Acorn Income share skyrockets as board recommends liquidation of trust

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The board of the Acorn Income trust has recommended liquidation
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The board of the Acorn Income trust has recommended liquidation

The share price of the Acorn Income investment company has surged 12.4% following the board's recommendation to liquidate the trust, with shareholders having the option to move their holdings to the Unicorn UK Income fund, an open ended vehicle, or receive cash. 

Last month, the board reversed its decision to appoint BMO Global Asset Management and substantially change the trust's investment objective and policy.

In its latest update on 1 September, the board said due to a number of factors including the dual portfolio structure, likely future cut in dividends, historic discount to NAV and size of the company, they "did not believe that the company can viably continue in its existing form".

The trust's ordinary shares were trading on a discount of 18.5% but news of the board's proposal has boosted the trust's share price, which was up 48p on Thursday morning to 406p per share, according to Hargreaves Lansdown.

In the board's latest consultation with shareholders, the board found that some endorsed the portfolio under Unicorn's management, while others simply wanted to exit.

The £527m Unicorn UK Income fund follows the same approach as the Acorn trust. The managers of the open-ended fund are the same as the trust - Fraser Mackersie and Simon Moon. The open-ended fund also has a similar portfolio to the trust, with about 67% crossover in holdings.

Unicorn confirmed their support for the proposal on Thursday.

Chris Hutchinson, director and senior fund manager at Unicorn said the rollover option would allow them to "leverage efficiencies in the sale of the equity element of the Acorn portfolio for investors looking to redeem, while protecting the interests of those shareholders wishing to retain and grow the value of their investment, by remaining invested".  

In the past three years, the Unicorn fund has returned 15.7% ahead of its benchmark the FTSE All Share, which returned 11.4%, according to FE fundinfo.

Unicorn has agreed to waive its management fees and entry charge for the Unicorn UK Income fund for a period of 12 months for those Acorn shareholders choosing to move their investment over.

The proposals remain subject to shareholder and regulatory approvals.