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                                      LF WOODFORD EQUITY INCOME FUND SCHEME OF ARRANGEMENT – OUTCOME OF SCHEME MEETING

Scheme approved by the required majority of Scheme Creditors who attended and voted (in person or by proxy) at a meeting of Scheme Creditors held on 13 December 2023

Link Fund Solutions Limited (LFSL) provides an update on its scheme of arrangement (the Scheme) in relation to the LF Equity Income Fund, formerly the LF Woodford Equity Income Fund (WEIF). A single meeting of Scheme Creditors (the Scheme Meeting) was held on 13 December 2023. The purpose of the Scheme Meeting was to allow Scheme Creditors to consider and, if thought fit, approve the Scheme.

Under the Companies Act 2006, a scheme of arrangement requires the support of a majority in number, representing at least 75% by value, of those persons who attend and vote (in person or by proxy) at a meeting of scheme creditors. The required majority of Scheme Creditors approved LFSL’s Scheme.

Work is ongoing to verify the votes cast at the Scheme Meeting. However, provisional numbers are set out below. The final numbers will be released prior to the Sanction Hearing.

Over 54,000 Scheme Creditors attended the Scheme Meeting in person, or by proxy. Of the Scheme Creditors who voted, approximately 93.7% in number, representing approximately 96.1% in value, voted in favour of the Scheme. Where an institution is the beneficial owner of shares, it only had one vote. As the Scheme has comfortably met the statutory threshold for approval, LFSL will now ask the Court to sanction the Scheme at a second Court hearing on 18 January 2024 (the Sanction Hearing).

The vote was open to all investors who held investments in the WEIF at the time of its suspension on 3 June 2019 (Scheme Creditors). In accordance with the order of the High Court issued on 13 October 2023, Scheme Creditors’ votes were valued at their proportionate share of the FCA Total Amount of £298,403,919.

Provisional result of the Scheme Meeting
Further, provisional, information on the outcome of the Scheme Meeting is provided below. LFSL intends to publish a transcript of the Scheme Meeting on the Scheme Website (https://lfwoodfordfundscheme.com/) in due course.

Individual Scheme Creditors comprise all Scheme Creditors other than Institutional Scheme Creditors (see note 3 below).

Scheme Creditors could submit a Voting Form in their  own name. Alternatively, a person with authority to act on behalf of the Scheme Creditor (an Authorised Representative), could submit a Voting Form on the Scheme Creditor’s behalf. Authorised Representatives included wealth managers and other financial intermediaries with authority to vote on their Scheme Creditor clients’ behalf, trustees, and executors of estates.

Institutional Scheme Creditors are corporate entities who held a beneficial interest in the WEIF as at the Record Date. Institutional Scheme Creditors include (among others) ‘funds of funds’, pension funds, and custodians.

A spokesperson for LFSL comments: “With this vote, investors have demonstrated their strong support for the Scheme. We actively sought to reach as many Scheme Creditors as possible to ensure they had their say and are extremely grateful to all investors who made their voices heard.

“This is an important step for the Scheme, and the establishment of the Settlement Fund, which LFSL has always believed is the best option available for investors as it materially enhances the amount of redress available from LFSL and provides the fastest route for redress possible.”

The Sanction Hearing

Given the strong show of support from Scheme Creditors, LFSL intends to seek an order from the Court sanctioning the Scheme at the Sanction Hearing on 18 January 2024. If approved by the Court, the Scheme will affect all Scheme Creditors, irrespective of whether they voted at the Scheme Meeting or not. Payments to Scheme Creditors will commence in the first quarter of 2024.

Next steps for Scheme Creditors

Scheme Creditors who do not wish to oppose LFSL’s application to Court for an order sanctioning the Scheme do not need to take any further action.

Scheme Creditors or other persons who wish to make submissions at the Sanction Hearing should refer to the Convening Order, which is available on the Scheme Website at https://lfwoodfordfundscheme.com/documents/.

Further information on the Scheme

The Scheme offers Scheme Creditors certainty of payment from a Settlement Fund of up to £230 million. If the Scheme is approved on 18 January 2024, LFSL expects to make an initial payment of between £183.5 million and £200 million during the first quarter of 2024. The Settlement Fund includes all of LFSL’s available assets and a voluntary contribution of £60 million from LFSL’s parent company.

The Scheme will settle all purported, disputed and threatened claims that Scheme Creditors have or could bring against LFSL, and other members of the Link Group, in relation to the WEIF. This allows LFSL to make the maximum possible payment to Scheme Creditors, at the earliest opportunity. Representatives of PwC will be appointed to supervise the Scheme.

Ever since the practice statement letter was published on 7 September 2023, LFSL has actively sought to contact as many Scheme Creditors as possible to inform them about the Scheme, and their opportunities to have their voices heard. This included contacting investors in the WEIF directly, or via their investment platform or broker. LFSL has also conducted a national advertising campaign, with information about the Scheme and the voting deadlines being run on national television, print and online media and Facebook.

The Financial Conduct Authority (FCA) continues to consider that the Scheme offers the quickest and best way to return as much money to investors as possible than might be achieved by any other means.

Key dates in the Scheme timeline:

● 18 January 2024 – The Sanction Hearing. As Scheme Creditors have voted in favour of the Scheme, LFSL will ask the Court to approve the Scheme at this Court hearing.
● 9am 9 February 2024 – expected Effective Time. The Scheme will become fully effective on this date if the Court orders the sanction of the Scheme after the Sanction Hearing on 18 January 2024 and no appeal of that decision is made within 21 days of the Sanction Order being made.
● By 31 March 2024 – The first payments from the Settlement Fund, estimated to be between £183.5 million and £200 million, are expected to be made as soon as the first quarter of 2024 if the Scheme is approved.

Summary of the Settlement Agreement
As announced by the FCA and LFSL on 19 and 20 April 2023, LFSL has agreed to make a substantial payment to investors who held investments in the WEIF at the time of its suspension on 3 June 2019. The settlement was subject to:

● The completion of a sale of Link Group’s Fund Solutions’ business, which includes LFSL’s business and other additional assets owned by other companies in its group, to the Waystone Group. The sale completed on 9 October 2023; and
● The approval of the Scheme by the Court and by a majority of investors in number (more than 50%) and representing 75% or more in value of those that vote. Investors have voted in favour of the Scheme, and the Court will be asked to sanction the Scheme on 18 January 2024.

The Settlement Fund will comprise all of LFSL’s available assets following the sale of its business (which completed on 9 October 2023), plus a voluntary contribution from Link Group of up to £60 million and insurance proceeds of up to £48 million (the Settlement Fund). LFSL estimates this will provide an expected settlement fund of up to £230 million which will be paid to Scheme Creditors via the LF Equity Income Fund (formerly, the LF Woodford Equity Income Fund) (the WEIF). Link Group will also voluntarily contribute £2.5 million towards the costs of implementing the Scheme.

The first distributions from the Settlement Fund are estimated to be between £183.5 million and £200 million and are expected to be made as soon as the first quarter of 2024. LFSL has set a prudent Reserve Amount of £46.5m to cover certain cost contingencies. This means payments can be made to investors much earlier than would otherwise be the case. The Reserve Amount will be reviewed on a regular basis by LFSL and Scheme Supervisors (who will be representatives of PwC) and further distributions will be made to investors if the cost contingencies are released.

The FCA’s assessment of the redress that LFSL should be required to pay following its investigation is approximately £298m. However it is important to note that this is not a binding or final determination, and LFSL will continue to dispute all liability if the Scheme does not proceed. The compensation to be paid through the Scheme is up to approximately 77% of the amount that the FCA states LFSL should pay.

It is important to note that none of the assets in the WEIF are being used to fund the Scheme. Over the past few years, any money raised from selling assets in the WEIF has been distributed to investors and this process will continue in exactly the same way with the remaining assets of the WEIF, regardless of the Scheme outcome. The net asset value of the WEIF on the Suspension Date was approximately £3.6 billion. If the Settlement Fund is distributed in full, then it is estimated that investors will receive about 80% of the net asset value of the WEIF at the point of suspension taking into account what has been paid to investors to date and the most recent quarterly valuation of the remaining assets of the WEIF to be sold. It should be noted that the value of those remaining assets may increase or decrease.

If the Scheme becomes effective, all Scheme Creditors, even those that voted against the Scheme or who did not vote at all, will be affected by it. Once implemented, the Settlement Fund will be paid to the WEIF, which will distribute it to each of its members proportionally based on the number and class of shares they hold. Once the Scheme has been implemented, Scheme Creditors will no longer be able to make any claim against LFSL, Link Group and other entities and persons in the Link Group of companies (the Released Parties). Scheme Creditors will continue to be able to bring claims against parties other than the Released Parties. However, Scheme Creditors’ recoveries from those claims may be reduced by the amount of any contribution claims that third parties may bring against LFSL in relation to such proceedings.

LFSL entered into the conditional settlement agreement with the FCA and Link Group expressly on the basis that there is no admission of liability. LFSL’s rights in respect of the Settlement are expressly and entirely reserved unless and until the Scheme becomes fully effective. If the Scheme does not go ahead, LFSL intends to defend itself against the claims made against it. Such litigation may take several years to conclude and no payments will be made in the meantime. If LFSL is successful in its defence of those claims, it may not be required to pay anything at all to investors in respect of their claims (or may be required to pay less than the amount being offered in the Scheme). Even if LFSL is unsuccessful in defence of those claims, there will be less money available from LFSL to pay to relevant investors because, amongst other things, Link Group will not make its voluntary contribution to the Scheme or LFSL’s costs, meaning that £62.5 million (which includes an additional contribution of £2.5 million towards the costs of the Scheme) will not be available to investors. In addition, the cost of LFSL’s defence may be significant and will reduce the amount of money that LFSL will have available to pay compensation to the relevant investors.