All change at Polar Capital Global Healthcare (PCGH)


#1

To give the trust its full title of Polar Capital Global Healthcare Growth and Income Trust (PCGH for short) was floated on 15 June 2010 with £90m of investor funds under its belt, plus an additional £19m in the form subscription shares (i.e. warrants) that since issue have all been exercised. The trust was also given a fixed life that is set to expire January 2018.

The stated mandate of the trust being to invest in a diversified range of global healthcare related dividend paying stocks that would hopefully increase on a total return basis over time. Which has meant in practice the avoidance of many of the non-dividend paying healthcare stocks operating in the speculative R&D areas of medicine.

As of release of the half-yearly report on 05 May for the 6-month period ending 31 March 2017 - a copy of which can be viewed at …

http://www.investegate.co.uk/polar-cap-glb-health--pcgh-/rns/half-year-report/201705050700082611E/

The net assets of the trust stood at £255.7m with no debt on the balance sheet (of which there has never been any). And, a total return to shareholders since inception of 154.2%.

As one can gather, I’m a shareholder and have been since 2011. During this time the value of my initial share price purchase has doubled with my adding to my holding in incremental stages over the course of time. However, I now in the process of cashing in my chips as a result of the proposed and upcoming reorganisation on the cards for PCGH. The Polar Capital management having talked the Board of Directors into moving the goal posts of the trust big time - for example:

Being ditched is the requirement for dividend paying stocks in favour of an unconstrained approach to global healthcare stocks. Which as a result means the current level of regular payouts to shareholders will overtime be considerably reduced.

The taking on of debt in the form of Zero Dividend Preference shares at a ratio of 1:8 ordinary shares. The Zero’s to roll-up at 3% per annum over the course of 7.5 years. Which is a cute way of borrowing money and not being required to repay the principal plus interest for 7-and-a-half years.

The introduction of a management performance fee :angry:

To view more info about the move go to …

http://citywire.co.uk/investment-trust-insider/news/polar-capital-healthcare-to-halve-dividend-under-growth-push/a1015388

The initial public offering (IPO) of the to be renamed Polar Capita Global Healthcare Trust is now live and is due to close at 1PM on 31 May 2017. By which time the necessary forms will have been submitted on my behalf accepting the offer to tender all my existing shares for purchase.

Re: The spate of investment trust IPOs

Of late I’ve noticed a surge in the number of investment trust IPOs being pushed in the direction of retail investors. As someone with a now more than 35-year interest in investment trusts, this for me is a red flag sign. Marketing departments of fund management houses are well-versed when it comes to identifying times of increasing retail investors’ appetites for riskier assets in apparently buoyant markets. Previously shelved plans can be quickly dusted off and readied for implementation in order to strike while the iron is hot. What the general retail investor fails to grasp is that most of the gains (such as they are) have already been booked and, all that’s left on the table is crumbs. Being that, more times than not, following periodic bouts of investor enthusiasm for new and seemingly tempting offers of participation comes the inevitable disappointment as the act of reversion-to-the-mean takes its effect on previously inflated asset prices.


#2

To give an update for anybody interested:

The tender offer period is now closed, 26,299,042 ordinary shares (representing 21.8% of the ordinary shares in issue) being tendered as a result. As shareholders’ assets of PCGH are presently valued at some £252m that means £55m of it is has voted for the exit (my share included).

As a result, the ongoing IPO offering, that is set to close 15 June, will now only need to bring in some £5m of new money for things to proceed to the next stage. The Board having previously stated that the IPO will need to raise sufficient funds in order to increase total funds under management of the new PCGH trust, after deduction of the exit seeking £55m, to a minimum starting threshold of £200m. So, as there £197m of assets remaining after deduction of the tendered £55m then the bar has now been set extremely low for the IPO to jump over.


#3

That’s it, the offer is now closed, the results are in, and the cynic in me thinks that it’s proved to be nothing but a glorified debt raising exercise …

http://www.investegate.co.uk/polar-cap-glb-health--pcgh-/rns/results-of-the-offerings/201706161700273891I/

26.3m of the ‘old’ shares tendered to be repurchased at 211.16p each (including mine).
27.8m of the ‘new’ shares issued at 213.8p each.
32.1m ZDP shares issued at 100p each.

Nothing but the trust’s name appears to have changed other than the fund manager having an extra £32m to play with on the understanding that in 7 years £39.5m is returned to those holders of the ZDP shares. I’m out now, so let them get on with it.


#4

Thanks for your contributions forrado. I share the same opinion.
I too have largely withdrawn from PCGH (sold 70% holding). I’m still interested in the health care sector and other than the biotech trusts that only leaves WWH, until the “new” PCGH can prove its performance under the new stucture. Any other suggestions? Do any of the generalist trusts hold significant holdings in the health care sector? Maybe have to resort to OEICS (9 available including 2 from Polar Capital!)