Acorn Income Fund released results for the year ended 31 December 2014 yesterday. Over 2014 the total return on gross assets was -0.4%. This compares to a -1.8% return on the Numis Smaller Companies ex Investment Companies Index, a -2.7% return on the FTSE Small Cap. ex Investment Companies Index and a 1.2% return on the FTSE All-Share Index.
However the gearing effect of Acorn Income’s zero dividend preference shares meant that the total return on Acorn Income’s ordinary shares was -3.1% and a widening of the discount from a 1.4% premium to a 9.2% discount meant that the return to shareholders was -16.2%.
The dividend on the ordinary shares was 12.75p, up from 12p in 2013.
The managers’ report says, during a year in which the benchmark NSCI ended in negative territory the IPO market provided a meaningful contribution to performance. Clipper Logistics, River & Mercantile and Flowtech Fluidpower all featured in the top ten contributors to performance during the year. The largest individual contribution to performance during the year came from Tyman, the supplier of buildings products to the door and window industry which ended the year 39% higher. The company generates a significant proportion of its revenue from North America and continues to benefit from the robust US economic recovery. Other notable contributions to performance came from Berendsen (+17%), Cineworld (+9%), Hill and Smith (+13%) and Safestyle UK (+11%).
Detractors from performance were broadly driven by the indiscriminate sell off of small UK listed companies however there were a small number of stock specific issues. John Menzies (-51%) lost half its value after the company warned on significant contract losses associated with the reorganisation of terminals at Heathrow. UK Mail (-24%), highlighted a slower than expected autumn trading period and faced wider market concerns about over capacity in the industry.
Within the bond portfolio, overweight exposures to the consumer sectors bolstered performance with holdings in both Punch Taverns and Sprit Issuer performing well on a debt restructuring and takeover approach respectively. The long duration maiden issue from technology giant Apple provided an impressive total return, resulting in strong outperformance of the broad market in the technology sector.
AIF : Split Structure works against Acorn in 2014