Invesco Income Growth Trust Plc - Publication of Circular
PR Newswire
London, March 30
Invesco Income Growth Trust Plc - Circular re. General Meetings
Invesco Income Growth Trust plc (the "Company" or "IVI")
Recommended Proposals for the Voluntary Winding-Up and Reconstruction of the Company
30 March 2021
On 1 December 2020, the Board announced that it had agreed heads of terms with Invesco Select Trust plc ("IST") in respect of a proposed merger of the Company with IST to be effected by way of a scheme of reconstruction of the Company under Section 110 of the Insolvency Act 1986.
The Company is today sending a circular to Shareholders in connection with the Proposals (the "Circular").
Defined terms used in this announcement have the meanings given to them in the Circular.
The Proposals, which are unanimously recommended by the Board, comprise a members' voluntary liquidation (solvent liquidation) and a scheme of reconstruction of the Company pursuant to which Shareholders will be entitled, in respect of their shareholdings, to:
elect to receive IST UK Equity Shares (the "Rollover Option"); and/or
elect to receive cash (the "Cash Option").
Shareholders can make different Elections in respect of different parts of their holdings. The maximum number of Ordinary Shares that can be elected for the Cash Option is 30 per cent. of the total number of Ordinary Shares in issue (excluding Ordinary Shares held in treasury). Shareholders are entitled to elect for the Cash Option in respect of more than 30 per cent. of their individual holdings of Ordinary Shares. However, if aggregate Elections are made for the Cash Option which exceed 30 per cent. of the issued Ordinary Shares (excluding Ordinary Shares held in treasury), Shareholders who have made an Election for the Cash Option in excess of their Basic Entitlement shall have their Excess Applications scaled back in a manner which is, as near as practicable, pro rata to the number of Shares elected under such Excess Applications.
Shareholders who make no Election (or no valid Election) will be deemed to have elected for the Rollover Option in respect of their entire holding of Ordinary Shares. To the extent that an Overseas Shareholder would otherwise receive IST UK Equity 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 IST UK Equity Shares may be sold by the Liquidators in the market and the net proceeds paid to the relevant Overseas Shareholder.
Background to and rationale for the Proposals
At the Company's annual general meeting held on 10 September 2020, Shareholders voted in favour of a resolution for the continuation of the Company as a closed-ended investment company. Noting that just over 20 per cent. of those Shareholders who voted on the continuation resolution voted against the resolution, the Board announced that it would assess with its advisers the votes cast and engage with Shareholders as appropriate to determine what, if any, action to take.
The Board and its advisers have subsequently undertaken a comprehensive review of the Company's competitive positioning and, following that review, concluded that a merger with IST will offer Shareholders the best way to continue their investment in a closed-ended investment vehicle with a similar investment objective and the same manager, but in a vehicle whose shares trade at a tighter discount to net asset value per share than the persistently wide discount to net asset value at which the Ordinary Shares have historically traded.
The Proposals also allow those Shareholders who voted against the continuation resolution the opportunity for a partial cash exit at near to net asset value (less a discount of 2.5 per cent). Conditional upon the Scheme becoming effective, the Proposals would result in those assets in the Company which are to be transferred to IST pursuant to the Scheme forming part of the IST UK Equity Portfolio.
Benefits of the Proposals
The Directors consider that the Proposals should have the following benefits for Shareholders as compared to their current position, or under a simple liquidation scenario:
They enable Shareholders to roll over some or all of their investment into IST, which is proposing to amend the investment objective and policy of the IST UK Equity Portfolio to make it more compatible with the investment objective and policy of the Company.
Shareholders who may be subject to UK capital gains tax or corporation tax on chargeable gains should be able to roll over their investments into IST and thereby continue to receive investment returns without triggering an immediate liability to UK capital gains tax or corporation tax on chargeable gains.
For Shareholders electing for the Rollover Option, it is anticipated that they should be able to continue to receive similar levels of income in IST as they did as Shareholders of the Company.
For those Shareholders electing for the Rollover Option, the Proposals are anticipated to result in an uplift in the market value of their investments due to the narrower discount to net asset value at which the IST UK Equity Shares have historically traded compared with the Ordinary Shares.
For those Shareholders electing for the Rollover Option, the structure of IST should enable IST Shareholders to elect in the future to convert some or all of their shareholding into shares of another class within IST (currently on a quarterly basis, with the next conversion opportunity expected to occur in or around July 2021), thereby giving them the ability to diversify their investment into portfolio(s) of different asset class(es) within IST.
The Cash Option provides Shareholders with the option to realise part of their shareholding at a price which is close to the prevailing net asset value per share less a discount of 2.5 per cent.
Shareholders who roll their investment into IST will hold their investment in an enlarged vehicle. The increase in the size of IST will allow fixed costs to be spread over a larger cost base, thereby improving the ongoing charges ratio for the benefit of IST Shareholders, and may result also in better liquidity for their shares trading on the London Stock Exchange compared to the current level of trading liquidity in the Company's shares.
Shareholders electing for the Rollover Option will not suffer the full dealing costs that would be incurred on the realisation of the Company's portfolio in the event of a simple winding-up.
Invesco (in its capacity as the investment manager of IST) has agreed to waive, subject to the Scheme becoming effective, its entitlement to any performance fee accrued in respect of the IST UK Equity Portfolio up to the Effective Date (the "IST Accrued Performance Fee Waiver"); the benefit of such accrued performance fee waiver shall be shared by both the IST UK Equity Portfolio and those Shareholders who elect for the Rollover Option on a pro rata basis.
The management fee currently payable by the Company to Invesco is based on market capitalisation and is 0.60 per cent. per annum on the first £150 million and 0.50 per cent. per annum above that level.Upon the implementation of the Scheme (and subject to the Scheme becoming effective):
the management fee payable by IST in respect of the IST UK Equity Portfolio will be reduced to 0.55 per cent. per annum on the net assets of the IST UK Equity Portfolio up to £100 million and 0.50 per cent. per annum on the net assets of the IST UK Equity Portfolio over £100 million; and
Invesco's entitlement to future performance fees in respect of the IST UK Equity Portfolio will be removed in its entirety.
Invesco has agreed to waive, subject to the Scheme becoming effective, the termination fee which would otherwise be payable to it in respect of the termination of the existing investment management agreement with the Company on the Effective Date (the "Termination Fee Waiver Amount").
Summary of the mechanics of the scheme
On or shortly after the Calculation Date (being 5.00 p.m. on 15 April 2021), the Company NAV and IST UK Equity NAV as at the Calculation Date shall be determined.
Appropriation of the Company's assets into three pools
On or shortly after the Calculation Date, the Board, in consultation with the proposed Liquidators, shall finalise the division of the Company's undertaking, cash and other assets into three separate and distinct pools (the Liquidation Pool, the Cash Pool and the Rollover Pool), as follows:
First, there shall be appropriated to the Liquidation Pool such undertaking, cash and other assets of the Company of a value sufficient to meet the outstanding current and future liabilities, including contingent liabilities, of the Company and a retention to meet unknown and unascertained liabilities of the Company (the "Retention").
Second, there shall be appropriated to the Cash Pool and to the Rollover Pool the balance of the undertaking, cash and other assets of the Company remaining after the appropriation of the Liquidation Pool referred to above, of a value equal to that attributable to the Elections (which shall include deemed Elections) for the Cash Option and the Rollover Option respectively, on the basis that the value attributable to each Election for the purposes of the appropriation shall be the Residual Net Asset Value per Ordinary Share multiplied by the number of Ordinary Shares to which that Election relates.
Adjustments to the Cash Pool and Rollover Pool
Next, the Cash Pool will be adjusted so that the Cash Pool Discount (being an amount equal to 2.5 per cent. of the value of the Cash Pool as at the Calculation Date) will be deducted from the Cash Pool and instead will be applied towards the Total Benefits.
(The Total Benefits will be allocated to the Rollover Pool and the IST UK Equity Portfolio in such manner as described in the sub-section headed "IIGT FAV and IST UK FAV" below.)
The Rollover Pool as at the Calculation Date will also be adjusted and the adjustments will be made in such manner as described in the sub-section headed "IIGT FAV and IST UK FAV" below.
Total Costs and Total Benefits
The Total Costs and Total Benefits, both to be fixed as at the Calculation Date, shall be determined and agreed between the Board (in consultation with the proposed Liquidators) and the IST Board.
Total Costs means the following costs and expenses relating to the Company and IST which are attributable to the implementation of the Scheme and which are fixed as at the Calculation Date:
| Costs and expenses relating to the Company | Costs and expenses relating to IST (to be borne by the IST UK Equity Portfolio) |
| Company's financial adviser | IST's financial adviser |
| Company's legal adviser | IST's legal adviser |
| Fee of the Liquidators | Registrar |
| Reporting accountant | Reporting accountant |
| Receiving agent | Printing and postage of the IST Prospectus and IST Circular |
| D&O run off | Other miscellaneous costs directly attributable to the publication of the IST Prospectus and IST Circular |
| Printing and postage of the Company's Scheme circular and the Forms | |
| Other miscellaneous costs directly attributable to the implementation of the Scheme |
Total Costs shall not include any of the following:
any costs and expenses incurred by either the Company and/or IST in realising or realigning their respective portfolios in connection with the implementation of the Scheme;
stamp duty on the transfer of assets from the Company to IST;
any dividends which have been declared by either the Company or IST prior to the Calculation Date but not yet paid to the relevant company's shareholders;
any fees and expenses in connection with the application for the Admission of the IST UK Equity Shares; and
the Retention.
Total Benefits means (i) the Cash Pool Discount and (ii) the amount representing the IST Accrued Performance Fee Waiver, both of which are fixed as at the Calculation Date. For the avoidance of doubt, the Termination Fee Waiver Amount shall not be included in the Total Benefits.
IIGT FAV and IST UK FAV
The Total Costs and Total Benefits will be allocated to the Rollover Pool and the IST UK Equity Portfolio as at the Calculation Date on a pro rata basis by reference to the Company NAV and the IST UK Equity NAV respectively as at the Calculation Date (the Company's pro rata portion being the "IIGT Proportion" and the IST UK Equity Share class's pro rata portion being the "IST Proportion").
As a result of such pro rata allocations to the Rollover Pool and the IST UK Equity Portfolio as at the Calculation Date:
the value of the Rollover Pool as at the Calculation Date will therefore be adjusted. Such adjusted value of the Rollover Pool shall be referred to as the "IIGT FAV"; and
the IST UK Equity NAV as at the Calculation Date will therefore be adjusted. Such adjusted net asset value of the IST UK Equity Portfolio shall be referred to as the "IST UK FAV".
For illustrative purposes only, if the Company NAV as at the Calculation Date is £80 million and the IST UK Equity NAV as at the Calculation Date is £20 million, the Total Costs and Total Benefits will be split between the Rollover Pool and the IST UK Equity Portfolio on a 4:1 basis. If the Total Costs as at the Calculation Date are £100,000 and the Total Benefits as at the Calculation Date are £50,000, then the IIGT Proportion of the Total Costs will be equal to £80,000 and the IST Proportion of the Total Costs will be equal to £20,000, and the IIGT Proportion of the Total Benefits will be equal to £40,000 and the IST Proportion of the Total Benefits will be equal to £10,000. The value of the Rollover Pool as at the Calculation Date will therefore be adjusted to take into account the deduction of £80,000 from it and the allocation of £40,000 to it, and the IST UK Equity NAV as at the Calculation Date will therefore be adjusted to take into account the deduction of £20,000 from it and the allocation of £10,000 to it.
Conversion ratio
The issue of IST UK Equity 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 IST UK FAV per Share as at the Calculation Date.
Effective Date
On the Effective Date, the cash, undertaking and other assets of the Company comprising the Rollover Pool shall be transferred to IST, for the benefit of the IST UK Equity Portfolio. In consideration for the transfer of the Rollover Pool to the IST UK Equity Portfolio under the Transfer Agreement, the relevant numbers of IST UK Equity Shares will be allotted to the Liquidators who will renounce the IST UK Equity Shares in favour of the Shareholders who elect or are deemed to have elected for the Rollover Option (save for any Overseas Shareholders).
Shortly following the Effective Date, the Liquidators will distribute the net realisation proceeds (following the realisation of the Cash Pool) to the Shareholders who have elected for the Cash Option in accordance with their respective entitlements under the Scheme.
Special Dividend
The Directors have declared a special dividend of 8.35 pence per Share (the "Dividend") and Shareholders who are on the Register as at 6.00 p.m. on 6 April 2021 will be entitled to receive such dividend, subject to the passing of the Resolutions at the First General Meeting. The Dividend incorporates an amount equal to the Company's expected net income for the period from 1 April 2021 to 22 April 2021 and the balance represents an amount in lieu of the fourth interim dividend for the year ended 31 March 2021 and brought forward revenue reserves. The Dividend will be paid on 21 April 2021. The ex-dividend date will be 1 April 2021.
It is not anticipated that there will be further dividends paid in relation to the current financial period or for the period up to the liquidation of the Company.
Conditions of the Proposals
Implementation of the Proposals is subject to a number of conditions, including:
the passing of the Resolutions to be proposed at the First General Meeting and the Resolution to be proposed at the Second General Meeting, or any adjournment of those meetings, and any conditions of such Resolutions being fulfilled;
the Financial Conduct Authority agreeing to amend the listing of the Ordinary Shares to reflect their reclassification as Reclassified Shares for the purpose of implementing the Scheme;
the IST Resolutions 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 IST UK Equity Shares to the Official List and to trading on the main market of the London Stock Exchange, respectively; and
the Directors resolving to proceed with the Scheme.
If any condition is not satisfied, the Proposals will not become effective, the Company will not proceed with the winding-up and instead will continue in existence. In these circumstances, the Directors will reassess the options available to the Company at that time.
Shareholder Meetings
The implementation of the Proposals will require two general meetings of the Company. The notices convening the First General Meeting (to be held at 10.30 a.m. on 15 April 2021) and the Second General Meeting (to be held at 11.00 a.m. on 23 April 2021) are set out at the end of the Circular.
As a result of the Covid-19 pandemic and associated UK Government guidance, attendance at the General Meetings is not expected to be possible. Arrangements will be made by the Company to ensure that a minimum number of Shareholders required to form a quorum will attend each of the General Meetings in order that the meetings may proceed.
Recommendation and voting intentions
The Board, which has received financial advice from J.P. Morgan Cazenove, considers the Proposals and the Resolutions to be in the best interests of Shareholders as a whole. Accordingly, the Board unanimously recommends Shareholders to vote in favour of the Resolutions, as the Directors intend to do in respect of their own beneficial holdings, which total 113,527 Ordinary Shares (representing approximately 0.19 per cent. of the Company's total voting rights) as at the Latest Practicable Date. In providing advice to the Board, J.P. Morgan Cazenove has relied on the Board's commercial assessment of the Proposals.
Expected Timetable
| 2021 | |
| Ex dividend date for the Dividend | 1 April |
| Record date for the Dividend | 6 April |
| Latest time and date for receipt of Forms of Proxy in respect of the First General Meeting | 10.30 a.m. on 13 April |
| Latest time and date for receipt of Forms of Election and/or TTE Instructions from Shareholders | 1.00 p.m. on 14 April |
| Record Date for entitlements under the Scheme | close of business on 14 April |
| First General Meeting | 10.30 a.m. on 15 April |
| Calculation Date | 5.00 p.m. on 15 April |
| Dividend paid to Shareholders | 21 April |
| Latest time and date for receipt of Forms of Proxy in respect of the Second General Meeting | 11.00 a.m. on 21 April |
| Ordinary Shares disabled in CREST | close of business on 21 April |
| Reclassification of the Ordinary Shares [2] | 8.00 a.m. on 22 April |
| Suspension of listing of Reclassified Shares | 7.30 a.m. on 23 April |
| Second General Meeting | 11.00 a.m. on 23 April |
| Effective Date for implementation of the Scheme | 23 April |
| Announcement of the results of Elections, IIGT FAV per Share, IST UK FAV per Share and conversion ratio | 23 April |
| CREST accounts credited with, and dealings commence in, IST UK Equity Shares | 8.00 a.m. on 26 April |
| Certificates despatched in respect of IST UK Equity Shares during or as soon as practicable after | week commencing 3 May |
| Cheques despatched to Shareholders who elect for the Cash Option in accordance with their entitlements and CREST accounts credited with cash | week commencing 3 May |
| Cancellation of listing of Reclassified Shares | as soon as practicable after the Effective Date |
Enquiries:
J.P. Morgan Cazenove +44 (0) 20 7742 4000
William Simmonds
Invesco Asset Management Limited +44 (0) 20 3753 1000
Angus Pottinger
Will Ellis
LEI: 549300DI4285Q8ZFO135
[1] Please note that this is not a profit forecast and there can be no assurance that any distributions or dividend levels can be achieved. Please also note that the IST Board has not set dividend targets for the year to 31 May 2021.
[2] Reclassified Shares are a technical requirement of the Scheme and will be created if Resolution 1 to be proposed at the First General Meeting is passed and becomes effective. Ordinary Shares will be reclassified according to the Elections made (or deemed to be made) by Shareholders.
