Acorn Income Fund Publication of circular announcement

 
TIDMAIF TIDMAIFZ 
 
THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN ARE NOT FOR RELEASE, 
PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO, THE UNITED 
STATES, AUSTRALIA, CANADA OR THE REPUBLIC OF SOUTH AFRICA 
 
23 September 2021 
 
             Acorn Income Fund Limited ("Acorn" or the "Company") 
 
       Publication of Circular: Scheme of Reconstruction and Winding Up 
 
On 01 September, the Company announced that it had agreed heads of terms with 
Unicorn Asset Management ("Unicorn") in respect of the proposed rollover of its 
assets into Unicorn UK Income Fund and an option for a cash exit (together, the 
"Proposals"). The Board of the Company announces that it has today published a 
shareholder circular setting out the terms of the Proposals (the "Circular"), 
which convenes an Annual General Meeting and an Extraordinary General Meeting 
of its Ordinary Shareholders to consider and, if thought fit, to approve the 
implementation of the Proposals. 
 
Introduction 
 
Given a combination of factors, including the Company's existing dual portfolio 
structure, a likely future cut in dividends, the historic discount to Net Asset 
Value at which the Ordinary Shares have traded in the market, and the 
relatively small size of the Company, the Board does not believe that the 
Company can viably continue in its existing form. 
 
However, some Shareholders have confirmed their endorsement of the Company's 
Smaller Companies portfolio investment strategy under the management of 
Unicorn.  Other Shareholders have indicated a preference for a cash exit at 
close to Net Asset Value. Having reviewed and considered various proposals 
regarding the future of the Company and following consultation with some of the 
Company's Shareholders, the Board concluded that offering a rollover of its 
assets into the Unicorn UK Income Fund, an open ended vehicle managed by 
Unicorn, and an option for a cash exit is in the best interests of Shareholders 
as a whole. 
 
The Board has agreed terms with Unicorn for a scheme of reconstruction and 
winding up of the Company that would involve a rollover of some or all of the 
Company's assets (excluding those attributable to the ZDP Shares) into the 
Unicorn UK Income Fund. 
 
The Board is therefore pleased to propose to Ordinary Shareholders recommended 
Proposals for a scheme of reconstruction of the Company (the "Scheme"), which 
would result in the voluntary winding up of the Company.  The Scheme would 
entitle Ordinary Shareholders to elect to roll over all or part of their 
holdings of Ordinary Shares in the Company into the Unicorn UK Income Fund, 
with rollover entitlements being calculated on an NAV for NAV basis; and/or to 
receive cash as all of or part of Ordinary Shareholders' entitlement upon the 
liquidation of the Company, at a price which will be close to the prevailing 
NAV per Ordinary Share. 
 
Unicorn has agreed that the income shares in Unicorn UK Income Fund ("UKI 
Shares") issued to Ordinary Shareholders under the Shares Option will not be 
subject to an entry charge and, further, will benefit from a waiver of UKI's 
annual management charge for the 12 months from the date of issue. 
 
As part of the Proposals, ZDP Shareholders would be paid their ZDP Share Final 
Capital Entitlement in full and sooner than the current ZDP Repayment Date of 
28 February 2022.  ZDP Shareholders should take no action in relation to the 
Proposals. 
 
The Proposals are subject to the approval of the Company's Ordinary 
Shareholders. The purpose of the Circular is to seek Ordinary Shareholders' 
approval of the Proposals at the Extraordinary General Meeting, to give 
Ordinary Shareholders information about the options available under the Scheme, 
as well as to convene the Company's next, and likely final, Annual General 
Meeting. 
 
The Proposals 
 
Under the Proposals, the Company will enter into a scheme of reconstruction 
(the "Scheme"). In accordance with the terms of the Scheme, the Company will be 
placed into liquidation at the Extraordinary General Meeting by means of a 
voluntary winding-up pursuant to section 391(1)(b) of the Companies Law. 
Shareholders will be able to elect to receive in exchange for their existing 
shareholdings in the Company: 
 
·      UKI Shares with the same value as their holding of Ordinary Shares on 
the basis of the relative values of the Residual Value per Ordinary Share 
(calculated as the NAV of the Ordinary Shares less their pro rata contribution 
to the Liquidation Fund and the Retention Fund) and the NAV per UKI Share as at 
the Calculation Date (the "Shares Option"); and/or 
 
·      a cash amount equal to the Residual Value per Ordinary Share multiplied 
by the number of Ordinary Shares held by such holder as at the Calculation Date 
(the "Cash Option"). 
 
Ordinary Shareholders (other than Restricted Shareholders) who do not make any 
elections will be deemed to have elected for the Shares Option as the default 
option under the Scheme. 
 
Under the Proposals, the Company's ZDP Shareholders will receive their Final 
Capital Entitlement in full in advance of the current repayment date of 28 
February 2022.  The date on which ZDP Shareholders are expected to be sent 
cheques or electronic bank transfers (as applicable) in respect of the ZDP 
Final Capital Entitlement will be announced in due course. 
 
Benefits of the Proposals 
 
The Directors consider that the Proposals should have the following benefits 
for Shareholders: 
 
(i)           they provide Ordinary Shareholders with a greater choice than if 
the Company were simply to be wound up, since the Proposals enable Ordinary 
Shareholders to: (i) continue their investment exposure through a rollover into 
the Unicorn UK Income Fund; (ii) receive cash; or (iii) receive a combination 
of cash and UKI Shares; 
 
(ii)          the Proposals allow Ordinary Shareholders to retain their 
investment exposure through another investment vehicle with a similar 
investment objective and portfolio and managed by the same manager as the 
Company's current Smaller Companies Portfolio, Unicorn; 
 
(iii)         the Proposals enable those Ordinary Shareholders who wish to 
acquire UKI Shares to do so whilst avoiding an entry charge and, further, 
benefitting from a waiver of UKI's annual management charge for the 12 months 
from the date of issue; 
 
(iv)         the UKI Shares may carry certain advantages for some Ordinary 
Shareholders.  The Unicorn UK Income Fund is the best performing fund in the IA 
UK Equity Income sector since launch[1].  In addition, Unicorn offers daily 
liquidity in the UKI Shares through a dealing facility priced by reference to 
net asset value; 
 
(v)          the Proposals afford Ordinary Shareholders the opportunity to 
achieve a complete cash exit from the Company at a price that should be close 
to Net Asset Value per Ordinary Share; 
 
(vi)         the mechanics of the Scheme are designed with the intention of 
allowing certain Ordinary Shareholders subject to UK tax to continue to receive 
investment returns without triggering an immediate liability to capital gains 
tax (Shareholders should read paragraph 6 of Part 6 of the Circular carefully 
and should consult their own tax advisers as to the advantages or otherwise of 
the Proposals); and 
 
(vii)        the Proposals allow the ZDP Shareholders to receive their ZDP 
Final Capital Entitlement in full and sooner than the ZDP Repayment Date. 
 
Conditions to the Scheme 
 
The Scheme is conditional upon, amongst other things: 
 
(i)         the passing of all the Resolutions to be proposed at the 
Extraordinary General Meeting and all conditions to such Resolutions (excluding 
any condition relating to the passing of any other Resolution) being fulfilled; 
and 
 
(ii)        the Directors not resolving to abandon the Scheme. 
 
In the event that any of the Resolutions is not passed or any other condition 
of the Proposals is not met, the Proposals will not be implemented. In that 
event, the Company will continue as presently constituted. 
 
The Rollover Vehicle - Unicorn UK Income Fund 
 
The Unicorn UK Income Fund is a sub-fund of Unicorn Investment Funds, an 
open-ended investment company with variable capital incorporated in England and 
Wales and authorised by the FCA. Unicorn Investment Funds is an umbrella 
company (as defined in the FCA's rules) and is a UCITS scheme. 
 
The investment objective of the Unicorn UK Income Fund is to provide an income 
by investing in UK companies. UK companies are defined as those which are 
incorporated or domiciled in the UK, or have a significant part of their 
operations in the UK. 
 
The Unicorn UK Income Fund may also invest, at its discretion, in other 
transferable securities and deposits and cash. The fund may also enter into 
certain derivative and forward transactions for hedging purposes. The fund 
invests at least 80 per cent. of its assets in UK companies which are quoted 
companies with a bias towards small and medium sized companies (those with a 
market value of less than £4 billion). Some of the companies in which the fund 
invests may be quoted on AIM. 
 
The Unicorn UK Income Fund was launched in 2004 and is the best performing fund 
in the IA UK Equity Income sector since launch1. The fund follows the same 
long-term approach as the Company'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 
Unicorn UK Income Fund is £527 million in size1 and has been managed since 2013 
by Fraser Mackersie and Simon Moon, who are also the managers of the Company's 
Smaller Companies Portfolio. 
 
As at 31 August 2021, Unicorn estimates that the Company's existing Smaller 
Companies portfolio that it manages has an approximately 67 per cent. 
commonality with the UKI portfolio and that the balance of the portfolio can be 
realigned in an efficient manner ahead of the rollover. 
 
Costs of the Proposals 
 
The costs of the Proposals incurred by the Company (including all advisers' 

fees, printing and other ancillary costs of the Proposals) are expected to be 
approximately £500,000 (inclusive of any VAT). 
 
Conditional on the passing of the resolutions to be proposed at the 
Extraordinary General Meeting, Unicorn has agreed to contribute £100,000 (the " 
Costs Contribution") towards the costs of the Proposals to Shareholders. The 
Costs Contribution will be reduced by the proportion of Ordinary Shares in 
respect of which valid elections (or deemed elections) are made for the Cash 
Option but subject to a minimum contribution of £50,000. 
 
The stamp duty incurred on the transfer of assets from the Company to Unicorn 
UK Income Fund pursuant to the Transfer Agreement will be paid by the enlarged 
Unicorn UK Income Fund and therefore borne by the existing shareholders of the 
Unicorn UK Income Fund as well as the Company's Ordinary Shareholders who elect 
to roll over. 
 
In the event that the Proposals do not proceed, each of the Company and the 
Unicorn UK Income Fund will bear its own fees incurred in connection with the 
Proposals. 
 
Liquidation Fund and Retention Fund 
 
The Liquidators will retain cash and other assets in the Liquidation Fund in an 
amount which they consider sufficient to provide for all known liabilities of 
the Company (including tax and contingent liabilities) including the costs of 
the Proposals. Further details of the Liquidation Fund are set out in Part 2 of 
the Circular. 
 
In addition, the Liquidators will retain cash and other assets in the Retention 
Fund in an amount for unknown and unascertainable liabilities of the Company. 
The retention in respect of all unknown and unascertainable liabilities is 
currently expected to be £10,000. Further details of the Retention Fund are set 
out in Part 2 of the Circular. 
 
If, following completion of the Proposals and payment of the Company's 
liabilities, there remain funds in the Liquidation Fund and/or the Retention 
Fund, the Liquidators shall, on behalf of the Company, pay such surplus to 
those persons who held Ordinary Shares immediately prior to the Scheme becoming 
effective, pro rata to such holders, subject to a de minimis amount and at the 
discretion of the Liquidators. 
 
ZDP Shareholders 
 
Finally, before any assets are transferred to the Unicorn UK Income Fund under 
the Scheme or set aside to pay Ordinary Shareholders who have elected for cash, 
the Liquidators will retain in a "ZDP Fund" for the account of the holders of 
the ZDP Shares an amount in cash equal to ZDP Shareholders' aggregate ZDP Final 
Capital Entitlement as at 28 February 2022. 
 
The ZDP Fund will be distributed to ZDP Shareholders by the Liquidators at a 
date to be determined following the Effective Date, once the Company's 
portfolio is sufficiently realised to meet the ZDP Final Capital Entitlement in 
cash.  This may be prior to the Final NAV Calculation Date for the purpose of 
Ordinary Shareholders' entitlements under the Scheme, and in any event will be 
prior to the planned ZDP Repayment Date as provided for in the Articles of 28 
February 2022.  The date of repayment of the ZDP Shares will be announced in 
due course. 
 
Publication of Net Asset Value 
 
Following the Effective Date of the Scheme, the Company will suspend its twice 
weekly publication of the Net Asset Value of the Company.  The final NAV of the 
Company, the NAV per Ordinary Share and the Residual Value per Ordinary Share 
will be announced on the Final NAV Publication Date. 
 
Payment of further interim dividend 
 
The Directors intend to declare a further interim dividend, payable to the 
holders of Ordinary Shares, prior to the Effective Date and representing 
substantially all of the estimated revenue reserves of the Company at the 
relevant date. The dividend will be paid on 08 October 2021 to Ordinary 
Shareholders who are on the Register as at close of business on 01 October 
2021.  Any balance accruing to the Company's revenue reserve after the further 
interim dividend has been declared (if any) will be included in the calculation 
of Total Assets for the purposes of calculating the entitlements of Ordinary 
Shareholders under the Scheme. 
 
Restricted Shareholders 
 
Restricted Shareholders will receive cash in respect of their entire holding of 
Ordinary Shares unless they have satisfied the Directors and Unicorn that it is 
lawful for Unicorn UK Income Fund to issue UKI Shares to them under all 
applicable laws and regulations including any applicable "know your customer" 
rules. 
 
Shareholder Meetings 
 
Annual General Meeting 
 
The Company's next Annual General Meeting is being held immediately prior to 
the Extraordinary General Meeting at which the Proposals will be considered. 
At the AGM, Resolutions will be proposed dealing with the Company's normal AGM 
business, notwithstanding that this is expected to be the Company's final 
annual general meeting assuming the Proposals are approved at the EGM. 
 
In addition, the Board is required by the Company's Articles to propose the 
Discontinuation Resolution at the Annual General Meeting.  The Discontinuation 
Resolution is a special resolution that the Company shall cease to continue as 
presently constituted.  Such a resolution is required to be proposed by the 
Board at the Annual General Meeting and every five years thereafter, in 
accordance with the Company's Articles. 
 
The Board is recommending that Ordinary Shareholders vote IN FAVOUR of the 
Discontinuation Resolution at the Annual General Meeting.  The Board's 
proposals for the future of the Company will then be put to Ordinary 
Shareholders at the Extraordinary General Meeting. 
 
Extraordinary General Meeting 
 
The Proposals are conditional on the approval of Ordinary Shareholders which is 
being sought at the Extraordinary General Meeting. 
 
At the Extraordinary General Meeting resolutions will be proposed which, if 
passed, will: 
 
·      reclassify the Ordinary Shares to reflect the Elections made or deemed 
to have been made under the Scheme, and amend the Articles of Incorporation of 
the Company for the purposes of implementing the Scheme; 
 
·      authorise the implementation of the Scheme by the Liquidators; 
 
·      appoint the Liquidators and place the Company into liquidation (the " 
Winding-up Resolution"); and 
 
·      agree the basis of the Liquidators' remuneration. 
 
Each of the Resolutions proposed at the Extraordinary General Meeting will be 
proposed as a special resolution. 
 
Recommendation 
 
The Board unanimously recommends that Ordinary Shareholders vote (i) IN FAVOUR 
of the Discontinuation Resolution to be proposed at the Annual General Meeting, 
and (ii) IN FAVOUR of all of the Resolutions to be proposed at the 
Extraordinary General Meeting, as the Directors intend to do in respect of 
their own beneficial holdings amounting, in aggregate, to 74,366 Ordinary 
Shares (representing 0.47 per cent. of the aggregate voting rights of the 
Ordinary Shares). 
 
Expected timetable 
 
Record date for the interim dividend            close of business on 1 October 
to Ordinary Shareholders 
 
Date and time from which it is advised                  6.00 p.m. on 6 October 
that dealings in Ordinary Shares will 
be for cash settlement only and 
immediate delivery of documents of 
title 
 
Payment of interim dividend to                                       8 October 
Ordinary Shareholders 
 
Latest time for receipt of Forms of                    10.00 a.m. on 8 October 
Proxy from Ordinary Shareholders for 
use at the Annual General Meeting 
 
Latest time for receipt of Forms of                    10.10 a.m. on 8 October 
Proxy from Ordinary Shareholders for 
use at the Extraordinary General 
Meeting 
 
Latest time for receipt of Forms of                    1.00 p.m. on 11 October 
Election and TTE Instructions from 
Ordinary Shareholders2 
 
Record Date for participation in the                   6.00 p.m. on 11 October 
Proposals 
 
Shares disabled in CREST                       close of business on 11 October 
 
Trading in the Ordinary Shares                         7.30 a.m. on 12 October 
suspended 
 
Annual General Meeting                                10.00 a.m. on 12 October 
 
Extraordinary General Meeting                        10.10 a.m.3 on 12 October 
 
Effective Date                                                      12 October 
 
Ordinary Shares reclassified to                                     12 October 
reflect Elections made or deemed to 
have been made under the Scheme 
 
Calculation Date                               close of business on 9 November 
 
Final NAV Publication Date and                        on or around 10 November 
publication of the Residual Values per 
Ordinary Share 
 
Date of transfer of Rollover Fund to                               11 November 
Unicorn UK Income Fund 
 
Issue of UKI Shares under the Scheme                  on or around 15 November 
in respect of the Shares Option and 
contract notes despatched4 
 
Cheques expected to be despatched and                 on or around 15 November 
electronic bank transfers made to 
Ordinary Shareholders in respect of 
the Cash Option4 
 
Expressions used but not defined in this announcement have the meanings 
ascribed to them in the Circular. 
 
The Circular, including the Notice of Extraordinary General Meeting, will be 
submitted to the Financial Conduct Authority's National Storage Mechanism (the 
'NSM') and will be available for inspection on the NSM's website at https:// 
data.fca.org.uk/#/nsm/nationalstoragemechanism. The Circular, including the 
Notice of the Annual General Meeting and Extraordinary General Meeting, will 
also be available for viewing on Acorn's website at https:// 
www.acornincome.co.uk/ 
 
1. as at 31 August 2021. 
 
2. ZDP Shareholders should take no action in relation to the AGM, the EGM or 
the Proposals. 
 
3. Or as soon thereafter as the preceding Annual General Meeting shall have 
been concluded or adjourned 
 
4. Assuming the Final NAV Publication date is 10 November 2021. The Settlement 

Date will be as soon as practicable following the Final NAV Publication Date. 
 
This announcement does not contain all the information which is contained in 
the Circular.  Ordinary Shareholders should read the Circular and the Unicorn 
Investment Funds Prospectus (as defined in the Circular) to make informed 
elections under the Proposals. 
 
For information, please contact: 
 
Nigel Ward (Chairman) 
 
via Singer Capital Markets or Company Secretary 
 
Northern Trust International Fund Administration Services (Guernsey) Limited 
Company Secretary  [phone] 
 
Singer Capital Markets (Corporate Broker) 
Paul Glover / Alan Ray / Alaina Wong  + 44 (0) 207 496 3000 
 
 
 
END 
 
 

(END) Dow Jones Newswires

September 23, 2021 02:01 ET (06:01 GMT)