28th Jun 2019 09:55
(Alliance News) - Woodford Patient Capital Trust PLC on Friday issued an update, telling shareholders it is "building on some of the immediate measures" amid the fallout from its sister open-ended fund freezing redemptions.
At the beginning of June, Neil Woodford took the decision to suspend withdrawals from his equity income fund due to "an increased level of redemptions", with the fund now needing time to "reposition" its portfolio invested in unquoted and less liquid stocks into more liquid investments.
Woodford Investment manages three funds: LF Woodford Income Focus Fund, LF Woodford Equity Income Fund and London-listed Woodford Patient Capital Trust.
Woodford Patient Chair Susan Searle said: "The dialogue we have had with shareholders has been thoughtful and constructive. The main areas of discussion for shareholders are consistent with the board's immediate priorities, notably: gearing levels, the share price discount to net asset value, valuations, board composition and the ongoing developments at the portfolio manager."
She added: "As a result, the board is building on some of the immediate measures taken following the gating of the Woodford Equity Income Fund and as the situation remains fluid, will use the additional controls in place while continuing to monitor and assess the situation as it evolves, to ensure the long-term interests of shareholders are protected. We will continue to update shareholders as appropriate."
The closed-ended trust said it will reduce its gearing to below 10% within the next six months. Its gearing level is currently 16.8%.
Woodford Patient said its priority will remain focused on ensuring it has funding available for its portfolio companies as it attempts to reduce its gearing.
Woodford Patient also noted its share price discount to NAV has widened to 33% from 14%, in the period from May 31 to June 26. The trust said it will undertake share repurchases to reduce this.
Shares in Woodford Patient were up 1.7% in morning trading in London at 58.47 pence. However, the stock is down 25% in the past month.
The trust reiterated to investors that its portfolio is independently valued, and is line with UK Financial Conduct Authority regulations. Woodford Patient said the pricing of its unquoted securities is "solely the responsibility" of the appointed alternative investment fund manager, Link Fund Solutions.
Link, however, has found itself at the heart of a scandal this week. The Financial Times reported on Wednesday that the FCA pressured Woodford into using Link, despite the fact that it had already censured the business over its role in two funds that had collapsed in previous years.
Woodford Patient said: "Link's Fair Value Pricing Policy provides an objective, consistent and transparent basis for evaluating the fair value of unquoted equity securities in accordance with Financial Reporting Standard 102 as well as International Private Equity and Venture Capital Valuation Guidelines."
The trust noted that an "in-depth" valuation is also carried out by IHS Markit.
"The valuation of the company's portfolio is inherently subject to a degree of volatility given the early-stage nature of the company's investments and will vary over time reflecting many factors taken into account by the independent valuer," the trust added.
Woodford Patient also reiterated to shareholders that its board is independent of the portfolio manager and said it has put in place "additional controls" since early June.
Any proposed sale of an asset that is also held by one of Woodford's other managed funds must be brought to the board of Woodford Patient. The trust has also demanded to be brought any new investments but noted no new investments are anticipated.
In an attempt to bolster its board, Woodford Patient announced it has appointed former Mercury Asset Management investment manager Stephen Cohen as non-executive director. He is currently sits on the board of JPMorgan Japan Investment Trust PLC.
The trust said it also is seeking to hire a new independent non-executive director.
Finally, Woodford Patient said it is "closely monitoring" the "situation" with its portfolio manager, and continues to have "regular dialogue" with the manager.
"It is using the additional controls in place to ensure appropriate oversight and visibility of the assets within the portfolio and is committed to a reduction in the company's gearing over time. As ever, the Board remains focused on protecting the value of the portfolio and shareholder interests," the trust added.
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