Restructuring Proposals

Overview from the Chair – Victoria Muir

As described in the announcement of 14 December 2023, the Invesco Select Trust Plc Board has undertaken a review of the Company and its strategy, with the objective of broadening the appeal of the Company as well as improving liquidity and narrowing the discount at which the Company’s shares trade. Consequently, the Board intends to put forward proposals to the Company’s Shareholders, to simplify the Company’s corporate structure and to introduce certain features that we believe will appeal to a broad investor base. 

In recent years, the Company has seen a limited take-up of the conversion opportunities between the existing four share classes. The Balanced Risk Allocation Class and the Managed Liquidity Class now amount to, in aggregate, only circa 3.7% of the net assets of the Company as at 5 February 2024. Further, with demand from investors for larger, more liquid investment vehicles, the Board believes it could be increasingly challenging to market separately the Global Share Class and the UK Share Class in their current form, with the structure potentially presenting an additional hurdle for those looking to invest.

Proposals 

The Board believes that the Global universe offers the broadest set of investment opportunities for equity investors whilst also providing diversification benefits for UK investors. Additionally, the Board has confidence in its award-winning Global Equity Income fund manager, Stephen Anness, to continue to seek out investment opportunities for the ongoing benefit of Shareholders. Accordingly, the Board has concluded that it would be in the best interests of Shareholders as a whole to consolidate the UK Equity, Balanced Risk Allocation and Managed Liquidity Share Classes into the Global Equity Income Share Class. As part of this consolidation the Board will undertake a 15% tender offer on the UK Equity Share Class. Additionally, given the Balanced Risk Allocation and Managed Liquidity shares classes offer significantly differentiated risk profiles and asset exposures to the Global Equity Income Share Class, the Board will provide those two share classes with the opportunity for a full cash exit through tender offers. The tender offer prices will be based on the NAVs of the respective share classes less the costs of the proposals, including those incidental costs of the tender offers, less a 2% discount.

Based on NAVs as at 5 February 2024 and on an assumption that the tender offers are subscribed in full, the consolidation would result in the Company having net assets of approximately £182million. As compared with any of the Company’s current share classes individually, the Board believes this should increase the appeal to investors and would be expected to have a beneficial impact on liquidity, and potentially on the discount of the enlarged Global Equity Income Share Class.

The investment objective and investment policy of the Global Equity Income Share Class will be retained, reflecting the Board’s confidence in Stephen’s investment process as well as the strength and depth of his team. In the recent Citywire Investment Trust Awards 2023, held in November, Stephen Anness and his team won ‘Best International Income Trust’¹. Additionally, in January 2024 Kepler Trust Intelligence awarded the Global Equity Income Share Class a ‘Kepler Growth Rating’².

In recognition of the increasing importance of dividends to Shareholders in the current economic environment, the Board intends, subject to Shareholder approval of the proposals, to enhance the current dividend policy of the Global Equity Income Share Class, which consists of three equal interim dividends and a `wrap-up’ fourth interim dividend. The new policy will involve paying at least 4%. calculated on the unaudited year end NAV, paid quarterly in equal amounts. The intention would be that these dividends would predominantly be paid from the Company’s revenues and topped up from capital reserves as required. The Board believes that this should provide both an enhanced dividend compared to current levels on the Global Equity Income Share Class and, once the relevant NAV is known, a smoother, predictable income stream to Shareholders.

If the restructuring proposals are approved, the Board intends to put forward a vote at the Company’s AGM in 2026 for the continuation of the Company. If the 2026 continuation vote is passed the Board will put forward a continuation vote at the AGM in 2031 and, if passed, at each fifth AGM thereafter.

The Board also intends to introduce a discount control policy in the enlarged Global Equity Income Share Class which will seek to maintain the discount at less than 10%, in normal market conditions. These proposals will require the approval of Shareholders. The Board has received indications of support for the proposals from those Shareholders it was able to consult through market soundings.

We encourage you to learn more by reading the Circular that explains the proposal and its background in detail. We hope the information provided will make clear why we believe this proposal will add real value.