Final Results

Acorn Income Fund Ld 18 April 2007 INCOME STATEMENT for the year ended 31 December 2006 Revenue Capital Total Revenue Capital Total 2006 2006 2006 2005 2005 2005 £'000 £'000 £'000 £'000 £'000 £'000 Gains on investments - 10,178 10,178 - 12,177 12,177 Income 3,158 - 3,158 3,391 - 3,391 Management fee (195) (586) (781) (176) (529) (705) Performance fee - (150) (150) - - - Costs of Tender Offer (189) (189) - - - Other expenses (206) (249) (455) (158) (111) (269) ------- ------ ------ ------- ------ ------ Net return on ordinary activities before finance costs 2,757 9,004 11,761 3,057 11,537 14,594 Interest payable and similar charges (313) (940) (1,253) (373) (1,120) (1,493) ------- ------ ------ ------- ------ ------ Net return for the year 2,444 8,064 10,508 2,684 10,417 13,101 ------- ------ ------ ------- ------ ------ Total return per Ordinary Share 8.25p 27.24p 35.49p 9.07p 35.19p 44.26p The total columns of this statement represent the Income Statement of the Company. STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES for the year ended 31 December 2006 Revenue Capital Total Revenue Capital Total 2006 2006 2006 2005 2005 2005 £'000 £'000 £'000 £'000 £'000 £'000 Net return for the year 2,444 8,064 10,508 2,684 10,417 13,101 Prior year adjustment - - - - (601) (601) ------- ------ ------ ------- ------ ------ Total recognised gains and losses recognised since last annual report 2,444 8,064 10,508 2,684 9,816 12,500 ------- ------ ------ ------- ------ ------ The revenue and capital columns represent supplementary information. All revenue and capital items in the above statements derive from continuing operations. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS For the year ended 31 December 2006 Share Share Revenue Special Capital Total capital premium reserve reserve reserve £'000 £'000 £'000 £'000 £'000 £'000 Balance as at 1 January 2006 7,400 17,079 902 10,000 16,046 51,427 Return for the year - - 2,444 - 8,064 10,508 Dividends paid - - (2,664) - - (2,664) ------ ------- ------- ------- ------- ---------- Balance as at 31 December 2006 7,400 17,079 682 10,000 24,110 59,271 ------ ------- ------- ------- ------- ---------- For the year ended 31 December 2005 Share Share Revenue Special Capital Total capital premium reserve reserve reserve £'000 £'000 £'000 £'000 £'000 £'000 Balance as at 1 January 2005 as previously stated 7,400 17,079 882 10,000 6,230 41,591 Prior year adjustment - - - - (601) (601) Balance as at 1 January 2005 as restated 7,400 17,079 882 10,000 5,629 40,990 Return for the year - - 2,684 - 10,417 13,101 Dividends paid - - (2,664) - - (2,664) -------- ------- ---------- ------- ------ ------- Balance as at 31 December 2005 7,400 17,079 902 10,000 16,046 51,427 -------- ------- ---------- ------- ------ ------- BALANCE SHEET as at 31 December 2006 2006 2005 (restated) £'000 £'000 Fixed assets Listed investments 21,943 72,075 Current assets Debtors 159 651 Cash at bank 37,547 5,238 -------- -------- 37,706 5,889 Creditors - amounts falling due within one year Other creditors (378) (921) Bank loan - (25,616) -------- -------- (378) (26,537) -------- -------- Net current assets/(liabilities) 37,328 (20,648) -------- -------- Total assets less current liabilities 59,271 51,427 -------- -------- Share capital and reserves Called-up share capital 7,400 7,400 Share premium 17,079 17,079 Revenue reserve 493 902 Special reserve 10,000 10,000 Capital reserve 24,299 16,046 -------- -------- Total shareholders' funds attributable to equity interests 59,271 51,427 -------- -------- Net asset value per Ordinary Share 200.24p 173.74p CASH FLOW STATEMENT for the year ended 31 December 2006 2006 2005 (restated) £'000 £'000 Net cash inflow from operating activities 2,159 2,533 Servicing of finance Interest paid (1,452) (1,607) - - -------- -------- Net cash outflow from servicing of finance (1,452) (1,607) Investing activities Purchase of investments (14,646) (16,377) Sale of investments 74,528 19,111 -------- -------- Net cash inflow from investing activities 59,882 2,734 Equity dividends paid (2,664) (2,664) -------- -------- Cash inflow before financing 57,925 996 -------- -------- Financing Activities Repayment of bank loan (25,616) - -------- -------- Net cash outflow from financing (25,616) - -------- -------- Increase in cash in the year 32,309 996 Opening cash balance 5,238 4,242 Increase in cash in the year 32,309 996 -------- -------- Closing cash balance 37,547 5,238 -------- -------- Chairman's statement Dear shareholder, This is my first opportunity to address shareholders since taking over as Chairman and I am very pleased to be able to report on the continuation of the Company following the arrangements that were put in place towards the end of last year to allow an exit for shareholders wishing to redeem their holdings. The Company has had another successful year. On 31 December 2006 the net asset value per share was 200.24p, an increase of 15.25% during the course of the year. The share price rose 23.1% over the same period from 158.75p to 195.5p. Additionally, dividends totalling 9.0p were paid during the year. You will recall that, at the Annual General Meeting held on 26 June 2006, a resolution to wind-up the Company was supported by 67.67% of those who voted. Although this was less than the 75% threshold specified for a winding-up, the Directors decided to examine a range of alternative proposals to provide an opportunity for shareholders to remain invested whilst providing an exit for those who wished to redeem their investment. After careful consideration of the merits of the various propositions, the Board decided to proceed with a proposal put forward by Premier Asset Management plc in conjunction with the incumbent investment adviser for the Smaller Companies portfolio, Unicorn Asset Management. This scheme involved a tender to allow shareholders who wanted to sell their holding to exit at close to net asset value while the remaining shareholders could continue with their investment in Acorn. Premier Asset Management (Guernsey) Limited would take over the management of the Company from Collins Stewart Fund Management Limited and retain Unicorn to manage the Smaller Companies portfolio. The proposal was put to shareholders at an Extraordinary General Meeting on 5 January 2007 and carried. The tender for shares was completed on 17 January 2007. 20,660,212 shares (equivalent to 69.80% of the total shares in issue) were tendered at 201.6p and shareholders representing 8,939,790 shares (30.20%) retained their investment in the Company. The overall effect of this process was to contract the total assets of the Company from £59.67million to £18.02million. The management and administration of the Company was transferred to Premier Asset Management (Guernsey) Ltd with effect from 17 January 2007. Banking arrangements The original banking facility with Bank of Scotland was repaid at the end of October 2006. A new bank facility for £6 million has been arranged with Bank of Scotland. The interest rate payable on this facility is 1% over Libor with a non-utilisation charge of 0.5% on any undrawn part of the facility. The capital covenant on the facility requires a ratio of specified investment to debt of 2:1. Specified investments includes UK listed securities with a market capitalisation of over £50 million, investment grade bonds and reverse convertible bonds meeting certain criteria relating to the issuer and the reference equity. It is intended to utilise the bank facility so that the net assets of the company can be geared by 30%. At 2 April 2007 £5.5 million of the loan facility had been drawn down and net assets were geared 29.2%. Dividends The Company declared dividends in respect of the year to 31 December 2006 totalling 9.0p (2005:9.0p) comprising of four interim dividends of 2.0p each and a special dividend of 1.0p. In the Circular to shareholders dated 13 December 2006, the Board indicated that for the year to 31 December 2007 it was expected, in the absence of unforeseen circumstances, to maintain a dividend of 8p per share. Investment strategy While the overall investment objectives for Acorn are intended to be much the same as in the past, the Circular to shareholders dated 13 December 2006 sets out in detail the proposed strategy and this was approved by Shareholders at the EGM. In summary, the strategy is to allocate approximately 70% of the portfolio to Smaller Companies with approximately 30% to income generating assets in the Income portfolio. The Income portfolio will invest in bonds, including reverse convertible bonds (RCBs), and may have some exposure to investment companies, although this will not exceed 15% of the total portfolio (measured at the time of acquisition). The alteration to the investment policy has introduced some additional risks to the Income portfolio, specifically the equity risk associated with RCBs and the increased credit risk associated with sub investment grade bonds. Investors' attention is drawn to the section headed 'Principal risks associated with the Company' on page 14. Investment Performance and Outlook During the year to 31 December 2006, the UK stock market continued the upward trend established in 2003. The FTSE All-Share Index rose 13.2% (16.8% total return). The smaller companies sector outperformed the broader market with the Hoare Govett Smaller Companies Index ex Investment Trusts (HGSC ex IT) generating a total return of 28%. Acorn's total assets (less current liabilities) rose 15.25% over the year and with a dividend of 9p, the total assets total return was 22.9% (source: Fundamental Data). The Income portfolio that had been invested principally in investment grade bonds was liquidated in October 2006 and the bank debt repaid with the proceeds. During December 2006, sales were made from the Smaller Companies portfolio in order to raise cash to finance the redemptions expected through the Tender Offer. With the market rising strongly during December (The HGSC ex IT Total Return Index rose 6.5% during the month) the need to raise cash did have an adverse impact on the return that the portfolio would otherwise have generated during the final month of the year. The principal focus of the Smaller Companies portfolio has been towards industrial companies. The portfolio has had little exposure to consumer related stocks. With a background of rising interest rates and indirect taxes, this stance has been maintained as we enter 2007. Our investment manager and adviser remain confident on the potential for the smaller companies sector to deliver opportunities for income and capital growth. Rising UK interest rates during 2006 dampened activity in the bond markets and there was little scope for actively trading the Income portfolio during most of the year. Towards the Company's year end, the bond holdings were liquidated as part of the process of raising funds to repay the bank facility ahead of the Tender Offer. Going forward, income generation will be achieved by investing in a broader range of instruments. Board changes Following the Tender Offer, Martin Bralsford and Eitan Milgram stood down from the Board and Helen Green joined the Board. Martin had served as Chairman of the Company since inception and during a period of volatile investment markets, made an invaluable contribution to its success. I should like to record our appreciation and thanks for his leadership of the Board. I would also like to record my thanks to Eitan Milgram whose input during the process of deciding on the future of the Company and in dealing with the complexity of the Tender Offer was of great assistance to the Board. I welcome Helen Green to the Board. Helen brings both her professional skills as an accountant and experience from sitting on the boards of other investment companies. John Boothman Chairman This information is provided by RNS The company news service from the London Stock Exchange

Companies

Acorn Income Fund Ld (AIF)
UK 100
FTSE quotes by TradingView

Latest directors dealings

All directors dealings today