IVI.L Regulatory News (IVI)

Invesco Income Growth Trust Plc - Statement re Proposed Combination with IP Select

PR Newswire

London, November 30

01 December 2020

Invesco Income Growth Trust plc

Proposed merger with Invesco Perpetual Select Trust plc

Introduction

The Board of Invesco Income Growth Trust plc (the “Company” or “IVI”) is pleased to announce that it has agreed heads of terms with the Board of Invesco Perpetual Select Trust plc (“IP Select”) in respect of a future merger with IP Select to be effected by way of a scheme of reconstruction (the “Scheme”) under Section 110 of the Insolvency Act 1986 and a voluntary winding up of the Company.

As part of the Scheme, IVI shareholders will have the option of a rollover into the UK Equity class of IP Select without triggering capital gains tax.

It is proposed that Ciaran Mallon, the current fund manager of IVI, will be appointed as the fund manager of IP Select’s UK Equity portfolio, with IP Select’s UK Equity portfolio’s investment objective and policy changing to reflect IVI’s current investment objective and policy.

(The above proposals are referred to herein as the “Proposals”.)

The Board was pleased to receive shareholder support at the recent continuation vote and believes that with the Proposals it has found a better continuation structure which also provides shareholders with choice and addresses the persistently wide discount.

Benefits of the Proposals to IVI Shareholders

The Board believes that the Proposals have a number of benefits for IVI shareholders:

Continuity of investment proposition: Shareholders will be able to continue with the same fund manager and investment style.

IVI income level maintained: It is anticipated that the income level will be maintained and as such IVI shareholders are anticipated to receive the same quantum of income upon completion of the transaction.

Sustainably tighter discount to NAV: The Board believes that the benefits of the Proposals should help IP Select’s shares to trade at a tighter discount to their underlying net asset value when compared to IVI. In addition, IP Select’s tighter discount is supported by an active share buy-back policy.

Lower costs: The management fee payable on IP Select’s UK Equity portfolio will be reduced to 0.55% on net assets up to £100m and 0.50% over £100m. The current performance fee will also be removed. In comparison IVI’s current management fee is 0.60% on market capitalisation up to £150m and 0.50% over £150m.

Opportunity to diversify: The structure of IP Select enables shareholders to diversify across multiple geographies, asset classes and risk profiles, with quarterly conversions allowing shareholders to react to changing investment conditions.

Opportunity for cash exit: A partial cash exit option will allow shareholders the option to exit part of their holding at a price close to prevailing net asset value.

Significant Invesco cost contribution: Invesco has waived both their accrued IP Select UK Equity portfolio performance fee and their IVI termination fee, reducing any costs of the Proposals borne by shareholders.

Increase in scale: An enlarged IP Select will allow fixed costs to be spread over a larger cost base, alongside improving liquidity and aiding marketing.

The Proposals will be subject to approval by the shareholders of both companies in addition to regulatory and tax approvals. A timetable and further details of the Proposals will be announced in due course.

Further details on the Scheme

The Scheme will be effected by way of a scheme of reconstruction under Section 110 of the Insolvency Act 1986, under which shareholders will be able to elect either to:

Receive UK Equity class shares in IP Select, the (“Rollover Option”); and/or

Realise a proportion of their holding for cash (the “Cash Option”)

Shareholders in the Company who elect to realise their holding in the Company for cash will receive the cash equivalent to a 2.5 per cent. discount to the underlying net asset value. The Cash Option will be limited to 30 per cent. of the Company's issued share capital (excluding treasury shares) and aggregate elections for the Cash Option in excess of this number will be scaled back into the Rollover Option on a pro rata basis.

The Scheme will be undertaken on a Formula Asset Value to Formula Asset Value (“FAV”) basis. When calculating the respective FAVs for each company, the total costs of the Scheme will be attributed proportionally to each company in line with the quantum of their net assets (or the net assets of IP Select’s UK Equity class in IP Select’s case). The same split will be used to attribute the benefit of Invesco’s accrued performance fee waiver and any net asset value uplift from the Cash Option. Stamp duty, listing fees and any portfolio re-organisation costs will be borne by the enlarged IP Select UK Equity class shareholders.

Enlarged IP Select

Current overview of IP Select

IP Select is a multi-asset class investment trust with four independently managed share portfolios: UK Equity, Global Equity Income, Balance Risk Allocation and Managed Liquidity.

IP Select offers shareholders access to a wide array asset classes and markets, from the home shores of the UK to the wider global markets. In addition, IP Select’s innovative capital structure permits quarterly conversions between the four share classes without triggering a disposal for capital gains tax purposes. Investors can hold one or more of the share classes, in any combination.

As at 31 October 2020, IP Select had total assets of £111.3m.

UK Equity class – change of investment objective, investment policy and fund manager

The investment objective and policy of the UK Equity class will change to reflect the current investment objective and policy of IVI.

It is proposed that Ciaran Mallon, the current fund manager of IVI, will become the fund manager of IP Select’s UK Equity portfolio following completion of the Scheme.

It is envisaged that by completion of any portfolio re-organisation, the UK Equity portfolio will have very similar holdings to IVI’s current portfolio.

Global Equity Income class – management fee amendment and performance fee removal

In the interests of alignment, the 0.55% management fee on IP Select's Global Equity Income class will be amended to reflect the same terms as the UK Equity class, and its performance fee removed.

Post-transaction share class conversion opportunity

Shareholders who elect for the Rollover Option will have the opportunity post completion of the Scheme to convert some, or all, of their holding into the other share classes offered by IP Select.

Board Composition

It has been agreed that following completion of the Scheme the Board of IP Select will comprise of three directors from the current Board of IVI and three directors from the current Board of IP Select, with the expectation that the total number of directors may reduce to five in the future. Graham Kitchen will continue as Chairman of IP Select.

Expected timetable

It is currently envisaged that a shareholder circular and notice of the general meeting setting out the details of the Scheme and seeking shareholder approval for the cash exit and liquidation will be sent to shareholders in late January 2021. The relevant general meetings are expected to be held in February 2021.

The Chairman of IVI, Hugh Twiss, commented:

This proposed merger addresses the key challenges which the Board has faced in providing continuity of investment objective and manager - as shareholders clearly voted for in the recent Continuation Vote - whilst addressing the persistently wide discount in a way that does not undermine the financial stability of the Company, as well as providing some cash for those shareholders who desire it.

For further information please contact:

Invesco Asset Management Limited +44 (0) 20 3753 1000

Angus Pottinger

Will Ellis

J.P. Morgan Cazenove +44 (0) 20 7742 4000

William Simmonds

LEI: 549300DI4285Q8ZFO135

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 Shilla Pindoria of Invesco Asset Management Limited.