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.