Information Regarding Investment Advisory and Sub-Advisory Contract Renewals
The Boards of Trustees/Board of Directors (the Board) of the Invesco Funds are required under the Investment Company Act of 1940, as amended, to approve annually the renewal of the investment advisory agreements with Invesco Advisers, Inc. (Invesco Advisers) and the Master Intergroup Sub-Advisory Contracts for Mutual Funds (the sub-advisory contracts) with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers). During contract renewal meetings held in June 2011 and June 2012, the Board as a whole, and the disinterested or "independent" Trustees, voting separately, approved the continuance of each fund's investment advisory agreement and the sub-advisory contracts for another year. In doing so, the Board considered the process that it follows in reviewing and approving the investment advisory agreements and sub-advisory contracts and the information that it is provided. The Board determined that the investment advisory agreement and the sub-advisory contracts are in the best interests of each fund and its shareholders and that the compensation to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board's Fund Evaluation Process
The Board's Investments Committee has established three Sub-Committees, each of which is primarily responsible for overseeing the management of a number of the series portfolios of the funds advised by Invesco Advisers (Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies, limitations and investment risks of these funds. The Sub-Committees meet regularly and at designated contract renewal meetings each year to conduct a review of the performance, fees, expenses and other matters related to all their assigned Invesco Funds. Each Sub-Committee recommends to the Investments Committee, which in turn recommends to the full Board, whether and on what terms to approve the continuance of each Invesco Fund's investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Trustees receive comparative performance and fee data regarding the Invesco Funds prepared by an independent company, Lipper, Inc. (Lipper). The Trustees also receive an independent written evaluation from the Senior Officer. The Senior Officer's report is prepared as part of his responsibility to manage the process by which the Invesco Funds' proposed management fees are negotiated during the annual contract renewal process to ensure that they are negotiated in a manner that is at arms' length and reasonable. The independent Trustees are assisted in their annual evaluation of the investment advisory agreements by the Senior Officer and by independent legal counsel. In addition to meeting with Invesco Advisers and fund counsel, the independent Trustees also discuss the continuance of the investment advisory agreements and sub-advisory contracts in private sessions with the Senior Officer and independent legal counsel.
In evaluating the fairness and reasonableness of the each fund's investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed in the discussion described below. In 2011 and in 2012, the Trustees also considered information provided in connection with fund reorganizations approved by the Trustees. The Trustees recognized that the advisory fees for the Invesco Funds include advisory fees that are the result of years of review and negotiation between the Trustees and Invesco Advisers as well as advisory fees previously approved by a different board that, at the time, was responsible for overseeing Morgan Stanley and Van Kampen funds, which have become Invesco Funds following the acquisition of the retail mutual fund business of Morgan Stanley. The Trustees' deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these same arrangements throughout the year and in prior years. One Trustee may have weighed a particular piece of information or factor differently than another Trustee.
Please click on the links below to view a discussion by fund of the factors the Board considered in evaluating the fairness and reasonableness of each fund's advisory and sub-advisory agreements. For each fund, the applicable link serves as the Senior Officer's independent written evaluation in 2011 and 2012 with respect to the investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board's approval of the investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 2011 and June 2012 respectively, and may not reflect consideration of factors that became known to the Board after those respective dates, including, for example, changes to the Fund's performance, advisory fees, expense limitations and/or fee waivers.