into account the investment policy, liquidity of
investments, potential impact of economic cycles, nature of
operating costs, dividends and the availability of funding. The
Directors had regard to the general advice that equity investment
should be made on a medium to longer term view (perhaps 3 to 10
years) but also to evidence that the average holding time for an
equity investment is under three years. The Directors consider that
three years is a sufficient investment time horizon to be relevant
to shareholders and that choosing a longer time period can present
difficulties given the lack of longer term economic visibility.
In their assessment of the viability of the Company, the
Directors have considered the Company’s principal risks and
uncertainties detailed in Statement of Principal and Emerging Risks
and Uncertainties in particular:
- the Company’s ability to repay the final capital entitlement of
the ZDP Shares on 28 February
2022;
- any potential falls in value of the Company’s investment
portfolio;
- the potential impact of COVID-19;
- the potential impact on the Company and its activities of a
disorderly Brexit; and
- the impact on the Company should the shareholders vote not to
pass the continuation vote scheduled to take place at the 2021
annual general meeting of the Company, which would oblige the
Directors to follow the provisions in the Articles of Incorporation
and put forward proposals to the effect that the Company would be
wound up, liquidated, reorganised, unitised or to find some other
suitable solution that would be satisfactory to the
shareholders.
The Directors 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. Consideration has also been given to
potential reduction in income due to global economic slowdown from
the COVID-19 pandemic.
The Directors have carried out a robust assessment of the risks
outlined above and the Directors confirm that they have a
reasonable expectation that the Company will be able to continue in
operation to serve shareholders appropriately and to meet its
liabilities as they fall due over the three year period to
June 2023.
Condensed Statement of Comprehensive
Income (unaudited)
For the period ended 30 June
2020
|
|
|
|
Period ended
30 June 2020 |
Period ended
30 June 2019 |
|
|
|
|
|
|
Revenue |
Capital |
Total |
Total |
|
Notes |
GBP |
GBP |
GBP |
GBP |
Net (losses)/gains on
financial assets designated as at fair value through profit or
loss |
8 |
- |
(23,379,166) |
(23,379,166) |
6,687,975 |
(Losses)/gains on
derivative financial instruments |
2 |
- |
(263,264) |
(263,264) |
23,514 |
Investment income |
3 |
1,048,112 |
- |
1,048,112 |
2,154,679 |
Total income and
(losses)/gains |
|
1,048,112 |
(23,642,430) |
(22,594,318) |
8,866,168 |
Expenses |
4 |
(325,309) |
(346,095) |
(671,404) |
(729,213) |
(Loss)/return on
ordinary activities before finance costs and taxation |
|
722,803 |
(23,988,525) |
(23,265,722) |
8,136,955 |
Interest payable and
similar charges |
5 |
- |
(619,728) |
(619,728) |
(586,289) |
(Loss)/return on
ordinary activities before taxation |
|
722,803 |
(24,608,253) |
(23,885,450) |
7,550,666 |
Taxation on ordinary
activities |
|
- |
- |
- |
- |
Other comprehensive
income |
|
- |
- |
- |
- |
|
|
|
|
|
|
Total comprehensive
(loss)/income for the period attributable to Ordinary
Shareholders |
|
722,803 |
(24,608,253) |
(23,885,450) |
7,550,666 |
|
|
Pence |
Pence |
Pence |
Pence |
(Loss)/return per
Ordinary Share |
7 |
4.57 |
(155.58) |
(151.01) |
47.74 |
Dividend per
Ordinary Share |
6 |
11.50 |
- |
11.50 |
10.40 |
Return per ZDP
Share |
7 |
- |
2.92 |
2.92 |
2.76 |
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 relate to continuing operations. No operations were acquired
or discontinued in the period.
The Notes form an integral part of the Unaudited Condensed
Interim Financial Statements.
Condensed Statement of Financial
Position (unaudited)
As at 30 June 2020
|
|
|
30
June 2020 |
|
31 Dec
2019 |
|
Notes |
|
GBP |
|
GBP |
NON-CURRENT
ASSETS |
|
|
|
|
|
Financial assets
designated as at fair value through profit or loss |
8 |
|
80,380,721 |
|
103,788,482 |
CURRENT
ASSETS |
|
|
|
|
|
Receivables |
9 |
|
337,202 |
|
491,738 |
Cash and cash
equivalents |
|
|
1,447,434 |
|
2,324,683 |
Derivative financial
instruments |
|
|
28,440 |
|
186,453 |
|
|
|
1,813,076 |
|
3,002,874 |
TOTAL
ASSETS |
|
|
82,193,797 |
|
106,791,356 |
CURRENT
LIABILITIES |
|
|
|
|
|
Derivative financial
instruments |
|
|
26,245 |
|
6,661 |
Payables - due within
one year |
10 |
|
767,259 |
|
299,762 |
|
|
|
793,504 |
|
306,423 |
NON-CURRENT
LIABILITIES |
|
|
|
|
|
ZDP Shares |
11 |
|
33,340,835 |
|
32,721,106 |
TOTAL
LIABILITIES |
|
|
34,134,339 |
|
33,027,529 |
NET ASSETS |
|
|
48,059,458 |
|
73,763,827 |
EQUITY |
|
|
|
|
|
Share capital and
premium |
12 |
|
27,420,824 |
|
27,420,824 |
Revenue reserve |
|
|
2,321,111 |
|
3,417,227 |
Capital reserve |
|
|
13,097,685 |
|
37,705,938 |
Other reserves |
13 |
|
5,219,838 |
|
5,219,838 |
TOTAL
EQUITY |
|
|
48,059,458 |
|
73,763,827 |
|
|
|
Pence |
|
Pence |
Net asset value per
Ordinary Share (per Articles) |
|
|
303.90 |
|
466.43 |
Net asset value per
Ordinary Share (per IFRS) |
|
|
303.85 |
|
466.37 |
Net asset value per
ZDP Share (per Articles) |
|
|
157.00 |
|
154.07 |
Net asset value per
ZDP Share (per IFRS) |
|
|
157.04 |
|
154.12 |
The Unaudited Condensed Interim Financial Statements were
approved by the Board of Directors and authorised for issue on
17 August 2020 and signed on its
behalf by:
Nigel
Ward
Chairman
The Notes form an integral part of the Unaudited Condensed
Interim Financial Statements.
Condensed Statement of Cash Flows
(unaudited)
For the period ended 30 June
2020
|
|
Period ended 30 June 2020 |
Period ended 30 June 2019 |
|
|
|
Notes |
GBP |
GBP |
Operating
activities |
|
|
|
(Loss)/return on
ordinary activities before taxation |
|
(23,885,450) |
7,550,666 |
Net losses/(gains) on
financial assets designated as at fair value through profit or
loss |
8 |
23,379,166 |
(6,687,975) |
Investment income |
3 |
(1,048,112) |
(2,154,679) |
Interest expense |
5 |
619,728 |
586,289 |
Decrease in derivative
financial assets |
|
158,013 |
8,131 |
Increase/(decrease) in
derivative financial liabilities |
|
19,584 |
(10,007) |
(Decrease)/increase in
payables and appropriations excluding amount due to brokers |
10 |
(45,296) |
363,177 |
Increase in
receivables excluding accrued investment income and due from
brokers |
9 |
(9,790) |
(1,220) |
Net cash flow used
in operating activities before investment income |
|
(812,157) |
(345,618) |
Investment income
received |
|
1,183,957 |
2,001,998 |
Net cash flow from
operating activities before taxation |
|
371,800 |
1,656,380 |
Tax paid |
|
- |
- |
Net cash flow from
operating activities |
|
371,800 |
1,656,380 |
Investing
activities |
|
|
|
Purchase of financial
assets designated at fair value through profit or loss |
|
(15,233,430) |
(20,038,297) |
Sale of financial
assets designated at fair value through profit or loss |
|
15,803,301 |
19,320,321 |
Net cash flow
from/(used in) investing activities |
|
569,871 |
(717,976) |
Financing
activities |
|
|
|
Equity dividends
paid |
6 |
(1,818,920) |
(1,644,936) |
Net cash flow used
in financing activities |
|
(1,818,920) |
(1,644,936) |
Decrease in cash
and cash equivalents |
|
(877,249) |
(706,532) |
Cash and cash
equivalents at beginning of period |
|
2,324,683 |
2,884,610 |
Cash and cash
equivalents at end of period |
|
1,447,434 |
2,178,078 |
The Notes form an integral part of the Unaudited Condensed
Interim Financial Statements.
Condensed Statement of Changes in
Equity (unaudited)
As at 30 June 2020
|
|
Share
Capital
and Premium |
Revenue
Reserve |
Capital
Reserve |
Other
Reserves |
Total |
|
|
30 June
2020 |
30 June
2020 |
30 June
2020 |
30 June
2020 |
30 June
2020 |
Notes |
GBP |
GBP |
GBP |
GBP |
GBP |
Balances as at 1
January 2020 |
|
27,420,824 |
3,417,227 |
37,705,938 |
5,219,838 |
73,763,827 |
Total
comprehensive income/(loss) for the period attributable to Ordinary
Shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
722,803 |
(24,608,253) |
- |
(23,885,450) |
Dividends |
6 |
- |
(1,818,919) |
- |
- |
(1,818,919) |
Balances as at 30 June
2020 |
|
27,420,824 |
2,321,111 |
13,097,685 |
5,219,838 |
48,059,458 |
|
|
|
|
|
|
|
|
|
Share
Capital
and Premium |
Revenue
Reserve |
Capital
Reserve |
Other
Reserves |
Total |
|
|
30 June
2019 |
30 June
2019 |
30 June
2019 |
30 June
2019 |
30 June
2019 |
|
GBP |
GBP |
GBP |
GBP |
GBP |
Balances as at 1
January 2019 |
|
27,420,824 |
3,178,203 |
24,997,090 |
5,219,838 |
60,815,955 |
Total comprehensive
income for the period attributable to Ordinary Shareholders |
|
- |
1,765,281 |
5,785,385 |
- |
7,550,666 |
Dividends |
6 |
- |
(1,644,936) |
- |
- |
(1,644,936) |
Balances as at 30 June
2019 |
|
27,420,824 |
3,298,548 |
30,782,475 |
5,219,838 |
66,721,685 |
The Notes form an integral part of the Unaudited Condensed
Interim Financial Statements.
Notes to the Condensed Financial
Statements (unaudited)
For the period ended 30 June
2020
1. ACCOUNTING POLICIES
(a) Basis of Preparation
The for the six months ended 30 June
2020 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 2019.
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 2019 which were prepared
in accordance with International Financial Reporting Standards
(“IFRS”) as adopted by the EU.
(b) Presentation of Information
The Unaudited Condensed Interim Financial Statements have been
prepared on a going concern basis under the historical cost
convention adjusted to take account of the revaluation of the
Company’s investments at fair value.
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:
Segment
Investment Objectives and Principal Investment 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.
Smaller 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
2020 |
|
|
|
|
|
|
|
|
|
External
revenues: |
|
|
|
|
|
|
|
|
|
Net losses on financial assets designated as at fair value
through profit or loss |
|
|
|
|
|
|
|
(188,583) |
|
(23,190,583) |
|
- |
|
(23,379,166) |
Losses on
derivative financial instruments |
(263,264) |
|
- |
|
- |
|
(263,264) |
Investment
income: |
|
|
|
|
|
|
|
|
|
Dividend
income |
|
|
73,882 |
|
747,302 |
|
- |
|
821,184 |
Bond
income |
|
|
226,928 |
|
- |
|
- |
|
226,928 |
Total losses |
|
|
|
(151,037) |
|
(22,443,281) |
|
- |
|
(22,594,318) |
Expenses |
|
|
|
- |
|
- |
|
(671,404) |
|
(671,404) |
Interest
payable and similar charges |
|
- |
|
- |
|
(619,728) |
|
(619,728) |
Total comprehensive loss for the period attributable to
shareholders |
|
|
|
|
|
|
|
(151,037) |
|
(22,443,281) |
|
(1,291,132) |
|
(23,885,450) |
|
|
|
|
|
|
Smaller |
|
|
|
|
|
|
|
|
Income |
|
Companies |
|
|
|
|
|
|
|
|
Portfolio |
|
Portfolio |
|
Unallocated |
|
Total |
|
|
|
|
GBP |
|
GBP |
|
GBP |
|
GBP |
|
|
|
|
|
|
|
|
|
|
|
30 June
2020 |
|
|
|
|
|
|
|
|
|
Financial assets designated as at fair
value
through profit or loss |
|
|
|
|
|
|
|
19,318,940 |
|
61,061,781 |
|
- |
|
80,380,721 |
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 liabilities |
|
|
26,245 |
|
- |
|
767,259 |
|
793,504 |
|
|
|
|
|
|
Smaller |
|
|
|
|
|
|
|
|
Income |
|
Companies |
|
|
|
|
|
|
|
|
Portfolio |
|
Portfolio |
|
Unallocated |
|
Total |
|
|
|
|
GBP |
|
GBP |
|
GBP |
|
GBP |
|
|
|
|
|
|
|
|
|
|
|
30 June
2019 |
|
|
|
|
|
|
|
|
|
External
revenues: |
|
|
|
|
|
|
|
|
|
Net gains on financial assets designated as at fair value
through profit or loss |
|
|
|
|
|
|
|
340,533 |
|
6,347,442 |
|
- |
|
6,687,975 |
Gains on
derivative financial instruments |
23,514 |
|
- |
|
- |
|
23,514 |
Investment
income: |
|
|
|
|
|
|
|
|
|
Dividend
income |
|
|
83,619 |
|
1,785,594 |
|
- |
|
1,869,213 |
Bond
income |
|
|
281,319 |
|
- |
|
- |
|
281,319 |
Sundry
Income |
|
|
4,147 |
|
|
|
- |
|
4,147 |
Total gains |
|
|
|
733,132 |
|
8,133,036 |
|
- |
|
8,866,168 |
Expenses |
|
|
|
- |
|
- |
|
(729,213) |
|
(729,213) |
Interest
payable and similar charges |
|
- |
|
- |
|
(586,289) |
|
(586,289) |
Total
comprehensive income for the period attributable |
|
|
|
|
|
|
|
to
shareholders |
|
|
733,132 |
|
8,133,036 |
|
(1,315,502) |
|
7,550,666 |
|
|
|
|
|
|
Smaller |
|
|
|
|
|
|
|
|
Income |
|
Companies |
|
|
|
|
|
|
|
|
Portfolio |
|
Portfolio |
|
Unallocated |
|
Total |
|
|
|
|
GBP |
|
GBP |
|
GBP |
|
GBP |
|
|
|
|
|
|
|
|
|
|
|
30 June
2019 |
|
|
|
|
|
|
|
|
|
Financial assets designated as at fair value through profit
or loss |
|
|
|
|
|
|
|
22,150,565 |
|
73,650,392 |
|
- |
|
95,800,957 |
Receivables |
|
|
|
659,791 |
|
952,080 |
|
2,430 |
|
1,614,301 |
Derivative
financial instruments |
|
5,955 |
|
- |
|
- |
|
5,955 |
Cash and
cash equivalents |
|
1,281,722 |
|
896,356 |
|
- |
|
2,178,078 |
Total assets |
|
|
|
24,098,033 |
|
75,498,828 |
|
- |
|
99,599,291 |
Derivative
financial instruments |
|
189,593 |
|
- |
|
- |
|
189,593 |
Payables |
|
|
|
- |
|
- |
|
588,288 |
|
588,288 |
Total
current liabilities |
|
|
189,593 |
|
- |
|
588,288 |
|
777,881 |
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
world |
|
Total |
|
|
|
GBP |
|
GBP |
|
GBP |
|
GBP |
|
GBP |
30 June
2020 |
|
|
|
|
|
|
|
|
|
|
External revenues |
|
|
|
|
|
|
|
|
|
|
Total
Revenue |
|
871,327 |
|
52,409 |
|
31,653 |
|
92,723 |
|
1,048,112 |
|
|
|
UK |
|
Guernsey |
|
Europe |
|
the
world |
|
Total |
|
|
|
GBP |
|
GBP |
|
GBP |
|
GBP |
|
GBP |
30 June
2019 |
|
|
|
|
|
|
|
|
|
|
External revenues |
|
|
|
|
|
|
|
|
|
|
Total
Revenue |
|
1,664,079 |
|
115,582 |
|
119,342 |
|
255,676 |
|
2,154,679 |
The Company did not hold any non-current assets during the
period other than financial instruments (30
June 2019: £nil).
Major Customers
The Company regards its shareholders as customers. As at the
period ended 30 June 2020, the
Company had no shareholders with a holding greater than 10%.
(30 June 2019: nil).
3. INVESTMENT INCOME
|
|
|
|
Period ended |
|
Period ended |
|
|
|
|
30
June 2020 |
|
30
June 2019 |
|
|
|
|
GBP |
|
GBP |
Dividend income |
|
|
|
821,184 |
|
1,869,213 |
Bond income |
|
|
|
226,928 |
|
281,319 |
Sundry income |
|
|
|
- |
|
4,147 |
|
|
|
|
1,048,112 |
|
2,154,679 |
4. EXPENSES
|
|
|
|
|
Period ended 30 June 2020 |
|
Period ended 30 June 2019 |
|
|
|
|
Revenue |
|
Capital |
|
Total |
|
Revenue |
|
Capital |
|
Total |
|
|
|
|
GBP |
|
GBP |
|
GBP |
|
GBP |
|
GBP |
|
GBP |
Manager's
fee* |
|
|
76,028 |
|
228,083 |
|
304,111 |
|
84,969 |
|
254,908 |
|
339,877 |
Administrator's fee** |
|
|
42,545 |
|
- |
|
42,545 |
|
41,200 |
|
- |
|
41,200 |
Registrar's fee |
|
|
22,719 |
|
- |
|
22,719 |
|
19,810 |
|
- |
|
19,810 |
Directors'
fees |
|
|
71,781 |
|
- |
|
71,781 |
|
57,785 |
|
- |
|
57,785 |
Custody
fees |
|
|
12,388 |
|
- |
|
12,388 |
|
11,395 |
|
- |
|
11,395 |
Audit fees |
|
|
|
18,473 |
|
- |
|
18,473 |
|
21,644 |
|
- |
|
21,644 |
Directors'
and Officers' insurance |
|
2,820 |
|
- |
|
2,820 |
|
8,691 |
|
- |
|
8,691 |
Annual fees |
|
|
|
15,463 |
|
- |
|
15,463 |
|
15,762 |
|
- |
|
15,762 |
Commissions and charges paid |
|
- |
|
78,399 |
|
78,399 |
|
- |
|
84,907 |
|
84,907 |
Legal and
professional fees |
|
10,043 |
|
- |
|
10,043 |
|
18,727 |
|
- |
|
18,727 |
Broker fees |
|
|
|
23,763 |
|
- |
|
23,763 |
|
22,294 |
|
- |
|
22,294 |
Bank
interest |
|
|
2,849 |
|
- |
|
2,849 |
|
- |
|
- |
|
- |
Sundry
costs |
|
|
28,606 |
|
- |
|
28,606 |
|
17,221 |
|
- |
|
17,221 |
(Gains)/loss on foreign exchange |
|
(2,170) |
|
39,613 |
|
37,443 |
|
69,900 |
|
- |
|
69,900 |
|
|
|
|
325,308 |
|
346,095 |
|
671,403 |
|
389,398 |
|
339,815 |
|
729,213 |
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, currently £3,100 for the
twelve months from 1 April 2019 to
31 March 2020. The Management
Agreement may be terminated, in writing, by either party giving 6
months’ notice, provided the initial 12 month period from signing
has expired, this date being 17 April
2020. 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.
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
2020 (31 December 2019:
£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.
5. INTEREST PAYABLE AND SIMILAR
CHARGES
|
|
|
|
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 |
|
|
|
|
Period ended 30 June 2019 |
|
|
|
|
Revenue |
Capital |
Total |
|
|
|
|
GBP |
GBP |
GBP |
Appropriation in respect of ZDP Shares |
|
- |
586,289 |
586,289 |
|
|
|
|
- |
586,289 |
586,289 |
6. DIVIDENDS IN RESPECT OF ORDINARY
SHARES
|
|
|
Period ended |
Period ended |
|
|
|
30 June 2020 |
30 June 2019 |
|
|
|
|
|
Pence |
|
|
Pence |
|
|
|
GBP |
|
per
share |
GBP |
|
per
share |
First
interim payment |
|
909,460 |
|
5.75 |
822,468 |
|
5.20 |
Second
interim payment |
|
909,460 |
|
5.75 |
822,468 |
|
5.20 |
|
|
|
1,818,920 |
|
11.50 |
1,644,936 |
|
10.40 |
Further details on the Company’s dividend policy can be found in
Investment Objectives and Policy.
7. EARNINGS PER SHARE
Ordinary Shares
The total loss per Ordinary Share (per IFRS) is based on the
total loss on ordinary activities for the period attributable to
Ordinary Shareholders of £23,885,450 (30
June 2019: return of £7,550,666) and on 15,816,687
(30 June 2019: 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 £722,803 (30
June 2019 revenue return of: £1,765,281) and on 15,816,687
(30 June 2019: 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 loss per Ordinary Share (per IFRS) is based on the
capital loss on ordinary activities for the period attributable to
Ordinary Shareholders of £24,608,253 (30
June 2019: capital return of £5,785,385) and on 15,816,687
(30 June 2019: 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 £619,728 (30 June 2019: £586,289) and on 21,230,989
(30 June 2019: 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 2020 |
|
31
Dec 2019 |
|
|
|
|
|
|
|
GBP |
|
GBP |
INVESTMENTS |
|
|
|
|
|
|
|
|
Opening
portfolio cost |
|
|
|
|
|
87,991,361 |
|
85,087,877 |
Purchases
at cost |
|
|
|
|
|
15,746,225 |
|
34,978,783 |
Sales |
|
|
|
|
|
|
|
|
|
- proceeds |
|
|
|
|
|
|
(15,774,820) |
|
(35,060,945) |
- realised
gains on sales |
|
|
|
|
|
3,310,392 |
|
6,179,329 |
- realised
losses on sales |
|
|
|
|
|
(6,518,703) |
|
(3,193,683) |
Closing
book cost |
|
|
|
|
|
84,754,455 |
|
87,991,361 |
Unrealised
appreciation on investments |
|
|
|
9,338,051 |
|
20,503,186 |
Unrealised
depreciation on investments |
|
|
|
(13,711,785) |
|
(4,706,065) |
Fair value |
|
|
|
|
|
|
80,380,721 |
|
103,788,482 |
Realised
gains on sales |
|
|
|
|
|
3,310,392 |
|
6,179,329 |
Realised
losses on sales |
|
|
|
|
|
(6,518,703) |
|
(3,193,683) |
(Decrease)/increase in unrealised appreciation on investments |
|
|
(11,165,135) |
|
8,019,527 |
(Increase)/decrease in unrealised depreciation on investments |
|
|
(9,005,720) |
|
3,535,914 |
Net
(losses)/ gains on financial assets designated as at fair value
through profit or loss |
(23,379,166) |
|
14,541,087 |
As at 30 June 2020, the closing
fair value of investments comprises £61,061,783 (31 December 2019: £83,169,400) of Smaller
Companies Portfolio, £19,318,940 (31
December 2019: £20,619,082) of Income Portfolio. The Market
Value of open Futures included in the Income Portfolio totalled an
asset of £17,986 (31 December 2019:
liability of £43,458).
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
2020 |
|
30 June
2020 |
|
31 Dec
2019 |
|
31 Dec
2019 |
|
|
|
Market
value |
|
Market
value |
|
Market
value |
|
Market
value |
|
|
|
% |
|
GBP |
|
% |
|
GBP |
Level 1 |
|
|
82.44 |
|
66,264,962 |
|
81.72 |
|
84,817,978 |
Level 2 |
|
|
17.56 |
|
14,115,759 |
|
18.28 |
|
18,970,504 |
Level 3 |
|
|
- |
|
- |
|
- |
|
- |
Total |
|
|
100.00 |
|
80,380,721 |
|
100.00 |
|
103,788,482 |
Bonds and structured investments are priced by reference to
market quotations which incorporate assessment of yield, maturity
and the instrument’s terms and conditions.
For investments categorised in Level 3 as at 30 June 2020, the below details the valuation
methodologies used:
Silverdell plc – The stock is suspended and is valued at zero.
JPMorgan Global Convertibles Income – The stock is in liquidation
and is valued at zero, following a final liquidation payment of
£478,435 on the 18 November 2019. The
Investment Adviser does not expect any return of capital.
Derivative Financial Assets and
Liabilities Designated as at Fair Value Through Profit or Loss
|
|
|
30 June
2020 |
|
30 June
2020 |
|
31 Dec
2019 |
|
31 Dec
2019 |
|
|
|
Market
value |
|
Market
value |
|
Market
value |
|
Market
value |
|
|
|
% |
|
GBP |
|
% |
|
GBP |
Level 1
derivative financial assets |
- |
|
3,480 |
|
- |
|
846 |
Level 2
derivative financial assets |
0.03 |
|
55,957 |
|
0.18 |
|
185,607 |
Level 2
derivative financial liabilities |
(0.02) |
|
(39,256) |
|
(0.01) |
|
6,661 |
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 period. 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 2020 |
|
31 Dec
2019 |
|
|
|
|
|
|
|
GBP |
|
GBP |
Due from brokers |
|
|
|
|
|
|
- |
|
28,481 |
Prepayments |
|
|
|
|
|
|
14,580 |
|
4,790 |
Accrued
investment income |
|
|
|
322,622 |
|
458,467 |
|
|
|
|
|
|
|
337,202 |
|
49,1738 |
10. PAYABLES
|
|
|
|
|
|
|
30
June 2020 |
|
31 Dec
2019 |
|
|
|
|
|
|
|
GBP |
|
GBP |
Accrued expenses |
|
|
|
|
|
|
85,053 |
|
93,235 |
Amounts
due to brokers |
|
|
|
|
539,907 |
|
27,114 |
Trade creditors |
|
|
|
|
|
|
142,299 |
|
179,413 |
|
|
|
|
|
|
|
767,259 |
|
299,762 |
11. ZDP SHARES
|
|
|
|
|
|
|
30
June 2020 |
|
31 Dec
2019 |
|
|
|
|
|
|
|
GBP |
|
GBP |
ZDP Share
entitlement |
|
|
|
|
33,340,835 |
|
32,721,106 |
The above
entitlement comprises the following: |
|
|
|
21,230,989
ZDP Shares issued to date up to 30 Jun 2020 |
22,831,682 |
|
- |
21,230,989
ZDP Shares issued to date up to 31 Dec 2019 |
- |
|
22,831,682 |
ZDP Premium |
|
|
|
|
|
|
(8,144) |
|
(10,581) |
Appropriation in respect of ZDP Shares |
|
10,509,153 |
|
9,889,424 |
ZDP value
(calculated in accordance with the Articles) |
33,332,691 |
|
32,710,525 |
Add back
ZDP Premium |
|
|
|
|
8,144 |
|
10,581 |
ZDP value
(calculated in accordance with IFRS) |
|
33,340,835 |
|
32,721,106 |
The fair value of the ZDP Shares as at 30
June 2020 was £32,377,258 (31
December 2019: £33,014,188). 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 (2019: 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
2019: 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
2020 |
31 Dec
2019 |
|
|
|
|
|
|
Number
of |
Number
of |
Issued |
|
|
|
|
|
Shares |
Shares |
Number of
shares in issue at the start of the period/year |
|
15,816,687 |
15,816,687 |
Number of
shares in issue at the end of the period/year |
|
15,816,687 |
15,816,687 |
Issued and
fully paid capital at the end of the period/year |
|
£196,606 |
£196,606 |
|
|
|
|
|
Share
Capital |
Share
Premium |
Total |
Total |
|
|
|
|
|
30 June
2020 |
30 June
2020 |
30 June
2020 |
31 Dec
2019 |
|
|
|
|
|
GBP |
GBP |
GBP |
GBP |
Opening
share capital and premium |
|
|
196,606 |
27,224,218 |
27,420,824 |
27,420,824 |
Closing
share capital and premium |
|
|
196,606 |
27,224,218 |
27,420,824 |
27,420,824 |
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 2020 was £196,606 (31 December 2019: £196,606).
13. OTHER RESERVES
TREASURY RESERVE
|
|
|
|
30
June 2020 |
|
31 Dec
2019 |
|
|
|
|
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 2020 |
|
31 Dec
2019 |
|
|
|
|
No.
Shares |
|
No.
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.
£304,111 (30 June 2019: £339,877)
of costs were incurred by the Company with this related party in
the period, of which £142,299 (31 December
2019: £179,413) was due to this related party as at
30 June 2020.
During the period ended 30 June
2020, £nil (30 June 2019:
£nil) was charged as performance fees of which, £nil (31 December 2019: £nil) remained payable at
period end.
The Directors’ remuneration is disclosed in Note 4.
David Warr holds 63,000
(31 December 2019: 63,000) Ordinary
Shares in the capital of the Company, which represents an interest
of 0.40% (31 December 2019: 0.40%) of
the Company’s Ordinary Shares in issue as at 30 June 2020.
Nigel Sidebottom holds 4,366
(31 December 2019: 4,366) Ordinary
Shares in the capital of the Company, which represented an interest
of 0.03% (31 December 2019: 0.03%) of
the Company’s Ordinary Shares in issue as at 30 June 2020, and 5,205 (31 December 2019: 5,205) ZDP Shares in the
capital of the Company, which represented an interest of 0.02%
(31 December 2018: 0.02%) of the
Company’s ZDP Shares in issue as at 30 June
2020.
Nigel Ward holds 7,000
(31 December 2019: 7,000) Ordinary
Shares in the capital of the Company, via a nominee account. This
represents an interest of 0.04% (31 December
2019: 0.04%).
As at 30 June 2020 employees of
the Investment Manager held interest in 10,990 Ordinary Shares of
the Company representing 0.07% of the issued share capital.
15. SUBSEQUENT EVENTS
These Unaudited Condensed Interim Financial Statements were
approved for issue by the Board on 17 August
2020. Subsequent events have been evaluated until this
date.
A dividend of 5.75p was declared on 17
August 2020 and is expected to be paid to ordinary
shareholders on 30 September
2020.
As at 12 August 2020 the published
NAV per Ordinary Share for the Company was 317.99p. This represents
an increase of 4.63% from 30 June
2020 NAV of 303.91p.
Directors, Advisers and Contacts
Directors
John Nigel Ward (Chairman)
David John Warr
Nigel Sidebottom
Sharon Parr
Shareholders are welcome to contact the Chairman directly by
emailing at:
Acorn_Income_Fund_Limited@ntrs.com |
Corporate
Broker
N+1 Singer Advisory LLP
One Bartholomew Lane
London
EC2N 2AX
Tel: 0207 4963000
(appointed 1 August 2020) |
Investment
Manager
Premier Asset Management (Guernsey) Limited
PO Box 255
Trafalgar Court
Les Banques
St Peter Port
Guernsey
GY1 3QL
Tel: 01483 400430
Contact: Claire Long |
Numis Securities
Limited
10 Paternoster Square
London
EC4M 7LT
Tel: 0207 2601000
(until 31 July 2020) |
Investment Adviser
– Smaller Companies Portfolio
Unicorn Asset Management Limited
Preacher’s Court
The Charterhouse
Charterhouse Square
London
EC1M 6AU
Tel: 0207 2530889
Contact: Simon Moon |
Independent
Auditor
KPMG Channel Islands Limited
Glategny Court
Glategny Esplanade
St Peter Port
Guernsey
GY1 1WR |
Investment Adviser
– Income Portfolio
Premier Fund Managers Limited
Eastgate Court
High Street
Guildford
GU1 3DE
Tel: 01483 400430
Contact: Claire Long |
Registrar
JTC Registrars Limited
PO Box 156
Ground Floor
Dorey Court
Admiral Park
St Peter Port
Guernsey
GY1 4EU
Tel: 01481 702400
Email: registrars@jtcgroup.com |
Administrator and
Secretary
Northern Trust International Fund Administration Services
(Guernsey) Limited
PO Box 255
Trafalgar Court
Les Banques
St Peter Port
Guernsey
GY1 3QL
Email: Team_Acorn@ntrs.com |
Company’s
Registered Office
PO Box 255
Trafalgar Court
Les Banques
St Peter Port
Guernsey
GY1 3QL |
Custodian
Northern Trust (Guernsey) Limited
PO Box 71
Trafalgar Court
Les Banques
St Peter Port
Guernsey
GY1 3DA |
Company
Details
Company Number: 34778
GIIN Number: CY0IXM.99999.SL.831
Ordinary Shares
ISIN: GB0004829437
Ticker: AIF
ZDP Shares
ISIN: GGOOBYMJ7X48
Ticker: AIFZ |