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  • LF Equity Income – Frequently asked questions

    Important notes

    This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

    What can I do with the money from the wind-up payments?

    You can invest the money, hold it on your account as cash to invest at a later date or, if outside a SIPP, you can withdraw it.

    You don’t need to make a decision now, the cash will stay on your account until you tell us what you’d like to do.

    Will the money be automatically reinvested in another fund?

    The money won’t be automatically reinvested.

    You can invest the money when logged into your account online or by calling us on 0117 980 9800.

    Will the payments be credited to the income or capital section of my account?

    The payments will be made to the capital section of the account in which you hold the fund.

    What if I hold it in an ISA/SIPP?

    The payments will not affect your ISA or pension allowances. The payment will be treated as a return of capital rather than an income payment.

    How long will the wind-up take to fully complete, and when will the next payments be made?

    We’re not sure how long the full wind-up will take to complete. We’re waiting on further updates from Link Asset Services, and we’ll keep you up to date as more information is announced.

    Most of the easier-to-sell investments which made up the majority of the fund have now been sold. The remaining investments left to be sold are less liquid and selling these may take longer than was the case for the sales to date. Further payments are expected as and when suitable amounts of cash have been raised from the sale of the remaining assets in the Fund.

    Will each distribution be a disposal for capital gains tax purposes?

    Link Asset Services has confirmed that any proceeds from the winding up, including cash payments, will be deemed a part disposal for capital gains tax purposes.

    Any liabilities depend on your personal circumstances, so if you’re not sure how it might affect you, please speak to a tax expert.

    Will the cost price of my investment change?

    Approximately 74.05% of the fund was returned in the first payment with a further 21% of the remaining assets in the fund returned in the second payment. The cost price of remaining investments will be reduced in line with this percentage.

    Cost prices shown in your online account should not be used for capital gains tax purposes. If you’re not sure how it might affect you, please speak to a tax expert.

    How can I decide where to invest now?

    We publish research on funds to help you make the decisions that are right for you.

    Our latest fund research or sector reviews are good places to start. If you’d like more from us, you can take a look at our latest ideas.

    For tailored advice, we can put you in touch with a financial adviser.

    What have we been doing since the suspension of the LF Equity Income Fund (formerly Woodford Equity Income Fund)?

    When the Woodford Equity Income Fund and Woodford Income Focus Fund were suspended, we waived our platform fee on all assets held in these funds.

    Since then we’ve set up a dedicated Helpdesk, helping clients who own investments in the suspended Woodford Equity Income Fund and Woodford Income Focus Fund.

    We’ve taken on board the feedback from our clients, and listened to what they had to say. We’ve reviewed our Wealth 50 and sought other independent insights. As a result, we will be making changes, including a greater focus on transparency and a new structure to our research notes, for those clients who want a deeper level of information, and new functionality on our platform to help those who want to follow a more independent path. More details will follow in the coming months.

    On 16 December we announced the appointment of a new independent non-executive director – adding increased independent scrutiny, challenge and oversight.

    We’ve been in regular contact with Link Asset Services, and shared our clients’ views on the proposed next steps regarding the Woodford Income Focus Fund. Throughout, we’ve kept investors up-to-date with the latest developments.

    Will I continue to see the fund price regularly on the website and in my account?

    Link Asset Services has said it will continue to update and publish the net asset value per unit of the LF Equity Income Fund (previously Woodford Equity Income Fund) regularly.

    This will be calculated each Wednesday until we are notified otherwise, and we’ll let you know if anything changes.

    How has the first wind-up payment been calculated?

    Link has said:

    "In the period up to 24 January 2020, £2,167,100,490, equivalent to 75.55% of the value of the assets of the Fund (as at 24 January 2020), has been generated by the Fund (including through the sale of assets) to enable the first capital distribution of cash to all investors on the register as at 24 January 2020. A separate letter has been sent, dated 27 January 2020, detailing the payment due to each named investor from this first capital distribution.

    In previous letters, dated 15 October 2019 and 13 December 2019, we explained how the Fund’s assets were split into two portfolios to enable the assets to be sold in the most effective way (these letters are available at equityincome.linkfundsolutions.co.uk). BlackRock Advisors (UK) Limited (“BlackRock”) is assisting us with the repositioning and subsequent selling of the assets in Portfolio A.

    We continue, with PJT Partners (UK) Limited (“Park Hill”), to explore opportunities for the sale of assets within Portfolio B.

    As explained in our previous letter, we have taken into account any liabilities of the Fund including the estimated costs associated with the winding up process (including legal and audit fees – see section 2 below), the commitments and possible further funding which the Fund may have in respect of its investments and the estimated values for the regular and special income distributions of 31 December 2019 and 17 January 2020. These are detailed in Table 1 below, which shows the calculation of the amount of cash that is available for the Fund’s first capital distribution:

    Table 1

    Value
    Cash generated by the Fund, including from the sale of assets £2,167,100,490
    Less
    Regular income distribution as at 31 December 2019 (to be paid to investors on 28 February 2020) £9,737,392
    Special income distribution as at 17 January 2020 (to be paid to investors on 17 March 2020) £451,444
    Provision for costs of the Fund during wind up (including transaction fees, brokerage costs, legal fees and audit fees) £5,340,000
    Outstanding accrued costs incurred from 15 October 2019 to the Effective Date (including transaction fees, brokerage costs and legal fees) £4,988,374
    Estimated further funding and commitments in relation to investments of the Fund (this amount relates to known and possible funding requirements in relation to certain assets held by the Fund) £22,500,000
    Total cash available for first capital distribution from the Fund on or around 30 January 2020 £2,124,083,280

    This first capital distribution from the fund of £2,124,083,280 will be paid to investors as an amount per share as follows:

    Table 2

    Share Class Name Fund ISIN Code Pence per share
    A Sterling Accumulation GB00BLRZQ513 57.9127p
    A Sterling Income GB00BLRZQ406 47.5873p
    C Sterling Accumulation GB00BLRZQ737 58.6631p
    C Sterling Income GB00BLRZQ620 48.2426p
    F Sterling Accumulation GB00BZ01L372 46.3633p
    X Sterling Accumulation GB00BLRZQ950 56.4549p
    X Sterling Income GB00BLRZQ844 46.4091p
    Z Sterling Accumulation GB00BLRZQC88 58.9936p
    Z Sterling Income GB00BLRZQB71 48.4932p

    This first capital distribution will be reflected in the Net Asset Value of the fund on 30 January 2020, being the date on which named investors on the register should receive their payment. This means that the number of shares that you hold in the Fund will remain the same but the Net Asset Value of the Fund and the price per share will reduce to reflect the value paid out by way of the first capital distribution of the Fund on that date.

    It is intended that further capital distributions will be made as and when suitable amounts of cash have been raised from the sale of the remaining assets of the Fund. At this stage we are unable to advise you of the exact timing and amount of these subsequent capital distributions as this is dependent upon assets being realised within the Fund. Investors should be aware that the assets that remain to be sold are the less liquid assets of the Fund and disposing of these assets may take longer than was the case for the sales to date. We will continue to keep you informed of the progress made on this matter as well as other developments in relation to the Fund."

    What are the costs associated with the wind up?

    Link has said:

    "In our letter dated 15 October 2019 we explained that it was necessary for the Fund’s assets to be repositioned prior to the commencement of the Fund’s winding up to enable as much of investors’ cash to be returned as soon as possible (taking into account investors’ best interests). BlackRock was appointed to assist us to perform this repositioning in relation to the majority of the Fund’s listed assets (Portfolio A).

    In the same letter we told investors that BlackRock’s fees for its services of repositioning and realising assets in Portfolio A, would be paid out of the periodic charge paid to LFS by the Fund (in the same way that LFS had paid Woodford Investment Management Limited (“WIM”), previously the Fund’s investment manager). However, as BlackRock did not perform the same role as WIM we have decided that it would be more appropriate to charge BlackRock’s fees directly to the Fund as allowable by and in accordance with the Fund’s prospectus.

    We have previously advised investors that there would be no increase to the overall costs paid by the Fund up to the period of the commencement of the winding up and that LFS would not take a fee for its services for that period.

    Taking all of the above into account (including the rebating of the surplus from the periodic charge paid by the Fund to LFS), for the period between the Fund’s suspension and the commencement of the wind up, LFS will ensure that the Fund will pay no more than an amount equal to the periodic charge plus an amount for brokerage. Brokerage is payable for the arrangement of the Fund’s sale transactions and the amount paid by the Fund will be consistent with the brokerage costs incurred on the sale of the Fund’s assets in the six-month period to 15 October 2019, the date at which investors were notified of the intention to wind up the Fund.

    As shown in Table 1 above, from the Effective Date there will be further costs associated with the sale of the assets in Portfolio A and these will be charged to the Fund in addition to the brokerage costs associated with those sales, in accordance with the Fund’s prospectus. We expect these costs together with audit fees and legal fees to amount to around 0.2% of the Fund’s value at 17 January 2020; however, the exact amount will be dependent upon the value realised from the sale of the Fund’s remaining assets.

    Brokerage costs have also been incurred for the sale of assets in Portfolio B and there will be further brokerage costs relating to the sale of assets in that portfolio, including those payable to Park Hill. These brokerage costs will be offset against the future proceeds from the sale of assets in Portfolio B. We currently do not expect these costs to be proportionally greater than the costs previously incurred by the Fund from previous sales of similar unquoted and less liquid listed assets."

    Important notes

    This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.