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 Companies) Index |
23,117.10 |
24,153.03 |
-4.29% |
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 Gross Assets) |
1.19% |
1.13% |
5.31% |
Ongoing Charges
(calculated on average Net Assets) |
1.98% |
1.79% |
10.61% |
|
|
|
|
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 of Total Assets 2020 |
Percentage of Total Assets 2019 |
Position |
Company |
Market
Value £’000 |
Percentage of 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% 15/07/2022 |
772,561 |
3.73 |
0.85 |
0.75 |
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% 19/09/2030 |
535,380 |
2.59 |
0.59 |
- |
7 |
Citigroup 1.75%
23/10/2026 |
526,522 |
2.54 |
0.58 |
0.47 |
8 |
UK Municipal
Bonds Agency 1.625% 26/08/2060 |
522,141 |
2.52 |
0.57 |
- |
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% 04/09/2026 |
459,454 |
2.22 |
0.50 |
0.41 |
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 to: |
As at
or year to: |
|
|
31
December 2020 |
31
December 2019 |
%
change |
Total Return
Performance |
|
|
|
Total Return on Gross
Assets |
- |
- |
-10.85% |
Numis Smaller
Companies (Ex Investment Companies) Index |
23,117.10 |
24,153.03 |
-4.29% |
|
|
|
|
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 2020 |
31
December 2020 |
31
December 2019 |
31
December 2019 |
|
Pence
per |
|
Pence
per |
|
|
Ordinary Share |
GBP
'000 |
Ordinary Share |
GBP
'000 |
Revenue return per
Ordinary Share |
13.75p |
2,175 |
22.31p |
3,529 |
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 December 2020 |
|
|
31 March
2020 |
5.75p |
Second Interim
for the year ended 31 December 2020 |
|
|
29 June
2020 |
5.75p |
Third Interim
for the year ended 31 December 2020 |
|
|
30
September 2020 |
5.75p |
Fourth Interim
for the year ended 31 December 2020 |
|
|
18
December 2020 |
5.75p |
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
Meetings* |
Ad hoc Board
Meetings* |
Committee
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:
Refer to Audit Committee Report
We draw attention to note 1(a) to the financial statements which
indicates that the Company is obliged to hold a discontinuation
vote at the 2021 Annual General Meeting of Shareholders.
This condition constitutes a material uncertainty that may cast
doubt about the Company's ability to continue as a going
concern.
Our opinion is not modified in respect of this matter. |
Disclosure quality
The financial statements explain how the Board has formed a
judgment that it is appropriate to adopt the going concern basis of
preparation for the Company.
That judgment is based on an evaluation of the inherent risks to
the Company’s business model and how those risks might affect the
Company’s financial resources or ability to continue operations
over a period of at least a year from the date of approval of the
financial statements, in particular in relation to the
discontinuation vote.
The risk for our audit is whether or not those risks are such that
they amounted to a material uncertainty that may cast significant
doubt about the ability to continue as a going concern. If
so, that fact is required to be disclosed (as has been done) and,
along with a description of the circumstances, is a key financial
statement disclosure.
|
Our procedures
included, but were not limited to:
We obtained and inspected a Board approved written assessment of
going concern on the Company and corroborated the assessment with
our knowledge of the business.
We considered the risk that the outcome of the discontinuation vote
could affect the Company for at least a year from the date of
approval of the financial statements (the “going concern period”)
by inspecting minutes of meetings held by the directors, inquiring
with management as to their assessment of the likelihood of uptake
of the discontinuation vote, and considering key financial metrics
including the discount of the Company’s share price against its net
asset value.
Assessing disclosures:
We considered whether the going concern disclosure in
note 1(a) to the financial 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
(Financial assets designated at fair value through profit or
loss)
£90,003,736; (2019: £103,788,482)
Refer to the Audit Committee Report, accounting policy notes
1(b), 1(l) and disclosure note 10. |
Basis:
As at 31 December 2020 the Company had invested the equivalent of
158.0% (2019: 140.7%) of its net assets in listed equities, bonds
and structured notes (together, the "investments").
The Company's listed investments are valued based on market prices
while its structured notes are valued based on price quotes
obtained from a third party pricing provider (the “Price Quotes”).
Where the Price Quotes may not be representative of fair value, the
Company will use the resources of the Investment Manager to augment
its own fair value analysis to determine the most appropriate fair
value for such investments.
Risk:
The valuation of the Company's investments, given that it
represents the majority of the Company's net assets is considered
to be a significant area of our audit. |
Our audit procedures
included, but were not limited to:
Use of KPMG Valuation Specialist:
We used our KPMG Valuation Specialist to independently price listed
investments to a third party pricing source.
For structured notes our KPMG Valuation Specialist assisted us with
the assessment of the quality and integrity of the Price Quotes,
through comparison to available quotes from independent sources or
through applying a valuation model based on contractual terms and
market data.
Assessing disclosures:
We also considered the Company's disclosures (see note 1 (b)) in
relation to the use of judgments regarding valuation of investments
and the Company's valuation policies adopted (see note 1(I))
and fair value disclosures in note 10 for compliance with
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 31 December 2020 |
Year ended 31 December 2019 |
|
|
|
|
|
Revenue |
Capital |
Total |
Total |
|
|
Notes |
GBP |
GBP |
GBP |
GBP |
Net (losses)/gains on
financial assets designated as at fair value through profit or
loss |
|
10 |
- |
(13,516,405) |
(13,516,405) |
14,541,087 |
Gains on derivative
financial instruments |
|
4 |
- |
106,175 |
106,175 |
249,850 |
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 activities before finance costs and taxation |
|
|
2,175,061 |
(14,075,464) |
(11,900,403) |
17,445,415 |
Interest payable and
similar charges |
|
7 |
- |
(1,258,297) |
(1,258,297) |
(1,207,671) |
|
|
|
|
|
|
|
Return/(loss) on
ordinary activities before taxation |
|
|
2,175,061 |
(15,333,761) |
(13,158,700) |
16,237,744 |
Taxation on ordinary
activities |
|
|
- |
- |
- |
- |
Other comprehensive
income |
|
|
- |
- |
- |
- |
|
|
|
|
|
|
|
Total comprehensive
income/(loss) for the year attributable to Ordinary
Shareholders |
|
|
2,175,061 |
(15,333,761) |
(13,158,700) |
16,237,744 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pence |
Pence |
Pence |
Pence |
Return/(loss) per
Ordinary Share |
|
9 |
13.75 |
(96.95) |
(83.20) |
102.66 |
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
December 2020 |
|
31
December 2019 |
|
Notes |
|
GBP |
|
GBP |
NON-CURRENT
ASSETS |
|
|
|
|
|
Financial assets
designated as at fair value through profit or loss |
10 |
|
90,003,736 |
|
103,788,482 |
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 2020 |
|
31 December 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 at fair value through profit or
loss |
10 |
13,516,405 |
|
(14,541,087) |
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 excluding amount due to brokers |
12 |
(15,515) |
|
47,537 |
(Increase)/decrease in
receivables excluding accrued investment income and due from
brokers |
11 |
(2,524) |
|
13,949 |
|
|
|
|
|
Net cash flow used
in operating activities before investment income |
|
(1,167,746) |
|
(1,619,679) |
Dividend income
received |
|
2,360,099 |
|
3,673,593 |
Interest income
received |
|
474,249 |
|
595,235 |
|
|
|
|
|
Net cash flow from
operating activities before taxation |
|
1,666,602 |
|
2,649,149 |
Tax paid |
|
- |
|
- |
|
|
|
|
|
Net cash flow from
operating activities |
|
1,666,602 |
|
2,649,149 |
|
|
|
|
|
Investing
activities |
|
|
|
|
Purchase of financial
assets designated at fair value through profit or loss |
|
(25,565,259) |
|
(34,951,668) |
Sale of financial
assets designated at fair value through profit or loss |
|
25,821,280 |
|
35,032,464 |
|
|
|
|
|
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 and Premium |
Revenue
Reserve |
Capital
Reserve |
Other
Reserves |
Total |
|
|
31
December 2020 |
31
December 2020 |
31
December 2020 |
31
December 2020 |
31
December 2020 |
Notes |
GBP |
GBP |
GBP |
GBP |
GBP |
Balances as at 1
January 2020 |
|
27,420,824 |
3,417,227 |
37,705,938 |
5,219,838 |
73,763,827 |
Total comprehensive
income/(loss) for the year attributable to Ordinary
Shareholders |
|
- |
2,175,061 |
(15,333,761) |
- |
(13,158,700) |
Dividends |
8 |
- |
(3,637,840) |
- |
- |
(3,637,840) |
|
|
|
|
|
|
|
Balances as at 31
December 2020 |
|
27,420,824 |
1,954,448 |
22,372,177 |
5,219,838 |
56,967,287 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
Capital and Premium |
Revenue
Reserve |
Capital
Reserve |
Other
Reserves |
Total |
|
|
31
December 2019 |
31
December 2019 |
31
December 2019 |
31
December 2019 |
31
December 2019 |
|
GBP |
GBP |
GBP |
GBP |
GBP |
Balances as at 1
January 2019 |
|
27,420,824 |
3,178,203 |
24,997,090 |
5,219,838 |
60,815,955 |
Total comprehensive
income for the year attributable to Ordinary Shareholders |
|
- |
3,528,896 |
12,708,848 |
- |
16,237,744 |
Dividends |
8 |
- |
(3,289,872) |
- |
- |
(3,289,872) |
|
|
|
|
|
|
|
Balances as at 31
December 2019 |
|
27,420,824 |
3,417,227 |
37,705,938 |
5,219,838 |
73,763,827 |
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) on financial assets designated as at fair value
through profit or loss |
|
|
481,328 |
|
(13,997,733) |
|
- |
|
(13,516,405) |
Gains on
derivative financial instruments |
|
|
106,175 |
|
- |
|
- |
|
106,175 |
Investment
income: |
|
|
|
|
|
|
|
|
|
Dividend
income |
|
|
142,424 |
|
2,214,813 |
|
- |
|
2,357,237 |
Bond
income |
|
|
455,995 |
|
- |
|
- |
|
455,995 |
Foreign
exchange loss |
|
|
- |
|
- |
|
(96,581) |
|
(96,581) |
Total
income/(losses) |
|
|
1,185,922 |
|
(11,782,920) |
|
(96,581) |
|
(10,693,579) |
Expenses |
|
|
|
- |
|
- |
|
(1,206,824) |
|
(1,206,824) |
Interest payable and
similar charges |
|
|
|
- |
|
- |
|
(1,258,297) |
|
(1,258,297) |
Total comprehensive
income/(loss) for the year attributable to shareholders |
|
|
|
1,185,922 |
|
(11,782,920) |
|
(2,561,702) |
|
(13,158,700) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Smaller |
|
|
|
|
|
|
|
|
Income |
|
Companies |
|
|
|
|
|
|
|
|
Portfolio |
|
Portfolio |
|
Unallocated |
|
Total |
|
|
|
|
GBP |
|
GBP |
|
GBP |
|
GBP |
31
December 2020 |
|
|
|
|
|
|
|
|
|
Financial
assets designated as at fair value through profit or loss |
|
|
20,698,208 |
|
69,305,528 |
|
- |
|
90,003,736 |
Receivables |
|
|
|
437,351 |
|
21,002 |
|
- |
|
458,353 |
Derivative financial
instruments |
|
|
|
132,269 |
|
- |
|
- |
|
132,269 |
Cash and cash
equivalents |
|
|
|
307,493 |
|
301,973 |
|
- |
|
609,466 |
Total assets |
|
|
|
21,575,321 |
|
69,628,503 |
|
- |
|
91,203,824 |
Payables |
|
|
|
- |
|
- |
|
257,133 |
|
257,133 |
Total
current liabilities |
|
|
- |
|
- |
|
257,133 |
|
257,133 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Smaller |
|
|
|
|
|
|
|
|
Income |
|
Companies |
|
|
|
|
|
|
|
|
Portfolio |
|
Portfolio |
|
Unallocated |
|
Total |
|
|
|
|
GBP |
|
GBP |
|
GBP |
|
GBP |
|
|
|
|
|
|
|
|
|
|
|
31
December 2019 |
|
|
|
|
|
|
|
|
|
External
revenues: |
|
|
|
|
|
|
|
|
|
Net gains
on financial assets designated as at fair value through profit or
loss |
|
|
449,802 |
|
14,091,285 |
|
- |
|
14,541,087 |
Gains on
derivative financial instruments |
249,850 |
|
- |
|
- |
|
249,850 |
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 charges |
|
- |
|
- |
|
(1,207,671) |
|
(1,207,671) |
Total
comprehensive income for the year attributable to shareholders |
|
|
1,396,451 |
|
17,614,673 |
|
(2,773,380) |
|
16,237,744 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Smaller |
|
|
|
|
|
|
|
|
Income |
|
Companies |
|
|
|
|
|
|
|
|
Portfolio |
|
Portfolio |
|
Unallocated |
|
Total |
|
|
|
|
GBP |
|
GBP |
|
GBP |
|
GBP |
|
|
|
|
|
|
|
|
|
|
|
31
December 2019 |
|
|
|
|
|
|
|
|
|
Financial
assets designated as at fair value through profit or loss |
|
|
20,619,082 |
|
83,169,400 |
|
- |
|
103,788,482 |
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
world |
|
Total |
|
|
|
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
world |
|
Total |
|
|
|
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 2020 |
|
31
December 2019 |
|
|
|
|
GBP |
|
GBP |
Dividend income |
|
|
|
2,357,237 |
|
3,679,715 |
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 2020 |
|
31
December 2019 |
|
|
|
|
GBP |
|
GBP |
Unrealised
(loss)/gain on forward foreign currency contracts |
(47,523) |
|
365,305 |
Realised
gain/(loss) on forward foreign currency contracts |
153,698 |
|
(115,455) |
|
|
|
|
106,175 |
|
249,850 |
5
EXPENSES
|
|
|
|
Year ended 31 December 2020 |
Year ended 31 December 2019 |
|
|
|
|
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 fee** |
|
|
84,775 |
|
- |
|
84,775 |
84,221 |
|
- |
|
84,221 |
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 Officers' insurance |
|
26 |
|
- |
|
26 |
12,653 |
|
- |
|
12,653 |
Annual fees |
|
|
|
18,219 |
|
- |
|
18,219 |
31,118 |
|
- |
|
31,118 |
Commissions and charges paid |
|
- |
|
117,009 |
|
117,009 |
- |
|
149,932 |
|
149,932 |
Legal and
professional fees |
|
34,104 |
|
- |
|
34,104 |
39,949 |
|
- |
|
39,949 |
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
DIVIDENDS 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 payment |
|
909,460 |
|
5.75 |
822,468 |
|
5.20 |
Second
interim payment |
|
909,460 |
|
5.75 |
822,468 |
|
5.20 |
Third
interim payment |
|
909,460 |
|
5.75 |
822,468 |
|
5.20 |
Fourth
interim payment |
|
909,460 |
|
5.75 |
822,468 |
|
5.20 |
|
|
|
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 2020 |
|
31
December 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 sales |
|
|
|
|
|
6,229,665 |
|
6,179,329 |
- realised
losses on sales |
|
|
|
|
|
(7,294,885) |
|
(3,193,683) |
Closing
book cost |
|
|
|
|
|
86,657,800 |
|
87,991,361 |
Unrealised
appreciation on investments |
|
|
|
12,291,265 |
|
20,503,186 |
Unrealised
depreciation on investments |
|
|
|
(8,945,329) |
|
(4,706,065) |
Fair value |
|
|
|
|
|
|
90,003,736 |
|
103,788,482 |
|
|
|
|
|
|
|
|
|
|
Realised
gains on sales |
|
|
|
|
|
6,229,665 |
|
6,179,329 |
Realised
losses on sales |
|
|
|
|
|
(7,294,885) |
|
(3,193,683) |
(Decrease)/increase in unrealised appreciation on investments |
|
|
(8,211,921) |
|
8,019,527 |
(Increase)/decrease in unrealised depreciation on investments |
|
|
(4,239,264) |
|
3,535,914 |
Net
(losses)/ gains on financial assets designated as at fair value
through profit or loss |
(13,516,405) |
|
14,541,087 |
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
December 2020 |
|
31
December 2020 |
|
31 Dec
2019 |
|
31 Dec
2019 |
|
|
|
Market
value |
|
Market
value |
|
Market
value |
|
Market
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 2020 |
|
31 Dec
2019 |
|
|
|
|
|
|
|
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 2020 |
|
31
December 2020 |
|
31 Dec
2019 |
|
31 Dec
2019 |
|
|
|
Market
value |
|
Market
value |
|
Market
value |
|
Market
value |
|
|
|
% |
|
GBP |
|
% |
|
GBP |
Level 1
derivative financial assets |
- |
|
- |
|
- |
|
846 |
Level 2
derivative financial assets |
0.15 |
|
132,269 |
|
0.18 |
|
185,607 |
Level 2
derivative financial liabilities |
- |
|
- |
|
(0.01) |
|
(6,661) |
It is the Company’s policy to recognise all the transfers into
the levels and transfers out of the levels at the end of the
reporting 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 2020 |
|
31 Dec
2019 |
|
|
|
|
|
|
|
GBP |
|
GBP |
|
|
|
|
|
|
|
|
|
|
Due from brokers |
|
|
|
|
|
|
13,688 |
|
28,481 |
Prepayments |
|
|
|
|
|
|
7,314 |
|
4,790 |
Accrued
investment income |
|
|
|
437,351 |
|
458,467 |
|
|
|
|
|
|
|
458,353 |
|
491,738 |
12
PAYABLES
|
|
|
|
|
|
|
31
December 2020 |
|
31
Dec 2019 |
|
|
|
|
|
|
|
GBP |
|
GBP |
|
|
|
|
|
|
|
|
|
|
Accrued expenses |
|
|
|
|
|
|
104,284 |
|
93,235 |
Amounts
due to brokers |
|
|
|
|
- |
|
27,114 |
Trade creditors |
|
|
|
|
|
|
152,849 |
|
179,413 |
|
|
|
|
|
|
|
257,133 |
|
299,762 |
13 ZDP
SHARES
|
|
|
|
|
|
|
31 December 2020 |
|
31 Dec 2019 |
|
|
|
|
|
|
|
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 Shares |
|
11,147,721 |
|
9,889,424 |
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 in accordance with IFRS) |
|
|
|
|
33,979,404 |
|
32,721,107 |
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 2020 |
31 Dec
2019 |
|
|
|
|
|
|
Number
of |
Number
of |
Issued |
|
|
|
|
|
Shares |
Shares |
Number of
shares in issue at the start of the year |
|
|
15,816,687 |
15,816,687 |
Number of
shares in issue at the end of the year |
|
|
15,816,687 |
15,816,687 |
Issued and
fully paid capital at the end of the year |
|
|
£196,606 |
£196,606 |
|
|
|
Share
Capital |
Share
Premium |
Total |
Total |
|
|
|
31
December 2020 |
31
December 2020 |
31
December 2020 |
31 Dec
2019 |
|
|
|
GBP |
GBP |
GBP |
GBP |
Opening
share capital and premium |
196,606 |
27,224,218 |
27,420,824 |
27,420,824 |
Closing
share capital and premium |
196,606 |
27,224,218 |
27,420,824 |
27,420,824 |
The Ordinary Shares (excluding treasury shares) are entitled to
participate in all dividends and distributions of the Company. On a
winding-up holders of Ordinary Shares are entitled to participate
in the distribution and the holders of Ordinary Shares are entitled
to receive notice of and attend and vote at all general meetings of
the Company.
The issued and fully paid capital as at 31 December 2020 was £196,606 (31 December 2019: £196,606).
15
OTHER RESERVES
TREASURY RESERVE
|
|
|
|
31
December 2020 |
|
31 Dec
2019 |
|
|
|
|
GBP |
|
GBP |
Balance as
at the beginning of the year |
(4,780,162) |
|
(4,780,162) |
Balance as
at the end of the year |
|
(4,780,162) |
|
(4,780,162) |
The other reserves presented on the Statement of Financial
Position comprise the treasury reserve of (£4,780,162) and special
reserve of £10,000,000 totalling £5,219,838.
ORDINARY SHARES HELD IN TREASURY
|
|
|
|
31
December 2020 |
|
31
Dec 2019 |
|
|
|
|
No.
Shares |
|
No.
Shares |
Balance as
at the beginning of the year |
1,325,972 |
|
1,325,972 |
Balance as
at the end of the year |
|
1,325,972 |
|
1,325,972 |
A Special reserve of £10,000,000 was created on the cancellation
of part of the Company’s Share premium account.
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
2020 |
|
31 Dec
2019 |
|
|
|
|
|
|
|
GBP |
|
GBP |
Financial Assets |
|
|
|
|
|
|
|
|
Financial
assets designated as at fair value through profit or loss |
|
90,003,736 |
|
103,788,482 |
Derivative
financial assets |
|
|
|
|
132,269 |
|
186,453 |
Total
financial assets at fair value through profit or loss |
|
|
90,136,005 |
|
103,974,935 |
Loans
and receivables |
|
|
|
|
|
|
|
|
Cash and
equivalents |
|
|
|
|
|
609,466 |
|
2,324,683 |
Receivables (excluding prepayments) |
|
|
|
|
451,039 |
|
486,948 |
Total
assets (excluding prepayments) |
|
|
|
|
91,196,510 |
|
106,786,566 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec
2020 |
|
31 Dec
2019 |
|
|
|
|
|
|
|
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 profit or loss |
|
|
- |
|
6,661 |
Financial liabilities measured at amortised cost |
|
|
|
|
|
|
ZDP Shares |
|
|
|
|
|
|
33,979,404 |
|
32,721,106 |
Payables |
|
|
|
|
|
|
257,133 |
|
299,762 |
Total
Financial liabilities measured at amortised cost |
|
|
|
34,236,537 |
|
33,020,868 |
Total
liabilities excluding net assets attributable to holders of
Ordinary Shares |
34,236,537 |
|
33,027,529 |
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
2020 |
|
31 Dec
2019 |
|
|
|
|
|
|
|
GBP |
|
GBP |
Financial
assets designated as at fair value through profit or loss |
|
|
|
|
(fixed
income securities and structured investments only) |
|
|
16,627,397 |
|
15,588,001 |
Cash and
cash equivalents |
|
|
|
|
609,466 |
|
2,324,683 |
Interest,
dividends and other receivables |
|
|
|
451,039 |
|
486,948 |
Derivatives financial instruments |
|
|
|
|
132,269 |
|
186,453 |
|
|
|
|
|
|
|
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
2020 |
|
31 Dec
2019 |
|
|
|
|
|
|
|
|
|
|
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
available |
|
|
|
|
|
26.33% |
|
35.41% |
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
year |
0-3
months |
|
Over 1
year |
|
|
|
|
|
|
|
GBP |
|
GBP |
GBP |
|
GBP |
Financial liabilities including derivatives |
|
|
|
|
|
|
|
|
|
Payables -
due within one year |
|
|
|
|
257,133 |
|
- |
299,762 |
|
- |
Derivative
financial instruments |
|
|
|
|
- |
|
- |
6,661 |
|
- |
ZDP Share
entitlement |
|
|
|
|
|
- |
|
35,498,214 |
- |
|
35,498,214 |
|
|
|
|
|
|
|
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
recognition |
|
|
- |
16,627,397 |
73,376,339 |
90,003,736 |
Cash and
cash equivalents |
|
609,466 |
- |
- |
609,466 |
Interest,
dividends and other receivables |
- |
- |
451,039 |
451,039 |
Derivative
financial instruments |
|
- |
- |
132,269 |
132,269 |
Total
Financial Assets |
|
|
609,466 |
16,627,397 |
73,959,647 |
91,196,510 |
Financial Liabilities |
|
|
|
|
|
|
Payables |
|
|
|
- |
- |
257,133 |
257,133 |
ZDP Share
entitlement |
|
|
- |
33,979,404 |
- |
33,979,404 |
Total
Financial Liabilities |
|
|
- |
33,979,404 |
257,133 |
34,236,537 |
Total
Interest Sensitivity Gap |
|
609,466 |
(17,352,007) |
|
|
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 instruments |
|
- |
|
- |
|
186,453 |
|
186,453 |
Total
Financial Assets |
|
|
2,324,683 |
|
15,588,001 |
|
88,873,882 |
|
106,786,566 |
Financial Liabilities |
|
|
|
|
|
|
|
|
|
Derivative Financial
instruments |
|
|
|
|
|
|
|
6,661 |
|
6,661 |
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 Gap |
|
2,324,683 |
|
(17,133,105) |
|
|
|
|
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 contract |
|
|
Expiration |
|
Underlying |
|
outstanding |
|
GBP |
|
|
|
|
|
|
|
|
|
|
Forward |
|
|
January
2021 |
|
Sold
EUR |
|
(200,000) |
|
3,785 |
Forward |
|
|
January
2021 |
|
Sold
RON |
|
(986,915) |
|
2,117 |
Forward |
|
|
January
2021 |
|
Sold
USD |
|
3,565,000 |
|
139,140 |
Forward |
|
|
January
2021 |
|
Purchased
USD |
|
237,959 |
|
(9,406) |
Forward |
|
|
January
2021 |
|
Purchased
USD |
|
350,000 |
|
(3,367) |
|
|
|
|
|
|
|
|
|
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
2020 |
|
Purchased
EUR |
|
71,855 |
|
(907) |
Forward |
|
|
January
2020 |
|
Sold
EUR |
|
(885,000) |
|
(23,973) |
Forward |
|
|
January
2020 |
|
Sold
RON |
|
(1,121,440) |
|
(4,481) |
Forward |
|
|
January
2020 |
|
Sold
USD |
|
(4,841,366) |
|
(156,576) |
Forward |
|
|
January
2020 |
|
Purchased
USD |
|
260,000 |
|
6,661 |
Forward |
|
|
January
2020 |
|
Purchased
USD |
|
53,690 |
|
(516) |
|
|
|
|
|
|
|
|
|
(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
Contracts |
|
Net
exposure |
|
|
|
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
Contracts |
|
Net
exposure |
|
|
|
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 reserves |
|
|
|
|
7,174,286 |
Share
capital and share premium |
|
|
|
27,420,824 |
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 of Total Assets 2020 |
Company |
|
Nominal
Holdings |
Valuation
GBP |
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 plc |
|
1,750,000 |
2,667,000 |
2.92 |
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
Limited |
|
242,500 |
2,012,750 |
2.21 |
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 plc |
|
750,000 |
1,125,000 |
1.23 |
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 plc |
|
50,000 |
640,000 |
0.70 |
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 Limited |
200,000 |
219,600 |
0.24 |
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 Share (pence) |
|
|
ZDP Shares |
|
|
|
NAV
per Share (pence) |
|
|
|
|
|
|
|
|
|
|
|
Net Assets (per
Articles) |
56,972,967 |
|
360.21 |
|
|
ZDP value (per
Articles) |
|
33,973,724 |
|
160.02 |
ZDP Premium |
(5,680) |
|
(0.04) |
|
|
ZDP premium |
|
5,680 |
|
0.03 |
Net Assets (per
IFRS) |
56,967,287 |
|
360.17 |
|
|
ZDP value (per
IFRS) |
|
33,979,404 |
|
160.05 |
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 31.12.20 |
|
|
2020 |
|
2019 |
|
|
|
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
assets |
Ordinary
share NAV |
Ordinary
share price |
Total
assets |
Ordinary
share NAV |
Ordinary
share price |
Closing NAV per
share/share price (pence) |
(a) |
576.63 |
360.17 |
322.50 |
675.18 |
466.37 |
406.00 |
Dividend adjustment
factor |
(b) |
1.0714 |
1.0714 |
1.0714 |
1.0337 |
1.0337 |
1.0337 |
Adjusted closing NAV
per share/share price (pence) |
(c = a x b) |
617.80 |
385.89 |
345.53 |
697.93 |
482.09 |
419.68 |
Opening NAV per
share/share price (pence) |
(d) |
675.18 |
466.37 |
406.00 |
586.43 |
384.51 |
334.00 |
Total return |
(c / d) -1 |
-8.5% |
-17.3% |
-14.9% |
19.0% |
25.4% |
25.7% |
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
John Nigel Ward (Chairman)
David John Warr
Nigel Sidebottom
Sharon Parr
Shareholders are welcome to contact the Chairman directly by
emailing at:
Acorn_Income_Fund_Limited@ntrs.com |
Corporate
Broker
N+1 Singer Advisory LLP
One Bartholomew Lane
London
EC2N 2AX
Tel: 0207 4963000
(appointed 1 August 2020) |
Investment
Manager
Premier Asset Management (Guernsey) Limited
PO Box 255
Trafalgar Court
Les Banques
St Peter Port
Guernsey
GY1 3QL
Tel: 01483 306090
Contact: Claire Long |
Numis Securities
Limited
10 Paternoster Square
London
EC4M 7LT
Tel: 0207 2601000
(until 31 July 2020) |
Investment Adviser
– Smaller Companies Portfolio
Unicorn Asset Management Limited
Preacher’s Court
The Charterhouse
Charterhouse Square
London
EC1M 6AU
Tel: 0207 2530889
Contact: Simon Moon |
Independent
Auditor
KPMG Channel Islands Limited
Glategny Court
Glategny Esplanade
St Peter Port
Guernsey
GY1 1WR |
Investment Adviser
– Income Portfolio
Premier Fund Managers Limited
Eastgate Court
High Street
Guildford
GU1 3DE
Tel: 01483 306090
Contact: Claire Long |
Registrar
JTC Registrars Limited
PO Box 156
Ground Floor
Dorey Court
Admiral Park
St Peter Port
Guernsey
GY1 4EU
Tel: 01481 702400
Email: registrars@jtcgroup.com |
Administrator and
Secretary
Northern Trust International Fund Administration Services
(Guernsey) Limited
PO Box 255
Trafalgar Court
Les Banques
St Peter Port
Guernsey
GY1 3QL
Email: Team_Acorn@ntrs.com |
Company’s
Registered Office
PO Box 255
Trafalgar Court
Les Banques
St Peter Port
Guernsey
GY1 3QL |
Custodian
Northern Trust (Guernsey) Limited
PO Box 71
Trafalgar Court
Les Banques
St Peter Port
Guernsey
GY1 3DA |
Company
Details
Company Number: 34778
GIIN Number: CY0IXM.99999.SL.831
Ordinary Shares
ISIN: GB0004829437
Ticker: AIF
ZDP Shares
ISIN: GGOOBYMJ7X48
Ticker: AIFZ |