IPE Invesco Enhanced Income Limited

 
TIDMIPE 
 
22 April 2021 
 
                        Invesco Enhanced Income Limited 
 
  Recommended Proposals for the Reconstruction and Winding-up of the Company 
 
On 1 March 2021, The Board of Invesco Enhanced Income Limited (the "Company" or 
"IPE") announced that it had signed Heads of Terms with the Board of City 
Merchants High Yield Trust Limited ("CMHY") in respect of a proposed merger 
with CMHY to be effected by way of a shareholder approved contractual scheme of 
reconstruction (the "Scheme"). 
 
A circular in connection with the Scheme will shortly be sent to the Company's 
shareholders (the "Shareholders") including 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"). 
 
Under the scheme, the Company's Shareholders will receive New CMHY Shares on 
the basis of the respective adjusted net asset values of each company. Upon the 
Scheme becoming effective, it is proposed that the name of CMHY be changed to 
"Invesco Bond Income Plus Limited" ("BIPS"). 
 
The Proposals, which are unanimously recommended by the Board, comprise a 
scheme of reconstruction and the summary winding up (solvent liquidation) of 
the Company pursuant to which Shareholders will be entitled, in respect of 
their shareholdings, to receive New CMHY Shares. 
 
Background to the Proposals 
 
IPE and CMHY share many similarities: both are managed by Invesco and have the 
same lead portfolio manager, Rhys Davies; the Company and CMHY invest in the 
same asset class with similar investment objectives and policies; there is 
significant overlap between the two portfolios; and the Company and CMHY have 
many common shareholders. 
 
The Board is very aware of the benefits that accrue to shareholders from 
greater economies of scale including lower ongoing charges and increased 
liquidity. In light of this and the similarities between the Company and CMHY, 
the Board entered into discussions with the CMHY Board with respect to a 
proposed merger and both the Board and CMHY are in agreement that the interests 
of Shareholders and CMHY Shareholders would be best served if the assets of the 
Company and CMHY were merged into a single entity. 
 
Conditional upon the Scheme becoming effective, the Proposals would result in 
the Company being wound up and the assets and undertaking of the Company 
transferring to CMHY, with Shareholders being issued New CMHY Shares. 
 
It is proposed that the enlarged entity will be renamed Invesco Bond Income 
Plus Limited ("BIPS") which, based on the existing net assets of CMHY and IPE, 
would have net assets in excess of £300 million. A resolution to change the 
name of the Company will be put to the Shareholders at the General Meeting. The 
current portfolio manager of both CMHY and IPE, Rhys Davies, will continue as 
the portfolio manager of BIPS. 
 
(The above proposals are referred to herein as the "Proposals".) 
 
Benefits of the Proposals 
 
The Directors consider that the Proposals should have the following benefits 
for IPE Shareholders: 
 
  * Greater scale through the combination of similar investment portfolios: 
    Shareholders will be able to continue with the same fund management company 
    and investment manager with a similar investment style. Rhys Davies 
    currently manages both funds with a good track record and does so with a 
    similar investment objective of high income and a focus on high-yield 
    fixed-interest securities. There is a high degree of overlap between the 
    two investment portfolios. 
  * Lower management fee arrangements: In connection with the Proposals, it has 
    been agreed with the Investment Manager that the management fee will be 
    reduced to an annual amount equal to 0.65 per cent of the total assets less 
    current liabilities to reflect the larger size of BIPS. This is a reduction 
    from the Company's tiered annual management fee with a current blended rate 
    of 0.76 per cent of the Company's net assets. 
  * Lower ongoing charges: In addition to the change in management fee 
    arrangements, the other costs of the Company will be spread across a larger 
    asset base resulting in further economies of scale and a reduction in 
    ongoing charges ratio. 
  * Sustainable income level: It is anticipated that the income yield payable 
    to Shareholders will be placed onto a more sustainable basis as a 
    consequence of the transaction. In addition, Shareholders will be paid a 
    special pre-liquidation dividend of 0.75 pence per Ordinary Share ahead of 
    the transaction. 
  * Increase in scale and improved liquidity: The Board expects that the 
    enlarged entity will benefit from greater liquidity in its shares. 
  * Potential for strong share price rating: The Board believes that the above 
    benefits should assist BIPS's shares in maintaining a strong rating as the 
    greater scale of BIPS is expected to result in broader market appeal. 
 
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 General Meeting, or 
    any adjournment of the General Meeting, and any conditions of such 
    Resolutions being fulfilled; 
  * The CMHY 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 New CMHY Shares to the Official List and 
    to trading on the main market of the London Stock Exchange, respectively; 
  * The novation of the Repo Contacts and FX Forwards to CMHY with effect from 
    the Effective Date; and 
  * The Directors resolving to proceed with the Scheme. 
 
If any of the above conditions are 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. 
 
Dividends 
 
In connection with the Proposals, it is proposed that the BIPS Board would 
target an annualised dividend of 11 pence per share over a period of three 
years following the implementation of the Scheme by way of twelve quarterly 
dividend payments of 2.75 pence per share, with the first such dividend being 
the second interim dividend for the year ending 31 December 2021 which is 
expected to be declared in June 2021. This is equivalent to approximately 4.22p 
per annum per share for Shareholders. On the implementation of the Scheme, the 
target total dividends per share for the year ending 31 December 2021 would 
therefore increase to 10.75 pence per share (being the First Interim Dividend 
of 2.5 pence per share and three further quarterly dividends of 2.75 pence per 
share). 
 
It is anticipated that dividends will be substantially covered by net income 
from the portfolio although BIPS will support the target dividend over this 
period through the use of revenue and capital reserves if necessary. 
Thereafter, the BIPS Board shall give consideration to its ongoing dividend 
policy, taking into account the annualised net income from its portfolio and 
the market environment at that time. 
 
This proposed dividend policy has been agreed between the IPE Board and the 
CMHY Board in recognition of the differential in income distribution ratios 
adopted by each of the two companies and is intended to provide a path towards 
a sustainable income distribution to shareholders of BIPS. 
 
Whilst the target dividend of 11 pence per share would result in a reduction in 
the annual dividend income for Shareholders compared with IPE's historical 
dividend pay-out, Shareholders will be paid a special pre-liquidation dividend 
of 0.75 pence per Ordinary Share ahead of the transaction, which is expected to 
be approximately equal to the reduction for the first year following the 
merger. 
 
IPE's dividend has been supported by the use of revenue reserves for several 
years. As noted in IPE's 2020 Annual Financial Report, the medium term effects 
of Covid-19 will likely bring a prolonged period of very low interest rates, in 
light of which the Board would be reviewing whether the dividend policy is 
sustainable, balancing the need for current income against the requirement to 
preserve investors' capital to earn that income in coming years. The Board has 
taken this into account when considering the dividend proposals set out above 
and believes they will continue to provide an attractive level of income for 
Shareholders over the long-term. 
 
Gearing 
 
While the maximum gearing level shall remain at the level within the CMHY 
investment policy of 30 per cent. of total assets, it is intended that, 
immediately following the implementation of the Scheme, the net gearing of the 
BIPS portfolio will be approximately 10 per cent. of net assets. 
 
Proposed Board Changes 
 
Following completion of the Proposals, BIPS will have board representation from 
both IPE and CMHY and will be chaired by Timothy Scholefield, current Chairman 
of CMHY (the "BIPS Board"). The BIPS Board will comprise six non-executive 
directors all of whom will be independent of the AIFM and the Investment 
Manager. 
 
The proposed BIPS Board will be as follows: 
 
  * Timothy Scholefield (Chairman), who is the existing chairman of CMHY; 
  * Kate Bolsover, who is an existing director of the Company, and is proposed 
    to be appointed senior independent director of BIPS; and 
  * Caroline Dutot, who is an existing director of CMHY; 
  * Heather MacCallum, who is an existing director of CMHY; 
  * Tom Quigley, who is an existing director of CMHY; 
  * Christine Johnson, who is an existing director of the Company. 
 
In accordance with Provisions 5.2.6 and 6.2.13 of the AIC Code, the Board has 

identified that Kate Bolsover and Timothy Scholefield are both directors of 
Fidelity Asian Values Plc ("FAS"). However, Timothy Scholefield does not intend 
to stand for re-election to the board of FAS at the annual general meeting to 
be held in December 2021. It is noted that the majority of the Board of the 
Enlarged Company will be independent of each other. 
 
Circular 
 
The Circular is expected to be published shortly and copies will be available 
for inspection on the Company's website www.invesco.co.uk/enhancedincome. In 
addition, a copy of the Circular has been submitted to the National Storage 
Mechanism and will shortly be available for viewing online at the following 
website address: 
 
https://data.fca.org.uk/#/nsm/nationalstoragemechanism. 
 
The General Meeting 
 
The General Meeting will be held at the offices of JTC Fund Solutions (Jersey) 
Limited, 28 Esplanade, St Helier, Jersey JE2 3QA at 10.00 a.m. on 19 May 2021 
but will follow the minimum legal requirements for a general meeting. In line 
with current guidance, physical attendance by members at the General Meeting 
may not be feasible and is therefore discouraged. Arrangements will therefore 
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. 
 
Given that it may not be feasible for Shareholders to attend the General 
Meeting, Shareholders are strongly encouraged to appoint the Chairman of the 
General Meeting as their proxy to vote on their behalf at the General Meeting. 
 
Expected Timetable 
 
                                                                          2021 
 
Ex dividend date for interim dividend                             8 April 2021 
 
Record date for interim dividend                                  9 April 2021 
 
Ex dividend date for special dividend                            29 April 2021 
 
Payment date for interim dividend                                30 April 2021 
 
Record date for special dividend                                 30 April 2021 
 
Record Date for entitlements under the             close of business on 13 May 
Scheme 
 
Calculation Date                                      5.00 p.m. on 14 May 2021 
 
Latest time and date for receipt of Forms            10.00 a.m. on 17 May 2021 
of Proxy 
 
Suspension of listing of Ordinary Shares              7.30 a.m. on 19 May 2021 
 
General Meeting                                      10.00 a.m. on 19 May 2021 
 
Effective Date for implementation of the                           19 May 2021 
Scheme 
 
Payment date for special dividend                                  20 May 2021 
 
CREST accounts credited with, and dealings   As soon as practicable after 8.00 
commence in, New CMHY Shares                               a.m. on 20 May 2021 
 
Certificates despatched in respect of New          Week commencing 24 May 2021 
CMHY Shares during or as soon as 
practicable after 
 
Cancellation of listing of Ordinary Shares    as soon as practicable after the 
                                                                Effective Date 
 
Terms used and not defined in this announcement have the meanings given in the 
Circular unless the context otherwise requires. 
 
This announcement does not contain all the information which is contained in 
the Circular. Shareholders should read the Circular to make an informed 
decision in respect of the Proposals 
 
For further information please contact: 
 
JTC Fund Solutions (Jersey) Limited 
+44 (0) 15 3470 0000 
 
Hilary Jones 
 
Invesco Asset Management Limited 
+44 (0) 20 3753 1000 
 
Will Ellis 
 
Guy Short 
 
J.P. Morgan Cazenove (Financial Advisor to IPE)+44 (0) 20 7742 4000 
 
William Simmonds 
 
Alexis Owuadey 
 
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 IPE 
is Hilary Jones of JTC Fund Solutions (Jersey) Limited. 
 
 
 
END 
 
 

(END) Dow Jones Newswires

April 22, 2021 02:00 ET (06:00 GMT)

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