STATEMENT
OF ADDITIONAL INFORMATION
Dated
December 16,
2022
AIM
Treasurer's Series Trust (Invesco Treasurer's Series Trust)
This Statement of
Additional Information (the SAI) relates to each portfolio (each a Fund,
collectively the Funds) of AIM Treasurer's Series Trust (Invesco Treasurer's
Series Trust) (the Trust) listed below. Each Fund offers separate classes
of shares as follows:
|
Fund: |
Investor
Class |
Institutional
Class |
Personal
Investment Class |
Private
Investment Class |
Reserve
Class |
Resource
Class |
|
Invesco
Premier Portfolio |
IMRXX |
IPPXX |
IPVXX |
IPTXX |
IRVXX |
IRCXX |
|
Invesco
Premier U.S.
Government
Money Portfolio |
FUGXX |
IUGXX |
N/A |
N/A |
N/A |
N/A |
This SAI is not a
Prospectus, and it should be read in conjunction with the Prospectuses for the
Funds listed above. Portions of each Fund's financial statements are
incorporated into this SAI by reference to each Fund’s most recent shareholder
report for its fiscal year ended August
31, 2022.
You may obtain,
without charge, a copy of any Prospectus and/or shareholder report for any Fund
listed above from an authorized dealer or by writing to:
Invesco
Investment Services, Inc.
P.O. Box 219078
Kansas City, MO 64121-9078
P.O. Box 219078
Kansas City, MO 64121-9078
or
by calling (800) 959-4246 (Investor Class) or (800) 659-1005 (all other
classes)
or
on the Internet: http://www.invesco.com/us
Any reference to
the term “Fund” or “Funds” throughout this SAI refers to each Fund named above
unless otherwise indicated.
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i
GENERAL
INFORMATION ABOUT THE TRUST
Fund
History
AIM
Treasurer's Series Trust (Invesco Treasurer's Series Trust) (the Trust) is a
Delaware statutory trust registered under
the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end
series management investment company. The Trust was originally organized as a
Massachusetts business trust on January 27, 1988. Under the Trust's Agreement
and Declaration of Trust, as amended, (the Trust Agreement), the Board of
Trustees of the Trust (the Board) is authorized to create new series of shares
without the necessity of a vote of shareholders of the Trust.
Prior
to April 30, 2010, the Trust was known as AIM Treasurer’s Series
Trust.
The
following table shows each Fund’s current name and Fund history:
|
Fund
Name |
Fund
History |
|
Invesco
Premier Portfolio |
Prior
to December 15, 2017, Invesco Premier Portfolio was known as Premier
Portfolio. |
|
|
|
|
Invesco
Premier U.S. Government
Money
Portfolio |
Prior
to December 15, 2017, Invesco Premier U.S. Government Money Portfolio was
known as
Premier
U.S. Government Money
Portfolio. |
Shares
of Beneficial Interest
Shares
of beneficial interest of the Trust are redeemable at their net asset value at
the option of the shareholder or at
the option of the Trust, in accordance with any applicable provisions of the
Trust Agreement and applicable law, subject in certain circumstances to a
contingent deferred sales charge, if applicable.
The
Trust allocates cash and property it receives from the issue or sale of shares
together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits and
proceeds thereof, to the appropriate Fund, subject only to the rights of
creditors of that Fund. These assets constitute the assets belonging to each
Fund, are segregated on the Trust’s books, and are charged with the liabilities
and expenses of such Fund and its respective classes. The Trust allocates any
general liabilities and expenses of the Trust not readily identifiable as
belonging to a particular Fund primarily on the basis of relative net assets or
other relevant factors, subject to oversight by the Board.
Each
share of each Fund represents an equal pro rata interest in that Fund with each
other share and is entitled to
dividends and other distributions with respect to the Fund, which may be from
income, capital gains,
capital or
distributions in kind, as declared by the Board.
Each
class of shares of a Fund represents a proportionate undivided interest in the
net assets belonging to that Fund.
Differing sales charges and expenses will result in differing net asset values
and dividends and distributions. Upon any liquidation of the Trust,
shareholders of each class are entitled to share pro rata in the net assets
belonging to the applicable Fund allocable to such class available for
distribution after satisfaction of, or reasonable provision for, the outstanding
liabilities of the Fund allocable to such class.
The
Trust Agreement provides that each shareholder, by virtue of having become a
shareholder of the Trust, is bound by
terms of the Trust Agreement and the Trust’s Bylaws. Ownership of shares does
not make shareholders third party beneficiaries of any contract entered into by
the Trust.
The
Trust is not required to hold annual or regular meetings of shareholders.
Meetings of shareholders of a Fund or class
will be held for any purpose determined by the Board, including from time to
time to consider matters requiring a vote of such shareholders in accordance
with the requirements of the 1940 Act, state law or the provisions of the Trust
Agreement. It is not expected that shareholder meetings will be held
annually.
The
Trust Agreement provides that the Board may authorize (i) a merger,
consolidation or sale of assets (including, but not
limited to, mergers, consolidations or sales of assets between two Funds, or
between a Fund and a series of any other registered investment company), and
(ii) the combination of two or more classes of shares of a Fund into a single
class, each without shareholder approval but subject to applicable requirements
under the 1940 Act and state law.
1
Each
share of a Fund generally has the same voting, dividend, liquidation and other
rights; however, each class of shares of
a Fund is subject to different sales loads, conversion features, exchange
privileges and class-specific expenses, as applicable.
Except
as specifically noted above, shareholders of each Fund are entitled to one vote
per share (with proportionate
voting for fractional shares), irrespective of the relative net asset value of
the shares of the Fund. However, on matters affecting an individual Fund or
class of shares, a separate vote of shareholders of that Fund or class is
required. Shareholders of a Fund or class are not entitled to vote on any matter
which does not affect that Fund or class but that requires a separate vote of
another Fund or class. An example of a matter that would be voted on separately
by shareholders of each Fund is the approval of the advisory agreement with
Invesco Advisers, Inc. (the Adviser or Invesco).
When
issued, shares of each Fund are fully paid and nonassessable, have no preemptive
or subscription rights, and are
freely transferable. Shares do not have cumulative voting rights in connection
with the election of Trustees or on any other matter.
Under
Delaware law, shareholders of a Delaware statutory trust shall be entitled to
the same limitation of personal liability
extended to shareholders of private for-profit corporations organized under
Delaware law. There is a remote possibility, however, that shareholders could,
under certain circumstances, be held liable for the obligations of the Trust to
the extent the courts of another state, which does not recognize such limited
liability, were to apply the laws of such state to a controversy involving such
obligations. The Trust Agreement disclaims shareholder personal liability for
the debts, liabilities, obligations and expenses of the Trust and requires that
every undertaking of the Trust or the Board relating to the Trust or any Fund
include a recitation limiting such obligation to the Trust and its assets or to
one or more of the Funds and the assets belonging thereto. The Trust Agreement
provides for indemnification out of the property of a Fund (or Class, as
applicable) for all losses and expenses of any shareholder of such Fund held
personally liable solely on account of being or having been a
shareholder.
The
trustees and officers of the Trust will not be liable for any act, omission or
obligation of the Trust or any trustee or
officer; however, a trustee or officer is not protected against any liability to
the Trust or to the shareholders to which a trustee or officer would otherwise
be subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his or her office
with the Trust or applicable Fund (Disabling Conduct). The Trust’s Bylaws
generally provide for indemnification by the Trust of the trustees, officers and
employees or agents of the Trust, provided that such persons have not engaged in
Disabling Conduct. Indemnification does not extend to judgments or amounts paid
in settlement in any actions by or in the right of the Trust. The Trust
Agreement also authorizes the purchase of liability insurance on behalf of
trustees and officers with Fund assets. The Trust’s Bylaws provide for the
advancement of payments of expenses to current and former trustees, officers and
employees or agents of the Trust, or anyone serving at their request, in
connection with the preparation and presentation of a defense to any claim,
action, suit or proceeding, for which such person would be entitled to
indemnification; provided that any advancement of expenses would be reimbursed
unless it is ultimately determined that such person is entitled to
indemnification for such expenses.
The
Trust Agreement provides that any Trustee who serves as chair of the
Board,
a
member or chair of a committee of the Board, lead independent Trustee, or an
expert on any topic or in any area (including an audit committee financial
expert), or in any other special appointment will not be subject to any greater
standard of care or liability because of such position.
The
Trust Agreement provides a detailed process for the bringing of derivative
actions by shareholders. A shareholder may
only bring a derivative action on behalf of the Trust if certain conditions are
met. Among other things, such conditions: (i) require shareholder(s) to make a
pre-suit demand on the Trustees (unless such effort is not likely to succeed
because a majority of the Board or the committee established to consider the
merits of such action are not independent Trustees under Delaware law); (ii)
require 10% of the beneficial owners to join in the pre-suit demand, or if a
pre-suit demand is not required, require 10% of beneficial owners to join in the
demand for the Board to commence such action; and (iii) afford the Trustees a
reasonable amount of time to consider the request and investigate the basis of
the claims (including
2
designating
a committee to consider the demand and hiring counsel or other advisers). These
conditions generally are
intended to provide the Trustees with the ability to pursue a claim if they
believe doing so would be in the best interests of the Trust and its
shareholders and to preclude the pursuit of claims that the Trustees determine
to be without merit or otherwise not in the Trust’s best interest to
pursue.
The
Trust Agreement also generally requires that actions by shareholders in
connection with or against the Trust or a Fund
be brought only in certain Delaware courts,
provided that
actions arising under the U.S. federal securities laws are required to be
brought in the United States District Court for the Southern District of New
York and that the right to jury trial be waived to the fullest extent permitted
by law.
Share
Certificates
Shareholders
of the Funds do not have the right to demand or require the Trust to issue share
certificates and share
certificates are not issued. Any certificate previously issued with respect to
any shares is deemed to be cancelled without any requirement for surrender to
the Trust.
DESCRIPTION
OF THE FUNDS AND THEIR INVESTMENTS AND RISKS
Classification
The
Trust is an open-end management investment company. Each of the Funds is
classified as "diversified" for
purposes of the 1940 Act and managed in accordance with Rule 2a-7 under the
1940 Act.
Investment
Strategies and Risks
Set
forth below are detailed descriptions of the various types of securities and
investment techniques that Invesco and/or the
Sub-Advisers (as defined herein) may use in managing the Funds, as well as the
risks associated with those types of securities and investment techniques. The
descriptions of the types of securities and investment techniques below
supplement the discussion of principal investment strategies and risks contained
in the Funds' Prospectuses.
Where
a particular type of security or investment technique is not discussed in the
Funds' Prospectuses, that security or investment technique is not a principal
investment strategy of that Fund.
The
Funds may invest in all of the following types of investments (unless otherwise
indicated). The Funds might not invest in
all of these types of securities or use all of the techniques at any one
time. Invesco and/or the Sub-Advisers may invest in other types of
securities and may use other investment techniques in managing the Funds as well
as securities and techniques not described. The Funds' transactions in a
particular type of security or use of a particular technique is subject to
limitations imposed by a Fund's investment objective, policies and restrictions
described in the Funds' Prospectuses and/or this SAI, as well as the federal
securities laws.
Unless a Fund’s
prospectus or this SAI states that a percentage limitation or fundamental or
non-fundamental restriction applies on an ongoing basis, it applies only at the
time a Fund makes an investment. That means a Fund is not required to sell
securities to meet
the
percentage limits
or investment restrictions if the value
of the
investment increases
in
proportion
to the
size of a Fund.
Percentage limits
on borrowing apply on an ongoing basis.
The
Funds' investment objectives, policies, strategies and practices described below
are non-fundamental and may be changed
without approval of the holders of the Funds’ voting securities, unless
otherwise indicated.
Rule
2a-7 Requirements.
As
permitted by Rule 2a-7 under the 1940 Act, each Fund seeks to maintain a stable
price of $1.00 per share by using the
amortized cost method to value portfolio securities and rounding the share value
to the nearest cent. Rule 2a-7 imposes requirements as to the diversification
and liquidity of each Fund, quality of portfolio securities, maturity of the
Funds and of individual securities. The discussion of investments in this SAI is
qualified by Rule 2a-7 limitations.
3
As
a “Government Money Market Fund” under Rule 2a-7, Invesco Premier U.S.
Government Money Portfolio (1) is
permitted to use the amortized cost method of valuation to seek to maintain a
stable $1.00 share price, (2) must invest at least 99.5% of its total assets in
cash, government securities and/or repurchase agreements that are
“collateralized fully” (i.e., backed by cash or government securities) and (3)
is not subject to a liquidity fee and/or a redemption gate on fund redemptions
which might apply to other types of funds in the future should certain
triggering events specified in Rule 2a-7 occur. (In conformance with Rule 2a-7,
the Board has reserved its ability to change this policy with respect to
liquidity fees and/or redemption gates, but such change would only become
effective after shareholders were provided with specific advance notice of a
change in the Fund’s policy and have the opportunity to redeem their shares in
accordance with Rule 2a-7 before the policy change became effective.) Invesco
Premier Portfolio intends to qualify as a “Retail Money Market Fund,” as defined
by Rule 2a-7. As a Retail Money Market Fund, Invesco Premier Portfolio (1) is
permitted to use the amortized cost method of valuation to seek to maintain a
stable $1.00 share price, (2) may be subject to a liquidity fee and/or a
redemption gate on fund redemptions should certain triggering events specified
in Rule 2a-7 occur; and (3) is limited to investments by natural persons. For
more information on shareholder eligibility, please see the Fund’s prospectus.
Institutional money market funds (that are not Government Money Market Funds)
may also be subject to a liquidity fee and/or a redemption gate on fund
redemptions should certain triggering events specified in Rule 2a-7 occur. For
more information on liquidity fees and redemptions, see “Purchase, Redemption,
and Exchange of Shares” below.
Diversification. In summary, Rule
2a-7 requires that a money market fund may not invest in the securities of any
issuer if, as a result, more than 5% of the Fund’s total assets would be
invested in that issuer; provided that, each Fund may invest up to 25% of its
total assets in securities of a single issuer for up to three business days
after acquisition. Certain securities are not subject to this diversification
requirement. These include: government securities; certain repurchase
agreements; and shares of certain money market funds. Rule 2a-7 imposes a
separate diversification test upon the acquisition of a guarantee or demand
feature. (A demand feature is, in summary, a right to sell a security at a price
equal to its approximate amortized cost plus accrued interest). Government
security generally means any security issued or guaranteed as to principal or
interest by the U.S. government or certain of its agencies or instrumentalities;
or any certificate of deposit for any of the foregoing.
For
purposes of these diversification requirements with respect to issuers of
Municipal Securities (defined under the caption
Municipal Securities), each state (including the District of Columbia and Puerto
Rico), territory and possession of the United States (U.S.), each political
subdivision, agency, instrumentality, and authority thereof, and each
multi-state agency of which a state is a member is a separate “issuer.” When the
assets and revenues of an agency, authority, instrumentality, or other political
subdivision are separate from the government creating the subdivision and the
security is backed only by assets and revenues of the subdivision, such
subdivision would be deemed to be the sole issuer. Similarly, in the case of an
industrial development bond or private activity bond, if such bond is backed
only by the assets and revenues of the non-governmental user, then such
non-governmental user would be deemed to be the sole issuer.
Quality. The Funds may
invest only in U.S. dollar denominated securities that are "Eligible Securities"
as defined by applicable regulations at the time of purchase. Rule 2a-7
defines an Eligible Security, in summary, as a security with a remaining
maturity of 397 calendar days or less that the Funds’ investment adviser
(subject to oversight and pursuant to guidelines established by the Board)
determines present minimal credit risk to the Fund. The eligibility of a
security with a guarantee may be determined based on whether the guarantee is an
Eligible Security.
The
Funds will limit investments to those which are Eligible Securities as defined by
applicable regulations at the time of purchase.
Liquidity. Under Rule 2a-7,
the Funds' must hold securities that are sufficiently liquid to meet reasonably
foreseeable shareholder redemptions in light of the Funds’ obligations under
section 22(e) of the 1940 Act (which forbids the suspension of the right of
redemption, or postponement of the date of payment or satisfaction upon
redemption for more than seven days after the tender of such security for
redemption, subject to specified exemptions) and any commitments the Funds have
made to shareholders. In addition, a
4
Fund
may not acquire an illiquid security if, immediately after the acquisition, the
Fund would have invested more than 5% of its
total assets in illiquid securities. The Funds may not acquire any security
other than a Daily Liquid Asset (cash, government securities, other securities
that will mature or are subject to a demand feature that is exercisable and
payable within one business day and amounts receivable and unconditionally due
within one business day on pending sales of portfolio securities) if,
immediately after the acquisition a Fund would have invested less than 10% of
its total assets in Daily Liquid Assets. The Funds may not acquire any security
other than a Weekly Liquid Asset (cash, direct obligations of the U.S.
government, government
securities issued
by a person controlled or supervised by and acting as an instrumentality of the
U.S. government pursuant to authority granted by the Congress that are issued at
a discount to the principal amount to be repaid at maturity and have a remaining
maturity of 60 calendar days or less, securities that will mature or are subject
to a demand feature that is exercisable and payable within 5 business days and
amounts receivable and unconditionally due within 5 business days on pending
sales of portfolio securities) if, immediately after the acquisition, the Fund
would have invested less than 30% of its total assets in Weekly Liquid
Assets.
Maturity. Under Rule 2a-7,
each Fund invests only in U.S. dollar-denominated securities maturing within 397
calendar days of the date of purchase, with certain exceptions permitted by
applicable regulations. Each Fund maintains a dollar-weighted
average portfolio maturity of no more than 60 calendar days, and a
dollar-weighted average life to maturity as determined without exceptions
regarding certain interest rate adjustments under Rule 2a-7 of no more than 120
calendar days. The maturity of a security is determined in compliance with Rule
2a-7, which for purposes of the dollar-weighted average portfolio maturity
permits, among other things, certain securities bearing adjustable interest
rates to be deemed to have a maturity shorter than their stated
maturity.
Foreign
Investments
Foreign
Government Obligations. Generally only
Invesco Premier Portfolio may invest in debt securities of foreign governments.
Debt securities issued by foreign governments are often, but not always,
supported by the full faith and credit of the foreign governments, or their
subdivisions, agencies or instrumentalities, that issue them. These securities
involve the risks discussed below under “Foreign Debt Securities”. Additionally,
the issuer of the debt or the governmental authorities that control repayment of
the debt may be unwilling or unable to pay interest or repay principal when due.
Political or economic changes or the balance of trade may affect a country’s
willingness or ability to service its debt obligations. Periods of economic
uncertainty may result in the volatility of market prices of sovereign debt
obligations, especially debt obligations issued by the governments of developing
countries. Foreign government obligations of developing countries, and some
structures of emerging market debt securities, both of which are generally below
investment grade, are sometimes referred to as “Brady Bonds.” The failure of a
sovereign debtor to implement economic reforms, achieve specified levels of
economic performance, or repay principal or interest when due may result in the
cancellation of third-party commitments to lend funds to the sovereign debtor,
which may impair the debtor’s ability or willingness to service its
debts.
Foreign
Bank Obligations. Foreign bank
obligations include certificates of deposit, banker’s acceptances and fixed time
deposits and other obligations (a) denominated in U.S. dollars and issued by a
foreign branch of a domestic bank (Eurodollar Obligations), (b) denominated in
U.S. dollars and issued by a domestic branch of a foreign bank (Yankee Dollar
Obligations), or (c) issued by foreign branches of foreign banks. Foreign banks
are not generally subject to examination by any U.S. government agency or
instrumentality.
Foreign
Debt Securities. Generally only
Invesco Premier Portfolio may invest in foreign debt securities. Foreign debt
securities are debt securities that are issued and/or settled outside the United
States and may be backed by foreign guarantees. A Fund will limit its
investments in foreign debt securities to debt obligations denominated in U.S.
dollars. Debt securities issued by a corporation or other issuer domiciled
outside the United States that are dollar denominated and traded in the United
States are not considered foreign securities. Although denominated in U.S.
dollars, Foreign Debt Securities may entail some or all of the risks set forth
below.
5
Political
and Economic Risk. The economies of
many countries may not be as developed as that of the United States’ economy and
may be subject to significantly different forces. Political, economic or social
instability and development, expropriation or confiscatory taxation, and
limitations on the removal of funds or other assets could also adversely affect
the value of portfolio investments. Certain foreign companies may be subject to
sanctions, embargoes, or other governmental actions that may impair or otherwise
limit the ability to invest in, receive, hold or sell the securities of such
companies. These factors may affect the value of investments in those companies.
In addition, certain companies may operate in, or have dealings with, countries
that the U.S. government has identified as state sponsors of terrorism. As a
result, such companies may be subject to specific constraints or regulations
under U.S. law and, additionally, may be subject to negative investor
perception, either of which could adversely affect such companies'
performance.
Regulatory
Risk.
Foreign companies may not be registered with the U.S. Securities and Exchange
Commission (SEC) and are generally not subject to the regulatory controls and
disclosure requirements imposed on U.S. issuers and, as a consequence, there is
generally less publicly available information about foreign securities than is
available about domestic securities. Foreign companies may not be subject to
uniform accounting, auditing and financial reporting standards, corporate
governance practices and requirements comparable to those applicable to domestic
companies. Therefore, financial information about foreign companies may be
incomplete, or may not be comparable to the information available on U.S.
companies. Income from foreign securities owned by the Funds may be reduced by a
withholding tax at the source, which tax would reduce dividend income payable to
Fund shareholders.
There
is generally less government supervision and regulation of securities exchanges,
brokers, dealers, and listed
companies in foreign countries than in the U.S., thus increasing the risk of
delayed settlements of portfolio transactions or loss of certificates for
portfolio securities. Foreign markets may also have different clearance and
settlement procedures. If a Fund experiences settlement problems, it may result
in temporary periods when a portion of that Fund’s assets are uninvested and
could cause it to miss attractive investment opportunities or create a potential
liability to that Fund arising out of its inability to fulfill a contract to
sell such securities.
Market
Risk.
Investing in foreign markets generally involves certain risks not typically
associated with investing in the United States. The securities markets in many
foreign countries will have substantially lower trading volume than the U.S.
markets. As a result, the securities of some foreign companies may be less
liquid and experience more price volatility than comparable domestic securities.
Obtaining and/or enforcing judgments in foreign countries may be more difficult,
and there is generally less government regulation and supervision of foreign
stock exchanges, brokers and issuers, each of which may make it more difficult
to enforce contractual obligations. Increased custodian costs as well as
administrative costs (such as the need to use foreign custodians) may also be
associated with the maintenance of assets in foreign jurisdictions. In addition,
transaction costs in foreign securities markets are likely to be higher, since
brokerage commission rates in foreign countries are likely to be higher than in
the United States.
Risks
Related to Russian Invasion of Ukraine. In late February
2022, Russian military forces invaded Ukraine, significantly amplifying already
existing geopolitical tensions among Russia, Ukraine, Europe, the North Atlantic
Treaty Organization (NATO), and the West. Russia’s invasion, the responses of
countries and political bodies to Russia’s actions, and the potential for wider
conflict may increase financial market volatility and could have severe adverse
effects on regional and global economic markets, including the markets for
certain securities and commodities such as oil and natural gas.
Following
Russia’s actions, various countries, including the U.S., Canada, the United
Kingdom, Germany, and France, among
others, as well as the European Union, issued broad-ranging economic sanctions
against Russia. The sanctions freeze certain Russian assets and prohibit trading
by individuals and entities in certain Russian securities, engaging in certain
private transactions, and doing business with certain Russian corporate
entities, large financial institutions, officials and oligarchs. The sanctions
include a commitment by certain countries and the European Union to remove
selected Russian banks from the Society for Worldwide Interbank Financial
Telecommunications, commonly called “SWIFT,” the electronic network that
connects banks globally, and imposed restrictive measures to prevent the Russian
Central Bank from undermining the
6
impact
of the sanctions. A number of large corporations have since withdrawn from
Russia or suspended or curtailed their
Russia-based operations.
The
imposition of these current sanctions (and the potential for further sanctions
in response to Russia’s continued military
activity) and other actions undertaken by countries and businesses may adversely
impact various sectors of the Russian economy, including, but not limited to,
the financials, energy, metals and mining, engineering, and defense and
defense-related materials sectors. Such actions also may result in the decline
of the value and liquidity of Russian securities, a weakening of the ruble, and
could impair the ability of a Fund to buy, sell, receive, or deliver those
securities. Moreover, the measures could adversely affect global financial and
energy markets and thereby negatively affect the value of a Fund’s investments
beyond any direct exposure to Russian issuers or those of adjoining geographic
regions.
In
response to sanctions, the Russian Central Bank raised its interest rates and
banned sales of local securities by
foreigners. Russia also prevented the export of certain goods and payments to
foreign shareholders of Russian securities. Russia may take additional
countermeasures or retaliatory actions, which may further impair the value and
liquidity of Russian securities and Fund investments. Such actions could, for
example, include restricting gas exports to other countries, the seizure of U.S.
and European residents’ assets, or undertaking or provoking other military
conflict elsewhere in Europe, any of which could exacerbate negative
consequences on global financial markets and the economy. The actions discussed
above could have a negative effect on the performance of Funds that have
exposure to Russia. While diplomatic efforts have been ongoing, the conflict
between Russia and Ukraine is unpredictable and has the potential to result in
broader military actions. The duration of the ongoing conflict and corresponding
sanctions and related events cannot be predicted and may result in a negative
impact on Fund performance and the value of Fund investments, particularly as it
relates to Russian exposure.
Debt
Investments
U.S.
Government Obligations. The Funds may
invest in U.S. government obligations, which include obligations issued or
guaranteed by the U.S. government, its agencies and instrumentalities, including
bills, notes and bonds issued by the U.S. Treasury, as well as “stripped” or
“zero coupon” U.S. Treasury obligations.
U.S.
government
obligations may be, (i) supported by the full faith and credit of the U.S.
Treasury, (ii) supported by the right of the issuer to borrow from the U.S.
Treasury, (iii) supported by the discretionary authority of the U.S. government
to purchase the agency’s obligations, or (iv) supported only by the credit of
the instrumentality. There is a risk that the U.S. government may choose not to
provide financial support to U.S. government-sponsored agencies or
instrumentalities if it is not legally obligated to do so. In that case, if the
issuer were to default, a Fund holding securities of such issuer might not be
able to recover its investment from the U.S. government. For example, while the
U.S. government has provided financial support to Federal National Mortgage
Association (FNMA) and Federal Home Loan Mortgage Corporation (FHLMC), no
assurance can be given that the U.S. government will always do so, since the
U.S. government is not so obligated by law. There also is no guarantee that the
government would support Federal Home Loan Banks. Accordingly, securities of
FNMA, FHLMC and Federal Home Loan Banks, and other agencies, may involve a risk
of non-payment of principal and interest. Any downgrade of the credit rating of
the securities issued by the U.S. government may result in a downgrade of
securities issued by its agencies or instrumentalities, including
government-sponsored entities. Additionally, from time to time uncertainty
regarding the status of negotiations in the U.S. government to increase the
statutory debt limit, commonly called the “debt ceiling,” could increase the
risk that the U.S. government may default on payments on certain U.S. government
securities, cause the credit rating of the U.S. government to be downgraded,
increase volatility in the stock and bond markets, result in higher interest
rates, reduce prices of U.S. Treasury securities, and/or increase the costs of
various kinds of debt. If a U.S. government-sponsored entity is negatively
impacted by legislative or regulatory action, is unable to meet its obligations,
or its creditworthiness declines, the performance of a Fund that holds
securities of that entity will be adversely impacted.
7
Temporary
Investments. The Funds may
experience situations where it is unable to invest money that it has received
overnight such as when it receives cash inflows after the overnight repurchase
markets have closed. The Funds are permitted to leave balances in their accounts
with the Bank of New York Mellon (BNY Mellon), the custodian bank. To compensate
the Funds for such activity, the Funds may receive compensation from BNY Mellon
at an agreed upon rate.
Changing
Interest Rates. In a low or
negative interest rate environment, debt securities may trade at, or be issued
with, negative yields, which means the purchaser of the security may receive at
maturity less than the total amount invested. In addition, in a negative
interest rate environment, if a bank charges negative interest, instead of
receiving interest on deposits, a depositor must pay the bank fees to keep money
with the bank. To the extent a Fund holds a negatively-yielding debt security or
has a bank deposit with a negative interest rate, the Fund would generate a
negative return on that investment. Cash positions may also subject a Fund to
increased counterparty risk to the Fund's bank. Debt market conditions are
highly unpredictable and some parts of the market are subject to dislocations.
In the past, the U.S. government and certain foreign central banks have taken
steps to stabilize markets by, among other things, reducing interest rates. To
the extent such actions are pursued, they present heightened risks to debt
securities, and such risks could be even further heightened if these actions are
unexpectedly or suddenly reversed or are ineffective in achieving their desired
outcomes. In recent years, the U.S. government began implementing increases to
the federal funds interest rate and there may be further rate increases. As
interest rates rise, there is risk that rates across the financial system also
may rise. To the extent rates increase substantially and/or rapidly, the Funds
may be subject to significant losses.
In a low or
negative interest rate environment, some investors may seek to reallocate assets
to other income-producing assets. This may cause the price of such higher
yielding instruments to rise, could further reduce the value of instruments with
a negative yield, and may limit a Fund's ability to locate fixed income
instruments containing the desired risk/return profile. Changing interest rates,
including, rates that fall below zero, could have unpredictable effects on the
markets and may expose fixed income markets to heightened volatility, increased
redemptions, and potential illiquidity.
With
respect to a money market fund, which seeks to maintain a stable $1.00 price per
share, a low or negative interest
rate environment could impact the money market fund’s ability to maintain a
stable $1.00 share price. During a low or negative interest rate environment,
such money market fund may reduce the number of shares outstanding on a pro rata
basis through reverse stock splits, negative dividends or other mechanisms to
seek to maintain a stable $1.00 price per share, to the extent permissible by
applicable law and its organizational documents. Alternatively, the money market
fund may discontinue using the amortized cost method of valuation to maintain a
stable $1.00 price per share and establish a fluctuating NAV per share rounded
to four decimal places by using available market quotations or
equivalents.
In
December 2021, the SEC proposed amendments to Rule 2a-7 that, if adopted, would
impact the manner in which all
types of money market funds operate. The amendments would, among other items,
prohibit certain mechanisms for maintaining a stable NAV per share in negative
interest rate environments, such as by reducing the number of fund shares
outstanding (including through reverse distribution mechanisms).
Asset-Backed
Securities.
Asset-backed
securities are interests in pooled mortgages, loans, receivables, or other
assets. Payments of interest and repayment of principal may be largely dependent
upon the cash flows generated by the assets backing the securities and, in
certain cases, supported by letters of credit, surety bonds, or other credit
enhancements. Asset-backed security values may also be affected by other factors
including changes in interest rates, the availability of information concerning
the pool and its structure, the creditworthiness of the servicing agent for the
pool, the originator of the loans or receivables, or the entities providing the
credit enhancement.
Bank
Instruments.
Bank
instruments are unsecured interest bearing bank deposits. Bank instruments
include, but are not limited to, certificates of deposit, time deposits, and
banker’s acceptances from U.S. or foreign banks, as well as Eurodollar CDs and
Eurodollar time deposits of foreign branches of domestic banks. Some
certificates of deposit are negotiable interest-bearing instruments with a
specific maturity issued by
8
banks
and savings and loan institutions in exchange for the deposit of funds, and can
typically be traded in the secondary
market prior to maturity. Other certificates of deposit, like time deposits, are
non-negotiable receipts issued by a bank in exchange for the deposit of funds
which earns a specified rate of interest over a definite period of time;
however, it cannot be traded in the secondary market. A banker’s acceptance is a
bill of exchange or time draft drawn on and accepted by a commercial
bank.
An
investment in Eurodollar CDs or Eurodollar time deposits may involve some of the
same risks that are described for
Foreign Debt Securities.
Synthetic
Municipal Instruments.
Synthetic
municipal
instruments are instruments, the value of and return on which are derived from
underlying securities. Synthetic municipal instruments in which the Funds
may invest include tender option bonds, and fixed or variable rate trust
certificates. These types of instruments involve the deposit into a trust or
custodial account of one or more long-term tax-exempt bonds or notes (Underlying
Bonds), and the sale of certificates evidencing interests in the trust or
custodial account to investors such as the Funds. The trustee or custodian
receives the long-term fixed rate interest payments on the Underlying Bonds, and
pays certificate holders fixed rates or short-term floating or variable interest
rates which are reset periodically. A “tender option bond” provides a
certificate holder with the conditional right to sell its certificate to the
sponsor or some designated third party at specified intervals and receive the
par value of the certificate plus accrued interest (a demand feature). A "fixed
rate trust certificate" evidences an interest in a trust entitling a certificate
holder to fixed future interest and/or principal payments on the Underlying
Bonds. A “variable rate trust certificate” evidences an interest in a trust
entitling the certificate holder to receive variable rate interest based on
prevailing short-term interest rates and also typically provides the certificate
holder with the conditional demand feature (the right to tender its certificate
at par value plus accrued interest under certain conditions).
All
synthetic municipal instruments must meet the minimum quality standards for the
Funds' investments and must present
minimal credit risks. In selecting synthetic municipal instruments for the
Funds, Invesco considers the creditworthiness of the issuer of the Underlying
Bond, the sponsor and the party providing certificate holders with a conditional
right to sell their certificates at stated times and prices (a demand
feature).
Typically,
a certificate holder cannot exercise the demand feature until the occurrence of
certain conditions, such as
where the issuer of the Underlying Bond defaults on interest payments. Moreover,
because synthetic municipal instruments involve a trust or custodial account and
a third party conditional demand feature, they involve complexities and
potential risks that may not be present where a municipal security is owned
directly.
The
tax-exempt character of the interest paid to certificate holders is based on the
assumption that the holders have an
ownership interest in the Underlying Bonds; however, the Internal Revenue
Service (IRS) has not issued a ruling addressing this issue. In the event the
IRS issues an adverse ruling or successfully litigates this issue, it is
possible that the interest paid to the Funds on certain synthetic municipal
instruments would be deemed to be taxable. The Funds rely on opinions of special
tax counsel on this ownership question and opinions of bond counsel regarding
the tax-exempt character of interest paid on the Underlying Bonds.
Municipal
Securities.
Municipal
Securities
are
typically debt obligations of states, territories or possessions of the United
States and the District of Columbia and their political subdivisions, agencies
and instrumentalities, the interest on which, in the opinion of bond counsel or
other counsel to the issuers of such securities, is, at the time of issuance,
exempt from federal income tax. The issuers of municipal securities obtain funds
for various public purposes, including the construction of a wide range of
public facilities such as airports, highways, bridges, schools, hospitals,
housing, mass transportation, streets and water and sewer works. Other public
purposes for which municipal securities may be issued include refunding
outstanding obligations, obtaining funds for general operating expenses and
obtaining funds to lend to other public institutions and facilities.
9
Certain
types of municipal securities are issued to obtain funding for privately
operated facilities. The credit and quality
of private activity debt securities are dependent on the private facility or
user, who is responsible for the interest payment and principal
repayment.
The
two major classifications of Municipal Securities are bonds and notes. Municipal
bonds are municipal debt obligations in
which the issuer is obligated to repay the original (or “principal”) payment
amount on a certain maturity date along with interest. A municipal bond’s
maturity date (the date when the issuer of the bond repays the principal) may be
years in the future. Short-term bonds mature in one to three years, while
long-term bonds usually do not mature for more than a decade. Notes are
short-term instruments which usually mature in less than two years. Most notes
are general obligations of the issuing municipalities or agencies and are sold
in anticipation of a bond sale, collection of taxes or receipt of other
revenues. Municipal notes also include tax, revenue notes and revenue and bond
anticipation notes (discussed more fully below) of short maturity, generally
less than three years, which are issued to obtain temporary funds for various
public purposes.
Municipal
debt securities may also be classified as general obligation or revenue
obligations (or "special delegation
securities"). General obligation securities are secured by the issuer's pledge
of its faith, credit and taxing power for the payment of principal and
interest.
Revenue
debt obligations, such as revenue bonds and revenue notes, are usually payable
only from the revenues derived
from a particular facility or class of facilities or, in some cases, from the
proceeds of a special excise tax or other specific revenue source but not from
the general taxing power. The principal and interest payments for industrial
development bonds or pollution control bonds are often the sole responsibility
of the industrial user and therefore may not be backed by the taxing power of
the issuing municipality. The interest paid on such bonds may be exempt from
federal income tax, although current federal tax laws place substantial
limitations on the purposes and size of such issues. Such obligations are
considered to be Municipal Securities provided that the interest paid thereon,
in the opinion of bond counsel, qualifies as exempt from federal income tax.
However, interest on municipal securities may give rise to a federal alternative
minimum tax (AMT) liability for noncorporate taxpayers and may have other
collateral federal income tax consequences. There is a risk that some or all of
the interest received by the Fund from tax-exempt
municipal
securities might become taxable as a result of tax law changes or determinations
of the IRS.
Another
type of revenue obligations is pre-refunded bonds, which are typically issued to
refinance debt. In other words,
pre-refunded bonds result from the advance refunding of bonds that are not
currently redeemable. The proceeds from the issue of the lower yield and/or
longer maturing pre-refunding bond will usually be used to purchase U.S.
government obligations, such as U.S. Treasury securities, which are held in an
escrow account and used to pay interest and principal payments until the
scheduled call date of the original bond issue occurs. Like other fixed income
securities, pre-refunded bonds are subject to interest rate, market, credit, and
reinvestment risks. However, because pre-refunded bonds are generally
collateralized with U.S. government obligations, such pre-refunded bonds have
essentially the same risks of default as a AAA-rated security. The Fund will
treat such pre-refunded securities as investment-grade securities,
notwithstanding the fact that the issuer of such securities may have a lower
rating (such as a below-investment-grade rating) from one or more rating
agencies.
Within
these principal classifications of municipal securities, there are a variety of
types of municipal securities,
including but not limited to, fixed and variable rate securities, variable rate
demand notes, municipal leases, custodial receipts, participation certificates,
inverse floating rate securities, and derivative municipal
securities.
After
purchase by a Fund, an issue of Municipal Securities may cease to be rated by
Moody's Investors Service, Inc.
(Moody's) or S&P Global Ratings Services (S&P), or another nationally
recognized statistical rating organization (NRSRO), or the rating of such a
security may be reduced below the minimum credit quality rating required for
purchase by the Fund. Neither event would require a Fund to dispose of the
security. To the extent that the ratings applied by Moody’s, S&P or another
NRSRO to Municipal Securities
10
may
change as a result of changes in these rating systems, a Fund will attempt to
use comparable credit quality ratings as
standards for its investments in Municipal Securities.
The
yields on Municipal Securities are dependent on a variety of factors, including
general economic and monetary
conditions, money market factors, conditions of the Municipal Securities market,
size of a particular offering, and maturity and rating of the obligation.
Because many Municipal Securities are issued to finance similar projects,
especially those related to education, health care, transportation and various
utilities, conditions in those sectors and the financial condition of an
individual municipal issuer can affect the overall municipal market. The market
values of the Municipal Securities held by a Fund will be affected by changes in
the yields available on similar securities. If yields increase following the
purchase of a Municipal Security, the market value of such Municipal Security
will generally decrease. Conversely, if yields decrease, the market value of a
Municipal Security will generally increase. The ratings of S&P and Moody’s
represent their opinions of the quality of the municipal securities they
undertake to rate. It should be emphasized, however, that ratings are general
and are not absolute standards of quality. Consequently, municipal securities
with the same maturity, coupon and rating may have different yields while
municipal securities of the same maturity and coupon with different ratings may
have the same yield.
Certain
of the municipal securities in which the Funds may invest represent relatively
recent innovations in the municipal
securities markets and the markets for such securities may be less developed
than the market for conventional fixed rate municipal securities.
Under
normal market conditions, longer-term municipal securities generally provide a
higher yield than shorter-term
municipal securities. The Funds have no limitation as to the maturity of
municipal securities in which they may invest. The Adviser may adjust the
average maturity of a Fund’s portfolio from time to time depending on its
assessment of the relative yields available on securities of different
maturities and its expectations of future changes in interest rates.
The
net asset value of a Fund will change with changes in the value of its portfolio
securities. With fixed income municipal
securities, the net asset value of a Fund can be expected to change as general
levels of interest rates fluctuate. When interest rates decline, the value of a
portfolio invested in fixed income securities generally can be expected to rise.
Conversely, when interest rates rise, the value of a portfolio invested in fixed
income securities generally can be expected to decline. The prices of longer
term municipal securities generally are more volatile with respect to changes in
interest rates than the prices of shorter term municipal securities. Volatility
may be greater during periods of general economic uncertainty.
Municipal
Securities, like other debt obligations, are subject to the credit risk of
nonpayment. The ability of issuers of
municipal securities to make timely payments of interest and principal may be
adversely impacted in general economic downturns and as relative governmental
cost burdens are allocated and reallocated among federal, state and local
governmental units. Such nonpayment would result in a reduction of income to a
Fund, and could result in a reduction in the value of the municipal securities
experiencing nonpayment and a potential decrease in the net asset value of the
Fund. In addition, a Fund may incur expenses to work out or restructure a
distressed or defaulted security.
The
Funds may invest in Municipal Securities with credit enhancements such as
letters of credit and municipal bond
insurance. The Funds may invest in Municipal Securities that are insured by
financial insurance companies. Since a limited number of entities provide such
insurance, a Fund may invest more than 25% of its assets in securities insured
by the same insurance company. If a Fund invests in Municipal Securities backed
by insurance companies and other financial institutions, changes in the
financial condition of these institutions could cause losses to the Fund and
affect share price. Letters of credit are issued by a third party, usually a
bank, to enhance liquidity and ensure repayment of principal and any accrued
interest if the underlying Municipal Bond should default. These credit
enhancements do not guarantee payments or repayments on the Municipal Securities
and a downgrade in the credit enhancer could affect the value of the Municipal
Security.
If
the IRS determines that an issuer of a Municipal Security has not complied with
applicable tax requirements,
interest from the security could be treated as taxable, which could result in a
decline in the
11
security’s
value. In addition, there could be changes in applicable tax laws or tax
treatments that reduce or eliminate the
current federal income tax exemption on Municipal Securities or otherwise
adversely affect the current federal or state tax status of Municipal
Securities. For example, 2017 legislation commonly known as the Tax Cuts and
Jobs Act repeals the exclusion from gross income for interest on pre-refunded
municipal securities effective for such bonds issued after December 31,
2017.
Taxable
municipal securities are debt securities issued by or on behalf of states and
their political subdivisions, the
District of Columbia, and possessions of the United States, the interest on
which is not exempt from federal income tax. Taxable investments include, for
example, hedging instruments, repurchase agreements, and many of the types of
securities the Fund would buy for temporary defensive purposes.
At
times, in connection with the restructuring of a municipal bond issuer either
outside of bankruptcy court in a negotiated
workout or in the context of bankruptcy proceedings, the Fund may determine or
be required to accept equity or taxable debt securities, or the underlying
collateral (which may include real estate or loans) from the issuer in exchange
for all or a portion of the Fund’s holdings in the municipal security. Although
the Adviser will attempt to sell those assets as soon as reasonably practicable
in most cases, depending upon, among other things, the Adviser’s valuation of
the potential value of such assets in relation to the price that could be
obtained by the Fund at any given time upon sale thereof, the Fund may determine
to hold such securities or assets in its portfolio for limited period of time in
order to liquidate the assets in a manner that maximizes their value to the
Fund.
Municipal
Securities also include the following securities:
•
Bond Anticipation
Notes usually are general obligations of state and local governmental issuers
which are sold to obtain interim financing for projects that will eventually be
funded through the sale of long-term debt obligations or bonds.
•
Revenue
Anticipation Debt Securities, including bonds, notes, and certificates, are
issued by governments or governmental bodies with the expectation that future
revenues from a designated source will be used to repay the securities. In
general, they also constitute general obligations of the issuer.
•
Tax Anticipation
Notes are issued by state and local governments to finance the current
operations of such governments. Repayment is generally to be derived from
specific future tax revenues.
•
Tax-Exempt
Commercial Paper (Municipal Paper) is similar to taxable commercial paper,
except that tax-exempt commercial paper is issued by states, municipalities and
their agencies.
•
Tax-Exempt
Mandatory Paydown Securities (TEMPS) are fixed rate term bonds carrying a
short-term maturity, usually three to four years beyond the expected redemption.
TEMPS are structured as bullet repayments, with required optional redemptions as
entrance fees are collected.
•
Zero Coupon and
Pay-in-Kind Securities do not immediately produce cash income. These securities
are issued at an original issue discount, with the full value, including accrued
interest, paid at maturity. Interest income may be reportable annually, even
though no annual payments are made. Market prices of zero coupon bonds tend to
be more volatile than bonds that pay interest regularly. Pay-in-kind securities
are securities that have interest payable by delivery of additional securities.
Upon maturity, the holder is entitled to receive the aggregate par value of the
securities. Zero coupon and pay-in-kind securities may be subject to greater
fluctuation in value and less liquidity in the event of adverse market
conditions than comparably rated securities paying cash interest at regular
interest payment periods. Prices on non-cash-paying instruments may be more
sensitive to changes in the issuer’s financial condition, fluctuation in
interest rates and market demand/supply imbalances than cash-paying securities
with similar credit ratings, and thus may be more speculative. Special tax
considerations are associated with investing in certain lower-grade securities,
such as zero coupon or pay-in-kind securities.
•
Capital
Appreciation Bonds are municipal securities in which the investment return on
the initial principal payment is reinvested at a compounded rate until the bond
matures. The principal and
12
interest are due on
maturity. Thus, like zero coupon securities, investors must wait until maturity
to receive interest and principal, which increases the interest rate and credit
risks.
•
Payments in lieu of
taxes (also known as PILOTs) are voluntary payments by, for instance the U.S.
government or nonprofits, to local governments that help offset losses in or
otherwise serve as a substitute for property taxes.
•
Converted Auction
Rate Securities (CARS) are a structure that combines the debt service deferral
feature of Capital Appreciation Bonds (CABS) with Auction Rate Securities. The
CARS pay no debt service until a specific date, then they incrementally convert
to conventional Auction Rate Securities. At each conversion date the issuer has
the ability to call and pay down any amount of the CARS.
Some
bonds may be “callable,” allowing the issuer to redeem them before their
maturity date. To protect
bondholders, callable bonds may be issued with provisions that prevent them from
being called for a period of time. Typically, that is 5 to 10 years from the
issuance date. When interest rates decline, if the call protection on a bond has
expired, it is more likely that the issuer may call the bond. If that occurs,
the Fund might have to reinvest the proceeds of the called bond in investments
that pay a lower rate of return, which could reduce the Fund’s
yield.
U.S.
Corporate Debt Obligations.
Corporate debt
obligations are debt obligations issued or guaranteed by corporations that are
denominated in U.S. dollars. Such investments may include, among others,
commercial paper, bonds, notes, debentures, variable rate demand notes, master
notes, funding agreements and other short-term corporate instruments. Commercial
paper consists of short-term promissory notes issued by corporations. Commercial
paper may be traded in the secondary market after its issuance. Variable rate
demand notes are securities with a variable interest rate which is readjusted on
pre-established dates. Variable rate demand notes are subject to payment of
principal and accrued interest (usually within seven days) on a Fund’s demand.
Master notes are negotiated notes that permit the investment of fluctuating
amounts of money at varying rates of interest pursuant to arrangements with
issuers who meet the credit quality criteria of the Fund. The interest rate on a
master note may fluctuate based upon changes in specified interest rates or be
reset periodically according to a prescribed formula or may be a set rate.
Although there is no secondary market in master notes, if such notes have a
demand feature, the payee may demand payment of the principal amount of the note
upon relatively short notice. Funding agreements are agreements between an
insurance company and a Fund covering underlying demand notes. Although there is
no secondary market in funding agreements, if the underlying notes have a demand
feature, the payee may demand payment of the principal amount of the note upon
relatively short notice. Master notes and funding agreements are generally
illiquid and therefore subject to the Funds' percentage limitation for illiquid
investments.
Other
Investments
Other
Investment Companies.
Unless
otherwise indicated in this SAI or in a Fund’s prospectus,
a Fund
may purchase shares of other investment companies, including exchange-traded
funds
(“ETFs”),
non-exchange traded
U.S. registered open-end investment companies (mutual funds), closed-end
investment companies, or non-U.S. investment companies traded on foreign
exchanges. When a Fund purchases shares of another investment company, the Fund
will indirectly bear its proportionate share of the advisory fees and other
operating expenses of such investment company and will be subject to the risks
associated with the portfolio investments of the underlying investment
company.
A
Fund’s investment in the securities of other investment companies is subject to
the applicable provisions of the
1940 Act and the rules thereunder. Specifically, Section 12(d)(1) of the 1940
Act contains various limitations on the ability of a registered investment
company (an “acquiring fund”) to acquire shares of another registered investment
company (an “acquired fund”). Under these limits, an acquiring fund generally
cannot (i) purchase more than 3% of the total outstanding voting stock of an
acquired fund;
(ii)
invest more than 5% of its total assets in securities issued by an acquired
company; and (iii) invest more than 10% of its total assets in securities issued
by other investment companies. Likewise, an acquired fund, as well as its
principal underwriter or any broker or dealer registered under the Securities
Exchange Act of 1934, as amended (Exchange Act), cannot knowingly sell more than
3% of the total outstanding voting stock of the
13
acquired
fund to an acquiring fund, or more than 10% of the total outstanding voting
stock of the acquired fund to acquiring
funds generally.
Rule 12d1-4 under
the 1940 Act, which became
effective January
19, 2022, created a regulatory framework for funds’ investments in other funds.
Rule 12d1-4 allows a fund to acquire the securities of another investment
company in excess of the limitations imposed by Section 12 without obtaining an
exemptive order from the SEC, subject to certain limitations and
conditions.
Among
those conditions is the requirement that, prior to a fund relying on Rule 12d1-4
to acquire securities of another fund in excess of the limits of Section
12(d)(1), the acquiring fund must enter into a Fund of Funds Agreement with the
acquired fund. (This requirement does not apply when the acquiring fund’s
investment adviser acts as the acquired fund’s investment adviser
and
does not act as
sub-adviser to
either fund.)
Rule
12d1-4 also is designed to limit the use of complex fund structures. Under Rule
12d1-4, an acquired fund is prohibited
from purchasing or otherwise acquiring the securities of another investment
company or private fund if, immediately after the purchase, the securities of
investment companies and private funds owned by the acquired fund have an
aggregate value in excess of 10% of the value of the acquired fund’s total
assets, subject to certain limited exceptions. Accordingly, to the extent a
Fund’s shares are sold to other investment companies in reliance on Rule 12d1-4,
the Fund will be limited in the amount it could invest in other investment
companies and private funds.
In
addition to Rule 12d1-4, the 1940 Act and related rules provide other exemptions
from these restrictions. For
example, these limitations do not apply to investments by a Fund in investment
companies that are money market funds, including money market funds that have
the Adviser or an affiliate of the Adviser as an investment
adviser.
Variable
or Floating Rate Instruments. Variable or
floating rate instruments are securities that provide for a periodic adjustment
in the interest rate paid on the obligation. The interest rates for securities
with variable interest rates are readjusted on set dates (such as the last day
of the month or calendar quarter) and the interest rates for securities with
floating rates are reset whenever a specified interest rate change occurs.
Variable or floating interest rates generally reduce changes in the market price
of securities from their original purchase price because, upon readjustment,
such rates approximate market rates. Accordingly, as market interest rates
decrease or increase, the potential for capital appreciation or depreciation is
less for variable or floating rate securities than for fixed rate obligations.
Many securities with variable or floating interest rates have a demand feature
allowing the Fund to demand payment of principal and accrued interest prior to
its maturity. The terms of such demand instruments require payment of principal
and accrued interest by the issuer, a guarantor, and/or a liquidity provider.
All variable or floating rate instruments will meet the applicable rating
standards of the Funds. A Fund’s Adviser, or Sub-Adviser, as applicable, may
determine that an unrated floating rate or variable rate demand obligation meets
the Fund’s rating standards by reason of being backed by a letter of credit or
guarantee issued by a bank that meets those rating standards.
For
Rule 2a-7 purposes, a variable rate security, the principal amount of which is
scheduled to be paid in more than 397
calendar days, that is subject to a demand feature, shall be deemed to have a
maturity equal to the longer of the period remaining until the next readjustment
of the interest rate or the period remaining until the principal amount can be
recovered through demand. A floating rate security, the principal amount
of which, in accordance with the terms of the security, must unconditionally be
paid in 397 calendar days or less shall be deemed to have a maturity of one
day.
The
secondary market for certain floating rate loans may be subject to
irregular trading activity, wide bid/ask spreads and
extended trade settlement periods (in some cases, longer than seven days).
Certain floating rate loans held by a Fund might not be considered securities
for purposes of the Securities Act of 1933 (1933 Act) or the Exchange Act and
therefore a risk exists that purchasers, such as the Funds, may not be
entitled to rely on the antifraud provisions of those Acts.
14
Investment
Techniques
Forward
Commitments, When-Issued and Delayed Delivery Securities. Each Fund may
purchase and sell securities on a forward commitment, when-issued and delayed
delivery basis whereby the Fund buys or sells a security with payment and
delivery taking place in the future. Securities purchased or sold on a forward
commitment, when-issued or delayed delivery basis involve delivery and payment
that take place in the future after the trade date or the date of the commitment
to purchase or sell the securities at a pre-determined price and/or yield.
Settlement of such transactions normally occurs a month or more after the
purchase or sale commitment is made. Typically, no interest accrues to the
purchaser until the security is delivered. Forward commitments include “to be
announced” (TBA) transactions, which are contracts for the purchase and sale of
mortgage-backed securities issued or guaranteed by certain U.S.
agencies or
government sponsored enterprises for delivery at a future
settlement date
agreed upon by the two
parties to the
transaction, which is typically a month or more after the trade date of the
transaction.
On
the
trade date of a TBA transaction, the counterparties agree upon certain criteria
for the securities that are to be delivered, including the issuer, maturity,
coupon, face value and price, but the precise securities to be delivered are not
specified.
Instead,
the
actual securities to be delivered,
which
must satisfy the specified criteria, are communicated by the seller to the buyer
shortly before the agreed upon settlement date. Although a Fund generally
intends to acquire or dispose of securities on a forward commitment, when-issued
or delayed delivery basis, a Fund may instead sell these securities or its
commitment before the settlement date if deemed advisable. This will frequently
be the case for TBA transactions and other forward-settling mortgage-backed
securities transactions. No specific limitation exists as to the percentage of
the Fund’s assets which may be used to acquire securities on a when-issued and
delayed delivery basis.
When
purchasing a security on a forward commitment, when-issued or delayed delivery
basis, a Fund assumes the risks
of ownership of the security, including the risk of price and yield
fluctuations, and takes such fluctuations into account when determining its net
asset value. Securities purchased on a forward commitment, when-issued or
delayed delivery basis are subject to changes in value based upon the public’s
perception of the creditworthiness of the issuer and changes, real or
anticipated, in the level of interest rates. Accordingly, securities acquired on
such a basis may expose a Fund to risks because they may experience such
fluctuations prior to actual delivery. Purchasing securities on a forward
commitment, when-issued or delayed delivery basis may involve the additional
risk that the yield available in the market when the delivery takes place
actually may be higher than that obtained in the transaction itself.
Many
forward commitments, when-issued and delayed delivery transactions, including
"to be announced" (TBA), are also
subject to the risk that a counterparty may become bankrupt or otherwise fail to
perform its obligations due to financial difficulties, including making payments
or fulfilling delivery obligations to a Fund. A Fund may obtain no or only
limited recovery in a bankruptcy or other reorganizational proceedings, and any
recovery may be significantly delayed. With respect to TBA transactions and
other
forward-settling
mortgage-backed securities transactions, the counterparty risk may be mitigated
by the exchange of variation margin between the counterparties on a regular
basis as the market value of the deliverable security fluctuates.
Investment
in these types of securities may increase the possibility that the Fund will
incur short-term gains subject to
federal taxation or short-term losses if the Fund must engage in portfolio
transactions in order to honor its commitment. In the case of a purchase
transaction, the delayed delivery securities, which will not begin to accrue
interest or dividends until the settlement date, will be recorded as an asset of
a Fund and will be subject to the risk of market fluctuation. The purchase price
of the delayed delivery securities is a liability of a Fund until settlement.
TBA transactions and other forward-settling mortgage-backed securities
transactions may be effected pursuant to a collateral agreement with the
counterparty
under
which the parties exchange
collateral
consisting of cash or liquid securities in an amount as specified by the
agreement that is based on the change in the market value of the TBA
transactions governed by the agreement. A Fund or the counterparty will make
payments throughout the term of the transaction as collateral values fluctuate
to maintain full collateralization for the term of the transaction. Collateral
will be marked-to-market every business day. If the counterparty defaults on the
transaction or declares bankruptcy or insolvency, a Fund might incur expenses in
enforcing its rights, or the Fund might experience delay and costs in recovering
collateral or may suffer a loss if the value of the collateral
declines.
15
Interfund
Loans.
The SEC has issued an exemptive order permitting the Invesco Funds to borrow
money from and lend money to each other for temporary or emergency purposes. The
Invesco Funds’ interfund lending program is subject to a number of conditions,
including the requirements that: (1) an interfund loan generally will occur only
if the interest rate on the loan is more favorable to the borrowing fund than
the interest rate typically available from a bank for a comparable transaction
and the rate is more favorable to the lending fund than the rate available on
overnight repurchase transactions; (2) an Invesco Fund may not lend more than
15% of its net assets through the program (measured at the time of the last
loan); and (3) an Invesco Fund may not lend more than 5% of its net assets to
another Invesco Fund through the program (measured at the time of the loan). A
Fund may participate in the program only if and to the extent that such
participation is consistent with the Fund’s investment objective and investment
policies. Interfund loans have a maximum duration of seven days. Loans may be
called with one day’s notice and may be repaid on any day.
Borrowing. The Funds may
borrow money to the extent permitted under the 1940 Act Laws, Interpretations
and Exemptions (defined below) and Fund Policies. Such borrowings may be
utilized (i) for temporary or emergency purposes; (ii) in anticipation of or in
response to adverse market conditions; or, (iii) for cash management purposes.
All borrowings are limited to an amount not exceeding 33 1/3% of a Fund’s total
assets (including the amount borrowed) less liabilities (other than borrowings).
Any borrowings that exceed this amount will be reduced within three business
days to the extent necessary to comply with the 33 1/3% limitation even if it is
not advantageous to sell securities at that time.
If
there are unusually heavy redemptions, a Fund may have to sell a portion of its
investment portfolio at a time when it may
not be advantageous to do so. Selling Fund securities under these circumstances
may result in a lower net asset value per share or decreased dividend income, or
both. Invesco and the Sub-Advisers believe that, in the event of abnormally
heavy redemption requests, a Fund’s borrowing ability would help to mitigate any
such effects and could make the forced sale of their portfolio securities less
likely.
The
Funds may borrow from a bank, broker-dealer, or another Invesco Fund.
Additionally, the Funds are permitted to
temporarily carry a negative or overdrawn balance in their account with their
custodian bank. To compensate the custodian bank for such overdrafts, the Funds
may either (i) leave funds as a compensating balance in their account so the
custodian bank can be compensated by earning interest on such funds; or (ii)
compensate the custodian bank by paying it an agreed upon rate. A Fund may not
purchase additional securities when any borrowings from banks or broker-dealers
exceed 5% of a Fund’s total assets or when any borrowings from an Invesco Fund
are outstanding.
Repurchase
Agreements. Each Fund may
engage in repurchase agreement transactions involving the types of securities in
which it is permitted to invest. Repurchase agreements are agreements under
which a Fund purchases a security from a broker-dealer or bank that agrees to
repurchase that security at a mutually agreed upon time and price (which is
higher than the purchase price), thereby determining the yield during a Fund's
holding period. A Fund may enter into a “continuing contract” or “open”
repurchase agreement under which the seller is under a continuing obligation to
repurchase the underlying securities from the Fund on demand and the effective
interest rate is negotiated on a daily basis. Repurchase agreements may be
viewed as loans made by a Fund which are collateralized by the securities
subject to repurchase.
In
any repurchase agreement, the
securities that are subject to the transaction may be obligations issued by the
U.S. government or its agencies or instrumentalities. The Funds consider
repurchase agreements with the Federal Reserve Bank of New York to be U.S.
government securities for purposes of the Funds’ investment policies.
Additionally, the Funds consider federal agency mortgage-backed securities to be
government securities. Invesco Premier Portfolio may also engage in repurchase
agreements collateralized by fixed income securities that are rated investment
grade and below investment grade by NRSROs or unrated securities of comparable
quality, loan participations, and equities (collectively "other collateral").
For these types of repurchase agreement transactions, the Fund would look to the
counterparty, and not the collateral, for determining diversification under Rule
2a-7. Thus, collateral for a repurchase agreement may include securities that a
Fund could not hold directly. Repurchase agreements involving obligations of
other
16
collateral
may be subject to special risks and may not have the benefit of certain
protections in the event of a counterparty’s
insolvency.
Regardless
of the collateral underlying the repurchase agreement, the Fund must determine
that the repurchase
agreement with the particular counterparty involves minimal credit risk and
satisfies the credit quality standards in compliance with Rule 2a-7 under the
1940 Act. Collateral with lower credit quality or longer maturities may be
subject to greater price fluctuations than collateral with higher credit quality
or shorter maturities. If the repurchase agreement counterparty were to default,
lower quality collateral may be more difficult to liquidate than higher quality
collateral.
If
the seller of a repurchase agreement fails to repurchase the security in
accordance with the terms of the agreement, a Fund
might incur expenses in enforcing its rights, and could experience a loss on the
sale of the security subject to the repurchase agreement to the extent that the
sale proceeds including accrued interest are less than the resale price provided
in the repurchase agreement, including interest. In addition, although the
Bankruptcy Code and other insolvency laws may provide certain protections for
some types of repurchase agreements, if the seller of a repurchase agreement
should be involved in bankruptcy or insolvency proceedings, a Fund may incur
delay and costs in selling the underlying security or may suffer a loss of
principal and interest if the value of the underlying security declines or the
Fund may be deemed to be an unsecured creditor and be required to return the
securities to the seller.
Invesco
Premier Portfolio may enter into repurchase agreements that involve securities
that may be subject to a court
ordered or other “stay” in the event of the seller’s bankruptcy or insolvency. A
“stay” will prevent a Fund from selling the securities it holds under a
repurchase agreement until permitted by a court or other authority. In these
situations, a Fund may be subject to greater risk that the value of the
securities may decline before they are sold, and that the Fund may experience a
loss.
The
securities underlying a repurchase agreement will be marked-to-market every
business day,
and
if
the
value of the securities falls below a specified percentage of the repurchase
price (typically 102%), the counterparty will be required to deliver additional
collateral to a Fund in the form of cash or additional securities. Custody of
the securities will be maintained by the Fund’s custodian or sub-custodian for
the duration of the agreement.
The
Funds may invest their cash balances in joint accounts with other Invesco Funds
for the purpose of investing in
repurchase agreements with maturities not to exceed 60 days and collateralized
by cash or government securities, and in certain other money market instruments
with remaining maturities not to exceed 90 days. Repurchase agreements may be
considered loans by a Fund under the 1940 Act.
Restricted
and Illiquid Investments. Each Fund may not
acquire any illiquid security if, immediately after the acquisition, the Fund
would have invested more than 5% of its total assets in illiquid
investments.
For purposes of
each Fund’s 5% limitation, an illiquid security means a security that cannot be
sold or disposed of in the ordinary course of business within seven calendar
days at approximately the value ascribed to it by the Fund, as determined
pursuant to the 1940 Act and applicable rules and regulations
thereunder.
Illiquid
investments may include a wide variety of investments, such as, for
example:
(1)
repurchase agreements maturing in more than seven days (unless the agreements
have demand/redemption features);
(2)
Over-the-counter (OTC) options contracts and certain other derivatives
(including certain swap agreements);
(3)
fixed time deposits that are not subject to prepayment or that provide for
withdrawal penalties upon prepayment (other than overnight
deposits);
(4)
loan interests and other direct debt instruments;
(5)
municipal lease obligations;
(6)
commercial paper issued pursuant to Section 4(2) of the 1933 Act; and (7)
securities that are unregistered, that can be sold to qualified institutional
buyers in accordance with Rule 144A under the 1933 Act, or that are exempt from
registration under the 1933 Act or otherwise restricted under the federal
securities laws, including private placement securities sold pursuant to
Regulation S.
Limitations
on the resale of restricted investments may have an adverse effect on their
marketability, which may prevent a
Fund from disposing of them promptly at reasonable prices. The Fund may have to
bear the expense of registering such securities for resale, and the risk of
substantial delays in effecting such
17
registrations.
A Fund’s difficulty valuing and selling restricted securities or illiquid
investments may result in a loss or be costly
to the Fund.
If
a substantial market develops for a restricted security or illiquid investment
held by a Fund, it may be treated as a liquid
investment, in accordance with procedures and guidelines adopted by the Board on
behalf of the Funds.
Rule
144A Securities. Rule 144A
securities are securities which, while privately placed, are eligible for
purchase and resale pursuant to Rule 144A under the 1933 Act. This Rule permits
certain qualified institutional buyers, such as the Funds, to trade in privately
placed securities even though such securities are not registered under the 1933
Act. A Fund will consider whether securities purchased under Rule 144A are
illiquid and thus subject to the Fund’s restriction on illiquid investments. The
determination of whether a Rule 144A security is liquid or illiquid will take
into account relevant market trading, and investment-specific considerations
consistent with applicable SEC guidance. Additional factors that may be
considered include the (i) frequency of trades and quotes; (ii) number of
dealers and potential purchasers; (iii) dealer undertakings to make a market;
and (iv) nature of the security and of market place trades (for example, the
time needed to dispose of the security, the method of soliciting offers and the
mechanics of transfer). Investing in Rule 144A securities could increase the
amount of a Fund’s illiquid investments if qualified institutional buyers are
unwilling to purchase such securities.
Sale
of Money Market Securities. The Funds do not
seek profits through short-term trading and will generally hold portfolio
securities to maturity. However, the Adviser and/or Sub-Adviser may seek to
enhance the yield of the Fund by taking advantage of yield disparities that
occur in the money markets. For example, market conditions frequently result in
similar securities trading at different prices. Also, there frequently are
differences in yields between various types of money market securities. The
Adviser and/or Sub-Adviser may dispose of any portfolio security prior to its
maturity if such disposition and reinvestment of proceeds are expected to
enhance yield consistent with the Adviser’s and/or Sub-Adviser’s judgment as to
desirable portfolio maturity structure. The Adviser and/or Sub-Adviser may also
dispose of any portfolio security prior to maturity to meet redemption requests,
and as a result of a revised credit evaluation of the issuer or other
circumstances or considerations. This procedure may increase or decrease the
Fund’s yield depending upon the Adviser’s and/or Sub-Adviser’s ability to
correctly time and execute such transactions. The Fund’s policy of investing in
securities with maturities of 397 calendar days or less will result in high
portfolio turnover. Since brokerage commissions are not normally paid on
investments of the type made by the Fund, the high turnover should not adversely
affect the Fund’s net income.
LIBOR
Transition Risk
A
Fund may have investments in
financial instruments that utilize the London Interbank Offered Rate (LIBOR) as
the reference or benchmark rate for variable interest rate calculations
(including variable or floating rate debt securities
or
loans and derivatives such as interest rate futures or swaps).
LIBOR
is intended to measure the rate generally at which
banks
can
lend and borrow from one another in the relevant currency on an unsecured basis.
LIBOR was a common benchmark interest rate index used to make adjustments to
variable-rate debt instruments, to determine interest rates for a variety of
financial instruments and borrowing arrangements and as reference rate in
derivative contracts. A Fund’s investments may pay interest at variable or
floating rates based on LIBOR, may be subject to interest caps or floors based
on LIBOR or may otherwise reference LIBOR as a reference rate to determine
payment obligations
or
financing terms.
In
the years following the 2008 financial crisis, the integrity of LIBOR was
increasingly questioned because several
banks contributing to its calculation were accused of rate manipulation and
because of a general contraction in the unsecured interbank lending market. As a
result, regulators and financial industry working groups in several
jurisdictions have worked over the past several years to identify alternative
reference rates (ARRs) to replace LIBOR and to assist with the transition to the
new ARRs. The industry working group in the United States, the Alternative
Reference Rate Committee, has recommended adoption of
18
the
Secured Overnight Financing Rate (SOFR) as a replacement for USD LIBOR. SOFR is
a broad measure of the cost of
overnight borrowing of cash through repurchase agreements collateralized by U.S.
Treasury securities.
In
connection with the LIBOR transition, on March 5, 2021 the UK Financial Conduct
Authority (FCA), the regulator that
oversees LIBOR, announced that the majority of LIBOR rates would cease to be
published or would no longer be representative on January 1, 2022. Specifically,
the publication of all settings of British Pound Sterling, Swiss Franc, Euro and
Japanese Yen LIBOR, as well as the 1-week and 2-month settings of U.S. Dollar
(USD) LIBOR were phased out at the end of 2021. The remaining settings of USD
LIBOR, which are the most widely used in financial markets, will continue to be
published until June 2023 to allow for an orderly transition away from these
rates. Additionally, key regulators have instructed banking institutions to
cease entering into new contracts that reference these remaining USD LIBOR
settings after December 31, 2021, subject to certain limited
exceptions.
There remains
uncertainty and risks relating to the continuing LIBOR transition and its
effects on a Fund and the instruments in which a Fund may invest. For
example,
there
can be no assurance that the composition or characteristics of any ARRs or
financial instruments in which a Fund invests that utilize ARRs
will
be similar to or produce the same value or economic equivalence as LIBOR or that
these instruments will have the same volume or liquidity. Additionally, although
regulators have generally prohibited banking institutions from entering into new
contracts that reference those USD LIBOR settings that continue to
exist,
there
remains
uncertainty and
risks relating to certain
“legacy”
USD
LIBOR
instruments that
were issued or entered into before December
31,
2021
and the process by which a replacement interest rate will
be
identified and implemented into these instruments when USD LIBOR is ultimately
discontinued. While
some
“legacy”
USD
LIBOR instruments may contemplate a scenario where LIBOR is no longer available
by providing for an alternative or “fallback” rate-setting methodology, there
may be significant uncertainty regarding the effectiveness of such alternative
or “fallback” methodologies to replicate USD LIBOR;
other
“legacy”
USD
LIBOR
instruments may not include such “fallback”
rate-setting
provisions at all. Certain legislation has been promulgated that would replace
references to USD LIBOR in certain
“legacy” USD LIBOR
instruments with a specified replacement rate, such as SOFR, by operation of
law;
however there
remains significant uncertainty regarding the effectiveness of any such
legislation. As a result,
the
ongoing LIBOR transition might lead to increased volatility and reduced
liquidity in, or a reduction in the value of,
“legacy”
USD
LIBOR instruments held by a Fund; increased difficulty for borrowers associated
with these instruments to refinance, the proceeds of which are needed to repay a
Fund; or diminished effectiveness of any hedging strategies that a Fund may seek
to implement in connection with these instruments. All of the foregoing may
adversely affect a Fund’s performance or NAV.
Environmental,
Social and Governance (ESG) Considerations
ESG
considerations
may be
assessed as part of the Adviser's credit research process. ESG factors may vary
across types of investments and issuers, and not every ESG factor may be
identified or evaluated. The incorporation of ESG factors may affect a Fund’s
exposure to certain issuers or industries and may not work as intended. A Fund
may underperform other funds that do not assess an issuer’s ESG factors as part
of the investment process or that use a different methodology to identify and/or
incorporate ESG factors. Because ESG considerations may be used as one part of
an overall investment process, a Fund may still invest in securities of issuers
that are not considered ESG-focused or that may be viewed as having a high ESG
risk profile. As investors can differ in their views regarding ESG factors, a
Fund may invest in issuers that do not reflect the views with respect to ESG of
any particular investor. Information used by a Fund to evaluate such factors,
including information from reliance on third-party research and/or proprietary
research, may not be readily available, complete or accurate, and may vary
across providers and issuers as ESG is not a uniformly defined characteristic,
which could negatively impact a Fund’s ability to accurately assess an issuer,
which could negatively impact a Fund’s performance. There is no guarantee that
the evaluation of ESG considerations will be additive to a Fund’s
performance.
19
Receipt
of Issuer’s Nonpublic Information
The
Adviser or Sub-Advisers (through their portfolio managers, analysts, or other
representatives) may receive material
nonpublic information about an issuer that may restrict the ability of the
Adviser or Sub-Advisers to cause the Funds to buy or sell securities of the
issuer on behalf of the Funds for substantial periods of time. This may impact
the Funds' ability to realize profit or avoid loss with respect to the issuer
and may adversely affect the Funds' flexibility with respect to buying or
selling securities, potentially impacting Fund performance. For example,
activist investors of certain issuers in which the Adviser or Sub-Advisers hold
large positions may contact representatives of the Adviser or Sub-Advisers and
may disclose material nonpublic information in such communication. The Adviser
or Sub-Advisers would be restricted from trading on the basis of such material
nonpublic information, limiting their flexibility in managing the Funds and
possibly impacting Fund performance.
Cybersecurity
Risk
With the increased
use of technologies such as the Internet to conduct business, the Funds, like
all companies, may be susceptible to operational,
information
security and related risks. Cybersecurity incidents involving the Funds and
their service providers (including,
without
limitation,
a
Fund’s investment adviser,
sub-adviser,
fund
accountant, custodian, transfer agent and financial intermediaries) have the
ability to cause disruptions and impact business operations, potentially
resulting in financial losses, impediments to trading,
the
inability of Fund shareholders to transact business, violations of applicable
privacy and other laws, regulatory fines, penalties, reputational damage,
reimbursement or other compensation costs, and/or additional compliance
costs.
Cybersecurity
incidents can result from deliberate cyberattacks or unintentional events and
may arise from external or
internal sources. Cyberattacks may include infection by malicious software or
gaining unauthorized access to digital systems, networks or devices that are
used to service the Funds' operations (e.g., by “hacking” or “phishing”).
Cyberattacks may also be carried out in a manner that does not require gaining
unauthorized access, such as causing denial-of-service attacks on websites
(i.e., efforts to make network services unavailable to intended users). These
cyberattacks could cause the misappropriation of assets or personal information,
corruption of data or operational disruptions. Geopolitical tensions may, from
time to time, increase the scale and sophistication of deliberate
cyberattacks.
Similar
adverse consequences could result from cybersecurity incidents affecting issuers
of securities in which the Funds
invest, counterparties with which the Funds engage, governmental and other
regulatory authorities, exchange and other financial market operators, banks,
brokers, dealers, insurance companies, other financial institutions and other
parties. In addition, substantial costs may be incurred in order to prevent any
cybersecurity incidents in the future. Although the Funds’ service providers may
have established business continuity plans and risk management systems to
mitigate cybersecurity risks, there can be no guarantee or assurance that such
plans or systems will be effective, or that all risks that exist, or may develop
in the future, have been completely anticipated and identified or can be
protected against. The Funds and their shareholders could be negatively impacted
as a result.
Business
Continuity and Operational Risk
The
Adviser, the Funds and the Funds’ service providers may experience disruptions
or operating errors, such as processing
errors or human errors, inadequate or failed internal or external processes,
systems or technology failures, or other disruptive events, that could
negatively impact and cause disruptions in normal business operations of the
Adviser, the Funds or the Funds’ service providers. The Adviser has developed a
Business Continuity Program (the “Program”) designed to minimize the disruption
of normal business operations in the event of an adverse incident affecting the
Funds, the Adviser and/or its affiliates. The Program is also designed to enable
the Adviser to reestablish normal business operations in a timely manner during
such an adverse incident; however, there are inherent limitations in such
programs (including the possibility that contingencies have not been anticipated
and procedures do not work as intended) and, under some circumstances (e.g.
natural disasters, terrorism, public health crises, power or utility shortages
and failures, system failures or malfunctions), the Adviser, its affiliates, and
any service providers or vendors used
20
by
the Adviser, its affiliates, or the Fund could be prevented or hindered from
providing services to the Funds for extended
periods of time. These circumstances could cause disruptions and negatively
impact the Funds’ service providers and the Funds’ business operations,
potentially including an inability to process Fund shareholder transactions, an
inability to calculate a Fund’s net asset value and price the Fund’s
investments, and impediments to trading portfolio securities.
Natural
Disaster/Epidemic Risk
Natural
or environmental disasters, such as earthquakes, fires, floods, hurricanes,
tsunamis and other severe
weather-related phenomena generally, and widespread disease, including pandemics
and epidemics, have been and can be highly disruptive to economies and markets,
adversely impacting individual companies, sectors, industries, markets,
currencies, interest and inflation rates, credit ratings, investor sentiment,
and other factors affecting the value of the Funds’ investments. Given the
increasing interdependence among global economies and markets, conditions in one
country, market, or region are increasingly likely to adversely affect markets,
issuers, and/or foreign exchange rates in other countries, including the U.S.
These disruptions could prevent the Funds from executing advantageous investment
decisions in a timely manner and negatively impact the Funds’ ability to achieve
their investment objectives. Any such event(s) could have a significant adverse
impact on the value and risk profile of the Funds.
COVID-19. The
COVID-19
strain
of coronavirus has resulted in instances of market closures and dislocations,
extreme volatility, liquidity constraints and increased trading costs.
Efforts to contain the spread of COVID-19 have resulted in travel restrictions,
closed international borders, disruptions of healthcare systems, business
operations (including business closures) and supply chains, layoffs, lower
consumer demand and employee availability, defaults and credit downgrades, among
other significant economic impacts, all of which have disrupted global economic
activity across many industries and may exacerbate other pre-existing political,
social and economic risks, locally or globally and cause general concern and
uncertainty. The full economic impact and ongoing effects of COVID-19 (or other
future epidemics or pandemics) at the macro-level and on individual businesses
are unpredictable and may result in significant and prolonged effects on the
Funds performance.
Fund
Policies for Invesco Premier Portfolio
Fundamental
Restrictions. Except as
otherwise noted below, the Fund is subject to the following investment
restrictions, which may be changed only by a vote of such Fund's outstanding
shares. Fundamental restrictions may be changed only by a vote of the lesser of
(i) 67% or more of the Fund's shares present at a meeting if the holders of more
than 50% of the outstanding shares are present in person or represented by
proxy, or (ii) more than 50% of the Fund's outstanding shares.
(1)
The Fund is a "diversified company" as defined in the 1940 Act. The Fund will
not purchase the securities of any
issuer if, as a result, the Fund would fail to be a diversified company within
the meaning of the 1940 Act, and the rules and regulations promulgated
thereunder, as such statute, rules and regulations are amended from time to time
or are interpreted from time to time by the SEC staff (collectively, the "1940
Act Laws and Interpretations") or except to the extent that the Fund may be
permitted to do so by exemptive order or similar relief (collectively, with the
1940 Act Laws and Interpretations, the "1940 Act Laws, Interpretations and
Exemptions"). In complying with this restriction, however, the Fund may purchase
securities of other investment companies to the extent permitted by the 1940 Act
Laws, Interpretations and Exemptions.
(2)
The Fund may not borrow money or issue senior securities, except as permitted by
the 1940 Act Laws,
Interpretations and Exemptions.
(3)
The Fund may not underwrite the securities of other issuers. This restriction
does not prevent the Fund from engaging in
transactions involving the acquisition, disposition or resale of its portfolio
securities, regardless of whether the Fund may be considered to be an
underwriter under the 1933 Act.
(4)
The Fund will not make investments that will result in the concentration (as
that term may be defined or interpreted by
the 1940 Act Laws, Interpretations and Exemptions) of its investments in the
securities of issuers primarily engaged in the same industry. This restriction
does not limit the Fund's investments in (i)
21
obligations
issued or guaranteed by the U.S. government, its
agencies or instrumentalities, or (ii) tax-exempt obligations issued by
governments or political subdivisions of governments, or (iii) bank instruments.
In complying with this restriction, the Fund will not consider a bank-issued
guaranty or financial guaranty insurance as a separate security.
(5)
The Fund may not purchase real estate or sell real estate unless acquired as a
result of ownership of securities or other
instruments. This restriction does not prevent the Fund from investing in
issuers that invest, deal, or otherwise engage in transactions in real estate or
interests therein, or investing in securities that are secured by real estate or
interests therein.
(6)
The Fund may not purchase or sell physical commodities except to the extent
permitted by the 1940 Act and any other
governing statute, and by the rules thereunder, and by the SEC or other
regulatory agency with authority over the Fund.
(7)
The Fund may not make personal loans or loans of its assets to persons who
control or are under common control with
the Fund, except to the extent permitted by 1940 Act Laws, Interpretations and
Exemptions. This restriction does not prevent the Fund from, among other things,
purchasing debt obligations, entering into repurchase agreements, loaning its
assets to broker-dealers or institutional investors, or investing in loans,
including assignments and participation interests.
(8)
The Fund may, notwithstanding any other fundamental investment policy or
limitation, invest all of its assets in the
securities of a single open-end management investment company with substantially
the same fundamental investment objectives, policies and restrictions as the
Fund.
The
investment restrictions set forth above provide the Fund with the ability to
operate under new interpretations of
the 1940 Act or pursuant to exemptive relief from the SEC without receiving
prior shareholder approval of the change. Even though the Fund has this
flexibility, the Board has adopted non-fundamental restrictions for the Fund
relating to certain of these restrictions which Invesco and, when applicable,
the Sub-Advisers must follow in managing the Fund. Any changes to these
non-fundamental restrictions, which are set forth below, require the approval of
the Board.
Explanatory
Note
For
purposes of the Fund’s fundamental restriction related to industry concentration
above, investments in tax-exempt
municipal securities where the payment of principal and interest for such
securities is derived solely from a specific project associated with an issuer
that is not a governmental entity or a political subdivision of a government are
subject to a Fund’s industry concentration policy.
For
purposes of the Fund’s fundamental restriction related to physical commodities
above, the Fund is currently permitted
to invest in futures, swaps, and other instruments on physical commodities and
the 1940 Act does not prohibit a fund from owning commodities or contracts
related to commodities. The extent to which the Fund can invest in
futures,
swaps
and other instruments on physical commodities, and/or commodities or contracts
related to commodities, is set out in the Fund’s prospectus, this SAI, and as
permitted by the Fund's fundamental restriction.
For
purposes of the Fund’s fundamental restriction related to real estate above, the
1940 Act does not prohibit a fund
from owning real estate. The extent to which the Fund can invest in real estate
is set out in the investment strategies described in the Fund’s prospectus or
this SAI.
For
purposes of the Fund’s fundamental restriction related to senior securities
above, the 1940 Act prohibits a fund
from issuing a “senior security,” which is generally defined as any bond,
debenture, note, or similar obligation or instrument constituting a security and
evidencing indebtedness, or any stock of a class having priority over any other
class of the fund’s shares with respect to the payment of dividends or the
distribution of fund assets, except that the fund may borrow money as described
above.
For
purposes of the Fund’s fundamental restriction related to loans above, made by
the Fund, current SEC staff
interpretations under the 1940 Act prohibit a fund from lending more than
one-third of its total assets, except through the purchase of debt obligations
or the use of repurchase agreements.
22
Non-Fundamental
Restrictions. The following
non-fundamental investment restrictions apply to Invesco Premier Portfolio. They
may be changed for any Fund without approval of that Fund’s voting
securities.
(1)
In complying with the fundamental restriction regarding issuer diversification,
the Fund will not, with respect to 75% of
its total assets, purchase the securities of any issuer (other than securities
issued or guaranteed by the U.S. government or any of its agencies or
instrumentalities and securities issued by other investment companies), if, as a
result, (i) more than 5% of the Fund's total assets would be invested in the
securities of that issuer, or (ii) the Fund would hold more than 10% of the
outstanding voting securities of that issuer. The Fund may purchase securities
of other investment companies as permitted by the 1940 Act Laws, Interpretations
and Exemptions.
(2)
In complying with the fundamental restriction regarding borrowing money and
issuing senior securities, the Fund may borrow
money in an amount not exceeding 33 1/3% of its total assets (including the
amount borrowed) less liabilities (other than borrowings). The Fund may borrow
from banks, broker-dealers, or an Invesco Fund. The Fund may not borrow for
leveraging, but may borrow for temporary or emergency purposes, in anticipation
of or in response to adverse market conditions, or for cash management purposes.
The Fund may not purchase additional securities when any borrowings from banks
exceed 5% of the Fund's total assets or when any borrowings from an Invesco Fund
are outstanding.
(3)
In complying with the fundamental restriction regarding industry concentration,
the Fund may invest up to 25% of its total
assets in the securities of issuers whose principal business activities are in
the same industry and may invest over 25% of its assets in (i) obligations
issued or guaranteed by the U.S. government, its agencies or instrumentalities,
(ii) tax-exempt obligations issued by governments or political subdivisions of
governments, and (iii) bank instruments.
(4)
In complying with the fundamental restriction with regard to making loans, the
Fund may lend up to 33 1/3% of its total
assets and may lend money to an Invesco Fund, on such terms and conditions as
the SEC may require in an exemptive order.
(5)
Notwithstanding the fundamental restriction with regard to investing all assets
in an open-end fund, the Fund may not invest
all of its assets in the securities of a single open-end management investment
company with the same fundamental investment objective, policies, and
restrictions as the Fund.
(6)
The Fund may not acquire any securities of registered unit investment trusts in
reliance on Sections 12(d)(1) or
12(d)(1)(G) of the 1940 Act.
Fund
Policies for Invesco Premier U.S. Government Money Portfolio
Fundamental
Restrictions. The investment
restrictions set forth below have been adopted by the Fund and, unless
identified as non-fundamental policies, may not be changed without the
affirmative vote of a majority of the outstanding voting securities of the Fund.
As provided in the 1940 Act, a “vote of a majority of the outstanding voting
securities of the Fund” means the affirmative vote of the lesser of (1) more
than 50% of the outstanding shares of the Fund or (2) 67% or more the shares
present at a meeting, if more than 50% of the outstanding shares are represented
at the meeting in person or by proxy. Except with respect to borrowing, changes
in values of the Fund's assets will not cause a violation of the following
investment restrictions as long as percentage restrictions are observed by the
Fund at the time it purchases any security. The Fund shall not:
(1)
Purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any
of its agencies or instrumentalities, municipal securities or securities issued
or guaranteed by domestic banks, including U.S. branches for foreign banks and
foreign branches of U.S. banks) if, as a result, more than 25% of the Fund's
total assets would be invested in the securities of companies whose principal
business activities are in the same industry;
(2)
Except to the extent permitted by Rule 2a-7 promulgated under the 1940 Act, or
any successor rule thereto, purchase
the securities of any issuer (other than securities issued or guaranteed by the
U.S. government or any of its agencies or instrumentalities, or securities of
other investment companies) if, as a
23
result,
(i) more than 5% of the Fund's total assets would be invested in the securities
of that issuer, or (ii) the Fund would hold
more than 10% of the outstanding voting securities of that issuer;
(3)
Underwrite securities of other issuers, except insofar as it may be deemed to be
an underwriter under the 1933 Act, in
connection with the disposition of the fund's portfolio securities;
(4)
Borrow money, except that the Fund may borrow money in an amount not exceeding
33 1/3% of its total assets
(including the amount borrowed) less liabilities (other than
borrowings);
(5)
Issue senior securities, except as permitted under the 1940 Act;
(6)
Lend any security or make any loan if, as a result, more than 33 1/3% of its
total assets would be lent to other parties,
but this limitation does not apply to the purchase of debt securities or to
repurchase agreements;
(7)
The Fund may not purchase or sell physical commodities except to the extent
permitted by the 1940 Act and any other
governing statute, and by the rules thereunder, and by the SEC or other
regulatory agency with authority over the Fund;
(8)
Purchase or sell real estate unless acquired as a result of ownership of
securities or other instruments (but this shall not
prevent the Fund from investing in securities or other instruments backed by
real estate or securities of companies engaged in the real estate business);
or
(9)
The Fund may, notwithstanding any other fundamental investment policy or
limitation, invest all of its assets in the
securities of a single, open-end management investment company managed by the
Adviser or an affiliate or a successor thereof, with substantially the same
fundamental investment objective, policies, and limitations as the
Fund.
The
Fund's investment objective is to seek a high level of current income,
consistent with the preservation of capital and the
maintenance of liquidity. The Fund's investment objective is fundamental and may
not be changed without shareholder approval.
Non-Fundamental
Restrictions. Non-fundamental
restrictions may be changed for any Fund without shareholder approval. The
non-fundamental investment restrictions listed below apply to Invesco Premier
U.S. Government Money Portfolio.
(1)
In complying with the fundamental restriction regarding issuer diversification,
the Fund will not, with respect to 100% of
its total assets, purchase the securities of any issuer (other than securities
issued or guaranteed by the U.S. government or any of its agencies or
instrumentalities and securities issued by other investment companies), if, as a
result, (i) more than 5% of the Fund's total assets would be invested in the
securities of that issuer, except, as permitted by Rule 2a-7 under the 1940 Act,
or (ii) the Fund would hold more than 10% of the outstanding voting securities
of that issuer. The Fund may purchase securities of other investment companies
as permitted by the 1940 Act Laws, Interpretations and Exemptions.
In
complying with the fundamental restriction regarding issuer diversification, any
Fund that invests in municipal
securities will regard each state (including the District of Columbia and Puerto
Rico), territory and possession of the United States, each political
subdivision, agency, instrumentality and authority thereof, and each multi-state
agency of which a state is a member as a separate "issuer." When the assets and
revenues of an agency, authority, instrumentality or other political subdivision
are separate from the government creating the subdivision and the security is
backed only by assets and revenues of the subdivision, such subdivision would be
deemed to be the sole issuer. Similarly, in the case of an Industrial
Development Bond or Private Activity Bond, if that bond is backed only by the
assets and revenues of the non-governmental user, then that non-governmental
user would be deemed to be the sole issuer.
(2)
In complying with the fundamental restriction regarding industry concentration,
the Fund may invest up to 25% of its total
assets in the securities of issuers whose principal business activities are in
the same industry.
24
(3)
Notwithstanding the fundamental restriction with regard to investing all assets
in an open-end fund, the Fund may not invest
all of its assets in the securities of a single open-end management investment
company with the same fundamental investment objective, policies and
restrictions as the Fund.
(4)
The Fund may not acquire any securities of registered unit investment trusts in
reliance on Section 12(d)(1)(F) or
12(d)(1)(G) of the 1940 Act.
(5)
The following applies:
Invesco Premier
U.S. Government Money Portfolio invests, under normal circumstances, at least
80% of its assets in (i) direct obligations of the U.S. Treasury, (ii) other
securities issued or guaranteed as to principal and interest by the U.S.
government or its agencies and instrumentalities (agency securities) and (iii)
repurchase agreements secured by those obligations referenced in (i) and (ii)
above.
For
purposes of the foregoing, "assets" means net assets, plus the amount of any
borrowings for investment
purposes. The Fund will provide written notice to its shareholders prior to any
change to this policy, as required by the 1940 Act Laws, Interpretations and
Exemptions.
It is the intention
of the Fund, unless otherwise indicated, that with respect to the Fund’s
policies that are a result of application of law, the Fund will take advantage
of the flexibility provided by rules or interpretations of the SEC currently in
existence or promulgated in the future, or changes to such laws.
Policies
and Procedures for Disclosure of Fund Holdings
The
Board has adopted policies and procedures with respect to the disclosure of the
Funds' portfolio holdings (the
Holdings Disclosure Policy). Invesco and the Board may amend the Holdings
Disclosure Policy at any time without prior notice. Details of the Holdings
Disclosure Policy and a description of the basis on which employees of Invesco
and its affiliates may release information about portfolio securities in certain
contexts are provided below. As used in the Holdings Disclosure Policy and
throughout the SAI, the term “portfolio holdings information” includes
information with respect to the portfolio holdings of a Fund, including holdings
that are derivatives and holdings held as short positions. Information generally
excluded from “portfolio holdings information” includes, without limitation, (i)
descriptions of allocations among asset classes, regions, countries, industries
or sectors; (ii) aggregated data such as average or median ratios, market
capitalization, credit quality or duration; (iii) performance attributions by
asset class, country, industry or sector; (iv) aggregated risk statistics,
analysis and simulations, such as stress testing; (v) the characteristics of the
stock and bond components of a Fund’s portfolio holdings and other investment
positions; (vi) the volatility characteristics of a Fund; (vii) information on
how various weightings and factors contributed to Fund performance; (viii)
various financial characteristics of a Fund or its underlying portfolio
investments; and (ix) other information where, in the reasonable belief of the
Funds' Chief Compliance Officer (or a designee), the release of such information
would not present risks of dilution, arbitrage, market timing, insider trading
or other inappropriate trading for the applicable Fund.
Public
release of portfolio holdings. The Funds make
available to institutions that maintain accounts with the Funds, beneficial
owners of the Fund shares and prospective investors (collectively, Qualified
Persons) information regarding or derived from the Funds’ portfolio holdings.
The Funds disclose the following portfolio holdings information at www.invesco.com/us1.
|
Information |
Approximate
Date of Website Posting |
Information
Remains Available
on
Website |
|
Weighted
average maturity
information
thirty-day, seven-day,
and
one-day yield information, daily
dividend
factor and total net assets |
Next
business day |
Until
posting of the
following
business day's
information |
|
|
|
|
|
With
respect to the Fund and each
class
of redeemable shares thereof: |
Fifth
business day of the month (as of the last business day or
subsequent
calendar day of the preceding month). |
Not less
than six months |
25
|
Information |
Approximate
Date of Website Posting |
Information
Remains Available
on
Website |
|
|
|
|
|
•
The dollar-weighted average
portfolio
maturity |
|
|
|
•
The dollar-weighted average
portfolio
maturity determined without
reference
to interest rate
readjustments |
|
|
|
|
|
|
|
With
respect to each security held
by
the Fund: |
|
|
|
|
|
|
|
•
The name of the issuer |
|
|
|
•
The category of investment (as
such
categories are provided in Rule
2a-7
and under Invesco’s
Procedures
for Money Market Funds
Operating
Under Rule 2a-7) |
|
|
|
•
CUSIP number, if any |
|
|
|
•
Principal amount |
|
|
|
•
Maturity date by taking into
account
the maturity shortening
provisions
in Rule 2a-7 |
|
|
|
•
Maturity date determined without
reference
to the exceptions
regarding
interest rate readjustments |
|
|
|
•
Coupon or yield |
|
|
|
•
Value |
|
|
|
|
|
|
|
The
percentage of the Fund’s total
assets
(as such term is defined in
Rule
2a-7)* invested in weekly liquid
assets;
and the Fund’s net inflows
and
outflows.
*A
tax-exempt fund is not required to
disclose
daily liquid asset
percentages
on the fund’s website
each
day |
Each
business day as of the end of the preceding business
day |
Six
months |
|
Complete
portfolio holdings, and
information
derived there from, as of
month-end
or as of some other
period
determined by the Adviser in
its
sole discretion |
One
day after month-end or any other period, as may be
determined
by the Advisor in its sole discretion |
Until
posting of the fiscal
quarter
holdings for the
months
included in the
fiscal
quarter |
|
Complete
portfolio holdings as of
fiscal
quarter-end |
60-70
days after fiscal quarter-end |
For one
year |
1
To locate
each Fund’s portfolio holdings information, go to www.invesco.com/us Select
“Financial Professional” or “Individual Investors,” if applicable. Hover over
the “Products” tab
and then
click on the “Money Market and Liquidity Funds.” On the “Money Market and
Liquidity Funds” page click on “Fund Materials.” Links to each Fund’s portfolio
holdings are located under the “Holdings” column.
You may also obtain
the publicly available portfolio holdings information described above by
contacting us at 1-800-959-4246.
For Institutional
Class, Personal Investment Class, Private Investment Class, Reserve Class and
Resource Class, Qualified Persons may obtain access to the website, as well as,
the information noted above, by calling the distributor toll free at
1-800-659-1005, option 2. The Funds’ distributor’s vice president/sale and
administration manager are authorized to determine whether any entity or
individual is a Qualified Person or is acting on behalf of a Qualified Person,
and to disclose portfolio information to such Qualified Person. If a beneficial
owner who is not a record owner requests portfolio information, such information
will be sent to
26
the record owner
for distribution to the beneficial owner. Existing shareholders can also obtain
portfolio information (other than portfolio holdings) by calling the transfer
agent toll free at 1-800-659-1005, option 1. Generally, employees of Invesco and
its affiliates may not disclose such portfolio holdings until one day after they
have been posted on http://www.invesco.com/us.
The
Funds will file monthly with the SEC portfolio holdings and other information
about the Fund and its portfolio as of the
last business day of the preceding month or any subsequent calendar day of such
month within five business days of the end of each month.
Selective
disclosure of portfolio holdings information pursuant to Non-Disclosure
Agreement.
Employees of
Invesco and its affiliates may disclose non-public full portfolio holdings
information on a selective basis only if Invesco approves the parties to whom
disclosure of non-public full portfolio holdings information will be made.
Invesco must determine that the proposed selective disclosure will be made for
business purposes of the applicable Fund and is in the best interest of the
applicable Fund’s shareholders. In making such determination, Invesco will
address any perceived conflicts of interest between shareholders of such Fund
and Invesco or its affiliates as part of granting its approval.
The
Board exercises continuing oversight of the disclosure of Fund portfolio
holdings information by (1) overseeing the
implementation and enforcement of the Holdings Disclosure Policy and the Invesco
Funds’ Code of Ethics by the Chief Compliance Officer (or his designee) of
Invesco and the Invesco Funds and (2) considering reports and recommendations by
the Chief Compliance Officer concerning any material compliance matters (as
defined in Rule 38a-1 under the 1940 Act and Rule 206(4)-7 under the Investment
Advisers Act of 1940, as amended (the Advisers Act)) that may arise in
connection with the Holdings Disclosure Policy. Pursuant to the Holdings
Disclosure Policy, the Board receives reports on the specific types of
situations in which Invesco proposes to provide such selective disclosure and
the situations where providing selective disclosure raises perceived conflicts
of interest between shareholders of the applicable Fund and Invesco or its
affiliates. In any specific situation where Invesco addresses a perceived
conflict, Invesco will report to the Board on the persons to whom such
disclosures are to be made and the treatment of any such conflicts before
agreeing to provide selective disclosure.
Invesco
discloses non-public full portfolio holdings information to the following
persons in connection with the day-to-day
operations and management of the funds advised by Invesco (the Invesco
Funds):
•
Attorneys and
accountants;
•
Securities lending
agents;
•
Lenders to the
Invesco Funds;
•
Rating and rankings
agencies;
•
Persons assisting
in the voting of proxies;
•
Invesco Funds’
custodians;
•
The Invesco Funds’
transfer agent(s) (in the event of a redemption in kind);
•
Pricing services,
market makers, or other fund accounting software providers (to determine the
price of investments held by an Invesco Fund);
•
Brokers identified
by the Invesco Funds’ portfolio management team who provide execution and
research services to the team;
•
Analysts hired to
perform research and analysis for the Invesco Funds’ portfolio management team;
and
•
Insurance companies
which receive portfolio holdings information before Invesco posts portfolio
holdings information to Invesco's website (to allow such insurance companies to
post portfolio holdings information to their websites at approximately the same
time that Invesco posts portfolio holdings information to Invesco's
website).
27
In
many cases, Invesco will disclose current portfolio holdings information on a
daily basis to these persons. In these
situations, Invesco has entered into non-disclosure agreements which provide
that the recipient of the portfolio holdings information will maintain the
confidentiality of such portfolio holdings information and will not trade on
such information (Non-disclosure Agreements). Please refer to Appendix B for a
list of examples of persons to whom Invesco provides non-public portfolio
holdings information on an ongoing basis.
Invesco
will also disclose non-public portfolio holdings information if such disclosure
is required by applicable laws,
rules or regulations, or by regulatory authorities having jurisdiction over
Invesco and its affiliates or the Invesco Funds, and where there is no other way
to transact the Funds' business without disclosure of such portfolio holdings
information.
The
Holdings Disclosure Policy provides that the Funds, Invesco or any other party
in connection with the disclosure of
portfolio holdings information will not request, receive or accept any
compensation (including compensation in the form of the maintenance of assets in
any Fund or other mutual fund or account managed by Invesco or one of its
affiliates) for the selective disclosure of portfolio holdings
information.
Disclosure
of certain portfolio holdings information without Non-Disclosure
Agreement. Invesco and its
affiliates that provide services to the Funds, the Sub-Advisers and each of
their employees may receive or have access to portfolio holdings information as
part of the day to day operations of the Funds.
Employees of
Invesco and its affiliates may express their views orally or in writing on one
or more of the Funds' portfolio investments or may state that a Fund has
recently purchased or sold, or continues to own, one or more investments. The
investments subject to these views and statements may be ones that were
purchased or sold since the date on which portfolio holdings was made available
on the Fund’s website and therefore may not be reflected on the portfolio
holdings information disclosed on the website. Such views and statements may be
made to various persons, including members of the press, shareholders in the
applicable Fund, persons considering investing in the applicable Fund or
representatives of such shareholders or potential shareholders, such as
fiduciaries of a 401(k) plan and their advisers. The nature and content of the
views and statements provided to each of these persons may differ.
Disclosure
of portfolio holdings information to traders. Additionally,
employees of Invesco and its affiliates may disclose one or more of the
investments held by a Fund when purchasing and selling investments through
broker-dealers, futures commissions merchants, clearing agencies and other
counterparties requesting bids on investments, obtaining price quotations on
investments, or in connection with litigation involving the Funds' portfolio
investments. Invesco does not enter into formal Non-Disclosure Agreements in
connection with these situations; however, the Funds would not continue to
conduct business with a person who Invesco believed was misusing the disclosed
information.
Disclosure
of portfolio holdings of other Invesco-managed products. Invesco and its
affiliates manage products sponsored by companies other than Invesco, including
investment companies, offshore funds, and separate accounts. In many cases,
these other products are managed in a similar fashion to certain Invesco Funds
(as defined herein) and thus have similar portfolio holdings. The sponsors of
these other products managed by Invesco and its affiliates may disclose the
portfolio holdings of their products at different times than Invesco discloses
portfolio holdings for the Invesco Funds.
MANAGEMENT
OF THE TRUST
Board
of Trustees
The
Trustees and officers of the Trust, their principal occupations during at least
the last five years and certain other
information concerning them are set forth in Appendix C.
Qualifications
and Experience. In addition to the
information set forth in Appendix C, the following sets forth additional
information about the qualifications and experiences of each of the
Trustees.
28
Interested
Trustee
Martin
L. Flanagan, Trustee and Vice Chair
Martin
L. Flanagan has been a member of the Board of Trustees and Vice Chair of the
Invesco Funds since 2007. Mr.
Flanagan is president and chief executive officer of Invesco Ltd., a position he
has held since August 2005. He is also a member of the Board of Directors of
Invesco Ltd.
Mr.
Flanagan joined Invesco, Ltd. from Franklin Resources, Inc., where he was
president and co-chief executive officer
from January 2004 to July 2005. Previously he had been Franklin’s co-president
from May 2003 to January 2004, chief operating officer and chief financial
officer from November 1999 to May 2003, and senior vice president and chief
financial officer from 1993 until November 1999.
Mr.
Flanagan served as director, executive vice president and chief operating
officer of Templeton, Galbraith &
Hansberger, Ltd. before its acquisition by Franklin in 1992. Before joining
Templeton in 1983, he worked with Arthur Andersen & Co.
Mr.
Flanagan is a chartered financial analyst and a certified public accountant. He
serves as vice chairman of the
Investment Company Institute and a member of the executive board at the SMU Cox
School of Business.
The
Board believes that Mr. Flanagan’s long experience as an executive in the
investment management area benefits the
Funds.
Independent
Trustees
Beth
Ann Brown, Trustee and Chair
Beth
Ann Brown has been a member of the Board of Trustees of the Invesco Funds since
2019
and Chair since August 2022. From 2016 to 2019, Ms. Brown served on the boards
of certain investment companies in the Oppenheimer Funds complex.
Ms.
Brown has served as Director of Caron Engineering, Inc. since 2018 and as an
Independent Consultant since
September 2012.
Previously,
Ms. Brown served in various capacities at Columbia Management Investment
Advisers LLC, including Head of
Intermediary Distribution, Managing Director, Strategic Relations and Managing
Director, Head of National Accounts. She also served as Senior Vice President,
National Account Manager from 2002-2004 and Senior Vice President, Key Account
Manager from 1999 to 2002 of Liberty Funds Distributor, Inc.
From
2013 through 2022, she served as Director, Vice President (through 2019) and
President (2019-2022) of Grahamtastic Connection, a non-profit
organization.
From
2014 to 2017, Ms. Brown served on the Board of Advisors of Caron Engineering
Inc. and also served as President
and Director of Acton Shapleigh Youth Conservation Corps, a non–profit
organization, from 2012 to 2015.
The
Board believes that Ms. Brown’s experience in financial services and investment
management and as a director of other
investment companies benefits the Funds.
Cynthia
Hostetler, Trustee
Cynthia
Hostetler has been a member of the Board of Trustees of the Invesco Funds since
2017.
Ms.
Hostetler is currently a member of the board of directors of the Vulcan
Materials Company, a public company engaged in
the production and distribution of construction materials, Trilinc Global Impact
Fund LLC, a publicly registered non-traded limited liability company that
invests in a diversified portfolio of private debt instruments, Resideo
Technologies, Inc., a public company that manufactures and distributes smart
home security products and solutions worldwide, and Textainer Group Holdings, a
public company that is the world’s second largest shipping container leasing
company. Ms. Hostetler also serves on the board of governors of
29
the
Investment Company Institute and is a member of the governing council of the
Independent Directors Council, both of
which are professional organizations in the investment management
industry.
Previously,
Ms. Hostetler served as a member of the board of directors/trustees of Aberdeen
Investment Funds, a mutual
fund complex, Edgen Group Inc., a public company that provides products and
services to energy and construction companies, from 2012 to 2013, prior to its
sale to Sumitomo, and Genesee & Wyoming, Inc., a public company that owns
and operates railroads worldwide, from 2018 to 2019, prior to its sale to
Brookfield Asset Management. Ms. Hostetler was also a member of the board of
directors of the Eisenhower Foundation, a non-profit organization.
From
2001 to 2009, Ms. Hostetler
served as Head of Investment Funds and Private Equity at Overseas Private
Investment Corporation (“OPIC”), a government agency that supports US investment
in the emerging markets. Ms. Hostetler oversaw a multi-billion dollar investment
portfolio in private equity funds. Prior to joining OPIC, Ms. Hostetler served
as President and member of the board of directors of First Manhattan
Bancorporation, a bank holding company, from 1991 to 2007, and its largest
subsidiary, First Savings Bank, from 1991 to 2006 (Board Member) and from 1996
to 2001 (President).
The
Board believes that Ms. Hostetler’s knowledge of financial services and
investment management, her experience as a
director of other companies, including a mutual fund complex, her legal
background, and other professional experience gained through her prior
employment benefit the Funds.
Dr.
Eli Jones, Trustee
Dr.
Eli Jones has been a member of the Board of Trustees of the Invesco Funds since
2016.
Dr. Jones has
served on the board of directors of First Financial Bancorp, a regional bank,
since 2022 and on the regional board since 2021. Since 2020, Dr. Jones has
served as a director on the board of directors of Insperity, Inc. (“Insperity”).
From 2004 to 2016, Dr. Jones was chair of the Compensation Committee, a member
of the Nominating and Corporate Governance Committee and a director on the board
of directors of Insperity.
Dr.
Jones
is a Professor of Marketing, Lowry and Peggy Mays Eminent Scholar, and Dean
Emeritus of Mays Business School at Texas A&M University. From 2015 to 2021,
Dr. Jones served as Dean of Mays Business School at Texas A&M University.
From 2012 to 2015, Dr. Jones was the dean of the Sam M. Walton College of
Business at the University of Arkansas and holder of the Sam M. Walton
Leadership Chair in Business. Prior to joining the faculty at the University of
Arkansas, he was dean of the E. J. Ourso College of Business and Ourso
Distinguished Professor of Business at Louisiana State University from 2008 to
2012; professor of marketing and associate dean at the C.T. Bauer College of
Business at the University of Houston from 2007 to 2008; an associate professor
of marketing from 2002 to 2007; and an assistant professor from 1997 until 2002.
He taught at Texas A&M University for several years before joining the
faculty of the University of Houston.
Dr.
Jones served as the executive director of the Program for Excellence in Selling
and the Sales Excellence
Institute at the University of Houston from 1997 to 2007. Before becoming a
professor, he worked in sales and sales management for three Fortune 100
companies: Quaker Oats, Nabisco, and Frito-Lay. Dr. Jones is a past director of
Arvest Bank. He received his Bachelor of Science degree in journalism in 1982,
his MBA in 1986 and his Ph.D. in 1997, all from Texas A&M
University.
The
Board believes that Dr. Jones’ experience in academia and his experience in
marketing benefits the Funds.
Elizabeth
Krentzman, Trustee
Elizabeth
Krentzman has been a member of the Board of Trustees of the Invesco Funds since
2019. From 2014 to 2019,
Ms. Krentzman served on the boards of certain investment companies in the
Oppenheimer Funds complex.
30
Ms.
Krentzman served from 2017 to
2022,
as a
member of the Cartica Funds Board of Directors (private investment funds). Ms.
Krentzman previously served as a member of the Board of Trustees of the
University of Florida National Board Foundation from 2016 to 2021. She also
served as a member of the Board of Trustees of the University of Florida Law
Center Association, Inc. from 2016 to 2021, as a member of its Audit Committee
from 2016 to 2020, and as a member of its Membership Committee from 2020 to
2021.
Ms.
Krentzman served from 1997 to 2004 and from 2007 and 2014 in various capacities
at Deloitte & Touche LLP,
including Principal and Chief Regulatory Advisor for Asset Management Services,
U.S. Mutual Fund Leader and National Director of the Investment Management
Regulatory Consulting Practice. She served as General Counsel of the Investment
Company Institute from 2004 to 2007.
From
1996 to 1997, Ms. Krentzman served as an Assistant Director of the Division of
Investment Management - Office
of Disclosure and Investment Adviser Regulation of the U.S. Securities and
Exchange Commission. She also served from 1991 to 1996 in various positions with
the Division of Investment Management – Office of Regulatory Policy of the U.S.
Securities and Exchange Commission and from 1987 to 1991 as an Associate at
Ropes & Gray LLP.
The
Board believes that Ms. Krentzman’s legal background, experience in financial
services and accounting and as a
director of other investment companies benefits the Funds.
Anthony
J. LaCava, Jr., Trustee
Anthony
J. LaCava, Jr. has been a member of the Board of Trustees of the Invesco Funds
since 2019.
Previously,
Mr. LaCava served as a member of the board of directors and as a member of the
audit committee of Blue
Hills Bank, a publicly traded financial institution.
Mr.
LaCava retired after a 37-year career with KPMG LLP (“KPMG”) where he served as
senior partner for a wide range of
firm clients across the retail, financial services, consumer markets, real
estate, manufacturing, health care and technology industries. From 2005 to 2013,
Mr. LaCava served as a member of the board of directors of KPMG and chair of the
board’s audit and finance committee and nominating committee. He also previously
served as Regional Managing Partner from 2009 through 2012 and Managing Partner
of KPMG’s New England practice.
Mr.
LaCava currently serves as Chairman of the Business School Advisory
Council of Bentley University and as a member of American College of Corporate
Directors and Board Leaders, Inc.
The
Board believes that Mr. LaCava’s experience in audit and financial services
benefits the Funds.
Dr.
Prema Mathai-Davis, Trustee
Dr.
Prema Mathai-Davis has been a member of the Board of Trustees of the Invesco
Funds since 1998.
Since
2021, Dr. Mathai-Davis has served as a member of the Board of Positive Planet
US, a non-profit organization and
Healthcare Chaplaincy Network, a non-profit organization.
Previously,
Dr. Mathai-Davis served as co-founder and partner of Quantalytics Research, LLC,
(a FinTech Investment Research
Platform) from 2017 to October 2019, when the firm was acquired by Forbes Media
Holdings, LLC.
Dr.
Mathai-Davis previously served as Chief Executive Officer of the YWCA of the USA
from 1994 until her retirement in
2000. Prior to joining the YWCA, Dr. Mathai-Davis served as the Commissioner of
the New York City Department for the Aging. She was a Commissioner and Board
Member of the Metropolitan Transportation Authority of New York, the largest
regional transportation network in the U.S. Dr. Mathai-Davis also served as a
Trustee of the YWCA Retirement Fund, the first and oldest pension fund for
women, and on the advisory board of the Johns Hopkins Bioethics Institute. She
was a member of the Board of Visitors of the University of Maryland School of
Public Policy, and on the visiting Committee of The Harvard University Graduate
School of Education.
31
Dr.
Mathai-Davis was the president and chief executive officer of the Community
Agency for Senior Citizens, a
non-profit social service agency that she established in 1981. She also directed
the Mt. Sinai School of Medicine-Hunter College Long-Term Care Gerontology
Center, one of the first of its kind.
The
Board believes that Dr. Mathai-Davis’ extensive experience in running public and
charitable institutions
benefits the Funds.
Joel
W. Motley, Trustee
Joel
W. Motley has been a member of the Board of Trustees of the Invesco Funds since
2019. From 2002 to 2019, Mr. Motley
served on the boards of certain investment companies in the Oppenheimer Funds
complex.
In
May
2022, Mr. Motley rejoined the Vestry and the Investment Committee of Trinity
Church Wall Street.
Since
2021, Mr. Motley has served as a Board member of the Trust for Mutual
Understanding, which makes grants to arts and environmental organizations in
Eastern Europe. Since 2021, Mr. Motley has served as a member of the board of
Blue Ocean Acquisition Corp. Since 2016, Mr. Motley has served as an independent
director of the Office of Finance of the Federal Home Loan Bank System. He has
served as Managing Director of Carmona Motley, Inc., a privately-held financial
advisory firm, since January 2002.
Mr.
Motley also serves as a member of the Council on Foreign Relations and its
Finance and Budget Committee. He is a
member of the Investment Committee and is Chairman Emeritus of the Board of
Human Rights Watch and a member of the Investment Committee and the Board of
Historic Hudson Valley, a non-profit cultural organization.
Since
2011, he has served as a Board Member and Investment Committee Member of the
Pulitzer Center for Crisis
Reporting, a non-profit journalism organization. Mr. Motley also serves as
Director and member of the Board and Investment Committee of The Greenwall
Foundation, a bioethics research foundation, and as a Director of Friends of the
LRC, a South Africa legal services foundation.
Previously,
Mr. Motley served as Managing Director of Public Capital Advisors, LLC, a
privately held financial advisory
firm, from 2006 to 2017. He also served as Managing Director of Carmona Motley
Hoffman Inc. a privately-held financial advisor, and served as a Director of
Columbia Equity Financial Corp., a privately-held financial advisor, from 2002
to 2007.
The
Board believes that Mr. Motley’s experience in financial services and as a
director of other investment companies benefits
the Funds.
Teresa
M. Ressel, Trustee
Teresa
Ressel has been a member of the Board of Trustees of the Invesco Funds since
2017.
Ms.
Ressel has previously served within the private sector and the U.S. government
as well as consulting. Formerly, Ms.
Ressel served at UBS AG in various capacities, including as Chief Executive
Officer of UBS Securities LLC, a broker-dealer division of UBS Investment Bank,
and as Group Chief Operating Officer of the Americas.
Between
2001 and 2004, Ms. Ressel served at the U.S. Treasury, initially as Deputy
Assistant Secretary for Management
& Budget and then as Assistant Secretary for Management and Chief Financial
Officer. Ms. Ressel was confirmed by the U.S. Senate and anchored financial
duties at the Department, including finance, accounting, risk, audit and
performance measurement.
From
2012
to 2020, Ms. Ressel served on the board of directors of ON Semiconductor, a
publicly traded manufacturer of semiconductors.
From
2017 to 2021, Ms. Ressel served as a director of Elucida Oncology, Inc., a
biotechnology company focused on the
development of therapeutics for cancer treatment. Ms. Ressel also volunteers
within her community across a number of functions and serves on the board of
GAVI, the Global Vaccine Alliance (non-profit) supporting children’s
health.
32
The
Board believes that Ms. Ressel’s risk management and financial experience in
both the private and public sectors
benefits the Funds.
Robert
C. Troccoli, Trustee
Robert
C. Troccoli has been a member of the Board of Trustees of the Invesco Funds
since 2016.
Mr.
Troccoli retired after a 39-year career with KPMG LLP (“KPMG”), where he served
as a senior Partner. From 2013
to 2017, he was an adjunct professor at the University of Denver’s Daniels
College of Business.
Mr.
Troccoli’s leadership roles during his career with KPMG included managing
partner and partner in charge of the
Denver office’s Financial Services Practice. He served regulated investment
companies, investment advisors, private partnerships, private equity funds,
sovereign wealth funds, and financial services companies. Toward the end of his
career, Mr. Troccoli was a founding member of KPMG’s Private Equity Group in New
York City, where he served private equity firms and sovereign wealth funds. Mr.
Troccoli also served mutual fund clients along with several large private equity
firms as Global Lead Partner of KPMG’s Private Equity Group.
The
Board believes that Mr. Troccoli’s experience as a partner in a large accounting
firm and his knowledge of
investment companies, investment advisors, and private equity firms benefits the
Funds.
Daniel
S. Vandivort, Trustee
Daniel
S. Vandivort has been a member of the Board of Trustees of the Invesco Funds
since 2019. From 2014 to 2019, Mr.
Vandivort served on the boards of certain investment companies in the
Oppenheimer Funds complex, as a Trustee and as the Governance Committee
Chair.
Mr.
Vandivort also served as Chairman, Lead Independent Director, and Chairman of
the Audit Committee of the Board of
Directors of the Value Line Funds from 2008 through 2014.
Previously, Mr. Vandivort also
served as a Trustee and Chairman of the Weiss Peck and Greer Mutual Funds Board
from 2004 to 2005.
Previously,
Mr. Vandivort served at Weiss Peck and Greer/Robeco Investment Management from
1994 to 2007, as President
and Chief Investment Officer and prior to that as Managing Director and Head of
Fixed Income. Mr. Vandivort also served in various capacities at CS First Boston
from 1984 to 1994, including as Head of Fixed Income at CS First Boston
Investment Management.
Mr. Vandivort was
also a Trustee on the Board of Huntington Disease Foundation of America from
2007 to 2013 and from 2015 to 2019. He also served as
Treasurer
and
Chairman of the Audit and Finance Committee of Huntington Disease Foundation of
America from 2016 to 2019.
Mr.
Vandivort currently
serves as President of Flyway Advisory Services LLC, a consulting and property
management company.
The
Board believes that Mr. Vandivort’s
experience in financial services and investment management and as a director of
other investment companies benefits the Funds.
Management
Information
The
Trustees have the authority to take all actions that they consider necessary or
appropriate in connection with
oversight of the Trust, including, among other things, approving the investment
objectives, investment policies and fundamental investment restrictions for the
Funds. The Trust has entered into agreements with various service providers,
including the Funds’ investment advisers, administrator, transfer agent,
distributor and custodians, to conduct the day-to-day operations of the Funds.
The Trustees are responsible for selecting these service providers, approving
the terms of their contracts with the Funds, and exercising general oversight of
these arrangements on an ongoing basis.
33
Certain
Trustees and officers of the Trust are affiliated with Invesco and Invesco Ltd.,
the parent corporation of
Invesco. All of the Trust’s executive officers hold similar offices with some or
all of the other Trusts.
Leadership
Structure and the Board of Trustees. The Board is
currently composed of eleven Trustees, including ten Trustees who are not
“interested persons” of the Funds, as that term is defined in the 1940 Act
(collectively, the Independent Trustees and each, an Independent Trustee). In
addition to eight regularly scheduled meetings per year, the Board holds special
meetings or informal conference calls to discuss specific matters that may
require action prior to the next regular meeting. As discussed below, the Board
has established four standing committees – the Audit Committee, the Compliance
Committee, the Governance Committee and the Investments Committee (the
Committees), to assist the Board in performing its oversight
responsibilities.
The
Board has appointed an Independent Trustee to serve in the role of Chair. The
Chair’s primary role is to preside at
meetings of the Board and act as a liaison with the Adviser and other service
providers, officers, attorneys, and other Trustees between meetings. The Chair
also participates in the preparation of the agenda for the meetings of the
Board, is active with mutual fund industry organizations, and may perform such
other functions as may be requested by the Board from time to time. Except for
any duties specified pursuant to the Trust’s Declaration of Trust or By-laws,
the designation of Chair does not impose on such Independent Trustee any duties,
obligations or liability that is greater than the duties, obligations or
liability imposed on such person as a member of the Board generally.
The
Board believes that its leadership structure, including having an Independent
Trustee as Chair, allows for effective
communication between the Trustees and management, among the Trustees and among
the Independent Trustees. The existing Board structure, including its Committee
structure, provides the Independent Trustees with effective control over Board
governance while also allowing them to receive and benefit from insight from the
interested Trustee who is an active officer of the Funds’ investment adviser.
The Board’s leadership structure promotes dialogue and debate, which the Board
believes allows for the proper consideration of matters deemed important to the
Funds and their shareholders and results in effective
decision-making.
Risk
Oversight. The Board
considers risk management issues as part of its general oversight
responsibilities throughout the year at its regular meetings and at regular
meetings of its Committees. Invesco prepares regular reports that address
certain investment, valuation and compliance matters, and the Board as a whole
or the Committees also receive special written reports or presentations on a
variety of risk issues at the request of the Board, a Committee or the Senior
Officer.
The
Board also considers liquidity risk management issues as part of its general
oversight responsibilities and oversees the
Trust's liquidity risk through, among other things, receiving periodic reporting
and presentations by Invesco personnel that address liquidity matters. As
required by Rule 22e-4 under the 1940 Act, the Board, including a majority of
the Independent Trustees, has approved the Trust's Liquidity Risk Management
("LRM") Program, which is reasonably designed to assess and manage the Trust's
liquidity risk, and has appointed the LRM Program Administrator that is
responsible for administering the LRM Program. The Board also reviews, no less
frequently than annually, a written report prepared by the LRM Program
Administrator that addresses, among other items, the operation of the program
and assesses its adequacy and effectiveness of implementation.
The
Audit Committee is apprised by, and discusses with, management its policies on
risk assessment and risk management.
Such discussion includes a discussion of the guidelines governing the process by
which risks are assessed and managed and an identification of each Fund’s major
financial risk exposures. In addition, the Audit Committee meets regularly with
representatives of Invesco Ltd.’s internal audit group to review reports on
their examinations of functions and processes within Invesco that affect the
Funds. The Audit Committee also oversees the Adviser’s process for valuing the
Funds’ portfolio investments and receives reports from management regarding its
process and the valuation of the Funds’ portfolio investments
as
consistent with the valuation
policy
approved by the Board and related procedures.
34
The
Compliance Committee receives regular compliance reports prepared by Invesco’s
compliance group and meets regularly
with the Fund’s Chief Compliance Officer (CCO) to discuss compliance issues,
including compliance risks. The Compliance Committee has recommended and the
Board has adopted compliance policies and procedures for the Funds and for the
Funds’ service providers. The compliance policies and procedures are designed to
detect, prevent and correct violations of the federal securities
laws.
The
Governance Committee monitors the composition of the Board and each of its
Committees and monitors the
qualifications of the Trustees to ensure adherence to certain governance
undertakings applicable to the Funds. In addition, the Governance Committee
oversees an annual self-assessment of the Board and addresses governance risks,
including insurance and fidelity bond matters, for the Trust.
The
Investments Committee and its sub-committees receive regular written reports
describing and analyzing the
investment performance of the Invesco Funds. In addition, Invesco’s Chief
Investment Officers and the portfolio managers of the Funds meet regularly with
the Investments Committee or its sub-committees to discuss portfolio
performance, including investment risk, such as the impact on the Funds of
investments in particular types of securities or instruments, such as
derivatives. To the extent that a Fund changes a particular investment strategy
that could have a material impact on the Fund’s risk profile, the Board
generally is consulted in advance with respect to such change.
Committee
Structure
The
members of the Audit Committee are Messrs. LaCava (Chair)
and
Troccoli, Dr. Jones, and Mss. Hostetler and Ressel. The Audit Committee performs
a number of functions with respect to the oversight of the Funds’ accounting and
financial reporting, including: (i) assisting the Board with its oversight of
the qualifications, independence and performance of the independent registered
public accountants; (ii) selecting independent registered public accountants for
the Funds; (iii) to the extent required, pre-approving certain audit and
permissible non-audit services; (iv) overseeing the financial reporting process
for the Funds; (v) assisting the Board with its oversight of the integrity of
the Funds’ financial statements and compliance with legal and regulatory
requirements that relate to the Funds’ accounting and financial reporting,
internal control over financial reporting and independent audits; (vi)
pre-approving engagements for non-audit services to be provided by the Funds’
independent auditors to the Funds’ investment adviser or to any of its
affiliates; and (vii) overseeing the performance of the fair
valuation
determinations by the Adviser. During the fiscal year ended August 31, 2022, the
Audit Committee held five meetings.
The
members of the Compliance Committee are Messrs. Motley and Vandivort, and Mss.
Brown
and
Krentzman (Chair) and Dr. Mathai-Davis. The Compliance Committee performs a
number of functions with respect to compliance matters, including: (i) reviewing
and making recommendations concerning the qualifications, performance and
compensation of the Funds’ Chief Compliance Officer; (ii) reviewing
recommendations and reports made by the Chief Compliance Officer of the Funds
regarding compliance matters; (iii) overseeing compliance policies and
procedures of the Funds and their service providers; (iv) overseeing potential
conflicts of interest that are reported to the Compliance Committee by Invesco,
the Chief Compliance Officer; (v) reviewing reports prepared by a third party’s
compliance review of Invesco; (vi) if requested by the Board, overseeing risk
management with respect to the Funds, including receiving and overseeing risk
management reports from Invesco that are applicable to the Funds and their
service providers; and (vii) reviewing reports by Invesco on correspondence with
regulators or governmental agencies with respect to the Funds and recommending
to the Board what action, if any, should be taken by the Funds in light of such
reports. During the fiscal year ended August 31, 2022, the Compliance Committee
held four meetings.
The
members of the Governance Committee are Messrs. Motley
and
Vandivort (Chair) and Mss. Brown and Hostetler and Dr. Mathai-Davis. The
Governance Committee performs a number of functions with respect to governance,
including: (i) nominating persons to serve as Independent Trustees and as
members of each Committee, and nominating the Chair of the Board,
the
Chair of each Committee and the Chair of each Sub-Committee of the Investments
committee; (ii) reviewing and making recommendations to the full Board regarding
the size and composition of the Board and the compensation payable to the
Independent
35
Trustees;(iii)
overseeing the annual evaluation of the performance of the Board and its
Committees; (iv) considering and
overseeing the selection of independent legal counsel to the Independent
Trustees; (v) considering and overseeing the selection and engagement of a
Senior Officer if and as they deem appropriate,
including
compensation and scope of services, and recommending all such matters to the
Board or the independent trustees as appropriate; (vi) reviewing administrative
and/or logistical matters pertaining to the operations of the Board; and (vii)
reviewing annually recommendations from Invesco regarding amounts and coverage
of primary and excess directors and officers/errors and omissions liability
insurance and allocation of premiums. During the fiscal year ended August 31,
2022, the Governance Committee held nine
meetings.
The
Governance Committee will consider nominees recommended by a shareholder to
serve as trustees, provided: (i) that
such submitting shareholder is a shareholder of record at the time he or she
submits such names and is entitled to vote at the meeting of shareholders at
which trustees will be elected; and (ii) that the Governance Committee or the
Board, as applicable, shall make the final determination of persons to be
nominated. Notice procedures set forth in the Trust’s bylaws require that any
shareholder of a Fund desiring to nominate a candidate for election at a
shareholder meeting must provide certain information about itself and the
candidate, and must submit to the Trust’s Secretary the nomination in writing
not later than the close of business on the later of the 90th day, nor earlier
than the close of business on the 120th day, prior to the first anniversary of
the preceding year’s annual meeting; provided, however, that in the event that
the date of the annual meeting is advanced by more than 30 days or delayed by
more than 60 days from such anniversary date or if the Trust has not previously
held an annual meeting, notice by the Shareholder to be timely must be so
delivered not earlier than the close of business on the 120th day prior to such
annual meeting and not later than the close of business on the later of the 90th
day prior to such annual meeting or the tenth day following the day on which
public announcement of the date of such meeting is first made by the
Trust.
The
members of the Investments Committee are Messrs. Flanagan, LaCava, Motley,
Troccoli
and
Vandivort (Sub-Committee Chair), Mss. Brown, Hostetler (Chair),
Krentzman
and
Ressel (Sub-Committee
Chair)
and Drs. Jones and Mathai-Davis (Sub-Committee Chair). The Investments
Committee’s primary purposes are to assist the Board in its oversight of the
investment management services provided by Invesco and the Sub-Advisers and to
periodically review Fund performance information, information regarding the
Funds’ trading practices and such other reports pertaining to portfolio
securities transactions and information regarding the investment personnel and
other resources devoted to the management of the Funds and make recommendations
to the Board, when applicable. During the fiscal year ended August 31, 2022, the
Investments Committee held four meetings.
The
Investments Committee has established three Sub-Committees and delegated to the
Sub-Committees responsibility
for, among other matters: (i) reviewing the performance of the Invesco Funds
that have been assigned to a particular Sub-Committee (for each Sub-Committee,
the Designated Funds), except to the extent the Investments Committee takes such
action directly; (ii) reviewing with the applicable portfolio managers from time
to time the investment objective(s), policies, strategies, performance and risks
and other investment-related matters of the Designated Funds; and (iii) being
generally familiar with the investment objectives and principal investment
strategies of the Designated Funds.
Trustee
Ownership of Fund Shares
The
dollar range of equity securities beneficially owned by each trustee (i) in the
Funds and (ii) on an aggregate basis, in
all registered investment companies overseen by the trustee within the Invesco
Funds complex, is set forth in Appendix C.
Compensation
Each
Trustee who is not affiliated with Invesco is compensated for his or her
services according to a fee schedule that
recognizes the fact that such Trustee also serves as a Trustee of other Invesco
Funds. Each such Trustee receives a fee, allocated among the Invesco Funds for
which he or she serves as a Trustee that
36
consists
of an annual retainer component and a meeting fee component. The Chair of the
Board and of each Committee and
Sub-Committee receive additional compensation for their services.
Information
regarding compensation paid or accrued for each Trustee of the Trust who was not
affiliated with Invesco during
the year ended December 31, 2021 is found in Appendix D.
Retirement
Policy
The
Trustees have adopted a retirement policy that permits each Trustee to serve
until December 31 of the year in which
the Trustee turns 75.
Pre-Amendment
Retirement Plan For Trustees
The
Trustees have adopted a Retirement Plan for the Trustees who are not affiliated
with the Adviser. A description of the
pre-amendment Retirement Plan follows. Annual retirement benefits are available
from the Funds and/or the other Invesco Funds for which a Trustee serves (each,
a Covered Fund), for each Trustee who is not an employee or officer of the
Adviser, who either (a) became a Trustee prior to December 1, 2008, and who has
at least five years of credited service as a Trustee (including service to a
predecessor fund) of a Covered Fund, or (b) was a member of the Board of
Trustees of a Van Kampen Fund immediately prior to June 1, 2010 (Former Van
Kampen Trustee), and has at least one year of credited service as a Trustee of a
Covered Fund after June 1, 2010.
For
Trustees other than Former Van Kampen Trustees, effective January 1, 2006, for
retirements after December 31, 2005,
the retirement benefits will equal 75% of the Trustee’s annual retainer paid to
or accrued by any Covered Fund with respect to such Trustee during the
twelve-month period prior to retirement, including the amount of any retainer
deferred under a separate deferred compensation agreement between the Covered
Fund and the Trustee. The amount of the annual retirement benefit does not
include additional compensation paid for Board meeting fees or compensation paid
to the Chair of the Board and the Chairs and Vice Chairs of certain Board
committees, whether such amounts are paid directly to the Trustee or deferred.
The annual retirement benefit is payable in quarterly installments for a number
of years equal to the lesser of (i) sixteen years or (ii) the number of such
Trustee’s credited years of service. If a Trustee dies prior to receiving the
full amount of retirement benefits, the remaining payments will be made to the
deceased Trustee’s designated beneficiary for the same length of time that the
Trustee would have received the payments based on his or her service or, if the
Trustee has elected, in a discounted lump sum payment. A Trustee must have
attained the age of 65 (60 in the event of disability) to receive any retirement
benefit. A Trustee may make an irrevocable election to commence payment of
retirement benefits upon retirement from the Board before age 72; in such a
case, the annual retirement benefit is subject to a reduction for early
payment.
If
the Former Van Kampen Trustee completes at least 10 years of credited service
after June 1, 2010, the retirement benefit
will equal 75% of the Former Van Kampen Trustee’s annual retainer paid to or
accrued by any Covered Fund with respect to such Trustee during the twelve-month
period prior to retirement, including the amount of any retainer deferred under
a separate deferred compensation agreement between the Covered Fund and such
Trustee. The amount of the annual retirement benefit does not include additional
compensation paid for Board meeting fees or compensation paid to the Chair of
the Board and the Chairs and Vice Chairs of certain Board committees, whether
such amounts are paid directly to the Trustee or deferred. The annual retirement
benefit is payable in quarterly installments for 10 years beginning after the
later of the Former Van Kampen Trustee’s termination of service or attainment of
age 72 (or age 60 in the event of disability or immediately in the event of
death). If a Former Van Kampen Trustee dies prior to receiving the full amount
of retirement benefits, the remaining payments will be made to the deceased
Trustee’s designated beneficiary or, if the Trustee has elected, in a discounted
lump sum payment.
If
the Former Van Kampen Trustee completes less than 10 years of credited service
after June 1, 2010, the retirement
benefit will be payable at the applicable time described in the preceding
paragraph, but will be paid in two components successively. For the period of
time equal to the Former Van Kampen Trustee’s years of credited service after
June 1, 2010, the first component of the annual retirement benefit will equal
75% of
37
the
compensation amount described in the preceding paragraph. Thereafter, for the
period of time equal to the Former Van
Kampen Trustee’s years of credited service after June 1, 2010, the second
component of the annual retirement benefit will equal the excess of (x) 75% of
the compensation amount described in the preceding paragraph, over (y) $68,041
plus an interest factor of 4% per year compounded annually measured from June 1,
2010 through the first day of each year for which payments under this second
component are to be made. In no event, however, will the retirement benefits
under the two components be made for a period of time greater than 10 years. For
example, if the Former Van Kampen Trustee completes 7 years of credited service
after June 1, 2010, he or she will receive 7 years of payments under the first
component and thereafter 3 years of payments under the second component, and if
the Former Van Kampen Trustee completes 4 years of credited service after June
1, 2010, he or she will receive 4 years of payments under the first component
and thereafter 4 years of payments under the second component.
Amendment
of Retirement Plan and Conversion to Defined Contribution Plan
The
Trustees approved an amendment to the Retirement Plan to convert it to a defined
contribution plan for active Trustees
(the Amended Plan). Under the Amended Plan, the benefit amount was amended for
each active Trustee to the present value of the Trustee’s existing retirement
plan benefit as of December 31, 2013 (the Existing Plan Benefit) plus the
present value of retirement benefits expected to be earned under the Retirement
Plan through the end of the calendar year in which the Trustee attained age 75
(the Expected Future Benefit and, together with the Existing Plan Benefit, the
Accrued Benefit). On the conversion date, the Covered Funds established
bookkeeping accounts in the amount of their pro rata share of the Accrued
Benefit, which is deemed to be invested in one or more Invesco Funds selected by
the participating Trustees. Such accounts will be adjusted from time to time to
reflect deemed investment earnings and losses. Each Trustee’s Accrued Benefit is
not funded and, with respect to the payments of amounts held in the accounts,
the participating Trustees have the status of unsecured creditors of the Covered
Funds. Trustees will be paid the adjusted account balance under the Amended Plan
in quarterly installments for the same period as described above.
Deferred
Compensation Agreements
Seven former
Trustees, as well as Messrs. LaCava, Motley, Troccoli
and
Vandivort, Mss. Hostetler and Drs. Jones and Mathai-Davis (for purposes of this
paragraph only, the Deferring Trustees) have each executed a Deferred
Compensation Agreement (collectively, the Compensation Agreements). Pursuant to
the Compensation Agreements, the Deferring Trustees have the option to elect to
defer receipt of up to 100% of their compensation payable by the Funds, and such
amounts are placed into a deferral account and deemed to be invested in one or
more Invesco Funds selected by the Deferring Trustees.
Distributions
from these deferral accounts will be paid in cash, generally in equal quarterly
installments over a period of up
to ten (10) years (depending on the Compensation Agreement) beginning on the
date selected under the Compensation Agreement. If a Deferring Trustee dies
prior to the distribution of amounts in his or her deferral account, the balance
of the deferral account will be distributed to his or her designated
beneficiary. The Compensation Agreements are not funded and, with respect to the
payments of amounts held in the deferral accounts, the Deferring Trustees have
the status of unsecured creditors of the Funds and of each other Invesco Fund
from which they are deferring compensation.
Code
of Ethics
Invesco,
the Trust, Invesco Distributors, Inc. (Invesco Distributors) and certain of the
Sub-Advisers each have adopted a Code
of Ethics that applies to all Invesco Fund trustees and officers, and employees
of Invesco, the Sub-Advisers and their affiliates, and governs, among other
things, the personal trading activities of all such persons. Certain
Sub-Advisers have adopted their own Code of Ethics. Each Code of Ethics is
designed to detect and prevent improper personal trading by portfolio managers
and certain other employees that could compete with or take advantage of the
Fund’s portfolio transactions. Unless specifically noted, to the extent a
Sub-Adviser has adopted its own Code of Ethics, each Sub-Adviser’s Code of
Ethics does not materially differ from Invesco’s Code of Ethics discussed below.
The Code of Ethics is intended to address conflicts of interest with the Trust
that may arise from personal trading in the Invesco Funds. Personal trading,
38
including
personal trading involving securities that may be purchased or held by an
Invesco Fund, is permitted under the Code of
Ethics subject to certain restrictions; however, employees are required to
pre-clear security transactions with the Compliance Officer or a designee and to
report transactions on a regular basis.
Proxy
Voting Policies
Invesco
has adopted its own specific Proxy Voting Policies.
The
Board has delegated responsibility for decisions regarding proxy voting for
securities held by each Fund to the
following Adviser/Sub-Adviser(s):
|
Fund
Name |
Adviser/Sub-Adviser |
|
Invesco
Premier Portfolio |
Invesco
Advisers, Inc. |
|
Invesco
Premier U.S. Government
Money
Portfolio |
Invesco
Advisers, Inc. |
Invesco
(the Proxy Voting Entity) will vote such proxies in accordance with its proxy
voting policies and procedures, as
outlined above, which have been reviewed and approved by the Board, and which
are found in Appendix E. Any material changes to the proxy voting policies and
procedures will be submitted to the Board for approval. The Board will be
supplied with a summary quarterly report of each Fund’s proxy voting record.
Information regarding how the Funds voted proxies related to their portfolio
securities during the twelve months ended June 30, 2022 is available without
charge at our website,
http://www.invesco.com/us.
This
information will also be available at the SEC website, http://www.sec.gov.
CONTROL
PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Information
about the ownership of each class of each Fund’s shares by beneficial or record
owners of such Fund and
ownership of Fund shares by trustees and officers as a group is found in
Appendix F. A shareholder who owns beneficially 25% or more of the outstanding
shares of a Fund is presumed to “control” that Fund.
INVESTMENT
ADVISORY AND OTHER SERVICES
Investment
Adviser
Invesco
serves as the Funds' investment adviser. The Adviser manages the investment
operations of the Funds as well as
other investment portfolios that encompass a broad range of investment
objectives, and has agreed to perform or arrange for the performance of the
Funds' day-to-day management. The Adviser, as successor in interest to multiple
investment advisers, has been an investment adviser since 1976. Invesco
Advisers, Inc. is an indirect, wholly-owned subsidiary of Invesco Ltd. Invesco
Ltd. and its subsidiaries are an independent global investment management group.
Certain of the directors and officers of Invesco are also executive officers of
the Trust and their affiliations are shown under “Management Information”
herein.
As
investment adviser, Invesco supervises all aspects of the Funds' operations and
provides investment advisory services
to the Funds. Invesco obtains and evaluates economic, statistical and financial
information to formulate and implement investment programs for the Funds. The
Master Investment Advisory Agreement (Advisory Agreement) provides that, in
fulfilling its responsibilities, Invesco may engage the services of other
investment managers with respect to one or more of the Funds. The investment
advisory services of Invesco are not exclusive and Invesco is free to render
investment advisory services to others, including other investment
companies.
Pursuant
to an administrative services agreement with the Funds, Invesco is also
responsible for furnishing to the
Funds, at Invesco’s expense, the services of persons believed to be competent to
perform all supervisory and administrative services required by the Funds, which
in the judgment of the trustees, are necessary to conduct the business of the
Funds effectively, as well as the offices, equipment and other facilities
necessary for their operations. Such functions include the maintenance of each
Fund’s accounts and
39
records,
and the preparation of all requisite corporate documents such as tax returns and
reports to the SEC and
shareholders.
The
Advisory Agreement provides that each Fund will pay or cause to be paid all
expenses of such Fund not assumed by
Invesco, including, without limitation: brokerage commissions, taxes, legal,
auditing or governmental fees, custodian, transfer and shareholder service agent
costs, expenses of issue, sale, redemption, and repurchase of shares, expenses
of registering and qualifying shares for sale, expenses relating to trustee and
shareholder meetings, the cost of preparing and distributing reports and notices
to shareholders, the fees and other expenses incurred by the Trust on behalf of
each Fund in connection with membership in investment company organizations, and
the cost of printing copies of prospectuses and statements of additional
information distributed to the Funds' shareholders.
Invesco,
at its own expense, furnishes to the Trust office space and facilities. Invesco
furnishes to the Trust all personnel
for managing the affairs of the Trust and each of its series of
shares.
Pursuant
to its Advisory Agreement with the Trust, Invesco receives a monthly fee from
each Fund calculated at the
annual rates indicated in the second column below, based on the average daily
net assets of each Fund during the year. Each Fund allocates advisory fees to a
class based on the relative net assets of each class.
|
Fund
Name |
Net
Assets |
Annual
Rate |
|
Invesco
Premier Portfolio |
All
Assets |
0.25% |
|
Invesco
Premier U.S. Government
Money
Portfolio |
All
Assets |
0.25% |
Invesco
may from time to time waive or reduce its fee. Voluntary fee waivers or
reductions may be rescinded at any
time without further notice to investors. During periods of voluntary fee
waivers or reductions, Invesco will retain its ability to be reimbursed for such
fee prior to the end of each fiscal year in which the voluntary fee waiver or
reduction was made.
Invesco
has voluntarily undertaken to waive fees to the extent necessary to assist the
Funds in attempting to maintain a
positive yield. There is no guarantee that a Fund will maintain a positive
yield. That undertaking may be amended or rescinded at any time.
Invesco
has contractually agreed through at least December 31, 2023, to waive
advisory fees equal to 0.07% of Invesco Premier Portfolio's and Invesco Premier
U.S. Government Money Portfolio's average daily net assets.
Such
contractual fee waivers or reductions are set forth in the Fee Table to the
Funds' Prospectuses. Unless Invesco
continues the fee waiver agreements, they will terminate on December 31,
2023. During their terms, the fee waiver agreements cannot be terminated
or amended to reduce the advisory fee waivers without approval of the
Board.
The
management fees payable by each Fund, the amounts waived by Invesco and the net
fee
paid by each Fund for the last three fiscal years or periods, as applicable,
ended August 31 are found in Appendix G.
Investment
Sub-Advisers
Invesco
has entered into a Sub-Advisory Agreement with certain affiliates to serve as
sub-advisers to each Fund (each, a
Sub-Adviser), other than Invesco Premier U.S. Government Money
Portfolio, pursuant to which these affiliated sub-advisers may be appointed
by Invesco from time to time to provide discretionary investment management
services, investment advice, and/or order execution services to the Funds. These
affiliated sub-advisers, each of which is a registered investment adviser under
the Advisers Act are:
•
Invesco Asset
Management (Japan) Limited (Invesco Japan)
•
Invesco Asset
Management Deutschland GmbH (Invesco Deutschland)
•
Invesco Asset
Management Limited (Invesco Asset Management)
40
•
Invesco Canada Ltd.
(Invesco Canada)
•
Invesco Hong Kong
Limited (Invesco Hong Kong)
•
Invesco Senior
Secured Management, Inc. (Invesco Senior Secured)
Invesco
has also entered into a Sub-Advisory Agreement with another affiliate, Invesco
Capital Management LLC
(Invesco Capital), also a registered investment adviser under the Advisers Act,
to provide discretionary investment management services, investment advice,
and/or order execution services to Invesco Premier Portfolio.
Invesco
has also entered into a Sub-Advisory Agreement with another affiliate, Invesco
Asset Management (India)
Private Limited (Invesco India), also a registered investment adviser under the
Advisers Act, to provide discretionary investment management services,
investment advice, and/or order execution services to Invesco Premier
Portfolio.
The
only fees payable to the Sub-Advisers described above under the Sub-Advisory
Agreements are for providing
discretionary investment management services. For such services, Invesco will
pay each Sub-Adviser a fee, computed daily and paid monthly, equal to (i) 40% of
the monthly compensation that Invesco receives from the Trust, multiplied by
(ii) the fraction equal to the net assets of such Fund as to which such
Sub-Adviser shall have provided discretionary investment management services for
that month divided by the net assets of such Fund for that month. Pursuant to
the Sub-Advisory Agreement, this fee is reduced to reflect contractual or
voluntary fee waivers or expense limitations by Invesco, if any, in effect from
time to time. In no event shall the aggregate monthly fees paid to the
Sub-Advisers under the Sub-Advisory Agreement exceed 40% of the monthly
compensation that Invesco receives from the Trust pursuant to its advisory
agreement with the Trust, as reduced to reflect contractual or voluntary fee
waivers or expense limitations by Invesco, if any.
Invesco
and each Sub-Adviser are indirect wholly-owned subsidiaries of Invesco
Ltd.
Marketing
Support and Administrative Support Payments
Invesco,
Invesco Distributors, or one of their affiliates (Invesco Affiliates) may, from
time to time, at their expense out of
their own financial resources make cash payments to financial intermediaries
that sell shares of the Invesco Funds or provide promotional and/or sales
support on behalf of Invesco and Invesco Distributors with respect to the
Invesco Funds. Financial intermediaries receiving marketing support payments may
agree to provide a variety of services and activities that benefit Invesco and
its affiliates, such as including the Invesco Funds on a preferred or select
sales list or in other sales programs, providing access to the financial
intermediaries’ registered representatives, providing assistance in training and
education of personnel, providing marketing support, and other services. In
addition, Invesco Affiliates may, from time to time, at their expense out of
their own financial resources make cash payments to financial intermediaries
that provide administrative services to their customers. These administrative
support payments may be made for recordkeeping, sub-accounting, sub-transfer
agency, shareholder processing and similar services.
Marketing
and administrative support payments are in addition to any fees paid by an
Invesco Fund, including Rule
12b-1 fees. Marketing and administrative support payments, whether a fixed
payment or calculated as a percentage of assets attributable to a financial
intermediary in a given Invesco Fund, may be different for different financial
intermediaries, and shall not exceed 0.25% of the average daily net assets of
all shares attributable to the financial intermediary in any Invesco Fund during
a particular period. Moreover, where financial intermediaries provide services
to the Invesco Funds or an Invesco Affiliate, the costs of providing the
services and the package of services provided may differ. The Invesco Affiliates
do not make an independent assessment of the cost of such services. A list of
financial intermediaries to whom Invesco Affiliates paid marketing and/or
administrative support payments during the prior calendar year is attached
hereto as Appendix H. This list may not be current and changes over
time.
These
payments could be significant to the financial intermediaries and may create an
incentive for a financial
intermediary to recommend or sell shares of the Invesco Funds to its customers,
thereby increasing
41
the
assets in the Invesco Funds. Please contact your financial intermediary for
details about any payments they or their firm
may receive in connection with the sale of Fund shares or the provision of
services to the Funds.
Service
Agreements
Administrative
Services Agreement. Invesco and the
Trust have entered into a Master Administrative Services Agreement
(Administrative Services Agreement) pursuant to which Invesco may perform or
arrange for the provision of certain accounting and other administrative
services to each Fund which are not required to be performed by Invesco under
the Advisory Agreement. The Administrative Services Agreement provides that it
will remain in effect and continue from year to year only if such continuance is
specifically approved at least annually by the Board, including the independent
trustees. The Administrative Services Agreement provides that Invesco will not
charge the Funds any fees for such services.
Administrative
services fees paid to Invesco by the Funds for the last three fiscal years or
periods, as applicable, ended
August 31 are found in Appendix I.
Other
Service Providers
Transfer
Agent.
Invesco Investment Services, Inc., (Invesco Investment Services), 11 Greenway
Plaza, Suite 1000, Houston, Texas 77046-1173, a wholly-owned subsidiary of
Invesco Ltd., is the Trust’s transfer agent.
The
Amended and Restated Transfer Agency and Service Agreement (the TA Agreement)
between the Trust and Invesco
Investment Services provides that Invesco Investment Services will perform
certain services related to the servicing of shareholders of the Funds. The TA
Agreement provides that Invesco Investment Services will not charge the Funds
any fees for such services.
Sub-Transfer
Agent.
Invesco Canada, 5140 Yonge Street, Suite 800, Toronto, Ontario, Canada M2N6X7, a
wholly-owned, indirect subsidiary of Invesco Ltd., provides services to the
Trust as a sub-transfer agent, pursuant to an agreement between Invesco Canada
and Invesco Investment Services. The Trust does not pay a fee to Invesco Canada
for these services. Rather Invesco Canada is compensated by Invesco Investment
Services, as a sub-contractor.
In
addition, Invesco (India) Private Limited, Divyasree Orion, B6 15TH FLOOR,
Raidurgam, Serilingampalli,
Hyderabad, India K7 500032, a wholly-owned, indirect subsidiary of Invesco Ltd.,
provides services to the Trust as a sub-transfer agent, pursuant to an agreement
between Invesco (India) Private Limited and Invesco Investment Services. The
Trust does not pay a fee to Invesco (India) Private Limited and Invesco
Investment Services. Rather Invesco (India) Private Limited is compensated by
Invesco Investment Services, as a sub-contractor.
Custodian
The
Bank of New York Mellon (the Custodian), 2 Hanson Place, Brooklyn, New York
11217-1431 is custodian of all
securities and cash of the Funds.
Under
its contract with the Trust, the Custodian maintains the portfolio securities of
the Funds, administers the
purchases and sales of portfolio securities, collects interest and dividends and
other distributions made on the securities held in the portfolios of the Funds
and performs other ministerial duties. These services do not include any
supervisory function over management or provide any protection against any
possible depreciation of assets.
Independent
Registered Public Accounting Firm. The Funds'
independent registered public accounting firm is responsible for auditing the
financial statements of the Funds. The Audit Committee of the Board has
selected, and the Board has ratified and approved PricewaterhouseCoopers LLP,
1000 Louisiana Street, Suite 5800, Houston, Texas 77002-5021, as the independent
registered public accounting firm to audit the financial statements of the
Funds. In connection with the audit of the Funds' financial statements, the
Funds entered into an engagement letter with PricewaterhouseCoopers LLP. The
terms of the engagement
42
letter
required by PricewaterhouseCoopers LLP, and agreed to by the Funds' Audit
Committee, include a provision mandating
the use of mediation and arbitration to resolve any controversy or claim between
the parties arising out of or relating to the engagement letter or the services
provided thereunder.
Counsel
to the Trust. Legal matters for
the Trust have been passed upon by Stradley Ronon Stevens & Young, LLP, 2005
Market Street, Suite 2600, Philadelphia, Pennsylvania 19103-7018.
BROKERAGE
ALLOCATION AND OTHER PRACTICES
The
Sub-Advisers have adopted compliance procedures that cover, among other items,
brokerage allocation and
other trading practices. If all or a portion of a Fund’s assets are managed by
one or more Sub-Advisers, the decision to buy and sell securities and broker
selection will be made by the Sub-Adviser for the assets it manages. Unless
specifically noted, the Sub-Advisers brokerage allocation procedures do not
materially differ from Invesco Advisers, Inc.’s procedures.
As
discussed below, Invesco and the Sub-Advisers, unless prohibited by applicable
law, may cause a Fund to pay a
broker-dealer a commission for effecting a transaction that exceeds the amount
another broker-dealer would have charged for effecting the same transaction in
recognition of the value of brokerage and research services provided by that
broker-dealer. Effective January 3, 2018, under the European Union’s Markets in
Financial Instruments Directive (MiFID II), European Union investment advisers,
including Invesco Deutschland and Invesco Asset Management, which may act as
sub-adviser to certain Invesco Funds as described in such Funds' prospectuses,
must pay for research from broker-dealers directly out of their own resources,
rather than through client commissions.
Brokerage
Transactions
Placing
trades generally involves acting on portfolio manager instructions to buy or
sell a specified amount of portfolio
securities, including selecting one or more broker-dealers, including affiliated
and third-party broker-dealers, to execute the trades, and negotiating
commissions and spreads. Various Invesco Ltd. subsidiaries have created a global
equity trading desk. The global equity trading desk has assigned local traders
in six primary trading centers to place equity securities trades in their
regions. Invesco Advisers’ Americas desk, located in Atlanta and Toronto,
generally places trades of equity securities trading in North America, Canada
and Latin America; the Hong Kong desk of Invesco Hong Kong (the Hong Kong Desk)
generally places trades of equity securities in the Asia-Pacific markets, except
Japan and China; the Japan trading desk of Invesco Japan generally places trades
of equity securities in the Japanese markets; the EMEA trading desk of Invesco
Asset Management Limited (the EMEA Desk) generally places trades of equity
securities in European, Middle Eastern and African countries; the Australia
desk, located in Sydney and Melbourne, for the execution of orders of equity
securities trading in the Australian and New Zealand markets and the Taipei
desk, located in Taipei, for the execution of orders of securities trading in
the Chinese market. Invesco, Invesco Canada, Invesco Japan, Invesco Deutschland,
Invesco Hong Kong, Invesco Capital and Invesco Asset Management use the global
equity trading desk to place equity trades. Other Sub-Advisers may use the
global equity trading desk in the future. The trading procedures for the global
trading desks are similar in all material respects.
References
in the language below to actions by Invesco or a Sub-Adviser making
determinations or taking actions
related to equity trading include these entities’ delegation of these
determinations/actions to the Americas Desk, the Hong Kong Desk, and the EMEA
Desk. Even when trading is delegated by Invesco or the Sub-Advisers to the
various arms of the global equity trading desk, Invesco or the Sub-Advisers that
delegate trading is responsible for oversight of this trading
activity.
Invesco
or the Sub-Advisers make decisions to buy and sell securities for each Fund,
select broker-dealers (each, a Broker),
effect the Funds' investment portfolio transactions, allocate brokerage fees in
such transactions and, where applicable, negotiate commissions and spreads on
transactions. Invesco’s and the Sub-Advisers’ primary consideration in effecting
a security transaction is to obtain best execution, which Invesco defines as
prompt and efficient execution of the transaction at the best obtainable price
with payment of commissions, mark-ups or mark-downs which are reasonable in
relation to the value of the brokerage
43
services
provided by the Broker. While Invesco or the Sub-Advisers seek reasonably
competitive commission rates, the Funds
may not pay the lowest commission or spread available. See “Broker Selection”
below.
Some
of the securities in which the Funds invest are traded in OTC markets.
Portfolio transactions in such markets may be effected on a principal basis at
net prices without commissions, but which include compensation to the Broker in
the form of a mark-up or mark-down, or on an agency basis, which involves the
payment of negotiated brokerage commissions to the Broker, including electronic
communication networks. Purchases of underwritten issues, which include initial
public offerings and secondary offerings, include a commission or concession
paid by the issuer (not the Funds) to the underwriter. Purchases of money market
instruments may be made directly from issuers without the payment of
commissions.
Historically,
Invesco and the Sub-Advisers did not negotiate commission rates on stock markets
outside the United States.
In recent years many overseas stock markets have adopted a system of negotiated
rates; however, a number of markets maintain an established schedule of minimum
commission rates.
In
some cases, Invesco may decide to place trades on a “blind principal bid” basis,
which involves combining all
trades for one or more portfolios into a single basket, and generating a
description of the characteristics of the basket for provision to potential
executing brokers. Based on the trade characteristics information provided by
Invesco, these brokers submit bids for executing all of the required trades at a
designated time for a specific commission rate. Invesco generally selects the
broker with the lowest bid to execute these trades.
Commissions
The
Funds may engage in certain principal and agency transactions with banks and
their affiliates that own 5% or more of
the outstanding voting securities of an Invesco Fund, provided the conditions of
an exemptive order received by the Invesco Funds from the SEC are met. In
addition, a Fund may purchase or sell a security from or to certain other
Invesco Funds or other accounts (and may invest in the Affiliated Money Market
Funds) provided the Funds follow procedures adopted by the Boards of the various
Invesco Funds, including the Trust. These inter-fund transactions generally do
not generate brokerage commissions but may result in custodial fees or taxes or
other related expenses.
Brokerage
commissions paid by each of the Funds during the last three fiscal years or
periods, as applicable, ended
August 31 are found in Appendix J.
Broker
Selection
Invesco’s
or the Sub-Advisers’ primary consideration in selecting Brokers to execute
portfolio transactions for a Fund is to
obtain best execution. In selecting a Broker to execute a portfolio transaction
in equity securities for a Fund, Invesco or the Sub-Advisers consider the full
range and quality of a Broker’s services, including the value of research and/or
brokerage services provided (if permitted by applicable law or regulation),
execution capability, commission rate, and willingness to commit capital,
anonymity and responsiveness. Invesco’s and the Sub-Advisers’ primary
consideration when selecting a Broker to execute a portfolio transaction in
fixed income securities for a Fund is the Broker’s ability to deliver or sell
the relevant fixed income securities; however, Invesco and the Sub-Advisers
will, if permitted by applicable law or regulation, also consider the various
factors listed above. In each case, the determinative factor is not the lowest
commission or spread available but whether the transaction represents the best
qualitative execution for the Fund. Invesco and the Sub-Advisers will not select
Brokers based upon their promotion or sale of Fund shares.
Unless
prohibited by applicable law, such as MiFID II (described herein), in choosing
Brokers to execute portfolio
transactions for the Funds, Invesco or the Sub-Advisers may select Brokers that
provide brokerage and/or research services (Soft Dollar Products) to the Funds
and/or the other accounts over which Invesco and its affiliates have investment
discretion. For the avoidance of doubt, European Union investment advisers,
including Invesco Deutschland and Invesco Asset Management, which may act as
sub-adviser to certain Invesco Funds as described in such Funds’ prospectuses,
must pay for research from broker-dealers directly out of their own resources,
rather than through client commissions. Therefore, the use of the defined term
44
“Sub-Advisers”
throughout this section shall not be deemed to apply to those Sub-Advisers
subject to the MiFID II
prohibitions. Section 28(e) of the Exchange Act, provides that Invesco or the
Sub-Advisers, under certain circumstances, lawfully may cause an account to pay
a higher commission than the lowest available. Under Section 28(e)(1), Invesco
or the Sub-Advisers must make a good faith determination that the commissions
paid are “reasonable in relation to the value of the brokerage and research
services provided ... viewed in terms of either that particular transaction or
[Invesco’s or the Sub-Advisers’] overall responsibilities with respect to the
accounts as to which [it] exercises investment discretion.” The services
provided by the Broker also must lawfully and appropriately assist Invesco or
the Sub-Advisers in the performance of its investment decision-making
responsibilities. Accordingly, a Fund may pay a Broker commissions higher than
those available from another Broker in recognition of the Broker’s provision of
Soft Dollar Products to Invesco or the Sub-Advisers.
Invesco
and the Sub-Advisers face a potential conflict of interest when they use client
trades to obtain Soft Dollar
Products. This conflict exists because Invesco and the Sub-Advisers are able to
use the Soft Dollar Products to manage client accounts without paying cash for
the Soft Dollar Products, which reduces Invesco’s or a Sub-Adviser’s expenses to
the extent that Invesco or such Sub-Adviser would have purchased such products
had they not been provided by Brokers. Section 28(e) permits Invesco or the
Sub-Advisers to use Soft Dollar Products for the benefit of any account it
manages. Certain Invesco-managed accounts (or accounts managed by the
Sub-Advisers) may generate soft dollars used to purchase Soft Dollar Products
that ultimately benefit other Invesco-managed accounts (or Sub-Adviser-managed
accounts), effectively cross subsidizing the other Invesco-managed accounts (or
the other Sub-Adviser-managed accounts) that benefit directly from the product.
Invesco or the Sub-Advisers may not use all of the Soft Dollar Products provided
by Brokers through which a Fund effects securities transactions in connection
with managing the Fund whose trades generated the soft dollars used to purchase
such products.
Invesco
presently engages in the following instances of cross-subsidization:
Fixed
income funds normally do not generate soft dollar commissions to pay for Soft
Dollar Products. Therefore, soft
dollar commissions used to pay for Soft Dollar Products which are used to manage
certain fixed income Invesco Funds are generated entirely by equity Invesco
Funds and other equity client accounts managed by Invesco. In other words,
certain fixed income Invesco Funds are cross-subsidized by the equity Invesco
Funds in that the fixed income Invesco Funds receive the benefit of Soft Dollar
Products services for which they do not pay. Similarly, other accounts managed
by Invesco or certain of its affiliates may benefit from Soft Dollar Products
services for which they do not pay.
Invesco
and the Sub-Advisers attempt to reduce or eliminate the potential conflicts of
interest concerning the use of Soft
Dollar Products by directing client trades for Soft Dollar Products only if
Invesco or the Sub-Adviser concludes that the Broker supplying the product is
capable of providing best execution.
Certain
Soft Dollar Products may be available directly from a vendor on a hard dollar
basis; other Soft Dollar Products are
available only through Brokers in exchange for soft dollars. Invesco and the
Sub-Adviser use soft dollars to purchase two types of Soft Dollar
Products:
•
proprietary
research created by the Broker executing the trade, and
•
other products
created by third parties that are supplied to Invesco or the Sub-Advisers
through the Broker executing the trade.
Proprietary
research consists primarily of traditional research reports, recommendations and
similar materials produced
by the in-house research staffs of broker-dealer firms. This research includes
evaluations and recommendations of specific companies or industry groups, as
well as analyses of general economic and market conditions and trends, market
data, contacts and other related information and assistance. Invesco
periodically rates the quality of proprietary research produced by various
Brokers. Based on the evaluation of the quality of information that Invesco
receives from each Broker, Invesco develops an estimate of each Broker’s share
of Invesco clients’ commission dollars and attempts to direct trades to these
firms to meet these estimates.
45
Invesco
and the Sub-Advisers also use soft dollars to acquire products from third
parties that are supplied to Invesco or the
Sub-Advisers through Brokers executing the trades or other Brokers who “step in”
to a transaction and receive a portion of the brokerage commission for the
trade. Invesco or the Sub-Advisers may from time to time instruct the executing
Broker to allocate or “step out” a portion of a transaction to another Broker.
The Broker to which Invesco or the Sub-Advisers have “stepped out” would then
settle and complete the designated portion of the transaction, and the executing
Broker would settle and complete the remaining portion of the transaction that
has not been “stepped out.” Each Broker may receive a commission or brokerage
fee with respect to that portion of the transaction that it settles and
completes.
Soft
Dollar Products received from Brokers supplement Invesco’s and the Sub-Advisers’
own research (and the research
of certain of its affiliates), and may include the following types of products
and services:
•
Database Services –
comprehensive databases containing current and/or historical information on
companies and industries and indices. Examples include historical securities
prices, earnings estimates and financial data. These services may include
software tools that allow the user to search the database or to prepare
value-added analyses related to the investment process (such as forecasts and
models used in the portfolio management process).
•
Quotation/Trading/News
Systems – products that provide real time market data information, such as
pricing of individual securities and information on current trading, as well as
a variety of news services.
•
Economic
Data/Forecasting Tools – various macro economic forecasting tools, such as
economic data or currency and political forecasts for various countries or
regions.
•
Quantitative/Technical
Analysis – software tools that assist in quantitative and technical analysis of
investment data.
•
Fundamental/Industry
Analysis – industry specific fundamental investment research.
•
Fixed Income
Security Analysis – data and analytical tools that pertain specifically to fixed
income securities. These tools assist in creating financial models, such as cash
flow projections and interest rate sensitivity analyses, which are relevant to
fixed income securities.
•
Other Specialized
Tools – other specialized products, such as consulting analyses, access to
industry experts, and distinct investment expertise such as forensic accounting
or custom built investment-analysis software.
If
Invesco or the Sub-Advisers determine that any service or product has a mixed
use (i.e., it also serves functions that do
not assist the investment decision-making or trading process), Invesco or the
Sub-Advisers will allocate the costs of such service or product accordingly in
its reasonable discretion. Invesco or the Sub-Advisers will allocate brokerage
commissions to Brokers only for the portion of the service or product that
Invesco or the Sub-Advisers determine assists it in the investment
decision-making or trading process and will pay for the remaining value of the
product or service in cash.
Outside
research assistance is useful to Invesco or the Sub-Advisers because the Brokers
used by Invesco or the
Sub-Advisers tend to provide more in-depth analysis of a broader universe of
securities and other matters than Invesco’s or the Sub-Advisers’ staff follow.
In addition, such services provide Invesco or the Sub-Advisers with a diverse
perspective on financial markets. Some Brokers may indicate that the provision
of research services is dependent upon the generation of certain specified
levels of commissions and underwriting concessions by Invesco’s or the
Sub-Advisers’ clients, including the Funds. However, the Funds are not under any
obligation to deal with any Broker in the execution of transactions in portfolio
securities. In some cases, Soft Dollar Products are available only from the
Broker providing them. In other cases, Soft Dollar Products may be obtainable
from alternative sources in return for cash payments. Invesco and the
Sub-Advisers believe that because Broker research supplements rather than
replaces Invesco’s or the Sub-Advisers’ research, the receipt of such research
tends to improve the quality of Invesco’s or the Sub-Advisers’ investment
advice. The advisory fee paid by the Funds is not reduced because Invesco or the
Sub-Advisers
46
receive
such services. To the extent the Funds' portfolio transactions are used to
obtain Soft Dollar Products, the brokerage
commissions obtained by the Funds might exceed those that might otherwise have
been paid.
Invesco
or the Sub-Advisers may determine target levels of brokerage business with
various Brokers on behalf of its
clients (including the Funds) over a certain time period. Invesco determines
target levels based upon the following factors, among others: (1) the execution
services provided by the Broker; and (2) the research services provided by the
Broker. Portfolio transactions may be effected through Brokers that recommend
the Funds to their clients, or that act as agent in the purchase of a Fund’s
shares for their clients, provided that Invesco or the Sub-Advisers believe such
Brokers provide best execution and such transactions are executed in compliance
with Invesco’s policy against using directed brokerage to compensate Brokers for
promoting or selling Invesco Fund shares. Invesco and the Sub-Advisers will not
enter into a binding commitment with Brokers to place trades with such Brokers
involving brokerage commissions in precise amounts.
As
noted above, under MiFID II, European Union investment advisers, including
Invesco Deutschland and Invesco Asset
Management, are not permitted to use Soft Dollar Products to pay for research
from brokers but rather must pay for research out of their own profit and loss
or have research costs paid by clients through research payment accounts that
are funded by a specific client research charge or the research component of
trade orders. Such payments for research must be unbundled from the payments for
execution. As a result, Invesco Deutschland and Invesco Asset Management are
restricted from using Soft Dollar Products in managing the Invesco Funds that
they sub-advise.
Directed
Brokerage (Research Services)
Directed
brokerage (research services) commissions paid by each of the Funds during
the fiscal year or period, as
applicable, ended August 31 is found in Appendix J.
Affiliated
Transactions
The
Adviser or Sub-Adviser may place trades with Invesco Capital Markets, Inc.
(ICMI), a broker-dealer with whom it is
affiliated, provided the Adviser or Sub-Adviser determines that ICMI’s trade
execution abilities and costs are at least comparable to those of non-affiliated
brokerage firms with which the Adviser or Sub-Adviser could otherwise place
similar trades. ICMI receives brokerage commissions in connection with effecting
trades for the Funds and, therefore, use of ICMI presents a conflict of interest
for the Adviser or Sub-Adviser. Trades placed through ICMI, including the
brokerage commissions paid to ICMI, are subject to procedures adopted by the
Board.
The
Funds did not pay brokerage commissions on affiliated transactions for the last
three fiscal years.
Regular
Brokers
Information
concerning the Funds' acquisition of securities of their brokers during the last
fiscal
year or period, as applicable, ended August 31 is found in Appendix
J.
Allocation
of Portfolio Transactions
Invesco
and the Sub-Advisers manage numerous Invesco Funds and other accounts. Some of
these accounts may have
investment objectives similar to the Funds. Occasionally, identical securities
will be appropriate for investment by multiple Invesco Funds or other accounts.
However, the position of each account in the same security and the length of
time that each account may hold its investment in the same security may vary.
Invesco and the Sub-Adviser will also determine the timing and amount of
purchases for an account based on its cash position. If the purchase or sale of
securities is consistent with the investment policies of the Fund(s) and one or
more other accounts, and is considered at or about the same time, Invesco or the
Sub-Adviser will allocate transactions in such securities among the Fund(s) and
these accounts on a pro rata basis based on order size or in such other manner
believed by Invesco to be fair and equitable. In determining what is fair and
equitable, Invesco or the Sub-Adviser can consider various factors, including
how closely the investment opportunity matches the investment objective and
strategy of a Fund or account, the
47
capital
available to a Fund or account, and which portfolio management team sourced the
opportunity. Invesco or the
Sub-Adviser may combine transactions in accordance with applicable laws and
regulations to obtain the most favorable execution. Simultaneous transactions
could, however, adversely affect a Fund’s ability to obtain or dispose of the
full amount of a security which it seeks to purchase or sell.
PURCHASE,
REDEMPTION, EXCHANGE AND PRICING OF SHARES
Purchase,
Redemption, and Exchange of Shares
Before
the initial purchase of shares, an investor must submit a completed account
application either directly or through
its financial intermediary, to the Funds’ transfer agent at P.O. Box 219286,
Kansas City, Missouri 64121-9286. An investor may change information in his
account application by submitting written changes or a new account application
to his intermediary or to the Funds’ transfer agent.
Purchase
and redemption orders must be received in good order. To be in good order, the
investor, either directly or through
his financial intermediary must give the Funds’ transfer agent all required
information and documentation. Additionally, purchase payment must be made in
federal funds or by check. If the intermediary fails to deliver the investor’s
payment on the required settlement date, the intermediary must reimburse the
Funds for any overdraft charges incurred.
The
Funds’ transfer agent and Invesco Distributors may authorize agents to accept
purchase and redemption orders
that are in good order on behalf of the Funds. In certain cases, these
authorized agents are authorized to designate other intermediaries to accept
purchase and redemption orders on a Fund’s behalf. A Fund will be deemed to have
received the purchase or redemption order when the Fund’s transfer agent accepts
the order. The order will be priced at the net asset value next determined after
the order is accepted by the Fund’s transfer agent. Orders submitted through a
financial intermediary that has not received authorization to accept orders on a
Fund’s behalf are priced at the Fund’s net asset value next calculated by the
Fund after it receives the order from the financial intermediary and accepts it,
which may not occur on the day submitted to the financial
intermediary.
An
investor or a financial intermediary may submit a written request to the Funds’
transfer agent for correction of
transactions involving Fund shares. If the Funds’ transfer agent agrees to
correct a transaction, and the correction requires a dividend adjustment, the
investor or the intermediary must agree in writing to reimburse the Funds for
any resulting loss.
Payment
is
normally made by Federal Reserve wire to the bank account designated in the
investor’s account application. Any changes to wire instructions must be
submitted to the Funds’ transfer agent in writing. The Funds’ transfer agent may
request additional documentation.
The
Funds’ transfer agent may request that an intermediary maintain separate master
accounts in the Funds for shares
held by the intermediary (a) for its own account, for the account of other
institutions and for accounts for which the intermediary acts as a fiduciary;
and (b) for accounts for which the intermediary acts in some other
capacity.
With
regard to Funds that do not qualify as Government Money Market Funds, if a
Fund’s weekly liquid assets fall below
30% of its total assets, the Board, in its discretion, may impose liquidity fees
of up to 2% of the value of the shares redeemed and/or gates on redemptions. In
addition, if a Fund’s weekly liquid assets fall below 10% of its total assets at
the end of any business day, the Fund must impose a 1% liquidity fee on
shareholder redemptions unless the Board determines that not doing so is in the
best interests of the Fund. For Funds that do not qualify as Government Money
Market Funds, when a fee or a gate is in place, shareholders will not be
permitted to exchange into or out of a Fund.
The
Board may, in its discretion, terminate a liquidity fee or redemption gate at
any time if it believes such action to be in the
best interest of the Fund and its shareholders. Also, liquidity fees and
redemption gates will automatically terminate at the beginning of the next
business day once a Fund’s weekly liquid assets reach at least 30% of its total
assets. Redemption gates may only last up to 10 business days in any 90-day
period. When a fee or a gate is in place, the Fund may elect not to permit the
purchase of shares or to subject the
48
purchase
of shares to certain conditions, which may include affirmation of the
purchaser’s knowledge that a fee or a gate is in
effect.
The
Board may, in its discretion, permanently suspend redemptions and liquidate if,
among other things, a Fund, at the end of
a business day, has less than 10% of its total assets invested in weekly liquid
assets. The Board of the Retail and Government Money Market Funds may suspend
redemptions and liquidate if the Fund’s amortized cost price per share has
deviated from its market-based NAV per share, or the Board has determined such
deviation is likely to occur.
You
may only exchange Institutional Class shares of the Funds for shares of other
Funds in the Trust or for shares of other
money market funds in Short-Term Investments Trust, but may not exchange
Institutional Class shares of such Funds for retail shares of other Invesco
Funds or Investor Class shares of Funds in the Trust. You may only
exchange Personal Investment Class, Private Investment Class, Reserve Class and
Resource Class shares of Invesco Premier Portfolio for shares of other Funds in
the Trust or for shares of other money market funds in Short-Term Investments
Trust, but may not exchange Personal Investment Class, Private Investment Class,
Reserve Class and Resource Class shares of Invesco Premier Portfolio for retail
shares of other Invesco Funds or Investor Class shares of Funds in the
Trust.
Additional
information regarding purchases and redemptions is located in each class’
prospectus, under the headings
“Purchasing Shares,” “Redeeming Shares,” and “Exchanging Shares.”
Offering
Price
The
offering price of each Fund’s shares is the Fund’s net asset value. The Funds
value their portfolio securities on the
basis of amoratized cost, which approximates market value. This method of
valuation is designed to enable a Fund to price its shares at $1.00 per share.
The Funds cannot guarantee their net asset value will always remain at $1.00 per
share.
Calculation
of Net Asset Value
The
Board has established procedures, in accordance with Rule 2a-7 under the 1940
Act, designed to stabilize each
Fund’s net asset value per share at $1.00, to the extent reasonably possible.
Such procedures include daily calculation of the extent of the deviation, if
any, of the current net asset value per share using available market quotations
from the fund's amortized cost price per share, and the periodic review by the
Trustees of the amount of such deviation. The reviews are used to determine
whether net asset value, calculated by using available market quotations,
deviates from $1.00 per share and, if so, whether such deviation may result in
material dilution or is otherwise unfair to investors or existing shareholders.
In the event the trustees determine that a material deviation exists, they
intend to take such corrective action as they deem necessary and appropriate.
Such actions may include selling portfolio securities prior to maturity in order
to realize capital gains or losses or to shorten average portfolio maturity,
withholding dividends, redeeming shares in kind, or establishing a net asset
value per share by using available market quotations. When available market
quotations are used to establish the market-based net asset value, the net asset
value could possibly be more or less than $1.00 per share.
Under
the amortized cost method, each investment is valued at its cost and thereafter
any discount or premium is
amortized on a constant basis to maturity. Although this method provides
certainty of valuation, it may result in periods in which the amortized cost
value of the Funds’ investments is high or lower than the price that would be
received if the investments were sold.
Debt
securities (including convertible bonds) and unlisted equities are fair valued
using an evaluated quote provided by
an independent pricing vendor. Evaluated quotes provided by the pricing vendor
may be determined without exclusive reliance on quoted prices, and may reflect
appropriate factors such as institution size, trading in similar groups of
securities, developments related to special securities, dividend rate, yield,
quality, coupon rate, maturity, type of issue, individual trading
characteristics and other market data. Securities for which market prices are
not provided by any of the above methods may be valued based upon quotes
furnished by independent sources and are valued at the last bid price in the
case of equity securities and Corporate Loans and in the case of debt
obligations (excluding Corporate Loans), the mean between the last
49
bid
and ask prices. Senior secured floating rate loans and senior secured floating
rate debt securities are fair valued using an
evaluated quote provided by an independent pricing service. Evaluated quotes
provided by the pricing service may reflect appropriate factors such as ratings,
tranche type, industry, company performance, spread, individual trading
characteristics, institution-size trading in similar groups of securities and
other market data. Investments in open-end and closed-end registered investment
companies that do not trade on an exchange are valued at the end of day net
asset value per share.
Generally,
trading in corporate bonds, U.S. government
securities and money market instruments is substantially completed each day
prior to the close of the customary trading session of the New York Stock
Exchange (NYSE). The values of such securities used in computing the net asset
value of an Invesco Fund's shares are the valuation time(s) for the particular
Fund. Occasionally, events affecting the values of such securities may occur
between the times at which such values are determined and the close of the
customary trading session of the NYSE. If the Adviser believes a
development/event has actually caused a closing price to no longer reflect
current market value, the closing price may be adjusted to reflect the fair
value of the affected security as of the close of the NYSE as determined in good
faith using the valuation policy approved by the Board and related
procedures.
Foreign
securities are converted into U.S. dollar amounts using exchange rates as of the
valuation time(s) for the particular
Fund. If market quotations are available and reliable for foreign exchange
traded equity securities, the securities will be valued at the market
quotations. Because trading hours for certain foreign securities end before the
close of the NYSE, closing market quotations may become unrepresentative of
market value in the Adviser's judgment ("unreliable"). If between the time
trading ends on a particular security and the valuation time(s) for the
particular Fund, events occur that are significant and may make the closing
price unreliable, the Adviser may fair value the security. If an issuer specific
event has occurred that the Adviser determines, in its judgment, is likely to
have affected the closing price of a foreign security, it will price the
security at fair value in good faith using the valuation policy approved by the
Board and related procedures. Adjustments to closing prices to reflect fair
value may also be based on a screening process from a pricing vendor to indicate
the degree of certainty, based on historical data, that the closing price in the
principal market where a foreign security trades is not the current market value
as of the close of the NYSE. For foreign securities where the Adviser believes,
at the approved degree of certainty, that the price is not reflective of current
market value, the Adviser will use the indication of fair value from the pricing
vendor to determine the fair value of the security. The pricing vendor, pricing
methodology or degree of certainty may change from time to time. Multiple
factors may be considered by the pricing vendor in determining adjustments to
reflect fair value and may include information relating to sector indices,
American Depositary Receipts, domestic and foreign index futures, and
exchange-traded funds.
Invesco
Fund securities primarily traded in foreign markets may be traded in such
markets on days that are not business
days of the Invesco Fund. Because the net asset value per share of each Invesco
Fund is determined only on business days of the Invesco Fund, the value of the
portfolio securities of an Invesco Fund that invests in foreign securities may
change on days when an investor cannot exchange or redeem shares of the Invesco
Fund.
Securities
for which market quotations are not available or are unreliable are valued at
fair value as determined in good
faith by or under the supervision of the Trust's officers in accordance with the
valuation policy approved by the Board and related procedures. Issuer specific
events, market trends, bid/ask quotes of brokers and information providers and
other market data may be reviewed in the course of making a good faith
determination of a security's fair value.
Redemptions
in Kind
The
Funds do not intend to redeem shares representing an interest in the Funds in
kind (i.e., by distributing its
portfolio securities).
Although
the Invesco Funds generally intend to pay redemption proceeds solely in cash,
the Invesco Funds reserve the
right to determine, in their sole discretion, whether to satisfy redemption
requests by making payment in securities or other property (known as a
redemption in kind). For instance, an Invesco
50
Fund
may make a redemption in kind if a cash redemption would disrupt its operations
or performance. Securities that
will be delivered as payment in redemptions in kind will be valued using the
same methodologies that the Invesco Fund typically utilizes in valuing such
securities. Shareholders receiving such securities are likely to incur
transaction and brokerage costs on their subsequent sales of such securities,
and the securities may increase or decrease in value until the shareholder sells
them. The Trust, on behalf of the Invesco Funds, made an election under Rule
18f-1 under the 1940 Act (a Rule 18f-1 Election) and therefore, the Trust, on
behalf of an Invesco Fund, is obligated to redeem for cash all shares presented
to such Invesco Fund for redemption by any one shareholder in an amount up to
the lesser of $250,000 or 1% of that Invesco Fund's net assets in any 90-day
period. The Rule 18f-1 Election is irrevocable while Rule 18f-1 under the 1940
Act is in effect unless the SEC by order permits withdrawal of such Rule 18f-1
Election.
Backup
Withholding
Accounts
submitted without a correct, certified taxpayer identification number (TIN) or,
alternatively, a correctly completed
and currently effective IRS Form W-8 (for non-resident aliens) or Form W-9 (for
U.S. persons including resident aliens) accompanying the registration
information generally will be subject to backup withholding.
Each
Invesco Fund, and other payers, generally must withhold 24% of reportable
dividends (whether paid in cash or
reinvested in additional Invesco Fund shares), including exempt-interest
dividends, in the case of any shareholder who fails to provide the Invesco Funds
with a TIN and a certification that he is not subject to backup
withholding.
An
investor is subject to backup withholding if:
1.
The investor fails to furnish a correct TIN to the Invesco Fund;
2.
the IRS notifies the Invesco Fund that the investor furnished an incorrect
TIN;
3. the investor or
the Invesco Fund is notified by the IRS that the investor is subject to backup
withholding because the investor failed to report all of the interest and
dividends on such investor’s tax return (for reportable interest and dividends
only);
4. the investor
fails to certify to the Invesco Fund that the investor is not subject to backup
withholding under (3) above (for reportable interest and dividend accounts
opened after 1983 only); or
5. the investor
does not certify his TIN. This applies only to non-exempt mutual fund accounts
opened after 1983.
Interest
and dividend payments are subject to backup withholding in all five situations
discussed above. Redemption proceeds
are subject to backup withholding only if (1), (2) or (5) above
applies.
Certain
payees and payments are exempt from backup withholding and information
reporting. Invesco or the Transfer Agent
will not provide Form 1099 to those payees.
Investors
should contact the IRS if they have any questions concerning
withholding.
IRS
Penalties. Investors who do
not supply the Invesco Funds with a correct TIN will be subject to a $50 penalty
imposed by the IRS unless such failure is due to reasonable cause and not
willful neglect. If an investor falsifies information on this form or makes any
other false statement resulting in no backup withholding on an account which
should be subject to backup withholding, such investor may be subject to a $500
penalty imposed by the IRS and to certain criminal penalties including fines
and/or imprisonment.
Nonresident
Aliens. Nonresident alien
individuals and foreign entities with a valid Form W-8 are not subject to the
backup withholding previously discussed. The Form W-8 generally remains in
effect for a period starting on the date the Form is signed and ending on the
last day of the third succeeding calendar year. Such shareholders may, however,
be subject to federal income tax withholding at a 30% rate on ordinary income
dividends and other distributions. Under applicable treaty law, residents of
treaty countries may qualify for a
51
reduced
rate of withholding or a withholding exemption. Nonresident alien individuals
and some foreign entities failing to
provide a valid Form W-8 may be subject to backup withholding and Form 1099
reporting.
DIVIDENDS,
DISTRIBUTIONS AND TAX MATTERS
Dividends
and Distributions
The
following discussion of dividends and distributions should be read in connection
with the applicable sections in the
Prospectus.
All
dividends and distributions will be automatically reinvested in additional
shares of the same class of a Fund unless the
shareholder has requested in writing to receive such dividends and distributions
in cash or that they be invested in shares of another Invesco Fund, subject to
the terms and conditions set forth in the Prospectus under the caption
“Purchasing Shares - Automatic Dividend and Distribution Investment.” Such
dividends and distributions will be reinvested at the net asset value per share
determined on the ex-dividend date.
The
Fund calculates income dividends and capital gain distributions the same way for
each class. The amount of any
income dividends per share will differ, however, generally due to any
differences in the distribution and service (Rule 12b-1) fees applicable to the
classes, as well as any other expenses attributable to a particular class (Class
Expenses). Class Expenses, including distribution plan expenses, must be
allocated to the class for which they are incurred consistent with applicable
legal principles under the 1940 Act.
In
the event, a Fund incurs or anticipates any unusual expense, loss or
depreciation in the value of a portfolio
investment that would adversely affect the net asset value per share of the Fund
or the net income per share of a class of the Fund for a particular period, the
Board would at that time consider whether to adhere to the present dividend
policy described above or to revise it in light of then prevailing
circumstances. For example, if the net asset value per share of the Fund was
reduced, or was anticipated to be reduced below $1.00, the Board might suspend
further dividend payments on shares of the Fund until the net asset value
returns to $1.00. Thus, such expense, loss or depreciation might result in a
shareholder receiving no dividends for the period during which it held shares of
the Fund and/or its receiving upon redemption a price per share lower than that
which it paid.
Tax
Matters
The
following is a summary of certain additional tax considerations generally
affecting the Fund and its shareholders that
are not described in the Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of the Fund or its shareholders, and the
discussion here and in the Prospectus is not intended as a substitute for
careful tax planning.
This
“Tax Matters” section is based on the Code and applicable regulations in effect
on the date of this SAI. Future
legislative, regulatory or administrative changes, including provisions of
current law that sunset and thereafter no longer apply, or court decisions may
significantly change the tax rules applicable to the Fund and its shareholders.
Any of these changes or court decisions may have a retroactive
effect.
This
is for general information only and not tax advice. All investors should
consult their own tax advisors
as to the federal, state, local and foreign tax provisions applicable to
them.
Taxation
of the Fund. The Fund has
elected and intends to qualify (or, if newly organized, intends to elect and
qualify) each year as a “regulated investment company” (sometimes referred to as
a regulated investment company, RIC or fund) under Subchapter M of the Code. If
the Fund qualifies, the Fund will not be subject to federal income tax on the
portion of its investment company taxable income (i.e., generally, taxable
interest, dividends, net short-term capital gains and other taxable ordinary
income net of expenses without regard to the deduction for dividends paid) and
net capital gain (i.e., the excess of net long-term capital gains over net
short-term capital losses) that it distributes to shareholders.
52
Qualification
as a regulated investment company. In order to
qualify for treatment as a regulated investment company, the Fund must satisfy
the following requirements:
•
Distribution
Requirement – the Fund must distribute an amount equal to the sum of at least
90% of its investment company taxable income and 90% of its net tax-exempt
income, if any, for the tax year (certain distributions made by the Fund after
the close of its tax year are considered distributions attributable to the
previous tax year for purposes of satisfying this requirement).
•
Income Requirement
– the Fund must derive at least 90% of its gross income from dividends,
interest, certain payments with respect to securities loans, and gains from the
sale or other disposition of stock, securities or foreign currencies, or other
income (including, but not limited to, gains from options, futures or forward
contracts) derived from its business of investing in such stock, securities or
currencies and net income derived from qualified publicly traded partnerships
(QPTPs).
•
Asset
Diversification Test – the Fund must satisfy the following asset diversification
test at the close of each quarter of the Fund’s tax year: (1) at least 50% of
the value of the Fund’s assets must consist of cash and cash items, U.S.
government securities, securities of other regulated investment companies, and
securities of other issuers (as to which the Fund has not invested more than 5%
of the value of the Fund’s total assets in securities of an issuer and as to
which the Fund does not hold more than 10% of the outstanding voting securities
of the issuer); and (2) no more than 25% of the value of the Fund’s total assets
may be invested in the securities of any one issuer (other than U.S. government
securities or securities of other regulated investment companies) or of two or
more issuers which the Fund controls and which are engaged in the same or
similar trades or businesses, or, collectively, in the securities of
QPTPs.
In
some circumstances, the character and timing of income realized by the Fund for
purposes of the Income Requirement
or the identification of the issuer for purposes of the Asset Diversification
Test is uncertain under current law with respect to a particular investment, and
an adverse determination or future guidance by the IRS with respect to such type
of investment may adversely affect the Fund’s ability to satisfy these
requirements. See “Tax Treatment of Portfolio Transactions” with respect to the
application of these requirements to certain types of investments. In other
circumstances, the Fund may be required to sell portfolio holdings in order to
meet the Income Requirement, Distribution Requirement, or Asset Diversification
Test, which may have a negative impact on the Fund’s income and performance. In
lieu of potential disqualification, the Fund is permitted to pay a tax for
certain failures to satisfy the Asset Diversification Test or Income
Requirement, which, in general, are limited to those due to reasonable cause and
not willful neglect.
The
Fund may use “equalization accounting” (in lieu of making some cash
distributions) in determining the portion of its
income and gains that has been distributed. If the Fund uses equalization
accounting, it will allocate a portion of its undistributed investment company
taxable income and net capital gain to redemptions of Fund shares and will
correspondingly reduce the amount of such income and gains that it distributes
in cash. However, the Fund intends to make cash distributions for each taxable
year in an aggregate amount that is sufficient to satisfy the Distribution
Requirement without taking into account its use of equalization accounting. If
the IRS determines that the Fund’s allocation is improper and that the Fund has
under-distributed its income and gain for any taxable year, the Fund may be
liable for federal income and/or excise tax.
If
for any taxable year the Fund does not qualify as a regulated investment
company, all of its taxable income (including
its net capital gain) would be subject to tax at the corporate income tax rate
without any deduction for dividends paid to shareholders, and the dividends
would be taxable to the shareholders as ordinary income (or possibly as
qualified dividend income) to the extent of the Fund’s current and accumulated
earnings and profits. Failure to qualify as a regulated investment company thus
would have a negative impact on the Fund’s income and performance. Subject to
savings provisions for certain inadvertent failures to satisfy the Income
Requirement or Asset Diversification Test which, in general, are limited to
those due to reasonable cause and not willful neglect, it is possible that the
Fund will not qualify as a regulated investment company in any given tax year.
Even if such savings provisions apply, the Fund may be subject to a monetary
sanction of $50,000 or more. Moreover, the Board reserves the right not to
maintain the
53
qualification
of the Fund as a regulated investment company if it determines such a course of
action to be beneficial to
shareholders.
Capital
loss carryovers. The capital losses
of the Fund, if any, do not flow through to shareholders. Rather, the Fund may
use its capital losses, subject to applicable limitations, to offset its capital
gains without being required to pay taxes on or distribute to shareholders such
gains that are offset by the losses. If the Fund has a “net capital loss” (that
is, capital losses in excess of capital gains), the excess (if any) of the
Fund’s net short-term capital losses over its net long-term capital gains is
treated as a short-term capital loss arising on the first day of the Fund’s next
taxable year, and the excess (if any) of the Fund’s net long-term capital losses
over its net short-term capital gains is treated as a long-term capital loss
arising on the first day of the Fund’s next taxable year. Any such net capital
losses of the Fund that are not used to offset capital gains may be carried
forward indefinitely to reduce any future capital gains realized by the Fund in
succeeding taxable years. The amount of capital losses that can be carried
forward and used in any single year is subject to an annual limitation if there
is a more than 50% “change in ownership” of the Fund. An ownership change
generally results when shareholders owning 5% or more of the Fund increase their
aggregate holdings by more than 50% over a three-year look-back period. An
ownership change could result in capital loss carryovers being used at a slower
rate thereby reducing the Fund’s ability to offset capital gains with those
losses. An increase in the amount of taxable gains distributed to the Fund’s
shareholders could result from an ownership change. The Fund undertakes no
obligation to avoid or prevent an ownership change, which can occur in the
normal course of shareholder purchases and redemptions or as a result of
engaging in a tax-free reorganization with another fund. Moreover, because of
circumstances beyond the Fund’s control, there can be no assurance that the Fund
will not experience, or has not already experienced, an ownership
change.
Deferral
of late year losses. The Fund may elect
to treat part or all of any “qualified late year loss” as if it had been
incurred in the succeeding taxable year in determining the Fund’s taxable
income, net capital gain, net short-term capital gain, and earnings and profits.
The effect of this election is to treat any such “qualified late year loss” as
if it had been incurred in the succeeding taxable year, which may change the
timing, amount, or characterization of Fund distributions (see “Taxation of Fund
Distributions — Capital gain dividends” below). A “qualified late year loss”
includes:
(i)
any net capital loss incurred after October 31 of the current taxable year, or,
if there is no such loss, any net
long-term capital loss or any net short-term capital loss incurred after October
31 of the current taxable year (post-October capital losses); and
(ii)
the sum of (1) the excess, if any, of (a) specified losses incurred after
October 31 of the current taxable year, over
(b) specified gains incurred after October 31 of the current taxable year and
(2) the excess, if any, of (a) ordinary losses incurred after December 31 of the
current taxable year, over (b) the ordinary income incurred after December 31 of
the current taxable year.
The
terms “specified losses” and “specified gains” mean ordinary losses and gains
from the sale, exchange, or other
disposition of property (including the termination of a position with respect to
such property), foreign currency losses and gains, and losses and gains
resulting from holding stock in a passive foreign investment company (PFIC) for
which a mark-to-market election is in effect. The terms “ordinary losses” and
“ordinary income” mean other ordinary losses and income that are not described
in the preceding sentence.
Special
rules apply to a fund with a fiscal year ending in November or December that
elects to use its taxable year for
determining its capital gain net income for excise tax purposes.
Federal
excise tax. To avoid a 4%
non-deductible excise tax, the Fund must distribute by December 31 of each year
an amount equal to at least: (1) 98% of its ordinary income for the calendar
year, (2) 98.2% of capital gain net income (the excess of the gains from sales
or exchanges of capital assets over the losses from such sales or exchanges) for
the one-year period ended on October 31 of such calendar year (or, at the
election of a regulated investment company having a taxable year ending November
30 or December 31, for its taxable year), and (3) any prior year undistributed
ordinary income and capital gain net income. The Fund may elect to defer to the
following year any net ordinary loss incurred for the portion of the calendar
year
54
which
is after the beginning of the Fund’s taxable year. Also, the Fund will defer any
“specified gain” or “specified loss”
which would be properly taken into account for the portion of the calendar after
October 31. Any net ordinary loss, specified gain, or specified loss deferred
shall be treated as arising on January 1 of the following calendar year.
Generally, the Fund may make sufficient distributions to avoid liability for
federal income and excise tax, but can give no assurances that all or a portion
of such liability will be avoided. In addition, under certain circumstances
temporary timing or permanent differences in the realization of income and
expense for book and tax purposes can result in the Fund having to pay an excise
tax.
Foreign
income tax. Investment income
received by the Fund from sources within foreign countries may be subject to
foreign income tax withheld at the source, and the amount of tax withheld
generally will be treated as an expense of the Fund. The United States has
entered into tax treaties with many foreign countries that entitle the Fund to a
reduced rate of, or exemption from, tax on such income. Some countries require
the filing of a tax reclaim or other forms to receive the benefit of the reduced
tax rate; whether or when the Fund will receive the tax reclaim is within the
control of the individual country. Information required on these forms may not
be available such as shareholder information; therefore, the Fund may not
receive the reduced treaty rates or potential reclaims. Other countries have
conflicting and changing instructions and restrictive timing requirements which
may cause the Fund not to receive the reduced treaty rates or potential
reclaims. Other countries may subject capital gains realized by the Fund on sale
or disposition of securities of that country to taxation. These and other
factors may make it difficult for the Fund to determine in advance the effective
rate of tax on its investments in certain countries. Under certain
circumstances, the Fund may elect to pass-through certain eligible foreign
income taxes paid by the Fund to shareholders, although it reserves the right
not to do so. If the Fund makes such an election and obtains a refund of foreign
taxes paid by the Fund in a prior year, the Fund may be eligible to reduce the
amount of foreign taxes reported by the Fund to its shareholders, generally by
the amount of the foreign taxes refunded, for the year in which the refund is
received. Certain foreign taxes imposed on the Fund's investments, such as a
foreign financial transaction tax, may not be creditable against U.S. income tax
liability or eligible for pass through by the Fund to its
shareholders.
As
a result of several court cases, in certain countries across the European Union,
the Fund may have filed additional
tax reclaims for previously withheld taxes on dividends earned in those
countries ("EU reclaims"). For U.S. income tax purposes, EU reclaims plus
interest received by the Fund, if any, reduce the amount of foreign taxes Fund
shareholders can use as tax deductions or credits on their income tax returns,
if any. Any interest received that offsets such foreign taxes is required to be
reported to the shareholder as additional dividend income from the Fund and
included in the shareholder's gross income. In the event that EU reclaims
received by the Fund during a fiscal year exceed foreign withholding taxes paid
by the Fund, and the Fund previously passed through to its shareholders foreign
taxes incurred by the Fund to be used as a credit or deduction on a
shareholder's income tax return, the Fund will enter into a closing agreement
with the IRS in order to pay the associated tax liability on behalf of the
Fund's shareholders.
Liquidity
Fees.
There is some degree of uncertainty with respect to the tax treatment of
liquidity fees received by a Fund, and such tax treatment may be the subject of
future IRS guidance. If a Fund receives liquidity fees, it will consider the
appropriate tax treatment of such fees to the Fund at such time.
Taxation
of Fund Distributions (All Funds). The Fund
anticipates distributing substantially all of its investment company taxable
income and net capital gain for each taxable year. Distributions by the Fund
will be treated in the manner described below regardless of whether such
distributions are paid in cash or reinvested in additional shares of the Fund
(or of another Fund). The Fund will send you information annually as to
the federal income tax consequences of distributions made (or deemed made)
during the year.
Distributions
of ordinary income. The Fund receives
income generally in the form of interest on its investments. The Fund may also
recognize ordinary income from other sources, including, but not limited to,
certain gains on foreign currency-related transactions. The Fund also may
distribute to you any market discount and net short-term capital gains from the
sale of its portfolio securities. This income, less expenses incurred in the
operation of the Fund, constitutes the Fund’s net investment income from which
dividends may be paid to you. If you are a taxable investor,
distributions of net investment income generally are taxable as
55
ordinary
income to the extent of the Fund’s earnings and profits. In the case of a Fund
whose strategy includes investing
in stocks of corporations, a portion of the income dividends paid to you may be
qualified dividends eligible to be taxed at reduced rates.
Capital
gain dividends. Taxes on
distributions of capital gains are determined by how long the Fund owned the
investments that generated them, rather than how long a shareholder has owned
his or her shares. In general, the Fund will recognize long-term capital gain or
loss on the sale or other disposition of assets it has owned for more than one
year, and short-term capital gain or loss on investments it has owned for one
year or less. Distributions of net capital gain (the excess of net long-term
capital gain over net short-term capital loss) that are properly reported by the
Fund to shareholders as capital gain dividends generally will be taxable to a
shareholder receiving such distributions as long-term capital gain. Long-term
capital gain rates applicable to individuals are 0%, 15%, 20% or 25%
depending on the nature of the capital gain and the individual’s taxable
income. Distributions of net short-term capital gains for a taxable year
in excess of net long-term capital losses for such taxable year generally will
be taxable to a shareholder receiving such distributions as ordinary income. The
Fund does not expect to realize any long-term capital gains and
losses.
Qualified
dividend income for individuals. Because the income
of the Fund primarily is derived from investments earning interest rather than
dividend income, generally none of the Fund’s income dividends will be qualified
dividend income eligible for taxation at capital gain rates.
Corporate
dividends-received deduction. Because the income
of the Fund primarily is derived from investments earning interest rather than
dividend income, generally none of its income dividends will be eligible for the
corporate dividends-received deduction.
Maintaining
a $1.00 share price. Because the shares
in the Fund are offered and redeemed at a constant net asset value of $1.00 per
share, gains and losses on the sale of portfolio securities and unrealized
appreciation or depreciation in the value of these securities may require the
Fund to adjust its dividends to maintain its $1.00 share price. This procedure
may result in under- or over-distributions by the Fund of its net investment
income. This in turn may result in return of capital distributions, the effect
of which is described in the following paragraph.
Return
of capital distributions. Distributions by
the Fund that are not paid from earnings and profits will be treated as a return
of capital to the extent of (and in reduction of) the shareholder’s tax basis in
his shares; any excess will be treated as gain from the sale of his shares.
Thus, the portion of a distribution that constitutes a return of capital will
decrease the shareholder’s tax basis in his Fund shares (but not below zero),
and will result in an increase in the amount of gain (or decrease in the amount
of loss) that will be recognized by the shareholder for tax purposes on the
later sale of such Fund shares. Return of capital distributions can occur for a
number of reasons including, among others, the Fund over-estimates the income to
be received from certain investments.
Tax
credit bonds. If the Fund holds,
directly or indirectly, one or more “tax credit bonds” (including build America
bonds, clean renewable energy bonds and qualified tax credit bonds) on one or
more applicable dates during a taxable year, the Fund may elect to permit its
shareholders to claim a tax credit on their income tax returns equal to each
shareholder’s proportionate share of tax credits from the applicable bonds that
otherwise would be allowed to the Fund. In such a case, shareholders must
include in gross income (as interest) their proportionate share of the income
attributable to their proportionate share of those offsetting tax credits. A
shareholder’s ability to claim a tax credit associated with one or more tax
credit bonds may be subject to certain limitations imposed by the Code. (Under
the Tax Cuts and Jobs Act, build America bonds, clean renewable energy bonds and
certain other qualified bonds may no longer be issued after December 31, 2017.)
Even if the Fund is eligible to pass-through tax credits to shareholders, the
Fund may choose not to do so.
U.S.
government
interest. Income earned on
certain U.S. government obligations is exempt from state and local personal
income taxes if earned directly by you. States also grant tax-free status to
dividends paid to you from interest earned on direct obligations of the U.S.
government, subject in some states to minimum investment or reporting
requirements that must be met by the Fund. Income on investments by the Fund in
56
certain
other obligations, such as repurchase agreements collateralized by U.S.
government
obligations, commercial paper and federal agency-backed obligations (e.g., GNMA
or FNMA obligations), generally does not qualify for tax-free treatment. The
rules on exclusion of this income are different for corporations.
Dividends
declared in December and paid in January. Ordinarily,
shareholders are required to take distributions by the Fund into account in the
year in which the distributions are made. However, dividends declared in
October, November or December of any year and payable to shareholders of record
on a specified date in such a month will be deemed to have been received by the
shareholders (and made by the Fund) on December 31 of such calendar year if such
dividends are actually paid in January of the following year. Shareholders will
be advised annually as to the U.S. federal income tax consequences of
distributions made (or deemed made) during the year in accordance with the
guidance that has been provided by the IRS.
Medicare
tax. A
3.8% Medicare tax is imposed on net investment income earned by certain
individuals, estates and trusts. “Net investment income,” for these purposes,
means investment income, including ordinary dividends and capital gain
distributions received from the Fund and net gains from redemptions or other
taxable dispositions of Fund shares, reduced by the deductions properly
allocable to such income. In the case of an individual, the tax will be
imposed on the lesser of (1) the shareholder’s net investment income or (2) the
amount by which the shareholder’s modified adjusted gross income exceeds
$250,000 (if the shareholder is married and filing jointly or a surviving
spouse), $125,000 (if the shareholder is married and filing separately) or
$200,000 (in any other case). This Medicare tax, if applicable, is
reported by you on, and paid with, your federal income tax return. Net
investment income does not include exempt-interest dividends.
Tax
Treatment of Portfolio Transactions. Set forth below is
a general description of the tax treatment of certain types of securities,
investment techniques and transactions that may apply to a fund. This section
should be read in conjunction with the discussion under “Description of the
Funds and their Investments and Risks — Investment Strategies and Risks” for a
detailed description of the various types of securities and investment
techniques that apply to the Fund.
In
general. In general, gain
or loss recognized by a fund on the sale or other disposition of portfolio
investments will be a capital gain or loss. Such capital gain and loss may be
long-term or short-term depending, in general, upon the length of time a
particular investment position is maintained and, in some cases, upon the nature
of the transaction. Property held for more than one year generally will be
eligible for long-term capital gain or loss treatment. The application of
certain rules described below may serve to alter the manner in which the holding
period for a security is determined or may otherwise affect the characterization
as long-term or short-term, and also the timing of the realization and/or
character, of certain gains or losses.
Certain
fixed-income investments. Gain recognized on
the disposition of a debt obligation purchased by a fund at a market discount
(generally, at a price less than its principal amount) will be treated as
ordinary income to the extent of the portion of the market discount that accrued
during the period of time the fund held the debt obligation unless the fund made
a current inclusion election to accrue market discount into income as it
accrues. If a fund purchases a debt obligation (such as a zero coupon security
or pay-in-kind security) that was originally issued at a discount, the fund
generally is required to include in gross income each year the portion of the
original issue discount that accrues during such year. Therefore, a fund’s
investment in such securities may cause the fund to recognize income and make
distributions to shareholders before it receives any cash payments on the
securities. To generate cash to satisfy those distribution requirements, a fund
may have to sell portfolio securities that it otherwise might have continued to
hold or to use cash flows from other sources such as the sale of fund
shares.
Investments
in debt obligations that are at risk of or in default present tax issues for a
fund.
Tax rules are not entirely clear about issues such as whether and to what extent
a fund should recognize market discount on a debt obligation, when a fund may
cease to accrue interest, original issue discount or market discount, when and
to what extent a fund may take deductions for bad debts or worthless securities
and how a fund should allocate payments received on obligations in default
between principal and income. These and other related issues will be addressed
by a fund in order to ensure that it distributes sufficient income to preserve
its status as a regulated investment company.
57
Options,
futures, forward contracts, swap agreements and hedging
transactions. In general, option
premiums received by a fund are not immediately included in the income of the
fund. Instead, the premiums are recognized when the option contract expires, the
option is exercised by the holder, or the fund transfers or otherwise terminates
the option (e.g., through a closing transaction). If an option written by a fund
is exercised and the fund sells or delivers the underlying stock, the fund
generally will recognize capital gain or loss equal to (a) the sum of the strike
price and the option premium received by the fund minus (b) the fund’s basis in
the stock. Such gain or loss generally will be short-term or long-term depending
upon the holding period of the underlying stock. If securities are purchased by
a fund pursuant to the exercise of a put option written by it, the fund
generally will subtract the premium received from its cost basis in the
securities purchased. The gain or loss with respect to any termination of a
fund’s obligation under an option other than through the exercise of the option
and related sale or delivery of the underlying stock generally will be
short-term gain or loss depending on whether the premium income received by the
fund is greater or less than the amount paid by the fund (if any) in terminating
the transaction. Thus, for example, if an option written by a fund expires
unexercised, the fund generally will recognize short-term gain equal to the
premium received.
The
tax treatment of certain futures contracts entered into by a fund as well as
listed non-equity options written or
purchased by the fund on U.S. exchanges (including options on futures contracts,
broad-based equity indices and debt securities) may be governed by section 1256
of the Code (section 1256 contracts). Gains or losses on section 1256 contracts
generally are considered 60% long-term and 40% short-term capital gains or
losses (60/40), although certain foreign currency gains and losses from such
contracts may be treated as ordinary in character. Also, any section 1256
contracts held by a fund at the end of each taxable year (and, for purposes of
the 4% excise tax, on certain other dates as prescribed under the Code) are
“marked-to-market” with the result that unrealized gains or losses are treated
as though they were realized and the resulting gain or loss is treated as
ordinary or 60/40 gain or loss, as applicable. Section 1256 contracts do not
include any interest rate swap, currency swap, basis swap, interest rate cap,
interest rate floor, commodity swap, equity swap, equity index swap, credit
default swap or similar agreement.
In
addition to the special rules described above in respect of options and futures
transactions, a fund’s transactions in
other derivative instruments (including options, forward contracts and swap
agreements) as well as its other hedging, short sale, or similar transactions,
may be subject to one or more special tax rules (including the constructive
sale, notional principal contract, straddle, wash sale and short sale rules).
These rules may affect whether gains and losses recognized by a fund are treated
as ordinary or capital or as short-term or long-term, accelerate the recognition
of income or gains to the fund, defer losses to the fund, and cause adjustments
in the holding periods of the fund’s securities. These rules, therefore, could
affect the amount, timing and/or character of distributions to shareholders.
Moreover, because the tax rules applicable to derivative financial instruments
are in some cases uncertain under current law, an adverse determination or
future guidance by the IRS with respect to these rules (which determination or
guidance could be retroactive) may affect whether a fund has made sufficient
distributions and otherwise satisfied the relevant requirements to maintain its
qualification as a regulated investment company and avoid a fund-level
tax.
Certain
of a fund’s investments in derivatives and foreign currency-denominated
instruments, and the fund’s transactions
in foreign currencies and hedging activities, may produce a difference between
its book income and its taxable income. If a fund’s book income is less than the
sum of its taxable income and net tax-exempt income (if any), the fund could be
required to make distributions exceeding book income to qualify as a regulated
investment company. If a fund’s book income exceeds the sum of its taxable
income and net tax-exempt income (if any), the distribution of any such excess
will be treated as (i) a dividend to the extent of the fund’s remaining earnings
and profits (including current earnings and profits arising from tax-exempt
income, reduced by related deductions), (ii) thereafter, as a return of capital
to the extent of the recipient’s basis in the shares, and (iii) thereafter, as
gain from the sale or exchange of a capital asset.
Foreign
currency transactions. A fund’s
transactions in foreign currencies, foreign currency-denominated debt
obligations and certain foreign currency options, futures contracts and forward
contracts (and similar instruments) may give rise to ordinary income or loss to
the extent such income or loss results from fluctuations in the value of the
foreign currency concerned. This treatment could increase or decrease a fund’s
58
ordinary
income distributions to you, and may cause some or all of the fund’s previously
distributed income to be classified as a
return of capital. In certain cases, a fund may make an election to treat such
gain or loss as capital.
PFIC
investments. A fund may invest
in securities of foreign companies that may be classified under the Code as
PFICs. In general, a foreign company is classified as a PFIC if at least
one-half of its assets constitute investment-type assets or 75% or more of its
gross income is investment-type income. When investing in PFIC securities, a
fund intends to mark-to-market these securities under certain provisions of the
Code and recognize any unrealized gains as ordinary income at the end of the
fund’s fiscal and excise tax years. Deductions for losses are allowable only to
the extent of any current or previously recognized gains. These gains (reduced
by allowable losses) are treated as ordinary income that a fund is required to
distribute, even though it has not sold or received dividends from these
securities. You should also be aware that the designation of a foreign security
as a PFIC security will cause its income dividends to fall outside of the
definition of qualified foreign corporation dividends. These dividends generally
will not qualify for the reduced rate of taxation on qualified dividends when
distributed to you by a fund. Foreign companies are not required to identify
themselves as PFICs. Due to various complexities in identifying PFICs, a fund
can give no assurances that it will be able to identify portfolio securities in
foreign corporations that are PFICs in time for the fund to make a
mark-to-market election. If a fund is unable to identify an investment as a PFIC
and thus does not make a mark-to-market election, the fund may be subject to
U.S. federal income tax on a portion of any “excess distribution” or gain from
the disposition of such shares even if such income is distributed as a taxable
dividend by the fund to its shareholders. Additional charges in the nature of
interest may be imposed on a fund in respect of deferred taxes arising from such
distributions or gains.
Investments
in non-U.S. REITs. While non-U.S.
REITs often use complex acquisition structures that seek to minimize taxation in
the source country, an investment by a fund in a non-U.S. REIT may subject the
fund, directly or indirectly, to corporate taxes, withholding taxes, transfer
taxes and other indirect taxes in the country in which the real estate acquired
by the non-U.S. REIT is located. The fund's pro rata share of any such taxes
will reduce the fund's return on its investment. A fund's investment in a
non-U.S. REIT may be considered an investment in a PFIC, as discussed
above in “Tax Treatment of Portfolio Transactions – PFIC
investments.” Additionally, foreign withholding taxes on distributions from the
non-U.S. REIT may be reduced or eliminated under certain tax treaties, as
discussed above in “Taxation of the Fund – Foreign income tax.” Also, the fund
in certain limited circumstances may be required to file an income tax return in
the source country and pay tax on any gain realized from its investment in the
non-U.S. REIT under rules similar to those in the United States which tax
foreign persons on gain realized from dispositions of interests in U.S. real
estate.
Investments
in U.S. REITs. A U.S. REIT is not
subject to federal income tax on the income and gains it distributes to
shareholders. Dividends paid by a U.S. REIT, other than capital gain
distributions, will be taxable as ordinary income up to the amount of the U.S.
REIT’s current and accumulated earnings and profits. Capital gain dividends paid
by a U.S. REIT to a fund will be treated as long-term capital gains by the fund
and, in turn, may be distributed by the fund to its shareholders as a capital
gain distribution. Because of certain noncash expenses, such as property
depreciation, an equity U.S. REIT’s cash flow may exceed its taxable
income. The equity U.S. REIT, and in turn a fund, may distribute this
excess cash to shareholders in the form of a return of capital distribution.
However, if a U.S. REIT is operated in a manner that fails to qualify as a REIT,
an investment in the U.S. REIT would become subject to double taxation, meaning
the taxable income of the U.S. REIT would be subject to federal income tax at
the corporate income tax rate without any deduction for dividends paid to
shareholders and the dividends would be taxable to shareholders as ordinary
income (or possibly as qualified dividend income) to the extent of the U.S.
REIT’s current and accumulated earnings and profits. Also, see “Tax Treatment of
Portfolio Transactions — Investment in taxable mortgage pools (excess inclusion
income)” and “Foreign Shareholders — U.S. withholding tax at the source” with
respect to certain other tax aspects of investing in U.S. REITs.
Investment
in taxable mortgage pools (excess inclusion income). Under a Notice
issued by the IRS, the Code and Treasury regulations to be issued, a portion of
a fund’s income from a U.S. REIT that is attributable to the REIT’s residual
interest in a real estate mortgage investment conduit (REMIC) or equity
interests in a
59
“taxable
mortgage pool” (referred to in the Code as an excess inclusion) will be subject
to federal income tax in all events. The
excess inclusion income of a regulated investment company, such as a fund, will
be allocated to shareholders of the regulated investment company in proportion
to the dividends received by such shareholders, with the same consequences as if
the shareholders held the related REMIC residual interest or, if applicable,
taxable mortgage pool directly. In general, excess inclusion income allocated to
shareholders (i) cannot be offset by net operating losses (subject to a limited
exception for certain thrift institutions), (ii) will constitute unrelated
business taxable income (UBTI) to entities (including qualified pension plans,
individual retirement accounts, 401(k) plans, Keogh plans or other tax-exempt
entities) subject to tax on UBTI, thereby potentially requiring such an entity
that is allocated excess inclusion income, and otherwise might not be required
to file a tax return, to file a tax return and pay tax on such income, and (iii)
in the case of a foreign stockholder, will not qualify for any reduction in U.S.
federal withholding tax. In addition, if at any time during any taxable year a
“disqualified organization” (which generally includes certain cooperatives,
governmental entities, and tax-exempt organizations not subject to tax on UBTI)
is a record holder of a share in a regulated investment company, then the
regulated investment company will be subject to a tax equal to that portion of
its excess inclusion income for the taxable year that is allocable to the
disqualified organization, multiplied by the corporate income tax rate. The
Notice imposes certain reporting requirements upon regulated investment
companies that have excess inclusion income. There can be no assurance
that a fund will not allocate to shareholders excess inclusion
income.
These
rules are potentially applicable to a fund with respect to any income it
receives from the equity interests of
certain mortgage pooling vehicles, either directly or, as is more likely,
through an investment in a U.S. REIT. It is unlikely that these rules will
apply to a fund that has a non-REIT strategy.
Investments
in partnerships and QPTPs. For purposes of
the Income Requirement, income derived by a fund from a partnership that is not
a QPTP will be treated as qualifying income only to the extent such income is
attributable to items of income of the partnership that would be qualifying
income if realized directly by the fund. While the rules are not entirely clear
with respect to a fund investing in a partnership outside a master-feeder
structure, for purposes of testing whether a fund satisfies the Asset
Diversification Test, the fund generally is treated as owning a pro rata share
of the underlying assets of a partnership. See “Taxation of the Fund —
Qualification as a regulated investment company.” In contrast, different rules
apply to a partnership that is a QPTP. A QPTP is a partnership (a) the interests
in which are traded on an established securities market, (b) that is treated as
a partnership for federal income tax purposes, and (c) that derives less than
90% of its income from sources that satisfy the Income Requirement (e.g.,
because it invests in commodities). All of the net income derived by a fund from
an interest in a QPTP will be treated as qualifying income but the fund may not
invest more than 25% of its total assets in one or more QPTPs. However, there
can be no assurance that a partnership classified as a QPTP in one year will
qualify as a QPTP in the next year. Any such failure to annually qualify as a
QPTP might, in turn, cause a fund to fail to qualify as a regulated investment
company. Although, in general, the passive loss rules of the Code do not apply
to RICs, such rules do apply to a fund with respect to items attributable to an
interest in a QPTP. Fund investments in partnerships, including in QPTPs, may
result in the fund being subject to state, local or foreign income, franchise or
withholding tax liabilities.
If
an MLP is treated as a partnership for U.S. federal income tax purposes (whether
or not a QPTP), all or portion of the
dividends received by a fund from the MLP likely will be treated as a return of
capital for U.S. federal income tax purposes because of accelerated deductions
available with respect to the activities of such MLPs. Further, because of these
accelerated deductions, on the disposition of interests in such an MLP, a fund
likely will realize taxable income in excess of economic gain with respect to
those MLP interests (or if the fund does not dispose of the MLP, the fund could
realize taxable income in excess of cash flow with respect to the MLP in a later
period), and the fund must take such income into account in determining whether
the fund has satisfied its Distribution Requirement. A fund may have to borrow
or liquidate securities to satisfy its Distribution Requirement and to meet its
redemption requests, even though investment considerations might otherwise make
it undesirable for the fund to sell securities or borrow money at such time. In
addition, any gain recognized, either upon the sale of a fund’s MLP interest or
sale by the MLP of property held by it, including in excess of economic gain
thereon, treated as so-called “recapture income,” will be treated as
60
ordinary
income. Therefore, to the extent a fund invests in MLPs, fund shareholders might
receive greater amounts of
distributions from the fund taxable as ordinary income than they otherwise would
in the absence of such MLP investments.
Although
MLPs are generally expected to be treated as partnerships for U.S. federal
income tax purposes, some MLPs
may be treated as PFICs or “regular” corporations for U.S. federal income tax
purposes. The treatment of particular MLPs for U.S. federal income tax purposes
will affect the extent to which a fund can invest in MLPs and will impact the
amount, character, and timing of income recognized by the Fund.
Investments
in commodities ― structured notes, corporate subsidiary and certain
ETFs.
Gains from the disposition of commodities, including precious metals, will
neither be considered qualifying income for purposes of satisfying the Income
Requirement nor qualifying assets for purposes of satisfying the Asset
Diversification Test. See “Taxation of the Fund — Qualification as a regulated
investment company.” Also, the IRS has issued a revenue ruling which holds that
income derived from commodity-linked swaps is not qualifying income for purposes
of the Income Requirement. In a subsequent revenue ruling, as well as in a
number of follow-on private letter rulings (upon which only the fund that
received the private letter ruling may rely), the IRS provides that income from
certain alternative investments which create commodity exposure, such as certain
commodity-linked or structured notes or a corporate subsidiary that invests in
commodities, may be considered qualifying income under the Code.
However, the
portion of such rulings relating to the treatment of a corporation as a
regulated investment company that require a determination of whether a financial
instrument or position is a security under section 2(a)(36) of the 1940 Act was
revoked because of changes in the IRS’s position. (A financial instrument or
position that constitutes a security under section 2(a)(36) of the 1940 Act
generates qualifying income for a corporation taxed as a regulated investment
company.) Accordingly, a fund may invest in certain commodity-linked notes
relying on an opinion of counsel confirming that income from such investments
should be qualifying income because such commodity-linked notes constitute
securities under section 2(a)(36) of the 1940 Act. In addition, a RIC may gain
exposure to commodities through investment in a QPTP, such as an exchange-traded
fund or ETF that is classified as a partnership and which invests in
commodities, or through investment in a wholly-owned foreign subsidiary that is
treated as a controlled foreign corporation for federal income tax purposes.
Treasury regulations treat “Subpart F” income (defined in Section 951 of the
Code to include passive income such as income from commodity-linked derivatives)
as qualifying income, even if a foreign corporation, such as a wholly-owned
foreign subsidiary, does not make a distribution of such income. If a
distribution is made, such income will be treated as a dividend by the Funds to
the extent that, under applicable provisions of the Code, there is a
distribution out of the earnings and profits of the foreign corporation
attributable to the distribution. Accordingly, the extent to which a fund
directly invests in commodities or commodity-linked derivatives may be limited
by the Income Requirement and the Asset Diversification Test, which the fund
must continue to satisfy to maintain its status as a regulated investment
company. A fund also may be limited in its ability to sell its investments in
commodities, commodity-linked derivatives, and certain ETFs or be forced to sell
other investments to generate income due to the Income Requirement. If a fund
does not appropriately limit such investments or if such investments (or the
income earned on such investments) were to be recharacterized for U.S. tax
purposes, the fund could fail to qualify as a regulated investment company. In
lieu of potential disqualification, a fund is permitted to pay a tax for certain
failures to satisfy the Asset Diversification Test or Income Requirement, which,
in general, are limited to those due to reasonable cause and not willful
neglect.
Securities
lending. While securities
are loaned out by a fund, the fund generally will receive from the borrower
amounts equal to any dividends or interest paid on the borrowed securities. For
federal income tax purposes, payments made “in lieu of” dividends are not
considered dividend income. These distributions will neither qualify for the
reduced rate of taxation for individuals on qualified dividends nor the 50%
dividends-received deduction for corporations. Also, any foreign tax withheld on
payments made “in lieu of” dividends or interest will not qualify for the
pass-through of foreign tax credits to shareholders. Additionally, in the case
of a fund with a strategy of investing in tax-exempt securities, any payments
made “in lieu of” tax-exempt interest
61
will
be considered taxable income to the fund, and thus, to the investors, even
though such interest may be tax-exempt when
paid to the borrower.
Investments
in convertible securities. Convertible debt
is ordinarily treated as a “single property” consisting of a pure debt interest
until conversion, after which the investment becomes an equity interest. If the
security is issued at a premium (i.e., for cash in excess of the face amount
payable on retirement), the creditor-holder may amortize the premium over the
life of the bond. If the security is issued for cash at a price below its face
amount, the creditor-holder must accrue original issue discount in income over
the life of the debt. The creditor-holder’s exercise of the conversion privilege
is treated as a nontaxable event. Mandatorily convertible debt (e.g., an
exchange-traded note or ETN issued in the form of an unsecured obligation that
pays a return based on the performance of a specified market index, exchange
currency, or commodity) is often, but not always, treated as a contract to buy
or sell the reference property rather than debt. Similarly, convertible
preferred stock with a mandatory conversion feature is ordinarily, but not
always, treated as equity rather than debt. Dividends received may be qualified
dividend income and eligible for the corporate dividends-received deduction. In
general, conversion of preferred stock for common stock of the same corporation
is tax-free. Conversion of preferred stock for cash is a taxable redemption. Any
redemption premium for preferred stock that is redeemable by the issuing company
might be required to be amortized under original issue discount principles. A
change in the conversion ratio or conversion price of a convertible security on
account of a dividend paid to the issuer’s other shareholders may result in a
deemed distribution of stock to the holders of the convertible security equal to
the value of their increased interest in the equity of the issuer. Thus, an
increase in the conversion ratio of a convertible security can be treated as a
taxable distribution of stock to a holder of the convertible security (without a
corresponding receipt of cash by the holder) before the holder has converted the
security.
Tax
Certification and Backup Withholding. Tax certification
and backup withholding tax laws may require that you certify your tax
information when you become an investor in the Fund. For U.S. citizens and
resident aliens, this certification is made on IRS Form W-9. Under these laws,
the Fund must withhold a portion of your taxable distributions and sales
proceeds unless you:
•
provide your
correct Social Security or taxpayer identification number;
•
certify that this
number is correct;
•
certify that you
are not subject to backup withholding; and
•
certify that you
are a U.S. person (including a U.S. resident alien).
The
Fund also must withhold if the IRS instructs it to do so. When withholding is
required, the amount will be 24% of any
distributions or proceeds paid. Backup withholding is not an additional tax. Any
amounts withheld may be credited against the shareholder’s U.S. federal income
tax liability, provided the appropriate information is furnished to the IRS.
Certain payees and payments are exempt from backup withholding and information
reporting.
Non-U.S.
investors have special U.S. tax certification requirements. See “Foreign
Shareholders — Tax certification and
backup withholding.”
Foreign
Shareholders. Shareholders who,
as to the United States, are nonresident alien individuals, foreign trusts or
estates, foreign corporations, or foreign partnerships (foreign shareholder),
may be subject to U.S. withholding and estate tax and are subject to special
U.S. tax certification requirements.
Taxation
of a foreign shareholder depends on whether the income from the Fund is
“effectively connected” with a U.S. trade
or business carried on by such shareholder.
U.S.
withholding tax at the source. If the income from
the Fund is not effectively connected with a U.S. trade or business carried on
by a foreign shareholder, distributions to such shareholder will be subject to
U.S. withholding tax at the rate of 30% (or lower treaty rate) upon the gross
amount of the distribution, subject to certain exemptions including those for
dividends reported by the Fund to shareholders as:
62
•
exempt-interest
dividends paid by the Fund from its net interest income earned on municipal
securities;
•
capital gain
dividends paid by the Fund from its net long-term capital gains (other than
those from disposition of a U.S. real property interest), unless you are a
nonresident alien present in the United States for a period or periods
aggregating 183 days or more during the calendar year; and
•
interest-related
dividends paid by the Fund from its qualified net interest income from U.S.
sources and short-term capital gain dividends.
However,
the Fund (with the possible exception of Invesco Premier U.S. Government
Money Portfolio) does not intend to
utilize the exemptions for interest-related dividends paid and short-term
capital gain dividends paid. Moreover, notwithstanding such exemptions from U.S.
withholding at the source, any dividends and distributions of income and capital
gains, including the proceeds from the sale of your Fund shares, will be subject
to backup withholding at a rate of 24% if you fail to properly certify that you
are not a U.S. person.
Foreign
shareholders may be subject to U.S. withholding tax at a rate of 30% on the
income resulting from an election to
pass-through foreign tax credits to shareholders, but may not be able to claim a
credit or deduction with respect to the withholding tax for the foreign tax
treated as having been paid by them.
Amounts
reported by the Fund to shareholders as capital gain dividends (a) that are
attributable to certain capital gain
dividends received from a qualified investment entity (QIE) (generally defined
as either (i) a U.S. REIT or (ii) a RIC classified as a “U.S. real property
holding corporation” or which would be if the exceptions for holding 5% or less
of a class of publicly traded shares or an interest in a domestically controlled
QIE did not apply), or (b) that are realized by the Fund on the sale of a “U.S.
real property interest” (including gain realized on the sale of shares in a QIE
other than one that is domestically controlled), will not be exempt from U.S.
federal income tax and may be subject to U.S. withholding tax at the rate of 30%
(or lower treaty rate) if the Fund by reason of having a REIT strategy is
classified as a QIE. If the Fund is so classified, foreign shareholders owning
more than 5% of the Fund’s shares may be treated as realizing gain from the
disposition of a U.S. real property interest, causing Fund distributions to be
subject to U.S. withholding tax at the corporate income tax rate, and requiring
the filing of a nonresident U.S. income tax return. In addition, if the Fund is
classified as a QIE, anti-avoidance rules apply to certain wash sale
transactions. Namely, if the Fund is a domestically controlled QIE and a foreign
shareholder disposes of the Fund’s shares prior to the Fund paying a
distribution attributable to the disposition of a U.S. real property interest
and the foreign shareholder later acquires an identical stock interest in a wash
sale transaction, the foreign shareholder may still be required to pay U.S. tax
on the Fund’s distribution. Also, the sale of shares of the Fund, if classified
as a “U.S. real property holding corporation,” could also be considered a sale
of a U.S. real property interest with any resulting gain from such sale being
subject to U.S. tax as income “effectively connected with a U.S. trade or
business.”
Income
effectively connected with a U.S. trade or business. If the income from
the Fund is effectively connected with a U.S. trade or business carried on by a
foreign shareholder, then ordinary income dividends, capital gain dividends and
any gains realized upon the sale or redemption of shares of the Fund will be
subject to U.S. federal income tax at the rates applicable to U.S. citizens or
domestic corporations and require the filing of a nonresident U.S. income tax
return.
Tax
certification and backup withholding. Foreign
shareholders may have special U.S. tax certification requirements to avoid
backup withholding (at a rate of 24%) and, if applicable, to obtain the benefit
of any income tax treaty between the foreign shareholder’s country of residence
and the United States. To claim these tax benefits, the foreign shareholder must
provide a properly completed Form W-8BEN (or other Form W-8, where applicable,
or their substitute forms) to establish his or her status as a non-U.S.
investor, to claim beneficial ownership over the assets in the account, and to
claim, if applicable, a reduced rate of or exemption from withholding tax under
the applicable treaty. A Form W-8BEN provided without a U.S. taxpayer
identification number remains in effect for a period of three years beginning on
the date that it is signed and ending on the last day of the third succeeding
calendar year. However, non-U.S. investors must advise the
63
Fund
of any changes of circumstances that would render the information given on the
form incorrect, and must then provide a
new W-8BEN to avoid the prospective application of backup withholding. Forms
W-8BEN with U.S. taxpayer identification numbers remain valid indefinitely, or
until the investor has a change of circumstances that renders the form incorrect
and necessitates a new form and tax certification. Certain payees and payments
are exempt from backup withholding.
Foreign
Account Tax Compliance Act (FATCA). Under FATCA, the
Fund will be required to withhold a 30% tax on income dividends made by the Fund
to certain foreign entities, referred to as foreign financial institutions (FFI)
or non-financial foreign entities (NFFE). After December 31, 2018, FATCA
withholding also would have applied to certain capital gain distributions,
return of capital distributions and the proceeds arising from the sale of Fund
shares; however, based on proposed regulations issued by the IRS, which can be
relied upon currently, such withholding is no longer required unless final
regulations provide otherwise (which is not expected). The FATCA withholding tax
generally can be avoided: (a) by an FFI, if it reports certain direct and
indirect ownership of foreign financial accounts held by U.S. persons with the
FFI and (b) by an NFFE, if it: (i) certifies that it has no substantial U.S.
persons as owners or (ii) if it does have such owners, reporting information
relating to them. The U.S. Treasury has negotiated intergovernmental agreements
(IGA) with certain countries and is in various stages of negotiations with a
number of other foreign countries with respect to one or more alternative
approaches to implement FATCA.
An
FFI can avoid FATCA withholding if it is deemed compliant or by becoming a
“participating FFI,” which requires the FFI to
enter into a U.S. tax compliance agreement with the IRS under section 1471(b) of
the Code (FFI agreement) under which it agrees to verify, report and disclose
certain of its U.S. accountholders and meet certain other specified
requirements. The FFI will either report the specified information about the
U.S. accounts to the IRS, or, to the government of the FFI’s country of
residence (pursuant to the terms and conditions of applicable law and an
applicable IGA entered into between the U.S. and the FFI’s country of
residence), which will, in turn, report the specified information to the IRS. An
FFI that is resident in a country that has entered into an IGA with the U.S. to
implement FATCA will be exempt from FATCA withholding provided that the FFI
shareholder and the applicable foreign government comply with the terms of such
agreement.
An
NFFE that is the beneficial owner of a payment from the Fund can avoid the FATCA
withholding tax generally by
certifying that it does not have any substantial U.S. owners or by providing the
name, address and taxpayer identification number of each substantial U.S. owner.
The NFFE will report the information to the Fund or other applicable withholding
agent, which will, in turn, report the information to the IRS.
Such
foreign shareholders also may fall into certain exempt, excepted or deemed
compliant categories as established by U.S.
Treasury regulations, IGAs, and other guidance regarding FATCA. An FFI or NFFE
that invests in the Fund will need to provide the Fund with documentation
properly certifying the entity’s status under FATCA in order to avoid FATCA
withholding. Non-U.S. investors should consult their own tax advisors regarding
the impact of these requirements on their investment in the Fund. The
requirements imposed by FATCA are different from, and in addition to, the U.S.
tax certification rules to avoid backup withholding described above.
Shareholders are urged to consult their tax advisors regarding the application
of these requirements to their own situation.
U.S.
estate tax. Transfers by gift
of shares of the Fund by a foreign shareholder who is a nonresident alien
individual will not be subject to U.S. federal gift tax. An individual who, at
the time of death, is a foreign shareholder will nevertheless be subject to U.S.
federal estate tax with respect to shares at the graduated rates applicable to
U.S. citizens and residents, unless a treaty exemption applies. If a treaty
exemption is available, a decedent’s estate may nonetheless need to file a U.S.
estate tax return to claim the exemption in order to obtain a U.S. federal
transfer certificate. The transfer certificate will identify the property (i.e.,
Fund shares) as to which the U.S. federal estate tax lien has been released. In
the absence of a treaty, there is a $13,000 statutory estate tax credit
(equivalent to an estate with assets of $60,000).
Local
Tax Considerations. Rules of state and
local taxation of ordinary income, qualified dividend income and capital gain
dividends may differ from the rules for U.S. federal income taxation described
above.
64
Distributions
may also be subject to additional state, local and foreign taxes depending on
each shareholder’s particular
situation.
DISTRIBUTION
OF SECURITIES
Distribution
Plan
Personal
Investment Class, Private Investment Class, Reserve Class and Resource
Class
The
Trust has adopted a distribution plan pursuant to Rule 12b-1 under the 1940 Act
with respect to Invesco Premier
Portfolio’s Personal Investment Class, Private Investment Class, Reserve Class
and Resource Class shares (the Plan).
The
following Fund, pursuant to its Compensation Plan, pays Invesco Distributors
compensation at the annual rate, shown
immediately below, of the Fund’s average daily net assets of the applicable
class.
|
Fund |
Personal
Investment
Class |
Private
Investment
Class |
Reserve
Class |
Resource
Class |
|
Invesco
Premier Portfolio |
0.55% |
0.30% |
0.87% |
0.16% |
|
|
|
|
|
|
The
Compensation Plan compensates Invesco Distributors for expenses incurred for the
purpose of financing any
activity that is primarily intended to result in the sale of shares of the Fund.
Such activities may include, but are not limited to, the following: printing and
distributing prospectuses and reports used for sales purposes, preparing and
distributing sales literature (and any related services), advertisements,
payment of dealer commissions and wholesaler compensation in connection with
sales of certain Fund shares exceeding a certain amount set forth in the
prospectus for such Fund (for which the Fund imposes no sales charge) and other
distribution-related services permitted by Rule 12b-1.
Payments
pursuant to the Plan are subject to any applicable limitations imposed by FINRA
rules.
See
Appendix K for a list of the amounts paid by Invesco Premier Portfolio’s –
Personal Investment Class, Private Investment
Class, Reserve Class and Resource Class shares pursuant to its distribution plan
for the fiscal year ended August 31, 2022 and Appendix L for an estimate by
category of the allocation of actual fees paid by shares of Invesco Premier
Portfolio’s Personal Investment Class and Private Investment Class shares
pursuant to its distribution plan for the fiscal year ended August 31,
2022.
As
required by Rule 12b-1, the Plan was approved by a majority of the Board,
including a majority of the trustees who are
not “interested persons” (as defined in the 1940 Act) of the Trust and who have
no direct or indirect financial interest in the operation of the Plan or in any
agreements related to the Plan (the Rule 12b-1 Trustees). In approving the Plan
in accordance with the requirements of Rule 12b-1, the trustees considered
various factors and determined that there is a reasonable likelihood that the
Plan would benefit each class of the Fund and its respective
shareholders.
The
anticipated benefits that may result from the Plan with respect to the Fund
and/or the classes of the Fund and its
shareholders include but are not limited to the following: (i) an increase in
assets which may result in a diversified shareholder base, thereby reducing the
outflow risk to other shareholders in the Fund; (ii) an increase in assets which
may reduce expenses as fixed dollar costs are allocated across a larger asset
base and/or allow a Fund to reach advisory fee breakpoints; and (iii) increased
scale could increase the likelihood of name recognition and the profile of a
Fund in its asset space, thereby improving the momentum for asset
generation.
Unless
terminated earlier in accordance with their terms, the Plan continues from year
to year as long as such continuance is
specifically approved, at least annually by the Board, including a majority of
the Rule 12b-1 Trustees. A Plan may be terminated at any time in whole or, with
respect to a particular Fund or class, by the vote of a majority of the Rule
12b-1 Trustees or by the vote of a majority of outstanding voting securities of
that class.
65
Any
amendment to the Plan that would increase materially the distribution expenses
paid by the applicable class
requires shareholder approval; otherwise, the Plan may be amended by the
trustees, including a majority of the Rule 12b-1 Trustees, by votes cast at a
meeting called for the purpose of voting upon such amendment. As long as the
Plan is in effect, the Board shall satisfy the fund governance standards as
defined in Rule 0-1(a)(7) under the 1940 Act.
The
Compensation Plan obligates the Fund to pay Invesco Distributors the full amount
of the distribution and service fees
reflected on the schedules to the plan. Thus, even if Invesco Distributors’
actual allocated share of expenses exceeds the fee payable to Invesco
Distributors at any given time, under the Compensation Plan, the Fund will not
be obligated to pay more than that fee. If Invesco Distributors’ actual
allocated share of expenses is less than the fee it receives, under the
Compensation Plan, Invesco Distributors will retain the full amount of the
fee.
Invesco
Distributors may from time to time waive or reduce any portion of its 12b-1 fee.
Voluntary fee waivers or
reductions may be rescinded at any time without further notice to investors.
During periods of voluntary fee waivers or reductions, Invesco Distributors will
retain its ability to be reimbursed for such fee prior to the end of each fiscal
year.
The
Fund may pay a service fee of up to the cap disclosed in the Fund’s Plan
attributable to the customers’ selected
dealers and financial institutions to such dealers and financial institutions,
including Invesco Distributors, acting as principal, who furnish continuing
personal shareholder services and/or maintenance of accounts to their customers
who purchase and own the applicable class of shares of the Fund. Under the terms
of a shareholder service agreement, such personal shareholder services and/or
maintenance of accounts may include, but are not limited to, assisting in
establishing and maintaining customer accounts and records, assisting with
purchase and redemption requests, arranging for bank wires, monitoring dividend
payments from a Fund on behalf of customers, forwarding certain shareholder
communications from a Fund to customers, receiving and answering correspondence,
aiding in maintaining the investment of their respective customers in a Fund and
providing such other information and services as reasonably requested. Any
amounts not paid as a service fee under each Plan would constitute an
asset-based sales charge.
The
Fund may agree to pay fees to selected dealers and other institutions who render
the foregoing services to their
customers subject to an agreement. Fees shall be paid only to those selected
dealers or other institutions who are dealers or institutions of record at the
close of business on the last business day of the applicable payment period for
the account in which the Fund’s shares are held.
Selected
dealers and other institutions entitled to receive compensation for selling Fund
shares may receive different
compensation for selling shares of one particular class over another. Under the
Plan, certain financial institutions which have entered into service agreements
and which sell shares of the Fund, may receive payments from the Fund pursuant
to the Plan in an amount not to exceed the maximum annual rate to be paid to
Invesco Distributors under the Plan. These payments are an obligation of the
Fund and not of Invesco Distributors.
Invesco
Distributors has voluntarily undertaken to waive or reduce 12b-1 fees to the
extent necessary to assist the Funds in
attempting to maintain a positive yield. There is no guarantee that a Fund will
maintain a positive yield. That undertaking may be amended or rescinded at any
time.
Distributor
Investor
Class
The
Trust has entered into a master distribution agreement relating to the Funds
(the Distribution Agreement) with
Invesco Distributors, Inc., a registered broker-dealer and a wholly-owned
subsidiary of Invesco, pursuant to which Invesco Distributors acts as the
distributor of the Investor Class shares of the Funds. The address of Invesco
Distributors is 11 Greenway Plaza, Suite 1000, Houston, TX
77046-1173.
66
Certain
trustees and officers of the Trust are affiliated with Invesco Distributors. See
"Management of the Trust."
The
Distribution Agreement provides Invesco Distributors with the exclusive right to
distribute the shares of each class of
the Portfolios on a continuous basis directly and through other broker dealers
with whom Invesco Distributors has entered into selected dealer agreements.
Invesco Distributors has not undertaken to sell any specified number of shares
of Investor Class Shares of the Funds.
Institutional
Class
The
Trust or Invesco Distributors may terminate the Distribution Agreement on sixty
(60) days' written notice without
penalty. The Distribution Agreement will terminate automatically in the event of
its assignment.
The
Trust has entered into an underwriting agreement relating to the Funds (the
Underwriting Agreement) with Invesco
Distributors, a registered broker-dealer and a wholly-owned subsidiary of
Invesco, pursuant to which Invesco Distributors acts as the distributor of the
Institutional Class shares of the Funds. The address of Invesco Distributors is
11 Greenway Plaza, Suite 1000, Houston, TX 77046-1173. Mail addressed to Invesco
Distributors should be sent to P.O. Box 4497, Houston, TX 77210-4497. Certain
trustees and officers of the Trust are affiliated with Invesco Distributors. See
"Management of the Trust."
The
Underwriting Agreement provides Invesco Distributors with the right to
distribute the Institutional Class shares of the
Funds on a continuous basis directly and through other broker dealers. Invesco
Distributors has not undertaken to sell any specified number of Institutional
Class shares the Funds.
The
Trust (on behalf of the Funds) or Invesco Distributors may terminate the
Underwriting Agreement on 60 days' written
notice without penalty. The Underwriting Agreement will terminate automatically
in the event of its assignment.
Invesco
Distributors may, from time to time at its expense, pay a fee to broker-dealers,
banks or other financial
institutions for operations and/or marketing support, including support for
distribution programs or platforms. Such fees will not impose additional
expenses on a class, nor will they change the price paid by investors for the
purchase of the applicable classes' shares or the amount that any particular
class will receive as proceeds from such sales.
Personal
Investment Class, Private Investment Class, Reserve Class and Resource
Class
The
Trust has entered into a master distribution agreement relating to Invesco
Premier Portfolio (the Distribution
Agreement) with Invesco Distributors, Inc., a registered broker-dealer and a
wholly-owned subsidiary of Invesco, pursuant to which Invesco Distributors acts
as the distributor of each class of the Fund. The address of Invesco
Distributors is 11 Greenway Plaza, Suite 1000, Houston, TX 77046-1173. Certain
trustees and officers of the Trust are affiliated with Invesco Distributors. See
"Management of the Trust."
The
Distribution Agreement provides Invesco Distributors with the exclusive right to
distribute the shares of each class of
the Fund on a continuous basis directly and through other broker dealers with
whom Invesco Distributors has entered into selected dealer agreements. Invesco
Distributors has not undertaken to sell any specified number of shares of any
classes of the Fund. The Distribution Agreement also provides that Invesco
Distributors will pay promotional expenses, including the incremental costs of
printing prospectuses and statements of additional information, annual reports
and other periodic reports for distribution to persons who are not shareholders
of the Trust and the costs of preparing and distributing any other supplemental
sales literature.
The
Trust (on behalf of any class of the Fund) or Invesco Distributors may terminate
the Distribution Agreement on sixty
(60) days' written notice without penalty. The Distribution Agreement will
terminate automatically in the event of its assignment.
Invesco
Distributors may, from time to time at its expense, pay a fee to broker-dealers,
banks or other financial
institutions for operations and/or marketing support, including support for
distribution programs or platforms. Such fees will not impose additional
expenses on a class, nor will they change the price paid by
67
investors
for the purchase of the applicable classes' shares or the amount that any
particular class will receive as proceeds from
such sales.
FINANCIAL
STATEMENTS
The
audited financial statements for the Funds’ most recent fiscal year ended
August
31, 2022, including the
notes thereto and the reports of PricewaterhouseCoopers LLP thereon, are
incorporated by reference to the annual reports to shareholders contained in the
Funds’ Form N-CSR filed on November 4, 2022.
The
portions of such annual reports that are not specifically listed above are not
incorporated by reference into this
SAI and are not a part of this Registration Statement.
68
APPENDIX
A - RATINGS OF DEBT SECURITIES
The
following is a description of the factors underlying the debt ratings of
Moody's, S&P, and Fitch.
Moody's
Long-Term Debt Ratings
Aaa: Obligations rated
'Aaa' are judged to be of the highest quality, subject to the lowest level of
credit risk.
Aa: Obligations rated
'Aa' are judged to be of high quality and are subject to very low credit
risk.
A: Obligations rated
'A' are judged to be upper-medium grade and are subject to low credit
risk.
Baa: Obligations rated
'Baa' are judged to be medium-grade and subject to moderate credit risk and as
such may possess certain speculative characteristics.
Ba: Obligations rated
'Ba' are judged to be speculative and are subject to substantial credit
risk.
B: Obligations rated
'B' are considered speculative and are subject to high credit risk.
Caa: Obligations rated
'Caa' are judged to be speculative of poor standing and are subject to very high
credit risk.
Ca: Obligations rated
'Ca' are highly speculative and are likely in, or very near, default, with some
prospect of recovery of principal and interest.
C: Obligations rated
'C' are the lowest rated and are typically in default, with little prospect for
recovery of principal or interest.
Note: Moody's
appends numerical modifiers 1, 2, and 3 to each generic rating classification
from Aa through Caa. The modifier 1 indicates that the obligation ranks in the
higher end of its generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates a ranking in the lower end of that generic
rating category. Additionally, a “(hyb)” indicator is appended to all ratings of
hybrid securities issued by banks, insurers, finance companies, and securities
firms*.
*
By their terms, hybrid securities allow for the omission of scheduled dividends,
interest, or principal payments, which can potentially result in impairment if
such an omission occurs. Hybrid securities may also be subject to contractually
allowable write-downs of principal that could result in impairment. Together
with the hybrid indicator, the long-term obligation rating assigned to a hybrid
security is an expression of the relative credit risk associated with that
security.
Moody's
Short-Term Prime Rating System
P-1:
Ratings
of
Prime-1 reflect a superior ability to repay short-term obligations.
P-2:
Ratings
of
Prime-2 reflect a strong ability to repay short-term obligations.
P-3:
Ratings
of
Prime-3 reflect an acceptable ability to repay short-term
obligations.
NP
(Not Prime): Issuers (or
supporting institutions) rated Not Prime do not fall within any of the Prime
rating categories.
Moody's
MIG/VMIG US Short-Term Ratings
Short-Term
Obligation Ratings
We
use the global short-term Prime rating scale for commercial paper issued by US
municipalities and nonprofits. These
commercial paper programs may be backed by external letters of credit or
liquidity facilities, or by an issuer’s self-liquidity.
For
other short-term municipal obligations, we use one of two other short-term
rating scales, the Municipal Investment Grade
(MIG) and Variable Municipal Investment Grade (VMIG) scales discussed
below.
A-1
We
use the MIG scale for US municipal cash flow notes, bond anticipation notes and
certain other short-term obligations, which
typically mature in three years or less. Under certain circumstances, we use the
MIG scale for bond anticipation notes with maturities of up to five
years.
MIG
1:
This designation denotes superior credit quality. Excellent protection is
afforded by established cash flows, highly reliable liquidity support, or
demonstrated broad-based access to the market for refinancing.
MIG
2:
This designation denotes strong credit quality. Margins of protection are ample,
although not as large as in the preceding group.
MIG
3:
This designation denotes acceptable credit quality. Liquidity and cash-flow
protection may be narrow, and market access for refinancing is likely to be less
well-established.
SG: This designation
denotes speculative-grade credit quality. Debt instruments in this category may
lack sufficient margins of protection.
Demand
Obligation Ratings
In
the case of variable rate demand obligations (VRDOs), a two-component rating is
assigned. The components are a
long-term rating and a short-term demand obligation rating. The long-term rating
addresses the issuer’s ability to meet scheduled principal and interest
payments. The short-term demand obligation rating addresses the ability of the
issuer or the liquidity provider to make payments associated with the
purchase-price-upon-demand feature (“demand feature”) of the VRDO. The
short-term demand obligation rating uses the VMIG scale. VMIG ratings with
liquidity support use as an input the short-term Counterparty Risk Assessment of
the support provider, or the long-term rating of the underlying obligor in the
absence of third party liquidity support. Transitions of VMIG ratings of demand
obligations with conditional liquidity support differ from transitions on the
Prime scale to reflect the risk that external liquidity support will terminate
if the issuer’s long-term rating drops below investment grade. Please see our
methodology that discusses demand obligations with conditional liquidity
support.
We
typically assign the VMIG short-term demand obligation rating if the frequency
of the demand feature is less than every
three years. If the frequency of the demand feature is less than three years but
the purchase price is payable only with remarketing proceeds, the short-term
demand obligation rating is “NR”.
VMIG
1:
This designation denotes superior credit quality. Excellent protection is
afforded by the superior short-term credit strength of the liquidity provider
and structural and legal protections.
VMIG
2:
This designation denotes strong credit quality. Good protection is afforded by
the strong short-term credit strength of the liquidity provider and structural
and legal protections.
VMIG
3:
This designation denotes acceptable credit quality. Adequate protection is
afforded by the satisfactory short-term credit strength of the liquidity
provider and structural and legal protections.
SG: This designation
denotes speculative-grade credit quality. Demand features rated in this category
may be supported by a liquidity provider that does not have a sufficiently
strong short-term rating or may lack the structural or legal
protections.
Standard
& Poor's Long-Term Issue Credit Ratings
Issue
credit ratings are based, in varying degrees, on S&P Global Ratings’
analysis of the following considerations:
•
The likelihood of
payment--the capacity and willingness of the obligor to meet its financial
commitment on an obligation in accordance with the terms of the
obligation;
•
The nature and
provisions of the financial obligation, and the promise we impute;
and
A-2
•
The protection
afforded by, and relative position of, the financial obligation in the event of
bankruptcy, reorganization, or other arrangement under the laws of bankruptcy
and other laws affecting creditors' rights.
Issue
ratings are an assessment of default risk but may incorporate an assessment of
relative seniority or ultimate recovery
in the event of default. Junior obligations are typically rated lower than
senior obligations, to reflect the lower priority in bankruptcy, as noted above.
(Such differentiation may apply when an entity has both senior and subordinated
obligations, secured and unsecured obligations, or operating company and holding
company obligations.)
AAA: An obligation
rated 'AAA' has the highest rating assigned by S&P Global Ratings. The
obligor's capacity to meet its financial commitments on the obligation is
extremely strong.
AA: An obligation
rated 'AA' differs from the highest-rated obligations only to a small degree.
The obligor's capacity to meet its financial commitments on the obligation is
very strong.
A: An obligation
rated 'A' is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than obligations in higher-rated
categories. However, the obligor's capacity to meet its financial commitments on
the obligation is still strong.
BBB: An obligation
rated 'BBB' exhibits adequate protection parameters. However, adverse economic
conditions or changing circumstances are more likely to weaken the obligor’s
capacity to meet its financial commitments on the obligation.
BB,
B, CCC, CC and C: Obligations rated
'BB', 'B', 'CCC' 'CC', and 'C' are regarded as having significant speculative
characteristics. 'BB' indicates the least degree of speculation and 'C' the
highest. While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major
exposure to adverse conditions.
BB: An obligation
rated 'BB' is less vulnerable to nonpayment than other speculative issues.
However, it faces major ongoing uncertainties or exposure to adverse business,
financial, or economic conditions which could lead to the obligor's inadequate
capacity to meet its financial commitments on the obligation.
B: An obligation
rated 'B' is more vulnerable to nonpayment than obligations rated 'BB', but the
obligor currently has the capacity to meet its financial commitments on the
obligation. Adverse business, financial, or economic conditions will likely
impair the obligor's capacity or willingness to meet its financial commitments
on the obligation.
CCC: An obligation
rated 'CCC' is currently vulnerable to nonpayment and is dependent upon
favorable business, financial, and economic conditions for the obligor to meet
its financial commitments on the obligation. In the event of adverse business,
financial, or economic conditions, the obligor is not likely to have the
capacity to meet its financial commitments on the obligation.
CC: An obligation
rated 'CC' is currently highly vulnerable to nonpayment. The 'CC' rating is used
when a default has not yet occurred but S&P Global Ratings expects default
to be a virtual certainty, regardless of the anticipated time to
default.
C: An obligation
rated 'C' is currently highly vulnerable to nonpayment, and the obligation is
expected to have lower relative seniority or lower ultimate recovery compared
with obligations that are rated higher.
D: An obligation
rated 'D' is in default or in breach of an imputed promise. For non-hybrid
capital instruments, the 'D' rating category is used when payments on an
obligation are not made on the date due, unless S&P Global Ratings believes
that such payments will be made within five business days in the absence of a
stated grace period or within the earlier of the stated grace period or 30
calendar days. The 'D' rating also will be used upon the filing of a bankruptcy
petition or the taking of similar action and where default on an obligation is a
virtual certainty, for example due to automatic stay provisions. An obligation's
rating is lowered to 'D' if it is subject to a distressed exchange
offer.
A-3
Plus
(+) or minus (-): The ratings from
'AA' to 'CCC' may be modified by the addition of a plus (+) or minus (-) sign to
show relative standing within the major rating categories.
NR: This indicates
that no rating has been requested, or that there is insufficient information on
which to base a rating, or that S&P Global Ratings does not rate a
particular obligation as a matter of policy.
Standard
& Poor's Short-Term Issue Credit Ratings
A-1: A short-term
obligation rated 'A-1' is rated in the highest category by S&P Global
Ratings. The obligor's capacity to meet its financial commitments on the
obligation is strong. Within this category, certain obligations are designated
with a plus sign (+). This indicates that the obligor's capacity to meet its
financial commitments on these obligations is extremely strong.
A-2: A short-term
obligation rated 'A-2' is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in higher
rating categories. However, the obligor's capacity to meet its financial
commitments on the obligation is satisfactory.
A-3: A short-term
obligation rated 'A-3' exhibits adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely to weaken an
obligor's capacity to meet its financial commitments on the
obligation.
B: A short-term
obligation rated 'B' is regarded as vulnerable and has significant speculative
characteristics. The obligor currently has the capacity to meet its financial
commitments; however, it faces major ongoing uncertainties that could lead to
the obligor's inadequate capacity to meet its financial commitments.
C: A short-term
obligation rated 'C' is currently vulnerable to nonpayment and is dependent upon
favorable business, financial, and economic conditions for the obligor to meet
its financial commitments
on the
obligation.
D: A short-term
obligation rated 'D' is in default or in breach of an imputed promise. For
non-hybrid capital instruments, the 'D' rating category is used when payments on
an obligation are not made on the date due, unless S&P Global Ratings
believes that such payments will be made within any stated grace period.
However, any stated grace period longer than five business days will be treated
as five business days. The 'D' rating also will be used upon the filing of a
bankruptcy petition or the taking of a similar action and where default on an
obligation is a virtual certainty, for example due to automatic stay provisions.
A rating on an obligation is lowered to 'D' if it is subject to a distressed
debt restructuring.
Standard
& Poor's Municipal Short-Term Note Ratings Definitions
An
S&P Global Ratings U.S. municipal note rating reflects S&P Global
Ratings’ opinion about the liquidity factors and market
access risks unique to the notes. Notes due in three years or less will likely
receive a note rating. Notes with an original maturity of more than three years
will most likely receive a long-term debt rating. In determining which type of
rating, if any, to assign, S&P Global Ratings’ analysis will review the
following considerations:
•
Amortization
schedule -- the larger final maturity relative to other maturities, the more
likely it will be treated as a note; and
•
Source of payment
-- the more dependent the issue is on the market for its refinancing, the more
likely it will be treated as a note.
Note
rating symbols are as follows:
SP-1: Strong capacity
to pay principal and interest. An issue determined to possess a very strong
capacity to pay debt service is given a plus (+) designation.
SP-2: Satisfactory
capacity to pay principal and interest, with some vulnerability to adverse
financial and economic changes over the term of the notes.
A-4
SP-3: Speculative
capacity to pay principal and interest.
D: ‘D’ is assigned
upon failure to pay the note when due, completion of a distressed exchange
offer, or the filing of a bankruptcy petition or the taking of similar action
and where default on an obligation is a virtual certainty, for example due to
automatic stay provisions.
Standard
& Poor's Dual Ratings
Dual
ratings may be assigned to debt issues that have a put option or demand feature.
The first component of the
rating addresses the likelihood of repayment of principal and interest as due,
and the second component of the rating addresses only the demand feature. The
first component of the rating can relate to either a short-term or long-term
transaction and accordingly use either short-term or long-term rating symbols.
The second component of the rating relates to the put option and is assigned a
short-term rating symbol (for example, 'AAA/A-1+' or 'A-1+/A-1'). With U.S.
municipal short-term demand debt, the U.S. municipal short-term note rating
symbols are used for the first component of the rating (for example,
'SP-1+/A-1+').
Fitch
Credit Rating Scales
Fitch
Ratings publishes credit ratings that
are forward-looking opinions on the relative ability of an entity or obligation
to meet financial commitments. Issuer default ratings
(IDRs)
are
assigned to corporations, sovereign entities, financial institutions such as
banks, leasing companies and insurers, and public finance entities (local and
regional governments). Issue level ratings are also assigned, often include an
expectation of recovery and may be notched above or below the issuer level
rating. Issue ratings are assigned to secured and unsecured debt securities,
loans, preferred stock and other instruments, Structured finance ratings are
issue ratings to securities backed by receivables or other financial assets that
consider the obligations’ relative vulnerability to default. Credit ratings are
indications of the likelihood of repayment in accordance with the terms of the
issuance. In limited cases, Fitch may include additional considerations (i.e.,
rate to a higher or lower standard than that implied in the obligation’s
documentation). Please see the section Specific Limitations Relating to Credit
Rating Scales for details. Fitch Ratings also publishes other ratings, scores
and opinions. For example, Fitch provides specialized ratings of servicers of
residential and commercial mortgages, asset managers and funds. In each case,
users should refer to the definitions of each individual scale for guidance on
the dimensions of risk covered in each assessment.
Fitch’s
credit rating scale for
issuers and issues is expressed using the categories
‘AAA’
to
‘BBB’
(investment
grade)
and
‘BB’
to
‘D’
(speculative
grade)
with
an additional
+/-for
AA through CCC levels indicating relative differences of probability of default
or recovery for issues.
The
terms “investment grade” and “speculative grade” are market
conventions and do not imply any recommendation or endorsement of a specific
security for investment purposes. Investment grade categories indicate
relatively low to moderate credit risk, while ratings in the speculative
categories signal either a higher level of credit risk or that a default has
already occurred.
Fitch may also
disclose issues relating to a rated issuer that are not and have not been rated.
Such issues are also denoted as ‘NR’ on its web page.
Credit
ratings express risk in relative rank order, which is to say they are ordinal
measures of credit risk and are not
predictive of a specific frequency of default or loss. For information about the
historical performance of ratings, please refer to Fitch’s Ratings Transition
and Default studies, which detail the historical default rates. The European
Securities and Markets Authority also maintains a central repository of
historical default rates. Fitch’s credit ratings do not directly address any
risk other than credit risk. Credit ratings do not deal with the risk of market
value loss due to changes in interest rates, liquidity and/or other market
considerations. However, market risk may be considered to the extent that it
influences the ability of an issuer to pay or refinance a financial commitment.
Ratings nonetheless do not reflect market risk to the extent that they influence
the size or other conditionality of the obligation to pay upon a commitment (for
example, in the case of index-linked bonds).
A-5
Fitch will use
credit rating scales to provide ratings to privately issued obligations or
certain note issuance
programs,
or for
private ratings using the same public scale and criteria.
Private ratings are
not published,
and
are only provided
to the
issuer or its agents
in the
form of a rating letter.
The
primary credit rating scales may also be used to provide ratings for a narrower
scope,
including
interest
strips
and return of principal or in other forms of opinions such as Credit
Opinions
or
Rating
Assessment
Services.
Fitch
Long-Term Rating Scales
Issuer
Default Ratings
Rated
entities in a number of sectors, including financial and non-financial
corporations, sovereigns, insurance companies
and certain sectors within public finance, are generally assigned Issuer Default
Ratings (IDRs). IDRs are also assigned to certain entities in global
infrastructure and project finance. IDRs opine on an entity's relative
vulnerability to default on financial obligations. The threshold default risk
addressed by the IDR is generally that of the financial obligations whose
non-payment would best reflect the uncured failure of that entity. As such, IDRs
also address relative vulnerability to bankruptcy, administrative receivership
or similar concepts.
In
aggregate, IDRs provide an ordinal ranking of issuers based on the agency's view
of their relative vulnerability to
default, rather than a prediction of a specific percentage likelihood of
default.
AAA:
Highest credit quality.
'AAA'
ratings denote the lowest expectation of default risk. They are assigned only in
cases of exceptionally
strong capacity for payment of financial commitments. This capacity is highly
unlikely to be adversely affected by foreseeable events.
AA:
Very high credit quality.
'AA'
ratings denote expectations of very low default risk. They indicate very strong
capacity for payment of financial
commitments. This capacity is not significantly vulnerable to foreseeable
events.
A:
High credit quality.
'A'
ratings denote expectations of low default risk. The capacity for payment of
financial commitments is considered strong.
This capacity may, nevertheless, be more vulnerable to adverse business or
economic conditions than is the case for higher ratings.
BBB:
Good credit quality.
'BBB'
ratings indicate that expectations of default risk are currently low. The
capacity for payment of financial
commitments is considered adequate, but adverse business or economic conditions
are more likely to impair this capacity.
BB:
Speculative.
'BB'
ratings indicate an elevated vulnerability to default risk, particularly in the
event of adverse changes in business or
economic conditions over time; however, business or financial flexibility exists
that supports the servicing of financial commitments.
B:
Highly speculative.
'B'
ratings indicate that material default risk is present, but a limited margin of
safety remains. Financial commitments are
currently being met; however, capacity for continued payment is vulnerable to
deterioration in the business and economic environment.
CCC:
Substantial credit risk.
Default
is a real possibility.
A-6
CC:
Very high levels of credit risk.
Default
of some kind appears probable.
C:
Near default
A
default or default-like process has begun, or the issuer is in standstill, or
for a closed funding vehicle, payment capacity is
irrevocably impaired. Conditions that are indicative of a 'C' category rating
for an issuer include:
a. the issuer has
entered into a grace or cure period following non-payment of a material
financial obligation;
b. the issuer has
entered into a temporary negotiated waiver or standstill agreement following a
payment default on a material financial obligation; or
c.
the formal announcement by the issuer or their agent of a distressed debt
exchange;
d. a closed
financing vehicle where payment capacity is irrevocably impaired such that it is
not expected to pay interest and/or principal in full during the life of the
transaction, but where no payment default is imminent
RD:
Restricted default.
‘RD’
ratings indicate an issuer that in Fitch’s opinion has experienced:
a. an uncured
payment default or distressed debt exchange on a bond, loan or other material
financial obligation, but
b. has not entered
into bankruptcy filings, administration, receivership, liquidation, or other
formal winding-up procedure, and
c.
has not otherwise ceased operating.
This
would include:
i.
the selective payment default on a specific class or currency of
debt;
ii. the uncured
expiry of any applicable grace period, cure period or default forbearance period
following a payment default on a bank loan, capital markets security or other
material financial obligation;
iii. the extension
of multiple waivers or forbearance periods upon a payment default on one or more
material financial obligations, either in series or in parallel; ordinary
execution of a distressed debt exchange on one or more material financial
obligations.
D:
Default.
'D'
ratings indicate an issuer that in Fitch Ratings' opinion has entered into
bankruptcy filings, administration,
receivership, liquidation or other formal winding-up procedure or which has
otherwise ceased business.
Default
ratings are not assigned prospectively to entities or their obligations; within
this context, non-payment on an instrument
that contains a deferral feature or grace period will generally not be
considered a default until after the expiration of the deferral or grace period,
unless a default is otherwise driven by bankruptcy or other similar
circumstance, or by a distressed debt exchange.
In
all cases, the assignment of a default rating reflects the agency's opinion as
to the most appropriate rating category
consistent with the rest of its universe of ratings and may differ from the
definition of default under the terms of an issuer's financial obligations or
local commercial practice.
A-7
Notes
The
modifiers + or - may be appended to a rating to denote relative status within
major rating categories. Such suffixes are
not added to the 'AAA' Long-Term IDR category, or to Long-Term IDR categories
below 'B'.
Fitch
Short-Term Ratings Assigned to Issuers and Obligations
A
short-term issuer or obligation rating is based in all cases on the short-term
vulnerability to default of the rated entity and
relates to the capacity to meet financial obligations in accordance with the
documentation governing the relevant obligation. Short-term deposit ratings may
be adjusted for loss severity. Short-Term Ratings are assigned to obligations
whose initial maturity is viewed as "short term" based on market convention.
Typically, this means up to 13 months for corporate, sovereign, and structured
obligations and up to 36 months for obligations in U.S. public finance
markets.
F1:
Highest Short-Term Credit Quality. Indicates the
strongest intrinsic capacity for timely payment of financial commitments; may
have an added “+” to denote any exceptionally strong credit feature.
F2:
Good Short-Term Credit Quality. Good intrinsic
capacity for timely payment of financial commitments.
F3:
Fair Short-Term Credit Quality. The intrinsic
capacity for timely payment of financial commitments is adequate.
B:
Speculative Short-Term Credit Quality. Minimal capacity
for timely payment of financial commitments, plus heightened vulnerability to
near term adverse changes in financial and economic conditions.
C:
High Short-Term Default Risk. Default is a real
possibility.
RD:
Restricted Default. Indicates an
entity that has defaulted on one or more of its financial commitments, although
it continues to meet other financial obligations. Typically applicable to entity
ratings only.
D:
Default. Indicates a
broad-based default event for an entity, or the default of a short-term
obligation.
A-8
APPENDIX
B - PERSONS TO WHOM INVESCO PROVIDES NON-PUBLIC PORTFOLIO HOLDINGS ON
AN
ONGOING BASIS
(as
of November 30, 2022)
|
Service
Provider |
Disclosure
Category |
|
ABN
AMRO Financial Services, Inc. |
Broker
(for certain Invesco Funds) |
|
Absolute
Color |
Financial
Printer |
|
Anglemyer
& Co. |
Analyst
(for certain Invesco Funds) |
|
AXA |
Other |
|
Ballard
Spahr Andrews & Ingersoll,
LLP |
Special
Insurance Counsel |
|
Barclays
Capital, Inc. |
Broker
(for certain Invesco Funds) |
|
Blaylock
Robert Van LLC |
Broker
(for certain Invesco Funds) |
|
BB&T
Capital Markets |
Broker
(for certain Invesco Funds) |
|
Bear
Stearns Pricing Direct, Inc. |
Pricing
Vendor (for certain Invesco Funds) |
|
BLNS
Securities Ltd. |
Broker
(for certain Invesco Funds) |
|
BOSC,
Inc. |
Broker
(for certain Invesco Funds) |
|
Brown
Brothers Harriman & Co. |
Custodian
and Securities Lender (each, respectively, for certain Invesco
Funds) |
|
Cabrera
Capital Markets |
Broker
(for certain Invesco Funds) |
|
Charles
River Systems, Inc. |
System
Provider |
|
Chas.
P. Young Co. |
Financial
Printer |
|
Cirrus
Research, LLC |
Trading
System |
|
Citibank,
N.A. |
Custodian
and Securities Lender (each, respectively, for certain Invesco
Funds) |
|
Citigroup
Global Markets, Inc. |
Broker
(for certain Invesco Funds) |
|
Commerce
Capital Markets |
Broker
(for certain Invesco Funds) |
|
Crane
Data, LLC |
Analyst
(for certain Invesco Funds) |
|
Credit
Suisse International / Credit
Suisse
Securities (Europe) Ltd. |
Service
Provider |
|
Crews
& Associates |
Broker
(for certain Invesco Funds) |
|
D.A.
Davidson & Co. |
Broker
(for certain Invesco Funds) |
|
Dechert
LLP |
Legal
Counsel |
|
DEPFA
First Albany |
Broker
(for certain Invesco Funds) |
|
Deutsche
Bank Trust Company
Americas |
Custodian
and Securities Lender (each, respectively, for certain Invesco
Funds) |
|
E.K.
Riley Investments LLC |
Broker
(for certain Invesco Funds) |
|
Empirical
Research Partners |
Analyst
(for certain Invesco Funds) |
|
Finacorp
Securities |
Broker
(for certain Invesco Funds) |
|
First
Miami Securities |
Broker
(for certain Invesco Funds) |
|
First
Southwest Co. |
Broker
(for certain Invesco Funds) |
|
First
Tryon Securities |
Broker
(for certain Invesco Funds) |
|
Fitch,
Inc. |
Rating
& Ranking Agency (for certain Invesco Funds) |
|
FT
Interactive Data Corporation |
Pricing
Vendor |
|
FTN
Financial Group |
Broker
(for certain Invesco Funds) |
|
GainsKeeper |
Software
Provider (for certain Invesco Funds) |
|
GCom2
Solutions |
Software
Provider (for certain Invesco Funds) |
|
George
K. Baum & Company |
Broker
(for certain Invesco Funds) |
|
Glass,
Lewis & Co. |
System
Provider (for certain Invesco Funds) |
|
Global
Trading Analytics, LLC |
Software
Provider |
|
Global
Trend Alert |
Analyst
(for certain Invesco Funds) |
|
Hattier,
Sanford & Reynoir |
Broker
(for certain Invesco Funds) |
|
Hutchinson,
Shockey, Erley & Co. |
Broker
(for certain Invesco Funds) |
|
ICI
(Investment Company Institute) |
Analyst
(for certain Invesco Funds) |
|
ICRA
Online Ltd. |
Rating
& Ranking Agency (for certain Invesco
Funds) |
B-1
|
Service
Provider |
Disclosure
Category |
|
Lincoln
Investment Advisors
Corporation |
Other |
|
iMoneyNet,
Inc. |
Rating
& Ranking Agency (for certain Invesco Funds) |
|
Initram
Data, Inc. |
Pricing
Vendor |
|
Institutional
Shareholder Services,
Inc. |
Proxy
Voting Service (for certain Invesco Funds) |
|
Invesco
Investment Services, Inc. |
Transfer
Agent |
|
Invesco
Senior Secured
Management,
Inc. |
System
Provider (for certain Invesco Funds) |
|
Investment
Company Institute |
Analyst
(for certain Invesco Funds) |
|
Investortools,
Inc. |
Broker
(for certain Invesco Funds) |
|
ITG,
Inc. |
Pricing
Vendor (for certain Invesco Funds) |
|
J.P.
Morgan Chase Bank |
Custodian
and Securities Lender (each, respectively, for certain Invesco
Funds) |
|
J.P.
Morgan Securities, Inc. |
Analyst
(for certain Invesco Funds) |
|
J.P.
Morgan Securities Inc.\Citigroup
Global
Markets Inc.\JPMorgan
Chase
Bank, N.A. |
Lender
(for certain Invesco Funds) |
|
J.P.
Morgan Securities |
Broker
(for certain Invesco Funds) |
|
Janney
Montgomery Scott LLC |
Broker
(for certain Invesco Funds) |
|
John
Hancock Investment
Management
Services, LLC |
Sub-advisor
(for certain sub-advised accounts) |
|
Jorden
Burt LLP |
Special
Insurance Counsel |
|
KeyBanc
Capital Markets, Inc. |
Broker
(for certain Invesco Funds) |
|
Kramer
Levin Naftalis & Frankel LLP |
Legal
Counsel |
|
Lebenthal
& Co. LLC |
Broker
(for certain Invesco Funds) |
|
Lipper,
Inc. |
Rating
& Ranking Agency (for certain Invesco Funds) |
|
Loan
Pricing Corporation |
Pricing
Service (for certain Invesco Funds) |
|
Loop
Capital Markets |
Broker
(for certain Invesco Funds) |
|
M.R.
Beal |
Broker
(for certain Invesco Funds) |
|
MarkIt
Group Limited |
Pricing
Vendor (for certain Invesco Funds) |
|
Merrill
Communications LLC |
Financial
Printer |
|
Mesirow
Financial, Inc. |
Broker
(for certain Invesco Funds) |
|
Middle
Office Solutions |
Software
Provider |
|
Moody's
Investors Service |
Rating
& Ranking Agency (for certain Invesco Funds) |
|
Morgan
Keegan & Company, Inc. |
Broker
(for certain Invesco Funds) |
|
Morrison
Foerster LLP |
Legal
Counsel |
|
MS
Securities Services, Inc. and
Morgan
Stanley & Co. Incorporated |
Securities
Lender (for certain Invesco Funds) |
|
Muzea
Insider Consulting Services,
LLC |
Analyst
(for certain Invesco Funds) |
|
Ness
USA Inc. |
System
provider |
|
Noah
Financial, LLC |
Analyst
(for certain Invesco Funds) |
|
Omgeo
LLC |
Trading
System |
|
Piper
Jaffray |
Analyst
(for certain Invesco Funds) |
|
Prager,
Sealy & Co. |
Broker
(for certain Invesco Funds) |
|
PricewaterhouseCoopers
LLP |
Independent
Registered Public Accounting Firm (for all Invesco
Funds) |
|
Protective
Securities |
Broker
(for certain Invesco Funds) |
|
Ramirez
& Co., Inc. |
Broker
(for certain Invesco Funds) |
|
Raymond
James & Associates, Inc. |
Broker
(for certain Invesco Funds) |
|
RBC
Capital Markets |
Analyst
(for certain Invesco Funds) |
|
RBC
Dain Rauscher Incorporated |
Broker
(for certain Invesco Funds) |
|
Reuters
America LLC |
Pricing
Service (for certain Invesco Funds) |
|
Rice
Financial Products |
Broker
(for certain Invesco Funds) |
|
Robert
W. Baird & Co. Incorporated |
Broker
(for certain Invesco
Funds) |
B-2
|
Service
Provider |
Disclosure
Category |
|
RR
Donnelley Financial |
Financial
Printer |
|
Ryan
Beck & Co. |
Broker
(for certain Invesco Funds) |
|
SAMCO
Capital Markets, Inc. |
Broker
(for certain Invesco Funds) |
|
Seattle-Northwest
Securities
Corporation |
Broker
(for certain Invesco Funds) |
|
Siebert
Brandford Shank & Co.,
L.L.C. |
Broker
(for certain Invesco Funds) |
|
Simon
Printing Company |
Financial
Printer |
|
Southwest
Precision Printers, Inc. |
Financial
Printer |
|
Southwest
Securities |
Broker
(for certain Invesco Funds) |
|
Standard
and Poor's/Standard and
Poor's
Securities Evaluations, Inc. |
Pricing
Service and Rating and Ranking Agency (each, respectively, for certain
Invesco Funds) |
|
StarCompliance,
Inc. |
System
Provider |
|
State
Street Bank and Trust
Company |
Custodian,
Lender, Securities Lender, and System Provider (each, respectively, for
certain
Invesco
Funds) |
|
Sterne,
Agee & Leach, Inc. |
Broker
(for certain Invesco Funds) |
|
Stifel,
Nicolaus & Company,
Incorporated |
Broker
(for certain Invesco Funds) |
|
Stradley
Ronon Stevens & Young,
LLP |
Legal
Counsel |
|
The
Bank of New York |
Custodian
and Securities Lender (each, respectively, for certain Invesco
Funds) |
|
The
MacGregor Group, Inc. |
Software
Provider |
|
The
Savader Group LLC |
Broker
(for certain Invesco Funds) |
|
Thomson
Information Services
Incorporated |
Software
Provider |
|
TradingHub
Group Ltd. |
Analyst
(for certain Invesco Funds) |
|
UBS
Financial Services, Inc. |
Broker
(for certain Invesco Funds) |
|
UMB
Bank, N.A. |
Custodian
and Securities Lender (each, respectively, for certain Invesco
Funds) |
|
VCI
Group Inc. |
Financial
Printer |
|
Vining
Sparks IBG |
Broker
(for Certain Invesco Funds) |
|
W.H
Mell Associates, Inc. |
Broker
(for certain Invesco Funds) |
|
Wachovia
National Bank, N.A. |
Broker
(for certain Invesco Funds) |
|
Western
Lithograph |
Financial
Printer |
|
Wiley
Bros. Aintree Capital L.L.C. |
Broker
(for certain Invesco Funds) |
|
William
Blair & Co. |
Broker
(for certain Invesco Funds) |
|
XSP,
LLC\Solutions Plus, Inc. |
Software
Provider |
B-3
APPENDIX
C - TRUSTEES AND OFFICERS
As
of November 30, 2022
The
address of each trustee and officer is 11 Greenway Plaza, Suite 1000, Houston,
Texas 77046-1173. The trustees serve
for the life of the Trust, subject to their earlier death, incapacitation,
resignation, retirement or removal as more specifically provided in the Trust's
organizational documents. Each officer serves for a one year term or until their
successors are elected and qualified. Column two below includes length of time
served with predecessor entities, if any.
Interested
Trustee
|
Name,
Year of Birth |
Position(s)
Held
with
the Trust |
Trustee
and/or
Officer
Since |
Principal
Occupation(s)
During
Past 5 Years |
Number
of
Funds
in
Fund
Complex
Overseen
by
Trustee |
Other
Trusteeship(s)/
Directorship
Held by
Trustee/Director
During
Past
5 Years |
|
Martin
L. Flanagan1
- 1960 |
Trustee
and
Vice
Chair |
2007 |
Executive
Director, Chief
Executive
Officer and
President,
Invesco Ltd.
(ultimate
parent of Invesco
and
a global investment
management
firm);
Trustee
and Vice Chair,
The
Invesco Funds; Vice
Chair,
Investment
Company
Institute; and
Member
of Executive
Board,
SMU Cox School
of
Business
Formerly:
Advisor to the
Board,
Invesco Advisers,
Inc.
(formerly known as
Invesco
Institutional
(N.A.),
Inc.); Chairman
and
Chief Executive
Officer,
Invesco Advisers,
Inc.
(registered investment
adviser);
Director,
Chairman,
Chief Executive
Officer
and President,
Invesco
Holding Company
(US),
Inc. (formerly IVZ
Inc.)
(holding company),
Invesco
Group Services,
Inc.
(service provider) and
Invesco
North American
Holdings,
Inc. (holding
company);
Director, Chief
Executive
Officer and
President,
Invesco Holding
Company
Limited (parent
of
Invesco and a global
investment
management
firm);
Director, Invesco
Ltd.;
Chairman,
Investment
Company
Institute
and President,
Co-Chief
Executive
Officer,
Co-President,
Chief
Operating Officer |
189 |
None |
C-1
|
Name,
Year of Birth |
Position(s)
Held
with
the Trust |
Trustee
and/or
Officer
Since |
Principal
Occupation(s)
During
Past 5 Years |
Number
of
Funds
in
Fund
Complex
Overseen
by
Trustee |
Other
Trusteeship(s)/
Directorship
Held by
Trustee/Director
During
Past
5 Years |
|
|
|
|
and
Chief Financial
Officer,
Franklin
Resources,
Inc. (global
investment
management
organization) |
|
|
1.
Mr. Flanagan is
considered an interested person (within the meaning of Section 2(a)(19) of the
1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and
an officer and a director of Invesco Ltd., ultimate parent of the
Adviser.
Independent
Trustees
|
Name,
Year of Birth |
Position(s)
Held
with
the Trust |
Trustee
and/or
Officer
Since |
Principal
Occupation(s)
During
Past 5 Years |
Number
of
Funds
in
Fund
Complex
Overseen
by
Trustee |
Other
Trusteeship(s)/
Directorship
Held by
Trustee/Director
During
Past
5 Years |
|
|
|
|
|
|
|
|
Beth
Ann Brown – 1968 |
Trustee
(2019)
and
Chair
(August
2022) |
2019 |
Independent
Consultant
Formerly:
Head of
Intermediary
Distribution,
Managing
Director,
Strategic
Relations,
Managing
Director, Head
of
National Accounts,
Senior
Vice President,
National
Account Manager
and
Senior Vice President,
Key
Account Manager,
Columbia
Management
Investment
Advisers LLC;
Vice
President, Key
Account
Manager, Liberty
Funds
Distributor, Inc.;
and
Trustee of certain
Oppenheimer
Funds |
189 |
Director,
Board of
Directors
of Caron
Engineering
Inc.;
Advisor,
Board of
Advisors
of Caron
Engineering
Inc.;
President
and Director,
Acton
Shapleigh Youth
Conservation
Corps
(non-profit);
and
formerly
President and
Director
of
Grahamtastic
Connection
(non-profit) |
|
Cynthia
Hostetler —1962 |
Trustee |
2017 |
Non-Executive
Director
and
Trustee of a number
of
public and private
business
corporations
Formerly:
Director,
Aberdeen
Investment
Funds
(4 portfolios);
Director,
Artio Global
Investment
LLC (mutual
fund
complex); Director,
Edgen
Group, Inc.
(specialized
energy and
infrastructure
products
distributor);
Director,
Genesee
& Wyoming, Inc.
(railroads);
Head of
Investment
Funds and
Private
Equity, Overseas
Private
Investment
Corporation;
President, |
189 |
Resideo
Technologies
(smart
home
technology);
Vulcan
Materials
Company
(construction
materials
company);
Trilinc
Global
Impact Fund;
Textainer
Group
Holdings,
(shipping
container
leasing
company);
Investment
Company
Institute
(professional
organization);
and
Independent
Directors
Council
(professional
organization) |
C-2
|
Name,
Year of Birth |
Position(s)
Held
with
the Trust |
Trustee
and/or
Officer
Since |
Principal
Occupation(s)
During
Past 5 Years |
Number
of
Funds
in
Fund
Complex
Overseen
by
Trustee |
Other
Trusteeship(s)/
Directorship
Held by
Trustee/Director
During
Past
5 Years |
|
|
|
|
First
Manhattan
Bancorporation,
Inc.; and
Attorney,
Simpson
Thacher
& Bartlett LLP |
|
|
|
Eli
Jones – 1961 |
Trustee |
2016 |
Professor
and Dean
Emeritus,
Mays Business
School
at Texas A&M
University
Formerly:
Dean of Mays
Business
School at Texas
A&M
University; Professor
and
Dean, Walton College
of
Business, University of
Arkansas
and E.J. Ourso
College
of Business,
Louisiana
State University;
and
Director, Arvest Bank |
189 |
Insperity,
Inc. (formerly
known
as Administaff)
(human
resources
provider);
and Member
of
Regional Board of
Directors
and Board of
Directors,
First
Financial
Bancorp
(regional
bank) |
|
Elizabeth
Krentzman – 1959 |
Trustee |
2019 |
Formerly:
Principal and
Chief
Regulatory Advisor
for
Asset Management
Services
and U.S. Mutual
Fund
Leader of Deloitte &
Touche
LLP; General
Counsel
of the Investment
Company
Institute (trade
association);
National
Director
of the Investment
Management
Regulatory
Consulting
Practice,
Principal,
Director and
Senior
Manager of
Deloitte
& Touche LLP;
Assistant
Director of the
Division
of Investment
Management
- Office of
Disclosure
and Investment
Adviser
Regulation of the
U.S.
Securities and
Exchange
Commission
and
various positions with
the
Division of Investment
Management
– Office of
Regulatory
Policy of the
U.S.
Securities and
Exchange
Commission;
Associate
at Ropes &
Gray
LLP; and Trustee of
certain
Oppenheimer
Funds |
189 |
Formerly:
Member of
the
Cartica Funds
Board
of Directors
(private
investment
funds);
Trustee of the
University
of Florida
National
Board
Foundation;
and
Member
of the
University
of Florida
Law
Center
Association,
Inc. Board
of
Trustees, Audit
Committee
and
Membership
Committee |
|
Anthony
J. LaCava, Jr.–
1956 |
Trustee |
2019 |
Formerly:
Director and
Member
of the Audit
Committee,
Blue Hills
Bank
(publicly traded
financial
institution) and |
189 |
Blue
Hills Bank;
Chairman,
Bentley
University;
Member,
Business
School
Advisory
Council; and |
C-3
|
Name,
Year of Birth |
Position(s)
Held
with
the Trust |
Trustee
and/or
Officer
Since |
Principal
Occupation(s)
During
Past 5 Years |
Number
of
Funds
in
Fund
Complex
Overseen
by
Trustee |
Other
Trusteeship(s)/
Directorship
Held by
Trustee/Director
During
Past
5 Years |
|
|
|
|
Managing
Partner, KPMG
LLP |
|
Nominating
Committee,
KPMG
LLP |
|
Prema
Mathai-Davis – 1950 |
Trustee |
2003 |
Retired
Formerly:
Co-Founder &
Partner
of Quantalytics
Research,
LLC, (a
FinTech
Investment
Research
Platform for the
Self-Directed
Investor);
Trustee
of YWCA
Retirement
Fund; CEO of
YWCA
of the USA; Board
member
of the NY
Metropolitan
Transportation
Authority;
Commissioner
of the NYC
Department
of Aging; and
Board
member of Johns
Hopkins
Bioethics Institute |
189 |
Member
of Board of
Positive
Planet US
(non-profit)
and
HealthCare
Chaplaincy
Network
(non-profit) |
|
Joel
W. Motley – 1952 |
Trustee |
2019 |
Director
of Office of
Finance,
Federal Home
Loan
Bank System;
Managing
Director of
Carmona
Motley Inc.
(privately
held financial
advisor);
Member of the
Council
on Foreign
Relations
and its Finance
and
Budget Committee;
Chairman
Emeritus of
Board
of Human Rights
Watch
and Member of its
Investment
Committee;
Member
of Investment
Committee
and Board of
Historic
Hudson Valley
(non-profit
cultural
organization);
Member of
Board
of Blue Ocean
Acquisition
Corp.; and
Member
of the Vestry and
Investment
Committee of
Trinity
Church Wall Street
Formerly:
Managing
Director
of Public Capital
Advisors,
LLC (privately
held
financial advisor);
Managing
Director of
Carmona
Motley Hoffman,
Inc.
(privately held
financial
advisor); Trustee
of
certain Oppenheimer
Funds;
and Director of
Columbia
Equity Financial |
189 |
Member
of Board of
Trust
for Mutual
Understanding
(non-
profit
promoting the
arts
and environment);
Member
of Board of
Greenwall
Foundation
(bioethics
research
foundation)
and its
Investment
Committee;
Member
of Board of
Friends
of the LRC
(non-profit
legal
advocacy);
and Board
Member
and
Investment
Committee
Member
of Pulitzer
Center
for Crisis
Reporting
(non-profit
journalism) |
C-4
|
Name,
Year of Birth |
Position(s)
Held
with
the Trust |
Trustee
and/or
Officer
Since |
Principal
Occupation(s)
During
Past 5 Years |
Number
of
Funds
in
Fund
Complex
Overseen
by
Trustee |
Other
Trusteeship(s)/
Directorship
Held by
Trustee/Director
During
Past
5 Years |
|
|
|
|
Corp.
(privately held
financial
advisor) |
|
|
|
Teresa
M. Ressel — 1962 |
Trustee |
2017 |
Non-executive
director
and
trustee of a number of
public
and private
business
corporations
Formerly:
Chief Executive
Officer,
UBS Securities
LLC
(investment banking);
Chief
Operating Officer,
UBS
AG Americas
(investment
banking); Sr.
Management
Team
Olayan
America, The
Olayan
Group
(international
investor/commercial/industrial);
Assistant
Secretary for
Management
& Budget
and
Designated Chief
Financial
Officer, U.S.
Department
of Treasury;
and
ON Semiconductor
Corporation
(semiconductor
manufacturing) |
189 |
None |
|
|
|
|
|
|
|
|
Robert
C. Troccoli – 1949 |
Trustee |
2016 |
Retired
Formerly:
Adjunct
Professor,
University of
Denver
– Daniels College
of
Business; and
Managing
Partner, KPMG
LLP |
189 |
None |
|
Daniel
S. Vandivort –1954 |
Trustee |
2019 |
President,
Flyway
Advisory
Services LLC
(consulting
and property
management)
Formerly:
President and
Chief
Investment Officer,
previously
Head of Fixed
Income,
Weiss Peck and
Greer/Robeco
Investment
Management;
Trustee and
Chair,
Weiss Peck and
Greer
Funds Board; and
various
capacities at CS
First
Boston including
Head
of Fixed Income at
First
Boston Asset |
189 |
Formerly:
Trustee and
Governance
Chair,
Oppenheimer
Funds;
Treasurer,
Chairman of
the
Audit and Finance
Committee,
Huntington
Disease
Foundation of
America. |
C-5
|
Name,
Year of Birth |
Position(s)
Held
with
the Trust |
Trustee
and/or
Officer
Since |
Principal
Occupation(s)
During
Past 5 Years |
Number
of
Funds
in
Fund
Complex
Overseen
by
Trustee |
Other
Trusteeship(s)/
Directorship
Held by
Trustee/Director
During
Past
5 Years |
|
|
|
|
Management |
|
|
Officers
|
Name,
Year of Birth |
Position(s)
Held
with
the Trust |
Trustee
and/or
Officer
Since |
Principal
Occupation(s) During Past 5 Years |
|
Sheri
Morris – 1964 |
President
and
Principal
Executive
Officer |
2003 |
Director,
Invesco Trust Company; Head of Global Fund Services,
Invesco
Ltd.; President and Principal Executive Officer, The
Invesco
Funds; Vice President, Invesco Exchange-Traded Fund
Trust,
Invesco Exchange-Traded Fund Trust II, Invesco India
Exchange-Traded
Fund Trust, Invesco Actively Managed
Exchange-Traded
Fund Trust, Invesco Actively Managed
Exchange-Traded
Commodity Fund Trust and Invesco Exchange-
Traded
Self-Indexed Fund Trust; and Vice President,
OppenheimerFunds,
Inc.
Formerly:
Vice President, Treasurer and Principal Financial
Officer,
The Invesco Funds; Vice President, Invesco AIM Advisers,
Inc.,
Invesco AIM Capital Management, Inc. and Invesco AIM
Private
Asset Management, Inc.; Assistant Vice President and
Assistant
Treasurer, The Invesco Funds; Vice President and
Assistant
Vice President, Invesco Advisers, Inc.; Assistant Vice
President,
Invesco AIM Capital Management, Inc. and Invesco
AIM
Private Asset Management, Inc.; Treasurer, Invesco
Exchange-Traded
Fund Trust, Invesco Exchange-Traded Fund
Trust
II, Invesco India Exchange-Traded Fund Trust and Invesco
Actively
Managed Exchange-Traded Fund Trust; and Senior Vice
President,
Invesco Advisers, Inc. (formerly known as Invesco
Institutional
(N.A.), Inc.) (registered investment adviser) |
|
Jeffrey
H. Kupor – 1968 |
Senior
Vice
President,
Chief
Legal
Officer
and
Secretary |
2018 |
Head
of Legal of the Americas, Invesco Ltd.; Senior Vice
President
and Secretary, Invesco Advisers, Inc. (formerly known
as
Invesco Institutional (N.A.), Inc.) (registered investment
adviser);
Secretary, Invesco Distributors, Inc. (formerly known as
Invesco
AIM Distributors, Inc.); Vice President and Secretary,
Invesco
Investment Services, Inc. (formerly known as Invesco
AIM
Investment Services, Inc.); Senior Vice President, Chief
Legal
Officer and Secretary, The Invesco Funds; Secretary and
General
Counsel, Invesco Investment Advisers LLC (formerly
known
as Van Kampen Asset Management); Secretary and
General
Counsel, Invesco Capital Markets, Inc. (formerly known
as
Van Kampen Funds Inc.); Chief Legal Officer, Invesco
Exchange-Traded
Fund Trust, Invesco Exchange-Traded Fund
Trust
II, Invesco India Exchange-Traded Fund Trust, Invesco
Actively
Managed Exchange-Traded Fund Trust, Invesco Actively
Managed
Exchange-Traded Commodity Fund Trust and Invesco
Exchange-Traded
Self-Indexed Fund Trust; Secretary and Vice
President,
Harbourview Asset Management Corporation;
Secretary
and Vice President, OppenheimerFunds, Inc. and
Invesco
Managed Accounts, LLC; Secretary and Senior Vice
President,
OFI Global Institutional, Inc.; Secretary and Vice
President,
OFI SteelPath, Inc.; Secretary and Vice President,
Oppenheimer
Acquisition Corp.; Secretary and Vice President,
Shareholder
Services, Inc.; and Secretary and Vice President,
Trinity
Investment Management Corporation
Formerly:
Senior Vice President, Invesco Distributors, Inc.;
Secretary
and Vice President, Jemstep, Inc.; Head of Legal,
|
C-6
|
Name,
Year of Birth |
Position(s)
Held
with
the Trust |
Trustee
and/or
Officer
Since |
Principal
Occupation(s) During Past 5 Years |
|
|
|
|
Worldwide
Institutional, Invesco Ltd.; Secretary and General
Counsel,
INVESCO Private Capital Investments, Inc.; Senior Vice
President,
Secretary and General Counsel, Invesco Management
Group,
Inc. (formerly known as Invesco AIM Management Group,
Inc.);
Assistant Secretary, INVESCO Asset Management
(Bermuda)
Ltd.; Secretary and General Counsel, Invesco Private
Capital,
Inc.; Assistant Secretary and General Counsel, INVESCO
Realty,
Inc.; Secretary and General Counsel, Invesco Senior
Secured
Management, Inc.; Secretary, Sovereign G./P. Holdings
Inc.;
Secretary, Invesco Indexing LLC; and Secretary, W.L. Ross
&
Co., LLC; |
|
Andrew
R. Schlossberg –
1974 |
Senior
Vice
President |
2019 |
Senior
Vice President, Invesco Group Services, Inc.; Head of the
Americas
and Senior Managing Director, Invesco Ltd.; Director
and
Senior Vice President, Invesco Advisers, Inc. (formerly known
as
Invesco Institutional (N.A.), Inc.) (registered investment
adviser);
Director and Chairman, Invesco Investment Services,
Inc.
(formerly known as Invesco AIM Investment Services, Inc.)
(registered
transfer agent); Senior Vice President, The Invesco
Funds;
and Director, Invesco Investment Advisers LLC (formerly
known
as Van Kampen Asset Management)
Formerly:
Director, President and Chairman, Invesco Insurance
Agency,
Inc.; Director, Invesco UK Limited; Director and Chief
Executive,
Invesco Asset Management Limited and Invesco Fund
Managers
Limited; Assistant Vice President, The Invesco Funds;
Senior
Vice President, Invesco Advisers, Inc. (formerly known as
Invesco
Institutional (N.A.), Inc.) (registered investment adviser);
Director
and Chief Executive, Invesco Administration Services
Limited
and Invesco Global Investment Funds Limited; Director,
Invesco
Distributors, Inc.; Head of EMEA, Invesco Ltd.; President,
Invesco
Actively Managed Exchange-Traded Commodity Fund
Trust,
Invesco Actively Managed Exchange-Traded Fund Trust,
Invesco
Exchange-Traded Fund Trust, Invesco Exchange-Traded
Fund
Trust II and Invesco India Exchange-Traded Fund Trust; and
Managing
Director and Principal Executive Officer, Invesco
Capital
Management LLC |
|
John
M. Zerr – 1962 |
Senior
Vice
President |
2006 |
Chief
Operating Officer of the Americas; Senior Vice President,
Invesco
Advisers, Inc. (formerly known as Invesco Institutional
(N.A.),
Inc.) (registered investment adviser); Senior Vice
President,
Invesco Distributors, Inc. (formerly known as Invesco
AIM
Distributors, Inc.); Director and Vice President, Invesco
Investment
Services, Inc. (formerly known as Invesco AIM
Investment
Services, Inc.); Senior Vice President, The Invesco
Funds;
Managing Director, Invesco Capital Management LLC;
Director,
Invesco Investment Advisers LLC (formerly known as
Van
Kampen Asset Management); Senior Vice President, Invesco
Capital
Markets, Inc. (formerly known as Van Kampen Funds
Inc.);
Manager, Invesco Indexing LLC; Manager, Invesco
Specialized
Products, LLC; Member, Invesco Canada Funds
Advisory
Board; Director, President and Chief Executive Officer,
Invesco
Corporate Class Inc. (corporate mutual fund company);
Director,
Chairman, President and Chief Executive Officer,
Invesco
Canada Ltd. (formerly known as Invesco Trimark
Ltd./Invesco
Trimark Ltèe) (registered investment adviser and
registered
transfer agent); President, Invesco, Inc.; President,
Invesco
Global Direct Real Estate Feeder GP Ltd.; President,
Invesco
IP Holdings (Canada) Ltd; President, Invesco Global
Direct
Real Estate GP Ltd.; President, Invesco Financial Services
Ltd/Services
Financiers Invesco Ltée; and Director and Chairman,
|
C-7
|
Name,
Year of Birth |
Position(s)
Held
with
the Trust |
Trustee
and/or
Officer
Since |
Principal
Occupation(s) During Past 5 Years |
|
|
|
|
Invesco
Trust Company
Formerly:
President, Trimark Investments Ltd/Services Financiers
Invesco
Ltee; Director and Senior Vice President, Invesco
Insurance
Agency, Inc.; Director and Senior Vice President,
Invesco
Management Group, Inc. (formerly known as Invesco AIM
Management
Group, Inc.); Secretary and General Counsel,
Invesco
Management Group, Inc. (formerly known as Invesco AIM
Management
Group, Inc.); Secretary, Invesco Investment
Services,
Inc. (formerly known as Invesco AIM Investment
Services,
Inc.); Chief Legal Officer and Secretary, The Invesco
Funds;
Secretary and General Counsel, Invesco Investment
Advisers
LLC (formerly known as Van Kampen Asset
Management);
Secretary and General Counsel, Invesco Capital
Markets,
Inc. (formerly known as Van Kampen Funds Inc.); Chief
Legal
Officer, Invesco Exchange-Traded Fund Trust, Invesco
Exchange-Traded
Fund Trust II, Invesco India Exchange-Traded
Fund
Trust, Invesco Actively Managed Exchange-Traded Fund
Trust,
Invesco Actively Managed Exchange-Traded Commodity
Fund
Trust and Invesco Exchange-Traded Self-Indexed Fund
Trust;
Secretary, Invesco Indexing LLC; Director, Secretary,
General
Counsel and Senior Vice President, Van Kampen
Exchange
Corp.; Director, Vice President and Secretary, IVZ
Distributors,
Inc. (formerly known as INVESCO Distributors, Inc.);
Director
and Vice President, INVESCO Funds Group, Inc.;
Director
and Vice President, Van Kampen Advisors Inc.; Director,
Vice
President, Secretary and General Counsel, Van Kampen
Investor
Services Inc.; Director and Secretary, Invesco
Distributors,
Inc. (formerly known as Invesco AIM Distributors,
Inc.);
Director, Senior Vice President, General Counsel and
Secretary,
Invesco AIM Advisers, Inc. and Van Kampen
Investments
Inc.; Director, Vice President and Secretary, Fund
Management
Company; Director, Senior Vice President,
Secretary,
General Counsel and Vice President, Invesco AIM
Capital
Management, Inc.; and Chief Operating Officer and
General
Counsel, Liberty Ridge Capital, Inc. (an investment
adviser) |
|
Gregory
G. McGreevey –
1962 |
Senior
Vice
President |
2012 |
Senior
Managing Director, Invesco Ltd.; Director, Chairman,
President,
and Chief Executive Officer, Invesco Advisers, Inc.
(formerly
known as Invesco Institutional (N.A.), Inc.) (registered
investment
adviser); Director, Invesco Mortgage Capital, Inc. and
Invesco
Senior Secured Management, Inc.; Senior Vice President,
The
Invesco Funds; President, SNW Asset Management
Corporation
and Invesco Managed Accounts, LLC; Chairman and
Director,
Invesco Private Capital, Inc.; Chairman and Director,
INVESCO
Private Capital Investments, Inc.; Chairman and
Director,
INVESCO Realty, Inc.; and Senior Vice President,
Invesco
Group Services, Inc.
Formerly:
Senior Vice President, Invesco Management Group,
Inc.
and Invesco Advisers, Inc.; Assistant Vice President, The
Invesco
Funds |
|
Adrien
Deberghes – 1967 |
Principal
Financial
Officer,
Treasurer
and
Vice
President |
2020 |
Head
of the Fund Office of the CFO and Fund Administration;
Vice
President, Invesco Advisers, Inc.; Principal Financial Officer,
Treasurer
and Vice President, The Invesco Funds; and Vice
President,
Invesco Exchange-Traded Fund Trust, Invesco
Exchange-Traded
Fund Trust II, Invesco India Exchange-Traded
Fund
Trust, Invesco Actively Managed Exchange-Traded Fund
Trust,
Invesco Actively Managed Exchange-Traded Commodity
|
C-8
|
Name,
Year of Birth |
Position(s)
Held
with
the Trust |
Trustee
and/or
Officer
Since |
Principal
Occupation(s) During Past 5 Years |
|
|
|
|
Fund
Trust and Invesco Exchange-Traded Self-Indexed Fund
Trust
Formerly:
Senior Vice President and Treasurer, Fidelity
Investments |
|
Crissie
M. Wisdom – 1969 |
Anti-Money
Laundering
Compliance
Officer |
2013 |
Anti-Money
Laundering and OFAC Compliance Officer for Invesco
U.S.
entities including: Invesco Advisers, Inc. and its affiliates,
Invesco
Capital Markets, Inc., Invesco Distributors, Inc., Invesco
Investment
Services, Inc., The Invesco Funds, Invesco Capital
Management,
LLC, Invesco Trust Company; and Fraud
Prevention
Manager for Invesco Investment Services, Inc. |
|
Todd
F. Kuehl – 1969 |
Chief
Compliance
Officer
and
Senior
Vice
President |
2020 |
Chief
Compliance Officer, Invesco Advisers, Inc. (registered
investment
adviser); and Chief Compliance Officer and Senior
Vice
President, The Invesco Funds
Formerly:
Managing Director and Chief Compliance Officer, Legg
Mason
(Mutual Funds); Chief Compliance Officer, Legg Mason
Private
Portfolio Group (registered investment adviser) |
|
James
Bordewick, Jr. -
(1959) |
Senior
Vice
President
and
Senior
Officer |
2022 |
Senior
Vice President and Senior Officer, The Invesco Funds; and
Chief
Legal Officer, KingsCrowd, Inc. (research and analytical
platform
for investment in private capital markets)
Formerly,
Chief Operating Officer and Head of Legal and
Regulatory,
Netcapital (private capital investment platform);
Managing
Director, General Counsel of asset management and
Chief
Compliance Officer for asset management and private
banking,
Bank of America Corporation; Chief Legal Officer,
Columbia
Funds and BofA Funds; Senior Vice President and
Associate
General Counsel, MFS Investment Management; Chief
Legal
Officer, MFS Funds; Associate, Ropes & Gray; Associate,
Gaston
Snow & Ely Bartlett. |
C-9
Trustee
Ownership of Fund Shares as of December 31, 2021
|
Name
of Trustee |
Dollar
Range of Equity Securities Per Fund |
Aggregate
Dollar Range of
Equity
Securities in All
Registered
Investment
Companies
Overseen by
Trustee
in Invesco Funds |
|
Interested
Person |
|
|
|
Martin
L. Flanagan |
None |
Over
$100,000 |
|
|
|
|
|
Independent
Trustees |
|
|
|
Beth
A. Brown |
None |
Over
$100,000 |
|
Cynthia
Hostetler |
None |
Over
$100,0002
|
|
Eli
Jones |
None |
Over
$100,0002
|
|
Elizabeth
Krentzman |
None |
Over
$100,000 |
|
Anthony
J. LaCava, Jr. |
None |
Over
$100,0002 |
|
Prema
Mathai-Davis |
Invesco
Premier Portfolio (Over $100,000) |
Over
$100,0002
|
|
Joel
W. Motley |
None |
Over
$100,0002
|
|
Teresa
M. Ressel |
None |
Over
$100,000 |
|
Robert
C. Troccoli |
None |
Over
$100,0002 |
|
Daniel
S. Vandivort |
None |
Over
$100,0002 |
|
|
|
|
2.
Includes total
amount of compensation deferred by the trustee at his or her election pursuant
to a deferred compensation plan. Such deferred compensation is placed in a
deferral account and deemed to be invested in one or more of the Invesco
Funds.
C-10
APPENDIX
D - TRUSTEE COMPENSATION TABLE
Set
forth below is information regarding compensation paid or accrued for each
trustee of the Trust who was not affiliated
with Invesco during the year ended December 31, 2021, unless otherwise
noted.
|
Trustee |
Aggregate
Compensation
From
the Trust(1)
|
Retirement
Benefits
Accrued
by
All Invesco
Funds |
Estimated
Annual
Benefits
Upon
Retirement(2)
|
Total
Compensation
From
All Invesco Funds Paid to
the
Trustees(3)
|
|
Independent
Trustees(4) |
|
|
|
|
|
Beth
A. Brown |
$6,217 |
$- |
$- |
$428,989 |
|
Cynthia
Hostetler |
6,377 |
- |
- |
443,985 |
|
Eli
Jones |
5,851 |
- |
- |
403,989 |
|
Elizabeth
Krentzman |
6,408 |
- |
- |
461,485 |
|
Anthony
J. LaCava, Jr. |
6,701 |
- |
- |
466,263 |
|
Prema
Mathai-Davis |
5,754 |
- |
205,000 |
398,989 |
|
Joel
W. Motley |
5,851 |
- |
- |
406,489 |
|
Teresa
M. Ressel |
6,037 |
- |
- |
422,589 |
|
Robert
C. Troccoli |
5,882 |
- |
- |
418,989 |
|
Daniel
S. Vandivort |
6,160 |
- |
- |
420,089 |
(1)
Amounts shown are
based on the fiscal year ended August 31, 2022. The total amount of compensation
deferred by all trustees of the Trust during the fiscal year ended August 31,
2022, including earnings, was $24,289.
(2)
These amounts
represent the estimated annual benefits payable by the Invesco Funds upon the
trustees’ retirement and assumes each trustee serves until his or her normal
retirement date. These amounts are not adjusted to reflect deemed investment
appreciation or depreciation.
(3)
These amounts
represent the compensation paid from all Invesco Funds to the individuals who
serve as trustees. All trustees currently serve as trustee of 32 registered
investment companies advised by Invesco, unless otherwise noted.
(4)
On
October
3,
2021, Jack M. Fields retired. During the fiscal year ended August 31, 2022,
aggregate compensation from the Trust for Mr. Fields was $81.
On
December
31,
2021, James D. Vaughn retired. During the fiscal year ended August 31, 2022,
aggregate compensation from the Trust for Mr. Vaughn was $1,376.
On August 28,
2022, Christopher Wilson retired. During the fiscal year ended August 31, 2022,
aggregate compensation from the Trust for Mr. Wilson was $9,863. Pursuant to a
consulting agreement with the Trust, Mr. Wilson may receive payments for
consulting services provided to the Trust for up to three years following his
retirement. No such fees were paid during the fiscal year.
On September 14,
2022, Ann Barnett Stern resigned. During the fiscal year ended August 31, 2022,
aggregate compensation from the Trust for Ms. Stern was
$6,531.
D-1
APPENDIX
E - PROXY POLICY AND PROCEDURES
Invesco’s
Policy Statement on Global Corporate Governance and Proxy Voting
The
Adviser and each sub-adviser rely on this policy. In addition, Invesco Asset
Management (Japan)
Limited and Invesco Asset Management (India) Pvt. Ltd. have also adopted
operating guidelines and procedures for proxy voting particular to each regional
investment center. Such guidelines and procedures are attached
hereto.
E-1
Invesco’s
Policy Statement on Global
Corporate Governance and
Proxy Voting
Corporate Governance and
Proxy Voting
Effective
January 2022
E-2
I.
INTRODUCTION
Invesco Ltd. and
its affiliated investment advisers (collectively, “Invesco”, the “Company”,
“our” or “we”) has adopted and implemented this Policy Statement on Global
Corporate Governance and Proxy Voting (“Policy”) which it believes describes
policies and procedures reasonably designed to ensure that proxies are voted in
the best interests of its clients. This Policy is intended to help Invesco’s
clients understand our commitment to responsible investing and proxy voting, as
well as the good governance principles that inform our approach to engagement
and voting at shareholder meetings.
A.
Our Commitment to Environmental, Social and Governance Investment Stewardship
and
Proxy Voting
Proxy Voting
Our commitment to
environmental, social and governance (ESG) principles is a core element of our
ambition to be the most client centric asset manager. We aspire to incorporate
ESG considerations into all of our investment capabilities in the context of
financial materiality and in the best interest of our clients. In our role as
stewards of our clients’ investments, we regard our stewardship activities,
including engagement and the exercise of proxy voting rights as an essential
component of our fiduciary duty to maximize long-term shareholder value. Our
Global ESG team functions as a center of excellence, providing specialist
insights on research, engagement, voting, integration, tools, and client and
product solutions with investment teams implementing ESG approaches appropriate
to asset class and investment style. Much of our work is rooted in fundamental
research and frequent dialogue with companies during due diligence and
monitoring of our investments.
Invesco views proxy
voting as an integral part of its investment management responsibilities. The
proxy voting process at Invesco focuses on protecting clients’ rights and
promoting governance structures and practices that reinforce the accountability
of corporate management and boards of directors to shareholders. The voting
decision lies with our portfolio managers and analysts with input and support
from our Global ESG team and Proxy Operations functions. Our proprietary proxy
voting platform (“PROXYintel”) facilitates implementation of voting decisions
and rationales across global investment teams. Our good governance principles,
governance structure and processes are designed to ensure that proxy votes are
cast in accordance with clients’ best interests.
As a large active
investor, Invesco is well placed to use our ESG expertise and beliefs to engage
directly with portfolio companies or by collaborative means in ways which drive
corporate change that we believe will enhance shareholder value. We take our
responsibility as active owners very seriously and see engagement as an
opportunity to encourage continual improvement and ensure that our clients’
interests are represented and protected. Dialogue with portfolio companies is a
core part of the investment process. Invesco may engage with investee companies
to discuss environmental, social and governance issues throughout the year or on
specific ballot items to be voted on.
Our passive
strategies and certain other client accounts managed in accordance with fixed
income, money market and index strategies (including exchange traded funds) will
typically vote in line with the majority holder of the active-equity shares held
by Invesco outside of those strategies. Invesco refers to this approach as
“Majority Voting”. This process of Majority Voting ensures that our passive
strategies benefit from the engagement and deep dialogue of our active
investors, which Invesco believes benefits shareholders in passively-managed
accounts. In the absence of overlap between the active and passive holders, the
passive holders vote in line with our internally developed voting guidelines (as
defined below). Portfolio managers and analysts for accounts employing Majority
Voting retain full discretion to override Majority Voting and to vote the shares
as they determine to be in the best interest of those accounts, absent certain
types of conflicts of interest, which are discussed elsewhere in this
Policy.
B.
Applicability of Policy
Invesco may be
granted by its clients the authority to vote the proxies of securities held in
client portfolios. Invesco’s investment teams vote proxies on behalf of
Invesco-sponsored funds and both fund and non-fund advisory clients that have
explicitly granted Invesco authority in writing to vote proxies on their behalf.
In the case of institutional or sub-advised clients, Invesco will vote the
proxies in
E-3
accordance with
this Policy unless the client agreement specifies that the client retains the
right to vote or has designated a named fiduciary to direct voting.
This Policy applies
to all entities in Exhibit A. Due to regional or asset-class specific
considerations, there may be certain entities that have local proxy voting
guidelines or policies and procedures that differ from this Policy. In the event
that local policies and the Global Policy differ, the local policy will apply.
These entities are also listed in Exhibit A and include proxy voting guidelines
specific to: Invesco Asset Management (Japan) Limited, Invesco Asset Management
(India) Pvt. Ltd, Invesco Taiwan Ltd and Invesco Capital Markets, Inc. for
Invesco Unit Investment Trusts. In Europe, we comply with the Shareholder Rights
Directive and publish our disclosures and voting practices in this
regard.
II.
GLOBAL
PROXY VOTING OPERATIONAL PROCEDURES
Invesco’s global
proxy voting operational procedures are in place to implement the provisions of
this Policy (the “Procedures”). At Invesco, proxy voting is conducted by our
investment teams through PROXYintel. Our investment teams globally are supported
by Invesco’s centralized team of ESG professionals and proxy voting specialists.
Invesco’s Global ESG team oversees the proxy policy, operational procedures,
inputs to analysis and research and leads the Global Invesco Proxy Advisory
Committee (“Global IPAC”). Invesco’s global proxy services team is responsible
for operational implementation, including vote execution oversight.
Invesco aims to
vote all proxies where we have been granted voting authority in accordance with
this Policy as implemented by the Procedures. Our portfolio managers and
analysts review voting items based on their individual merits and retain full
discretion on vote execution conducted through our proprietary proxy voting
platform. Invesco may supplement its internal research with information from
independent third-parties, such as proxy advisory firms.
A.
Proprietary Proxy Voting Platform
Invesco’s
proprietary proxy voting platform is supported by a dedicated team of internal
proxy specialists. PROXYintel streamlines the proxy voting process by providing
our investment teams globally with direct access to meeting information and
proxies, external proxy research and ESG ratings, as well as related functions,
such as management of conflicts of interest issues, significant votes, global
reporting and record-keeping capabilities. Managing these processes internally,
as opposed to relying on third parties, is designed to provide Invesco greater
quality control, oversight and independence in the proxy administration
process.
Historical proxy
voting information is stored to build institutional knowledge across the Invesco
complex with respect to individual companies and proxy issues. Certain
investment teams also use PROXYintel to access third-party proxy research and
ESG ratings.
Our proprietary
systems facilitate internal control and oversight of the voting process. Invesco
may choose to leverage this capability to automatically vote proxies based on
its internally developed custom voting guidelines and in circumstances where
Majority Voting applies.
B.
Oversight of Voting Operations
Invesco’s Proxy
Governance and Voting Manager provides oversight of the proxy voting
verification processes facilitated by a dedicated global proxy services team
which include: (i) the monthly global vote audit review of votes cast containing
documented rationales of conflicts of interest votes, market and operational
limitations; (ii) the quarterly sampling of proxy votes cast to determine that
(a) Invesco is voting consistently with this Policy and (b) third-party proxy
advisory firms’ methodologies in formulating the vote recommendation are
consistent with their publicly disclosed guidelines; and (iii) quarterly review
of rationales with the Global IPAC of occasions where a portfolio manager may
take a position that may not be in accordance with Invesco’s good governance
principles and our internally developed voting guidelines.
To the extent
material errors are identified in the proxy voting process, such errors are
reviewed and reported to, as appropriate, the Global Head of ESG, Global Proxy
Governance and Voting Manager,
E-4
legal and
compliance, the Global IPAC and relevant boards and clients, where applicable.
Invesco’s Global Head of ESG and Proxy Governance and Voting Manager provide
proxy voting updates and reporting to the Global IPAC, various boards and
clients. Invesco’s proxy voting administration and operations are subject to
periodic review by Internal Audit and Compliance groups.
C.
Disclosures and Record Keeping
Unless otherwise
required by local or regional requirements, Invesco maintains voting records in
either electronic format or hard copy for at least 6 years. Invesco makes
available its proxy voting records publicly in compliance with regulatory
requirements and industry best practices in the regions below:
•
In accordance with
the US Securities and Exchange Commission regulations, Invesco will file a
record of all proxy voting activity for the prior 12 months ending June 30th for
each U.S. registered fund. That filing is made on or before August 31st of each
year. Each year, the proxy voting records are made available on Invesco’s
website here. Moreover, and to
the extent applicable, the U.S. Employee Retirement Income Security Act of 1974,
as amended (“ERISA”), including Department of Labor regulations and guidance
thereunder, provide that the named fiduciary generally should be able to review
not only the investment manager's voting procedure with respect to plan-owned
stock, but also to review the actions taken in individual proxy voting
situations. In the case of institutional and sub-advised Clients, Clients may
contact their client service representative to request information about how
Invesco voted proxies on their behalf. Absent specific contractual guidelines,
such requests may be made on a semi-annual basis.
•
In the UK and
Europe, Invesco publicly discloses our proxy votes monthly in compliance with
the UK Stewardship Code and for the European Shareholder Rights Directive
annually here.
•
In Canada, Invesco
publicly discloses our annual proxy votes each year here by August 31st,
covering the 12-month period ending June 30th in compliance with the National
Instrument 81-106 Investment Fund Continuous Disclosure.
•
In Japan, Invesco
publicly discloses our proxy votes annually in compliance with the Japan
Stewardship Code.
•
In India, Invesco
publicly discloses our proxy votes quarterly in compliance with The Securities
and Exchange Board of India (“SEBI”) Circular on stewardship code for all mutual
funds and all categories of Alternative Investment Funds in relation to their
investment in listed equities. SEBI has implemented principles on voting for
Mutual Funds through circulars dated March 15, 2010 and March 24, 2014, which
prescribed detailed mandatory requirements for Mutual Funds in India to disclose
their voting policies and actual voting by Mutual Funds on different resolutions
of investee companies.
•
In Hong Kong,
Invesco Hong Kong Limited will provide proxy voting records upon request in
compliance with the Securities and Futures Commission (“SFC”) Principles of
Responsible Ownership.
•
In Taiwan, Invesco
publicly discloses our proxy voting policy and proxy votes annually in
compliance with Taiwan’s Stewardship Principles for Institutional
Investors.
•
In Australia,
Invesco publicly discloses a summary of its proxy voting record annually
here.
D.
Global Invesco Proxy Advisory Committee
Guided by its
philosophy that investment teams should manage proxy voting, Invesco has created
the Global IPAC. The Global IPAC is an investments-driven committee comprised of
representatives from various investment management teams globally, Invesco’s
Global Head of ESG and chaired by its Global Proxy Governance and Voting
Manager. The Global IPAC provides a forum for investment teams to monitor,
understand and discuss key proxy issues and voting trends within the Invesco
complex, to
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assist Invesco in
meeting regulatory obligations, to review votes not aligned with our good
governance principles and to consider conflicts of interest in the proxy voting
process, all in accordance with this Policy.
In fulfilling its
responsibilities, the Global IPAC meets as necessary, but no less than
semi-annually, and has the following responsibilities and functions: (i) acts as
a key liaison between the Global ESG team and local proxy voting practices to
ensure compliance with this Policy; (ii) provides insight on market trends as it
relates to stewardship practices; (iii) monitors proxy votes that present
potential conflicts of interest; (iv) the Conflict of Interest sub-committee
will make voting decisions on submissions made by portfolio managers on conflict
of interest issues to override the Policy; and (v) reviews and provides input,
at least annually, on this Policy and related internal procedures and recommends
any changes to the Policy based on, but not limited to, Invesco’s experience,
evolving industry practices, or developments in applicable laws or
regulations.
In addition to the
Global IPAC, for some clients, third parties (e.g., U.S. fund boards) provide
oversight of the proxy voting process.
E.
Market and Operational Limitations
In the great
majority of instances, Invesco will vote proxies. However, in certain
circumstances, Invesco may refrain from voting where the economic or other
opportunity costs of voting exceeds any benefit to clients. Moreover, ERISA
fiduciaries, in voting proxies or exercising other shareholder rights, must not
subordinate the economic interests of plan participants and beneficiaries to
unrelated objectives. These matters are left to the discretion of the relevant
portfolio manager. Such circumstances could include, for example:
•
In some countries
the exercise of voting rights imposes temporary transfer restrictions on the
related securities (“share blocking”). Invesco generally refrains from voting
proxies in share blocking countries unless Invesco determines that the benefit
to the client(s) of voting a specific proxy outweighs the client’s temporary
inability to sell the security.
•
Some companies
require a representative to attend meetings in person to vote a proxy,
additional documentation or the disclosure of beneficial owner details to vote.
Invesco may determine that the costs of sending a representative, signing a
power-of-attorney or submitting additional disclosures outweigh the benefit of
voting a particular proxy.
•
Invesco may not
receive proxy materials from the relevant fund or client custodian with
sufficient time and information to make an informed independent voting
decision.
•
Invesco held shares
on the record date but has sold them prior to the meeting date.
In some non-U.S.
jurisdictions, although Invesco uses reasonable efforts to vote a proxy, proxies
may not be accepted or may be rejected due to changes in the agenda for a
shareholder meeting for which Invesco does not have sufficient notice, due to a
proxy voting service not being offered by the custodian in the local market or
due to operational issues experienced by third-parties involved in the process
or by the issuer or sub-custodian. In addition, despite the best efforts of
Invesco and its proxy voting agent, there may be instances where our votes may
not be received or properly tabulated by an issuer or the issuer’s
agent.
F.
Securities Lending
Invesco’s funds may
participate in a securities lending program. In circumstances where shares are
on loan, the voting rights of those shares are transferred to the borrower. If
the security in question is on loan as part of a securities lending program,
Invesco may determine that the benefit to the client of voting a particular
proxy outweighs the benefits of securities lending. In those instances, Invesco
may determine to recall securities that are on loan prior to the meeting record
date, so that we will be entitled to vote those shares. There may be instances
where Invesco may be unable to recall shares or may choose not to recall shares.
The relevant portfolio manager will make these determinations.
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G.
Conflicts of Interest
There may be
occasions where voting proxies may present a perceived or actual conflict of
interest between Invesco, as investment manager, and one or more of Invesco’s
clients or vendors.
Firm-Level
Conflicts of interest
A conflict of
interest may exist if Invesco has a material business relationship with either
the company soliciting a proxy or a third party that has a material interest in
the outcome of a proxy vote or that is actively lobbying for a particular
outcome of a proxy vote. Such relationships may include, among others, a client
relationship, serving as a vendor whose products / services are material or
significant to Invesco, serving as a distributor of Invesco’s products, a
significant research provider or broker to Invesco.
Invesco identifies
potential conflicts of interest based on a variety of factors, including but not
limited to the materiality of the relationship between the issuer or its
affiliates to Invesco.
Material firm-level
conflicts of interests are identified by individuals and groups within Invesco
globally based on criteria established by the global proxy services team. These
criteria are monitored and updated periodically by the global proxy services
team so as to seek to ensure an updated view is available when conducting
conflicts checks. Operating procedures and associated governance are designed to
seek to ensure conflicts of interest are appropriately considered ahead of
voting proxies. The Global IPAC Conflict of Interest Sub-committee maintains
oversight of the process. Companies identified as conflicted will be voted in
line with the principles below as implemented by Invesco’s internally developed
voting guidelines. To the extent a portfolio manager disagrees with the Policy,
our processes and procedures seek to ensure justification and rationales are
fully documented and presented to the Global IPAC Conflict of Interest
Sub-committee for approval by a majority vote.
As an additional
safeguard, persons from Invesco’s marketing, distribution and other
customer-facing functions may not serve on the Global IPAC. For the avoidance of
doubt, Invesco may not consider Invesco Ltd.’s pecuniary interest when voting
proxies on behalf of clients. To avoid any appearance of a conflict of interest,
Invesco will not vote proxies issued by Invesco Ltd. that may be held in client
accounts.
Personal
Conflicts of Interest
A conflict also may
exist where an Invesco employee has a known personal or business relationship
with other proponents of proxy proposals, participants in proxy contests,
corporate directors, or candidates for directorships. Under Invesco’s Global
Code of Conduct, Invesco entities and individuals must act in the best interests
of clients and must avoid any situation that gives rise to an actual or
perceived conflict of interest.
All Invesco
personnel with proxy voting responsibilities are required to report any known
personal or business conflicts of interest regarding proxy issues with which
they are involved. In such instances, the individual(s) with the conflict will
be excluded from the decision-making process relating to such
issues.
Voting
Fund of Funds
There may be
conflicts that can arise from Invesco voting on matters when shares of
Invesco-sponsored funds are held by other Invesco funds or entities. The
scenarios below set out how Invesco votes in these instances.
•
In the United
States, as required by law, proportional voting applies.
•
Shares of an
Invesco-sponsored fund held by other Invesco funds will be voted in the same
proportion as the votes of external shareholders of the underlying fund, where
required by law.
•
Shares of an
unaffiliated registered fund held by one or more Invesco funds will be voted
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in the same
proportion as the votes of external shareholders of the underlying fund where
the thresholds are met as required by federal securities law or any exemption
therefrom.
•
To the extent
proportional voting is required by law but not operationally possible, Invesco
will not vote the shares.
•
For US fund of
funds where proportional voting is not required by law, Invesco will still apply
proportional voting. In the event this is not operationally possible, Invesco
will vote in line with our internally developed voting guidelines (as defined
below).
•
For non-US fund of
funds Invesco will vote in line with our above-mentioned firm-level conflicts of
interest process unless local policies are in place as per Exhibit
A.
H.
Use of Third-Party Proxy Advisory Services
Invesco may
supplement its internal research with information from independent
third-parties, such as proxy advisory firms, to assist us in assessing the
corporate governance of investee companies. Globally, Invesco leverages research
from Institutional Shareholder Services Inc. (“ISS”) and Glass Lewis (“GL”).
Invesco generally retains full and independent discretion with respect to proxy
voting decisions.
ISS and GL both
provide research reports, including vote recommendations, to Invesco and its
portfolio managers and analysts. Invesco retains ISS to provide written analysis
and recommendations based on Invesco’s internally developed custom voting
guidelines. Updates to previously issued proxy research reports may be provided
to incorporate newly available information or additional disclosure provided by
the issuer regarding a matter to be voted on, or to correct factual errors that
may result in the issuance of revised proxy vote recommendations. Invesco’s
global proxy services team may periodically monitor for these research alerts
issued by ISS and GL that are shared with our investment teams. Invesco will
generally endeavor to consider such information where such information is
considered material provided it is delivered in a timely manner ahead of the
vote deadline.
Invesco also
retains ISS to assist in the implementation of certain proxy voting-related
functions, including, but not limited to, operational and reporting
services.
These
administrative services include receipt of proxy ballots, vote execution through
PROXYintel and vote disclosure in Canada, the UK and Europe to meet regulatory
reporting obligations.
As part of its
fiduciary obligation to clients, Invesco performs extensive initial and ongoing
due diligence on the proxy advisory firms it engages globally. This includes
reviews of information regarding the capabilities of their research staff,
methodologies for formulating voting recommendations, the adequacy and quality
of personnel and technology, as applicable, and internal controls, policies and
procedures, including those relating to possible conflicts of
interest.
The proxy advisory
firms Invesco engages globally complete an annual due diligence questionnaire
submitted by Invesco, and Invesco conducts annual due diligence meetings in part
to discuss their responses to the questionnaire. In addition, Invesco monitors
and communicates with these firms and monitors their compliance with Invesco’s
performance and policy standards. ISS and GL disclose conflicts to Invesco
through a review of their policies, procedures and practices regarding potential
conflicts of interests (including inherent internal conflicts) as well as
disclosure of the work ISS and GL perform for corporate issuers and the payments
they receive from such issuers. As part of
our
annual policy development process, Invesco engages with external proxy and
governance experts to understand market trends and developments and to weigh
in
on the
development of these policies at these firms, where appropriate. These meetings
provide Invesco with an opportunity to assess the firms’ capabilities, conflicts
of interest and service levels, as well as provide investment professionals with
direct insight into the advisory firms’ stances on key governance and proxy
topics and their policy framework/methodologies.
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Invesco completes a
review of the System and Organizational Controls (“SOC”) Reports for each proxy
advisory firm to ensure the related controls operated effectively to provide
reasonable assurance.
In addition to ISS
and GL, Invesco may use regional third-party research providers to access
regionally specific research.
I.
Review of Policy
The Global IPAC and
Invesco’s Global ESG team, global proxy services team, compliance and legal
teams annually communicate and review this Policy and our internally developed
custom voting guidelines to seek to ensure that they remain consistent with
clients’ best interests, regulatory requirements, investment team
considerations, governance trends and industry best practices. At least
annually, this Policy and our internally developed voting guidelines are
reviewed by various groups within Invesco to ensure that they remain consistent
with Invesco’s views on best practice in corporate governance and long-term
investment stewardship.
III.
OUR
GOOD GOVERNANCE PRINCIPLES
Invesco’s good
governance principles outline our views on best practice in corporate governance
and long-term investment stewardship. These principles have been developed by
our global investment teams in collaboration with the Global ESG team. The broad
philosophy and guiding principles in this section inform our approach to
long-term investment stewardship and proxy voting. These principles are not
intended to be exhaustive or prescriptive.
Our portfolio
managers and analysts retain full discretion on vote execution in the context of
our good governance principles and internally developed custom voting
guidelines, except where otherwise specified in this Policy. The final voting
decisions may consider the unique circumstances affecting companies, regional
best practices and any dialogue we have had with company management. As a
result, different Portfolio Management Teams may vote differently on particular
votes for the same company. To the extent a portfolio manager chooses to vote a
proxy in a way that is not aligned with the principles below, such manager’s
rationales are fully documented.
The following
guiding principles apply to operating companies. We apply a separate approach to
open-end and closed-end investment companies and unit investment trusts. Where
appropriate, these guidelines are supplemented by additional internal guidance
that considers regional variations in best practices, disclosure and
region-specific voting items.
Our good governance
principles are divided into six key themes that Invesco endorses.
The following are
high-level governance principles that Invesco endorses:
A.
Transparency
We expect companies
to provide accurate, timely and complete information that enables investors to
make informed investment decisions and effectively carry out their stewardship
activities. Invesco supports the highest standards in corporate
transparency
and
believes that these disclosures should be made available ahead of the voting
deadlines for the Annual General Meeting or Extraordinary General Meeting to
allow for timely decision-making.
Financial
reporting: Company accounts
and reporting must accurately reflect the underlying economic position of a
company. Arrangements that may constitute an actual or perceived conflict with
this objective should be avoided.
•
We will generally
support proposals to accept the annual financial statements, statutory accounts
and similar proposals unless these reports are not presented in a timely manner
or significant issues are identified regarding the integrity of these
disclosures.
•
We will generally
vote against the incumbent audit committee chair, or nearest equivalent, where
the non-audit fees paid to the independent auditor exceed audit fees for two
consecutive years
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or other
problematic accounting practices are identified such as fraud, misapplication of
audit standards or persistent material weaknesses/deficiencies in internal
controls over financial reporting.
•
We will generally
not support the ratification of the independent auditor and/or ratification of
their fees payable if non-audit fees exceed audit and audit related fees or
there are significant auditing controversies or questions regarding the
independence of the external auditor. We will consider an auditor’s length of
service as a company’s independent auditor in applying this policy.
B.
Accountability
Robust shareholder
rights and strong board oversight help ensure that management adhere to the
highest standards of ethical conduct, are held to account for poor performance
and responsibly deliver value creation for stakeholders over the long-term. We
therefore encourage companies to adopt governance features that ensure board and
management accountability. In particular, we consider the following as key
mechanisms for enhancing accountability to investors:
One
share one vote: Voting rights are
an important tool for investors to hold boards and management teams accountable.
Unequal voting rights may limit the ability of investors to exercise their
stewardship obligations.
•
We generally do not
support proposals that establish or perpetuate dual classes of voting shares,
double voting rights or other means of differentiated voting or disproportionate
board nomination rights.
•
We generally
support proposals to decommission differentiated voting rights.
•
Where unequal
voting rights are established, we expect these to be accompanied by reasonable
safeguards to protect minority shareholders’ interests.
Anti-takeover
devices: Mechanisms
designed to prevent or unduly delay takeover attempts may unduly limit the
accountability of boards and management teams to shareholders.
•
We generally will
not support proposals to adopt antitakeover devices such as poison pills.
Exceptions may be warranted at entities without significant operations and to
preserve the value of net operating losses carried forward or where the
applicability of the pill is limited in scope and duration.
•
In addition, we
will generally not support capital authorizations or amendments to corporate
articles or bylaws at operating companies that may be utilized for antitakeover
purposes, for example, the authorization of classes of shares of preferred stock
with unspecified voting, dividend, conversion or other rights (“blank check”
authorizations).
Shareholder
rights: We support the
rights of shareholders to hold boards and management teams accountable for
company performance. We generally support best practice aligned proposals to
enhance shareholder rights, including but not limited to the
following:
•
Adoption of proxy
access rights
•
Rights to call
special meetings
•
Rights to act by
written consent
•
Reduce
supermajority vote requirements
•
Remove antitakeover
provisions
•
Requirement that
directors are elected by a majority vote
In addition, we
oppose practices that limit shareholders’ ability to express their views at a
general meeting such as bundling unrelated proposals or several significant
article or bylaw amendments into a
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single voting item.
We will generally vote against these proposals unless we are satisfied that all
the underlying components are aligned with our views on best
practice.
Director
Indemnification: Invesco recognizes
that individuals may be reluctant to serve as corporate directors if they are
personally liable for all related lawsuits and legal costs. As a result,
reasonable limitations on directors’ liability can benefit a company and its
shareholders by helping to attract and retain qualified directors while
preserving recourse for shareholders in the event of misconduct by directors.
Accordingly, unless there is insufficient information to make a decision about
the nature of the proposal, Invesco will generally support proposals to limit
directors’ liability and provide indemnification and/or exculpation, provided
that the arrangements are reasonably limited in scope to directors acting in
good faith and, in relation to criminal matters, limited in scope to directors
having reasonable grounds for believing the conduct was lawful.
Responsiveness: Boards should
respond to investor concerns in a timely fashion, including reasonable requests
to engage with company representatives regarding such concerns, and address
matters that receive significant voting dissent at general meetings of
shareholders.
•
We will generally
vote against the lead independent director and/or the incumbent chair of the
governance committee, or nearest equivalent, in cases where the board has not
adequately responded to items receiving significant voting opposition from
shareholders at an annual or extraordinary general meeting.
•
We will generally
vote against the lead independent director and/or incumbent chair of the
governance committee, or nearest equivalent, where the board has not adequately
responded to a shareholder proposal which has received significant support from
shareholders.
•
We will generally
vote against the incumbent chair of the compensation committee if there are
significant ongoing concerns with a company’s compensation practices that have
not been addressed by the committee or egregious concerns with the company’s
compensation practices for two years consecutively.
•
We will generally
vote against the incumbent compensation committee chair where there are ongoing
concerns with a company’s compensation practices and there is no opportunity to
express dissatisfaction by voting against an advisory vote on executive
compensation, remuneration report (or policy) or nearest equivalent.
•
Where a company has
not adequately responded to engagement requests from Invesco or satisfactorily
addressed issues of concern, we may oppose director nominations, including, but
not limited to, nominations for the lead independent director and/or committee
chairs.
C.
Board Composition
and Effectiveness
Director
election process: Board
members should generally stand for election annually and
individually.
•
We will generally
support proposals requesting that directors stand for election
annually.
•
We will generally
vote against the incumbent governance committee chair or lead independent
director if a company has a classified board structure that is not being phased
out. We may make exceptions to this policy for non-operating
companies
(e.g.,
open-end and closed-end funds) or in regions where market practice is for
directors to stand for election on a staggered basis.
•
When a board is
presented for election as a slate (e.g., shareholders are unable to vote against
individual nominees and must vote for or against the entire nominated slate of
directors) and this approach is not aligned with local market practice, we will
generally vote against the slate in cases where we otherwise would vote against
an individual nominee.
•
Where market
practice is to elect directors as a slate we will generally support the
nominated
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slate unless there
are governance concerns with several of the individuals included on the slate or
we have broad concerns with the composition of the board such as a lack
independence.
Board
size:
We will generally defer to the board with respect to determining the optimal
number of board members given the size of the company and complexity of the
business, provided that the proposed board size is sufficiently large to
represent shareholder interests and sufficiently limited to remain
effective.
Board
assessment and succession planning: When evaluating
board effectiveness, Invesco considers whether periodic performance reviews and
skills assessments are conducted to ensure the board represents the interests of
shareholders. In addition, boards should have a robust succession plan in place
for key management and board personnel.
Definition
of independence: Invesco considers
local market definitions of director independence but applies a proprietary
standard for assessing director independence considering a director’s status as
a current or former employee of the business, any commercial or consulting
relationships with the company, the level of shares beneficially owned or
represented and familial relationships, among others.
Board
and committee independence: The board of
directors, board committees and regional equivalents should be sufficiently
independent from management, substantial shareholders and conflicts of interest.
We consider local market practices in this regard and in general we look for a
balance across the board of directors. Above all, we like to see signs of robust
challenge and discussion in the boardroom.
•
We will generally
vote against one or more non-independent directors when a board is less than
majority independent, but we will take into account local market practice with
regards to board independence in limited circumstances where this standard is
not appropriate.
•
We will generally
vote against non-independent directors serving on the audit
committee.
•
We will generally
vote against non-independent directors serving on the compensation
committee.
•
We will generally
vote against non-independent directors serving on the nominating
committee.
•
In relation to the
board, compensation committee and nominating committee we will consider the
appropriateness of significant shareholder representation in applying this
policy. This exception will generally not apply to the audit
committee.
Separation
of Chair and CEO roles: We believe that
independent board leadership generally enhances management accountability to
investors. Companies deviating from this best practice should provide a strong
justification and establish safeguards to ensure that there is independent
oversight of a board’s activities (e.g., by appointing a lead or senior
independent director with clearly defined powers and
responsibilities).
•
We will generally
vote against the incumbent nominating committee chair where the board chair is
not independent unless a lead independent or senior director is
appointed.
•
We will generally
support shareholder proposals requesting that the board chair be an independent
director.
•
We will generally
not vote against a CEO or executive serving as board chair solely on the basis
of this issue, however, we may do so in instances where we have significant
concerns regarding a company’s corporate governance, capital allocation
decisions and/or compensation practices.
Attendance
and over boarding:
Director attendance
at board and committee meetings
is a
fundamental part of their responsibilities and provides efficient oversight for
the company and its investors. In addition, directors should not have excessive
external board or managerial commitments that may interfere with their ability
to execute the duties of a director.
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•
We will generally
vote against directors who attend less than 75% of board and committee meetings
held in the previous year unless an acceptable extenuating circumstance is
disclosed,
such
as health matters or family emergencies.
•
We will generally
vote against directors who have more than four total mandates at public
operating companies. We apply a lower threshold for directors with significant
commitments such as executive positions and chairmanships.
Diversity: We encourage
companies to continue to evolve diversity and inclusion practices. Boards should
be comprised of directors with a variety of relevant skills and industry
expertise together with a diverse profile of individuals of different genders,
ethnicities, race, skills, tenures and backgrounds in order to provide robust
challenge and debate. We consider diversity at the board level, within the
executive management team and in the succession pipeline.
•
We will generally
vote against the incumbent nominating committee chair of a board where women
constitute less than two board members or 25% of the board, whichever is lower,
for two or more consecutive years, unless incremental improvements are being
made to diversity practices.
•
In addition, we
will consider a company’s performance on broader types of diversity which may
include diversity of skills, non-executive director tenure,
ethnicity,
race
or other factors where appropriate and reasonably determinable. We will
generally vote against the incumbent nominating committee chair if there are
multiple concerns on diversity issues.
•
We generally
believe that an individual board’s nominating committee is best positioned to
determine whether director term limits would be an appropriate measure to help
achieve these goals and, if so, the nature of such limits. Invesco generally
opposes proposals to limit the tenure of outside directors through mandatory
retirement ages.
D.
Long Term Stewardship of Capital
Capital
allocation:
Invesco expects
companies to responsibly raise and deploy capital towards the long-term,
sustainable success of the business. In addition, we expect capital allocation
authorizations and decisions to be made with due regard to shareholder dilution,
rights of shareholders to ratify significant corporate actions and pre-emptive
rights, where applicable.
Share
issuance and repurchase authorizations: We generally
support authorizations to issue shares up to 20% of a company’s issued share
capital for general corporate purposes. Shares should not be issued at a
substantial discount to the market price or be repurchased at a substantial
premium to the market price.
Stock
splits: We generally
support management proposals to implement a forward or reverse stock split,
provided that a reverse stock split is not being used to take a company private.
In addition, we will generally support requests to increase a company’s common
stock authorization if requested in order to facilitate a stock
split.
Increases
in authorized share capital: We will generally
support proposals to increase a company’s number of authorized common and/or
preferred shares, provided we have not identified concerns regarding a company’s
historical share issuance activity or the potential to use these authorizations
for antitakeover purposes. We will consider the amount of the request in
relation to the company’s current authorized share capital, any proposed
corporate transactions contingent on approval of these requests and the
cumulative impact on a company’s authorized share capital, for example, if a
reverse stock split is concurrently submitted for shareholder
consideration.
Mergers,
acquisitions, proxy contests, disposals and other corporate
transactions: Invesco’s
investment teams will review proposed corporate transactions including mergers,
acquisitions,
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reorganizations,
proxy contests, private placements, dissolutions and divestitures based on a
proposal’s individual investment merits. In addition, we broadly approach voting
on other corporate transactions as follows:
•
We will generally
support proposals to approve different types of restructurings that provide the
necessary financing to save the company from involuntary bankruptcy.
•
We will generally
support proposals to enact corporate name changes and other proposals related to
corporate transactions that we believe are in shareholders’ best
interests.
•
We will generally
support reincorporation proposals, provided that management have provided a
compelling rationale for the change in legal jurisdiction and provided further
that the proposal will not significantly adversely impact shareholders’
rights.
•
With respect to
contested director elections, we consider the following factors, among others,
when evaluating the merits of each list of nominees: the long term performance
of the company relative to its industry, management’s track record, any relevant
background information related to the contest, the qualifications of the
respective lists of director nominees, the strategic merits of the approaches
proposed by both sides including the likelihood that the proposed goals can be
met, positions of stock ownership in the company.
E.
Environmental, Social and Governance Risk Oversight
Director
responsibility for risk oversight: The board of
directors are ultimately responsible for overseeing management and ensuring that
proper governance, oversight and control mechanisms are in place at the
companies they oversee. Invesco may take voting action against director nominees
in response to material governance or risk oversight failures that adversely
affect shareholder value.
Invesco considers
the adequacy of a company's response to material oversight failures when
determining whether any voting action is warranted. In addition, Invesco will
consider the responsibilities delegated to board subcommittees when determining
if it is appropriate to hold certain director nominees accountable for these
material failures.
Material
governance or risk oversight failures at a company may include, without
limitation:
i.
significant
bribery, corruption or ethics violations;
ii.
events causing
significant climate-related risks;
iii.
significant health
and safety incidents; or
iv.
failure to ensure
the protection of human rights.
Reporting
of financially material ESG information: Companies should
report on their environmental, social and governance opportunities and risks
where material to their business operations.
•
Where Invesco finds
significant gaps in terms of management and disclosure of environmental, social
and governance risk policies, we will generally vote against the annual
reporting and accounts or an equivalent resolution.
Shareholder
proposals addressing environmental and social risks: Invesco may
support shareholder resolutions requesting that specific actions be taken to
address environmental and social (“E&S”) issues or mitigate exposure to
material E&S risks, including reputational risk, related to these issues.
When considering such proposals, we will consider a company's track record on
E&S issues, the efficacy of the proposal's request,
whether the
requested action is unduly burdensome, and whether we consider the adoption of
such a proposal would promote long-term shareholder value. We will also consider
company responsiveness to the proposal and any engagement on the issue when
casting votes.
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•
We generally do not
support resolutions where insufficient information has been provided in advance
of the vote or a lack of disclosure inhibits our ability to make fully informed
voting decisions.
•
We will generally
support shareholder resolutions requiring additional disclosure on material
environmental, social and governance risks facing their businesses, provided
that such requests are not unduly burdensome or duplicative with a company’s
existing reporting. These may include, but are not limited to,
reporting on the
following: gender and racial diversity issues, political contributions and
lobbying disclosure, information on data security, privacy, and internet
practices, human capital and labor issues and the use of natural capital, and
reporting on climate change-related risks.
Ratification
of board and/or management acts: We will generally
support proposals to ratify the actions of the board of directors, supervisory
board and/or executive decision-making bodies, provided there are no material
oversight failures as described above. When such oversight concerns are
identified, we will consider a company’s response to any issues raised and may
vote against ratification proposals instead of, or in addition to, director
nominees.
F.
Executive Compensation and Alignment
Invesco supports
compensation polices and equity incentive plans that promote alignment between
management incentives and shareholders’ long-term interests. We pay close
attention to local market practice and may apply stricter or modified criteria
where appropriate.
Advisory
votes on executive compensation, remuneration policy and remuneration
reports: We will generally
not support compensation related proposals where more than one of the following
is present:
i.
there is an
unmitigated misalignment between executive pay and company performance for at
least two consecutive years;
ii.
there are
problematic compensation practices which may include among others incentivizing
excessive risk taking or circumventing alignment between management and
shareholders’ interests via repricing of underwater options;
iii.
vesting periods for
long term incentive awards are less than three years;
iv.
the company “front
loads” equity awards;
v.
there are
inadequate risk mitigating features in the program such as clawback
provisions;
vi.
excessive,
discretionary one-time equity grants are awarded to executives;
vii.
less than half of
variable pay is linked to performance targets, except where prohibited by
law.
Invesco will
consider company reporting on pay ratios as part of our evaluation of
compensation proposals, where relevant.
Equity
plans: Invesco generally
supports equity compensation plans that promote the proper alignment of
incentives with shareholders’ long-term interests, and generally votes against
plans that are overly dilutive to existing shareholders, plans that contain
objectionable structural features which may include provisions to reprice
options without shareholder approval, plans that include evergreen provisions or
plans that provide for automatic accelerated vesting upon a change in
control.
Employee
stock purchase plans: We generally
support employee stock purchase plans that are reasonably designed to provide
proper incentives to a broad base of employees, provided that the price at which
employees may acquire stock represents a reasonable discount from the market
price.
Severance
Arrangements: Invesco considers
proposed severance arrangements (sometimes known as “golden parachute”
arrangements) on a case-by-case basis due to the wide variety among their terms.
Invesco acknowledges that in some cases such arrangements, if reasonable, may be
in shareholders’
E-15
best interests as a
method of attracting and retaining high-quality executive talent. We generally
vote in favor of proposals requiring shareholder ratification of senior
executives’ severance agreements where the proposed terms and disclosure align
with good market practice.
E-16
Exhibit
A
Harbourview
Asset Management Corporation
Invesco
Advisers, Inc.
Invesco
Asset Management (India) Pvt. Ltd*1
Invesco
Asset Management (Japan) Limited*1
Invesco
Asset Management (Schweiz) AG
Invesco
Asset Management Deutschland GmbH
Invesco
Asset Management Limited1
Invesco
Asset Management Singapore Ltd
Invesco
Asset Management Spain
Invesco
Australia Ltd
Invesco
European RR L.P
Invesco
Canada Ltd.1
Invesco
Capital Management LLC
Invesco
Capital Markets, Inc.*1
Invesco
Hong Kong Limited
Invesco
Investment Advisers LLC
Invesco
Investment Management (Shanghai) Limited
Invesco
Investment Management Limited
Invesco
Loan Manager, LLC
Invesco
Managed Accounts, LLC
Invesco
Management S.A
Invesco
Overseas Investment Fund Management (Shanghai) Limited
Invesco
Pensions Limited
Invesco
Private Capital, Inc.
Invesco
Real Estate Management S.a.r.l1
Invesco
RR Fund L.P.
Invesco
Senior Secured Management, Inc.
Invesco
Taiwan Ltd*1
Invesco
Trust Company
Oppenheimer
Funds, Inc.
WL
Ross & Co. LLC
* Invesco entities
with specific proxy voting guidelines
1 Invesco entities with specific conflicts of interest policies
1 Invesco entities with specific conflicts of interest policies
E-17
Invesco
Japan Proxy Voting Guideline
Invesco
Japan
(hereinafter
“we”
or
“our)
votes
proxies to maximize the interests of our clients (investors) and beneficiaries
in the long term, acknowledging the importance of corporate governance based on
fiduciary duties to our clients (investors) and beneficiaries. We do not vote
proxies for the interests of ourselves and any third party other than clients
(investors) and beneficiaries. The interests of clients (investors) and
beneficiaries are to expand the corporate value or the shareholders’
economic interests
or prevent damage thereto. Proxy voting is an integral part of our stewardship
activities, and we make voting decisions considering whether the proposal would
contribute to corporate value expansion and sustainable growth.
To vote proxies
adequately, we have established the Responsible Investment Committee and
developed the
Proxy
Voting Guideline to govern the decision-making process of proxy voting. While we
may seek advice from an external service provider based on our own guidelines,
our investment professionals make voting decisions in principle, based on the
proxy voting guideline, taking into account whether they contribute to
increasing the subject company’s shareholder value.
Responsible proxy
voting and constructive dialogue with investee companies are important
components of stewardship activities. While the Proxy Voting Guideline are
principles for our voting decisions, depending on the proposals, we may make an
exception if we conclude that such a decision is in the best interests of
clients (investors) and beneficiaries
after
having constructive dialogue with the investee companies. In such a case,
approval of the Responsible Investment Committee shall be obtained.
The Responsible
Investment Committee consists of members including Chief Investment Officer, as
the chair, Head of Compliance, Head of ESG, investment professionals nominated
by the chair and the other members, including persons in charge at the Client
Reporting department.
We have established
the Conflict of Interest Management Policy.
In
the
situation that may give rise to a
conflict of
interest, we aim to control it in the best interests of clients (investors) and
beneficiaries. The Compliance department is responsible for governing
company-wide control of a conflict of interest. The Compliance department is
independent of Investment and Sales departments and shall not receive any
command or order for the matters compliant with the laws and regulations,
including a conflict of interest,
from
them.
Proxy
Voting Guidelines
1.
Appropriations
of Retained Earnings and Dividends
We decide how to
vote on proposals seeking approval for appropriations of retained earnings and
dividends, taking into account the subject company’s financial conditions and
business performance, shareholders’
economic interests
and so on.
•
Taking into account
the company’s capital adequacy,
business
strategies, and
so on
if the total payout ratio, including dividends and share repurchases, is
significantly low, we consider voting
against the
proposals unless reasonable explanations are given by the company.
•
With respect to the
company where the Board of Directors determines appropriations of retained
earnings, taking into account the subject company’s capital
adequacy,
business
strategies, and
so on
if the total payout ratio, including dividends and share repurchases, is
significantly low, we consider voting against the reappointment of board
directors unless reasonable explanations are given by the company.
•
Taking into account
the subject company’s capital adequacy,
business
strategies, and
so on
if the total payout ratio, including dividends and share repurchases, is
significantly low, we consider voting for shareholder proposals increasing
shareholder returns.
E-19
2.
Appointment
of Board Directors
We decide how to
vote on proposals concerning the appointment of board directors, taking into
account their independence, competence,
anti-social
activity records
(if
any), and so on. Furthermore,
we
decide how to vote on the reappointment of board directors, taking into account
their corporate governance practices, accountability during their tenures, the
company’s business performance and anti-social records
(if
any), and
so on
in addition to the above factors.
Board directors
should make best efforts to continuously gain knowledge and skills to fulfill
the critical role and responsibilities in the company’s governance. A company
should also provide sufficient training opportunities.
Independent outside
directors are expected to play a significant role, such as safeguarding minority
shareholders’
interests through
action based on their insights to increase the company’s corporate value. It is
desirable to enhance the board’s governance function with independent outside
directors accounting for the board majority. However, given the challenge to
secure competent candidates, we also recognize that
it is
difficult for all the companies, irrespective of their size, to deploy the
independent outside directors’ majority on the Board.
Sufficient
disclosure is a prerequisite for reflecting the assessment of independence and
suitability of director candidates and board composition in voting decisions.
Currently, there are cases where sufficient information cannot be obtained due
to insufficient disclosure on a board chair, each committee’s function and
committee chairs in Notice of Annual General Meeting (AGM) and a corporate
governance report, as well as untimeliness of these issuances. We generally make
decisions based on Notice of AGM, a corporate governance report and an annual
securities report disclosed by the time of voting. However, this shall not apply
if we obtain such information from direct engagement with the company or find
relevant disclosure elsewhere.
(1)
Independence
We generally vote
for the appointment of outside directors.
However, we
generally vote against if a candidate is not regarded as independent of the
subject company. It is desirable that the company discloses information, such as
numerical data, which supports our decision on board independence.
•
We view the
following outside director candidates are not independent enough.
•
Candidates who have
been working for the following companies for the last ten years or are those
people’s relatives.
•
The subject
company
•
Its
subsidiary
•
Its parent
company
•
Candidates who have
been working for the following companies for the last five years or are those
people’s relatives.
•
Shareholders who
own more than 10% of the subject company
•
Principal loan
lenders
•
Principal
securities brokers
•
Major business
partners
•
Auditors
•
Audit companies,
consulting companies or any related service providers which have any consulting
contracts with the subject company
•
Any other
counterparts which have any interests in the subject company
E-20
In cases other than
above, we separately scrutinize the independence of candidates who are regarded
as not independent enough.
•
We take extra care
when we assess the independence of candidates from a company which is regarded
as a policy shareholder under cross shareholding, mutually sends outside
directors to each other, and so on, as such cases potentially raise doubts about
their independence. The company should give reasonable explanations. It is also
desirable that the company contrives the timing and method of disclosure to
allow investors to understand those relationships enough.
•
We judge board
independence according to the stock exchange’s independence criteria with
emphasizing independence ensured practically. We consider each company’s
business environment and make the best effort to engage with the subject company
to determine the independence of the candidates.
•
We regard an
outside director with a significantly long tenure as non-independent and
consider voting against the reappointment of such an outside director. We
generally consider voting against the reappointment of outside directors whose
tenures are longer than ten years.
•
If the subject
company is a company with Audit Committee, we judge the independence of outside
director candidates who become audit committee board members using the same
independence criteria for the appointment of statutory auditors in
principle.
•
We generally
consider voting against the appointment of top executives and a nominating
committee chair at a company
with
three Committees if independent outside directors of the subject company account
for less than 1/3 of the Board after the AGM.
However, this shall
not apply if we confirm sufficient planning or special circumstances on
increasing the number of independent outside directors in
engagements.
•
In case the subject
company has a parent company, we generally consider voting against the
appointment of top executives and a nominating committee
chair
at a company with three Committees if independent outside directors account for
less than half of the Board after the AGM.
However, this shall
not apply if we confirm sufficient planning or special circumstances on
increasing the number of independent outside directors in
engagements.
(2)
Attendance
rate and concurrent duties
•
All members are
expected to attend board and respective committee meetings in
principle.
A
Company is
generally obligated
to facilitate all members to attend these meetings. We generally vote against
the reappointment of board directors who attended less than 75% of board or
respective committee
meetings.
•
We take into
account not only the number of attendance but nomination reasons and
candidates’
real
contributions if
disclosed.
•
We take extra care
when we assess the capability of board directors who have many concurrent duties
as an outside director or outside statutory auditor of listed companies, as such
cases potentially arise doubts about their capacity given the importance of
outside directors’ role and responsibilities. Accordingly,
we
consider voting against the appointment of board directors who perform five or
more duties as a director or statutory auditor of a listed company or equivalent
company.
•
If a company
nominates a board director with many concurrent duties, it should provide
reasonable explanations. It is also desirable that the company contrives
disclosure timing and methods to allow investors to understand the situation
enough.
(3)
Company’s
business performance
•
We consider voting
against the reappointment of board directors if the subject company made a loss
for the three consecutive years during their tenures.
E-21
•
We consider voting
against the reappointment of board directors if we judge that the subject
company’s business performance significantly lags the peers in the same industry
during their tenures.
•
We consider voting
against top executives if, concerning capital efficiency including return on
capital,
business strategies
achieving corporate value expansion and sustainable growth are not demonstrated,
and constructive dialogues are not conducted.
(4)
Company’s
anti-social activities
•
If we judge that a
corporate scandal damages or is likely to damage
shareholder value
with having a significant effect on society during a board tenure, we conduct
adequate dialogues with the subject company on the background and subsequent
resolutions of the scandal. Based on the dialogues, we decide how to vote on the
reappointment of top executives, board directors in charge of those cases and
audit committee board members at a company with Audit Committee or three
Committees, considering the impact on shareholder value.
•
With respect to
domestic corporate scandals, at the time a company receives administrative
dispositions to cartel,
bid-rigging, and so
on from authorities, such as the Fair Trade Commission, we consider voting
against the reappointment of top executives, directors in charge and audit
committee board members at a company with Audit Committee or three
Committees.
However,
in
case
final dispositions are subsequently determined based on appeal or complaints
resolutions, we do not vote against the reappointment again at that time. We
vote on a case-by-case basis concerning compensation orders in a civil
case,
dispositions from
the Consumer Affairs Agency or administrative dispositions from overseas
authorities.
•
With respect to
administrative dispositions to an unlisted subsidiary or affiliate, we consider
voting against the reappointment of top executives, directors in charge and
audit committee board members at a company with Audit Committee or three
Committees of the holding or parent company. If a
subsidiary or
affiliate is listed, we consider voting against the reappointment of top
executives, directors in charge and audit committee board members at a company
with Audit Committee or three Committees of both the subsidiary or affiliate and
the holding or parent company.
However, we may
vote on a case-by-case basis, depending on the importance of the disposition to
the subsidiary or affiliate, its impact on the holding or parent company’s
financial performance, and so on.
•
With respect to
employees’
scandals, if the
scandal damages or is likely to damage shareholder value, and we judge that the
subject company owes management responsibility, we consider voting against the
reappointment of top executives, directors in charge and audit committee board
members at a company with Audit Committee or three Committees.
•
We consider voting
against the reappointment of board directors if the subject company engages
in
window
dressing or inadequate accounting practices during their tenures.
(5)
Activities
against shareholder interest
•
If a company raises
capital through an excessively dilutive third-party allotment without a
shareholders’
meeting’s approval,
we consider voting against the reappointment of board directors, particularly
top executives.
•
If a company raises
capital through a large-scale public offering without reasonable explanations,
we consider voting against the reappointment of board directors, particularly
top executives.
•
If a company does
not execute a shareholder proposal regarded as favorable for minority
shareholders receiving the majority support
from
shareholders or does not make a similar company proposal at an AGM in the
following year, we consider voting against the appointment of top
executives.
(6)
Others
•
If a company
insufficiently discloses board director candidates’
information, we
generally vote against such candidates.
E-22
3.
Composition
of Board of Directors
While each
company’s board structure would differ depending on its size and so on, we
believe that a company with three Committees
(Nomination,
Audit
and Remuneration) is desirable to achieve better governance as a listed company.
For a company with Board of Statutory Auditors
(Kansayaku) or
Audit Committee, it is also desirable to voluntarily deploy a Nomination
Committee, a Remuneration Committee
and
other necessary committees. Besides,
it is
desirable that Board Chair is an independent outside director. We believe that a
highly transparent board composition ensures management accountability and
contributes to sustained enterprise value expansion. Finally,
the
disclosure of the third-party assessment on the Board of Directors is
desirable.
To strengthen the
Board of Directors’ monitoring function and increase its transparency and
effectiveness, we believe it is important to ensure gender, nationality, career,
and age diversity in principle. It is desirable that each company adopts a
skills matrix that defines the diversity and expertise required to fulfill the
Board’s responsibilities reflecting its situation and selects director
candidates accordingly.
We are concerned
about retired directors assuming consulting, advisory or other similar positions
which could negatively impact transparency and decision making of the Board. If
such positions exist,
and
retired directors assume them,
it is
desirable that the company discloses their existence, their expected roles and
contributions and compensations for such posts.
(1)
Number
of board members and change in board composition
•
We decide how to
vote on proposals concerning the number of board members and change in board
composition, taking into account the impacts on the subject company and
shareholders’ economic interests compared to the current situations.
•
The number of board
members should be optimized to make the right management decision at the right
time. We may consider each company’s business situation and scale.
However, we
generally consider voting against the appointment of top executives
and a
nominating committee chair at a company three Committees if the number of board
members is expected to exceed 20 without decreasing from the previous AGM, and
reasonable explanations are not given.
•
We generally vote
against the appointment of top executives and a nomination committee chair at a
company three Committees if a decrease in outside directors or an increase in
internal directors reduces the percentage of outside directors to less than half
of the board members.
•
If there are no
females on the Board, we consider voting against the appointment of top
executives and a nomination committee chair at a company three Committees.
However, this shall not apply if we confirm sufficient planning or special
circumstances on increasing the number of female directors in
engagements.
•
We believe that
board diversity is important and may set a higher target for a female board
member ratio in the future. Similarly, we may set a racial and nationality
diversity target, especially for companies with global business
operations.
(2)
Procedures
of board director appointment, scope of their responsibilities and
so
on
•
We decide how to
vote on proposals concerning change in board director appointment procedures,
taking into account the rationales, and so on, compared to the current
procedures.
•
We generally vote
against proposals reducing board directors’
responsibilities
for financial damages on fiduciary duty breach.
•
Board
directors’
responsibilities
include effective monitoring of top executives succession planning. The
Nomination Committee at a company with three Committees or the arbitrary
Nomination Committee created at a company with the other governance
structures should
provide effective monitoring of successor development and appointment with
transparency. It is desirable that an independent outside
E-23
director serves as
Nomination Committee Chair. If we judge that the succession procedure
significantly lacks transparency and rationality, we consider voting against the
appointment of top executives.
4.
Appointment
of Statutory Auditors (Kansayaku)
We decide how to
vote on proposals concerning the appointment of statutory auditors, taking into
account their independence, competence and anti-social activities
records
(if
any), and so on. We decide how to vote on the reappointment of statutory
auditors, taking into account their corporate governance practices and
accountability during their tenures, the company’s anti-social activity records,
and
so on
in addition to the above factors.
Statutory auditors
and audit committee board directors at a company with Audit committee or three
Committees should have deep knowledge specialized in accounting,
laws
and regulations and should make best efforts to continuously gain knowledge and
skills to fulfill the critical role and responsibilities in the company’s
governance. A company should also provide sufficient training
opportunities.
(1)
Independence
•
We generally vote
against the appointment of outside statutory auditors without
independency.
•
In general, a
person who has no relationship with the subject company other than a statutory
auditor appointment is regarded as independent.
•
We regard that an
outside statutory auditor with a significantly long tenure is not independent
and generally vote against the reappointment of such an outside statutory
auditor. We generally consider voting against the candidate whose tenure is
longer than ten years.
(2)
Attendance
rate and concurrent duties
•
All statutory
auditors are expected to attend board or board of statutory auditors meetings in
principle.
A
companies is generally obligated to facilitate all statutory auditors to attend
these meetings. We generally vote against the reappointment of statutory
auditors who attended less than 75% of board or board of statutory auditors
meetings.
•
We take into
account not only the number of attendance but nomination reasons and
candidates’
real
contributions if
disclosed.
•
We take extra care
when we assess the capability of statutory auditors who have many concurrent
duties as an outside director or outside statutory auditor of listed companies,
as such cases potentially arise doubts about their capacity given the importance
of outside statutory auditors’
role
and responsibilities.
Accordingly,
we
consider voting against the appointment of
statutory auditors
who perform five or more duties as a board director or statutory auditor of a
listed company or equivalent company.
If a
company nominates a statutory auditor with many concurrent duties,
it
should give reasonable explanations.
It is
also desirable that the company contrives disclosure timing and methods to allow
investors to understand the situation enough.
(3)
Accountability
•
If there are
material concerns about a published audit report or audit procedures, or
insufficiencies of required disclosures, we vote against the reappointment of
statutory auditors.
(4)
Company’s
anti-social activities
•
If we judge that a
corporate scandal damages or is likely to damage
shareholder value
with having a significant impact on society during a statutory auditor’s tenure,
we conduct adequate dialogues with the subject company on the background and
subsequent resolutions of the scandal. Based on the dialogues, we decide how to
vote on the reappointment of statutory auditors,
considering the
impact on shareholder value.
•
With respect to
domestic corporate scandals, at the time a company receives administrative
E-24
dispositions to
cartel,
bid-rigging, and so
on from authorities, such as the Fair Trade Commission, we consider voting
against the reappointment of statutory auditors. However,
in
case the final dispositions are subsequently determined based on appeal or
complaints resolutions, we do not vote against the reappointment again at that
time. We vote on a case-by-case basis concerning compensation orders in a civil
case,
dispositions from
the Consumer Affairs Agency or administrative dispositions from overseas
authorities.
•
With respect to
administrative dispositions to an unlisted subsidiary or affiliate, we consider
voting against the reappointment of statutory auditors of the holding or parent
company. If a subsidiary or affiliate is listed, we consider voting against the
reappointment of statutory auditors of both the subsidiary or affiliate and the
holding or parent company.
However, we may
decide on a case-by-case basis, depending on the importance of the dispositions
to the subsidiary or affiliate, its impact on the holding or parent company’s
financial performance, and so on.
•
With respect to
employees’
scandals, if the
scandal damages or is likely to damage shareholder value, and we judge that the
subject company owes management responsibility, we consider voting against the
reappointment of statutory auditors.
•
We consider voting
against the reappointment of statutory auditors if the subject company engages
in
window-dressing or
inadequate accounting practices during their tenures
5.
Composition
of Board of Statutory Auditors (Kansayaku)
We decide how to
vote on proposals concerning the number of members or change in composition of
the board of statutory auditors, taking into account the impact on the subject
company and shareholders’
economic interests
compared to the current situations.
•
We consider an
increase in statutory auditors favorably. However, in case of a decrease, we
consider voting against the reappointment of top executives unless clear and
reasonable explanations are given.
6.
Appointment
of Accounting Auditors
We decide how to
vote on proposals concerning the appointment and replacement of accounting
auditors, taking into account their competence,
audit
fee levels, and so on.
•
We generally vote
against the reappointment of statutory auditors
(Kansayaku)
or
audit committee board members at a company with Audit Committee or three
Committees if we judge that a company reappoints an accounting auditor without
replacing it despite the following accounting audit problems.
•
It is determined
that an accounting auditor provides an unfair opinion on the company’s financial
conditions.
•
In case there are
concerns on financial statements, required disclosures are
insufficient.
•
In case an
accounting auditor has a service contract other than accounting audit services
with the subject company, it is regarded that such a contract creates a conflict
of interest between them.
•
Excessive audit
fees are paid.
•
It is regarded that
an accounting auditor makes fraud or negligence.
•
If it is regarded
that an accounting auditor has issues in other company’s audits, in case a
company appoints or reappoints the accounting auditor without replacing it, we
take the impact on the company’s corporate value full consideration into voting
decisions.
•
We generally vote
against proposals concerning accounting auditor replacement if it is regarded
that a company changes an incumbent accounting auditor
due to
a dispute about accounting principles.
E-25
7.
Compensation
for Board Directors, Statutory Auditors (Kansayaku) and Employees
(1)
Board
directors’ salaries and bonuses
•
It is desirable to
increase the proportion of stock incentive plans in board directors’ salaries
and bonuses, on condition that a performance-based compensation structure is
established, transparency,
such
as disclosures of a benchmark or formula laying the foundations for calculation,
ensures accountability, and the impact on shareholders, such as dilution, are
taken into considerations. The Remuneration Committee at a company with three
Committees
(Nomination, Audit
and Remuneration) or the arbitrary Remuneration Committee preferably deployed at
a company with the other
governance
structures should ensure the accountability of compensation schemes. It is
desirable that an independent outside director serves as Remuneration Committee
Chair.
•
We consider voting
against proposals seeking approval for salaries and bonuses in the following
cases.
•
Negative
correlation between company’s financial performance and directors’
salaries and
bonuses are observed.
•
Inappropriate
systems and practices are in place.
•
The total amount of
salaries and bonuses is not disclosed.
•
Management
failures,
such
as a significant share price decline or serious earnings
deterioration,
are
apparent.
•
The remuneration
proposal includes people determined to be responsible for activities against
shareholder interest.
•
We generally vote
for shareholder proposals requesting disclosure of individual directors’
salaries and bonuses.
•
If a company
implements any measures ensuring transparency other than disclosure, we take it
into consideration.
•
If there is no
proposal seeking approval for directors’
salaries and
bonuses, and the compensation structure lacks transparency, we consider voting
against the appointment of top executives.
•
We generally vote
against bonuses for statutory auditors at a company with Board of Statutory
Auditors and audit committee board members at a company with Audit
Committee.
•
We separately
consider voting to audit committee board members at a company with three
Committees.
(2)
Stock
incentive plans
•
We decide how to
vote on proposals concerning stock incentive plans, including stock options and
restricted stock units, taking into account the impact on shareholder value and
rights, compensation levels, the scope, the rationales, and so on.
•
We generally vote
against proposals seeking to lower the strike price of stock
options.
•
We generally vote
for proposals seeking to change the strike price on condition that shareholders’
approval is required every time.
•
We generally vote
against stock incentive plans if the terms and
conditions for
exercising options,
including equity
dilution,
lack
transparency. We generally consider voting against proposals potentially causing
10% or more equity dilution.
•
It is desirable
that stock incentive plans is a long-term incentive aligned with sustainable
growth and
corporate value
expansion. As such, we generally vote against stock incentive plans allowing
recipients to exercise all the rights within two years after vested for the
subject fiscal year. However,
E-26
this shall not
apply to recipients who retire during the subject fiscal year. We assess the
validity if a vesting period is regarded as too long.
•
We generally vote
against stock incentive plans granted to statutory auditors and audit committee
board members at a company with Audit Committee.
•
We separately
consider stock incentive plans granted to audit committee board members,
including both inside and outside directors,
at a
company with three Committees.
•
We generally vote
against stock incentive plans granted to any third parties other than
employees.
•
We generally vote
against stock incentive plans in case a company is likely to adopt the plans
as
takeover
defense.
(3)
Employee
stock purchase plan
•
We decide how to
vote on proposals concerning employee stock purchase plans, taking into account
the impact on shareholder value and rights, the scope and the rationales, and so
on.
(4)
Retirement
benefits for board directors
•
We decide how to
vote on proposals concerning grant of retirement benefits, taking into account
the scope and scandals
(if
any)
of
recipients
and
business performance and scandals
(if
any) of the subject company, and so on.
•
We generally vote
for proposals granting retirement benefits if all the following criteria are
satisfied.
•
The granted amount
is disclosed.
•
Outside directors,
statutory auditors and audit committee board members at a company with Audit
Committees are excluded.
•
Recipients do not
cause any significant scandals during their tenures.
•
The subject company
does not make a loss for the three consecutive years, or its business
performance is not determined to significantly lag behind the peers in the same
industry.
•
The company does
not cause scandals that significantly impact society and damage, or are unlikely
to damage, shareholder value during their tenures.
•
The company does
not engage in window-dressing or inadequate accounting practices during their
tenures.
8.
Cross-shareholdings
If a company holds
shares for the sake
of
business relations
(cross
shareholdings), the company should explain the medium- to long-term business and
financial strategies,
including capital
costs, and disclose proxy voting guidelines,
voting
results, and so on. If the company does not give reasonable explanations and
engage in constructive dialogues, we consider voting against the appointment of
top executives. It is important that the company does not hinder the
sales/reduction of cross shareholdings when a policy
shareholder
intends.
•
If a company's
cross shareholdings account for 20% or more of its net assets, we generally
consider voting against the appointment of top executives. However, this shall
not apply if we confirm that the company makes a reduction, does sufficient
planning or has industry- specific circumstances that should be taken into
consideration in engagement.
9.
Capital
Policy
As a listed
companies’
capital policy is
likely to significantly impact shareholder value and interests, a
company should
implement a rational capital policy and explain capital policy guidelines to
shareholders. We consider voting against proposals concerning capital policies
that we judge damage shareholder value. If a
E-27
company has a
capital policy that is not part of proposals at an AGM but regarded to damage
shareholder value, we consider voting against the reappointment of board
directors.
•
It is undesirable
that a company intends to maintain or increase so-called “friendly” stable
shareholders and infringes minority shareholders’
rights
by the third-party allotment, treasury stocks transfer or company management
holdings’ transfer to foundations affiliated with the company.
(1)
Change
in authorized shares
•
We decide how to
vote on proposals seeking to increase authorized shares, taking into account the
impact on shareholder value and rights, the rationales,
the
impact on the sustainability of stock market listing and a going concern, and so
on.
•
We generally vote
for proposals seeking to increase authorized shares if we judge that not
increasing authorized shares is likely to lead to delisting or have a
significant impact on a going concern.
•
We generally vote
against proposals seeking to increase authorized shares after an acquirer
emerges.
(2)
New
share issue
•
We decide how to
vote on new share issues, taking into account the rationales,
the
terms and conditions
of
issues, the impact of dilution on shareholder value and rights and the impact on
the sustainability of stock market listing or a going concern, and so
on.
(3)
Share
repurchase
and
reissue
•
We decide how to
vote on proposals concerning share repurchase or reissue, taking into account
the rationales, and so on.
(4)
Stock
split
•
We generally vote
for proposals seeking a stock split.
(5)
Consolidation
of shares (reverse stock split)
•
We decide how to
vote on proposals seeking consolidation of shares, taking into account the
rationale, and so on.
(6)
Preferred
shares
•
We generally vote
against proposals seeking to issue
blank-cheque
preferred shares or increase authorized shares without specifying voting rights,
dividends, conversion and other rights.
•
We generally vote
for proposals seeking to issue
preferred shares or
increase authorized shares if voting rights, dividends, conversion and other
rights are specified, and those rights are regarded as reasonable.
•
We generally vote
for proposals requiring approvals for preferred shares issues from
shareholders.
(7)
Convertible
bonds
•
We decide how to
vote on proposals seeking to issue convertible bonds, taking into account the
number of new shares,
the
time to maturity, and so on.
(8)
Corporate bonds
and
credit facilities
•
We decide how to
vote on proposals concerning a corporate bond issue or a credit facility
expansion, taking into account the subject company’s financial conditions,
and
so
on.
(9)
Debt capitalization
•
We decide how to
vote on proposals seeking to change the number of authorized shares or issue
shares for debt restructuring, taking into account the terms and conditions of
the change or the issue, the impact
E-28
on shareholder
value and rights, the rationales,
the
impact on the sustainability of stock market listing and a going concern, and so
on.
(10)
Capital reduction
•
We decide how to
vote on proposals concerning capital reduction, taking into account the impact
on
shareholder value
and rights, the rationales and the impact on the sustainability of stock market
listing and a going concern, and so on.
•
We generally vote
for proposals seeking capital reduction following standard accounting
procedures.
(11)
Financing plan
•
We decide how to
vote on proposals concerning a financing plan, taking into account the impact on
shareholder value and rights, the rationales and the impact on the
sustainability of stock market listing and a going concern, and so
on.
(12)
Capitalization of reserves
•
We decide how to
vote on proposals seeking capitalization of reserves, taking into account the
rationales, and so on.
10.
Amendment
to Articles of Incorporation
and
Other Legal Documents
(1)
Change in an accounting period
•
We generally vote
for proposals seeking to change an accounting period unless it is regarded as an
aim to delay an AGM.
(2)
Amendment to articles of incorporation
•
We decide how to
vote on proposals to amend an article of incorporation, taking into account the
impact on shareholder value and rights, the necessity,
the
rationales,
and
so
on.
•
We generally vote
for proposals seeking to amend an article of
incorporation if it
is required by law.
•
We generally vote
against proposals seeking to amend an article of
incorporation if we
judge that it is likely to infringe shareholder rights or damage shareholder
value.
•
We generally vote
for transition to a company with three Committees.
•
We decide how to
vote on proposals seeking to relax or eliminate special resolution requirements,
taking into account the rationale.
•
We are concerned
about retired directors assuming advisory, consulting, or other similar
positions which could negatively impact on transparency and decision making of
the Board of Directors. We generally vote against proposals seeking to create
such a position.
(3)
Change in a quorum for an annual general meeting (AGM)
•
We decide how to
vote on proposals concerning change in quorum for an AGM, taking into account
the impact on shareholder value and rights, and so on.
11.
Company
Organization Change
(1)
Change in a registered company name and address
•
We decide how to
vote on proposals seeking to change a registered company name, taking into
account the impact on shareholder value, and so on.
•
We generally vote
for proposals seeking to change a registered address.
E-29
(2)
Company reorganization
•
We decide how to
vote on proposals concerning the following company reorganization, taking into
account their respective impacts on shareholder value and rights, the subject
company’s financial conditions and business performance, and the sustainability
of stock market listing or a going concern, and so on.
Mergers
and acquisitions
Business
transfers
Company split
(spin-off)
Asset
sale
Company
sale
Liquidation
12.
Proxy
Fight
(1)
Proxy
fight
•
We decide how to
vote on proposals concerning the appointment of directors with opposition
candidates, taking into account their independence, competence, anti-social
activity
records
(if
any), corporate governance practices and accountability of the
candidates
and
business performance and anti-social activity records
(if
any) of the subject company, the proxy fight background, and so on.
(2)
Proxy
context defense
•
Classified
board
•
We generally vote
against proposals seeking to introduce a classified board.
•
We generally vote
for proposals seeking to set a director's term of one year.
•
Shareholder
rights to remove a director
•
We generally vote
against proposals seeking to tighten requirements for shareholders to remove a
director.
•
Cumulative
voting
•
We decide how to
vote on proposals seeking to introduce cumulative voting for director
appointments, taking into account the background, and so on.
•
We decide how to
vote on proposals seeking to terminate cumulative voting for director
appointment, taking into account the background, and so on.
13.
Takeover
Defense
We believe that
management and shareholder interest is not always aligned.
As
such, we generally vote against the creation, amendment and renewal of takeover
defense measures that we judge decrease
shareholder value
or infringes shareholder rights. We generally vote against the reappointment of
directors if takeover defense measures are not part of proposals at an AGM but
are regarded to decrease shareholder value or infringes shareholder
rights.
•
Relaxing
requirements to amend articles of incorporation and company policies
•
We decide how to
vote on proposals seeking to relax requirements to amend articles of
incorporation or company policies, taking into account the impact on shareholder
value and rights, and so on.
•
Relaxing
of requirements for merger approval
E-30
•
We decide how to
vote on proposals seeking to relaxing requirements for merger approval, taking
into account the impact on shareholder value and rights,
and so
on.
14.
Environment,
Social and Governance (ESG)
We support the
United Nations Principles for Responsible Investment (UN PRI) and acknowledge
that company’s ESG practices are an important factor in investment decision
making. Thus, we consider voting against the reappointment of top executives and
directors in charge if we judge that there is an issue that could significantly
damage corporate value. We consider voting for proposals related to ESG
materiality, including climate change or diversity, if we judge that such
proposals contribute to preventing from damaging or expanding
corporate
value.
If
not, we consider voting against such proposals.
15.
Disclosure
Disclosure and
constructive dialogues based thereon are important in proxy voting and
investment decision making. Furthermore, proactive disclosure and effective
engagement are desirable as demand for ESG disclosure, including climate change,
has been increasing, and the disclosure frameworks have been rapidly
progressing.
•
We generally vote
against proposals that lack sufficient disclosure to make proxy voting
decisions.
•
We generally vote
for proposals seeking to enhance disclosures if such information is beneficial
to shareholders.
•
If a company’s
financial and non-financial disclosures is significantly poor, and if the level
of investor relations activities by management or people in charge is
significantly low, we consider voting against the reappointment of top
executives and directors in charge.
16.
Conflict
of Interest
We abstain from
voting proxies of the following companies that are likely to have a conflict of
interest. We also abstain from voting proxies with respect to the following
investment trusts
that
are managed by us or Invesco group companies, as a conflict of interest may
rise.
•
Companies and
investment trusts
that
we abstain from voting proxies:
•
Invesco
Ltd.
We
have established the
Conflict of Interest Management Policy. In the situation that may give rise to
a
conflict of
interest, we aim to control it in the best interests of clients (investors) and
beneficiaries. The Compliance department is responsible for governing
company-wide control of a conflict of interest. The Compliance department is
independent of the
Investment and
Sales departments and shall not receive any command or order for the matters
compliant with the laws and regulations, including a conflict of interest, from
the Investment and Sales departments.
Proxy
voting and stewardship activities are reported to the Responsible Investment
Committee. The Responsible
Investment Committee approves them. Besides, the Compliance department reviews
whether conflicts of interest are properly managed in proxy voting and then
reports the results to the Conflict of Interest Oversight Committee.
Furthermore, the results are reported to the Executive Committee in Tokyo and
the Invesco Proxy Advisory Committee.
17.
Shareholder
Proposals
We vote on a
case-by-case basis on shareholder proposals while we follow the Proxy Voting
Guidelines in principle.
DISCLAIMER:
The English version is a translation of the original in Japanese for information
purposes only. In case of a discrepancy, the Japanese original will prevail. You
can download the Japanese version from our website:
http://www.invesco.co.jp/footer/proxy.html.
E-31
Invesco
Asset Management (India) Pvt. Ltd.
Voting
Policy
A.
Preamble
SEBI vide its
circular reference no. SEBI/IMD/Cir No.18/198647/2010 dated March 15, 2010 has
stated that mutual fund should play an active role in ensuring better corporate
governance of listed companies. The said circular stated that the AMCs should
disclose their general policies and procedures for exercising the voting rights
in respect of shares held by them.
Subsequently, SEBI
vide its circular ref. no. CIR/IMD/DF/05/2014 dated March 24, 2014,
SEBI/HO/IMD/DF2/CIR/P/2016/68 dated August 10, 2016,
SEBI
vide its circular ref. no. CIR/CFD/CMD1/ 168 /2019 dated December 24, 2019 and
SEBI/HO/IMD/DF4/CIR/P/2021/29 dated March 5, 2021 have amended certain
provisions of above mentioned circular specifying additional compliance /
disclosure requirements with respect to exercise of voting rights by mutual
funds so as to further improve transparency as well as encourage Mutual
Funds/AMCs to diligently exercise their voting rights in best interest of the
unitholders. In this respect, AMFI vide its best practices guidelines circular
no. 35P/ MEM-COR/ 51/ 2020-21 dated March 09, 2021 has communicated that it
would be mandatory for the Mutual Funds to cast their votes ‘For’ or ‘Against’
and Abstention will not be counted as having voted.
This policy is
drafted in pursuance of SEBI circular dated March 15, 2010 read with March 24,
2014, August 10, 2016,
December 24, 2019
and circular dated March 5, 2021 and provides general philosophy, broad
guidelines, procedures and principles for exercising voting rights.
Invesco Asset
Management (India) Private Limited (“IAMI”) is an Investment
Manager to the scheme(s) of Invesco Mutual Fund (“the
Fund”). As an
investment manager, IAMI has fiduciary responsibility to act in the best
interest of unit-holders of the Fund. This responsibility includes exercising
voting rights attached to the securities of the companies in which the schemes
of the Fund invest. It will be IAMI’s endeavor to participate in the voting
process (i.e. exercise voting rights) based on the philosophy enunciated in this
policy.
B.
Philosophy
of Voting Policy
Good corporate
governance ensures that a corporation is managed keeping in mind the long-term
interest of shareholders. Promoting good corporate governance standards forms an
integral part of corporate ownership responsibilities.
With this in the
forefront, IAMI expects all corporations, in which it invests in, to comply with
high corporate governance standards. Accordingly, as the decision to invest is
generally an endorsement of sound management practices, IAMI may generally vote
with the management of these corporations. However, when IAMI is of the view
that the unit holders will be prejudiced by any such proposal, then it may vote
against such proposal to protect the interest of unit holders. Also, in case of
resolutions moved by the shareholders of the company, IAMI will exercise its
voting rights in the best interest of its unit holders. Other than matters
mentioned under section D
(I),
in certain circumstances, IAMI may also decide to refrain from voting where it
has insufficient information or there is conflict of interest or it does not
have a clear stance on the proposal under consideration.
IAMI, as an
investment manager, will generally vote in accordance with the Voting Policy.
However, it may deviate from the policy if there are particular facts and/or
circumstances that warrant for such deviation to protect the interests of
unit-holders of the Fund.
C.
Conflict
of Interest in Exercising Voting Rights
IAMI, under
schemes, may invest in the securities of associate/group companies (to the
extent permitted under SEBI (Mutual Funds) Regulations, 1996 as amended from
time to time). Further, IAMI is an Indian subsidiary of global organization
consisting of many affiliates. Moreover, schemes under IAMI may invest in
securities of companies which have invested in schemes of Invesco Mutual Fund.
Such scenarios may lead
E-35
to a situation
creating conflict of interest. Potential Conflict of interest may also arise if
IAMI and the investee company are associates or are part of the same group; or
the investee company holds a material ownership interest in IAMI; a nominee of
IAMI has been appointed as a director of the investee company or having
cross-directorships, the Investee Company is an entity participating in the
distribution of investment products advised or administered by the Investment
Manager and/or any of its affiliate; the Investee Company is a client of
Investment Manager and/or its affiliates.
IAMI will attempt
to avoid conflict of interest and will exercise its voting rights in the best
interest of the unit-holders. Voting decisions in such cases will be based on
merits without any bias and the same parameters will be applied for taking
voting decisions as are applied for other companies.
In cases where
there is a potential conflict of interest, IAMI will vote exactly as per
recommendations of the proxy voting advisory entity with no modifications
whatsoever. In case there is need for a clearer direction, the matter may be
referred to the Investment committee for its guidance. Rationale for decision
taken/ voting on the issue shall be recorded.
D.
Voting
Policy Guidelines
I. The matters
regarding, but not limited to, which the IAMI will exercise the voting rights in
the Annual General Meeting (AGMs) /Extra Ordinary General Meeting (EGMs)/
Through Postal Ballots/Electronic voting of the investee companies are as
follows:
•
Corporate
governance matters, including changes in the state of incorporation, merger and
other corporate restructuring and anti- takeover provisions.
•
Changes to capital
structure, including increase and decrease of capital and preferred stock
issuances.
•
Stock option plans
and other management compensation issues.
•
Social and
corporate responsibility issues.
•
Appointment and
Removal of Directors.
•
Any other issue
that may affect the interest of the shareholders in general and interest of the
unit- holders in particular.
•
Related party
transactions of the investee companies (excluding own group companies). For this
purpose, “Related Party Transactions” shall have same meaning as assigned to
them in clause (zc) of Sub-Regulation (1) of Regulation (2) of the SEBI (Listing
Obligation and Disclosure Requirements) Regulations, 2015.
Effective April 01,
2021, voting shall be mandatory for all resolutions mentioned above. Further,
for all remaining resolutions which are not covered in (I) above, IAMI will
compulsorily be required to cast votes with effect from April 01,
2022.
II. In case of the
Mutual Funds having no economic interest on the day of voting, it may be
exempted from compulsorily casting of votes.
III. The vote shall
be cast at Mutual Fund Level. However, in case Fund Manager/(s) of any specific
scheme has strong view against the views of Fund Manager/(s) of the other
schemes, the voting at scheme level shall be allowed subject to recording of
detailed rationale for the same.
IAMI will exercise
voting rights keeping in mind the need to improve economic value of the
companies and importance of protecting the interests of unit holders of its
schemes but subject to importance of the matter and cost/time implications. The
analysts in equity team will make recommendations on key voting issues and same
will be approved by the Head of Equity or Fund Manager. In case of conflicts or
need for a clearer direction, the matter may be referred to the Voting Committee
for its guidance.
E-36
E.
Voting
Committee
As a guiding
principle, IAMI shall exercise voting rights solely in the interest of unit
holders of the Fund. IAMI has constituted a Voting Committee (VC).The Committee
is empowered to provide guidance on the voting matters referred to it, establish
voting guidelines and procedures as it may consider necessary and is responsible
to ensure that these guidelines and procedures are adhered to and also make
changes in the Policy as may be required from time to time. The members of this
Committee are as follows:
•
CEO / COO/Head -
Operations (any one)
•
Head of Compliance
or Member of compliance team
•
Head of Equity or
Fund Manager (equity)
•
Head of Fixed
Income and/ or Fund Managers (fixed income)
•
Any other
representative as the Committee may co-opt from time to time
Broad Guidelines
for functioning of Voting Committee are:
1.
Voting Committee may record its decisions by circulation including
decisions/guidance on voting matters that have
been referred to it.
2.
Voting Committee may consult with outside experts and other investors on issues
as it may deem fit.
3.
Decisions of Voting Committee should be maintained by compliance.
4.
Details of voting decisions taken by the Fund Management team will be presented
to the Voting Committee/Investment
Committee.
5.
Voting Committee may review this policy from time to time.
F.
Steps
(Procedure) in Exercising Voting Rights
The following
points outline the key steps in exercising Voting rights:
1)
Notification of company AGMs / EGMs and relevant voting items to Fund Management
Team.
2)
The IAMI shall endeavor to vote for all holdings of the Fund aggregated for all
its schemes. The voting will cover all equity holding across all schemes of
Invesco Mutual Fund including passive investments like Index Funds, Exchange
Traded Fund etc. (except for companies which are held only in arbitrage
fund).
3)
Custodian will send ballots and or other relevant papers (notice of meeting,
proxy form, attendance slips etc.) to IAMI
relating to AGM/EGM as soon as it receives.
4)
The fund management team is authorized to decide on voting decisions but may
refer decisions to the Voting Committee
for its guidance/direction.
5)
Based on internal discussion within the fund management team, a decision would
be arrived to vote on the
proposed resolution. Routine matters and ordinary resolutions like adoption of
financials (unless there are significant auditor qualifications), dividend
declaration, general updating/corrective amendments to the Articles of
Association would also be considered for voting purpose. However, IAMI may on a
case to case basis, not vote on such resolutions, if it deems fit to do
so.
6)
IAMI
will generally support and vote “for” proposals which are likely to result in
maximizing long-term investment returns for unit holders. IAMI would not support
and will vote “against” proposals that appear to be detrimental to the company
financials / interest of the minority shareholders or which would adversely
impact shareholders’ value.
7)
IAMI may exercise its voting rights by authorizing its own executives/authorized
representative to attend the AGM/EGM
or may instruct the Custodian to exercise voting rights in accordance with the
instructions of IAMI.
E-37
8)
IAMI may exercise its voting rights through Postal Ballot or may use Electronic
voting mechanism, wherever available,
either through its own executives or by authorizing the Custodian. The records
of voting exercised through Postal Ballot will be maintained by
IAMI.
9)
IAMI may utilize the services of third party professional agencies for getting
in-depth analyses of proposals and vote
recommendations. However, the recommendations of the third party agencies will
be non-binding in nature. IAMI will perform due diligence on proxy voting
advisory firms at the time of initial selection as well as at the time of
renewal of services of the proxy voting. The due diligence will be carried out
on parameters viz. resource strength, Companies under coverage, extent of
institutional ownership, depth of analysis, quality of advice / recommendations,
analyst access & support, timely availability of reports, composition of
board of directors, advisory board and top management, web-based interface
platform and clientele.
10)
The rationale supporting each voting decision (For, Against and Abstain) will be
recorded and such records will be
retained for number of years (currently 8 years) as may be required under the
SEBI (Mutual Funds) Regulations, 1996 from time to time.
G.
Details
of Service Provider
IIAS (Institutional
Investor advisory Services) has been appointed as our proxy voting advisor. The
scope of the agreement with IIAS includes: IIAS shall provide non-binding Voting
Recommendations for each Voting Event for Investee companies, access to their
research portal and analysts for any discussion, access to their online voting
management systems etc. The details of the service provider (currently IIAS) are
provided in the “Rationale for continuation of Proxy Voting advisory report”
which is prepared once in 2 years. IIAS has standardized voting policies and has
a committee-based voting decision making system. Their analysis to arrive at the
recommendations are detailed in nature and recommendations are fairly objective.
However, the recommendations of IIAS are non-binding in nature, and IAMI,
reserves the right to vote differently based on their own judgement on the
matter involved.
H.
Disclosures
The disclosures of
voting rights exercised are as follows:
•
Details of votes
cast by the schemes of the Fund will be uploaded on the website of IAMI
(www.invescomutualfund.com)
(in
machine readable spreadsheet form) on a quarterly basis in the prescribed format
within the stipulated timelines as prescribed by SEBI from time to
time.
•
Details of votes
cast by the schemes of the Fund will be uploaded on the website of IAMI
(www.invescomutualfund.com) on an annual
basis in the prescribed format.
Further,
AMCs
shall provide the web link in the Annual Reports of the schemes of the Fund
regarding the disclosure of voting details.
•
Summary on actual
exercise of votes cast and its break-up in terms of total number of votes cast
in favor, against or abstained will also be uploaded on the website of IAMI
(www.invescomutualfund.com) on an annual
basis.
I.
Certification/Confirmation
•
On an annual basis,
IAMI will obtain a certification from scrutinizer (in terms of Rule 20 (3) (ix)
of Companies (Management and Administration) Rules, 2014) on voting reports and
the same will be placed before the Boards of AMC and Trustee. The scrutinizer’s
certificate will form part of Annual Report and will also be uploaded on the
website of IAMI (www.invescomutualfund.com).
•
A confirmation
shall also be submitted by Trustees in its half yearly report to SEBI that IAMI
have voted on important decisions affecting interests of
unitholders.
E-38
J.
Review
The Board of
Directors of IAMI and Trustees shall review and ensure that IAMI have voted on
important decisions affecting interests of unitholders and the rationale
recorded for vote decision is prudent and adequate.
E-39
APPENDIX
F - CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
To
the best knowledge of the Trust, the names and addresses of the record and
beneficial holders of 5% or more of the
outstanding shares of each class of the Funds' equity securities and the
percentage of the outstanding shares held by such holders are set forth below.
Unless otherwise indicated below, the Trust has no knowledge as to whether all
or any portion of the shares owned of record are also owned
beneficially.
A
shareholder who owns beneficially 25% or more of the outstanding securities of a
Fund is presumed to “control” that Fund
as defined in the 1940 Act. Such control may affect the voting rights of other
shareholders.
All
information listed below is as of December 1, 2022.
Invesco
Premier Portfolio
|
Name
and Address
of
Principal Holder |
Percentage
Owned of Record | |||||
|
|
Investor
Class
Shares |
Institutional
Class
Shares |
Personal
Investment
Class
Shares |
Private
Investment
Class
Shares |
Reserve
Class
Shares |
Resource
Class
Shares |
|
|
|
|
|
|
|
|
|
Catherine
N. Wylie Ttee
JYL
Harrison Trust
Houston,
TX |
- |
- |
- |
- |
- |
7.23% |
|
|
|
|
|
|
|
|
|
Charles
Schwab & Co Inc
Special
Custody Acct FBO Customers
Attn
Mutual Funds
211
Main St
San
Francisco, CA 94105-1901 |
9.99% |
- |
- |
- |
- |
- |
|
|
|
|
|
|
|
|
|
George
Fahey
Breckenridge,
CO |
6.26% |
- |
- |
- |
- |
- |
|
|
|
|
|
|
|
|
|
Invesco
Advisors Inc
Attn
Corporate Controller
1360
Peachtree St NE
Atlanta,
GA 30309-3283 |
- |
- |
- |
43.48% |
100.00%* |
- |
|
|
|
|
|
|
|
|
|
Karen
Dunn Kelley
Pittsburgh,
PA |
10.19% |
- |
- |
- |
- |
- |
|
|
|
|
|
|
|
|
|
Morgan
Stanley Smith Barney LLC
For
Exclusive Benefit of Customers
1
New York Plaza Floor 12
New
York, NY 10004-1901 |
- |
77.19% |
- |
- |
- |
- |
|
|
|
|
|
|
|
|
|
National
Financial Services LLC
FEBO
Customers
Mutual
Funds
499
Washington Boulevard, Floor 5
Jersey
City, NJ 07310-2010 |
5.33% |
5.23% |
- |
- |
- |
- |
|
|
|
|
|
|
|
|
|
Pershing
LLC
1
Pershing Plaza
Jersey
City, NJ 07399-0001 |
19.18% |
- |
- |
- |
- |
- |
|
|
|
|
|
|
|
|
|
Pershing
LLC
For
Exclusive Benefit of Brokerage Customers
Attn
Cash Management Services
1
Pershing Plaza
Jersey
City, NJ 07399 |
- |
- |
99.92% |
- |
- |
- |
|
|
|
|
|
|
|
|
F-1
|
Name
and Address
of
Principal Holder |
Percentage
Owned of Record | |||||
|
|
Investor
Class
Shares |
Institutional
Class
Shares |
Personal
Investment
Class
Shares |
Private
Investment
Class
Shares |
Reserve
Class
Shares |
Resource
Class
Shares |
|
Ric
R Waugh
Pasadena,
CA |
- |
- |
- |
55.06% |
- |
- |
|
|
|
|
|
|
|
|
|
William
R Lemmons
Angeliene
B Lemmons
Boerne,
TX |
|
|
|
|
|
92.16% |
___________________________
*Owned of record
and beneficially
Invesco
Premier U.S. Government Money Portfolio
|
Name
and Address
of
Principal Holder |
Percentage
Owned of Record |
|
| |
|
|
Investor
Class Shares |
Institutional
Class Shares |
|
|
|
|
|
|
|
|
|
Calhoun
& Co Comerica Bank
411
West Lafayette
Detroit,
MI 48226 |
- |
5.90% |
|
|
|
|
|
|
|
|
|
Charles
Schwab & Company, Inc.
Special
Custody Account FBO Customers
Attn:
Mutual Funds
211
Main Street
San
Francisco, CA 94105-1905 |
21.38% |
- |
|
|
|
|
|
|
|
|
|
Empower
Trust Company LLC
Plans
of Great West Financial
8515
E Orchard Rd 2T2
Greenwood,
CO 80111-5002 |
10.90% |
- |
|
|
|
|
|
|
|
|
|
Hare
& Co 2
Attn
Stif Operations
PO
Box 223910
Pittsburgh,
PA 15251-2910 |
- |
20.78% |
|
|
|
|
|
|
|
|
|
Morgan
Stanley Smith Barney LLC
For
Exclusive Benefit of Customers
1
New York Plaza Floor 12
New
York, NY 10004-1932 |
20.71% |
23.16% |
|
|
|
|
|
|
|
|
|
Nabank
& Co
PO
Box 2180
Tulsa,
OK 74101 |
- |
5.87% |
|
|
|
|
|
|
|
|
|
Pershing
LLC
1
Pershing Plaza
Jersey
City, NJ 07399-0001 |
26.53% |
- |
|
|
|
|
|
|
|
|
|
SEI
Private Trustco
C
O Moody National Bank
Attn
Mutual Fund Admin
One
Freedom Valley Drive
Oaks,
PA 19456-9989 |
- |
14.92% |
|
|
F-2
Management
Ownership
As
of December 1, 2022, the trustees
and officers as a group owned less than 1% of the outstanding shares of each
class of each Fund except the trustees and officers as a group owned 4.38% of
outstanding Investor Class Shares of Invesco Premier
Portfolio.
F-3
APPENDIX
G - MANAGEMENT FEES
For
the last three fiscal years or periods, as applicable, ended August 31, the
management fees payable by each Fund, the
amounts waived by Invesco and the net fees paid by each Fund were as
follows:
|
|
2022 |
2021 | ||||||
|
Fund
Name |
Management
Fee
Payable |
Management
Fee
Waivers |
Yield
Waiver |
Net
Management
Fee
Paid |
Management
Fee
Payable |
Management
Fee
Waivers |
Yield
Waiver |
Net
Management
Fee
Paid |
|
Invesco
Premier Portfolio |
$3,105,925 |
$(869,826) |
$(45,340) |
$2,190,759 |
$3,787,769 |
$(1,060,411) |
$(12,635) |
$2,714,723 |
|
Invesco
Premier U.S. Government Money
Portfolio |
15,830,027 |
(4,433,537) |
(2,738,094) |
8,658,396 |
15,931,054 |
(4,459,586) |
(3,834,280) |
7,637,188 |
|
|
2020 | |||
|
Fund
Name |
Management
Fee
Payable |
Management
Fee
Waivers |
Yield
Waiver |
Net
Management
Fee
Paid |
|
Invesco
Premier Portfolio |
$4,378,700 |
$(1,226,042) |
$0 |
$3,152,658 |
|
Invesco
Premier U.S. Government Money Portfolio |
26,648,035 |
(7,461,487) |
(30,303) |
19,156,245 |
G-1
APPENDIX
H - CERTAIN FINANCIAL INTERMEDIARIES THAT RECEIVE ONE OR MORE TYPES OF
PAYMENTS
Admin Partners
LLC
ADP Broker Dealer
Inc
Advisor
Group
Advisory
Services
AIG Capital
Services Inc
Alight Financial
Solutions LLC
Allianz
Life
Allstate
Alta
Montclair
American
Enterprise Investment
American Fidelity
Assurance Company
American
General
American
Portfolios Financial
American United
Life Insurance Company
Ascensus
College Savings Recordkeeping Services LLC
Ascensus
LLC
Avantax Investment
Services Inc
AXA Advisors
LLC
AXA
Equitable
Bank of America
NA
Bank of New York
Mellon
Bank of Oklahoma –
Nabank & Co
Bay Bridge
Administrators LLC
Benefit
Consultants Group
Benefit Plans
Administrators
Benefit Trust
Company
BMO Harris Bank
NA
BOSC
Inc
Branch Banking
& Trust Co
Brighthouse Life
Insurance Co
Brighthouse
Services LLC
Broadway National
Bank
Brown Brothers
Harriman & Co
Cadaret Grant and
Co Inc
Cambridge
Investment Research Inc
Cantella &
Company
Cavu Securities,
LLC
Cetera Financial
Group Inc
Cetera Investment
Services LLC
Charles Schwab and
Company Inc
Citibank
NA
Citigroup Global
Markets
Citistreet
City Bank
Trust
CLS
Investments
CoBank
Comerica
Bank
Commonwealth
Annuity and Life Insurance Company
Commonwealth
Financial Network
CUSO Financial
Services LP
Delaware Life
Insurance Company
Digital Retirement
Solutions
Donnelley
Financials LLC
E Trade
Financial
Educators Benefit
Consultants LLC
Edward Jones &
Co
EKON
Benefits
Empire Fidelity
Investments
Envestnet Asset
Management Inc
Envoy Plan
Services Inc
Equitable Advisors
LLC
Equitable
Life
Farmers Financial
Solutions LLC
Fidelity Brokerage
Services
Fidelity
Institutional
Fidelity
Investments
Fifth
Third
Financial Data
Services Inc
First
Command
Foley and Lardner
LLP
Forethought Life
Insurance Company
Forrest T Jones
& Company
Frost Brokerage
Services Inc
Frost National
Bank
FSC Securities
Corporation
Genworth
Financial
Genworth Life and
Annuity Insurance Company
Global Atlantic
Distributors LLC
Goldman Sachs
& Co
Great
West
Guardian
Guardian Insurance
& Annuity Co Inc
GWFS Equites
Inc
GWN
Marketing
Hantz Financial
Services Inc
Hare and
Company
Hartford
Life
Hartford Life
Insurance Co Inc
Hilltop Securities
Inc
Huntington
Securities Inc
ING Life Insurance
Annuity Company
Institutional Cash
Distributors LLC
Janney Montgomery
Scott LLC
Jefferson National
Life Insurance Company
Jefferson
National Life Insurance Company of New York
JNT Resource
Partners, LP
John
Hancock
JP Morgan Chase
Bank
JP Morgan Clearing
Corp
JP Morgan
Securities LLC
Kestra Investment
Services LLC
Key Bank National
Association
Ladenburg Thalmann
Financial Services Inc
Legend Group
Adserv
Lincoln Benefit
Life Company
Lincoln
Financial
Lincoln Financial
Securities Corp
Lincoln Investment
Planning
Lincoln National
Life Insurance
LPL Financial
LLC
M&T
Bank
Mass
Mutual
Merrill
Lynch
Merrill Lynch
Pierce Fenner and Smith Inc
Metropolitan Life
Insurance Company
Mid Atlantic
Capital Corporation
Minnesota
Life
MML Investors
Services LLC
Moreton Asset
Management
Moreton Capital
Markets LLC
Morgan
Stanley
MSCS Financial
Services Inc
Mutual Securities
Inc
Nassau Companies
of New York
National Benefit
Services LLC
National Financial
Services Corporation
National Financial
Services LLC
National Plan
Administrators Inc
National
Securities Corporation
Nationwide
New
Mexico
New York
Life
New York Life
Insurance and Annuity Corporation
Newport Retirement
Plan Services Inc
Next Financial
Group Inc
Northwestern
Mutual Investment Services
Oppenheimer &
Co Inc
ORANJ
Pacific Life Fund
Advisors LLC
Pacific Life
Insurance Company
Penserv Plan
Services Inc
Pershing
Pershing
LLC
PFS
Investments
PFS Shareholder
Services
Piper
Jaffray
Plains Capital
Bank
Plan
Administrators Inc
PNC Bank
NA
PNC Capital
Markets LLC
PNC Investments
LLC
Principal Life
Insurance Company
Princor Financial
Services Corporation
Protective
Life
Pruco Life
Insurance Company
Pruco Life
Insurance Company of New Jersey
Pruco Securities
LLC
Prudential
Raymond
James
RBC Capital
Markets LLC
RBC Wealth
Management
Reliance Trust
Company
Research
Affiliates LLC
Rhode
Island
Riversource Life
Insurance Company
Robert W Baird and
Co Inc
Russell Investment
Management LLC
Sammons Financial
Network LLC
Santander Bank
NA
SB Business
Services LLC
Schools First Plan
Administration
Security Benefit
Life
Security
Distributors Inc
Security Financial
Resources
Security Life of
Denver
SEI Private Trust
Company
Siracusa Benefits
Programs, Inc
Sorrento Pacific
Financial LLC
H-1
Standard Insurance
Company
State Street
Corporation
Stifel Nicolaus
& Co Inc
Stifel Trust
Company Delaware NA
Sungard
T Rowe Price
Associates Inc
Talcott Resolution
Life Insurance Company
TD
Ameritrade
TDS Group
Inc
The OMNI
Group
TIAA-CREF
Transamerica
Financial Life Insurance Company
Transamerica Life
Insurance Company
Transamerica
Premier Life Insurance Co
Treasury
Curve
Truist
Trust Management
Network LLC
TSA Consulting
Group Inc
Tuition Plan
Consortium LLC
UBS Financial
Services Inc
Ultimas Asset
Services LLC
UMB
Bank
Union
Bank
US Bancorp
Investments Inc
US
Bank
VALIC
Financial
Vanguard Brokerage
Services
Vanguard Group
Inc
Variable Annuity
Life Insurance Co
Variable Life
Insurance Co
VOYA Financial
Advisors Inc
VOYA Institutional
Plan Services LLC
VOYA Insurance and
Annuity Company
VOYA Retirement
Insurance and Annuity Company
VOYA Services
Company
VRSCO-American
General Distributors
Wachovia Bank
NA
Wedbush Securities
Inc
Wells
Fargo
Wells Fargo Bank
NA
Wells Fargo
Securities LLC
Western
International Securities Inc
Woodforest
National Bank
Zions First
National Bank
Zurich American
Life Insurance Company
H-2
APPENDIX
I - ADMINISTRATIVE SERVICES FEES
For
the last three fiscal years or periods, as
applicable, ended August 31, the Funds paid no fees to Invesco for
Administrative services.
I-1
APPENDIX
J - DIRECTED BROKERAGE (RESEARCH SERVICES) AND PURCHASES OF SECURITIES
OF
REGULAR BROKERS OR DEALERS
DIRECTED
BROKERAGE
During
the last fiscal year or periods, as applicable, ended August 31,
2022,
the Funds did not allocate any transactions to broker-dealers that provided the
Adviser with certain research, statistics and other information.
REGULAR
BROKER-DEALERS
During
the last fiscal year or periods, as
applicable, ended August 31, 2022, the Funds did not purchase securities
of its regular brokers or dealers.
J-1
APPENDIX
K - AMOUNTS PAID TO INVESCO DISTRIBUTORS, INC. PURSUANT TO DISTRIBUTION
PLANS
PLANS
A
list of amounts paid by each class of shares of Invesco Premier Portfolio to
Invesco Distributors pursuant to the
Plan for the fiscal year or periods, as applicable, ended August 31, 2022
follows:
|
Invesco
Premier Portfolio |
|
|
Class |
Amount* |
|
Personal
Investment Class |
$17,604 |
|
Private
Investment Class |
33 |
|
Reserve
Class |
31 |
|
Resource
Class |
2,150 |
*Net of 12b-1 fee
waiver.
K-1
APPENDIX
L - ALLOCATION OF ACTUAL FEES PAID PURSUANT TO DISTRIBUTION PLANS
An
estimate by category of the allocation of actual fees paid by the following
classes of shares of Invesco Premier
Portfolio during the fiscal year or periods, as applicable, ended August 31,
2022, follows:
|
Invesco
Premier Portfolio |
Personal
Investment
Class |
Private
Investment
Class |
Reserve
Class |
Resource
Class |
|
Advertising |
$0 |
$0 |
$0 |
$0 |
|
Printing
and Mailing prospectuses, semi-
annual
reports and annual reports (other
than
to current shareholders) |
0 |
0 |
0 |
0 |
|
Seminars |
0 |
0 |
0 |
0 |
|
Compensation
to Underwriters to partially
offset
other marketing expenses |
0 |
0 |
5 |
0 |
|
Compensation
to Dealer including
Finders’
Fees |
17,602 |
32 |
24 |
2,149 |
|
Compensation
to Sales Personnel |
0 |
1 |
2 |
1 |
|
Travel
Expenses Related to Marketing |
2 |
0 |
0 |
0 |
|
Annual
Report Total* |
$17,604 |
$33 |
$31 |
$2,150 |
*Net of 12b-1 fee
waiver.
L-1