Invesco Perpetual Select Trust Plc - Statement re Proposed Combination with IVI

Invesco Perpetual Select Trust Plc - Statement re Proposed Combination with IVI

PR Newswire

London, November 30

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.

1 December2020

LEI: 549300JZQ39WJPD7U596

Invesco Perpetual Select Trustplc

Combination with Invesco Income Growth Trust plc

Introduction

The Board of Invesco Perpetual Select Trust plc (the "Company" or "IP Select") is pleased to announce that it has agreed heads of terms with the Board of Invesco Income Growth Trust plc ("IVI") in respect of a proposed combination of IVI with the UK Equity share class of IP Select (the "Proposals"). It is intended that the Proposals, if approved by each company's shareholders and subject to regulatory and tax approvals, will be implemented through a scheme of reconstruction pursuant to section 110 of the Insolvency Act 1986 (the "Scheme"), resulting in the voluntary liquidation of IVI and the rollover of its assets into the Company in exchange for the issue of new IP Select UK Equity class shares to IVI shareholders, with IVI shareholders also offered the option of a cash exit for 30% of IVI's shares in issue (the "Transaction").

As part of the Proposals, Ciaran Mallon, the current fund manager of IVI, will be appointed on the Scheme's effective date as the fund manager of the IP Select UK Equity class portfolio, with the investment objective and policy of the share class adjusted to reflect IVI's current investment objective and policy. IP Select will retain its innovative capital structure, offering investors the opportunity to switch (on a quarterly basis) between its UK Equity Income, Global Equity Income, Balanced Risk Allocation and Managed Liquidity share classes to react to changing investment conditions.

Benefits of the Proposals

The Board believes that the Proposals have a number of benefits for IP Select's existing shareholders:

• Increase in scale: With IVI's net assets currently standing at approximately £165m, the Company will increase in size materially as a result of the Transaction. This is expected to enhance the profile of IP Select, 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 OCR to the benefit of the Company's shareholders.

• Improved management fee structure: As part of the Proposals, the current flat annual management fee of 0.55% of net assets payable on the UK Equity share class will be reduced, with 0.55% payable on its net assets up to £100m and 0.50% over £100m; and the performance fee (being 12.5% of any increase in net assets above the benchmark plus 1.0%, capped at 0.55% of net assets) will be removed. In the interests of alignment, the 0.55% management fee on the Company's Global Equity Income share class will be amended in the same way, and its performance fee removed.

• Significant Invesco cost contribution: As part of the Proposals, Invesco Fund Managers Limited, which acts as manager to both IP Select and IVI, will waive its accrued performance fee of approximately £530,000 in respect of IP Select's UK Equity share class portfolio, as well as the fee to which it is entitled upon termination of its management arrangements with IVI.

• Attractive UK equity income strategy: The UK Equity share class will be managed to a UK equity income mandate going forward, benefitting from the expertise of Ciaran Mallon. Ciaran has been lead portfolio manager of IVI 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 31 October 2020, IVI has returned 78.6% on a NAV total return basis compared with the FTSE All-Share Index, which returned 53.7% over the same timeframe.

Further details of the Scheme

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

1. Receive UK Equity class shares in the Company, the ("Rollover Option"); and/or

2. Realise a proportion or all of their holding for cash (the "Cash Option")

IVI Shareholders who elect for the Cash Option will receive their cash at the equivalent to a 2.5 per cent. discount to the underlying net asset value. The Cash Option is expected to be for 30 per cent. of IVI'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, 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 two companies pro rata by reference to the net assets of IVI and of the Company's UK Equity share class. 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 and listing fees will be borne by the shareholders of the enlarged Company. In accordance with customary practice for such transactions involving investment trusts, the City Code on Takeovers and Mergers is not expected to apply to the Transaction.

The UK Equity Income mandate

As part of the Proposals, Ciaran Mallon, the current fund manager of IVI, will be appointed as the fund manager of the IP Select UK Equity portfolio, with the investment objective and policy of the share class adjusted to reflect IVI's current investment objective and policy. Following completion of the Transaction, the objective of the share class will be to produce income and capital growth superior to that of the UK stock market and dividends paid quarterly that, over time, grow above the rate of inflation.

With over 26 years of investment experience, Ciaran has a disciplined approach, driven by company fundamentals which are combined with a considered approach to diversification. He seeks trustworthy management whose interests are aligned with shareholders and which represent a long-term investment opportunity, which means that there is a low turnover of stocks within the strategy.

Board Composition

Three directors of IVI have been invited to join the Board of IP Select from the date of completion of the Transaction. It is expected that the Board of the Company will initially comprise six directors, but that this may reduce to five directors in the future. Graham Kitchen will remain Chairman of the Company.

Expected timetable

It is currently envisaged that a shareholder circular and notice of general meeting setting out details of the Proposals, and seeking shareholder approval for their implementation, will be sent to the Company's shareholders in late January 2021. The general meeting is expected to be held in February 2021.

The Chairman of IP Select, Graham Kitchen, commented:

"We are delighted to announce this combination with IVI, which will create a company with a significantly greater footprint. With our innovative capital structure, we will be able to offer our new shareholders the choice of allocating between our UK Equity Income, Global Equity Income, Balanced Risk Allocation and Managed Liquidity share classes. We will be creating an enlarged company with a unique proposition that offers a degree of flexibility that can only be of benefit in today's uncertain times."

For further information please contact:

Invesco Asset Management Limited [phone]
Angus Pottinger
Will Ellis

Investec Bank plc [phone]
David Yovichic
Tom Skinner
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.