TIDMAIF TIDMAIFZ
Acorn Income Fund Limited
LEI 213800UAZN7G46AHQM67
Annual Financial Report (audited)
For the year ended 31 December 2020
(Classified Regulated Information, under DTR 6 Annex 1 section 1.1)
The Company has today, in accordance with DTR 6.3.5, released its Annual
Financial Report (audited) for the year ended 31 December 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 "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, the 7.5% limit
may be exceeded on a short term basis, with Board approval, 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,
except, 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.
Performance Summary
for the year ended 31 December 2020
31/12/2020 31/12/2019 % change/
return
Total Return Performance*
Total Return on Gross Assets*## -10.85%
Numis Smaller Companies (Ex Investment 23,117.10 24,153.03 -4.29%
Companies) Index
FTSE All Share Index 7,068.59 7,837.96 -9.82%
FTSE Small Cap (Ex Investment Companies) Index 8,108.86 7,977.20 1.65%
Share Price and NAV Returns
Ordinary Shares
Share Price 322.50p 406.00p -20.57%
NAV** 360.21p 466.43p -22.77%
IFRS NAV# 360.17p 466.37p -22.77%
Total Return on Net Assets** -17.08%
Ordinary Share Price Total Return* -14.05%
Discount (-) to NAV on Ordinary Shares** -10.47% -12.96%
ZDP Shares
Share Price 157.00p 155.50p 0.96%
NAV** 160.02p 154.07p 3.86%
IFRS NAV# 160.05p 154.12p 3.85%
Discount (-) Premium (+) to NAV on ZDP Shares* -1.89% +0.93%
*
Other
Total Assets less Current Liabilities £90,946,691 £106,484,933 -14.59%
Package Discount (-) to
NAV Combined Ordinary and ZDP Shares -7.26% -8.69%
ZDP Liability** £33,973,724 £32,710,524 3.86%
Net Assets** £56,972,967 £73,774,408 -22.77%
Gearing Level 59.63% 44.34% 34.48%
Total Expenses Ratio (calculated on year end 1.19% 1.13% 5.31%
Gross Assets)
Ongoing Charges (calculated on average Net 1.98% 1.79% 10.61%
Assets)
Dividends and Earnings
Revenue Return per Ordinary Share 13.75p 22.31p -38.37%
Dividends Declared per Ordinary Share 23.00p 20.80p 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 70-80% 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 31 December 2020, there were 1,325,972 Ordinary and 1,779,873 ZDP Shares
held in treasury.
Shareholder Funds
£56.97 million as at 31 December 2020 (calculated in accordance with IFRS)
£56.97 million as at 31 December 2020 (calculated in accordance with the
Articles)
Market Capitalisation of the Ordinary Shares
£51.01 million as at 31 December 2020
Company Details
The Board
The Board consists of three independent non-executive directors Nigel Ward
(Chairman), David Warr and Sharon Parr and one non-executive director, Nigel
Sidebottom, who is not considered independent by virtue of his previous
employment with the Premier Miton Group PLC, the parent company of the
Investment Manager (the "Directors").
Investment Manager
Premier Asset Management (Guernsey) Limited ("PAMG"), is a subsidiary of
Premier Miton Group PLC ("PMG" or "Premier Miton"). PMG had approximately £
12.0bn of funds under management as at 31 December 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
in Note 5 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 10 August 2021
Half-year results announced August
Dividend payments At the end of March, June, September
and December
Company Website
www.acornincome.co.uk
Chairman's Statement
Year to 31 December 2020
Dear Shareholder
The impact of the COVID-19 pandemic on stock markets around the world during
the first part of 2020 was exacerbated in the UK by the uncertainty over the
outcome of the Brexit trade negotiations that persisted throughout the year.
With their overwhelmingly domestic focus, UK smaller companies were
particularly impacted both by this uncertainty and by weaker sterling. While
many companies reduced or passed their dividends out of caution rather than
necessity during the first half of the year, the majority have now indicated
their intention to resume dividend payments, on the back of a marked
operational recovery in the second half.
In fixed income markets, central bank buying of government bonds kept yields
low, enabling companies to repair their balance sheets by issuing debt at
favourable interest rates. As a result, the second half of the year saw many
companies increase their leverage to maintain liquidity in the face of
challenging operational conditions, but this left them vulnerable to future
earnings pressure. Amongst investment companies, many have yet to recover
following the indiscriminate market sell off of the first quarter, despite
showing an underlying resilience and maintaining dividends. The economic
background for both parts of the portfolio was therefore decidedly mixed.
Investment Performance
Set against a very turbulent market and economic background - both domestic and
global - it was unsurprising though nonetheless disappointing that the total
return on Acorn's gross assets, which measures the return on the portfolio
including all income and costs, fell by 10.9%, while the total return on net
assets, impacted by the gearing effect of the Zero Dividend Preference Shares
("ZDPs"), was down 17.1%. This compared to a fall in the total return from the
Numis Smaller Companies (ex-Investment Companies) Index of 4.3%, and in the
FTSE All Share Index, which was down 9.7% (also total return).
The performance of the ordinary share price in total return terms, down 14.1%,
was a little better than the net asset performance, reflecting the fact that
the discount (the difference between the value of the assets and the share
price), having widened considerably in the middle part of the year, reduced
steadily from late summer onwards, to end the year at 10.5%, more in line with
its long term average.
The gearing provided by the ZDPs is a long standing component of the Company,
introduced to enhance returns over the long term. During periods of market
strength gearing will boost performance, but when the market weakens it will
act as a drag on performance, which is why the ordinary share Net Asset Value
("NAV") fell further than total assets in 2020. The gearing level at the
year-end, excluding current period revenue, was 58.1%. The Income Portfolio,
which is run by the team at PFM, is designed to provide an element of balance
to the gearing, but does not match it completely.
Discount Management
The Board pays close attention to the discount on the ordinary shares,
considering whether steps including share buy backs are an appropriate measure
to enhance long term shareholder value. There were no buy backs during the
course of 2020 as the Board was keen to maintain the size of the Company and,
in line with the recommendation of the Investment Advisors, to ensure that cash
remained available to invest when market conditions started to improve. The
average level of discount was almost unchanged on the previous year, at just
over 13%, but widened considerably over the summer months. The directors were
therefore pleased to see it narrowing during the final few months of 2020,
although we would like to see it narrow further. We attribute this move in part
to a gradual recognition by the market that the balance sheets, earnings and
therefore income streams of the smaller companies held in the portfolio were
more resilient than the sector as a whole. The decision to appoint a new broker
(see below) may also have played a part and certainly in reducing the dealing
spread, which at one point was unacceptably high.
Change to Corporate Broking Arrangements
In August the Company announced a change of corporate broker, with the
appointment of N+1 Singer Advisory LLP ("N+1 Singer") as sole broker, replacing
Numis Securities Ltd, who had acted for the Company since 2012. Since taking on
the role, the team at N+1 Singer has put considerable effort into promoting
Acorn to professional investors, arranging a series of roadshows, and
publishing a research initiation piece, all of which we believe may have
contributed to a narrowing of the discount. As a board we look forward to
working closely with them going forward.
Asset Allocation
In April 2020, in response to the pandemic-induced market volatility, and
following discussions with the Investment Advisers, the board took the decision
to put some downside protection in place, as a form of insurance should the
market environment for smaller companies in particular continue to deteriorate.
This took the form of a listed put option on the FTSE 100 Index. In the event
the stock market recovered, it would result in a cost to the overall portfolio.
The cost would have been far outweighed by the return it offered had the market
fallen further, as seemed eminently possible at the time the decision was
taken, and of course was dwarfed by the increased capital value as the market
recovered.
The Investment Advisers have regular discussions to consider the appropriate
split of assets between the two parts of the portfolio. At the start of the
year, the weighting to Smaller Companies stood at just under 79%, positioned to
take advantage of the greater relative opportunities then seen as prevailing in
that market. However, following the market's sharp correction and decision to
put insurance in place, it was deemed more appropriate to maintain the
resulting weighting of 75% to Smaller Companies with 25% remaining in the
Income Portfolio, positions that were retained throughout the remainder of the
year.
Earnings and Dividends
The first interim dividend for 2020, declared in early February prior to the
full impact of COVID-19, was increased by 10.6%, to 5.75p per ordinary share.
This level was maintained for the year as a whole, resulting in a total
dividend for the year of 23.0p. With COVID-19 leading many UK companies to
reduce or cancel dividend payments this impacted on Acorn's earnings in 2020
which declined by 38.34% to 13.75p per share. This decline should however be
seen in context. The notional dividend on the Numis Smaller Companies (ex
Investment Companies) index declined by 56.3% over the same period. In the view
of the Board, the pandemic brought about a situation in which it was felt
appropriate to draw on revenue reserves to maintain income levels for investors
throughout 2020. Revenue reserves at the start of the year stood at 21.6p per
share representing approximately one year's worth of dividend. Maintaining the
dividend distribution throughout 2020 reduced reserves to 12.36p per share at
31 December 2020. The Board has been pleased to see the recovery in earnings
throughout the second half of the year, certainly reaching a level which was
far from visible during the second quarter, and although our projections do
show a recovery in the Company's revenues for 2021 and thereafter, the Board
believe that it is likely that a return to a sustainable and covered dividend
will necessitate a lower dividend payment in future years.
Zero Dividend Preference Shares ('ZDPs')
The price of the ZDP shares rose by 1.0%, ending the year at 157.0p, a 1.9%
discount to NAV. The asset cover at the year-end stood at 2.5x and the yield to
maturity was 5.6%. The number of ZDPs in issue is 21,230,989. The ZDPs will
mature in February 2022 and the board will be considering the refinancing
options during the second half of 2021.
Environmental, Social, Governance
The growing prominence of ESG reporting continues to be driven both by
regulatory momentum, and changing investor preferences. From a reporting
perspective, the Association of Investment Companies is encouraging its member
companies to publish ESG policies on its website. Reflecting these policies,
the Manager is working to integrate ESG considerations more closely into
investment processes, drawing on the expertise of Premier Miton's Head of
Responsible Investing in order to do so effectively. Premier Miton is a
signatory to the United Nations Principles of Responsible Investment which has
become an industry standard which marks a further step in embedding responsible
investment in the Company.
Investment Adviser Developments
The Premier Miton fixed income team has been bolstered by the addition of three
bond fund managers from Merian Global Investors, who joined in the second half
of 2020. While Chun Lee and Robin Willis will continue to manage Acorn's Income
Portfolio day to day, they will be able to draw on the additional expertise of
their new colleagues in doing so. There have been no changes to the Smaller
Companies team.
Strategic Review
At the Annual General Meeting in August 2021, a discontinuation vote will be
put to the shareholders and they will be asked to vote on whether they wish the
Company to continue for a further five years. At the same time the Directors
intend to put forward proposals, yet to be finalised, that may involve changes
to investment policy, corporate structure, gearing and dividend yield.
Shareholders will be able to consider whether they wish the Company to continue
for a further five years in the light of these changes. In preparing these
proposals the Board has been working with the Company's broker and has employed
an external consultant to conduct a strategic review of the company.
This strategic review is predominantly focussing on the following areas:
. the investment management structure and investment objectives
that will seek to address the discount, expand the investor base and facilitate
the growth of the Company over the coming years;
. the appropriate level of sustainable yield;
. gearing level together with the resultant impact on income yield;
and
. form of gearing, if any, (i.e. ZDPs and/or bank debt) that is
most appropriate in the current market environment.
At this time the review is still in active progress and we will report to
shareholders as soon as more detailed information is available. As a result of
the review the AGM voting documents will be made available separately to this
report and are not, as has historically been the Board's practice, included at
the end of this report.
As a consequence of the strategic review, there will inevitably be material
changes to the formal structure of the relationship with the Investment
Advisers and Investment Manager. To this end, the Company has served protective
notice to terminate the Investment Management Agreement which has the effect of
initiating the notice period required under the Agreement. This action should
not be interpreted as an indication that the current Investment Advisers will
not be involved in the management of Acorn's portfolio post the conclusion of
the strategic review.
Board Refreshment
Last year, the board announced the appointment of Sharon Parr as a
non-executive director as part of its longer term programme of board
refreshment. Effective 1 May 2020, Sharon took over from David Warr as chair of
the audit committee. I am pleased to report that David has agreed to remain on
the board pending the outcome of the strategic review, not least in light of
the two significant corporate actions scheduled over the next twelve months.
Outlook
UK equities, and in particular smaller companies, appear attractively valued
relative to other markets around the world. UK smaller companies stand to
benefit disproportionately from the UK's economic recovery when it comes, so
while near term challenges clearly remain, the prospects for the UK market
overall look more encouraging.
Contact with shareholders
During the course of 2020 I have received and responded to a number of emails
from shareholders expressing interest in and asking questions about Acorn. The
next 12 months will see several significant events in the life of the Company
and the board is committed to communicating developments as they arise.
Consequently, we welcome engagement with shareholders, who can contact me
directly via the email address acorn_income_fund_limited@ntrs.com. Further
information on the Company, including factsheets and a regularly updated
presentation may be found at www.acornincome.co.uk.
Thank you for your ongoing support as an investor in our Company.
Nigel Ward
Chairman
Investment Advisers' Report
The Smaller Companies Portfolio
Year to 31 December 2020
During the twelve month period to 31st December 2020 the Smaller Companies
portfolio generated a total return of -12.16%), before expenses, compared to a
total return of -4.29% by the Numis Smaller Companies Index (Ex Investment
Companies).
The world changed in 2020. We entered the year with confidence at an economic
level due to the return of a government majority in the UK and an appetite for
clarity around our future relationship with Europe; and at an investee company
level with a portfolio of cash generative firms sitting at attractive
valuations and holding an optimistic view on the domestic outlook. That
confidence came crashing down when COVID-19 forced changes in the behaviour of
people, governments, and companies across the globe and the outlook became very
uncertain and presented us with unique challenges.
One of the primary challenges caused by this uncertainty came in the form of
dividend distributions. The dividend-paying profile of the market went through
unparalleled change as companies reacted to the new environment. Dividends fell
by 44% across the main market as companies, many of which had previously been
paying dividends at unsustainable levels, were forced to cancel or rebase
payments to much lower levels. The Smaller Companies Portfolio saw a very
different profile of dividends than the wider market with the agility of
smaller companies being demonstrated by cuts occurring earlier in the year
during the initial highly uncertain period, and payments resuming faster than
the wider market as the picture became clearer. Consequently the Portfolio
fared better than the market and saw a reduction in dividends received of 36%
(compared to 44%), and finished the year with the recovery of payments on a
much greater tangent than the market. The managers reacted decisively to the
'new risk' challenge presented by the pandemic with selective disposals and
took advantage of the opportunities that the extreme market volatility offered,
the details of which are covered below.
In Q3 and Q4 the portfolio lagged the market recovery where speculative
companies and those which had most been harmed by changes caused by the
pandemic (for example the Travel and Leisure sector) saw sharp share price
growth from low bases. The long-standing sector exclusions of Mining and
Pharmaceuticals also detracted from relative performance over this period. This
is covered in more detail below, but this short term under-performance should
be viewed in the context of the operationally solid performance and quick
return to dividend payments seen in the underlying holdings; we believe this
will be rewarded as things return to a more normal environment.
Portfolio turnover was slightly higher during 2020 as the managers adapted the
portfolio to the challenges presented by the pandemic. As a result the number
of holdings within the portfolio fell from 47 to 44 during the period following
the disposal of 11 holdings and the addition of eight new names. Activity was
significantly lower in the second half of the year, with one disposal and three
additions.
The unique and unprecedented challenge the pandemic presented during the year
required a decisive approach. The initial focus of the managers was on
companies within the portfolio which exhibited either heighted balance sheet
risk or long term end mark risk as a direct result of the pandemic and its
associated restrictions. A small number of holdings were identified within the
portfolio where this risk was elevated, which led to disposals. The vast
majority of this activity took place in the first half of the year, with 10 of
the 11 disposals completed by the end of June.
The disposals also included companies which had delivered strong capital growth
during a number of years in the portfolio but had suffered significant yield
compression - these names included DiscoverIE and Alpha FX. This capital was
reinvested in higher yielding opportunities in order to enhance the overall
yield of the portfolio.
The new long term additions to the portfolio have already provided a helpful
contribution to both capital growth and income. One positive by-product of the
type of volatile market conditions experienced in 2020 is that opportunities
often arise in high quality assets which have been oversold. The number of
additions during the year reflected this opportunity and included new
investments in Bodycote, Liontrust, EMIS, Trifast, Devro and Curtis Banks. A
number of other existing holdings were also topped up during the year on share
price weakness.
The average holding period of existing holdings remains at the top end of our
three to five year range - highlighting the continued long term approach to
investing.
Performance during the period, both positively and negatively, was driven by
those sectors which found themselves most acutely impacted by the pandemic.
General Retail and Travel & Leisure, amongst the sectors hardest hit by the
restrictions on activity, were the two largest negative sector contributors to
relative performance. Within these sectors holdings in Topps Tiles, Hostelworld
and Hollywood Bowl have been retained but positions in Card Factory and
Cineworld were exited in full. Combined, these two sectors contributed to over
half of the relative underperformance during the year. Two long standing
excluded sectors, Mining and Pharmaceuticals & Biotechnology, both produced
strong absolute returns and increased the underperformance by over 1% each.
Long standing overweight positions in the Industrial and Financial Services
sectors, which combined represent nearly one third of the portfolio both made
positive contributions to performance, rising on average by 1% and 6%
respectively. The next three largest sectors, Construction, Real Estate and
Industrial Transport, which together represent a further 20% of the portfolio,
all delivered stronger returns than their sector average but unperformed the
benchmark index. Support Services, which accounted for 6% of the portfolio,
delivered a small positive performance during the period, well ahead of the 33%
decline in the sector average. This was the largest positive sector
contribution to performance and was driven by Clipper Logistics, a long term
holding whose share price more than doubled during the year as the pandemic
accelerated the rapid growth in online retail.
Unlike the prior year, when there were four bid approaches for investee
companies, there were none during the period. We do believe corporate activity
will increase in 2021 and we were encouraged to participate in the first IPO
for some time towards the end of the year when we initiated a position in
Conduit Holdings, a re-insurance business. Historically this has been an
excellent source of new investment opportunities for the portfolio.
We move into 2021 with increased clarity. The terms of trade with the UK's
largest trading partner, the EU, were agreed in a last-minute Christmas Eve
deal which removed any likelihood of a damaging no-deal Brexit. This is the
first time since the Brexit referendum of 2016 that question has been resolved
and the uncertainty surrounding it removed. In our opinion this removes a
significant risk that has been integral to net fund flows out of UK equities
over that period. Confidence can now return and with it, hopefully a return of
asset allocation in to the UK. Vaccine progress has been a stand out success in
the government's COVID-19 response and the potential relative benefit to the
domestic economy could be significant. These factors combined with the value we
currently see in UK equities - especially in smaller companies - and the
depressed level of sterling, all allow us to see a sustained equity recovery
which would benefit the portfolio.
From the perspective of the global economy, the US has a new president who is
more enamoured with the spirit of global cooperation than the last, which is
essential to aid the global recovery. The worldwide effect of the pandemic has
been brutal and potentially condensed the recession into a short and deep
contraction, accordingly this would indicate that the recovery is already
underway. As always we maintain our focus on the prospects of our underlying
holdings and are well placed to benefit from this with a high quality portfolio
of cash generative, well capitalised, dividend paying companies trading at
attractive valuations.
Fraser Mackersie and Simon Moon
Unicorn Asset Management Limited
20 April 2021
The Income Portfolio
2020 was a tumultuous year but one which, thanks to the unprecedented
combination of monetary and fiscal policy, ultimately delivered strong returns
across a wide spectrum of asset classes. Within fixed income, central bank
interventions in the corporate bond and sovereign markets saw credit spreads
end the year just shy of their pre-pandemic levels while government bond yields
remained well anchored relative to previous episodes of strong risk asset
rallies.
With a global vaccine roll-out now in operation, the question is where markets
go from here. Government bonds have been one of the most manipulated assets as
central banks continue to purchase them in huge size. While we might yet see
yields rise further, there is good reason to think that the move could be
contained in comparison to past recoveries. Central banks have signalled that
monetary policy will not be tightened for many years whilst economies recover
and that the large purchase of government bonds will continue, helping to stop
yields from rising too much. Monetary policy has prevented a wave of defaults
in credit markets by enabling access to cheap funding. However, this build-up
of debt, although at historically low rates of interest, does arguably leave
companies more vulnerable to any future crisis and makes it difficult for
central banks to let interest rates rise too much as balance sheets are
repaired.
Of course the evolution of inflation will be a major determinant of bond yields
and we wait to see how the inevitable rise in short term inflation - due to
base effects from the recovery in commodity prices, for example - plays out
against the longer term disinflationary forces stemming from themes such as
demographics, technology and supply and demand imbalances.
Whilst a vaccine-led recovery is now hopefully in sight, the strong performance
in corporate bonds due to policy intervention and the hunt for yield is
arguably already pricing that in. Maintaining a discerning stance within high
quality names, coupled with select improving credits, should continue to be a
prudent strategy. Although central banks appear to remain willing to limit the
stresses felt in credit markets for now, there are still enough structural
challenges to some sector fundamentals to caution against complacency.
To supplement the corporate bond portfolio we continue to invest in both debt
and equity issued by investment companies. The debt issuances are largely under
researched and therefore often offer attractive relative value versus the
broader fixed income sector. Our investment company equity positions are used
to gain exposure to alternative asset classes which provide both
diversification benefits and attractive dividend yields. Whilst a number of the
alternative strategies displayed a low correlation to broader markets during
the sell-off in February and March, some did see their discounts to NAV widen
considerably. However, the volatile markets also provided the opportunity to
rotate some positions into higher yielding investments. Since then it has been
pleasing to see, for the most part, that robust underlying performance has led
to significant price recovery.
Chun Lee and Robin Willis
Premier Fund Managers Limited
20 April 2021
Schedule of Principal Investments
as at 31 December 2020
Percentage Percentage
of Total of Total
Assets Assets
2020 2019
Position Company Market Percentage
Value £ of
'000 Portfolio
Smaller Companies Portfolio
1 Polar Capital Holdings plc 3,252,400 4.69 3.57 2.08
2 Sabre Insurance Group plc 2,917,075 4.21 3.20 1.79
3 Telecom Plus plc 2,868,000 4.14 3.14 2.88
4 Chesnara plc 2,798,150 4.04 3.07 1.46
5 Primary Health Properties plc 2,667,000 3.85 2.92 1.80
6 Numis Corporation plc 2,493,750 3.60 2.73 2.16
7 Severfield plc 2,163,800 3.12 2.37 2.38
8 Goodwin plc 2,107,000 3.04 2.31 2.05
9 Somero Enterprises Inc 2,039,713 2.94 2.24 1.90
10 Ocean Wilsons Holdings Limited 2,012,750 2.90 2.21 2.04
11 Clipper Logistics plc 1,820,800 2.63 2.00 1.87
12 Brewin Dolphin Holdings plc 1,769,000 2.55 1.94 2.05
13 Epwin Group plc 1,765,400 2.55 1.94 1.86
14 FDM Group Holdings plc 1,764,680 2.55 1.93 2.15
15 Regional Reit Limited 1,764,386 2.55 1.93 2.25
16 XPS Pensions Group plc 1,748,250 2.52 1.92 1.61
17 James Halstead plc 1,659,200 2.39 1.82 1.96
18 Wincanton plc 1,631,846 2.35 1.79 1.99
19 Boot (Henry) plc 1,606,500 2.32 1.76 1.24
20 STV Group plc 1,604,159 2.31 1.76 1.63
TOTAL 42,453,859 61.25 46.55
Income Portfolio
1 Pershing Square Holdings 5.50% 15/07/ 772,561 3.73 0.85 0.75
2022
2 Value & Income Trust 11.00% 31/03/2021 733,575 3.54 0.80 0.75
3 APQ Global Limited 3.5% CULS 30/09/2024 696,870 3.37 0.76 0.74
4 Credit Suisse Group 2.75% 08/08/2025 654,577 3.16 0.72 0.59
5 AT&T 2.9% 04/12/2026 554,276 2.68 0.61 0.49
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 0.47
8 UK Municipal Bonds Agency 1.625% 26/08/ 522,141 2.52 0.57 -
2060
9 GS Group 3.125% 25/07/2029 467,796 2.26 0.51 0.40
10 RM plc ZDP 465,400 2.25 0.51 0.44
11 France Telecom 8.125% 2028 463,188 2.24 0.51 0.21
12 British American Tobacco plc 4% 04/09/ 459,454 2.22 0.50 0.41
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 0.38
15 Barclays 3.125% 17/01/2024 425,386 2.06 0.47 0.39
16 US 0.875% IL Treasury 2047 424,170 2.05 0.47 0.32
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 0.38
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 10,198,215 49.27 11.18
Directors' Biographies
for the year ended 31 December 2020
Directors
Nigel Ward, David Warr and Sharon Parr are non-executive Directors and
considered independent of the Investment Manager.
Nigel Sidebottom is not considered independent by virtue of his previous
employment with PMG.
David Warr and Sharon Parr are chartered accountants. All four Directors have
extensive non-executive director experience. Further details of the
qualifications and suitability of each of the Director's appointments are as
follows:
Nigel Ward (Chairman)
Nigel joined the Company in December 2011. He has over 40 years experience of
international investment markets, credit and risk analysis, portfolio
management, corporate and retail banking, corporate governance, compliance and
the managed funds industry gained at Nat West, TSB Bank, Baring Asset
Management and Bank Sarasin. Nigel is a full-time non-executive director
serving on a number of boards including LSE Listings*. He was a founding
Commissioner of the Guernsey Police Complaints Commission, is an Associate of
the Institute of Financial Services, a member of the Institute of Directors and
holder of the IoD Diploma in Company Direction. Nigel is a resident of
Guernsey.
David John Warr
David joined the Company in August 2012. David is a Fellow of the Institute of
Chartered Accountants in England and Wales having qualified as a chartered
accountant in 1976. In 1981 David was appointed a partner in Reads & Co., a
Guernsey based firm of chartered accountants, which he helped develop into a
more broadly based financial services business leading up to its sale at the
end of 1998. David's experience at Reads & Co. included audit, trust and
company administration. David has acted as a non-executive director on a broad
range of listed companies over the past 15 years whilst combining those
responsibilities with charitable work*. David is a resident of Guernsey.
Nigel Sidebottom
Nigel joined the Company in February 2019. Nigel is a Chartered Fellow of the
Chartered Institute of Securities and Investment and a Chartered Wealth
Manager. Between 2005 and 2018 he was Deputy Chief Investment Officer and Head
of Closed Ended Funds at Premier Asset Management, now Premier Miton Group Plc,
the parent company of the Company's Investment Manager. He has over 30 years'
experience in private client stockbroking and in investment management and has
served as a non-executive director on a number of LSE listed companies. Nigel
is resident in the UK.
Sharon Parr
Sharon was appointed to the Board in August 2019. In 2003 she completed a
private equity backed MBO of the trust and fund administration division of
Deloitte and Touche, called Walbrook, selling it to Barclays Wealth in 2007. As
a Managing Director of Barclays, she ultimately became global head of their
trust and fund administration businesses, comprising over 450 staff in 10
countries. She stepped down from her executive roles in 2011 to focus on other
areas and interests but has maintained directorships in several companies. She
is a Fellow of the Institute of Chartered Accountants in England and Wales and
a member of the Society of Trust and Estate Practitioners, and is a resident of
Guernsey.
*Details of the Directors' other directorships for public companies can be
found in the Directors' Report.
Strategic Report
For the year ended 31 December 2020
The Directors submit to the shareholders their Strategic Report, Directors'
Report and the Audited Financial Statements of the Company for the year ended
31 December 2020.
Business Model and Strategy
The Company is a closed-ended investment company, incorporated with limited
liability in Guernsey. The Company has been granted exemption from income tax
within Guernsey. It is the intention of the Directors to continue to operate
the Company so that each year this tax-exempt status is maintained.
Investment Objectives and Policy
The Company's investment objectives are to provide Ordinary Shareholders with a
high income with the opportunity for capital growth. The Company seeks to
achieve these objectives by investing in a combination of smaller capitalised
United Kingdom companies listed on the London Stock Exchange or AIM, and high
yielding, predominantly fixed interest, instruments.
High Income
The Ordinary Shares are designed to offer a high dividend yield. The Board
intends to pay quarterly interim dividends with equal amounts paid in March,
June, September and December each year.
It is intended that the Company's income will consist wholly or mainly of
investment income. The Directors intend to distribute substantially all of the
Company's income after expenses and tax to the holders of the Ordinary Shares.
The full year dividend for 2020 totalled 23.0p (2019: 20.8p) representing a
yield of 7.13% on the year end share price.
Long Term Growth in Capital Value
The asset value of the Company's portfolios is heavily influenced by external
macro-economic factors. The Directors meet with the Investment Manager and
Investment Advisers regularly to discuss the portfolio. Additional details are
covered in the Chairman's Statement and Investment Advisers' Reports.
Business Environment
Principal and Emerging Risks
The Board has an on-going process in place for identifying, evaluating and
managing the significant risks faced by the Company. The responsibility for
carrying out the risk review is undertaken by the Risk Committee (see the
Directors' Report for details of the Risk Committee), which meets at least four
times per year. The results of the risk evaluations are then reported back to
the Board. The last risk assessment took place on 9 November 2020. The current
process is in line with the Association of Investment Companies ("AIC") Code of
Corporate Governance (the "AIC Code").
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.
Risks of the Structure of the Company and Gearing
The Company's business could be materially and adversely affected by a number
of risks. External factors to the Company may either adversely or favourably
affect the volatility and liquidity of the Portfolios, as well as their values.
These can be caused by economic conditions, changes to tax laws, competition
and a number of other factors.
Investors holding either Ordinary Shares or ZDP Shares should have carefully
considered whether these investments, given the risks attached, are suitable
for them.
The market value of ZDP Shares will be affected by changes in general interest
rates, with upward movements in interest rates likely to lead to reductions in
the market value of ZDP Shares, although not affecting the ultimate redemption
value.
Although the holders of ZDP Shares have a priority entitlement to the other
assets of the Company (after payment of its liabilities) on a winding-up, if
the gross assets of the Company fall to a level that is insufficient to redeem
the ZDP Shares in full, investors in the ZDP Shares would receive a lower
payment than the Fixed Capital Entitlement on the ZDP Shares repayment date.
In certain circumstances, such as a major fall in the capital value of the
Portfolios such that the Final Capital Entitlement of the ZDP Shares is
significantly uncovered but where the Company's Portfolios are still generating
revenue, the interests of ZDP Shareholders and the Ordinary Shareholders may
conflict. In such circumstances, the Directors may find it impossible to meet
both sets of expectations fully, and so will need to act in a manner which they
consider to be fair and equitable to both Ordinary Shareholders and ZDP
Shareholders, while having regard to the entitlements of each class of shares.
Further risks to the ZDP Shares include a lower level of regulatory protection
than applies to premium listed shares.
The Ordinary Shares are geared by the ZDP Shares and should be regarded as
carrying above average risk since a positive Net Asset Value ("NAV") for the
Ordinary Shareholders will be dependent upon the Company's assets being
sufficient to meet those prior entitlements of the holders of ZDP Shares. As a
consequence of the gearing, a decline in the value of the Company's investment
portfolio will result in a greater percentage decline in the NAV of the
Ordinary Shares.
Ordinary Shareholders do not have the right for their shares to be redeemed and
those Ordinary Shareholders wishing to realise their investment will be
required to dispose of their shares on the stock market.
Market liquidity in the shares of companies such as the Company is less than
market liquidity in shares issued by larger companies traded on the LSE. There
can be no guarantee that a liquid market will exist for the Ordinary Shares or
the ZDP Shares which may prevent any holder of Ordinary Shares or ZDP Shares
from disposing of such shares at a price or at such time that they wish.
The Company's future performance depends on the success of its strategy and the
skill and judgements of the Investment Manager and of the Investment Advisers.
The departure of key personnel from either provider may have an adverse effect
on the performance of the Company.
The Company may use derivatives to hedge exposure to currency risk and interest
rate risk. No assurance can be given that any hedging strategies which may be
used by the Company will be successful under all or any market conditions and,
if unsuccessful, could have an adverse effect on the Company's financial
position.
Risk Associated With Investment in Other Investment Companies
The Income Portfolio may contain higher yielding investment company shares
(including shares of split capital investment trusts). As a result of the
gearing in some investment company shares, any increase or decrease in the
value of the investments held by those investment companies might magnify
movements in their NAV and consequently affect the value of the Income
Portfolio. In accordance with the Listing Rules, where appropriate, the Company
makes Stock Exchange announcements detailing its holdings in other UK listed
investment companies which themselves do not have a stated investment policy to
invest no more than 15% of their gross assets in other UK listed investment
companies (including investment trusts).
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.
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.
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.
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.
Due to the COVID-19 pandemic, 2020 saw significant movements in the Company's
share price and discount.
Brexit
The UK's departure from the EU has introduced new uncertainties and instability
into the financial markets. Despite a last minute agreement, details of which
continue to emerge, the Board and the Investment Manager expect an ongoing
period of market uncertainty as the implications are clarified.
Dividend Levels
Dividends paid on the Company's Ordinary Shares principally rely on receipt of
dividends and interest payments from the securities in which the Company
invests. The Board monitors the income of the Company and reviews an income
forecast for the current financial year at its regular quarterly Board
meetings. Although our projections do show a recovery in the Company's revenues
for 2021, the Board believe that it is likely that a return to a sustainable
and covered dividend will necessitate a lower dividend payment in future years.
Currency Risk
The Company invests in overseas securities and its assets are therefore subject
to currency exchange rate fluctuations. The Company may hedge against foreign
currency movements affecting the value of the investment portfolio where
adverse movements are anticipated but otherwise takes account of this risk when
making investment decisions.
Operational
Like most other investment companies, the Company has no employees. The Company
therefore relies upon the services provided by third parties and is dependent
on the control systems of the Investment Manager and the Company's other
service providers. The security, for example, of the Company's assets, dealing
procedures, accounting records and maintenance of regulatory and legal
requirements, depend on the effective operation of these systems. The Board
reviews, at least annually, the performance of all the Company's third party
service providers, as well as reviewing service providers' anti-bribery and
corruption policies to address the provisions of the Bribery Act 2010. The
Board and Audit Committee regularly review statements on internal controls and
procedures provided by PMG and other third parties and also subject the books
and records of the Company to an annual external audit.
Accounting, Legal and Regulatory
The Board relies on the services of the administrator, PMG and its other
professional advisers to ensure compliance with the Companies Act and the UKLA
Listing Rules.
Counterparty/ Service Provider Risk
The Board reviews all aspects of the services provided by the Company's service
providers on an annual basis to ensure good standards are maintained. This
review also includes consideration of business continuity and procedures in
place to mitigate cyber attack risks. Regular communication is maintained with
and between Service Providers. Agreements with service providers include
sufficient notice period clauses to allow for alternative arrangements to be
made should contracts be terminated.
Discontinuation Vote
In accordance with Article 53.1 of the Articles of Incorporation of the
Company, shareholders are to be given the opportunity to vote against the
discontinuation of the Company. As this opportunity was last presented to the
shareholders on 26 September 2016, the next discontinuation resolution is to be
proposed at the Annual General Meeting on 10 August 2021 at which point it is
anticipated that the Directors will propose the shareholders vote against the
resolution (i.e. that the Company continues). Due to the unknown outcome of
this vote, as noted further in the Directors' Report the Directors are
disclosing that a material uncertainty exists which casts doubt about the
Company's ability to continue as a going concern.
Future Prospects
The Board's main focus is the achievement of a high income from the portfolio
together with the generation of long-term capital growth. The future of the
Company is dependent upon the success of the investment strategy, as discussed
both in the Chairman's Statement and the Investment Advisers' report, together
with the outcome of the strategic review as outlined in the Chairman's
Statement.
Board Diversity
When appointing new directors and reviewing the Board composition, the
Nomination Committee considers, amongst other factors, diversity, balance of
skills, knowledge, gender, social and ethnic background and experience. The
Nomination Committee however does not consider it appropriate to establish
targets or quotas in this regard. As at 31 December 2020, the Board comprised
of one female and three male directors. The Company has no employees.
Social, Community and Human Rights
The Company does not have any specific policies on social, community or human
rights issues as it is an investment company which does not have any physical
assets, property, employees or operations of its own.
Position and Performance
PRIIPs KIDs
The Company has published Key Information Documents ("KIDs") in compliance with
the Packaged Retail and Insurance-based Investment Products ("PRIIPs")
Regulation. KIDS for the Ordinary and ZDP Shares can be found on the Company's
area on the PMG website at:
www.acornincome.co.uk
The Company is not responsible for the information contained in the KIDs. The
process for calculating the risks, cost and potential returns are prescribed by
regulation. The figures in the KIDs may not reflect the expected returns for
the Company and anticipated returns cannot be guaranteed.
Key Performance Indicators
The Company's Directors meet regularly to review the performance of the Company
and its shares. The key performance indicators ("KPIs") used to measure the
progress and performance of the Company over time are as follows:
1) The performance against a set of reference points. The Investment
Adviser's performance is not assessed against a formal benchmark but rather
against a set of reference points which are more general in nature and intended
to be representative of the broad spread of assets in which the portfolio
invests. These references include the Numis Smaller Companies (Ex Investment
companies) Index, FTSE All share Index and FTSE Small Cap (Ex Investment
Companies) Index (see Performance Summary).
2) The performance against the peer group. The assessment of the Investment
Adviser's performance against companies which invest in similar, but not
necessarily the same, securities allows the Board to evaluate the effectiveness
of the Company's investment strategy.
3) The performance of the Company at the gross asset level. This shows how
the assets attributable to shareholders as a whole have performed (see
Performance Summary Total Return on Gross Assets).
4) The performance of the Ordinary Shares, both in terms of share price
total return (i.e accounting for dividends received) and in terms of total
return on net asset value. The share price performance is the measure of the
return that shareholders have actually received and will reflect the impact of
widening or narrowing of discounts to NAV.
5) Ongoing charges. The annualised ongoing charges figure for the year was
1.98% (2019: 1.79%). This figure, which has been prepared in accordance with
the recommended methodology of the Association of Investment Companies,
represents the annual percentage reduction in shareholder returns as a result
of recurring operational expenses excluding any performance fee.
All of these areas were examined throughout the year and the table below
summarises the key indicators:
As at or year As at or year
to: to:
31 December 31 December % change
2020 2019
Total Return Performance
Total Return on Gross Assets - - -10.85%
Numis Smaller Companies (Ex Investment 23,117.10 24,153.03 -4.29%
Companies) Index
Ordinary Share Performance
Total return on Net Assets -17.08%
Revenue return per Ordinary Share 13.75p 22.31p -38.37%
Net dividends declared per Ordinary Share 23.00p 20.80p 10.58%
Discount to Net Asset Value -10.47% -12.96%
Ongoing Charges 1.98% 1.79% 10.61%
Return Per Share - Basic
Total loss per Ordinary Share is based on the net total loss on ordinary
activities after tax of £13,158,700 (2019: net total return £16,237,744).
These calculations are based on the weighted average number of Ordinary Shares
in issue during the year to 31 December 2020, of 15,816,687 (2019: 15,816,687).
Year ended Year ended Year ended Year ended
31 December 31 December 31 December 31 December
2020 2020 2019 2019
Pence per Pence per
Ordinary GBP '000 Ordinary Share GBP '000
Share
Revenue return per Ordinary 13.75p 2,175 22.31p 3,529
Share
Net capital (loss)/gain -96.95p -15,334 80.35p 12,709
Net total (loss)/gain -83.20p -13,159 102.66p 16,238
Net Asset Value
The net asset value per Ordinary Share, including revenue reserve, at 31
December 2020 was 360.17p (31 December 2019: 466.37p) based on net assets as at
31 December 2020 of £56,967,287 divided by number of Ordinary Shares in issue
of 15,816,687.
The net asset value of a ZDP Share at 31 December 2020 was 160.05p (31 December
2019: 154.12p) based on the accrued capital entitlement as at 31 December 2020
of £33,979,404 divided by the number of ZDP Shares in issue of 21,230,989.
Dividends
During the year the following dividends were paid:
Dividend
pence
Payment Date (net per
share)
First Interim for the year ended 31 31 March 2020 5.75p
December 2020
Second Interim for the year ended 31 29 June 2020 5.75p
December 2020
Third Interim for the year ended 31 30 September 2020 5.75p
December 2020
Fourth Interim for the year ended 31 18 December 2020 5.75p
December 2020
Subsequent to the year end the Directors declared the first interim dividend
for the year ended 31 December 2021 of 5.75p, payable on 31 March 2021 to
members on the register at the close of business on 12 March 2021. The shares
were marked ex-dividend on 11 March 2021. This dividend relates to the year
ended 31 December 2020 but in accordance with International Financial Reporting
Standards, it is recognised in the period in which it is paid. Further dividend
details can be found in note 9.
Viability Statement
In accordance with the UK Corporate Governance Code 2018, published by the
Financial Reporting Council in July 2018 (the "UK Code"), the Directors have
assessed the viability of the Company over a three year period, taking into
account the Company's position at 31 December 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, availability of funding and the
ongoing strategic review as noted in the Chairman's Statement. The Directors
had regard to the general advice that equity investment should be made on a
medium to longer term view (perhaps 3 to 5 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 that the discontinuation vote scheduled for the 2021 AGM is the
Company's biggest risk. The Directors expect to support a vote against the
discontinuation of the Company and have a reasonable expectation that this will
be supported by a majority of the Company's shareholders. The Board has also
considered the Company's other principal and emerging risks and uncertainties.
(i) the Company's ability to repay the final capital entitlement of
the ZDP Shares on 28 February 2022;
(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.
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 December 2023.
Directors' Report
for the year ended 31 December 2020
The Directors have pleasure in presenting their Directors' Report for the year
ended 31 December 2020.
Principal Activities and Business Review
The principal activity of the Company is to carry on business as an investment
company. The Directors do not envisage any change in these activities for the
foreseeable future. A description of the activities of the Company in the
period under review is given in the Chairman's Statement.
Business and Tax Status
The Company is a closed-ended investment company, incorporated with limited
liability in Guernsey on 5 January 1999, registered number 34778. The Company
operates under The Companies (Guernsey) Law, 2008, (the "Law"), the Protection
of Investors (Bailiwick of Guernsey) Law, 1987 as amended and the Authorised
Closed Ended Investment Scheme Rules 2008.
The Company's Ordinary Shares and ZDP Shares are traded on the LSE with the
Ordinary Shares having a premium listing and the ZDP Shares having a standard
listing, as defined by the LSE.
The Company's management and administration takes place in Guernsey and the
Company has been granted exemption from income tax within Guernsey by the
Administrator of Income Tax. It is the intention of the Directors to continue
to operate the Company so that each year this tax-exempt status is maintained.
In respect of the Criminal Finances Act 2017 which has introduced a new
corporate criminal offence of 'failing to take reasonable steps to prevent the
facilitation of tax evasion', the Board confirms that they are committed to
zero tolerance towards the criminal facilitation of tax evasion.
Alternative Investment Fund Managers Directive ("AIFMD")
The Company is an 'Alternative Investment Fund' ("AIF"), as defined by the
Alternative Investment Fund Managers Directive ("AIFMD") and is self managed.
The Company was approved as an AIF and submitted an Article 42 Notification to
the FCA under the National Private Placement Regime on 3 August 2015 (see Going
Concern section below).
The Directors have set a maximum gearing level for the purpose of AIFMD of 400%
for both the commitment exposure level and gross leverage level. As at 31
December 2020 the commitment exposure level was 160% and the gross leverage
level was 167%.
Regulatory disclosures, including the Company's Investor Disclosure Document,
are provided on the Company's website www.acornincome.co.uk.
General Meetings/ Discontinuation Vote
At the Annual General Meeting held on 26 September 2016, shareholders were
given the opportunity in accordance with Article 53.1 of the Articles of
incorporation of the Company, to vote for the discontinuance of the Company.
The special resolution was not carried and it was noted that the Company would
continue in its present form. The next discontinuation resolution will be
proposed at the Annual General Meeting on 10 August 2021.
Following the publication of the updated AIC Code in February 2019, when 20% or
more of Shareholder votes have been cast against a Board recommendation for a
resolution, the Company should explain, when announcing the voting results,
what actions it intends to take to consult Shareholders in order to understand
the reasons behind the result. An update on the views received from
Shareholders and actions taken should be published no later than six months
after the shareholder meeting. The Board should then provide a final summary in
the annual report and, if applicable, in the explanatory notes to resolutions
at the next Shareholder meeting, on what impact the feedback has had on any
decision, action or resolution subsequently proposed. No resolutions received
20% or more votes against it during the year.
Foreign Account Tax Compliance Act ("FATCA")
FATCA requires certain financial institutions outside the United States ("US")
to pass information about their US customers to the US tax authorities, the
Internal Revenue Service (the "IRS"). A 30% withholding tax is imposed on the
US source income and disposal of assets of any financial institution within the
scope of the legislation that fails to comply with this requirement.
The Board of the Company has taken all necessary steps to ensure that the
Company is FATCA-compliant and confirms that the Company is registered and has
been issued a Global Intermediary Identification Number ("GIIN") by the IRS.
The Company will use its GIIN to identify that it is FATCA-compliant to all
financial counterparties.
Common Reporting Standard
The Common Reporting Standard is a global standard for the automatic exchange
of financial account information developed by the Organisation for Economic
Co-operation and Development ("OECD"), which has been adopted in Guernsey and
which came into effect in January 2016.
The Company is subject to Guernsey regulations and guidance on the automatic
exchange of tax information and the Board will therefore take the necessary
actions to ensure that the Company is compliant in this regard.
Going Concern
Whilst the Company is obliged to hold a discontinuation vote at the 2021 AGM,
the Directors in line with the AIC Statement of Recommended Practice ("SORP"),
do not believe this should automatically trigger the adoption of a basis in the
preparation of the financial statements other than going concern. The SORP
states that it is more appropriate to prepare financial statements on a going
concern basis unless a vote has already been triggered and shareholders have
voted against continuation. Additionally, the SORP guidance sets out that it is
appropriate for the financial statements to be prepared on a going concern
basis whilst making a material uncertainty disclosure as set out in accounting
standards.
The Directors will consider a number of factors in determining the
recommendation they put to shareholders in relation to the discontinuation vote
and, in conjunction with the strategic review discussed in more detail in the
Chairman's statement, has engaged in discussions with a number of shareholders
and its advisers. Based on this assessment the Directors have made the
assumption that the discontinuation vote will fail, and the Company will as a
result continue, however they recognise that the outcome of the vote is not yet
known which creates some uncertainty. In accordance with the SORP guidance, the
Directors note that these conditions indicate the existence of a material
uncertainty which may cast doubt about the Company's ability to continue as a
going concern.
The Directors have arrived at this opinion by considering, inter alia, the
following additional factors:
. the Company has sufficient liquidity to meet all ongoing
expenses. The Company has net current assets of £942,956 at the year end. In
January 2017, the ZDP Shares were refinanced and their life was extended to 28
February 2022. In addition, the Board regularly reviews the cash flow of the
Company and is confident that the Company will have sufficient resources to
meet all future obligations;
. both the Income and Smaller Companies Portfolios consist
substantially of listed investments which are readily realisable and therefore
the Company has sufficient resources to meet its liquidity requirements; and
. as at 31 December 2020, the Company had no borrowings other than
the ZDP Shares which, as explained in Note 13, have a final capital entitlement
on 28 February 2022.
In the opinion of the Directors, taking into account the considerations above,
the Company has adequate resources to continue in operational existence for the
foreseeable future. For this reason the financial statements have been prepared
on a going concern basis.
Gearing Policy
The Company's gearing policy is not to employ any gearing through long-term
bank borrowing. Save with the prior sanction of the ZDP Shareholders the
Company will not incur any 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.
Results and Dividends
The results attributable to Ordinary Shareholders for the period are shown in
the Statement of Comprehensive Income. The Company made a revenue return for
the year of 13.75 pence (2019: 22.31 pence) per Ordinary Share and a capital
loss of 96.95 pence (2019: capital gain of 80.35 pence) per Ordinary Share. The
dividend for the year was increased by 10.58% to 23.0p per Ordinary Share. With
earnings of 13.75p per Ordinary Share, revenue reserves decreased to £1,954,448
representing 12.36p per Ordinary Share, the decrease being due to dividend
payments during the year.
Company Performance
Key Performance Indicators and Analysis of Company's Performance
At each quarterly Board meeting, the Directors consider a number of performance
measures in order to assess the Company's success in achieving its objectives.
The key areas reviewed are as follows:
. The history of the NAV.
. Receive an update on the market activity of the Ordinary Shares
and the ZDP Shares from N+1 Singer, the Company's corporate broker.
. Receive updates on the performance of both the Income Portfolio
and the Smaller Companies Portfolio from the Investment Advisers.
. Discount to NAV.
. Consideration of the revenue projection.
Ongoing Charges and Total Expense Ratio (the "TER")
The annual ongoing charges figure for the year was 1.98% (2019: 1.79%). This
figure has been prepared in accordance with the recommended methodology
provided by AIC and represents the annual percentage reduction in shareholder
returns as a result of recurring operational expenses. In 2020, no performance
fee was accrued (2019: £ nil).
The TER of the Company is calculated as a percentage of costs against total
assets at the year end and is capped at 1.5%. For 2020 the TER was 1.19% (2019:
1.13%). The calculation of costs excludes performance fees, non-routine
administration and professional fees. The net management fee charged in 2020
was £601,436 (2019: £693,387).
Share Price Rating and Discount Management including information on Treasury
Shares
At the Annual General Meeting on 11 August 2020, the Directors obtained
shareholder approval to issue up to 1,591,668 Ordinary Shares and 2,123,098 ZDP
Shares, also obtaining the necessary pre-emption waiver from the ZDP
Shareholders in respect of any new issue of ZDP Shares.
The shareholders approved renewal of the Company's authority to buy back
Ordinary Shares and ZDP Shares. As at 11 August 2020, 2,370,921 Ordinary Shares
and 3,182,525 ZDP Shares were authorised to be purchased.
The Directors also obtained authority to sell from treasury Ordinary Shares at
a discount to the prevailing NAV per Ordinary Share, provided that the
authority conferred was limited to issues or sales of Ordinary Shares at the
same time as ZDP Shares are issued or sold from treasury at a premium, such
that, the combined effect of the issue or sale of Ordinary Shares and the issue
or sale of ZDP Shares at a premium is that; (i) the NAV per Ordinary Share is
thereby increased; and (ii) gearing is not thereby increased.
The Company intends to seek annual renewal of these authorities from
shareholders at each future general meeting to be held under section 199 of the
Law. In accordance with the Law, any share buy backs will be affected by the
purchase of a package of Ordinary Shares and ZDP Shares (in a specified ratio
as set out in the Company's Prospectus) in the market for cash at a package
price which in aggregate is at a discount to the prevailing NAVs of each class
of Share, where the Directors believe such a purchase will enhance shareholder
value. Shares which are purchased may be cancelled or held in treasury.
Investment Management and Administration
Management Agreement and Fees
The Board is responsible for the determination of the Company's investment
policy and has overall responsibility for the Company's day-to-day activities.
The Company has, however, entered into a Management Agreement with PAMG.
The Manager has discretion to make minor changes to the portfolios and also has
discretion to move cash from the Smaller Companies Portfolio to the Income
Portfolio. The Manager will refer any proposals to the Board to alter the split
of assets between the Income Portfolio and the Smaller Companies Portfolio
materially. The Board determines when any potential investment limits can be
exceeded, together with dividend levels and the appropriate issue size for the
ZDP Shares and hence the level of gearing.
Under separate Investment Adviser Agreements, PAMG has delegated a number of
its duties and responsibilities to PFM and Unicorn. In relation to the Income
Portfolio and Smaller Companies Portfolio respectively, both PFM and Unicorn
act as Investment Advisers who are responsible for the identification and
analysis of investments meeting the investment objectives and strategy of the
Company. PFM and Unicorn are authorised and regulated by the FCA.
The Board keeps under review the performance of the Investment Manager and the
Investment Advisers. In the opinion of the Directors the continuing appointment
of the Investment Manager on the terms agreed is in the interest of
shareholders as a whole, due to the experience and proven track record of the
fund management team in the chosen markets. The Directors consider the
investment performance of the Company is satisfactory relative to the markets
in which the Company invests.
A list of the top 20 holdings for each portfolio is shown in the Schedule of
Principal Investments of this report and the top 10 holdings for each portfolio
is included in the monthly fund factsheet, available on the Company's website.
For the Company's full holdings information please refer to Unaudited Full List
of Investment Holdings.
Administration Agreement
The administration of the Company is undertaken by Northern Trust International
Fund Administration Services (Guernsey) Limited ("Northern Trust").
Custodian
The custodian of the Company is Northern Trust (Guernsey) Limited.
Segmental Reporting
The Company has two reportable segments, being the Income Portfolio and the
Smaller Companies Portfolio. Each of these portfolios is managed separately,
entails different investment objectives and contains investments in different
products. A more comprehensive disclosure can be found within Note 2 of the
Notes to the Financial Statements.
Corporate Governance
On 1 October 2013, the Company became a member of the AIC, and on 19 November
2013 the Company formally resolved to adopt and comply with the AIC Code.
The Financial Reporting Council ("FRC") has confirmed that an AIC member which
reports according to the AIC Code and who follows the AIC Corporate Governance
Guide for Investment Companies (the "AIC Guide"), will be meeting their Listing
Rule obligations in relation to reporting in accordance with The UK Code.
Statement of Compliance with the UK Code
The UK Code was revised, and became effective for accounting periods commencing
1 January 2019. Following a consultation the 2019 AIC Code has been endorsed by
the FRC and the Guernsey Financial Services Commission. The revised UK Code
places great emphasis on relationships between companies, shareholders and
stakeholders. It also promotes the importance of establishing a corporate
culture that is aligned with the company purpose, business strategy, promotes
integrity and values diversity.
The Board of the Company has considered the principles and recommendations of
the AIC Code by reference to the AIC Guide. The AIC Code, as explained by the
AIC Guide, addresses all the principles set out in the UK Code, as well as
setting out additional principles and recommendations on issues that are of
specific relevance to the Company.
The Board considers that reporting in accordance with the principles and
recommendations of the AIC Code, and by reference to the AIC Guide (which
incorporates the UK Code), will provide better information to shareholders.
Due to the Ordinary Shares having a premium listing on the LSE, the Company
must comply with Listing Rule 9.8.6(5) which requires the Company to apply the
provisions of the UK Code to the extent that they are considered relevant to
the Company. By complying with the AIC Code the Company is meeting its
obligation under the UK Code and as such is not required to report further on
issues contained in the UK Code which are irrelevant to it. The Directors place
a high degree of importance on ensuring that high standards of corporate
governance are maintained within the Company.
The AIC Code is available for download from the AIC website: www.theaic.co.uk.
With effect from 1 January 2012, the Company was also required to comply with
the Guernsey Financial Services Commission Financial Sector Code of Corporate
Governance (the "Guernsey Code"). As the Company reports under the AIC Code it
is deemed to meet the Guernsey Code and the Board has undertaken to evaluate
its corporate governance compliance on an ongoing basis.
The Company has complied with the recommendations of the AIC Code and the
relevant provisions of the UK Code throughout the year, except for a number of
provisions which the Board considers as not relevant to the Company due to
being an externally managed investment company. In particular, all of the
Company's day to day management and administrative functions are outsourced to
third parties. As a result, the Company has no executive directors, employees
or internal operations. The Company therefore has not reported further in
respect of these provisions.
Other areas of non-compliance with the AIC Code by the Company, and the reasons
therefore, are as follows:
The non-executive Directors of the Company do not meet without the Chairman
present to appraise the Chairman's performance. This is not in accordance with
the AIC Code. However, the Company has a Chairman's Performance Evaluation
Questionnaire which is completed by all Directors (other than the Chairman) and
analysed annually to facilitate the review of the Chairman's performance.
Contrary to the AIC Code, but in line with the Company's Articles of
Incorporation, the Directors are not subject to re-election by the shareholders
except in their first year of appointment, nor are they appointed for specific
terms as required by these provisions, as this is not felt to be appropriate
for the size and nature of the Company. However, to facilitate good corporate
governance practice, subsequent to 2016, each director will offer themselves
for re-election every three years until their ninth year of service. Any
Director with over nine years service shall be eligible for re-election every
year thereafter. As a result, the Directors were elected as follows:
Nigel Ward will be eligible for re-election in 2021 having served on the Board
since 1 December 2011.
David Warr will be eligible for re-election in 2021 having served on the Board
since 22 August 2012.
Nigel Sidebottom and Sharon Parr are next eligible for re-election in 2023.
In accordance with the AIC Code, the following details are of all other public
company directorships and employment held by each director and shared
directorships of any commercial company held by two or more Directors:
David Warr
. None
Nigel Ward
. Fair Oaks Income Fund Limited#
Nigel Sidebottom
. None
Sharon Parr
. JZ Capital Partners Limited#
# Traded on the Specialist Fund Segment of the LSE
The Company does not comply with the AIC Code insofar as it does not have a
formal policy on diversity, however the Company has established a Nomination
Committee that adheres to formal terms of reference and which is responsible
for identifying any gaps on the Company's Board that need to be filled. When
considering candidates the Board has due regard to the benefits of diversity on
the Board and amongst other considerations this includes gender.
The Chairman of the Board has been in place since 17 August 2019 and served on
the Board since 1 December 2011. In normal circumstances, and in accordance
with the Board's policy on tenure, the Board would be actively addressing plans
for his replacement. However, it was felt that this process should be
temporarily suspended until the outcome of both the discontinuation vote
scheduled for August 2021 and the strategic review currently underway and
referred to in the Chairman's Statement, are known. The Board consider that
this is in the best interests of the shareholders and will report further in
the interim report to 30 June 2021.
Conflicts of Interest
None of the Directors nor any persons connected with them had a material
interest in any of the Company's transactions, arrangements or agreements at
the date of this report and none of the Directors has or had any interest in
any transaction which is or was unusual in its nature or conditions or
significant to the business of the Company, and which was effected by the
Company during the reporting period.
David Warr holds 63,000 Ordinary Shares in the capital of the Company, which
represented an interest of 0.40% of the Company's Ordinary Shares in issue as
at 31 December 2020.
Nigel Sidebottom holds 4,366 Ordinary Shares in the capital of the Company,
which represented an interest of 0.03% of the Company's Ordinary Shares in
issue as at 31 December 2020, and 5,205 ZDP Shares in the capital of the
Company, which represented an interest of 0.02% of the Company's ZDP Shares in
issue as at 31 December 2020.
Nigel Ward holds 7,000 Ordinary Shares in the capital of the Company, via a
nominee account, which represented an interest of 0.04% of the Company's
Ordinary Shares in issue as at 31 December 2020, and 10,000 ZDP Shares in the
capital of the Company, which represented an interest of 0.05% of the Company's
ZDP Shares in issue as at 31 December 2020.
At the date of this report, there are no outstanding loans or guarantees
between the Company and any Director.
Board Responsibilities
The Board comprises four non-executive Directors, who meet at least quarterly
to consider the affairs of the Company in a prescribed and structured manner.
All Directors are considered independent of the Investment Manager for the
purposes of the AIC Code and Listing Rule 15.2.12A, except for Nigel Sidebottom
by virtue of his prior employment with PFM. Biographies of the Directors for
the period from 1 January 2020 to the date of this report appear in the
Directors Biographies' demonstrating the wide range of skills and experience
they bring to the Board. David Warr is the Senior Independent Director.
The Board's policy on tenure is that it is the Board's expectation that
Directors will not serve beyond the Annual General Meeting following the ninth
anniversary of their appointment. However the Board takes the view that
independence of individual Directors is not necessarily compromised by length
of tenure on the Board and experience can add significantly to the Board's
strength. Nigel Ward was appointed Chairman effective 17 August 2019. Please
refer to the Chairman's statement for details on Board refreshment and to the
comment on the board's tenure policy.
The Directors, in the furtherance of their duties, may take independent
professional advice at the Company's expense, which is in accordance with the
AIC Code. The Directors also have access to the advice and services of the
Company Secretary through its appointed representatives who are responsible to
the Board for ensuring that the Board's procedures are followed and that
applicable rules and regulations are complied with. To enable the Board to
function effectively and allow the Directors to discharge their
responsibilities, full and timely access is given to all relevant information.
The Directors are requested to confirm their continuing professional
development is up to date and any necessary training is identified during the
annual performance reviews carried out and recorded by the Nomination
Committee.
None of the Directors has a contract of service with the Company.
Substantial Shareholdings
As at 19 April 2021, the latest practicable date for disclosure in this report,
the Company had no individual Shareholders with a holding greater than 10%.
Shareholder Communication
In line with the AIC Code, the Investment Advisers communicate with both the
Chairman and shareholders and are available to communicate and meet with major
shareholders. The Company has also appointed N+1 Singer to liaise with all
major shareholders together with PFM and Unicorn, all of who report back to the
Board at quarterly Board meetings ensuring that the Board is fully aware of
shareholder sentiment and expectation.
Director Attendance
During the year ended 31 December 2020, the number of Board meetings attended
was as follows:
Quarterly Board Ad hoc Board Meetings* Committee Meetings*
Meetings*
Nigel Ward 4 of 4 5 of 5 10 of 10
David Warr 4 of 4 5 of 5 10 of 10
Nigel Sidebottom 4 of 4 3 of 5 9 of 10
Sharon Parr 4 of 4 5 of 5 9 of 10
*Only meetings held during their membership of the Board and relevant
committees have been considered.
Committees
The Company has established four committees: the Audit Committee, the
Nomination Committee, the Remuneration and Management Engagement Committee and
the Risk Committee (together the "Committees"). The Nomination and Risk
Committees comprise the whole Board to ensure that these key areas benefit from
the review and input from the experience of all Board members. Nigel Ward,
David Warr and Sharon Parr sit on the Audit Committee and Remuneration and
Management Engagement Committee. The Terms of Reference for each committee are
available on request from the Administrator, or on the Company website
www.acornincome.co.uk.
The Audit Committee
A full report regarding the Audit Committee can be found in the Audit Committee
Report.
Nomination ("NOM") Committee
In accordance with the AIC Code, a Nomination Committee has been established.
David Warr is Chairman. The Nomination Committee meets at least once a year in
accordance with the terms of reference and reviews, inter alia, the structure,
size and composition of the Board. When the appointment of a non-executive
director is being considered the Nomination Committee will make recommendations
to the Board after evaluating candidates from a wide range of backgrounds.
Whilst considering the composition of the Board, the Nomination Committee will
be mindful of diversity, inclusiveness and meritocracy and, in considering a
new candidate, the Nomination Committee will apply comparative analysis of
candidates' qualifications and experience, applying pre-established clear,
neutrally formulated and unambiguous criteria to determine the most suitable
candidate sought for the specific position.
Other duties of the Nomination Committee are to give full consideration to
succession planning for Directors, to review regularly the leadership needs of
the non-executive Directors, ensure non-executive Directors receive a formal
letter of appointment and to review the results of the Board's performance
evaluation process.
Remuneration and Management Engagement ("RME") Committee
David Warr is Chairman of the RME Committee. The RME Committee meets at least
once a year to determine and agree with the Board the framework for the
remuneration of the Company's Chairman, Directors and service providers, taking
into account remuneration trends and all other factors which it deems
necessary. The RME Committee also reviews contractual terms and performance of
all service providers to ensure their satisfactory conduct and performance.
During a meeting held on 16 August 2019 it was proposed and agreed that fees be
increased as follows effective 1 September 2019:
Base fee increased from £25,000 per annum to £30,000 per annum
NOM / RME / Risk committee Chairs fee increased from £30,000 per annum to £
35,000 per annum
Audit Chair fee increased from £32,500 per annum to £37,500 per annum
Board Chair fee increased from £35,000 per annum to £40,000 per annum
Details of the Directors' remuneration can be found in Note 6.
Risk Committee
Nigel Sidebottom is Chairman of the Risk Committee. The Risk Committee meets at
least four times a year, reviewing the effectiveness of the Company's internal
controls and risk management systems and procedures on a quarterly basis,
actively seeking to identify, manage and monitor risks such as Market, Credit,
Liquidity, Counterparty, Operational and Leverage. In doing so the Risk
Committee reviews a quarterly report from the Investment Adviser and reviews
arrangements for monitoring investment risk. The Risk Committee also ensures
that the risk profile of the Company's portfolios are appropriate to the size;
structure and investment strategies applied and reports its findings and
recommendations to the Board quarterly.
Internal Control and Financial Reporting
The Board is responsible for establishing and maintaining the Company's systems
of internal control ensuring that they are designed to meet the particular
needs of the Company and the risks to which it is exposed, and by their very
nature provide reasonable, but not absolute, assurance against material
misstatement or loss. The key procedures which have been established to provide
effective internal control are as follows:
Investment advice is provided by PFM and Unicorn under Investment Adviser
Agreements. The Board is responsible for setting the overall investment policy
and monitors the actions of the Investment Advisers at regular Board meetings.
Both PFM and Unicorn provide the Board with updates at each quarterly Board
meeting and at any other time that the Board requests.
The administration and company secretarial duties of the Company are performed
by Northern Trust International Fund Administration Services (Guernsey)
Limited.
Registrar duties are performed by JTC Registrars Limited
The custody of assets, is undertaken by Northern Trust (Guernsey) Limited.
The duties of investment management, accounting and the custody of assets are
segregated. The procedures of the individual parties are designed to complement
one another.
The Directors of the Company clearly define the duties and responsibilities of
their agents and advisers. The appointment of agents and advisers is conducted
by the Board after consideration of the quality of the parties involved; the
Board monitors their ongoing performance and contractual arrangements. A
detailed annual review of the main service providers is undertaken by the RME
Committee and its findings are reported to the Board.
Mandates for authorisation of investment transactions and expense payments are
set out by the Board.
The Board reviews detailed financial information produced by the Investment
Advisers and the Administrator on a regular basis.
The Board is provided, on a quarterly basis, with a Compliance Report produced
by a specialist Compliance and Legal department at Premier Miton Group. The
monitoring programme seeks to ensure that all activities of PFM, for the year
under review, have been in accordance with both internal procedures and with
FCA principles for firms and individuals. Prior to the COVID-19 pandemic, the
Compliance team also makes regular external visits to both Unicorn and the
Administrator, the latest visit being to Unicorn on 25 April 2019. A visit to
Northern Trust took place on 23 May 2018. The Secretary provides a report at
each quarterly Board meeting which highlights any areas of non-compliance with
any applicable regulations and laws. The Board has access, at all times, to all
relevant compliance personnel.
The Company does not have an internal audit department. All the Company's
management and administration functions are delegated to independent third
parties and it is therefore felt there is no need for the Company to have an
internal audit facility.
No significant findings were found during the internal controls review.
Packaged Retail and Insurance-Based Investment Products ("PRIIPs")
As a listed closed-ended fund, the Company falls under the definition of a
retail investment product for PRIIPs Regulation issued by the FCA which came
into effect 1 January 2018. As such, the Company is required to produce KIDs
which are available on the Company's website www.acornincome.co.uk.
Relations with Shareholders
All holders of Ordinary Shares in the Company have the right to receive notice
of, and attend and vote at the general meetings of the Company. The holders of
ZDP Shares have the right to receive notice of all general meetings but only
have the right to attend and vote if the business of the meeting proposes a
resolution which will vary, modify or abrogate any of the special rights
attached to the ZDP Shares.
At each general meeting of the Company, the Board and the Investment Advisers
are available to discuss issues affecting the Company. This is in accordance
with the AIC Code. Only Ordinary Shares carry full voting rights, holders of
ZDP Shares are only entitled to vote on issues affecting their share class. The
primary responsibility for shareholder relations lies with PFM. However, the
Directors are always available to enter into dialogue with shareholders and the
Chairman is always willing to communicate with major shareholders as the
Company believes such communication to be important.
Shareholders are welcome to contact the Chairman directly by emailing at:
Acorn_Income_Fund_Limited@ntrs.com
Anti-Bribery and Corruption Policy
The Company has adopted a zero tolerance policy towards bribery and is
committed to carrying out business fairly, honestly and openly.
Voting and Stewardship Code
The Investment Manager is committed to the principles of the Financial
Reporting Council's UK Stewardship Code and this also constitutes the
disclosure of that commitment required under the rules of the FCA (Conduct of
Business Rule 2.2.3).
Global Greenhouse Gas Emissions
The Company has no greenhouse gas emissions to report from the operations of
the Company, nor does it have responsibility for other emission producing
sources.
Signed on behalf of the Board by:
Nigel Ward
Chairman
20 April 2021
Statement of Directors' Responsibility in Respect of the Annual Financial
Report
for the year ended 31 December 2020
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Financial Report and
financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law they have elected to prepare the financial
statements in accordance with International Financial Reporting Standards as
issued by the IASB and applicable law.
Under company law the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the Company and of its profit or loss for that period. In preparing
these financial statements, the Directors are required to:
. select suitable accounting policies and then apply them
consistently;
. make judgements and estimates that are reasonable, relevant and
reliable;
. state whether applicable accounting standards have been followed,
subject to any material departures disclosed and explained in the financial
statements;
. assess the Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern; and
. use the going concern basis of accounting unless they either
intend to liquidate the Company or to cease operations, or have no realistic
alternative but to do so.
The Directors are responsible for keeping proper accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that its financial statements comply with the Companies
(Guernsey) Law, 2008. They are responsible for such internal control as they
determine is necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error, and have
general responsibility for taking such steps as are reasonably open to them to
safeguard the assets of the Company and to prevent and detect fraud and other
irregularities.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website.
Legislation in Guernsey governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.
The Directors confirm that they have carried out a robust assessment of the
principal risks facing the Company, including those that would threaten its
business model, future performance, solvency or liquidity.
Disclosure of Information to Auditors
The Directors who held office at the date of approval of this Directors' Report
confirm that, so far as they are aware, there is no relevant audit information
of which the Company's Auditor is unaware; and that each Director has taken all
the steps that he ought to have taken as a director to make himself aware of
any relevant audit information and to establish that the Company's Auditor is
aware of that information.
Responsibility Statement of the Directors in respect of the Annual Financial
Report
We confirm that to the best of our knowledge:
. the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the Company; and
. the Management Report (comprising the Chairman's Statement, the
Investment Advisers' Reports, Strategic Report, Directors' Report and Audit
Committee Report) includes a fair review of the development and performance of
the business and the position of the issuer, together with a description of the
principal risks and uncertainties that they face.
We consider the annual financial report, taken as a whole, is fair, balanced
and understandable and provides the information necessary for shareholders to
assess the Company's position and performance, business model and strategy.
Reappointment of Auditor
The Auditor, KPMG Channel Islands Limited, has expressed its willingness to
continue in office as Auditor. A resolution proposing their reappointment will
be submitted at the forthcoming general meeting to be held pursuant to section
199 of the Law.
Signed on behalf of the Board by:
Nigel Ward
Chairman
20 April 2021
Audit Committee Report
for the year ended 31 December 2020
In accordance with the AIC Code an Audit Committee has been established
consisting of David Warr, Sharon Parr, and Nigel Ward. Sharon Parr is the
Chairman of the Audit Committee, effective 1 May 2020.
The Audit Committee meets at least twice a year and, when requested, provides
advice to the Board on whether the annual report and accounts, taken as a
whole, is fair, balanced and understandable and provides information necessary
for the shareholders to assess the Company's performance, business model and
strategy. The Audit Committee also reviews, inter alia, the financial reporting
process and the system of internal control and management of financial risks
including understanding the current areas of greatest financial risk and how
these are managed by the Investment Manager, reviewing the annual report and
accounts, assessing the fairness of preliminary and interim statements and
disclosures and reviewing the external audit process. The Audit Committee is
responsible for overseeing the Company's relationship with the external auditor
(the "Auditor"), including making recommendations to the Board on the
appointment of the Auditor and their remuneration.
Since the extent of COVID-19 became ever more apparent the Audit Committee has
been working very closely with the Investment Advisers to ensure the annual
report and accounts remain valid and reflect the Company's position as at the
date of signing.
The Audit Committee considers the nature, scope and results of the Auditor's
work and reviews, and develops and implements a policy on the supply of any
non-audit services that are to be provided by the Auditor. The Audit Committee
annually reviews the independence and objectivity of the Auditor and also
considers the appointment of an appropriate Auditor.
At the Audit Committee meeting on 9 November 2020 the appointment of the
Auditor was considered and the Board subsequently decided that the Auditor was
sufficiently independent and was appropriately appointed in order to carry out
the audit for the year ended 31 December 2020. During the year under review,
the Auditor was not engaged to provide any non-audit services to the Company.
The valuation of the Company's investments, given that they represent the
majority of net assets of the Company is considered to be a significant area of
focus. In discharging its responsibilities the Audit Committee has specifically
considered the valuation of investments as follows:
. The Board reviews the portfolio valuations on a regular basis
throughout the year and meets with the Investment Advisers at least quarterly.
It also seeks assurance that the pricing basis is appropriate and in line with
relevant accounting standards as adopted by the Company and that the carrying
values are correct.
. The Company's net asset value is calculated twice weekly using a
third party pricing source.
. The Audit Committee receives and reviews reports from the
Investment Advisers and the Auditor relating to the Company's annual financial
report. The Audit Committee focuses particularly on compliance with legal
requirements, accounting standards and the Listing Rules and ensures that an
effective system of internal financial and non-financial controls is
maintained. The ultimate responsibility for reviewing and approving the annual
financial report remains with the Board.
. The Audit Committee holds an annual meeting to approve the
Company's annual financial report before its publication. At a meeting held on
9 November 2020 the Audit Committee met with the Auditor to discuss the audit
plan and approach. During this meeting it was agreed with the Auditor that the
area of significant audit focus related to the valuation of investments given
that they represent the majority of net assets of the Company. The scope of the
audit work in relation to this asset class was discussed. At the conclusion of
the audit, the Audit Committee met with the Auditor and discussed the scope of
their annual audit work and also their audit findings.
. The Audit Committee reviews the scope and results of the audit,
its cost effectiveness together with the independence and objectivity of the
Auditor. The Audit Committee has particular regard to any non-audit work that
the Auditor may undertake and the terms under which the Auditor may be
appointed to perform non-audit services. In order to safeguard the Auditor's
independence and objectivity, the Audit Committee ensures that any other
advisory and/or consulting services provided by the Auditor does not conflict
with their statutory audit responsibilities.
In addition to the above the Audit Committee paid particular attention during
the year to the discontinuation vote that is to be presented at the 2021 AGM.
In reaching its conclusion the Audit Committee reviewed the AIC SORP which
states that it is more appropriate to prepare financial statements on a going
concern basis unless a vote has already been triggered and shareholders have
voted against continuation. The SORP guidance goes on to state that it is
appropriate for the financial statements to be prepared on a going concern
basis whilst making a material uncertainty disclosure as set out in accounting
standards.
To fulfil its responsibilities regarding the independence of the Auditor, the
Audit Committee considered:
. a report from the Auditor describing their arrangements to
identify, report and manage any conflicts of interest; and
. the extent of the non-audit services provided by the Auditor.
To assess the effectiveness of the Auditor, the committee reviewed:
. the Auditor's fulfilment of the agreed audit plan and variations
from it;
. the audit findings report highlighting any major issues that
arose during the course of the audit; and
. the effectiveness and independence of the Auditor having
considered the degree of diligence and professional scepticism demonstrated by
them.
The Audit Committee is satisfied with KPMG Channel Islands Limited's ("KPMG")
effectiveness and independence as Auditor.
As KPMG has been previously engaged to provide the annual audit, the Board was
able to rely on both their previous experiences with KPMG and their conduct
during the current year audit.
Sharon Parr
Chairman of the Audit Committee
20 April 2021
Independent Auditor's Report to the Members of Acorn Income Fund Limited
Our opinion is unmodified
We have audited the financial statements of Acorn Income Fund Limited (the
"Company"), which comprise the statement of financial position as at 31
December 2020, the statements of comprehensive income, cash flows and changes
in equity for the year then ended, and notes, comprising significant accounting
policies and other explanatory information.
In our opinion, the accompanying financial statements:
. give a true and fair view of the financial position of the
Company as at 31 December 2020, and of the Company's financial performance and
cash flows for the year then ended;
. are prepared in accordance with International Financial Reporting
Standards; and
. comply with the Companies (Guernsey) Law, 2008.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) ("ISAs (UK)") and applicable law. Our responsibilities are described
below. We have fulfilled our ethical responsibilities under, and are
independent of the Company in accordance with, UK ethical requirements
including FRC Ethical Standards, as applied to listed entities. We believe that
the audit evidence we have obtained is a sufficient and appropriate basis for
our opinion.
Material uncertainty relating to going concern
The risk Our response
Going concern: Disclosure quality Our procedures included, but
Refer to Audit Committee The financial statements were not limited to:
Report explain how the Board has We obtained and inspected a
We draw attention to note 1 formed a judgment that it is Board approved written
(a) to the financial appropriate to adopt the assessment of going concern
statements which indicates going concern basis of on the Company and
that the Company is obliged preparation for the Company. corroborated the assessment
to hold a discontinuation That judgment is based on an with our knowledge of the
vote at the 2021 Annual evaluation of the inherent business.
General Meeting of risks to the Company's We considered the risk that
Shareholders. business model and how those the outcome of the
This condition constitutes a risks might affect the discontinuation vote could
material uncertainty that may Company's financial affect the Company for at
cast doubt about the resources or ability to least a year from the date
Company's ability to continue continue operations over a of approval of the financial
as a going concern. period of at least a year statements (the "going
Our opinion is not modified from the date of approval of concern period") by
in respect of this matter. the financial statements, in inspecting minutes of
particular in relation to meetings held by the
the discontinuation vote. directors, inquiring with
The risk for our audit is management as to their
whether or not those risks assessment of the likelihood
are such that they amounted of uptake of the
to a material uncertainty discontinuation vote, and
that may cast significant considering key financial
doubt about the ability to metrics including the
continue as a going discount of the Company's
concern. If so, that fact share price against its net
is required to be disclosed asset value.
(as has been done) and, Assessing disclosures:
along with a description of We considered whether the
the circumstances, is a key going concern disclosure in
financial statement note 1(a) to the financial
disclosure. statements gives a full and
accurate description of the
directors' assessment of
going concern, including the
identified risks and
dependencies.
Other key audit matters: our assessment of the risks of material misstatement
Key audit matters are those matters that, in our professional judgment, were of
most significance in the audit of the financial statements and include the most
significant assessed risks of material misstatement (whether or not due to
fraud) identified by us, including those which had the greatest effect on: the
overall audit strategy; the allocation of resources in the audit; and directing
the efforts of the engagement team. Going concern is a significant key audit
matter and is described in the 'Material uncertainty relating to going concern'
section of our report. These matters were addressed in the context of our audit
of the financial statements as a whole, and in forming our opinion thereon, and
we do not provide a separate opinion on these matters. In arriving at our
audit opinion above, the other key audit matter was as follows (unchanged from
2019):
The risk Our response
Valuation of investments Basis: Our audit procedures
(Financial assets designated As at 31 December 2020 the included, but were not
at fair value through profit Company had invested the limited to:
or loss) equivalent of 158.0% (2019: Use of KPMG Valuation
£90,003,736; (2019: £ 140.7%) of its net assets in Specialist:
103,788,482) listed equities, bonds and We used our KPMG Valuation
Refer to the Audit Committee structured notes (together, Specialist to independently
Report, accounting policy the "investments"). price listed investments to
notes 1(b), 1(l) The Company's listed a third party pricing
and disclosure note 10. investments are valued based source.
on market prices while its For structured notes our
structured notes are valued KPMG Valuation Specialist
based on price quotes assisted us with the
obtained from a third party assessment of the quality
pricing provider (the "Price and integrity of the Price
Quotes"). Where the Price Quotes, through comparison
Quotes may not be to available quotes from
representative of fair value, independent sources or
the Company will use the through applying a valuation
resources of the Investment model based on contractual
Manager to augment its own terms and market data.
fair value analysis to Assessing disclosures:
determine the most We also considered the
appropriate fair value for Company's disclosures (see
such investments. note 1 (b)) in relation to
Risk: the use of judgments
The valuation of the regarding valuation of
Company's investments, given investments and the
that it represents the Company's valuation policies
majority of the Company's net adopted (see note 1(I)) and
assets is considered to be a fair value disclosures in
significant area of our note 10 for compliance with
audit. IFRS.
Our application of materiality and an overview of the scope of our audit
Materiality for the financial statements as a whole was set at £850,000,
determined with reference to a benchmark of net assets of £56,967,287, of which
it represents approximately 1.5% (2019: 1.5%).
In line with our audit methodology, our procedures on individual account
balances and disclosures were performed to a lower threshold, performance
materiality, so as to reduce to an acceptable level the risk that individually
immaterial misstatements in individual account balances add up to a material
amount across the financial statements as a whole. Performance materiality for
the Company was set at 75% (2019: 75%) of materiality for the financial
statements as a whole, which equates to £637,000. We applied this percentage in
our determination of performance materiality because we did not identify any
factors indicating an elevated level of risk.
We reported to the Audit Committee any corrected or uncorrected identified
misstatements exceeding £42,500 in addition to other identified misstatements
that warranted reporting on qualitative grounds.
Our audit of the Company was undertaken to the materiality level specified
above, which has informed our identification of significant risks of material
misstatement and the associated audit procedures performed in those areas as
detailed above.
Going concern basis of preparation
The directors have prepared the financial statements on the going concern basis
as they do not intend to liquidate the Company or to cease its operations, and
as they have concluded that the Company's financial position means that this is
realistic over the going concern period. As stated in the 'material uncertainty
relating to going concern' section of our report, they have also concluded that
there is a material uncertainty relating to going concern.
An explanation of how we evaluated the directors' assessment is set out in the
'material uncertainty relating to going concern' section of our report.
Our conclusions based on this work:
. we consider that the directors' use of the going concern basis of
accounting in the preparation of the financial statements is appropriate;
. we have nothing material to add or draw attention to in relation
to the directors' statement in the notes to the financial statements on the use
of the going concern basis of accounting, and their identification therein of a
material uncertainty over the Company's use of that basis for the going concern
period and we found the going concern disclosure in note 1(a) to be acceptable;
and
. the related statement under the Listing Rules set out in Audit
Committee Report is materially consistent with the financial statements and our
audit knowledge.
Fraud and breaches of laws and regulations - ability to detect
Identifying and responding to risks of material misstatement due to fraud
To identify risks of material misstatement due to fraud ("fraud risks") we
assessed events or conditions that could indicate an incentive or pressure to
commit fraud or provide an opportunity to commit fraud. Our risk assessment
procedures included:
. enquiring of management as to the Company's policies and
procedures to prevent and detect fraud as well as enquiring whether management
have knowledge of any actual, suspected or alleged fraud;
. reading minutes of meetings of those charged with governance; and
. using analytical procedures to identify any unusual or unexpected
relationships.
As required by auditing standards, we perform procedures to address the risk of
management override of controls, in particular the risk that management may be
in a position to make inappropriate accounting entries. On this audit we do not
believe there is a fraud risk related to revenue recognition because the
Company's revenue streams are simple in nature with respect to accounting
policy choice, and are easily verifiable to external data sources or agreements
with little or no requirement for estimation from management. We did not
identify any additional fraud risks.
We performed procedures including
. Identifying journal entries and other adjustments to test based
on risk criteria and comparing any identified entries to supporting
documentation; and
. incorporating an element of unpredictability in our audit
procedures.
Identifying and responding to risks of material misstatement due to
non-compliance with laws and regulations
We identified areas of laws and regulations that could reasonably be expected
to have a material effect on the financial statements from our general
commercial and sector experience and through discussion with management (as
required by auditing standards), and from inspection of the Company's
regulatory and legal correspondence, and discussed with management the policies
and procedures regarding compliance with laws and regulations. As the Company
is regulated, our assessment of risks involved gaining an understanding of the
control environment including the entity's procedures for complying with
regulatory requirements.
The Company is subject to laws and regulations that directly affect the
financial statements including financial reporting legislation and taxation
legislation and we assessed the extent of compliance with these laws and
regulations as part of our procedures on the related financial statement items.
The Company is subject to other laws and regulations where the consequences of
non-compliance could have a material effect on amounts or disclosures in the
financial statements, for instance through the imposition of fines or
litigation or impacts on the Company's ability to operate. We identified
financial services regulation as being the area most likely to have such an
effect, recognising the regulated nature of the Company's activities and its
legal form. Auditing standards limit the required audit procedures to identify
non-compliance with these laws and regulations to enquiry of management and
inspection of regulatory and legal correspondence, if any. Therefore if a
breach of operational regulations is not disclosed to us or evident from
relevant correspondence, an audit will not detect that breach.
Context of the ability of the audit to detect fraud or breaches of law or
regulation
Owing to the inherent limitations of an audit, there is an unavoidable risk
that we may not have detected some material misstatements in the financial
statements, even though we have properly planned and performed our audit in
accordance with auditing standards. For example, the further removed
non-compliance with laws and regulations is from the events and transactions
reflected in the financial statements, the less likely the inherently limited
procedures required by auditing standards would identify it.
In addition, as with any audit, there remains a higher risk of non-detection of
fraud, as this may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal controls. Our audit procedures
are designed to detect material misstatement. We are not responsible for
preventing non-compliance or fraud and cannot be expected to detect
non-compliance with all laws and regulations.
Other information
The directors are responsible for the other information. The other information
comprises the information included in the annual financial report but does not
include the financial statements and our auditor's report thereon. Our opinion
on the financial statements does not cover the other information and we do not
express an audit opinion or any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is
to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our
knowledge obtained in the audit, or otherwise appears to be materially
misstated. If, based on the work we have performed, we conclude that there is a
material misstatement of this other information, we are required to report that
fact. We have nothing to report in this regard.
Disclosures of emerging and principal risks and longer term viability
We are required to perform procedures to identify whether there is a material
inconsistency between the directors' disclosures in respect of emerging and
principal risks and the viability statement, and the financial statements and
our audit knowledge. we have nothing material to add or draw attention to in
relation to:
. the directors' confirmation within the Viability Statement that
they have carried out a robust assessment of the emerging and principal risks
facing the Company, including those that would threaten its business model,
future performance, solvency or liquidity;
. the emerging and principal disclosures describing these risks and
explaining how they are being managed or mitigated;
. the directors' explanation in the Viability Statement as to how
they have assessed the prospects of the Company, over what period they have
done so and why they consider that period to be appropriate, and their
statement as to whether they have a reasonable expectation that the Company
will be able to continue in operation and meet its liabilities as they fall due
over the period of their assessment, including any related disclosures drawing
attention to any necessary qualifications or assumptions.
We are also required to review the Viability Statement, set out under the
Listing Rules. Based on the above procedures, we have concluded that the above
disclosures are materially consistent with the financial statements and our
audit knowledge.
Corporate governance disclosures
We are required to perform procedures to identify whether there is a material
inconsistency between the directors' corporate governance disclosures and the
financial statements and our audit knowledge.
Based on those procedures, we have concluded that each of the following is
materially consistent with the financial statements and our audit knowledge:
. the directors' statement that they consider that the annual
financial report and financial statements taken as a whole is fair, balanced
and understandable, and provides the information necessary for shareholders to
assess the Company's position and performance, business model and strategy;
. the section of the annual financial report describing the work of
the Audit Committee, including the significant issues that the audit committee
considered in relation to the financial statements, and how these issues were
addressed; and
. the section of the annual financial report that describes the
review of the effectiveness of the Company's risk management and internal
control systems.
We are required to review the part of Corporate Governance Statement relating
to the Company's compliance with the provisions of the UK Corporate Governance
Code specified by the Listing Rules for our review. We have nothing to report
in this respect.
We have nothing to report on other matters on which we are required to report
by exception
We have nothing to report in respect of the following matters where the
Companies (Guernsey) Law, 2008 requires us to report to you if, in our opinion:
. the Company has not kept proper accounting records; or
. the financial statements are not in agreement with the accounting
records; or
. we have not received all the information and explanations, which
to the best of our knowledge and belief are necessary for the purpose of our
audit.
Respective responsibilities
Directors' responsibilities
As explained more fully in their statement, the directors are responsible for:
the preparation of the financial statements including being satisfied that they
give a true and fair view; such internal control as they determine is necessary
to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error; assessing the Company's ability to
continue as a going concern, disclosing, as applicable, matters related to
going concern; and using the going concern basis of accounting unless they
either intend to liquidate the Company or to cease operations, or have no
realistic alternative but to do so.
Auditor's responsibilities
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to fraud
or error, and to issue our opinion in an auditor's report. Reasonable assurance
is a high level of assurance, but does not guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material
if, individually or in aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of the financial
statements.
A fuller description of our responsibilities is provided on the FRC's website
at www.frc.org.uk/auditorsresponsibilities.
The purpose of this report and restrictions on its use by persons other than
the Company's members as a body
This report is made solely to the Company's members, as a body, in accordance
with section 262 of the Companies (Guernsey) Law, 2008. Our audit work has
been undertaken so that we might state to the Company's members those matters
we are required to state to them in an auditor's report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company's members, as a
body, for our audit work, for this report, or for the opinions we have formed.
Barry Ryan
For and on behalf of KPMG Channel Islands Limited
Chartered Accountants and Recognised Auditors
Guernsey
20 April 2021
Statement of Comprehensive Income
for the year ended 31 December 2020
Year ended Year ended
31 December 31 December
2020 2019
Revenue Capital Total Total
Notes GBP GBP GBP GBP
Net (losses)/gains on financial 10 - (13,516,405) (13,516,405) 14,541,087
assets designated as at fair
value through profit or loss
Gains on derivative financial 4 - 106,175 106,175 249,850
instruments
Investment income 3 2,813,232 - 2,813,232 4,220,187
Foreign exchange gains/(losses) 567 (97,148) (96,581) (204,962)
Total income and gains/(losses) 2,813,799 (13,507,378) (10,693,579) 18,806,162
Expenses 5 (638,738) (568,086) (1,206,824) (1,360,747)
Return/(loss) on ordinary 2,175,061 (14,075,464) (11,900,403) 17,445,415
activities before finance costs
and taxation
Interest payable and similar 7 - (1,258,297) (1,258,297) (1,207,671)
charges
Return/(loss) on ordinary 2,175,061 (15,333,761) (13,158,700) 16,237,744
activities before taxation
Taxation on ordinary activities - - - -
Other comprehensive income - - - -
Total comprehensive income/ 2,175,061 (13,158,700) 16,237,744
(loss) for the year (15,333,761)
attributable to Ordinary
Shareholders
Pence Pence Pence Pence
Return/(loss) per Ordinary 9 13.75 (96.95) (83.20) 102.66
Share
Dividend per Ordinary Share 8 23.00 - 23.00 20.80
Return per ZDP Share 9 - 5.93 5.93 5.69
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 year, all amounts above relate to
continuing operations. No operations were acquired or discontinued in the year.
The Notes form an integral part of the financial statements.
Statement of Financial Position
as at 31 December 2020
31 31 December
December 2019
2020
Notes GBP GBP
NON-CURRENT ASSETS
Financial assets designated as at fair value through 10 90,003,736 103,788,482
profit or loss
CURRENT ASSETS
Receivables 11 458,353 491,738
Cash and cash equivalents 609,466 2,324,683
Derivative financial instruments 132,269 186,453
1,200,088 3,002,874
TOTAL ASSETS 91,203,824 106,791,356
CURRENT LIABILITIES
Derivative financial instruments - 6,661
Payables - due within one year 12 257,133 299,762
257,133 306,423
NON-CURRENT LIABILITIES
ZDP Shares 13 33,979,404 32,721,106
TOTAL LIABILITIES 34,236,537 33,027,529
NET ASSETS 56,967,287 73,763,827
EQUITY
Share capital and premium 14 27,420,824 27,420,824
Revenue reserve 1,954,448 3,417,227
Capital reserve 22,372,177 37,705,938
Other reserves 15 5,219,838 5,219,838
TOTAL EQUITY 56,967,287 73,763,827
Pence Pence
Net asset value per Ordinary Share (per Articles) 360.21 466.43
Net asset value per Ordinary Share (per IFRS) 360.17 466.37
Net asset value per ZDP Share (per Articles) 160.02 154.07
Net asset value per ZDP Share (per IFRS) 160.05 154.12
The financial statements were approved by the Board of Directors and authorised
for issue on 20 April 2021 and signed on its behalf by:
Nigel Ward
Chairman
The Notes form an integral part of the financial statements.
Statement of Cash Flows
for the year ended 31 December 2020
31 December 31 December
2020 2019
Notes GBP GBP
Operating activities
(Loss)/return on ordinary activities before taxation (13,158,700) 16,237,744
Net losses/(gains) on financial assets designated as 10 13,516,405 (14,541,087)
at fair value through profit or loss
Dividend income 3 (2,357,237) (3,679,715)
Interest income 3 (455,995) (536,887)
Bank Interest income 3 - (3,585)
Interest expense 7 1,258,297 1,207,671
Decrease/(increase) in derivative financial assets 54,184 (172,367)
Decrease in derivative financial liabilities (6,661) (192,939)
(Decrease)/increase in payables and appropriations 12 (15,515) 47,537
excluding amount due to brokers
(Increase)/decrease in receivables excluding accrued 11 (2,524) 13,949
investment income and due from brokers
Net cash flow used in operating activities before (1,167,746) (1,619,679)
investment income
Dividend income received 2,360,099 3,673,593
Interest income received 474,249 595,235
Net cash flow from operating activities before 1,666,602 2,649,149
taxation
Tax paid - -
Net cash flow from operating activities 1,666,602 2,649,149
Investing activities
Purchase of financial assets designated at fair value (25,565,259) (34,951,668)
through profit or loss
Sale of financial assets designated at fair value 25,821,280 35,032,464
through profit or loss
Net cash flow from investing activities 256,021 80,796
Financing activities
Equity dividends paid 8 (3,637,840) (3,289,872)
Net cash flow used in financing activities (3,637,840) (3,289,872)
Decrease in cash and cash equivalents (1,715,217) (559,927)
Cash and cash equivalents at beginning of year 2,324,683 2,884,610
Cash and cash equivalents at end of year 609,466 2,324,683
The Notes form an integral part of the financial statements.
Statement of Changes in Equity
For the year ended 31 December 2020
Share Capital Revenue Capital Other Total
and Premium Reserve Reserve Reserves
31 December 31 December 31 December 31 31 December
2020 2020 2020 December 2020
2020
Notes GBP GBP GBP GBP GBP
Balances as at 1 27,420,824 3,417,227 37,705,938 5,219,838 73,763,827
January 2020
Total comprehensive - 2,175,061 (15,333,761) - (13,158,700)
income/(loss) for the
year attributable to
Ordinary Shareholders
Dividends 8 - (3,637,840) - - (3,637,840)
Balances as at 31 27,420,824 1,954,448 22,372,177 5,219,838 56,967,287
December 2020
Share Capital Revenue Capital Other Total
and Premium Reserve Reserve Reserves
31 December 31 31 December 31 31 December
2019 December 2019 December 2019
2019 2019
GBP GBP GBP GBP GBP
Balances as at 1 27,420,824 3,178,203 24,997,090 5,219,838 60,815,955
January 2019
Total comprehensive - 3,528,896 12,708,848 - 16,237,744
income for the year
attributable to
Ordinary Shareholders
Dividends 8 - (3,289,872) - - (3,289,872)
Balances as at 31 27,420,824 3,417,227 37,705,938 5,219,838 73,763,827
December 2019
The Notes form an integral part of the financial statements.
Notes to the Financial Statements
for the year ended 31 December 2020
1 SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Preparation
The financial statements, which give a true and fair view, have been prepared
in accordance with International Financial Reporting Standards ("IFRS") issued
by the International Accounting Standards Board ("IASB"), the Association of
Investment Companies ("AIC") Statements of Recommended Practice ("SORP") (as
revised in October 2019 and applicable to periods beginning 1 January 2019)
where this is consistent with the requirements of IFRS and in compliance with
the Companies (Guernsey) Law, 2008. All accounting policies adopted for the
period are consistent with IFRS issued by the IASB. The financial statements
have been prepared on an historical cost basis except for the measurement at
fair value of financial assets designated as at fair value through profit or
loss and derivative financial instruments.
Whilst the Company is obliged to hold a discontinuation vote at the 2021 AGM,
the Directors in line with the AIC SORP, do not believe this should
automatically trigger the adoption of a basis of preparation other than going
concern. The SORP states that it is more appropriate to prepare financial
statements on a going concern basis unless a vote has already been triggered
and shareholders have voted against continuation. Additionally, the SORP
guidance sets out that it is appropriate for the financial statements to be
prepared on a going concern basis whilst making a material uncertainty
disclosure as set out in accounting standards.
The Directors will consider a number of factors in determining the
recommendation they put to shareholders in relation to the discontinuation vote
and, in conjunction with the strategic review discussed in more detail in the
Chairman's statement, has engaged in discussions with a number of shareholders
and its advisers. Based on this assessment the Directors have made the
assumption that the discontinuation vote will fail, and the Company will as a
result continue, however they recognise that the outcome of the vote is not yet
known which creates some uncertainty. In accordance with the SORP guidance, the
Directors note that these conditions indicate the existence of a material
uncertainty which may cast doubt about the Company's ability to continue as a
going concern.
Other factors the Directors have considered are, inter alia, the following:
. the Company has sufficient liquidity to meet all ongoing
expenses. The Company has net current assets of £942,955 at the year end. In
January 2017, the ZDP Shares were refinanced and their life was extended to 28
February 2022. In addition, the Board regularly reviews the cash flow of the
Company and is confident that the Company will have sufficient resources to
meet all future obligations;
. both the Income and Smaller Companies Portfolios consist
substantially of listed investments which are readily realisable and therefore
the Company has sufficient resources to meet its liquidity requirements; and
. as at 31 December 2020, the Company had no borrowings other than
the ZDP Shares which, as explained in Note 13, have a final capital entitlement
on 28 February 2022;
· the ongoing impact of the COVID-19 pandemic and ability of key
service providers to maintain business continuity and resiliency whilst working
from home.
In the opinion of the Directors, taking into account the considerations above,
the Company has adequate resources to continue in operational existence for the
foreseeable future. For this reason the financial statements have been prepared
on a going concern basis.
New Standards, Forthcoming Standards or Amendments and Interpretations
Effective During the Reporting Period
The following standards are newly effective in the current year but will have
no significant impact on the Company.
· Definition of a Business (Amendments to IFRS 3)
· Definition of Material (Amendments to IAS 1 and IAS 8)
· Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and
IFRS 7)
(b) Use of Estimates and Judgements
The preparation of the financial statements in conformity with IFRS requires
the Directors to make judgements, estimates and assumptions that affect the
application of accounting policies and the reported amounts of assets,
liabilities, income and expenses. Actual results may differ from these
estimates.
Estimates and underlying assumptions are reviewed on an on going basis.
Revisions to accounting estimates are recognised in the period in which the
estimates are revised and in any future periods affected.
The Directors use judgements in allocating expenses between Revenue and Capital
and in ascertaining the risk disclosures contained in Note 18. The Directors
use judgements in valuing the market value of the investments contained in Note
10.
No significant estimates have been used.
(c) Dividend Policy
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.
(d) Share Capital
Ordinary Shares are classified as equity. Share capital includes the nominal
value of Ordinary Shares that have been issued and any premiums received on the
initial issuance of shares. Incremental costs directly attributable to the
issue of new Ordinary Shares or options are shown in equity as a deduction, net
of tax, from the proceeds.
When shares recognised as equity are repurchased, the amount of the
consideration paid, which includes directly attributable costs, is recognised
as a deduction from equity. Repurchased shares are classified as treasury
shares and are presented in the treasury reserve included in other reserves in
the Statement of Financial Position. When treasury shares are sold or reissued
subsequently, the amount received is recognised as an increase in equity and
the resulting surplus or deficit on the transaction is presented within share
premium.
(e) Zero Dividend Preference Shares
Under IAS 32 - Financial Instruments: Presentation, the ZDP Shares are
classified as financial liabilities and are held at amortised cost.
Appropriation for the period in respect of ZDP Shares is included in the
Statement of Comprehensive Income as a finance cost and is calculated using the
effective interest rate method ("EIR"). The costs of issue of the ZDP Shares
are being amortised over the period until the ZDP Shares are due for
redemption.
(f) Taxation
The Company has been granted exemption under the Income Tax (Exempt Bodies)
(Guernsey) Ordinance, 1989 from Guernsey Income Tax, and has elected to remain
exempt following changes to the Guernsey tax regime. The Company paid an annual
fee of £1,200 (2019: £1,200).
(g) Capital Reserve
The following are accounted for in this reserve:
- gains and losses on the realisation of financial assets
designated at fair value through profit or loss and derivative financial
instruments;
- expenses charged to this account in accordance with the expenses
policy below;
- increases and decreases in the valuation of the financial assets
designated at fair value through profit and loss held at the year end and
derivative financial instruments; and
- unrealised exchange differences of a capital nature.
(h) Expenses
All expenses are accounted for on an accruals basis and are recognised in
profit or loss. Expenses are charged to the capital reserve where a connection
with the maintenance or enhancement of the value of the investments can be
demonstrated.
75% of the Company's management fee costs are charged to the capital reserve in
line with the Board's expected long-term split of returns between income and
capital gains from the investment portfolio.
All other expenses are charged through the revenue reserve.
(i) Investment Income
Interest income and distributions receivable are accounted for on an accruals
basis. Interest income relates only to interest on bank balances. Bond income
is accounted for using the EIR basis. Dividends are recognised on the
ex-dividend date. Investment income is treated as a revenue item, except for
special dividends of a capital nature which are treated as a capital item, in
the Statement of Comprehensive Income.
(j) Foreign Currency Translation
The currency of the primary economic environment in which the Company operates
(the functional currency) is Great British Pounds ("GBP") which is also the
presentational currency.
Transactions denominated in foreign currencies are translated into GBP at the
rate of exchange ruling at the date of the transaction.
Monetary assets and liabilities, other than investments, denominated in foreign
currencies at the reporting date are translated to the functional currency at
the foreign exchange rate ruling at that date. Foreign exchange differences
arising on translation are recognised in profit or loss in the Statement of
Comprehensive Income. Foreign exchange differences relating to investments are
taken to the capital reserve. Realised and unrealised foreign exchange
differences on non-capital assets or liabilities are taken to profit or loss in
the Statement of Comprehensive Income in the period in which they arise.
(k) Cash and Cash Equivalents
Cash and cash equivalents are defined as cash in hand, demand deposits and
short term, highly liquid investments readily convertible to known amounts of
cash and subject to an insignificant risk of change in value. For the purposes
of the Statement of Cash Flows, cash and cash equivalents consist of cash,
deposits at bank and money market deposits with a maturity of less than three
months.
(l) Investments
All investments have been classified as financial assets at "fair value through
profit or loss". Investments are initially recognised on the date of purchase
at fair value, with transaction costs recognised in profit or loss in the
Statement of Comprehensive Income. Unrealised gains and losses on movement in
fair value of investments are recognised in profit or loss in the Statement of
Comprehensive Income. Investments are derecognised on the date of sale. Gains
and losses on the sale of investments, which is the difference between its
initial cost and sale value, will be taken to the profit or loss in the
Statement of Comprehensive Income in the period in which they arise. For
investments actively traded in organised financial markets, fair value is
determined by reference to Stock Exchange quoted market bid prices as at the
close of business on the reporting date.
For investments not actively traded, the Directors will consider where
practical, multiples used in recent transactions in comparable stocks. Where
there are no comparable listed or unlisted stocks the Directors will take into
consideration the performance of the stock, maturity date and finance
arrangements to determine the fair value.
(m) Derivatives
Derivatives consist of forward exchange contracts which are initially measured
at fair value and any directly attributable transaction costs are recognised in
profit or loss in the Statement of Comprehensive Income as incurred. Subsequent
to initial recognition, derivatives are measured at fair value, and changes
therein are generally recognised in profit or loss in the Statement of
Comprehensive Income. Derivatives contracts in a receivable position (positive
fair value) are reported as financial assets at fair value through profit or
loss. Derivatives contracts in a payable position (negative fair value) are
reported as financial liabilities at fair value through profit or loss.
(n) Trade Date Accounting
All "regular way" purchases and sales of financial assets are recognised on the
"trade date", i.e. the date that the entity commits to purchase or sell the
asset. Regular way purchases or sales are purchases or sales of financial
assets that require delivery of the asset within the timeframe generally
established by regulation or convention in the market place.
(o) Segmental Reporting
The Company retains two Investment Advisers: Unicorn Asset Management Limited
and Premier Fund Managers Limited for the Smaller Companies Portfolio and
Income Portfolio respectively. As the Board reviews the performance of each
portfolio separately and decides on the allocation of resources based on this
performance, the Board, as chief operating decision maker, has determined that
the Company has two reportable segments (2019: two).
The Board is charged with setting the Company's investment strategy in
accordance with the Prospectus. They have delegated the day to day
implementation of this strategy to its Investment Advisers but retain
responsibility to ensure that adequate resources of the Company are directed in
accordance with their decisions. The investment decisions of the Investment
Advisers are reviewed on a regular basis to ensure compliance with the policies
and legal responsibilities of the Board. The Investment Advisers have been
given full authority to act on behalf of the Company, including the authority
to purchase and sell securities and other investments on behalf of the Company
and to carry out other actions as appropriate to give effect thereto. Whilst
the Investment Advisers may make the investment decisions on a day to day basis
regarding the allocation of funds to different investments, any changes to the
investment strategy or major allocation decisions have to be approved by the
Board, even though they may be proposed by the Investment Advisers. The Board,
therefore, retains full responsibility as to the major allocation decisions
made on an ongoing basis. The Investment Advisers will always act under the
terms of the Prospectus.
The key measure of performance used by the Board to assess the Company's
performance and to allocate resources is the total return on the Company's net
asset value ("NAV"), as calculated under IFRS, and therefore no reconciliation
is required between the measure of profit or loss used by the Board and that
contained in the financial statements.
The principal investments held as at the year end are presented in the Schedule
of Principal Investments section of this report.
(p) Offsetting
Financial assets and liabilities are offset and the net amount is reported in
the Statement of Financial Position when there is currently a legally and
contractually enforceable right to offset the recognised amounts and there is
an intention to settle on a net basis, or realise the asset and settle the
liability simultaneously. A current legally and contractually enforceable right
to offset must not be contingent on a future event. Furthermore, it must be
legally and contractually enforceable in (i) the normal course of business;
(ii) the event of default; and (iii) the event of insolvency or bankruptcy of
the Company and all of the counterparties.
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 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.
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 increase 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 financial statements.
Smaller
Income Companies
Portfolio Portfolio Unallocated Total
GBP GBP GBP GBP
31 December 2020
External revenues:
Net gains/(losses) 481,328 -
on financial assets (13,997,733) (13,516,405)
designated as at
fair value through
profit or loss
Gains on derivative 106,175 - - 106,175
financial
instruments
Investment income:
Dividend income 142,424 2,214,813 - 2,357,237
Bond income 455,995 - - 455,995
Foreign exchange - - (96,581) (96,581)
loss
Total income/ 1,185,922 (11,782,920) (96,581) (10,693,579)
(losses)
Expenses - - (1,206,824) (1,206,824)
Interest - - (1,258,297) (1,258,297)
payable and
similar
charges
Total 1,185,922
comprehensive (11,782,920) (2,561,702) (13,158,700)
income/(loss)
for the year
attributable
to
shareholders
Smaller
Income Companies
Portfolio Portfolio Unallocated Total
GBP GBP GBP GBP
31 December 2020
Financial assets 20,698,208 69,305,528 - 90,003,736
designated as at
fair value through
profit or loss
Receivables 437,351 21,002 - 458,353
Derivative 132,269 - - 132,269
financial
instruments
Cash and cash 307,493 301,973 - 609,466
equivalents
Total assets 21,575,321 69,628,503 - 91,203,824
Payables - - 257,133 257,133
Total current - - 257,133 257,133
liabilities
Smaller
Income Companies
Portfolio Portfolio Unallocated Total
GBP GBP GBP GBP
31 December 2019
External revenues:
Net gains on financial assets 449,802 14,091,285 - 14,541,087
designated as at fair value
through profit or loss
Gains on derivative financial 249,850 - - 249,850
instruments
Investment income:
Dividend income 156,327 3,523,388 - 3,679,715
Bond income 536,887 - - 536,887
Foreign exchange loss - - (204,962) (204,962)
Sundry Income 3,585 - - 3,585
Total income 1,396,451 17,614,673 (204,962) 18,806,162
Expenses - - (1,360,747) (1,360,747)
Interest payable and similar - - (1,207,671) (1,207,671)
charges
Total comprehensive income for 1,396,451 17,614,673 (2,773,380) 16,237,744
the year attributable to
shareholders
Smaller
Income Companies
Portfolio Portfolio Unallocated Total
GBP GBP GBP GBP
31 December 2019
Financial assets designated as 20,619,082 83,169,400 - 103,788,482
at fair value through profit or
loss
Receivables 458,467 31,976 1,295 491,738
Derivative financial instruments 186,453 - - 186,453
Cash and cash equivalents 1,561,066 763,617 - 2,324,683
Total assets 22,825,068 83,964,993 1,295 106,791,356
Derivative financial instruments 6,661 - - 6,661
Payables - - 299,762 299,762
Total current liabilities 6,661 - 299,762 306,423
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
31 December 2020
External revenues
Total Revenue 2,348,117 104,116 63,453 297,546 2,813,232
Other Rest of
UK Guernsey Europe the Total
world
GBP GBP GBP GBP GBP
31 December 2019
External revenues
Total Revenue 3,597,917 120,371 171,620 330,279 4,220,187
The Company did not hold any non-current assets during the year other than
financial instruments (2019: £nil).
Major Customers
The Company regards its shareholders as customers. The Company had no
Shareholders with a holding greater than 10% at the year end (2019: nil).
3 INVESTMENT INCOME
Year ended Year ended
31 December 31 December
2020 2019
GBP GBP
Dividend 2,357,237 3,679,715
income
Bond income 455,995 536,887
Bank interest - 3,585
2,813,232 4,220,187
4 GAINS ON DERIVATIVE FINANCIAL INSTRUMENTS
Year ended Year ended
31 December 31 December
2020 2019
GBP GBP
Unrealised (loss)/gain on forward foreign currency (47,523) 365,305
contracts
Realised gain/(loss) on forward foreign currency 153,698 (115,455)
contracts
106,175 249,850
5 EXPENSES
Year ended 31 December 2019
Year ended 31 December 2020
Revenue Capital Total Revenue Capital Total
GBP GBP GBP GBP GBP GBP
Manager's fee* 150,359 451,077 601,436 173,347 520,040 693,387
Administrator's 84,775 - 84,775 84,221 - 84,221
fee**
Registrar's fee 35,784 - 35,784 45,050 - 45,050
Directors' fees 144,908 - 144,908 128,255 - 128,255
Custody fees 23,169 - 23,169 23,214 - 23,214
Audit fees 37,775 - 37,775 36,422 - 36,422
Directors' and 26 - 26 12,653 - 12,653
Officers' insurance
Annual fees 18,219 - 18,219 31,118 - 31,118
Commissions and - 117,009 117,009 - 149,932 149,932
charges paid
Legal and professional 34,104 - 34,104 39,949 - 39,949
fees
Broker fees 64,677 - 64,677 56,510 - 56,510
Bank interest 4,279 - 4,279 - - -
Sundry costs 40,663 - 40,663 60,036 - 60,036
638,738 568,086 1,206,824 690,775 669,972 1,360,747
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. Please refer to Note 1(h)
for details on how expenses are charged to the capital reserve and revenue
account. 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.
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.
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 year ended 31 December
2020 (2019: £nil).
6 DIRECTORS' REMUNERATION
Under their terms of appointment, each Director is paid a basic fee of £30,000
per annum by the Company. In addition to this, the Chairman receives an extra £
10,000 per annum, the Audit Committee Chairman receives an extra £7,500 per
annum, the Risk Committee Chairman receives an extra £5,000 per annum, and the
Remuneration and Management Engagement Committee Chairman receives an extra £
5,000 per annum.
Directors fees were increased as of 1 September 2019 as detailed in the
Directors' Report.
A special resolution was passed on 20 December 2016 for the new Articles of
Incorporation which included that the ordinary remuneration of the Directors
shall not exceed in aggregate of £200,000 per annum.
7 INTEREST PAYABLE AND SIMILAR CHARGES
Year ended 31 December 2020
Revenue Capital Total
GBP GBP GBP
Appropriation in respect of ZDP Shares - 1,258,297 1,258,297
- 1,258,297 1,258,297
Year ended 31 December 2019
Revenue Capital Total
GBP GBP GBP
Appropriation in respect of ZDP Shares - 1,207,671 1,207,671
- 1,207,671 1,207,671
8 DIVIDS IN RESPECT OF ORDINARY SHARES
Year ended Year ended
31 December 2020 31 December 2019
Pence Pence
GBP per share GBP per share
First interim 909,460 5.75 822,468 5.20
payment
Second interim 909,460 5.75 822,468 5.20
payment
Third interim 909,460 5.75 822,468 5.20
payment
Fourth interim 909,460 5.75 822,468 5.20
payment
3,637,840 23.00 3,289,872 20.80
Further details on the Company's dividend policy can be found in Investment
Objectives and Policy.
9 EARNINGS PER SHARE
Ordinary Shares
The total loss per Ordinary Share (per IFRS) is based on the total loss on
ordinary activities for the year attributable to Ordinary Shareholders of £
13,158,700 (2019: return of £16,237,744) and on 15,816,687 (2019: 15,816,687)
shares, being the weighted average number of shares in issue during the year.
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 year attributable to Ordinary Shareholders of £
2,175,061 (2019: £3,528,896) and on 15,816,687 (2019: 15,816,687) shares, being
the weighted average number of shares in issue during the year. 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 year attributable to Ordinary Shareholders of £
15,333,761 (2019: capital gain of £12,708,848) and on 15,816,687 (2019:
15,816,687) shares, being the weighted average number of shares in issue during
the year. 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 £1,258,297 (2019: £1,207,671) and on 21,230,989 (2019: 21,230,989)
shares, being the weighted average number of ZDP Shares in issue during the
year.
10 FINANCIAL ASSETS DESIGNATED AS AT FAIR VALUE THROUGH PROFIT OR
LOSS
31 December 31 December
2020 2019
GBP GBP
INVESTMENTS
Opening portfolio cost 87,991,361 85,087,877
Purchases at cost 25,538,145 34,978,783
Sales
- proceeds (25,806,486) (35,060,945)
- realised gains on 6,229,665 6,179,329
sales
- realised losses on (7,294,885) (3,193,683)
sales
Closing book cost 86,657,800 87,991,361
Unrealised appreciation on 12,291,265 20,503,186
investments
Unrealised depreciation on (8,945,329) (4,706,065)
investments
Fair value 90,003,736 103,788,482
Realised gains on sales 6,229,665 6,179,329
Realised losses on (7,294,885) (3,193,683)
sales
(Decrease)/increase in unrealised appreciation (8,211,921) 8,019,527
on investments
(Increase)/decrease in unrealised depreciation (4,239,264) 3,535,914
on investments
Net (losses)/ gains on financial assets designated as (13,516,405) 14,541,087
at fair value through profit or loss
As at 31 December 2020, the closing fair value of investments comprises £
69,305,528 (December 2019: £83,169,400) of Smaller Companies Portfolio, £
20,698,208 (December 2019: £20,619,082) of Income Portfolio. The Market value
of open Futures included in the Income Portfolio was £nil (December 2019:
liability of £43,458). Refer to the Unaudited Full List of Holdings for further
detail.
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
31 31 31 Dec 31 Dec 2019
December December 2019
2020 2020
Market Market Market Market
value value value value
% GBP % GBP
Level 1 81.36 73,221,136 81.72 84,817,978
Level 2 17.87 16,085,730 18.28 18,970,504
Level 3 0.77 696,870 - -
Total 100.00 90,003,736 100.00 103,788,482
Bonds and structured investments are priced by reference to market quotations
which incorporate assessment of yield, maturity and the instrument's terms and
conditions.
The following table is a reconciliation of investments the Company held during
the years ended 31 December 2020 and 31 December 2019 at fair value using
unobservable inputs (Level 3):
31 December 31 Dec 2019
2020
Market value Market
value
GBP GBP
Balance at start of the year - -
Transfer from Level 2 to Level 3 696,870 -
Balance at end of the year 696,870 -
For investments categorised in Level 3 as at 31 December 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. The Investment Adviser does not expect any return of capital.
During the year ended 31 December 2020 APQ Global Limited 3.5% CULS 30/09/2024
was moved from level 2 to 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
31 December 31 December 31 Dec 2019 31 Dec 2019
2020 2020
Market value Market value Market value Market
value
% GBP % GBP
Level 1 derivative financial - - - 846
assets
Level 2 derivative financial 0.15 132,269 0.18 185,607
assets
Level 2 derivative financial - - (0.01) (6,661)
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.
During the year ended 31 December 2020 Credit Suisse Group 2.75% 08/08/2025 and
GS Group 5.50% 12/10/2021 were transferred from Level 1 to Level 2 due to an
analysis of trading activity. During the year ended 31 December 2019, Castings
plc, Braemar Shipping Services plc, Alumasc Group plc and Barclays plc 8% PERP
- 2049 were transferred from Level 1 to Level 2 due to an analysis of trading
activity.
During the year ended 31 December 2020 HipGnosis Songs Fund Limited and Fondul
Proprietatea were transferred from Level 2 to Level 1 due to an analysis of
trading activity. During the year ended 31 December 2019, Credit Suisse Group
2.75% 08/08/2025 and GS Group 5.50% 12/10/2021 were transferred from Level 2 to
Level 1 due to an analysis of trading activity.
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.
There were no transfers to or from level 3 during the year ended 31 December
2019.
11 RECEIVABLES
31 December 31 Dec
2020 2019
GBP GBP
Due from 13,688 28,481
brokers
Prepayments 7,314 4,790
Accrued investment 437,351 458,467
income
458,353 491,738
12 PAYABLES
31 December 31 Dec 2019
2020
GBP GBP
Accrued 104,284 93,235
expenses
Amounts due to - 27,114
brokers
Trade creditors 152,849 179,413
257,133 299,762
13 ZDP SHARES
31 December 31 Dec 2019
2020
GBP GBP
ZDP Share entitlement 33,979,404 32,721,106
The above entitlement comprises the following:
21,230,989 ZDP Shares issued to date up to 31 Dec 2020 22,831,683 -
21,230,989 ZDP Shares issued to date up to 31 Dec 2019 - 22,831,683
ZDP Premium (5,680) (10,581)
Appropriation in respect of ZDP 11,147,721 9,889,424
Shares
ZDP value (calculated in accordance with the Articles) 33,973,724 32,710,526
Add back ZDP Premium 5,680 10,581
ZDP value (calculated 33,979,404 32,721,107
in accordance with
IFRS)
The fair value of the ZDP Shares as at 31 December 2020 was £33,332,653 (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.
14 SHARE CAPITAL AND PREMIUM
Authorised GBP GBP
Ordinary Shares of 1p each unlimited Unlimited
31 December 31 Dec
2020 2019
Number of Number of
Issued Shares Shares
Number of shares in issue at the 15,816,687 15,816,687
start of the year
Number of shares in issue at the end 15,816,687 15,816,687
of the year
Issued and fully paid capital at the £196,606 £196,606
end of the year
Share Capital Share Premium Total Total
31 December 31 December 31 December 31 Dec 2019
2020 2020 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 31 December 2020 was £196,606 (31
December 2019: £196,606).
15 OTHER RESERVES
TREASURY RESERVE
31 December 31 Dec 2019
2020
GBP GBP
Balance as at the beginning of the year (4,780,162) (4,780,162)
Balance as at the end of (4,780,162) (4,780,162)
the year
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
31 December 31 Dec 2019
2020
No. Shares No. Shares
Balance as at the beginning of the year 1,325,972 1,325,972
Balance as at the end of 1,325,972 1,325,972
the year
A Special reserve of £10,000,000 was created on the cancellation of part of the
Company's Share premium account.
16 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.
£601,436 (2019: £693,387) of costs were incurred by the Company with this
related party in the year, of which £152,849 (2019: £179,413) was due to this
related party as at 31 December 2020.
During the year ended 31 December 2020, £nil (31 December 2019: £nil) was
charged as performance fees of which, £nil (31 December 2019: £nil) remained
payable at year end.
The Directors' remuneration is disclosed in Notes 5 and 6.
David Warr holds 63,000 (31 December 2019: 63,000) Ordinary Shares in the
capital of the Company, which represented an interest of 0.40% (31 December
2019: 0.40%) of the Company's Ordinary Shares in issue as at 31 December 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 31 December 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 2019: 0.02%) of the
Company's ZDP Shares in issue as at 31 December 2020.
Nigel Ward holds 7,000 Ordinary Shares in the capital of the Company, via a
nominee account (31 December 2019: 7,000). This represents an interest of 0.04%
(31 December 2019: 0.04%), and 10,000 (31 December 2019: nil) ZDP Shares in the
capital of the Company, which represented an interest of 0.05% (31 December
2019: nil) of the Company's ZDP Shares in issue as at 31 December 2020.
As at 31 December 2020 employees of the Investment Manager held interest in
5,990 Ordinary Shares of the Company
representing 0.04% of the issued share capital.
17 FINANCIAL INSTRUMENTS
The Company's main financial instruments comprise:
(a) Cash and cash equivalents that arise directly from the Company's
operations;
(b) Investments in listed entities, receivables and payables;
(c) ZDP Shares; and
(d) Derivative financial instruments.
18 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The following table details the categories of financial assets and liabilities
held by the Company at the reporting date:
31 Dec 31 Dec 2019
2020
GBP GBP
Financial Assets
Financial assets designated as at fair value through profit 90,003,736 103,788,482
or loss
Derivative financial assets 132,269 186,453
Total financial assets at fair value through profit 90,136,005 103,974,935
or loss
Loans and receivables
Cash and equivalents 609,466 2,324,683
Receivables (excluding 451,039 486,948
prepayments)
Total assets (excluding 91,196,510 106,786,566
prepayments)
31 Dec 31 Dec 2019
2020
GBP GBP
Financial liabilities
Financial liabilities at fair value through profit
or loss:
Derivative financial liabilities - 6,661
Total financial liabilities at fair value through - 6,661
profit or loss
Financial liabilities measured at amortised
cost
ZDP Shares 33,979,404 32,721,106
Payables 257,133 299,762
Total Financial liabilities measured at 34,236,537 33,020,868
amortised cost
Total liabilities excluding net assets attributable to holders 34,236,537 33,027,529
of Ordinary Shares
Loans and receivables presented above represents cash and cash equivalents,
balances due from brokers and other receivables (excluding prepayments) as
detailed in the Statement of Financial Position.
Financial liabilities measured at amortised cost presented above represents
accrued expenses and ZDP Shares as detailed in the Statement of Financial
Position.
Derivative financial assets and liabilities presented above represent forward
foreign exchange contracts. Unrealised gains and losses on movement in fair
value are recognised in the Statement of Comprehensive Income.
The main risks arising from the Company's financial instruments are market
price risk, credit risk, liquidity risk, interest rate risk, foreign exchange
risk and COVID-19 risk (refer to Strategic Report for details on COVID-19
risk). The Board regularly reviews and agrees policies for managing each of
these risks and these are summarised in Notes 18(a) to 18(e).
(a) Market Price Risk
Market price risk arises mainly from uncertainty about future prices of
financial instruments held. It represents the potential loss the Company might
suffer through holding market positions in the face of price movements. The
Investment Advisers actively monitor market prices and report to the Board as
to the appropriateness of the prices used for valuation purposes. The
Investment Advisers also attempt to minimise market price risk by undertaking a
detailed analysis of the risk/reward relationship of each investee company
prior to any investment being made.
Unicorn monitors the industry concentration exposure for the Smaller Companies
Portfolio.
Details of the Company's Investment Objective and Policy are given inside the
front cover of this Report.
Price Sensitivity
The following details the Company's sensitivity to a 25% (2019: 25%) increase
and decrease in the market prices, with 25% being the sensitivity rate used
when reporting price risk internally to key management personnel and
representing management's assessment of the possible change in market prices.
At 31 December 2020, if market prices had been 25% (2019: 25%) higher with all
the other variables held constant, the return attributable to shareholders for
the year would have been £22,500,934 (2019: £25,947,121) greater, due to the
increase in the fair value of financial assets at fair value through profit or
loss. This would represent an increase in Net Assets of 39% (2019: 35%).
If market prices had been 25% (2019: 25%) lower with all the other variables
held constant, the return attributable to shareholders for the year would have
been £22,500,934 (2019: £25,947,121) lower, due to the decrease in the fair
value of financial assets at fair value through profit or loss. This would
represent a decrease in Net Assets of 39% (2019: 35%).
At 31 December 2020, the Company's largest exposure to a single investment was
£3,252,400 (2019: £3,073,783), 3.57% (2019: 2.88%) of total assets.
(b) Credit Risk
Credit risk is the risk that an issuer or counterparty will be unable or
unwilling to meet a commitment that it has entered into with the Company. The
Directors receive financial information on a regular basis which is used to
identify and monitor risk. It is the Company's policy not to invest, at the
time of investment, more than 7.5% in any one fixed interest security.
The Company has no significant concentration of credit risk, with exposure
spread over a large number of counterparties. At 31 December 2020, the
Company's largest exposure to a single counterparty was £3,252,400 (2019: £
3,073,783), 3.57% (2019: 2.88%) of total assets.
Investors should be aware that the prospective returns to shareholders mirror
the returns under the quoted securities held or entered into by the Company and
that any default by an issuer of any such quoted security held by the Company
would have a consequential adverse effect on the ability of the Company to pay
some or all of the entitlement to its shareholders. Such a default might, for
example, arise on the insolvency of an issuer of a quoted security.
The Company's financial assets exposed to credit risk are as follows:
31 Dec 31 Dec 2019
2020
GBP GBP
Financial assets designated as at fair value through
profit or loss
(fixed income securities and structured 16,627,397 15,588,001
investments only)
Cash and cash equivalents 609,466 2,324,683
Interest, dividends and other 451,039 486,948
receivables
Derivatives financial 132,269 186,453
instruments
17,820,171 18,586,085
The credit ratings of the bonds, as rated by Moody's Investor Services Inc
("Moodys") were:
Rating 31 Dec 31 Dec 2019
2020
Aaa 4.54% 8.97%
Aa 4.94% 4.62%
A 21.38% 11.97%
Baa 40.64% 36.99%
Ba 2.17% 2.04%
No ratings 26.33% 35.41%
available
The cash and cash equivalents were held with Northern Trust (Guernsey) Limited,
a fully owned subsidiary of The Northern Trust Company, which at the year ended
31 December 2020 held a credit rating, as rated by Moody's, of Aa2 (31 December
2019: Aa2). The Investment Adviser for the Income Portfolio selects investments
having regard to their potential return and the credit risk associated with
them. The Investment Adviser carries out its own assessment of credit risk and
the rating provided by a credit rating agency is just one of the factors taken
into account. The absence of a rating is not necessarily a reflection on credit
risk. The Board reviews the whole portfolio at quarterly Board meetings.
(c) Liquidity Risk
Liquidity risk is the risk that the Company will encounter difficulty in
meeting its obligations associated with its financial liabilities that are
settled by delivering cash or another financial asset. The Company's main
financial commitments are its ongoing operating expenses.
The ZDP Shares will not pay dividends but will have a final capital entitlement
at the end of their life on 28 February 2022 of 167.2 pence. It should be noted
that the predetermined capital entitlement of the 2022 ZDP Shares 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 the ZDP Shares.
The Investment Advisers ensure that the Company has sufficient liquid resources
available to fulfil its operational plans and to meet its financial obligations
as they fall due. This is monitored by carrying out a solvency calculation on a
quarterly basis by reference to management accounts and revenue projections.
The Board will approve a Solvency Certificate resolution prior to declaring any
interim distributions.
The Board intends to monitor the financial position of the Company to ensure
that it has sufficient liquid resources available to fulfil its obligation upon
maturity of the ZDP Shares.
The table below details the residual contractual undiscounted maturities of
financial liabilities:
As at 31 December 2020 As at 31 December 2019
0-3 months Over 1 0-3 months Over 1
year year
GBP GBP GBP GBP
Financial liabilities including
derivatives
Payables - due within one 257,133 - 299,762 -
year
Derivative financial - - 6,661 -
instruments
ZDP Share - 35,498,214 - 35,498,214
entitlement
257,133 35,498,214 306,423 35,498,214
(d) Interest Rate Risk
The Company could hedge interest rate risk using various different methods.
The following table details the Company's exposure to interest rate risks. It
includes the Company's assets and liabilities at fair values, categorised by
the earlier of contractual re-pricing or maturity date measured by the carrying
value of the assets and liabilities:
As at 31 December 2020:
Less than Non-interest
1 month Fixed interest Bearing Total
GBP GBP GBP GBP
Financial Assets
Financial assets at fair value
through profit or loss on
initial - 16,627,397 73,376,339 90,003,736
recognition
Cash and cash equivalents 609,466 - - 609,466
Interest, dividends and other - - 451,039 451,039
receivables
Derivative financial - - 132,269 132,269
instruments
Total Financial 609,466 16,627,397 73,959,647 91,196,510
Assets
Financial
Liabilities
Payables - - 257,133 257,133
ZDP Share - 33,979,404 - 33,979,404
entitlement
Total Financial - 33,979,404 257,133 34,236,537
Liabilities
Total Interest 609,466 (17,352,007)
Sensitivity Gap
As at 31 December 2019:
Less than Non-interest
1 month Fixed interest Bearing Total
GBP GBP GBP GBP
Financial Assets
Financial assets at fair value through profit or loss on
initial recognition 15,588,001 88,200,481 103,788,482
-
Cash and cash equivalents 2,324,683 2,324,683
- -
Interest, dividends and other receivables - 486,948 486,948
-
Derivative financial 186,453 186,453
instruments - -
Total Financial Assets 2,324,683 15,588,001 88,873,882 106,786,566
Financial Liabilities
Derivative Financial 6,661 6,661
instruments
Payables 299,762 299,762
- -
ZDP Share entitlement 32,721,106 32,721,106
- -
Total Financial Liabilities 32,721,106 306,423 33,027,529
-
Total Interest Sensitivity 2,324,683 (17,133,105)
Gap
Interest rate sensitivity takes account of the effect of interest rate
movements on cash balances. Interest rate risk does not affect the cash flows
of the fixed interest securities but does affect the fair value and as such
this sensitivity has been reflected in the market price risk disclosures at
Note 18(a).
Interest Rate Sensitivity
If interest rates had been 25 basis points higher and all other variables were
held constant, the Company's return attributable to Ordinary Shareholders for
the year ended 31 December 2020 would have increased by approximately
£1,524 (2019: £5,812) or 0.002% (2019: 0.005%) of Total Assets, due to an
increase in the amount of interest receivable on the bank balances.
If interest rates had been 25 basis points lower and all other variables were
held constant, the Company's return attributable to Ordinary Shareholders for
the year ended 31 December 2020 would have decreased by approximately
£1,524 (2019: £5,812) or 0.002% (2019: 0.005%) of Total Assets, due to a
decrease in the amount of interest receivable on the bank balances.
(e) Foreign Exchange Risk
Forward currency transactions are used to hedge the foreign currency exposure
in bonds, other investments and cash balances held within the Income Portfolio.
The purpose of the hedge is to protect the Company's assets from a decline in
value that might arise from the depreciation of a foreign currency against
Sterling.
At 31 December 2020, the Company's holdings in derivatives translated into GBP
were as specified below:
Notional Fair value
amount of assets and
contracts liabilities
Type of Expiration Underlying outstanding GBP
contract
Forward January Sold EUR (200,000) 3,785
2021
Forward January Sold RON (986,915) 2,117
2021
Forward January Sold USD 3,565,000 139,140
2021
Forward January Purchased 237,959 (9,406)
2021 USD
Forward January Purchased 350,000 (3,367)
2021 USD
132,269
At 31 December 2019, the Company's holdings in derivatives translated into GBP
were as specified below:
Notional
amount of Fair value
contracts liabilities
Expiration Underlying outstanding GBP
Forward January Purchased 71,855 (907)
2020 EUR
Forward January Sold EUR (885,000) (23,973)
2020
Forward January Sold RON (1,121,440) (4,481)
2020
Forward January Sold USD (4,841,366) (156,576)
2020
Forward January Purchased 260,000 6,661
2020 USD
Forward January Purchased 53,690 (516)
2020 USD
(179,792)
Exchange rate exposures are managed by minimising the amount of foreign
currency held at any one time and entering into forward exchange contracts.
The following table sets out the Company's total exposure to foreign currency
risk and the net exposure to foreign currencies of the monetary assets and
liabilities:
At 31 December
2020:
Monetary Monetary Forward
Assets Liabilities FX Net exposure
Contracts
GBP GBP GBP GBP
Euro 183,040 - (179,054) 3,986
US Dollar 53,300 - (2,177,668) (2,124,368)
Romanian Leu - (1) (181,353) (181,354)
At 31 December
2019:
Monetary Monetary Forward
Assets Liabilities FX Net exposure
Contracts
GBP GBP GBP GBP
Euro 634,495 - (689,249) (54,754)
US Dollar 3,423,652 (19,670) (3,416,705) (12,723)
Romanian Leu 66 - (198,383) (198,317)
Amounts in the above table are based on the carrying value of monetary assets
and liabilities and the underlying principal amount of forward currency
contracts.
(f) Capital Management
The principal investment objectives of the Company are to provide shareholders
with a high income and also the opportunity for capital growth.
The Company's investments are held in two portfolios. The Company's assets
comprise investments in equities and fixed interest and other income-bearing
securities in order to achieve its investment objectives. Approximately 70%-80%
of the portfolio are invested in smaller capitalised United Kingdom companies,
admitted to the Official List of the Financial Conduct Authority (the "FCA")
and traded on the London Stock Exchange (the "LSE") or traded on the
Alternative Investment Market ("AIM") at the time of investment. The Company
also aims to further enhance income for shareholders by investing approximately
20%-30% of its assets in high yielding securities which will be predominantly
fixed income securities (including corporate bonds, preference and permanent
interest bearing shares, convertible and reverse convertible bonds and
debentures) but may include up to 15% of the portfolio (measured at time of
acquisition) in high yielding investment company shares.
As the Company's Ordinary Shares are traded on the LSE, the Ordinary Shares may
trade at a discount or premium to their Net Asset Value per Share on occasion.
However, the Directors and the Investment Manager monitor the discount on a
regular basis and can use share buy backs to manage the discount.
The Company monitors capital on the basis of the carrying amount of equity as
presented on the face of the Statement of Financial Position. Capital for the
reporting periods under review is summarised as follows:
GBP
Distributable 7,174,286
reserves
Share capital and share 27,420,824
premium
Non distributable reserves 22,372,177
Total 56,967,287
The distributable reserves comprise the revenue reserve and other reserves. The
other reserves presented on the Statement of Financial Position comprise the
treasury reserve and special reserve as detailed in Note 15. The special
reserve of £10,000,000 was created on the cancellation of part of the Company's
share premium account. The non distributable reserves comprise the capital
reserve.
(g) Dividend Levels
Dividends paid on the Company's Ordinary Shares rely on receipt of interest
payments and dividends from the securities in which the Company invests. The
Company's revenue levels are monitored on a regular basis by the Board and the
Investment Advisers.
19 SUBSEQUENT EVENTS
These Financial Statements were approved for issue by the Board on 20 April
2021. Subsequent events have been evaluated until this date.
A dividend of 5.75p was declared on 25 February 2021 and was paid to Ordinary
Shareholders on 31 March 2021.
As a consequence of the ongoing strategic review, on 13 April 2021, the Company
served protective notice to terminate the Investment Management Agreement. This
action is not an indication that the current Investment Advisers will not be
involved in the management of Acorn's portfolio post the conclusion of the
strategic review.
Unaudited Full List of Investment Holdings
Percentage
Company Nominal Holdings Valuation of Total
GBP Assets
2020
Smaller Companies Portfolio
Polar Capital Holdings plc 470,000 3,252,400 3.57
Sabre Insurance Group plc 1,055,000 2,917,075 3.20
Telecom Plus plc 200,000 2,868,000 3.14
Chesnara plc 955,000 2,798,150 3.07
Primary Health Properties 1,750,000 2,667,000 2.92
plc
Numis Corporation plc 750,000 2,493,750 2.73
Severfield plc 3,100,000 2,163,800 2.37
Goodwin plc 70,000 2,107,000 2.31
Somero Enterprises Inc 691,428 2,039,713 2.24
Ocean Wilsons Holdings 242,500 2,012,750 2.21
Limited
Clipper Logistics plc 320,000 1,820,800 2.00
Brewin Dolphin Holdings plc 580,000 1,769,000 1.94
Epwin Group plc 1,940,000 1,765,400 1.94
FDM Group Holdings plc 157,000 1,764,680 1.93
Regional Reit Limited 2,170,216 1,764,386 1.93
XPS Pensions Group plc 1,350,000 1,748,250 1.92
James Halstead plc 340,000 1,659,200 1.82
Wincanton plc 637,440 1,631,846 1.79
Boot (Henry) plc 630,000 1,606,500 1.76
STV Group plc 536,508 1,604,159 1.76
Hill & Smith Holdings plc 110,000 1,548,800 1.70
Macfarlane Group plc 1,600,000 1,379,200 1.51
Gateley Holdings plc 950,000 1,377,500 1.51
Castings plc 380,000 1,375,600 1.51
Hollywood Bowl Group plc 675,000 1,346,625 1.48
Vesuvius plc 250,000 1,341,250 1.47
River & Mercantile Group plc 750,000 1,263,750 1.39
Iomart Group plc 382,529 1,216,442 1.33
Palace Capital plc 600,000 1,191,000 1.31
Curtis Banks Group Limited 524,460 1,164,301 1.28
Trifast plc 750,000 1,147,500 1.26
Devro plc 750,000 1,140,000 1.25
Braemar Shipping Services 750,000 1,125,000 1.23
plc
Emis Group plc 100,000 1,082,000 1.19
Secure Trust Bank plc 125,000 1,052,500 1.15
4imprint Group plc 40,000 1,026,000 1.12
Conduit Holdings Limited 200,000 998,800 1.10
Bodycote plc 130,000 969,150 1.06
Topps Tiles plc 1,700,000 955,400 1.05
Warpaint London plc 1,220,570 903,222 0.99
Alumasc Group plc 794,444 873,888 0.96
Hostelworld Group plc 1,115,694 870,241 0.95
Park Group plc 2,750,000 863,500 0.95
Liontrust Asset Management 50,000 640,000 0.70
plc
Silverdell plc 3,090,546 - 0.00
TOTAL 69,305,528 76.00
Income Portfolio
Pershing Square Holdings 5.50% 15/07/2022 1,000,000 772,561 0.85
Value & Income Trust 11.00% 31/03/2021 719,191 733,575 0.80
APQ Global Limited 3.5% CULS 30/09/2024 178 696,870 0.76
Credit Suisse Group 2.75% 08/08/2025 600,000 654,577 0.72
AT&T 2.9% 04/12/2026 500,000 554,276 0.61
Verizon Communications 1.875% 19/09/2030 500,000 535,380 0.59
Citigroup 1.75% 23/10/2026 500,000 526,522 0.58
UK Municipal Bonds Agency 1.625% 26/08/2060 500,000 522,141 0.57
GS Group 3.125% 25/07/2029 400,000 467,796 0.51
RM plc ZDP 447,500 465,400 0.51
France Telecom 8.125% 2028 300,000 463,188 0.51
British American Tobacco plc 4% 04/09/2026 400,000 459,454 0.50
Wells Fargo 2.5% 02/05/2029 400,000 441,267 0.48
HSBC Holdings 2.256% FRN 13/11/2026 400,000 425,932 0.47
Barclays 3.125% 17/01/2024 400,000 425,386 0.47
US 0.875% IL Treasury 2047 400,000 424,170 0.47
Karbon Homes Ltd 3.375% 15/11/2047 300,000 420,740 0.46
Lloyds Bank 1.75% 11/07/2024 400,000 413,215 0.45
SSE plc 3.75% FRN PERP 391,000 412,668 0.45
Morrison Supermarket 4.75% 04/07/2029 300,000 383,097 0.42
Burford Capital 6.5% 2022 365,000 361,383 0.40
Real Estate Investors plc 1,054,413 347,956 0.38
EDF 6% FRN PERP 300,000 341,550 0.37
HSBC Holdings 3% FRN 29/05/2030 300,000 341,478 0.37
US 2.375% Treasury Note 2029 400,000 330,709 0.36
Grainger 3% 03/07/2030 300,000 326,628 0.36
Tesco Corporate Treasury 2.5% 02/05/2025 300,000 321,202 0.35
Phoenix Group Holdings 4.125% 20/07/2022 300,000 312,660 0.34
GS Group 5.50% 12/10/2021 300,000 311,686 0.34
Aberdeen Asian Sma 2.25% 308,982 301,257 0.33
VPC Specialty Lending Investments plc 350,000 274,400 0.30
Orange 5.75% PERP 250,000 273,750 0.30
United Kingdom 1.25% IL Treasury 2032 125,000 268,872 0.29
UIL Finance Ltd 200,000 268,000 0.29
Places for People 1% IL 31/01/2022 211,000 263,701 0.29
Alternative Credit Investments plc 30,000 260,400 0.29
Phoenix Group Holdings 6.625% 18/12/2025 200,000 239,876 0.26
Supermarket Income REIT plc 225,000 238,500 0.26
Fidelity International 7.125% 2024 200,000 236,494 0.26
EJF Investments Ltd 200,000 232,000 0.25
Real Estate Credit Investments Limited 175,000 231,000 0.25
Thames Water Utilities 4.00% 2025 200,000 229,186 0.25
Wells Fargo 5.25% 01/08/2023 200,000 222,752 0.24
SDCL Energy Efficiency Income Trust plc 208,505 222,058 0.24
Lloyds Bank 2.707% FRN 03/12/2035 211,000 221,008 0.24
Sequoia Economic Infrastructure Income Fund 200,000 219,600 0.24
Limited
HipGnosis Songs Fund Limited 175,000 216,125 0.24
A2D Funding Plc 4.75% 18/10/2022 200,000 212,130 0.23
Credit Suisse Group 2.25% FRN 09/06/2028 200,000 211,900 0.23
UK Mortgages Limited 319,622 207,754 0.23
Barclays Plc 2.375% FRN 06/10/2023 200,000 205,554 0.23
Sainsbury 2.875% FRN PERP 200,000 204,294 0.22
Biopharma Credit plc 275,000 199,568 0.22
Tetragon Financial Group Limited 25,000 173,013 0.19
Folio Residential Finance 1.246% 31/10/2037 167,000 171,579 0.19
RL Finance Bonds plc 6.125% 2043 150,000 169,277 0.19
Fondul Proprietatea 13,318 165,629 0.18
Close Brothers Finance 1.625% 03/12/2030 156,000 158,430 0.17
Assura Financing 1.5% 15/09/2030 150,000 157,069 0.17
Wells Fargo 1.375% 6/2022 150,000 151,937 0.17
Gore Street Energy Storage Fund plc 145,216 151,025 0.17
Gresham House Energy Storage Fund plc 135,547 150,457 0.16
Tesco 6% 14/12/2029 110,000 145,922 0.16
Wm Morrison Supermarkets 3.50% 100,000 114,097 0.13
Tesco Property Finance 6.125% 2022 83,000 88,202 0.10
Citigroup Global Markets 31/7/2023 10 47,925 0.05
JPMorgan Global Convertibles Income 515,000 - -
20,698,208 22.66
TOTAL 90,003,736 98.66
Glossary of Terms and Alternative Performance Measures
ALTERNATIVE PERFORMANCE MEASURES ("APMS")
In accordance with ESMA Guidelines on Alternative Performance Measures ("APMs")
the Board has considered what APMs are included in the annual report and
accounts which require further clarification. APMs are defined as a financial
measure of historical or future financial performance, financial position or
cash flows, other than a financial measure defined or specified in the
applicable financial reporting framework.
COVER
The Cover on the ZDP Shares measures the amount by which the final redemption
value of the ZDP Shares is covered by the total assets of the Company allowing
for all prior ranking liabilities and the accrual of expenses to capital over
the remaining period to the redemption of the ZDP Shares. The calculation used
in this report is for non-cumulative cover and represents a fraction where the
numerator is equal to the gross assets of the Company less current liabilities
(other than debt and liabilities to ZDP Shareholders) less the Company's
revenue reserves and the denominator is the aggregate amount payable to ZDP
Shareholders on the repayment date plus any other borrowing plus the cumulative
management fee charged to capital over the remaining period to the repayment
date. The full definition of the calculation is set out in the Company's
Prospectus that can be found on the Company's website.
COVER TEST
The Cover Test is required to be met if the Company, with appropriate
Shareholder approval, issues new ZDP Shares in a manner that would result in a
reduction in Cover for existing ZDP Shareholders. For the Cover Test to be met
the ZDP Cover immediately after the issue of new ZDP Shares must be at least
2.0 times.
DISCOUNT/PREMIUM
If the share price of an investment company is lower than the NAV per share,
the shares are said to be trading at a discount. The size of the discount is
calculated by subtracting the share price from the NAV per share and is usually
expressed as a percentage of the NAV per share. If the share price is higher
than the NAV per share, the shares are said to be trading at a premium.
GEARING
Also known as leverage. Gearing is introduced when a company borrows money or
issues prior ranking share classes such as ZDP Shares, to buy additional
investments. The objective is to enhance returns to Ordinary Shareholders but
there is the risk of the opposite effect if the additional investments fall in
value.
HURDLE RATE
The compound rate of growth or decline of the total assets required each year
until the redemption date for shareholders to receive the predetermined
redemption price on a ZDP Share or the current share price on an Ordinary
Share.
NET ASSETS RECONCILIATION PER ORDINARY SHARES AND ZDP SHARES
Ordinary Shares NAV per ZDP Shares NAV per
Share Share
(pence) (pence)
Net Assets (per 56,972,967 360.21 ZDP value (per 33,973,724 160.02
Articles) Articles)
ZDP Premium (5,680) (0.04) ZDP premium 5,680 0.03
Net Assets (per 56,967,287 360.17 ZDP value (per 33,979,404 160.05
IFRS) IFRS)
NET ASSET VALUE ("NAV")
NAV is the assets attributable to Ordinary Shareholders expressed as an amount
per individual share. Within this report two different methods are used for
calculating NAV. One using the accounting standards specified by International
Financial Reporting Standards ("IFRS") and one which has been calculated in
accordance with the Company's Articles of Association. The latter is the method
which would be used to calculate the amount due to Ordinary Shareholders on the
winding up of the Company. However, the Financial Statements are prepared in
accordance with IFRS and where this method has been used it will be indicated.
ONGOING CHARGES
The ongoing charges represent the Company's management fee and all other
operating expenses, excluding finance costs, expressed as a percentage of the
average of the daily net assets during the year (see Performance Summary). The
Board continues to be conscious of expenses and works hard to maintain a
sensible balance between good quality service and cost.
for the Year ended 2020 2019
31.12.20
GBP GBP GBP GBP
Average NAV 53,623,233 66,267,314
Investment management fee 601,436 693,386
Other operating expenses 461,098 495,508
Total expenses excluding finance costs 1,062,534 1,188,894
Ongoing Charges 1.98% 1.79%
PACKAGE DISCOUNT TO NAV
The difference between NAV of Ordinary and ZDP Shares and Share price of
Ordinary and ZDP Shares as a percentage of the ZDP Shares to Ordinary Shares
ratio.
Calculated as:
(A+(B*(C/D))) - (E
+( F*(C/D)))
E+(F*(C/D))
Where:
A is Share price of Ordinary Shares
B is Share price of ZDP Shares
C is Number of ZDP Shares in issue
D is Number of Ordinary Shares in issue
E is NAV of Ordinary Shares
F is NAV of ZDP Shares
REVENUE RETURN PER ORDINARY SHARE
Revenue per share is calculated using the net loss on ordinary activities after
finance costs and taxation, 2020, net total loss of £13,158,700, (2019: net
total return of £16,237,744) divided by the weighted average number of shares
in issue for the financial year, 2020, 21,230,989 shares (2019: 21,230,989
shares). The Directors also regard returns per share to be a key indicator of
performance. The revenue return per share is shown in the Performance Summary.
TOTAL RETURN ON TOTAL ASSETS, NAV AND SHARE PRICE
The combined effect of any dividends paid, together with the rise or fall in
the Total Assets, NAV or share price. Total return statistics enable the
investor to make performance comparisons between companies with different
dividend policies. Any dividends received by a shareholder are assumed to have
been invested in the month that the shares go ex-dividend at a value
representing an average of the start and end values for that month of the Total
Assets, NAV or share price as appropriate. The Total Assets Total Return, the
NAV Total Return and the share price Total Return figures are shown in the
Performance Summary.
2020 2020 2020 2019 2019 2019
Total Ordinary Ordinary Total Ordinary Ordinary
assets share share assets share share
NAV price NAV price
Closing NAV per share/ (a) 576.63 360.17 322.50 675.18 466.37 406.00
share price (pence)
Dividend adjustment factor (b) 1.0714 1.0714 1.0714 1.0337 1.0337 1.0337
Adjusted closing NAV per (c = a x 617.80 385.89 345.53 697.93 482.09 419.68
share/share price (pence) b)
Opening NAV per share/ (d) 675.18 466.37 406.00 586.43 384.51 334.00
share price (pence)
Total return (c / d) -8.5% -17.3% -14.9% 19.0% 25.4% 25.7%
-1
TOTAL ASSETS
Total assets less current liabilities, before deduction of all borrowings.
TOTAL EXPENSE RATIO
This represents the total expenses, excluding Performance Fee, commissions and
exchange gain/losses as a percentage of total assets.
YIELD
The annual interest payments on a fixed-interest security, or the annual
dividends on an equity (less any withholding tax) expressed as a percentage of
the current market value of the security. The Company's yield was arrived at
considering total dividends paid in 2020 of 23p as a percentage of year end
share price of 322.50p.
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 306090
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 306090 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
April 21, 2021 02:00 ET (06:00 GMT)
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