Introduction
Link Fund Solutions (Link), the authorised corporate director (ACD) of the LF Woodford Equity Income Fund, intends to close this fund by selling its assets and returning the proceeds to investors. This decision is awaiting approval by the Financial Conduct Authority (FCA).
Why this has happened
The decision to originally suspend dealings in the Fund was taken to protect investors following an increased level of redemptions. As a “forced seller” of its assets to meet redemptions, the values received by the Fund for such assets could have been adversely impacted and the Fund may not have received full value from the sales.
The suspension was therefore intended to give Woodford Investment Management Limited (“Woodford”), the investment manager of the Fund, time to reposition the Fund’s portfolio into more liquid investments. This would have allowed the Fund, upon lifting of the suspension of dealings in the Fund, to meet redemption requests. They sought to complete the repositioning of the Fund’s portfolio by early December 2019 to enable the Fund to re-open, but in the meantime monitor progress to ensure that this date remained achievable.
Whilst progress has been made in relation to repositioning the Fund’s portfolio, this has unfortunately not been sufficient to allow reasonable certainty as to when the repositioning would be fully achieved and when the fund could be re-opened and therefore after careful consideration Link conclude that closing the fund would be in investors’ best interests. This will allow the return of money through interim payments to investors more quickly than if the Fund had remained suspended for a longer period.
New arrangements for the management of the Fund’s assets
Woodford will, with immediate effect, cease to be the investment manager of the Fund, which has consequently been renamed the ‘LF Equity Income Fund’. Link will continue to serve as the ACD of the Fund and manage the Fund during the period prior to the commencement of the winding up in accordance with its prospectus and applicable regulatory requirements. They have allocated the Fund’s assets into two parts.
- Listed Assets (Portfolio A). LFS have appointed BlackRock Advisors (UK) Limited (“BlackRock”), who have transition and investment management, trading and capital markets expertise and experience as transition manager, to prepare Portfolio A for the winding up of the Fund. During the period until winding up of the Fund commences, BlackRock will seek to sell the assets in Portfolio A and use the proceeds to purchase money market funds and FTSE 100 index instruments. This process will enable LFS to return part of investors’ cash as soon as possible once the Fund begins the winding up process.
- Unlisted and certain highly Illiquid assets (Portfolio B). During the period of the suspension LFS appointed PJT Partners (UK) Limited (“Park Hill”) as a specialist broker to assist us in selling the assets in Portfolio B.
Costs
In the period leading up to the commencement of the winding up of the Fund, charges paid by the Fund to the ACD will not change. Costs associated with selling the assets will continue to be borne by the Fund and these costs at this time will be greater than they were typically in previous periods due to the requirement to sell all of the Fund’s assets. Link will keep you informed of these costs.
What this means for you
Link expects to start winding up the fund from 17 January 2020. The assets of the Fund will start to be realised, taking into account of any liabilities which the Fund owes, and of the costs incurred in the winding up. Proceeds will be placed into cash in your ISA, Collective, Pension accounts as a number of capital payments. These will then be available for reinvestment.
It is anticipated that the first capital payment will be paid to you and all other investors by the end of January 2020. The size of this first amount will depend upon how quickly the value of the Fund’s assets can be realized. Any remaining assets of the Fund will continue to be sold over time in an orderly manner to seek to limit the loss of value which would be the key risk if they were sold on a forced or “fire sale” basis. Link will continue to provide regular updates in respect of the sale of the Fund’s assets and the payment of further capital distributions until the completion of the winding up of the Fund.
Tax Consequences
Please be aware that the receipt of your proceeds from the winding up of the Fund will be deemed to be part disposals of your shares in the Fund for capital gains tax purposes and may, if not invested in a pension or ISA, depending on your personal circumstances, give rise to a capital gains tax liability. If you are in any doubt as to the taxation consequences of this action you should seek professional advice.
Further Information
Please do let us know if you have any specific questions. A questions and answers document will be available at woodford.linkfundsolutions.co.uk and on request from Link. They will continue to calculate and publish the Net Asset Value per share on a daily basis for information purposes only, which will also be published on our website at www.linkfundsolutions.co.uk.
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