Interim Results

Acorn Income Fund Ld 14 September 2001 CHAIRMAN'S STATEMENT I am pleased to report that the Company continued to meet its investment objectives. Our investment advisers have successfully implemented the Company's investment policy, which resulted in an increase of 8.92 per cent. in the net asset value per share of the Company during the period under review, thus outperforming both of our selected benchmarks. In line with our practice of paying income to Shareholders as it arises on a quarterly basis, we paid first and second interim dividends of 2.75p per share to Shareholders on 27 March and 27 June respectively and declared a third interim dividend of 3.25p per share on 10 September. A further dividend is expected to be declared and paid in December this year. Dividends in the half year were 10 per cent. higher than the corresponding dividends in 2000. Subject to the continued success of the Company's investment strategy and in the absence of any unforeseen circumstances, the Board expect to be able to continue to pursue a progressive dividend policy The Company has not raised additional loan or share capital during the period under review. Our most recent published net asset value, as at 31 August 2001, was 144.6p per share. It is pleasing to note that the market price of our shares has consistently been at a premium to their underlying net asset value and as at 31 August 2001, the mid-market price stood at 146.5p per share. The Board remains confident that our investment advisers will continue to select attractive stocks and the Company's shares should perform satisfactorily in relation to our benchmarks, subject to financial markets recovering after the New York City terrorist incident. Martin Bralsford 14 September 2001 INVESTMENT ADVISER'S REPORT - Smaller Companies Portfolio The period under review witnessed a continuation of the difficult conditions seen in the second half of 2000. The formerly buoyant technology, media and telecommunications ('TMT') sectors suffered from the US investment recession in high-technology stocks (especially in relation to telecommunications and the internet) and many investors finally realised that apparently new high growth sectors can also have cyclical characteristics. Against this background we continued to focus on investing in businesses with strong market positions and cash flows. Rather belatedly, investors seem to be viewing business continuity as a valuable quality. Ambitious growth forecasts based on impossibly high profitability levels were always going to prove illusory. We concentrated on the consumer sectors with much of our new investment. Following last year's problems of falling car prices and sharply rising fuel costs, the better managed motor dealers were well placed for recovery. We added to holdings in European Motor and Pendragon and made a new investment in Vardy. Similarly the valuation of brewer and pub operator Greene King had little regard for the company's assets, management and earning power. We added to the holding. In contrast to this positive view of consumer related stocks, we sold the holding in Monsoon, the ladies fashion store chain. Whilst trading is currently good, we believe cost pressure from high street rents and wages could prove problematic next year. We added to the more lowly rated Oasis Stores, which was subsequently subject to a management buy-out bid. The Company accepted the offer during July in respect of its entire holding, which resulted in a good profit on our investment. In the industrial sectors we invested in Send Group. Send Group comprises the industrial activities of TT Group, which have been given a separate stockmarket quotation. The initial valuation was extremely low despite the group containing two growth divisions. Despite the success achieved to date by the smaller companies portfolio, there remain many unexploited opportunities in the smaller companies sector as the major investing institutions continue to focus on the FTSE 350 stocks. The present profit recession is likely to create a further round of opportunities, perhaps even in the TMT sectors if investors overreact to the increasingly apparent difficulties. As always, we will try to anticipate future events whilst paying close attention to our overriding valuation disciplines. Unicorn Asset Management Limited 14 September 2001 INVESTMENT ADVISERS' OVERVIEW - High Income Portfolio The objective of this portfolio is to provide Ordinary Shareholders with a consistently high quarterly flow of income, which continues to be achieved. Opportunities in the split capital market have continued to develop, not only in terms of quality, but also in structure and diversity of product range. In consequence, there is appetite from both institutional and private investors. The first quarter of 2001 proved to be difficult for the split capital market in general, and prices suffered as equity markets tumbled and investors became concerned with the potential for a breach of banking covenants within a small number of trusts. In turn, fears were expressed as to whether these trusts would be able to meet their dividend commitments. In consequence, the market pricing of split capital trusts quickly moved from a significant premium rating over assets, for a high level of income, to asset based pricing. All issues, good or bad, were punished - some inappropriately. However, this effectively wiped out the premium rating on several trusts to either par or a small discount. We were able to capitalise on some of the investment opportunities this market decline generated. At the start of the second quarter of 2001 there were clear signs of a recovery in global equity markets which have drawn strength from a series of interest rate cuts. In turn, the subsequent rise in asset values greatly reduced the pressure on banking covenants. For example, whilst a number of trusts were less than ten per cent. away from breaching their banking covenants towards the end of the first quarter of 2001, by the end of July this number had more than halved. We believe that there will be a strong recovery in share prices of split capital investment trusts, encouraged by a low interest rate environment. Indeed, during this low interest rate cycle, sustained income with growth potential should be comfortably achievable. Inflation is not seen as a threat by collective financial markets as Central Bank policing is acknowledged to be prudent and successful by all groups and styles of investors. In the Sterling bond markets, yields have been buffeted by cross currents. A retreating equity market and a grim earnings backdrop (especially in the telecommunications and technology sectors) have provided support to bonds, while signs of better-than-expected economic growth have capped attempted rallies. We believe yields should remain around current levels before drifting higher towards the end of the year and envisage that an improving economy will ease recession fears and trigger a revaluation of yields. With this in mind, we have focused on very short dated maturities, which should continue to benefit from low interest rates. Collins Stewart Asset Management Limited 14 September 2001 STATEMENT OF TOTAL RETURN For the six months to 30 June 2001 (unaudited) Six months to Six months to 30 June 2001 30 June 2000 Notes Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Gains on 3 - 4,798 4,798 - 1,260 1,260 investments Income 4 2,232 - 2,232 2,105 - 2,105 Investment management fee (82) (247) (329) (70) (211) (281) Other expenses (66) (612) (678) (62) (14) (76) Net return on ordinary 2,084 3,939 6,023 1,973 1,035 3,008 activities before finance costs Interest payable (232) (695) (927) (222) (665) (887) Return on ordinary activities for the 1,852 3,244 5,096 1,751 370 2,121 period Interim dividends 5 (1,628) - (1,628) (1,350) - (1,350) Transfer to reserves 224 3,244 3,468 401 370 771 Total Return per Ordinary Share 6.26p 10.96p 17.22p 6.49p 1.37p 7.86p Dividend per Ordinary Share (distributed) 5.50p - 5.50p 5.00p - 5.00p Return per Ordinary Share (retained) 0.76p 10.96p 11.72p 1.49p 1.37p 2.86p These accounts have been prepared in accordance with UK generally accepted accounting practice and using the accounting policies adopted for the Company's statutory annual accounts. These accounts are unaudited and are not the Company's statutory accounts. BALANCE SHEET as at 30 June 2001 (unaudited) Notes 30 June 30 June 2001 2000 £'000 £'000 Fixed assets Investments listed at market value 6 67,397 57,372 Current assets Debtors 990 936 Cash at bank 627 655 1,617 1,591 Creditors - amounts falling due within one year Creditors (1,055) (634) Net current assets 562 957 Total assets less current liabilities 67,959 58,329 Creditors - amounts falling due after more than one year Long term bank loan 7 (25,616) (23,337) Net asset value 42,343 34,992 Share capital and reserves Share capital 8 7,400 6,750 Share premium 27,079 24,317 Revenue reserve 1,180 638 Capital reserve 6,684 3,287 Shareholders' funds attributable to equity 9 42,343 34,992 interests Net assets per 25p Ordinary Share 143.1p 129.6p These accounts are unaudited and are not the Company's statutory accounts. CASH FLOW STATEMENT For the six months to 30 June 2001 (unaudited) Six Six months to months to 30 June 30 June 2001 2000 £'000 £'000 Net cash inflow from operating Note 1 below 1,365 665 activities Servicing of finance Interest paid (1,034) (801) Capital expenditure and financial investment Purchase of investments (12,154) (19,052) Sale of investments 8,942 19,056 (3,212) 4 Dividends paid (1,628) (1,350) Cash outflow before use of liquid resources and financing (4,509) (1,482) Financing 0 0 Movement in net cash Note 2 below (4,509) (1,482) These accounts are unaudited and are not the Company's statutory accounts. Note 1 Reconciliation of return on ordinary activities before financing to net cash inflow from operating activities Six Six months to months to 30 June 30 June 2001 2000 £'000 £'000 Net revenue return before finance costs 2,084 1,973 Investment management fees charged to the capital account (247) (211) Performance fees charged to the capital (612) (14) account Movement in accrued income (317) 78 Movement in other debtors 2 1 Movement in other creditors and accruals 455 (1,162) Net cash inflow from operating activities 1,365 665 Note 2 Analysis of changes in cash and cash equivalents Six Six months to months to 30 June 30 June 2001 2000 £'000 £'000 Cash at beginning of period 5,136 2,137 Decrease in cash and cash equivalents (4,509) (1,482) Cash at end of period 627 655 NOTES TO THE INTERIM ACCOUNTS for the six months to 30 June 2001 1. Accounting policies The accounting policies, all of which have been applied consistently throughout the period, in the preparation of the Company's interim accounts are set out below: a. Accounting convention The interim accounts have been prepared under the historical cost convention, except where stated in b) below and in accordance with UK applicable accounting standards and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies'. b. Investments held as fixed assets Quoted investments are valued at the mid-market price on the relevant Stock Exchange at the balance sheet date. c. Income Dividends receivable on equity shares are taken into account on the ex-dividend date. Income on debt and fixed interest securities is recognised on an accruals basis. d. Expenses All expenses are accounted for on an accruals basis. Expenses are charged through the revenue account except as follows: i. expenses which are incidental to the acquisition or disposal of an investment are treated as part of the cost or proceeds of the investment. ii. 75% of the Company's management fee and financing costs are charged to the capital account. iii. 100% of any performance fee is charged to the capital account. e. Capital reserve The following are accounted for in the capital reserve: i. realised gains and losses on the realisation of investments ii. unrealised gains and losses on investments iii. expenses charged to the capital reserve in accordance with the above accounting policies. 2. Taxation The Company has been granted exemption from Guernsey taxation under the Income Tax (Exempt Bodies) (Guernsey) ordinance 1989 and is charged an annual exemption fee of £600. 3. Gains on investments 2001 2000 £'000 £'000 Realised (losses) / gains on sales (754) 4,703 Increase / (decrease) in unrealised appreciation 5,552 (3,443) 4,798 1,260 4. Income 2001 2000 £'000 £'000 Dividend income 1,802 1,584 Bond interest 398 497 Bank interest 32 24 2,232 2,105 5. Dividends paid 2001 2000 £'000 £'000 Dividends on Ordinary Shares First interim paid of 2.75p (2000: 2.5p) 814 675 Second interim paid of 2.75p (2000: 2.5p) 814 675 1,628 1,350 6. Investments at market value 2001 2001 2001 2000 2000 2000 Smaller companies High income Total Smaller High Total companies income £'000 £'000 £'000 £'000 £'000 £'000 Cost 46,031 18,282 64,313 45,638 14,239 59,877 Market value 51,872 15,525 67,397 44,035 13,337 57,372 7. Long term bank loan 2001 2000 £'000 £'000 Bank of Scotland Offshore facility 25,616 23,337 Under loan agreements dated 28 September 1999 and 21 December 2000 between the Company and the Bank of Scotland Offshore, a term loan of £25,616,000 has been made available. The Company pays interest based on LIBOR plus a margin of 1% plus MLA costs. 8. Share capital 2001 2000 £'000 £'000 Authorised: 40,000,000 Ordinary Shares of 25p 10,000 10,000 Allotted, called up and fully paid: 29,600,002 (2000: 27,000,002) Ordinary Shares of 25p 7,400 6,750 9. Net asset value per share 2001 2000 pence pence Net asset value per Ordinary Share 143.1 129.6 The net asset value per Ordinary Share is based on the net assets attributable to equity Shareholders of £42,342,744 (2000: £34,991,831) and on 29,600,002 (2000: 27,000,002) shares in issue at the end of the period.

Companies

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

Latest directors dealings

All directors dealings today