AIF.L Regulatory News (AIF)

28 Sep 2006 15:01

Acorn Income Fund Ld28 September 2006 ACORN INCOME FUND LIMITED UNAUDITED INTERIM RESULTSFOR THE SIX MONTHS ENDED 30 JUNE 2006 CHAIRMAN'S STATEMENT I am pleased to present to Shareholders the Company's unaudited interim results for the half-year ending 30 June 2006. The financial position of the Company has continued to strengthen during the first half of 2006, with the net assetvalue ("NAV") per Ordinary Share, based on investments valued at bid market prices, rising by 13.41p to 187.15p on 30June 2006, after distributing dividends totalling 4.0p per share in the period. The Company generated a total returnfor the period of 10.02%, outperforming the Extended Hoare Govett Smaller Companies Index (excluding investmentcompanies), which achieved a total return over the same period of 6.76%. The market price of the Company's OrdinaryShares rose from 158.75p at 31 December 2005 to 181.50p at 30 June 2006. The Company's NAV per Ordinary Share has outperformed its benchmark index since launch in 1999, achieving a totalreturn of 172.55% compared to a total return of 127.21% for the Extended Hoare Govett Smaller Companies Index(excluding investment companies). Since the period end the NAV (with investments valued at bid prices) has continuedto increase, reaching 189.42p at 31 August 2006. A cessation vote was held on 26 June 2006 at the Company's Annual General Meeting. Although the Special Resolutionthat "the Company ceases to continue as an investment company" was not passed, a majority of voting Shareholders votedin favour of the Special Resolution. In accordance with its undertakings announced earlier in the year the Board andits advisers have considered various proposals in respect of the reconstruction of the Company. Further details willbe released in the near future. Martin BralsfordChairman28 September 2006 INCOME STATEMENTFor the six months ended 30 June 2006 (unaudited) Six months Year ended ended 30 June 31 December 2005 2005 Six months ended 30 June 2006 (unaudited) (unaudited) (audited) Note Revenue Capital Total Total Total £'000 £'000 £'000 £'000 £'000Gains and losses on investmentsRealised gain on investments 8 - 1,247 1,247 2,842 3,947Movement in unrealised gain on investments 8 - 3,561 3,561 579 8,230 -------- -------- -------- -------- --------Net Investment gain - 4,808 4,808 3,421 12,177 Income 3 1,661 - 1 ,661 1,779 3,391Management fee 4 (103) (308) (411) (342) (705)Other expenses 5 (98) (73) (171) (123) (269) -------- -------- -------- -------- --------Net return on ordinary activities before 1,460 4,427 5,887 4,735 14,594finance costsInterest payable and similar charges (183) (548) (731) (748) 1,493 -------- -------- -------- -------- --------Net return for the period 1,277 3,879 5,156 3,987 13,101 -------- -------- -------- -------- -------- Return per Ordinary Share 7 4.32p 13.10p 17.42p 12.46p 24.14pDividend per Ordinary Share (distributed) 6 4.00p - 4.00p 4.00p 9.00p The total columns of this statement represent the Income Statement of the Company.The accompanying notes form an integral part of these unaudited interim results.These results are unaudited and are not the Company's statutory accounts. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS For the six months ended 30 June 2006 (unaudited) Note Share Share Revenue Special Capital Capital premium reserve reserve reserve Total £'000 £'000 £'000 £'000 £'000 £'000Balance as at 1 January 2006 7,400 17,079 902 10,000 16,046 51,427Return for the period - - 1,277 - 3,879 5,156Dividends Paid 6 - - (1,184) - - (1,184) ---------- ---------- ---------- ---------- ---------- ----------Balance as 30 July 2006 7,400 17,079 995 10,000 19,925 55,399 ---------- ---------- ---------- ---------- ---------- ---------- For the six months ended 30 June 2005 (unaudited) Note Share Share Revenue Special Capital Capital Premium reserve reserve reserve Total £'000 £'000 £'000 £'000 £'000 £'000Balance as at 1 January 2005 7,400 17,079 882 10,000 5,629 40,990Return for the period - - 1,426 - 2,561 3,987Dividends Paid 6 - - (1,184) - - (1,184) ---------- ---------- ---------- ---------- ---------- ----------Balance as 30 June 2005 7,400 17,079 1,124 10,000 8,190 43,793 ---------- ---------- ---------- ---------- ---------- ---------- For the year ended 31 December 2005 (audited) Note Share Share Revenue Special Capital Capital premium reserve reserve reserve Total £'000 £'000 £'000 £'000 £'000 £'000Balance as at 1 January 2005 7,400 17,079 882 10,000 5,629 40,990Return for the year - - 2,684 - 10,417 13,101Dividends Paid 6 - - (2,664) - - (2,664) ---------- ---------- ---------- ---------- ---------- ----------Balance as 31 December 2005 7,400 17,079 902 10,000 16,046 51,427 ---------- ---------- ---------- ---------- ---------- ---------- The accompanying notes form an integral part of these unaudited interim results.These results are unaudited and are not the Company's statutory accounts. BALANCE SHEETas at 30 June 2006(unaudited) 31 December 30 June 2006 30 June 2005 2005 Note (unaudited) (unaudited) (audited) £'000 £'000 £'000Fixed assetsListed investments 8 75,156 62,795 72,075 Current assetsDebtors 440 385 651Cash at bank 5,895 6,640 5,238 -------- -------- -------- 6,335 7,025 5,889Creditors - amounts falling due within one yearCreditors (476) (411) (921)Bank loan 9 (25,616) (25,616) (25,616) -------- -------- -------- (26,092) (26,027) (26,537) -------- -------- --------Net current liabilities (19,757) (19,002) (20,648) -------- -------- --------Net assets 55,399 43,793 51,427 -------- -------- -------- Share capital and reservesCalled-up share capital 10 7,400 7,400 7,400Share premium 17,079 17,079 17,079Special reserve 10,000 10,000 10,000Revenue reserve 995 1,124 902Capital reserve 19,925 8,190 16,046 -------- -------- --------Total shareholders' funds attributable to equity interests 55,399 43,793 51,427 -------- -------- -------- Net asset value per Ordinary Share 11 187.15p 147.95p 173.74p The accompanying notes form an integral part of these unaudited interim results.These results are unaudited and are not the Company's statutory accounts. CASH FLOW STATEMENTFor the six months ended 30 June 2006(unaudited) Six months Six months Year ended ended 30 ended 30 31 December June 2006 June 2005 2005 Note (unaudited) (unaudited) (audited) £'000 £'000 £'000 Net cash inflow from operating activities 12 1,261 1,608 2,533 Servicing of financeInterest paid (671) (908) (1,607) -------- -------- --------Net cash outflow from servicing of finance (671) (908) (1,607) Investing activities Purchase of investments at fair value through profit and loss (14,646) (8,129) (16,377)Sale of investments at fair value through profit and loss 15,897 11,011 19,111 -------- -------- --------Net cash inflow from investing activities 1,251 2,882 2,734 Equity dividends paid 6 (1,184) (1,184) (2,664) -------- -------- --------Cash inflow before financing 657 2,398 996Net cash flow from financing - - - -------- -------- --------Increase in cash in the period 657 2,398 996 -------- -------- -------- Opening cash balance 5,238 4,242 4,242 Increase in cash in the year 657 2,398 996 -------- -------- --------Closing cash balance 5,895 6,640 5,238 -------- -------- -------- The accompanying notes form an integral part of these unaudited interim results.These results are unaudited and are not the Company's statutory accounts. NOTES TO THE UNAUDITED INTERIM RESULTSfor the six months ended 30 June 2006 1. Accounting policies The accounting policies, all of which have been applied consistently throughout the period, in the preparationof the Company's unaudited interim results, are set out below: a) Accounting convention The unaudited interim results have been prepared under the historical cost convention, as modified by therevaluation of investments, and in accordance with applicable United Kingdom accounting standards and with therevised Statement of Recommended Practice ("SORP"), for Financial Statements of Investment Trust Companies ("ITC"), issued in December 2005. b) Income Dividends receivable on equity shares are taken into account on the ex-dividend date. Income on debt and fixedinterest securities is recognised on an accruals basis. Dividends received from United Kingdom registeredcompanies are accounted for net of implied tax credits. Bank interest is accounted for on an accruals basis. c) Expenses All expenses are accounted for on an accruals basis. Expenses are charged through the revenue account except asfollows:(i) 75% of the Company's management fee and financing costs are charged to the capital reserve in line with the Board's expected long-term split of returns between income and capital gains from the investment portfolio; and(ii) 100% of any performance fee is charged to the capital account. d) 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) transaction costs (see 1(e)); and(iv) expenses charged to the capital reserve in accordance with the above accounting policies. e) Transaction costs In accordance with FRS 26 Financial Instruments: Measurement ("FRS 26"), transaction costs are charged throughthe Income Statement to the capital reserve in the period in which they are incurred. f) Investments Classification In accordance with FRS 26, all investments are classified as "fair value through profit and loss". Recognition The Company recognises financial assets held as fair value through profit and loss assets on the date itcommits to purchase the instruments. From this date, any gains and losses arising from the changes in fairvalue of the assets are recognised. Measurement Fair value through profit and loss assets are initially recognised at cost, being the fair value of theconsideration given, excluding transaction costs associated with the investment (see note 1(e)). Subsequent toinitial recognition, all fair value through profit and loss assets are measured at fair value with changes invalue being recognised in the Income Statement and taken to the capital reserve. For investments activelytraded in organised financial markets, fair value is determined by reference to Stock Exchange quoted marketbid prices as at the close of business on the Balance Sheet date. Derecognition A fair value through profit and loss asset is derecognised when the Company loses control over the contractualrights that comprise that asset. This occurs when rights are realised, expire or are surrendered. Realisedgains and losses on fair value through profit and loss assets sold are calculated as the difference between thesales proceeds (excluding transaction costs (see note 1(e))) and costs. Fair value through profit and lossassets that are sold are derecognised and corresponding receivables from the buyer for the payment arerecognised as of the date the Company commits to sell the assets. The Company uses the weighted average methodto determine realised gains and losses on derecognition. 2. TaxationThe Company has been granted exemption from Guernsey taxation under the Income Tax (Exempt Bodies) (Guernsey) Ordinance1989 and is charged an annual exemption fee of £600 (2005: £600). 3. Income Six months Six months Year ended 31 ended 30 ended 30 December 2005 June 2006 June 2005 (unaudited) (unaudited) (audited) £'000 £'000 £'000Dividend income 1,188 1,342 2,512Bond interest 325 311 634Bank interest 148 126 245 -------- -------- -------- 1,661 1,779 3,391 -------- -------- -------- 4. Management fee The Manager of the Company is entitled under the Management Agreement with the Company to receive a management fee fromthe Company at the annual rate of 1.0% of the total assets of the Company, valuing investments using mid market prices,payable quarterly in arrears. Where any investments comprised in the assets of the Company are in funds managed by oradvised by the Manager or Investment Adviser or an affiliate of either of them, the mid market value of such investmentsis deducted from total assets for the purposes of calculating the management fee. In addition, the Manager is entitled to receive a performance fee, payable at the end of each financial period of theCompany, at the rate of 15% of any excess of the net asset value per share (valuing investments using mid market prices)over the benchmark net asset value per share as at the last calculation day in the relevant financial period, multipliedby the time weighted number of shares in issue within such period. The benchmark net asset value per share is thehigher of 104.80p, compounded at 10% per annum since 31 December 1999, and the highest net asset value per share as ofthe last calculation day in any preceding financial period. When calculating the performance fee, the net asset valueper share is reduced by the amount that the dividend per share paid during that financial year is less than 8.50p. Asat 30 June 2006 the benchmark net asset value per share was 194.94p (30 June 2005: 177.15p, 31 December 2005: 185.66p).No performance fee has been paid or accrued in respect of the period ended 30 June 2006 (30 June 2005: nil, 31 December2005: nil). The Manager has delegated the obligations for the performance of the investment management services to Unicorn AssetManagement Limited ("the Smaller Companies Investment Adviser") and Collins Stewart Asset Management Limited ("the HighIncome Investment Adviser"). The agreements are between the Investment Advisers and the Manager, not the Company. AllInvestment Advisory fees are paid out of the management fees and performance fees received by the Manager from theCompany. Both Investment Advisers are entitled to receive from the Manager an annual fee at the rate of 0.5% of the total assetsattributable to the investments based on mid market prices in relation to which the Investment Adviser acts. TheSmaller Companies Investment Adviser is entitled to 5/8ths of the Manager's performance fee, while the Manager may, atits discretion, pay the High Income Investment Adviser a proportion of the remaining performance fee. In addition, theSmaller Companies Investment Adviser is entitled to receive, from the Manager, a fixed annual fee of £7,500 in relationto marketing services provided to investors. The Investment Advisory Agreements may be terminated by the Manager or the Investment Advisers, giving not less than 12months' notice in writing, or otherwise in circumstances where one of the parties has a receiver appointed over itsassets or if an order is made or an effective resolution passed for the winding up of one of the parties. Ontermination, the Investment Adviser shall be entitled to receive all fees accrued up to the date of the termination (orthereafter if the Investment Adviser necessarily incurs expenses arising out of the termination of the agreement) butshall not be entitled to compensation, except in the case of a wrongful termination by the Manager. 5. Other expenses Six months Six months ended 30 June 2006 ended 30 June Year ended 31 (unaudited) 2005 December 2005 Revenue Capital Total (unaudited) (audited) £'000 £'000 £'000 £'000 £'000Custody and settlement fees 23 - 23 18 39Auditors' remuneration 8 - 8 5 9Directors' remuneration 20 - 20 20 40Transaction charges - 73 73 43 111Other expenses 47 - 47 37 70 -------- -------- -------- -------- -------- 98 73 171 123 269 -------- -------- -------- -------- -------- 6. Dividends in respect of equity shares Six months Six months ended 30 ended 30 Year ended 31 June 2006 June 2005 December 2005 (unaudited) (unaudited) (audited) £'000 £'000 £'000Dividends on Ordinary Shares:First interim paid of 2.00p (2005: 2.00p) 592 592 592Second interim paid of 2.00p (2005: 2.00p) 592 592 592Third interim paid, n/a (2005: 2.00p) - - 592Special dividend paid, n/a (2005: 1.00p) - - 296Fourth interim paid, n/a (2005: 2.00p) - - 592 -------- -------- -------- 1,184 1,184 2,664 -------- -------- -------- 7. Return per Ordinary Share The revenue return per Ordinary Share is based on net revenue of £1,277,402 (30 June 2005: £1,425,805, 31 December 2005:£2,684,205) and on a weighted average number of 29,600,002 (30 June 2005 and 31 December 2005: 29,600,002) OrdinaryShares in issue throughout the period. The capital gain per Ordinary Share is based on the net capital gain of£3,878,990 (30 June 2005: £2,561,160, 31 December 2005: £10,416,826) and on a weighted average number of 29,600,002 (30June 2005 and 31 December 2005: 29,600,002) Ordinary Shares in issue throughout the period. 8. Fair value through profit and loss investments Six months Six months ended 30 June ended 30 June Year ended 31 2006 2005 December 2005 (unaudited) unaudited audited £'000 £'000 £'000Opening valuation 72,075 61,616 61,616Purchases at cost 14,146 8,490 17,185Sales - proceeds (15,873) (10,732) (18,903) - realised gains 1,247 2,842 3,947Movement in unrealised appreciation 3,561 579 8,230 -------- -------- --------Closing valuation 75,156 62,795 72,075 -------- -------- -------- Closing book cost 45,779 44,630 46,259Closing unrealised appreciation 29,377 18,165 25,816 -------- -------- --------Closing valuation 75,156 62,795 72,075 -------- -------- -------- 9. Bank loan 30 June 2006 30 June 2005 31 December 2005 (unaudited) (unaudited) (audited) £'000 £'000 £'000Bank of Scotland International facility 25,616 25,616 25,616 -------- -------- -------- Under loan agreements dated 28 September 1999 and 21 December 2000 between the Company and Bank of ScotlandInternational, a term loan of £25,616,000 has been made available. The loan is due for repayment on 31October 2006. The interest rates payable on the loan are based on LIBOR plus a margin of 1% plus Mandatory Liquid Asset ("MLA") costs. 10. Share capital 30 June 2006 30 June 2005 31 December 2005 (unaudited) (unaudited) (audited) £'000 £'000 £'000Authorised:40,000,000 Ordinary Shares of 25p 10,000 10,000 10,000 -------- -------- --------Allotted, called up and fully paid:29,600,002 Ordinary Shares of 25p 7,400 7,400 7,400 -------- -------- -------- 11. Net asset value per Ordinary Share The net asset value per Ordinary Share is based on the net assets attributable to equity Shareholders of £55,398,767 (30June 2005: £43,793,000, 31 December 2005: £51,427,357) and on 29,600,002 (30 June 2005 and 31 December 2005: 29,600,002)Ordinary Shares in issue at the end of the period. 12. Reconciliation of net revenue before finance costs and taxation to net cash inflow from operatingactivities Six months Six months Year ended 31 ended 30 ended 30 December 2005 June 2006 June 2005 (unaudited) (unaudited) (audited) £'000 £'000 £'000Net revenue before finance costs and taxation 1,460 1,613 3,057Management fees charged to the capital reserve (308) (256) (529)Other expenses charged to the capital reserve (73) (43) (111)Decrease in accrued income 186 295 102Decrease in other debtors - 4 1(Decrease)/increase in other creditors and accruals (4) (5) 13 -------- -------- --------Net cash inflow from operating activities 1,261 1,608 2,533 -------- -------- -------- If you have any queries please contact: Collins Stewart Fund Management Limited2nd FloorNo. 1 Le TruchotSt Peter PortGuernseyGY1 4AE Tel: 01481 731 987 This information is provided by RNS The company news service from the London Stock Exchange