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INVESCO Convertible (IVC)

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Wednesday 07 August, 2002

INVESCO Convertible

Scheme of Reconstruction

INVESCO Convertible Trust PLC
07 August 2002



                         INVESCO CONVERTIBLE TRUST PLC


                RECOMMENDED PROPOSALS FOR THE RECONSTRUCTION OF

                         THE COMPANY (the 'Proposals')



Introduction


The Board is today announcing proposals for the winding up and reconstruction of
the Company. Under the proposals, Shareholders (other than Overseas
Shareholders) will be able to elect to rollover their holdings into:


  • new INVESCO Income Growth Trust plc ('INVESCO Income Growth Trust')
    Ordinary Shares; and/or

  • new INVESCO Income Growth Trust plc Convertible Unsecured Loan Stock
    ('CULS'); and/or

  • income units in a new unit trust, the INVESCO Perpetual UK Recovery Fund
    (the 'UK Recovery Fund'); and/or

  • accumulation units in the INVESCO Perpetual Money Fund (the 'Money Fund');


(together, the 'Roll-Over Funds') or any combination thereof.


Shareholders who wish to receive cash in respect of all or part of their
Ordinary Shares can do so by electing for Money Fund Units and redeeming all or
part of those units under the Redemption Option (whereby units will be redeemed
on the first business day after the date on which the Scheme becomes effective).


The Board believes that the principal benefits of the Scheme for Shareholders
are that it provides an opportunity for those who wish to remain invested in
funds managed by INVESCO to do so with exposure to a choice of three funds,
whilst at the same time providing an orderly exit for those wishing to realise
their investment.


The Board considers that the Proposals are in the best interests of Shareholders
as a whole. Accordingly, your Board unanimously recommends Shareholders to vote
in favour of the Proposals.


For the reasons mentioned below, Shareholders are strongly recommended to
complete and return a Form of Election in connection with the Proposals.



Background to the Proposals

Under the Articles, the Board is required to propose a resolution to wind-up the
Company on or prior to 31 August 2002. However, in the Company's annual report
and accounts for the year ended 31 August 2001, the Board stated it would seek
to put forward proposals offering Shareholders one or more alternative
investment opportunities, to be effected in a tax efficient manner. In
conjunction with its advisers and after consultation with a number of
institutional Shareholders and advisers to individual Shareholders, the Board
has now developed proposals designed to satisfy the differing requirements of
Shareholders. Those proposals, which are outlined below, envisage a scheme of
reconstruction of the Company under section 110 of the Insolvency Act 1986.




The Proposals


Options available to Shareholders


Under the Proposals, the Company will be put into members' voluntary liquidation
and Shareholders will be able to elect to 'roll-over' their entitlement to the
Company's net assets, after providing for its liabilities (including contingent
liabilities and the costs of implementing the Proposals), into an existing
investment trust and/or a new unit trust and/or an existing unit trust, without
the paying of any commission, brokerage or initial charge or (subject to
obtaining the tax clearances detailed in the circular being sent to
Shareholders) the crystallising of any potential liability to UK capital gains
tax. All of the Roll-over Funds are managed by the AMVESCAP Group. INVESCO
Income Growth Trust is managed by INVESCO Asset Management Limited. The UK
Recovery Fund and the Money Fund are managed by INVESCO Fund Managers Limited.


Under the Proposals, Shareholders may elect to receive:


  • INVESCO Income Growth Trust Ordinary Shares having a net asset value equal
    to the residual net asset value per Ordinary Share (as determined in
    accordance with the Scheme); and/or


  • INVESCO Income Growth Trust CULS having a value equal (at their issue
    price, being the par value of £1) to the residual net asset value per
    Ordinary Share (as determined in accordance with the Scheme); and/or


  • income units in the UK Recovery Fund having a value equal to the residual
    net asset value per Ordinary Share (as determined in accordance with the
    Scheme); and/or


  • accumulation units in the Money Fund having a value equal to the residual
    net asset value per Ordinary Share (as determined in accordance with the
    Scheme).


The residual net asset value per Ordinary Share will be equal to the net asset
value of an Ordinary Share after providing for all of the Company's liabilities
(including contingent liabilities and other costs of implementing the
Proposals). Such liabilities are not expected to exceed 3.87 per cent. of the
Company's net assets as at the close of business on 31 July 2002 (being the
latest practicable date prior to publication of this announcement). Income units
in the UK Recovery Fund and accumulation units in the Money Fund will be issued
at their respective creation prices, which will be calculated by dividing the
value of each of such funds by the number of units in issue.


Shareholders who wish to receive cash in respect of all or any of their Ordinary
Shares can do so by electing for Money Fund Units and making a further election,
under the Redemption Option, for those units to be redeemed on the first
business day following the date on which the Proposals become effective.


Shareholders (apart from Overseas Shareholders) who do not make a valid election
under the Scheme will be deemed to have elected to receive INVESCO Income Growth
Trust Ordinary Shares. Overseas Shareholders will be deemed to have elected for
Money Fund Units and the Redemption Option. Shareholders elections are also
subject to certain other conditions. Details of these conditions and deemed
elections in the event these conditions are not met are set out under 'Deemed
elections' below and in the circular to Shareholders.


On liquidation, the Company's net assets, after providing for its liabilities
(including contingent liabilities and the costs incurred in implementing the
Proposals), will be transferred to the Roll-over Funds in proportions
corresponding to the elections made by Shareholders under the Scheme.


The Company has applied for clearances under section 707 of the Income and
Corporation Taxes Act 1988 and section 138 of the Taxation of Chargeable Gains
Act 1992. The Scheme is conditional, inter alia, on such clearances being
obtained.

Costs and commissions


The costs of the Proposals, including all advisory costs and the costs incurred
by the UK Recovery Fund, the Money Fund and INVESCO Income Growth Trust in
implementing the Proposals, are not expected to exceed 3.87 per cent. of the
Company's net assets as at the close of business on 31 July 2002 (being the
latest practicable date prior to publication of this document). The costs of the
Proposals will be borne pro rata by all Shareholders irrespective of the
election(s) made. Any stamp duty/stamp duty reserve tax payable on the transfer
of assets to INVESCO Income Growth Trust pursuant to the Scheme will be met by
INVESCO Income Growth Trust.


In the event that the Proposals are not implemented, the Company has agreed to
bear the all the costs of INVESCO Income Growth Trust in connection with its
proposed participation in the Scheme.




Benefits of the Proposals


The Directors believe that the Proposals will satisfy the differing requirements
of Shareholders. In particular:


  • INVESCO Income Growth Trust has a good relative performance record;


  • the Proposals offer Shareholders a range of alternatives:


  • ongoing exposure to portfolios which are invested to provide income and
    capital growth (INVESCO Income Growth Trust and the UK Recovery Fund) and/or
    cash (the Money Fund and the Redemption Option);


  • geared exposure to markets (INVESCO Income Growth Trust Ordinary Shares)
    and/or ungeared exposure (UK Recovery Fund);


  • fixed capital entitlement in 2009 with the potential for equity
    participation (INVESCO Income Growth Trust CULS);


  • closed ended structure (INVESCO Income Growth Trust) and/or open-ended
    structure (the UK Recovery Fund);


  • the Proposals are flexible, allowing Shareholders to make different
    elections in respect of different parts of their holdings; and


  • the Proposals are intended to be tax-efficient. Subject to the tax
    clearances detailed in the circular being sent to Shareholders being
    obtained, the Proposals will enable Shareholders to 'roll-over' their
    investment in the Company into one or more of the Roll-over Funds without
    crystallising any potential liability to UK capital gains tax.




Special interim dividend


For the financial year ending 31 August 2002, a third interim dividend of 1.55p
per Ordinary Share was declared on 11 July 2002 and which will be paid on 30
August 2002. The Directors intend that a further interim dividend will paid to
all Shareholders on the register at the close of business on 27 August 2002.




The Roll-over Funds


INVESCO Income Growth Trust plc


INVESCO Income Growth Trust is an investment trust company launched in 1996 and
which is listed on the Official List. It has a simple capital structure with
only ordinary shares in issue. Gearing is achieved through bank borrowings and,
following their issue, the INVESCO Income Growth Trust CULS. As at 31 July 2002,
it had gross assets of £92,973,098.17 and borrowings of £11,635,000. During the
year ended 31 March 2002, INVESCO Income Growth Trust secured a £5 million three
year term loan. This loan bears interest at a fixed rate of 5.58 per cent.


INVESCO Income Growth Trust seeks to provide shareholders with long term growth
in both income and capital from an above-average yielding portfolio, comprising
UK equities and equity-related securities. In managing the company's portfolio,
the investment manager seeks to achieve a total return in excess of the total
return on the FTSE Actuaries All-Share Index.


Shareholders are being offered Ordinary Shares and/or CULS in INVESCO Income
Growth Trust.


INVESCO Income Growth Trust Ordinary Shares


The INVESCO Income Growth Trust Ordinary Shares are entitled to all dividends
paid by INVESCO Income Growth Trust after deducting such expenses (including any
interest payable) that are charged to the revenue account. On a winding-up,
INVESCO Income Growth Trust Ordinary Shares are also entitled to receive the
surplus assets available after repaying any bank borrowings and, following their
issue, the redemption of the CULS.


INVESCO Income Growth Trust CULS


The INVESCO Income Growth Trust CULS are intended to offer investors a fixed
income of 4.75 per cent. per annum (subject to any deduction or withholding
required by law), together with capital repayment at par on 1 October 2009.
Interest on the CULS will be payable semi-annually in arrears on 1 October and 1
April in each year. The first payment of interest will be made on 1 April 2003
covering the period from the first date the INVESCO Income Growth Trust CULS are
issued to 1 April 2003.


Holders of INVESCO Income Growth Trust CULS may elect to convert their INVESCO
Income Growth Trust CULS into INVESCO Income Growth Trust Ordinary Shares during
the month of July in each year from 2006 to 2009. The rate of conversion will be
set at a premium of 18 per cent. to the middle market closing price of the
INVESCO Income Growth Trust Ordinary Shares (as derived from the Official List)
on the London Stock Exchange dealing day immediately prior to the issue of the
INVESCO Income Growth Trust CULS (subject to any future adjustment to the
conversion rate pursuant to the terms of the trust deed constituting the INVESCO
Income Growth Trust CULS).




The INVESCO Income Growth Trust CULS will be listed on the Official List and
traded on the London Stock Exchange. The INVESCO Income Growth Trust CULS are
expected to be illiquid and holders may therefore find it difficult to realise
their investment in INVESCO Income Growth Trust CULS through a market disposal.


UK Recovery Fund


INVESCO Perpetual UK Recovery Fund is being launched as an authorised UK unit
trust. The UK Recovery Fund's portfolio will be managed by Ian Carstairs, the
manager responsible for the Company. It is expected that the UK Recovery Fund
will have been launched by the date on which the Scheme becomes effective.


The UK Recovery Fund will aim to achieve capital growth through a portfolio of
primarily UK securities that are considered to offer recovery prospects. Such
securities are, for example, those whose prices are particularly depressed by
adverse sentiment which, in INVESCO's opinion, is unjustified and where INVESCO
expects a re-rating to take place.


Money Fund


INVESCO Perpetual Money Fund is an authorised UK unit trust which was launched
in 1994. As at 31 July 2002, it had total assets of £30,356,362.55. The Money
Fund's portfolio is managed by INVESCO Fund Managers Limited and in particular
INVESCO Perpetual's fixed income team based in Henley-on-Thames, led by Paul
Causer and Paul Read.


The Money Fund is invested for a high level of income return combined with a
degree of security from sterling-based deposit or related money market fund
assets. The Money Fund does not invest in any instrument that gives rise to a
stamp duty or stamp duty reserve tax liability.


Further detail of each of the Roll-over Funds is provided in the circular being
sent to Shareholders and in the documents that accompany such circular.


Performance


Equity markets have fallen significantly since 28 February 2002, the date to
which the last interim accounts of the Company were made up. As at 31 July 2002,
the net asset value of the Company had declined by 13.03 per cent since 28
February 2002.




Deemed elections


Shareholders who do not make any election will be deemed to have elected for
INVESCO Income Growth Trust Ordinary Shares.


It should be noted that in the event that the value, as at the Calculation Date,
of the assets to be transferred to the UK Recovery Fund is less than £250,000
and/or the total size of the UK Recovery Fund is less than £1 million, elections
for UK Recovery Fund Units will be deemed to be elections for INVESCO Income
Growth Trust Ordinary Shares. In the event that the UK Recovery Fund is not
approved by the Financial Services Authority as an authorised unit trust,
elections for the UK Recovery Fund Units will be deemed to be elections for
INVESCO Growth Trust Ordinary Shares. In the event that a minimum of £1 million
of INVESCO Income Growth Trust CULS are not issued by INVESCO Income Growth
Trust, elections for INVESCO Income Growth Trust CULS will be deemed to be
elections for Money Fund Units.


Elections for INVESCO Income Growth Trust Ordinary Shares or INVESCO Income
Growth Trust CULS will also be conditional on the passing of resolution(s)
authorising the issue of INVESCO Income Growth Trust Ordinary Shares and INVESCO
Income Growth Trust CULS pursuant to the Scheme at an extraordinary general
meeting of INVESCO Income Growth Trust and further conditional on Admission of
the INVESCO Income Growth Trust Ordinary Shares and INVESCO Income Growth Trust
CULS to be issued pursuant to the Scheme. If these conditions are not satisfied,
then elections for INVESCO Income Growth Trust Ordinary Shares will be deemed to
be elections for UK Recovery Fund Units and elections for INVESCO Income Growth
Trust CULS will be deemed to be elections for Money Fund Units.




Forms of Election


Shareholders (other than Overseas Shareholders) should complete and return a
Form of Election and return it so as to be received by Capita IRG Plc, PO Box
166, Bourne House, 34 Beckenham Road, Beckenham, Kent BR3 4TH, as soon as
possible but in any event so as to be received by not later than 3.00 p.m. on 27
August 2002. Elections, once submitted, will be irrevocable.


Shareholders should note that, if they hold Ordinary Shares in both certificated
and uncertificated form, they should complete a separate Form of Election for
each holding. If shareholders hold Ordinary Shares in certificated form, but
under different designations, they should complete a separate Form of Election
in respect of each designation. Similarly, if they hold Ordinary Shares in
uncertificated form, but under different member account IDs, they should
complete a separate Form of Election in respect of each member account ID.


Shareholders (other than Overseas Shareholders) who do not return a Form of
Election in accordance with the above instructions will be deemed to have
elected for INVESCO Income Growth Trust Ordinary shares in respect of their
entire holdings of Ordinary Shares. ACCORDINGLY, SHAREHOLDERS WHO WISH TO
RECEIVE INVESCO INCOME GROWTH TRUST ORDINARY SHARES IN RESPECT OF THEIR ENTIRE
HOLDING OR ORDINARY SHARES NEED NOT RETURN A FORM OF ELECTION.




Fractional Entitlements

Fractions of INVESCO Income Growth Trust Ordinary Shares or INVESCO Income
Growth Trust CULS will not be issued to Shareholders. Assets representing
fractional entitlements will be retained by INVESCO Income Growth Trust and so
represent an accretion to the assets of INVESCO Income Growth Trust. Fractional
entitlements to UK Recovery Fund Units and Money Fund Units will be rounded up
to the nearest one-hundredth of a unit.

Extraordinary General Meetings

The Proposals require the approval of Shareholders. Notices convening the
Meetings and providing detail of the resolutions to be proposed to Shareholders
are set out in the Circular being sent to Shareholders. The First EGM will be
held at 9.30 a.m. on 30 August 2002. The Second EGM will be held at 12 noon on
13 September 2002.

Implementation of the Scheme is conditional, inter alia, upon the tax clearances
detailed in the circular to Shareholders, the first resolution at the First EGM
being passed and upon the first and second resolutions being passed at the
Second EGM. In the event that these conditions are not satisfied, the Scheme
will not be implemented and assuming the passing of the second and third
resolutions at the First EGM or the third and fourth resolutions to be proposed
at the Second EGM, the Company will be placed in immediate liquidation.


Recommendation


Your Directors, who have been advised by HSBC Investment Bank, consider that the
Proposals are in the best interests of Shareholders as a whole. In providing
advice to the Directors, HSBC Investment Bank has relied upon the Directors'
commercial assessments of the Proposals. Accordingly, the Directors unanimously
recommend you to vote in favour of the first resolution to be proposed at the
First EGM and the first and second resolutions to be proposed at the Second EGM
as they intend to do in respect of their beneficial holdings of Ordinary Shares,
which in total amount to 0.11 per cent. of the issued Ordinary Shares.

If the first resolution to be proposed at the First EGM is not passed or the
Scheme is, at that date, incapable of becoming effective, the Directors
recommend that you vote in favour of the second and third resolutions to be
proposed at the First EGM. Similarly, if the first and second resolutions to be
proposed at the Second EGM is not passed or the Scheme is, at that date,
incapable of becoming effective, the Directors recommend that you vote in favour
of the third and fourth resolutions to be proposed at the Second EGM.



Enquiries
INVESCO Convertible Trust plc
Steven Daniels                                        020 7929 9700
INVESCO Asset Management Limited
Graeme Proudfoot                                      020 7626 3434
HSBC Investment Bank plc
Jonathan Maxwell                                      020 7336 9000

The definitions in this announcement shall have the same meanings as those set
out in the circular to INVESCO Convertible Trust Shareholders dated 7 August
2002.


HSBC Investment Bank plc, which is regulated in the United Kingdom by the
Financial Services Authority, is acting for INVESCO Convertible Trust plc and
for no-one else in connection with the Proposals and will not be responsible to
anyone other than INVESCO Convertible Trust plc for providing the protections
afforded to customers of HSBC Investment Bank Plc or in advising them on the
contents of this announcement or any matter referred to herein.






EXPECTED TIMETABLE



                                                                                                    2002


Date from which it is advised dealings in Ordinary Shares                                 From 23 August
should only be for cash settlement and immediate delivery
of documents of title
Latest time and date for receipt of Forms of Election                             3.00 p.m. on 27 August


Record Date, the Company's register of members closes and                 close of business on 27 August
record date for further interim dividend
Latest time and date for receipt of Forms of Proxy for the                        9.30 a.m. on 28 August
First EGM
First EGM                                                                         9.30 a.m. on 30 August


Registers of members in respect of Reclassified Shares                         8.00 a.m. on 10 September
opens and dealings in Reclassified Shares expected to
commence
Dealings in Reclassified Shares suspended                                      8.00 a.m. on 11 September


Latest time for receipt of Forms of Proxy for Second EGM                         12 noon on 11 September


Calculation Date                                                               4.30 p.m. on 12 September


Second EGM                                                                       12 noon on 13 September


Effective Date for implementation of the Proposals and                                      13 September
commencement of the liquidation
Dealings commence in INVESCO Income Growth Trust Ordinary                         8.00am on 16 September
Shares, INVESCO Income Growth Trust CULS, UK Recovery Fund
Units and Money Fund Units
Redemption of Money Fund Units under the Redemption Option                                  16 September
Confirmation notes in respect of UK Recovery Fund Units and                                 16 September
Money Fund Units despatched
Definitive certificates in respect of INVESCO Income Growth                 week commencing 16 September
Trust Ordinary Shares and INVESCO Income Growth Trust CULS
despatched




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