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CONTAINED IN IT ARE NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION,
DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO,
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30 March
2021
LEI: 549300JZQ39WJPD7U596
Invesco Select
Trust plc
Publication of
Prospectus and Circular
Introduction
Invesco Select Trust PLC (the "Company" or “IST”)
announced on 1 December 2020 that the
Board had agreed heads of terms with the Board of Invesco Income
Growth Trust plc ("IIGT") in respect of a proposed
combination of IIGT with the assets of the Company’s UK Equity
Portfolio (the “Proposals”). If approved, the combination
will be implemented through a scheme of reconstruction and
voluntary winding-up of IIGT under section 110 of the Insolvency
Act 1986. The Board announces that the Company has
today published a prospectus (the "Prospectus") in relation
to the issue of new UK Equity Shares in the Company pursuant to the
Scheme ("New Shares"), together with a circular to provide
the Company's shareholders (the "Shareholders") with further
details of the Proposals and to convene a general meeting of the
Company (the "General Meeting") to seek approval from
Shareholders for the implementation of the Proposals (the
"Circular").
Background to the Proposals
At the annual general meeting of IIGT held in September 2020, IIGT Shareholders voted in favour
of a resolution for the continuation of IIGT as a closed-ended
investment company. Noting that just over 20 per cent. of those
IIGT Shareholders who voted on the continuation resolution voted
against the resolution, the IIGT Board announced that it would
assess with its advisers the votes cast and engage with IIGT
Shareholders as appropriate to determine what, if any, action to
take. The Board of IST was aware of that sentiment and considered
it could be a potential opportunity for the Company to propose a
combination of UK assets. Accordingly it entered into discussions
with the Investment Manager, being the investment manager of both
companies, and subsequently explored potential opportunities with
the IIGT Board. The IIGT Board and its advisers undertook a
comprehensive review of IIGT's competitive positioning. Following
that comprehensive review and taking into account the IST Board’s
desire to increase the size and scale of the Company, the Board and
the Board of IIGT concluded that the Combination would not only
offer IIGT Shareholders the best way to continue their investment
in a closed-ended investment vehicle with the same Investment
Manager and a similar investment philosophy, but that it would also
meet the IST Board’s objective of growing the size and scale of the
Company. Conditional upon the Scheme becoming effective, the
Proposals will result in certain assets of IIGT forming part of the
UK Equity Portfolio.
It is intended that following implementation of the Proposals,
the Company’s UK Equity Portfolio will be managed jointly by
James Goldstone and Ciaran Mallon, respectively the current managers
of the UK Equity Portfolio and IIGT. This would not be the first
time James and Ciaran have acted as joint managers. In May 2020 James and Ciaran were appointed joint
managers of the Invesco UK Equity High Income Fund (UK) and the
Invesco UK Equity Income Fund (UK), Invesco’s flagship UK equity
retail funds. There is commonality between the investment strategy,
objective and philosophy of the two managers. As a result of the
Combination, it is intended, subject to Shareholder approval, to
amend the investment objective and the investment policy of the UK
Equity Portfolio to make it more compatible with the investment
objective and policy of IIGT. This will recognise the income growth
expectations of the IIGT Shareholders. Following implementation of
the Proposals, the intended investment objective of the UK Equity
Portfolio will be to provide Shareholders with an attractive real
long-term total return, with an income that will grow over time, by
investing primarily in UK quoted equities.
For the avoidance of doubt, the Proposals will not alter the
innovative structure of the Company. The Company will remain a
multi-asset class investment trust, retaining its current capital
structure and offering investors the opportunity to switch (on a
quarterly basis) between its UK Equity, Global Equity Income,
Balanced Risk Allocation and Managed Liquidity Share classes to
react to changing investment conditions. IIGT Shareholders who
elect or are deemed to elect for the Rollover Option will be
electing to receive UK Equity Shares. In the same way as Existing
Shareholders can, those IIGT Shareholders will be permitted to
alter their asset allocation to reflect their views of prevailing
markets through the opportunity to convert between the four Share
classes every three months, in accordance with the conversion
rights contained in the Articles of Association. For the next 12
month period, the Company will enable Shareholders to convert
between Share classes on 4 May 2021,
2 August 2021, 1 November 2021 and 1
February 2022.
In addition, the Proposals will not alter the Company's discount
control policy. As Shareholders are aware, the Company has a
discount control policy in place for all four Share classes,
whereby the Company offers to issue or buy back Shares of all
classes with a view to maintaining the market price of the Shares
at close to their respective net asset values and, by so doing,
avoid significant overhangs or shortages in the market. It remains
the Board’s policy to buy back Shares and to sell Shares from
treasury on terms that do not dilute the net asset value
attributable to Existing Shareholders at the time of the
transaction.
Benefits of the Proposals
The IST Board believes that the Combination has the following
benefits to Shareholders:
-
Increase in scale: with IIGT's net assets currently
standing at approximately £174 million, the Company will increase
in size materially as a result of the Combination. This is expected
to enhance the profile of the Company, its relevance to investors
and its secondary market liquidity; it will also allow fixed costs
to be spread over a larger cost base, thereby improving the ongoing
charges ratio to the benefit of the Shareholders.
-
Improved management fee structure: upon the
implementation of the Scheme (and subject to the Scheme becoming
effective):
-
the management fee payable by the Company in respect of the UK
Equity Portfolio will be reduced to 0.55 per cent. per annum on the
net assets of the UK Equity Portfolio up to £100 million and 0.50
per cent. per annum on the net assets of the UK Equity Portfolio
over £100 million; and
-
Invesco’s entitlement to a performance fee in respect of the UK
Equity Portfolio (being 12.5 per cent. of any increase in net
assets above the benchmark plus 1.0 per cent. capped at 0.55 per
cent. of net assets) will be removed in its entirety.
In the interests of alignment, the 0.55% management fee payable
by the Company on the Global Equity Income Portfolio will be
amended in the same way, and its performance fee removed.
-
Significant Invesco cost contribution: upon the
implementation of the Scheme (and subject to the Scheme becoming
effective) Invesco will waive any performance fee accrued in
respect of the UK Equity Portfolio up to the Effective Date (being
approximately £531,000). The benefit of such accrued performance
fee waiver shall be shared by both the UK Equity Portfolio and
those IIGT Shareholders who elect for the Rollover Option on a
pro rata basis.
-
Attractive UK equity income strategy: the UK Equity Share
class will be managed to a UK equity income growth mandate going
forward, benefitting from the joint expertise of its current
portfolio manager, James Goldstone,
and of Ciaran Mallon, portfolio
manager of IIGT. Ciaran has been lead portfolio manager of IIGT
since July 2005 and has a
considerable track record of providing sustainable returns through
a combination of above average income combined with long-term
capital growth. Over the ten years to 28
February 2021, IIGT has returned 92.3 per cent. on a NAV
total return basis compared with the FTSE All-Share Index, which
returned 70.73 per cent. over the same timeframe. James Goldstone has been lead portfolio manager
of the UK Equity Portfolio since 4 October
2016. Since James became lead portfolio manager to
28 February 2021, the UK Equity
Portfolio has returned 11.7 per cent. on a NAV total return basis
compared with the FTSE All-Share Index, which returned 12.8 per
cent. over the same timeframe.
Details of the Scheme
Subject to the passing of the Scheme Resolutions and to the
satisfaction of certain conditions, IIGT will be placed into
members’ voluntary liquidation (solvent liquidation) and a scheme
of reconstruction of IIGT will be effected. Pursuant to the Scheme
IIGT Shareholders will have elected, in respect of their
shareholdings, to:
-
receive New Shares (the “Rollover Option”); and/or
-
receive cash at a discount of 2.5 per cent. of the value of the
Cash Pool as at the Calculation Date (the “Cash
Option”).
The maximum number of IIGT Shares that can be elected for the
Cash Option is 30 per cent. of the total number of IIGT Shares in
issue (excluding IIGT Shares held in treasury). IIGT Shareholders
are entitled to elect for the Cash Option in respect of more than
30 per cent. of their individual holdings of IIGT Shares; however,
aggregate Elections for the Cash Option in excess of this
percentage will be scaled back in a manner which is, as near as
practicable, pro rata to the number of IIGT Shares elected
under such Excess Applications, resulting in such IIGT Shareholders
(other than Overseas IIGT Shareholders) receiving New Shares
instead of cash in respect of part of their holding of IIGT
Shares.
To the extent that an Overseas IIGT Shareholder would otherwise
receive New Shares under the Scheme, either because no Election for
the Cash Option was made or because an Excess Application for the
Cash Option is scaled back in accordance with the Scheme, then such
New Shares will instead be issued to the Liquidators as nominees on
behalf of such Overseas IIGT Shareholder who will arrange for such
shares to be sold promptly by a market maker and the net proceeds
paid to the relevant Overseas IIGT Shareholder.
It is expected that the Scheme will become effective on the
Effective Date, whereupon the cash, undertaking and other assets of
IIGT comprising the Rollover Pool shall be transferred to the
Company pursuant to the Transfer Agreement in consideration for the
issue of the New Shares. The relevant numbers of New Shares will be
allotted to the Liquidators who will renounce the New Shares in
favour of the IIGT Shareholders who elect or are deemed to have
elected for the Rollover Option.
The issue of the New Shares under the Rollover Option will be
effected on a formula asset value per share for formula asset value
per share basis as at the Calculation Date at a conversion ratio
based on the IIGT FAV per Share and the UK Equity FAV per Share as
at the Calculation Date. When calculating the respective FAVs, the
total costs of the Scheme (which, for the avoidance of doubt, will
not include any portfolio realisation or realignment costs incurred
in implementing the Scheme) will be split between the UK Equity
Portfolio and IIGT pro rata by reference to the net assets
of the Company’s UK Equity share class and the net assets of IIGT.
The same split will be used to attribute the benefit of the
Investment Manager’s accrued performance fee waiver and the Cash
Pool Discount. Stamp duty and listing fees will be borne by the
Enlarged UK Equity Portfolio.
The New Shares will rank equally in all respects with the
existing issued UK Equity Shares other than in respect of the
Fourth Interim Dividend and any other dividends declared with a
record date prior to the Effective Date.
Conditions of the Proposals
Implementation of the Proposals is subject to a number of
conditions, including:
-
the passing of the Scheme Resolutions to be proposed at the
General Meeting, and any conditions of such Resolutions being
fulfilled;
-
the Financial Conduct Authority agreeing to amend the listing of
IIGT’s Ordinary Shares to reflect their reclassification as
Reclassified Shares for the purpose of implementing the Scheme;
-
the resolutions to be put to IIGT Shareholders at each of the
IIGT General Meetings being passed and becoming unconditional in
all respects;
-
the approval of the Financial Conduct Authority and the London
Stock Exchange to the Admission of the New Shares to the Official
List and to trading on the main market of the London Stock
Exchange, respectively; and
-
the Directors of IIGT resolving to proceed with the Scheme.
If any condition is not satisfied, the Proposals will not become
effective and the Scheme will not proceed.
Dividends
The holders of New Shares will not be entitled to the Fourth
Interim Dividend but rather will receive (prior to the Effective
Date) a pre-liquidation special dividend from IIGT as a holder of
IIGT Shares to reflect the distribution of IIGT's accumulated
revenue reserve (including current year net income to date). The
holders of New Shares will be entitled to any other dividends
declared in respect of the UK Equity Shares with a record date
after the Effective Date.
Proposed change to the Investment
Objective and Policy of the UK Equity Portfolio
As explained above, as a result of the Combination and
recognising the income growth expectations of the IIGT
shareholders, it is proposed to amend the investment objective and
the investment policy of the UK Equity Portfolio to make it more
compatible with the investment objective and policy of IIGT, and in
particular to include an express investment objective of the
Company to have "an income that will grow over time by investing
primarily in UK quoted equities".
The proposed change will also permit the UK Equity Portfolio to
invest in fixed interest securities of UK companies, will clarify
that the portfolio is invested primarily in UK-listed equities
across all market sectors and will reduce the number of positions
typically held by the UK Equity Portfolio from between 45 and 80
securities to between 40 and 50 securities.
The Board considers that these adjustments represent a material
change to the Company's published investment policy, and therefore
that the Company's Shareholders should vote to approve such a
change. A resolution will be put at the General Meeting seeking
such approval. In addition, the Listing Rules require that a
material change to a company's investment policy be submitted to
the FCA for prior approval, and this approval has been granted by
the FCA in connection with the current proposal.
Proposed increase of the Company's
current buyback authority
At a general meeting held on 7 January
2021, Shareholders passed a resolution to authorise the
Company to make market purchases of up to 14.99% of the Shares in
circulation of each of the UK Equity, Global Equity Income and
Balanced Risk Allocation classes of the Company's share capital.
The maximum number of UK Equity Shares authorised at that time to
be purchased by the Company was 4,086,531 UK Equity Shares. This
authority will expire at the conclusion of the next AGM of the
Company or, if earlier, on 6 April
2022.
If the Scheme is implemented, the number of UK Equity Shares
will increase. At the date of this announcement, being prior to the
Calculation Date, it is not known how many New Shares would be
issued to IIGT Shareholders under the Scheme. Accordingly, the
appropriate Resolution to be put forward at the General Meeting
will seek authority for the Company to buy back up to 14.99% of the
New Shares issued at Admission, subject to the restrictions
referred to in the Notice of the General Meeting. This authority
will supplement the Company's current buyback authority to reflect
the increased number of UK Equity Shares in issue following
implementation of the Scheme.
The Board intends to use the Company’s buyback authority when
this will benefit existing shareholders as a whole and to operate
the discount control policy. Any UK Equity Shares bought back by
the Company will either be cancelled or, alternatively, held as
treasury shares with a view to their resale, if appropriate, or
later cancellation. Any resale of treasury shares will only take
place on terms that are in the best interests of Shareholders as a
whole.
Proposed Board changes
If the Scheme is implemented, for continuity purposes for the
IIGT Shareholders, it is intended that Davina Curling, Mark
Dampier and Tim Woodhead will
join the Board on the Effective Date. Alan
Clifton will step down on the Effective Date. Graham Kitchen will be the Chairman of the
Enlarged Company. The Proposed Additional Directors will be
non-executive Directors and independent of the AIFM and the
Investment Manager.
It is expected that the Board of the Enlarged Company will
initially comprise six directors, but that this may reduce to five
directors in the future.
Costs and expenses of the Scheme
The Proposals will not result in any proceeds being raised by
the Company. The New Shares are being issued to the IIGT
Shareholders in consideration for the transfer of the Rollover Pool
to the Company.
The fixed costs of the Proposals payable by the UK Equity
Portfolio and by IIGT are to be aggregated and allocated to the IST
UK Equity Portfolio and the Rollover on a pro rata basis by
reference to the UK Equity Portfolio NAV and the IIGT NAV
respectively as at the Calculation Date. Any stamp duty, SDRT or
other transaction tax, or investment costs incurred by the Company
on the acquisition of the Rollover Pool or the deployment of the
cash therein upon receipt and listing fees in relation to the
listing of the New Shares, will be borne by the Enlarged UK Equity
Portfolio. If the Proposals do not proceed on the terms agreed or
the required approvals are not obtained, then the Company and IIGT
will bear their own costs. The Company’s costs are estimated at
approximately £278,000.
Any stamp duty, stamp duty reserve tax or other transaction tax,
or investment costs incurred by the Company on the acquisition of
the Rollover Pool or the deployment of the cash therein upon
receipt and listing fees in relation to the listing of the New
Shares, will be borne by the Enlarged UK Equity Portfolio. For
illustrative purposes, the stamp duty reserve tax on the
acquisition of the Rollover Pool based on IIGT's portfolio as at
26 March 2021 and assuming that no
IIGT Shareholders exercise their right to dissent from
participation in the Scheme and the maximum amount is elected for
the Cash Option, is expected to be approximately £593,848 and the
listing fees are expected to be approximately £147,057 (inclusive
of VAT).
In the event that the Proposals fail to complete then each
company shall pay its own costs.
The General Meeting
The Proposals are conditional amongst other things on the
approval of the Scheme Resolutions by the Company’s Shareholders at
the General Meeting. The Resolutions will be proposed as ordinary
resolutions in the case of the Scheme and the proposed amendment to
the UK Equity Portfolio’s investment objective and policy, and a
special resolution in the case of the proposed increase in the
Company’s buyback authority.
As a result of the Covid-19 pandemic and associated UK
Government guidance, attendance at the General Meeting will not be
possible. Arrangements will be made by the Company to ensure that a
minimum number of Shareholders required to form a quorum will
attend the General Meeting in order that the meeting may
proceed.
Recommendation
The Board considers the Proposals to be in the best interests of
Shareholders as a whole. Accordingly, the Board recommends
unanimously that Shareholders vote in favour of the Resolutions,
and that Shareholders either lodge their vote electronically via
the registrar’s online portal or complete and return their Forms of
Proxy or transmit CREST proxy instructions accordingly. The
Directors intend to vote in favour of the Resolutions in respect of
their own beneficial holdings which total 52,945 UK Equity Shares,
57,300 Global Equity Income Shares, 44,715 Balanced Risk Allocation
Shares and 2,500 Managed Liquidity Shares (representing 0.28 per
cent. of the total voting rights in the Company exercisable at the
General Meeting). In addition, the Board understands that the IIGT
Directors all intend to roll over their entire beneficial holdings
of IIGT Shares into New Shares.
Expected Timetable
Latest time and date for receipt of
Forms of Proxy |
11.00 a.m. on 13 April
2021 |
General Meeting |
11.00 a.m. on 15 April
2021 |
Calculation Date in relation to the
Scheme |
5.00 p.m. on 15 April
2021 |
Effective date for implementation of
the Scheme |
23 April 2021 |
Dealings in New Shares commence |
8.00 a.m. on 26 April
2021 |
Terms used and not defined in this announcement have the
meanings given in the Circular unless the context otherwise
requires.
For further information please contact:
Invesco Asset Management
Limited
+44 (0) 20 3753 1000
Angus
Pottinger
Investec Bank plc
+44 (0) 20 7597 4000
David Yovichic
Denis Flanagan
Important Information
This announcement contains information that is inside
information for the purposes of the Market Abuse Regulation (EU)
No. 596/2014. The person responsible for arranging for the
release of this announcement on behalf of the Company is
Paul Griggs of Invesco Asset
Management Limited.