Invesco hopes to avoid a hostile requisition of English & International

The board of the 275m Invesco English & International investment trust has announced proposals to allow its shareholders to redeem their shares on a quarterly basis.

The proposals, which need shareholder approval at a forthcoming extraordinary meeting, have been designed to reduce the discount of the trust in attempt to stave off a hostile requisition from an arbitrageur. Since December last year Laxey Partners – a hedge fund group – has built a 16% stake in the trust, putting pressure on the board to restructure the shareholder base.

Only shareholders already on the register at July 13, 2005 will be able to redeem their holdings at the first redemption date, which is expected to be in December/January. Shares will be redeemed at net asset value, less costs and an exit charge. For the first two quarterly tenders the exit charge will be 4%, reducing to 3% for the next two tenders and 2% thereafter.

According to the board, this charge will provide an NAV enhancement for ongoing shareholders, while the sliding scale will provide a further incentive for shareholders to remain in the fund rather than redeem at the first opportunity.

Although called Invesco English & International, the trust invests solely in UK smaller companies. Managed by Andy Crossley since November 1991, the fund traded at a premium in the mid-1990s. Indeed, Charles Cade, head of research at Close Wins, notes that Crossley was regarded as a star fund manager for a time during the 1990s.

“However, his reputation suffered somewhat from 2000-02 and, somewhat unfairly, he was tarred with the same brush as the smaller company growth managers who were exposed by the collapse of the TMT bubble,” says Cade. “As a result, the fund’s discount exceeded 35% in early 2003, although it has since narrowed as a result of a pick-up in performance, combined with arbitrage buying and, more recently, share buybacks.”

Cade adds that, going forward, the new regular redemption facility should limit the downside to the discount. Indeed, he notes that the buyback facility can be used to control the discount between the redemption periods if necessary.

l Cover story, page 21