Equalisation

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Woodford glossary

Equalisation is a mechanism used by open-ended collective investment vehicles to ensure that income distributions from a fund can be the same for all shareholders, regardless of when the shares were purchased.

By way of background, funds that distribute income do so regularly – sometimes yearly, sometimes half-yearly, quarterly or monthly. In the case of the LF Woodford Equity Income Fund, income is distributed quarterly. When a fund pays out income, it does so by going ‘ex-dividend‘ (XD). Income that is received by the fund from its underlying portfolio holdings is reflected in that fund’s net asset value until it goes ex-dividend, at which point the income is removed from the fund’s net asset value and is paid to shareholders on the pay date on a per share basis, typically several weeks after the ex-dividend date.

If an investor has bought shares in the fund since the last XD date, he/she has not held the shares for the full period over which income is being received by the fund and so those shares will be grouped separately (usually known as group 2 shares, whereas all other shares are in group 1). When it comes to payment of income on those shares, they will be entitled to the same payment per share as any other shares in the fund, but not all of the payment will be treated as income for tax purposes – part of the payment will be treated as a return of capital. This known as an ‘equalisation’ payment, because it equalises the per share amount that is paid on group 2 shares with that paid on group 1.

Once group 2 shares have passed their first XD date, they become group 1 shares.

Woodford Investment Management Ltd is authorised and regulated by the Financial Conduct Authority (firm reference number 745433). Incorporated in England and Wales, company number 10118169. Registered address 9400 Garsington Road, Oxford OX4 2HN.

Woodford Patient Capital Trust plc is incorporated in England and Wales, company number 09405653. Registered as an investment company under section 833 of the Companies Act 2006. Registered address Beaufort House, 51 New North Road, Exeter, EX4 4EP.

The Woodford Funds (Ireland) ICAV (the “Fund”) has appointed as Swiss Representative Oligo Swiss Fund Services SA, Av. Villamont 17, 1005 Lausanne, Switzerland. The Fund’s Swiss paying agent is Neue Helvetische Bank AG. All fund documentation including, Prospectus, Key Investor Information Documents, Instrument of Incorporation and financial reports may be obtained free of charge from the Swiss Representative in Lausanne. The place of performance and jurisdiction for all shares distributed in or from Switzerland is at the registered office of the Swiss Representative. Fund prices can be found at www.fundinfo.com.

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