Update on Future of the Company

ACORN INCOME FUND LIMITED
 (a closed-ended investment company incorporated in Guernsey with registration number 34778)
LEI 213800UAZN7G46AHQM67

01 September 2021

Acorn Income Fund Limited (“Acorn” or the “Company”)

Update on Future of the Company

Further to the Company’s announcements on 17 May and 12 August 2021 on the future of the Company, the Board announces that it is proposing a scheme of reconstruction. Having reviewed proposals regarding the future of the Company and following consultation with some of the Company’s shareholders, the Board has concluded that offering a rollover of its assets into Unicorn UK Income Fund, an open ended vehicle managed by Unicorn Asset Management (“Unicorn”), and an option for a cash exit (together, the “Proposals”) is in the best interests of shareholders as a whole.

Reasons for the Proposals

Given a combination of factors, including the existing dual portfolio structure, likely future cut in dividends, historic discount to NAV and size of the Company, the Board does not believe that the Company can viably continue in its existing form. However, some shareholders have confirmed their endorsement of the Company’s Smaller Companies portfolio investment strategy under Unicorn’s management and others have indicated a preference for a cash exit at close to NAV. After careful consideration, the Board therefore recommends a scheme of reconstruction of the Company, which would result in the voluntary liquidation of the Company. Shareholders would be entitled, in respect of their shareholdings in the Company, to elect to:

• roll over all or part of their holding into Unicorn UK Income Fund, an open ended vehicle managed by Unicorn (a sub-fund of Unicorn Investment Funds), with rollover entitlements being calculated on an NAV for NAV basis; and/or
• receive cash as all of or part of their entitlement upon the liquidation of the Company at a price which will be close to the prevailing net asset value per share (“Cash Option”).

Unicorn UK Income Fund

The Unicorn UK Income Fund (the “Fund”) was launched in 2004 and is the best performing Fund in the UK Equity Income sector since launch¹.  The Fund follows the same long-term approach as the Acorn Income Fund Smaller Companies portfolio with a focus on generating a differentiated and high quality income stream from a high conviction portfolio of predominantly small and medium sized UK equities.  The Fund is currently £527 million in size and has an historic dividend yield of 3.4%, which is paid quarterly.  Fraser Mackersie and Simon Moon have been managers of the portfolio since 2013.  The Fund is also currently top quartile in the UK Equity Income sector over 3, 5 and 10 years².

As at 31 August 2021, Unicorn estimates that the Company’s existing Smaller Companies portfolio that it manages has a circa 67% commonality with the Unicorn UK Income Fund and that the balance of the portfolio can be realigned in an efficient manner ahead of the rollover.

The Company has signed Heads of Terms with Unicorn and Unicorn Investment Funds in relation to the Proposals. Costs of the Proposals will be borne by the Company. However, Unicorn has agreed:

• to make a cost contribution to the Company in the amount of £100,000, reduced by the proportion of Ordinary Shares in respect of which elections are made for the Cash Option, subject to a minimum contribution of £50,000;
• to waive its management fees for Unicorn UK Income Fund for a period of 12 months for those Acorn shareholders choosing to roll over some or all of their holding; and
• to waive the entry charge to shareholders choosing to rollover.

Zero dividend preference shares

As part of the Proposals, the holders of zero dividend preference shares in Acorn will be paid an amount in cash equal to their final capital entitlement as at 28 February 2022, on completion of the rollover and liquidation, expected to be in October/November 2021.

General Meetings

The Proposals are conditional on, inter alia, shareholder and regulatory approvals. Shareholder documentation setting out full details of the proposals will be put forward in a circular to be sent to shareholders as soon as practicable, including a notice for the necessary general meeting to seek shareholder approval of the Proposals. If the Proposals are subsequently approved by shareholders, the conditions to the Proposals are fulfilled and the scheme of reconstruction is effected, it is expected that the Company will go into voluntary winding up.

Shareholders will also receive a notice for the Company’s upcoming Annual General Meeting, which will include a discontinuation resolution. In light of the Proposals recommended by the Board, the Board recommends voting in favour of the discontinuation resolution.

1. Source: FE Analytics from 24 May 2004 to 31 August 2021
2. Source: FE Analytics as at 31 August 2021

For information please contact:

Nigel Ward (Chairman)

via Singer Capital Markets or Company Secretary

Northern Trust International Fund Administration Services (Guernsey) Limited
Company Secretary  [phone]

Singer Capital Markets (Corporate Broker)
Paul Glover / Alan Ray / Alaina Wong  + 44 (0) 207 496 3000

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No 596/2014. This announcement has been authorised for release by the Company's Board of Directors.