Invesco Select Trust Plc - Publication of Prospectus and Circular

Invesco Select Trust Plc - Publication of Prospectus and Circular

PR Newswire

London, March 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.

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 [phone]

Angus Pottinger

Investec Bank plc [phone]

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.