The Lemon Fool

CrackAddick wrote:The large amount of ZDPs caught my eye too when I initially invested. From memory I think they are all due to be repaid at some point in early 2022, so one can only hope the markets will have recovered by then......

By the time the first continuation vote was held in late 2016, they were about 21.3m ZDPs in issue. 91.4% of holders elected to roll over their money into the second set of the ZDPs. Therefore, Acorn Income only had to repay about £2.5m.

A second continuation vote is due to be held in late 2021. With 21.2m ZDPs in issue, Acorn could theoretically be on the hook to repay as much as £35.5m. Only £31.5m is recorded as a debt on the company’s balance sheet right now, as the rolled-up dividend payment is spread over each year the ZDPs are in existence.

Hopefully, a similarly large majority of ZDP holders will elect to roll over again come 2021. However, if markets are in a slump at that time, who knows what might happen?

Acorn Income Fund’s gross assets are currently £97m with, I would estimate, around £25m in fixed-income securities and cash. If the ZDPs had to be redeemed in full, a sizeable chunk of the small-cap portfolio would need to be sold.
https://www.itinvestor.co.uk/2019/04/ac ... ome-twist/

shawsdale wrote:“The Company's income will inevitably be impacted by recent market developments. However, the board recognises the importance of dividends to shareholders and it is the board's intention to maintain the second interim dividend whilst keeping matters relating to future dividends under close review but noting the availability of a healthy dividend reserve.
Earnings per share for the year of 22.31p covered the dividend distribution by 107% and resulted in an addition to revenue reserves of £239,024.”

The report later notes that as of 31st December 2019 the trust’s revenue reserve was £3,417,227, representing 21.61p per Ordinary Share.

The Directors are pleased to declare a third interim dividend for the year ending 31 December 2020 of 5.75p per Ordinary Share which represents an increase of 10.58% compared to the corresponding dividend for the year ending 31 December 2019 and maintains the distribution level set for the first and second interim dividends in 2020.

...

The Company's investment adviser for the Smaller Companies portfolio keeps under close review the dividend outlook for the companies that Acorn is invested in. The investment adviser has been pleased to note that many of Acorn's investee companies reduced or passed their dividends out of caution rather than necessity and are now resuming payments in line with unchanged dividend policies. Against this background the directors believe that 5.75p per share is a reasonable target for the fourth interim dividend that will be paid in December; however shareholders should note that the actual dividend will be set in the light of income earned over the remainder of the year as well as the outlook for 2021 and beyond.