Acorn Income announces ‘scheme of reconstruction’ – Acorn Income (AIF) has announced that it is proposing a scheme of reconstruction. The board says it reviewed proposals regarding its future and following consultation with some 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, and an option for a cash exit is in the best interests of shareholders as a whole.
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 AIF 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, 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.
Unicorn UK Income Fund
The Unicorn UK Income fund was launched in 2004 and follows the same long-term approach as Acorn Income’s 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 £527m 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.
As at 31 August 2021, Unicorn estimates that the company’s existing smaller companies portfolio has approximately 67% commonality with the Unicorn UK Income 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 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.
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.
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, including a notice for the necessary general meeting to seek shareholder approval of the proposals. If these are subsequently approved by shareholders, the conditions to the proposals are fulfilled and the scheme of reconstruction is effected, it is expected that AIF will go into voluntary winding up.
Shareholders will also receive a notice for the company’s upcoming AGM, 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.
AIF : Acorn Income announces ‘scheme of reconstruction’
It is not clear what will happen in the event a shareholder on an is a or sipp platform is unable to receive the election in any form .
I say this deliberately as my sipp diverts to miton who call my connection unsafe although its safe enough for my sipp provider.
Is there a default option?
As we understand it, the default option is units in Unicorn’s open-ended fund. Premier Miton’s role is coming to an end.