The board of Invesco Select Trust has reviewed the company and its strategy, with the objective of broadening the appeal of the company as well as improving liquidity and narrowing the discount. It intends to put forward proposals to shareholders to simplify the corporate structure and to introduce certain features that it believes will appeal to a broad investor base.
Background
The company was launched in 2006 with a multi-share class structure to enable shareholders to invest in a wide array of asset classes and to rebalance their portfolio by allowing them to convert, tax-efficiently between share classes. However, in recent years, the company has seen a limited take-up of the conversion opportunities between the existing four share classes: Global Equity Income (IVPG); UK Equity Income (IVPU); Balanced Risk Allocation (IVPB); and Managed Liquidity (IVPM). Balanced Risk and the Managed Liquidity now amount to just 3.6% of net assets. Further, with demand from [some] investors for larger, more liquid investment vehicles, the board believes it could be increasingly challenging to market separately the Global and UK share classes in their current form, with the structure potentially presenting an additional hurdle for those looking to invest.
The 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, it 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. The board has concluded that it would be in the best interests of shareholders as a whole to consolidate everything into the Global Equity Income share class. As part of the consolidation the board will undertake a 15% tender offer on the UK share class, and offer investors in the balanced and liquidity classes the opportunity of a full cash exit through a tender offer. The tender offer prices will be based on the NAVs of the respective share class less the costs of the proposals less a 2% discount.
The consolidation would result in the company having net assets of approximately £182m [ignoring the basket case that is British & American, it would still be the smallest of the global equity income funds]. 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 share class.
The investment objective and investment policy of the Global share class will be retained.
Dividend enhancement
In recognition of the increasing importance of dividends to shareholders in the current economic environment, the board intends to enhance the current dividend policy of the Global share class, paying at least 1% of cum-income net asset value quarterly, calculated on the unaudited year end NAV. The intention would be that these dividends would be paid from both the revenues and capital reserves as required. [This would propel the Global share class up the yield table in its peer group – and crucially would allow it to compete on a level playing field with the sector’s current success story – JPMorgan Global Growth and Income, which has the same dividend policy. Investors would then presumably look at the track records of the two trusts to choose between them and here the Invesco fund has the edge over 1 and 3-years.].
Continuation votes and discount management
If the proposals are approved, the board intends to put forward a vote at the AGM in 2026 for the continuation of the company. If that vote is passed the board will put forward a continuation vote every fifth AGM thereafter.
The board also intends to introduce a discount control policy in the enlarged Global share class which will seek to maintain the discount at less than 10% in normal market conditions.
Next steps
The 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. The company currently anticipates being able to publish a circular and notice of meeting(s) in connection with the proposals in Q1 2024.
In order to facilitate the proposals, the board has determined to postpone the conversion that would have taken place in February 2024.
IVPB / IVPG / IVPM / IVPU : Invesco Select will no longer provide a selection