REG-Invesco Select Trust Plc: Publication of Prospectus and Circular

Invesco Select TrustAnnouncement

30/03/2021 15:05

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED IN IT ARE NOT FOR RELEASE,
PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN
OR INTO, THE UNITED STATES, AUSTRALIA, CANADA, JAPAN OR THE REPUBLIC OF SOUTH
AFRICA OR ANY JURISDICTION FOR WHICH THE SAME COULD BE UNLAWFUL.

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:
1.
receive New Shares (the “Rollover Option”); and/or
2.
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.



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