AIF Acorn Income Fund Ld

 
TIDMAIF TIDMAIFZ 
 
ACORN INCOME FUND LIMITED 
 (a closed-ended investment company incorporated in Guernsey with registration 
                                 number 34778) 
                           LEI 213800UAZN7G46AHQM67 
 
 
17 May 2021 
 
                           Acorn Income Fund Limited 
 
          Proposed Change of Investment Objective, Policy and Manager 
 
The Board of Acorn Income Fund Limited (the "Company") is pleased to confirm 
that it has concluded its previously announced strategic review and, having 
received strong interest from a number of high quality managers, is proposing 
to recommend the appointment of BMO Global Asset Management ("BMO") to manage 
the Company, and the adoption of a new Investment Objective and Policy which 
the Board believes will position the Company for success in the years ahead and 
deliver long-term value for shareholders. 
 
Using its Sustainable Global Equity Income investment strategy, BMO will manage 
the Company by investing principally in a global portfolio of publicly listed 
companies that offer an attractive level of income and make a positive impact 
on society and the environment. 
 
The Board believes that the proposed change in investment manager and the 
adoption of the Sustainable Global Equity Income investment strategy are in the 
best interests of shareholders and will position the Company for a more 
sustainable, long-term future. 
 
The strategy will seek a balance between growth and income by taking advantage 
of one of the most exciting and fastest growing investment opportunities in the 
market today: investing in companies that are expected to benefit commercially 
by proactively addressing long-term sustainability issues. Importantly, the 
proposals will also set the Company's revenue and dividends on a more 
sustainable path. 
 
These proposed changes in investment strategy will be set out in more detail in 
a circular to the Company's shareholders and an extraordinary general meeting 
(the "EGM") will be called at which shareholders will be able to vote on the 
proposals ahead of the five yearly discontinuation vote at the AGM in August. 
 
Nigel Ward, Chairman said: "The strategic review has been a lengthy and 
extensive process driven by the long-term interests of the Company's 
shareholders. The Company has reached a natural juncture ahead of the 
discontinuation vote in August and the Board has concluded that maintaining the 
status quo will not remove the historical challenges of scale and liquidity it 
is facing. 
 
"Against this backdrop, I am confident that the proposals the Board intends to 
recommend to shareholders at the EGM will lay the foundation for a successful 
long-term future by enabling the Company to benefit from a global investment 
mandate positioned to take advantage of the outstanding opportunities offered 
by sustainable investing. 
 
"In putting forward the recommendations the Board's view is that the choice for 
shareholders is clear and simple: a vote for the new investment Objective and 
Policy should be made in combination with a vote against discontinuation. 
 
"BMO's leadership in responsible investing and its investment trust track 
record stood out amongst a field of high-quality managers and is uniquely 
placed to take the Company on the next stage of its journey by delivering 
shareholder value through sustainable growth and income. I sincerely trust that 
shareholders will feel confident and enthused to support the Company not only 
at the forthcoming general meetings but also in the years to come." 
 
 
Benefits of the proposals 
 
The Board believes that the proposed change of Investment Objective and Policy 
and manager is in the best interests of shareholders and will have the 
following benefits for shareholders; 
 
  * Making a positive environmental and societal impact: The Company's proposed 
    investment strategy will target publicly listed companies globally, whose 
    products and services contribute directly to addressing sustainability 
    challenges such as climate change and ageing populations, and as a result 
    make a positive impact on the environment and society. The Board believes 
    this strategy is increasingly relevant to a very wide range of investors as 
    well as providing the potential for strong long-term growth. 
  * Attractive return profile: The strategy will offer an attractive risk/ 
    reward profile for the yield seeker with a balanced approach between growth 
    and income.  The initial portfolio yield is expected to be circa 3.5%. 
  * Aligns investment with values: The strategy will be ideal for individuals 
    wanting to align their investments to their values, while still benefiting 
    from an attractive level of income and potential for long term capital 
    growth. 
  * Reduced management fees and fixed costs: The management fee will fall from 
    0.7% on the gross assets of the Company to 0.65% on the net assets of the 
    Company and the performance fee is removed entirely. Other operational cost 
    savings are expected, including no additional fees associated with 
    investment research or AIFM services. Furthermore, BMO's management fee 
    will be waived for the first six months of appointment. 
  * BMO's leading ESG and investment trust track record: BMO Global Asset 
    Management is recognised as one of the original pioneers, and has one of 
    the longest track records, in responsible investing. Combining this with 
    its experience managing a range of investment trusts, across different 
    geographic mandates and asset classes, sets it apart from its peers. 
  * Engaging companies to improve is a key pillar of BMO's sustainable 
    philosophy: Investing sustainably is no longer about looking at 
    Environmental, Social and Governance factors from the single prism of 
    managing risks, and limiting the downside, but about also driving the 
    upside. The sustainability risks and challenges the world faces ultimately 
    underpin significant long-term growth opportunities for those companies 
    addressing them. 
  * Change of Investment Objective and Policy and Discontinuation vote: In the 
    upcoming general meetings, shareholders will have the opportunity to vote 
    on resolutions for the change of Investment Objective and Policy and for 
    discontinuation of the Company. The Board intends to recommend shareholders 
    vote in favour of the change of Investment Objective and Policy and against 
    the Discontinuation Vote. 
 
Background and Rationale 
 
During Q4 2020, the Board initiated a strategic review of the Company with the 
intention of presenting proposals for shareholders to consider in light of the 
Discontinuation Vote at the upcoming Annual General Meeting in August 2021. The 
strategic review predominantly focussed on: 
 
  * A fundamental review of the Company's structure and investment mandate and 
    its relevance to investors; 
  * Stabilising and putting the Company's revenue account and dividend policy 
    on a sustainable long-term footing while maintaining an income focus in the 
    investment objectives; 
  * Setting the Company on a path to growth and hence improved liquidity and a 
    lower expense ratio by broadening the appeal of the investment mandate to a 
    wider range of investors; and 
  * Operational cost savings through both management fee savings and other 
    fixed cost savings. 
 
The Board has concluded that the current arrangements will not deliver a 
product with wide appeal to investors and that maintaining the status quo will 
leave the Company facing the same problems of scale and liquidity that have 
challenged it in recent years. BMO's proposed investment strategy recognises 
the new commercial opportunities arising from technological advances and the 
increased awareness of the need to adopt sustainable practices.  This provides 
the potential to generate attractive investment returns through both dividends 
and capital appreciation in the years ahead and in the Board's view is more 
aligned to shareholders' interests and much better meets the objectives of a 
broader range of investors. In addition, BMO has proposed a fee package and 
scope of service, described above, that answers the Board's concerns in 
relation to operational costs. The Board believes that this strategy and the 
proposed fee structure will meet all of the objectives of its strategic review. 
 
As material changes to the formal structure of the relationship with the 
Investment Advisers and Investment Manager were one possible outcome of the 
strategic review, as previously announced, the Company has served protective 
notice to terminate the existing Investment Management Agreement. 
 
Change of Investment Objective and Policy 
 
It is proposed that, subject to shareholder and regulatory approvals, the 
Company's investment objective be changed to achieve long term capital growth 
and an attractive and growing dividend yield by investing principally in a 
portfolio of publicly listed global companies that make a positive impact on 
society and the environment. The detailed investment policy will be set out in 
the circular following its approval by the FCA. 
 
The proposed Global Sustainable Equity Income strategy aims to address a 
growing need in a clearly under-served area of the market, and will leverage 
the same philosophy and process of the award-winning teams within BMO behind 
the successful Responsible and Sustainable Development Goals Engagement 
strategies. The strategy will invest in a diversified global portfolio of 30 to 
50 high quality, cash generative companies that are in complete alignment with 
the positive sustainability themes identified within the UN Sustainable 
Development Goals. The strategy will also aim to deliver an attractive level of 
income to shareholders. The initial portfolio yield is expected to be circa 
3.5%. 
 
Change of Investment Manager 
 

The Company is proposing to appoint BMO as the Company's new Investment Manager 
and AIFM. The appointment of BMO is conditional upon the satisfaction of a 
number of conditions, including: (i) the Company's Discontinuation Vote failing 
(i.e. the Company continuing) at the upcoming Annual General Meeting; (ii) the 
proposed Investment Objective and Policy being approved by shareholders at the 
upcoming Extraordinary General Meeting; (iii) the execution of a new investment 
management agreement; and (iv) obtaining the necessary regulatory clearances. 
 
BMO is a diverse investment business with approximately £227bn[1] in assets 
under management and is recognised as one of the original pioneers of 
Responsible Investment, having launched Europe's first ethical fund over 35 
years ago. Today the business manages approximately £8.3bn[2] in responsible 
funds and mandates and has a team of over 20 dedicated responsible investment 
experts, with over 275 years of combined experience. 
 
The portfolio will be managed by Sacha El Khoury, with Nick Henderson as the 
named alternative. Both are members of BMO's Responsible Global Equities team, 
with Sacha having joined BMO in 2009, and Nick in 2008. 
 
Sacha El Khoury is a Portfolio Manager within the Global Equities team, Lead 
Portfolio Manager on the BMO Sustainable Opportunities European Equity Fund, 
and Alternate Portfolio Manager on the BMO Sustainable Opportunities Global 
Equity Fund. Sacha graduated with an MSc in Finance (with distinction) from 
City University, Cass Business School in 2009 and a BA in Economics (with a 
minor in Business Administration) from the American University of Beirut in 
2007. Sacha is a CFA Charterholder. 
 
Nick Henderson is a Portfolio Manager within the Global Equities team, Lead 
Portfolio Manager on the Sustainable Opportunities Global Equity Fund, winner 
of the 2019 Money Observer Best Global Growth Smaller Fund Award, Alternate 
Portfolio Manager of the BMO Responsible Global Equity Fund, the BMO SDG 
Engagement Global Equity Fund, and the BMO Sustainable Opportunities European 
Equity Fund. Prior to joining the firm, Nick graduated with a Bachelor of 
Science degree in Economics from the University of Bristol; he is a CFA 
Charterholder. 
 
 
Dividend Policy 
 
The Company's current dividend 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, via quarterly dividends. The Board has already announced its 
intention to utilise revenue reserves to maintain the second quarterly dividend 
payments due to be paid in June 2021 at the same level as the corresponding 
quarterly dividends for the year ended 31 December 2020, but has noted that a 
return to a sustainable and covered dividend will necessitate a lower dividend 
payment in future years. Further details on the proposed level of future 
dividends and gearing under the new arrangements will be contained in the 
Shareholder Circular, which is expected to be published in July 2021. 
 
Fees 
 
The proposed change of Manager to BMO would result in a reduction in management 
fees from the current level of 0.7% on gross assets to 0.65% on the net assets 
of the Company. There would be no performance fee, nor additional fees 
associated with investment research or AIFM services. Furthermore, BMO's 
management fee would be waived for the first six months of appointment. 
 
Change of name 
 
The Board proposes to change the name of the Company to BMO Global Sustainable 
Equity Income Fund Limited. The change of name is expected to become effective 
around the time of BMO's appointment. Shareholders will be asked to approve the 
proposed name change, which would also be conditional on the proposed 
investment objective and policy being approved by shareholders. 
 
Expected Timing 
 
The proposals are subject to shareholder and regulatory approvals. A circular 
with further details of the proposals, including a notice convening the 
Extraordinary and Annual General Meetings, both to be held in August 2021, is 
expected to be published in July 2021. The implementation of the new Investment 
Objective and Policy and management arrangements is expected following the 
Company's AGM. 
 
As part of the review process, the Board received a number of very high quality 
proposals and would like to express its thanks to all those who participated 
and to its advisers, N+1 Singer. 
 
The Board would also like to thank its Investment Advisers and Investment 
Manager for their commitment and services, including Claire Long, Chun Lee and 
Robin Willis from Premier Asset Management and Simon Moon and Fraser Mackersie 
from Unicorn Asset Management. 
 
For information please contact: 
 
Nigel Ward - Chairman via N+1 Singer and FTI Consulting 
N+1 Singer - Corporate Broker 
Alan Ray                             020 7436 3060 
Alaina Wong                      020 7436 3129 
FTI Consulting - PR Adviser 
Edward Berry                    07703330199 
Tom O'Brien                      07929021492 
 
This announcement contains inside information for the purposes of Article 7 of 
the Market Abuse Regulation (EU) No 596/2014. This announcement has been 
authorised for release by the Company's Board of Directors. 
 
[1] as at 31 December 2020 
 
[2] as at 31 December 2020 
 
 
 
END 
 
 

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