pre14a
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant þ
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12 |
Invesco Value Municipal Income Trust
Invesco Value Municipal Bond Trust
Invesco Value Municipal Trust
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. |
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Title of each class of securities to which transaction applies: |
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Aggregate number of securities to which transaction applies: |
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Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and
state how it was determined): |
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Proposed maximum aggregate value of transaction: |
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Total fee paid: |
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Fee paid previously with preliminary proxy materials. |
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Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing. |
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Amount Previously Paid: |
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Form, Schedule or Registration Statement No.: |
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Filing Party: |
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Date Filed: |
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Invesco Value Municipal Income Trust
Invesco Value Municipal Bond Trust
Invesco Value Municipal Trust
1555 Peachtree Street, N.E.
Atlanta, GA 30309
(800) 341-2929
NOTICE OF JOINT ANNUAL MEETING OF SHAREHOLDERS
To Be Held on July 17, 2012
Notice is hereby given to holders of preferred shares of beneficial interest designated as
Variable Rate Muni Term Preferred Shares (VMTP Shares) of Invesco Value Municipal Bond Trust
(IMC), Invesco Value Municipal Trust (IMT) and Invesco Value Municipal Income Trust (the
Acquiring Fund or IIM) that the Funds will hold a joint annual meeting of shareholders (the
Meeting) on July 17, 2012, at 1555 Peachtree Street, N.E., Atlanta, Georgia 30309. The Meeting
will begin at 1:00 p.m., Eastern time. At the Meeting, holders of VMTP Shares (VMTP
Shareholders) will be asked to vote on the following proposals:
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For IMC, IMT and the Acquiring Fund approval of an Agreement and Plan of
Redomestication that provides for the reorganization of such Fund as a Delaware statutory
trust. |
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Approval of the merger of each of IMC, IMT and Invesco Value Municipal Securities
(IMS) into the Acquiring Fund, which shall require the following shareholder actions: |
(a) For IMC and IMT, approval of an Agreement and Plan of Merger that provides for such Fund
to merge with and into the Acquiring Fund.
(b) For the Acquiring Fund, approval of the following sub-proposals:
(i) Approval of an Agreement and Plan of Merger that provides for IMC to merge with and
into the Acquiring Fund.
(ii) Approval of an Agreement and Plan of Merger that provides for IMS to merge with and
into the Acquiring Fund.
(iii) Approval of an Agreement and Plan of Merger that provides for IMT to merge with
and into the Acquiring Fund.
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For the Acquiring Fund, approval of an amendment to the Funds advisory agreement that
increases the Funds advisory fee. |
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For each Fund, the election of six Trustees to its Board of Trustees. |
Each Fund may also transact such other business as may properly come before the Meeting or any
adjournment or postponement thereof. IMC, IMT and IMS collectively are referred to as the Target
Funds. The Target Funds and the Acquiring Fund collectively are referred to as the Funds and
each is referred to individually as a Fund. IMS does not have outstanding VMTP Shares.
VMTP Shareholders of record as of the close of business on May 25, 2012, are entitled to
notice of, and to vote at, the Meeting or any adjournment or postponement thereof. Holders of the
Funds common shares of beneficial interest, whose voting instructions are being separately
solicited, will also vote on certain matters at the Meeting.
The Board of Trustees of each Fund requests that you vote your shares by either (i)
completing the enclosed proxy card and returning it in the enclosed postage paid return envelope,
or (ii) voting by telephone or via the internet using the instructions on the proxy card. Please
vote your shares promptly regardless of the number of shares you own.
Each Target Funds governing documents provide that shareholders do not have dissenters
appraisal rights, and each Target Fund does not believe that its shareholders are entitled to
appraisal rights in connection with its merger.
Each Funds Board unanimously recommends that you cast your vote FOR the above proposals and
FOR ALL the Trustee nominees as described in the Joint Proxy Statement.
Mr. Philip Taylor
President and Principal Executive Officer
June [ ], 2012
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE JOINT
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JULY 17, 2012:
The proxy statement and annual report to shareholders are available at www.invesco.com/us.
Invesco Value Municipal Income Trust
Invesco Value Municipal Bond Trust
Invesco Value Municipal Trust
1555 Peachtree Street, N.E.
Atlanta, GA 30309
(800) 341-2929
JOINT PROXY STATEMENT
June [ ], 2012
Introduction
This Joint Proxy Statement (the Proxy Statement) contains information that holders of
preferred shares of beneficial interest designated as Variable Rate Muni Term Preferred Shares
(VMTP Shares) of Invesco Value Municipal Bond Trust (IMC), Invesco Value Municipal Trust
(IMT), and Invesco Value Municipal Income Trust (the Acquiring Fund or IIM) should know
before voting on the proposals that are described herein.
A joint annual meeting of the shareholders of the Funds (the Meeting) will be held on July
17, 2012, at 1555 Peachtree Street, N.E., Atlanta, Georgia 30309. The Meeting will begin at 1:00
p.m., Eastern time. The following describes the proposals to be voted on by holders of VMTP Shares
(VMTP Shareholders) at the Meeting:
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For IMC, IMT and the Acquiring Fund approval of an Agreement and Plan of
Redomestication that provides for the reorganization of such Fund as a Delaware statutory
trust. |
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Approval of the merger of IMC, IMT and Invesco Value Municipal Securities (IMS) into
the Acquiring Fund, which shall require the following shareholder actions: |
(a) For IMC and IMT, approval of an Agreement and Plan of Merger that provides for such
Target Fund to merge with and into the Acquiring Fund.
(b) For the Acquiring Fund, approval of the following sub-proposals:
(i) Approval of an Agreement and Plan of Merger that provides for IMC to merge with and
into the Acquiring Fund.
(ii)
Approval of an Agreement and Plan of Merger that provides for IMS to
merge with and into the Acquiring Fund.
(iii) Approval of an Agreement and Plan of Merger that provides for IMT to merge with and
into the Acquiring Fund.
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For the Acquiring Fund, approval of an amendment to the Funds advisory agreement that
increases the Funds advisory fee. |
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For each Fund, the election of six Trustees to its Board of Trustees. |
Each Fund may also transact such other business as may properly come before the Meeting or any
adjournment or postponement thereof. IMC, IMT and IMS collectively are referred to as the Target
Funds. The Target Funds and the Acquiring Fund collectively are referred to as the Funds and
each is referred to individually as a Fund. IMS does not have outstanding VMTP Shares.
The redomestications contemplated by Proposal 1 are referred to herein each individually as a
Redomestication and together as the Redomestications. The mergers contemplated by Proposal 2
are referred to herein each individually as a Merger and together as the Mergers.
The Boards of Trustees of the Funds (the Boards) have fixed the close of business on May 25,
2012, as the record date (Record Date) for the determination of shareholders entitled to notice
of and to vote at the Meeting and at any adjournment or postponement thereof. Shareholders will be
entitled to one vote for each share held (and a proportionate fractional vote for each fractional
share). Holders of the common shares of beneficial interest (Common Shares) of the Funds, whose
voting instructions are being separately solicited, will also vote on certain matters at the
Meeting.
This Proxy Statement, the enclosed Notice of Joint Annual Meeting of Shareholders, and the
enclosed proxy card will be mailed on or about June [30], 2012, to all VMTP Shareholders eligible
to vote at the Meeting. Each Fund is a closed-end management investment company registered under
the Investment Company Act of 1940, as amended (the 1940 Act). The Common Shares of each Fund
are listed on the New York Stock Exchange (the Exchange).
The Meeting is scheduled as a joint meeting of the shareholders of the Funds and certain
affiliated funds, whose votes on proposals applicable to such funds are being solicited separately,
because the shareholders of the funds are expected to consider and vote on similar matters.
A joint Proxy Statement is being used in order to reduce the preparation, printing, handling
and postage expenses that would result from the use of separate proxy materials for each Fund. You
should retain this Proxy Statement for future reference, as it sets forth concisely information
about the Funds that you should know before voting on the proposals. Additional information about
each Fund is available in the annual and semi-annual reports to shareholders of such Fund. Each
Funds most recent annual report to shareholders, which contains audited financial statements for
the Funds most recently completed fiscal year, and each Funds most recent semi-annual report to
shareholders have been previously mailed to shareholders and are available on the Funds website at
www.invesco.com/us. These documents are on file with the U.S. Securities and Exchange Commission
(the SEC). Copies of all of these documents are also available upon request without charge by
writing to the Funds at 11 Greenway Plaza, Suite 1000, Houston, Texas 77046, or by calling (800)
341-2929.
You also may view or obtain these documents from the SECs Public Reference Room, which is
located at 100 F Street, N.E., Washington, D.C. 20549, or from the SECs website at www.sec.gov.
Information on the operation of the SECs Public Reference Room may be obtained by calling the SEC
at (202) 551-8090. You can also request copies of these materials, upon payment at the prescribed
rates of the duplicating fee, by electronic request to the SECs e-mail address
(publicinfo@sec.gov) or by writing to the Public Reference Branch, Office of Consumer Affairs and
Information Services, U.S. Securities and Exchange Commission, Washington, D.C. 20549-1520. You
may also inspect reports, proxy material and other information concerning each of the Funds at the
Exchange.
The VMTP Shares have not been registered under the Securities Act of 1933, as amended (the
Securities Act) or any state securities laws and, unless so registered, may not be offered or
sold except pursuant to an exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act and applicable state securities laws. Accordingly, VMTP Shares
to be issued in the Mergers are not offered for sale hereby, and may not be transferred or resold
except in compliance with the Securities Act. No person has been authorized to give any
information or make any representations not contained herein and, if so given or made, such
information or representation must not be relied upon as having been authorized.
TABLE OF CONTENTS
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PROPOSAL 1: APPROVAL OF REDOMESTICATION |
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On what am I being asked to vote? |
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Has my Funds Board of Trustees approved the Redomestication? |
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Will VMTP
Shares issued in connection with the Redomestications be the same as
my current VMTP Shares? |
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What are the reasons for the proposed Redomestications? |
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What effect will a Redomestication have on me as a shareholder? |
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How do the laws governing each Fund pre- and post-Redomestication compare? |
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How do the governing documents of each Fund pre- and post-Redomestication compare? |
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Will there be any tax consequences resulting from a Redomestication? |
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What is the Tax Treatment of the VMTP Shares of the DE Fund? |
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When are the Redomestications expected to occur? |
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What will happen if shareholders of a Fund do not approve Proposal 1? |
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PROPOSAL 2: APPROVAL OF MERGERS |
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On what am I being asked to vote? |
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Has my Funds Board of Trustees approved the Merger(s)? |
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Will VMTP
Shares issued in connection with the Mergers be the same as my
current VMTP Shares? |
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What are the reasons for the proposed Mergers? |
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What effect will a Merger have on me as a VMTP Shareholder? |
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How do the Funds investment objectives and principal investment strategies compare? |
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How do the Funds principal risks compare? |
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How do the Funds expenses compare? |
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How do the management, investment adviser and other service providers of the Funds compare? |
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Does the Acquiring Fund have the same portfolio managers as the Target Funds? |
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How do the distribution policies of the Funds compare? |
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Will there be any tax consequences resulting from the Mergers? |
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When are the Mergers expected to occur? |
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What will happen if shareholders of a Fund do not approve a Merger? |
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Where can I find more information about the Funds and the Mergers? |
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ADDITIONAL INFORMATION ABOUT THE FUNDS AND THE MERGERS |
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Principal Investment Strategies |
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Principal Risks of an Investment in the Funds |
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Portfolio Managers |
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Trading of VMTP Shares |
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Capital Structures of the Funds |
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Description of Securities to be Issued |
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Pending Litigation |
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Portfolio Turnover |
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Portfolio Guidelines of VMTP Share Rating Agencies and Certificates of Designation |
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Terms and Conditions of the Mergers |
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Additional Information About the Funds |
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Federal Income Tax Matters Associated with Investment in the Funds |
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Board Considerations in Approving the Mergers |
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Federal Income Tax Considerations of the Mergers |
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Tax Treatment of the VMTP Shares of the Acquiring Fund |
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Where to Find More Information |
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PROPOSAL 3: APPROVAL OF AN AMENDMENT TO THE ADVISORY AGREEMENT FOR THE ACQUIRING FUND |
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Background |
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Changes to Investment Advisory Fee Rate |
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Description of the Advisory Agreement |
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Additional Information about the Adviser |
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Board Considerations in Approving the Advisory Agreement and the Amendment |
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PROPOSAL 4: ELECTION OF TRUSTEES BY EACH FUND |
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VOTING INFORMATION |
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How to Vote Your Shares |
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Why are you sending me the Proxy Statement? |
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About the Proxy Statement and the Meeting |
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Quorum Requirement and Adjournment |
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Votes Necessary to Approve the Proposals |
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Proxy Solicitation |
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OTHER MATTERS |
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Share Ownership by Large Shareholders, Management and Trustees |
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Annual Meetings of the Funds |
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Shareholder Proposals |
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Shareholder Communications |
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Section 16(a) Beneficial Ownership Reporting Compliance |
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Other Meeting Matters |
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WHERE TO FIND ADDITIONAL INFORMATION |
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Exhibits |
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EXHIBIT A Form of Agreement and Plan of Redomestication |
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EXHIBIT B Comparison of Governing Documents |
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EXHIBIT C Comparison of State Laws |
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EXHIBIT D Form of Agreement and Plan of Merger |
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EXHIBIT E Executive Officers of the Funds |
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E-1 |
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EXHIBIT F Information Regarding the Funds Trustees |
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EXHIBIT G Board Leadership Structure, Role in Risk Oversight, and Committees and Meetings of the Funds |
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EXHIBIT H Remuneration of the Funds Trustees |
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EXHIBIT I Independent Auditor Information |
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EXHIBIT J Outstanding Shares of the Funds |
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J-1 |
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EXHIBIT K Ownership of the Funds |
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K-1 |
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EXHIBIT L Statement of Preferences of the VMTP Shares of the Acquiring Fund |
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L-1 |
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No dealer, salesperson or any other person has been authorized to give any information or to
make any representations other than those contained in this Proxy Statement or related solicitation
materials on file with the Securities and Exchange Commission, and you should not rely on such
other information or representations.
ii
PROPOSAL 1: APPROVAL OF REDOMESTICATION
On what am I being asked to vote?
Shareholders of IMC, IMT and the Acquiring Fund are being asked to approve an Agreement and
Plan of Redomestication (a Plan of Redomestication) providing for the reorganization of the Fund
as a Delaware statutory trust (referred to herein as a DE Fund). (Common Shareholders of IMS are
also being asked via a separate proxy statement to approve a Plan of Redomestication providing for
the reorganization of IMS as a Delaware statutory trust.) Each Fund is currently a Massachusetts
business trust. Each Funds Plan of Redomestication provides for the Fund to transfer all of its
assets and liabilities to a newly formed Delaware statutory trust whose capital structure will be
substantially the same as the Funds current structure, after which Fund shareholders will own
shares of the Delaware statutory trust and the Massachusetts business trust will be liquidated and
terminated. The Redomestication is only a change to your Funds legal form of organization and
there will be no change to the Funds investments, management, fee levels, or federal income tax
status as a result of the Redomestication.
Each Funds Redomestication may proceed even if other Redomestications are not approved by
shareholders or are for any other reason not completed. A form of the Plan of Redomestication is
available as Exhibit A.
By voting for this Proposal 1, you will be voting to become a shareholder of a fund organized
as a Delaware statutory trust with portfolio characteristics, investment objective(s), strategies,
risks, trustees, advisory agreements, subadvisory arrangements and other arrangements that are
substantially the same as those currently in place for your Fund.
Has my Funds Board of Trustees approved the Redomestication?
Yes. Each Funds Board has reviewed and unanimously approved the Plan of Redomestication and
this Proposal 1. The Board of each Fund unanimously recommends that shareholders vote FOR
Proposal 1.
Will VMTP Shares issued in connection with the Redomestications be the same as my current VMTP
Shares?
Yes. In connection with each Redomestication, the applicable DE Fund will issue VMTP Shares
with terms that are substantially identical to the terms IMCs, IMTs and the Acquiring Funds
currently outstanding VMTP Shares. Important information regarding the VMTP Shares to be issued in
connection with each Redomestications is set forth below.
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It is a condition of closing of each Redomestication that the Fund will have
satisfied all of its obligations set forth in certain documents related to the VMTP
Shares immediately prior to the Redomestication and that the DE Fund will satisfy all
of the obligations of the corresponding documents related to the VMTP Shares to be
issued by the DE Fund immediately after the Redomestication. |
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The terms of the Declaration of Trust of a DE Fund are identical to those terms
agreed upon by the initial purchaser of VMTP Shares of the Fund. |
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The terms of the bylaws of a DE Fund are identical to those terms agreed upon
by the initial purchaser of VMTP Shares of the Fund. |
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The terms of the VMTP Shares issued by a DE Fund, as set forth in the Statement
of Preferences of VMTP Shares of the DE Fund, are identical to those terms agreed upon
by the initial purchaser of VMTP Shares of the Fund. |
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In the Redomestication, VMTP Shareholders of a Fund will receive VMTP Shares of
the DE Fund and no VMTP Shares of the DE Fund will be issued to persons who are not
holders of VMTP Shares of the Fund. |
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It is a condition of closing of each Redomestication that upon closing of such
Redomestication the VMTP Shares of the DE Fund be rated at least AA-/Aa3 by each rating
agency that is rating, at the request of the DE Fund, such VMTP Shares. |
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The Redomestications are scheduled to occur on or prior to December 31, 2012. |
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A form of the Statement of Preferences of VMTP Shares of the Acquiring Fund is attached hereto
as Exhibit L. The Statement of Preferences of VMTP Shares of the DE Fund for each of IMC, IMT and
the Acquiring Fund will be identical in all material respects. The description of VMTP Shares of
the DE Funds included herein is subject to and qualified in its entirety by reference to the more
detailed description of the VMTP Shares set forth in such form of Statement of Preferences.
What are the reasons for the proposed Redomestications?
The Redomestications will serve to standardize the governing documents and certain agreements
of the Funds with each other and with other funds managed by Invesco Advisers, Inc. (the
Adviser). This standardization is expected to streamline the administration of the Funds, which
may result in cost savings and more effective administration by eliminating differences in
governing documents or controlling law. In addition, the legal requirements governing business
trusts under Massachusetts law are less certain and less developed than those under Delaware law,
which sometimes necessitates the Funds bearing the cost to engage counsel to advise on the
interpretation of such law.
The Redomestications are also a necessary step for the completion of the Mergers described in
Proposal 2 because, as Delaware statutory trusts, the Funds may merge with no delay in transactions
that are expected to qualify as tax-free reorganizations. However, the Redomestications may
proceed even if the Mergers described in Proposal 2 are not approved.
What effect will a Redomestication have on me as a shareholder?
A Redomestication will have no direct economic effect on Fund shareholders investments, other
than the cost savings described herein. Each redomesticated Fund will have investment advisory
agreements, subadvisory arrangements, administration agreements, custodian agreements, transfer
agency agreements, and other service provider arrangements that are identical in all material
respects to those in place immediately before the Redomestication, with certain non-substantive
revisions to standardize such agreements across the Funds. For example, after the
Redomestications, the investment advisory agreements of the Funds will contain standardized
language describing how investment advisory fees are calculated, but there will be no change to the
actual calculation methodology. Each Fund will continue to be served by the same individuals as
trustees and officers, and each Fund will continue to retain the same independent registered public
accounting firm. The portfolio characteristics, investment objective(s), strategies and risks of
each Fund will not change as a result of the Redomestications. Each Funds new governing documents
will be similar to its current governing documents, but will contain certain material differences.
These changes are intended to benefit shareholders by streamlining and promoting the efficient
administration and operation of the Funds. However, as a result of these changes, shareholders
will have fewer rights to vote on certain matters affecting the Fund and, therefore, less control
over the operations of the Fund. These changes to shareholder voting rights, and the benefits that
management believes will result from these changes, are described below.
Each of IMC, IMT and the Acquiring Fund will distribute to VMTP Shareholders all accrued but
unpaid dividends on the VMTP Shares through the closing date for its Redomestication. Dividends
will begin accruing on the VMTP Shares issued by the DE Fund as of the closing date for the
Redomestication at the same rate that was in effect immediately prior to the Redomestication.
Agreements of each of IMC, IMT and the Acquiring Fund related to the VMTP Shares, including the
purchase agreement, the redemption and paying agent agreement and the registration rights
agreement, will be assigned to the corresponding DE Fund.
In addition, each Funds capital structure will be substantially the same as its current
capital structure. The Common Shares of each Fund will continue to have equal rights to the
payment of dividends and the distribution of assets upon liquidation. The Acquiring Fund, IMC and
IMT may not declare distributions on Common Shares unless all accrued dividends on such Funds VMTP
Shares have been paid, and unless asset coverage with respect to such Funds preferred shares would
be at least 200% after giving effect to the distributions. In addition, under the terms of the
Acquiring Funds, IMCs and IMTs outstanding VMTP Shares, each respective Fund will continue to be
required to maintain minimum asset coverage of 225%.
Shareholder approval of a Redomestication will be deemed to constitute approval of the
advisory and subadvisory agreements, as well as a vote for the election of the trustees, of the
Delaware statutory trust. Accordingly, each Plan of Redomestication provides that the sole initial
shareholder of each Delaware statutory trust will vote to approve the advisory and subadvisory
agreements (which, as noted above, will be identical in all
2
material respects to the Funds current agreements) and to elect the trustees of the Delaware
statutory trust (which, as noted above, will be the same as the Funds current Trustees) after
shareholder approval of a Redomestication but prior to the closing of the Redomestication.
How do the laws governing each Fund pre- and post-Redomestication compare?
After the Redomestications, each Fund will be a Delaware statutory trust governed by the
Delaware Statutory Trust Act (DE Statute). The DE Statute is similar in many respects to the
laws governing each Funds current structure, a Massachusetts business trust, but they differ in
certain respects. Both the Massachusetts business trust law (MA Statute) and the DE Statute
permit a trusts governing instrument to contain provisions relating to shareholder rights and
removal of trustees, and provide trusts with the ability to amend or restate the trusts governing
instruments. However, the MA Statute is silent on many of the salient features of a Massachusetts
business trust whereas the DE Statute provides guidance and offers a significant amount of
operational flexibility to Delaware statutory trusts. The DE Statute provides explicitly that the
shareholders and trustees of a Delaware statutory trust are not liable for obligations of the trust
to the same extent as under corporate law. While the governing documents of each Fund contain an
express disclaimer of liability of shareholders, certain Massachusetts judicial decisions have
determined that shareholders of a Massachusetts business trust may, in certain circumstances, be
assessed or held personally liable as partners for the obligations of a Massachusetts business
trust. Therefore, the Funds believe that shareholders will benefit from the express statutory
protections of the DE Statute. The DE Statute authorizes the trustees to take various actions
without requiring shareholder approval if permitted by a Funds governing instruments. For
example, trustees of a Delaware statutory trust may have the power to amend the trusts governing
instrument, merge or consolidate a Fund with another entity, and to change the Delaware statutory
trusts domicile, in each case without a shareholder vote. The Funds believe that the guidance and
flexibility afforded by the DE Statute and the explicit limitation on liability contained in the DE
Statute will benefit the Funds and shareholders. A more detailed comparison of certain provisions
of the DE Statute and the MA Statute is included in Exhibit C.
How do the governing documents of each Fund pre- and post-Redomestication compare?
The governing documents of a Fund before and after its Redomestication will be similar, but
will contain certain material differences. In general, these changes to each Funds new governing
documents are intended to benefit shareholders by streamlining the administration and operation of
each Fund to save shareholders money and by making it more difficult for short-term speculative
investors to engage in practices that benefit such short-term investors at the expense of the Fund
and to the detriment of its long-term investors. For example, the new governing documents permit
termination of a Fund without shareholder approval, provided that at least 75% of the Trustees have
approved such termination, thereby avoiding the expense of a shareholder meeting in connection with
a termination of a Fund, which expense would reduce the amount of assets available for distribution
to shareholders. The current governing documents require shareholder approval to terminate a Fund
regardless of whether the Trustees have approved such termination. Also, a Funds new bylaws may
be altered, amended, or repealed by the Trustees, without the vote or approval of shareholders. A
Funds current bylaws may be altered, amended, or repealed by the Trustees, provided that bylaws
adopted by the shareholders may only be altered, amended or repealed by the shareholders. None of
the Funds currently have any bylaws that were adopted by shareholders. As a result of these
changes, shareholders will generally have fewer rights to vote on certain matters affecting the
Fund and, therefore, less control over the operations of the Fund.
The new governing documents include new procedures intended to provide the Board the
opportunity to better evaluate proposals submitted by shareholders and provide additional
information to shareholders for their consideration in connection with such proposals. For
example, the new governing documents require shareholders to provide additional information with
respect to shareholder proposals, including nominations, brought before a meeting of shareholders.
These additional procedures include, among others, deadlines for providing advance notice of
shareholder proposals, certain required information that must be included with such advance notice
and a requirement that the proposing shareholder appear before the annual or special meeting of
shareholders to present about the nomination or proposed business. The new governing documents
will not provide shareholders the ability to remove Trustees or to call special meetings of
shareholders, which powers are provided under the current governing documents.
The new governing documents contain provisions the Trustees believe will benefit shareholders
by deterring frivolous lawsuits and actions by short-term, speculative investors that are contrary
to the long-term best
3
interests of the Fund and long-term shareholders and limiting the extent to which Fund assets will
be expended defending against such lawsuits. These provisions include a different shareholder
voting standard with respect to a Funds merger, consolidation, or conversion to an open-end
company that, in certain circumstances, may be a lower voting standard than under the current
governing documents. The new governing documents also impose certain obligations on shareholders
seeking to initiate a derivative action on behalf of a Fund that are not imposed under the current
governing documents, which may make it more difficult for shareholders to initiate derivative
actions and are intended to save the Fund money by requiring reimbursement of the Fund for
frivolous lawsuits brought by shareholders. To further protect the Fund and its shareholders from
frivolous lawsuits, the new governing documents also provide that shareholders will indemnify a
Fund for all costs, expenses, penalties, fines or other amounts arising from any action against the
Fund to the extent that the shareholder is not the prevailing party and that the Fund is permitted
to redeem shares of and/or set off against any distributions due to the shareholder for such
amounts.
A comparison of the current and proposed governing documents of the Funds is available in
Exhibit B and a form of the Statement of Preferences of the VMTP Shares of the Acquiring Fund is
available in Exhibit L.
Will there be any tax consequences resulting from a Redomestication?
The following is a general summary of the material U.S. federal income tax considerations of
the Redomestications and is based upon the current provisions of the Internal Revenue Code of 1986,
as amended (the Code), the existing U.S. Treasury Regulations thereunder, current administrative
rulings of the Internal Revenue Service (IRS) and published judicial decisions, all of which are
subject to change. These considerations are general in nature and individual shareholders should
consult their own tax advisors as to the federal, state, local, and foreign tax considerations
applicable to them and their individual circumstances. These same considerations generally do not
apply to shareholders who hold their shares in a tax-deferred account.
Each Redomestication is intended to be a tax-free reorganization pursuant to Section 368(a) of
the Code. Each Fund is currently a Massachusetts business trust. Each Redomestication will be
completed pursuant to a Plan of Redomestication that provides for the applicable Fund to transfer
all of its assets and liabilities to a newly formed Delaware statutory trust (DE-Fund), after
which Fund shareholders will own shares of the Delaware statutory trust and the Massachusetts
business trust will be liquidated. Even though the Redomestication of a Fund is part of an overall
plan to effect the Merger of each Target Fund with the Acquiring Fund, the Redomestications will be
treated as separate transactions for U.S. federal income tax purposes. The principal federal
income tax considerations that are expected to result from the Redomestication of an applicable
Fund are as follows:
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no gain or loss will be recognized by the Fund or the shareholders of the Fund as a result
of the Redomestication; |
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no gain or loss will be recognized by the DE-Fund as a result of the Redomestication; |
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the aggregate tax basis of the shares of the DE-Fund to be received by a shareholder of
the Fund will be the same as the shareholders aggregate tax basis of the shares of the
Fund; and |
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the holding period of the shares of the DE-Fund received by a shareholder of the Fund will
include the period that a shareholder held the shares of the Fund (provided that such shares
of the Fund are capital assets in the hands of such shareholder as of the Closing (as
defined herein)). |
Neither the Funds nor the DE-Funds have requested or will request an advance ruling from the
IRS as to the federal tax consequences of the Redomestications. As a condition to Closing, Stradley
Ronon Stevens & Young, LLP will render a favorable opinion to each Fund and DE-Fund as to the
foregoing federal income tax consequences of each Redomestication, which opinion will be
conditioned upon, among other things, the accuracy, as of the Closing Date (as defined herein), of
certain representations of each Fund and DE-Fund upon which Stradley Ronon Stevens & Young, LLP
will rely in rendering its opinion. A copy of the opinion will be filed with the SEC and will be
available for public inspection. See Where to Find Additional Information. Opinions of counsel
are not binding upon the IRS or the courts. If a Redomestication is consummated but the IRS or the
courts determine that the Redomestication does not qualify as a tax-free reorganization under the
Code, and thus is taxable, each Fund would recognize gain or loss on the transfer of its assets to
its corresponding DE-Fund and each shareholder of the Fund would recognize a taxable gain or loss
equal to the difference between its tax basis in its Fund shares and the fair market value of the
shares of the DE-Fund it receives. The failure of one Redomestication to qualify as a tax-free
reorganization would not adversely affect any other Redomestication.
4
What is the Tax Treatment of the VMTP Shares of the DE Fund?
Each of IMC, IMT and the Acquiring Fund expects that the VMTP Shares issued by the DE Fund in
connection with its Redomestications will be treated as equity of the DE Fund for U.S. federal
income tax purposes. Each of IMC, IMT and the Acquiring Fund has received a private letter ruling
from the IRS to the effect that VMTP Shares issued by it prior to its Redomestication will be
treated as equity of such Fund for U.S. federal income tax purposes. Skadden, Arps, Slate, Meagher
& Flom LLP (Special VMTP Federal Income Tax Counsel) is of the opinion that, and as a condition
to the closing of the Redomestications will deliver to IMC, IMT and the Acquiring Fund an opinion
that, the VMTP Shares issued by the DE Fund in connection with a Redomestication will be treated as
equity of the DE Fund for U.S. federal income tax purposes. An opinion of counsel is not binding
on the IRS or any court. Thus, no assurance can be given that the IRS would not assert, or that a
court would not sustain, a position contrary to Special VMTP Federal Income Tax Counsels opinion.
The discussion herein assumes that the VMTP Shares issued by the DE Fund in connection with
Redomestication will be treated as equity of the DE Fund for U.S. federal income tax purposes.
When are the Redomestications expected to occur?
If shareholders of a Fund approve Proposal 1, it is anticipated that such Funds
Redomestication will occur in the third quarter of 2012.
What will happen if shareholders of a Fund do not approve Proposal 1?
If Proposal 1 is not approved by a Funds shareholders or if a Redomestication is for other
reasons not able to be completed, that Fund would not be redomesticated. In addition, that Fund
would not participate in a Merger, even if that Funds shareholders approve the Merger under
Proposal 2. If Acquiring Fund Shareholders do not approve Proposal 1 or if the Acquiring Funds
Redomestication is for any other reason not completed, no Mergers would be completed. If Proposal
1 is not approved by shareholders, the applicable Funds Board will consider other possible courses
of action for that Fund.
THE BOARD OF EACH FUND UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE
APPROVAL OF PROPOSAL 1.
PROPOSAL 2: APPROVAL OF MERGERS
On what am I being asked to vote?
Shareholders of IMC and IMT are being asked to consider and approve a Merger of their Fund
with and into the Acquiring Fund, as summarized below. Shareholders of the Acquiring Fund are also
being asked to consider and approve each such Merger, which involves the issuance of new Common
Shares and VMTP Shares by the Acquiring Fund. Acquiring Fund shareholders are also being asked to
approve the Merger of IMS with and into the Acquiring Fund, which involves the issuance of new
Common Shares by the Acquiring Fund. If a Merger is approved, VMTP Shares of IMC and IMT will be
exchanged on a one-for-one basis for newly issued Acquiring Fund VMTP Shares with substantially
identical terms, including equal aggregate liquidation preferences; and Common Shares of the Target
Funds will be exchanged for newly issued Acquiring Fund Common Shares of equal aggregate net asset
value.
Each Merger will be completed pursuant to an Agreement and Plan of Merger (Merger Agreement)
that provides for the applicable Target Fund to merge with and into the Acquiring Fund pursuant to
the Delaware Statutory Trust Act. A form of the Merger Agreement is attached hereto as Exhibit D.
Each Merger Agreement is substantially the same. The merger of a Target Fund and the Acquiring
Fund may proceed even if the merger of one or both of the other Target Funds is not approved by
shareholders or is for any other reason not completed. A Merger can proceed only if both the
Target Fund and the Acquiring Fund have also approved their respective Redomestications.
5
SUMMARY OF KEY INFORMATION REGARDING THE MERGERS
The following is a summary of certain information contained elsewhere in this Proxy Statement
and in the Merger Agreement. Shareholders should read the entire Proxy Statement carefully for
more complete information.
Has my Funds Board of Trustees approved the Merger(s)?
Yes. Each Funds Board has reviewed and unanimously approved the Merger Agreement and this
Proposal 2. Each Funds Board determined that the Mergers are in the best interest of each Fund
and will not dilute the interests of the existing shareholders of any Fund. Each Funds Board
unanimously recommends that shareholders vote FOR Proposal 2.
Will
VMTP Shares issued in connection with the Mergers be the same as my
current VMTP Shares?
Yes. In connection with each Merger, the Acquiring Fund will issue VMTP Shares in exchange
for VMTP Shares of IMC and IMT. The terms of the Acquiring Fund VMTP Shares will be substantially
identical to the terms of such Target Funds VMTP Shares outstanding immediately prior to the
closing of a Merger. Important information regarding the Acquiring Fund VMTP Shares to be issued
in connection with the Mergers is set forth below.
(1) It is a condition of closing of each Merger that each of IMC and IMT and the Acquiring
Fund will have satisfied all of its obligations set forth in certain documents related to its
respective VMTP Shares immediately prior to its Merger and that the Acquiring Fund will satisfy all
of the obligations of such documents related to the VMTP Shares immediately after giving effect to
a Merger.
(2) The terms of the Declaration of Trust of the Acquiring Fund (after giving effect to its
Merger) are identical to those terms agreed upon by the initial purchaser of VMTP Shares of the
Fund.
(3) The terms of the bylaws of the Acquiring Fund (after giving effect to the Merger) are
identical to those terms agreed upon by the initial purchaser of VMTP Shares of the Fund.
(4) The terms of the VMTP Shares issued by the Acquiring Fund, as set forth in the Statement
of Preferences of VMTP Shares of the DE Fund, are identical to those terms agreed upon by the
initial purchaser of VMTP Shares of the Fund.
(5) In the Merger, VMTP Shares of the IMC or IMT will be exchanged for VMTP Shares of the
Acquiring Fund and after giving effect to all Mergers, all VMTP Shares of the Acquiring Fund will
be held by the current holders of the VMTP Shares of IMC and IMT and the Acquiring Fund.
(6) It is a condition of closing of each Merger that upon closing of such Merger the VMTP
Shares of the Acquiring Fund be rated at least AA-/Aa3 by each rating agency that is rating, at the
request of the Acquiring Fund, such VMTP Shares.
(7) The Mergers are scheduled to occur on or prior to December 31, 2012.
A form of the Statement of Preferences of VMTP Shares of the Acquiring Fund (after giving effect to
its Redomestication) is attached hereto as Exhibit L. The description of VMTP Shares of the
Acquiring Fund included herein is subject to and qualified in its entirety by reference to the more
detailed description of the VMTP Shares set forth in such form of Statement of Preferences.
What are the reasons for the proposed Mergers?
The Mergers proposed in this Proxy Statement are part of a larger group of transactions across
the Advisers fund platform that began in early 2011. The Mergers are being proposed to reduce the
number of closed-end funds with similar investment processes and investment philosophies managed by
the Adviser. The Mergers seek to combine Funds with the same investment objective and portfolio
management team, and principal investment strategies and principal risks that are substantially the
same.
6
VMTP Shareholders are expected to benefit from the larger size of the combined fund due to a
larger funds ability to invest in a larger pool of securities.
In considering the Mergers and the Merger Agreements, the Board of each Fund considered that
the Common Shareholders of each Fund may benefit from the Mergers by becoming shareholders of a
larger fund that may have a more diversified investment portfolio, greater market liquidity, more
analyst coverage, smaller spreads and trading discounts, improved purchasing power and lower
transaction costs.
The Board of each Fund also considered that, in addition to the benefits mentioned above:
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the combined fund on a pro forma basis had a higher Common Share distribution yield
(as a percentage of net asset value) than IMS, but a slightly lower Common Share
distribution yield (as a percentage of net asset value) than IMC and IMT, even after
giving effect to the higher management fees and the total expense ratio (for IMS and
IMT only) that will apply to the combined fund; |
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as of July 31, 2011, the Acquiring Funds Common Shares had traded at an average
discount of -3.07% to its net asset value over the preceding 52-week period and, over
the same period, the Target Funds Common Shares had traded at average discounts of
-1.69% (IMC), -4.46% (IMS) and -1.93% (IMT); |
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as of July 31, 2011, the Acquiring Funds Common Shares traded at an average
discount of -6.70% to its net asset value for the preceding month and, over the same
period, the Target Funds Common Shares had traded at average discounts of -2.40%
(IMC), -6.40% (IMS) and -4.30% (IMT); and |
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the average daily trading volume for the Acquiring Funds Common Shares was almost
five times higher than the average daily trading volume of IMCs Common Shares, more
than three times higher than the average daily trading volume of IMSs Common Shares,
and approximately 75% higher than the average daily trading volume of IMTs Common
Shares. |
In addition, each Board considered the Advisers agreement to limit the Acquiring Funds total
expenses if a Merger is completed through at least two years from the closing date of the Mergers
and the allocation of expenses of the Mergers, including the Adviser paying all of the Merger costs
with respect to IMS and IMT.
The Board of each Fund considered these and other factors in concluding that the Mergers would
be in the best interest of the Funds and would not dilute the interests of the existing
shareholders of any Fund. The Boards considerations are described in more detail below in the
section entitled Additional Information About the Funds and the Mergers Board Considerations in
Approving the Mergers.
What effect will a Merger have on me as a VMTP Shareholder?
If you own VMTP Shares of IMC or IMT, you will, after the Merger, own VMTP Shares of the
Acquiring Fund with an aggregate liquidation preference equal to, and other terms that are
substantially identical to, the Target Fund VMTP Shares you held immediately before the Merger.
As discussed under Proposal 1, before the closing of the Mergers, IMC, IMT and the Acquiring
Fund will be reorganized as Delaware statutory trusts, each of which will have substantially
identical Statements of Preferences of VMTP Shares. A form of the Statement of Preferences of VMTP
Shares of the Acquiring Fund (after giving effect to its Redomestication) is attached hereto as
Exhibit L. The Statement of Preferences of VMTP Shares of each of IMC, IMT and the Acquiring Fund
(after giving effect to each Funds Redomestication) will be identical in all material respects.
If you are a VMTP Shareholder of the Acquiring Fund, your VMTP Shares of the Acquiring Fund
will not be changed by a Merger.
The principal differences between the Target Funds and the Acquiring Fund are described in the
following sections.
How do the Funds investment objectives and principal investment strategies compare?
The Funds have the same investment objective. Each Funds investment objective is to provide
current income which is exempt from federal income tax. Each of the investment objectives of the
Acquiring Fund and the Target Funds is fundamental and may not be changed without shareholder
approval of a majority of the Acquiring Funds or a Target Funds outstanding voting securities, as
defined in the 1940 Act.
7
The principal investment strategies of the Acquiring Fund are substantially the same as the
principal investment strategies of the Target Funds. The only difference is that each of the
Acquiring Fund, IMC and IMT employs leverage by investing the proceeds of its issuance of Preferred
Shares. IMS does not employ this type of leverage and has no outstanding VMTP Shares. The section
below entitled Additional Information About the Funds and the Mergers Principal Investment
Strategies provides more information on the principal investment strategies of the Target Funds
and the Acquiring Fund and highlights certain key differences.
How do the Funds principal risks compare?
The principal risks that may affect each Funds investment portfolio are substantially the
same. The only difference in the principal risks of the Funds is that each of the Acquiring Fund,
IMC and IMT employs leverage by issuing, and investing the proceeds of its issuance of, VMTP
Shares.
Investment in any of the Funds involves risks, including the risk that shareholders may
receive little or no return on their investment, and the risk that shareholders may lose part or
all of the money they invest. There can be no guarantee against losses resulting from an
investment in a Fund, nor can there be any assurance that a Fund will achieve its investment
objective(s). Whether a Fund achieves its investment objective(s) depends on market conditions
generally and on the Advisers analytical and portfolio management skills. As with any managed
fund, the Adviser may not be successful in selecting the best-performing securities or investment
techniques, and a Funds performance may lag behind that of similar funds. The risks associated
with an investment in a Fund can increase during times of significant market volatility. An
investment in a Fund is not a deposit in a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. Before investing in a Fund,
potential shareholders should carefully evaluate the risks.
The risks associated with an investment in VMTP Shares are identical for IMC, IMT and the
Acquiring Fund. IMS has no outstanding VMTP Shares.
Additional information on the principal risks of each Fund is included in such Funds
shareholder reports.
How do the Funds expenses compare?
The table below provides a summary comparison of the expenses of the Funds. The table also
shows estimated expenses on a pro forma basis giving effect to the proposed Merger with IMC and
giving effect to all of the Mergers. The pro forma expense ratios show projected estimated
expenses, but actual expenses may be greater or less than those shown. Note that pro forma total
expenses of the Acquiring Fund are expected to be higher than the current total expenses of
IMS. The Board of each Target Fund concluded that the higher management fees and total operating
expenses (for IMS and IMT only) that will apply to the combined fund were justified in light of the
anticipated benefits of the Mergers noted above.
It is anticipated that the lowest expense ratio will be achieved for the Acquiring Fund if all
of the Mergers are completed and that the highest expense ratio will result if IMC is the only
Target Fund that participates in a Merger with the Acquiring Fund. The range of impact to
Acquiring Fund expenses after the Mergers is reflected in the following table. VMTP Shareholders
are not expected to bear any of the costs of the Mergers.
8
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Current (a) |
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Pro Forma (b) |
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Pro Forma (c) |
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Pro Forma (d) |
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Invesco Value |
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IMC, IMS and |
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Municipal |
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IMC |
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IMT |
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Income Trust |
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+ |
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+ |
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Invesco |
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Invesco |
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Invesco |
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Invesco |
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(IIM) |
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Acquiring Fund |
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Acquiring Fund |
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Value |
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Value |
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Value |
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Value |
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(assumes the |
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(IIM) |
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(IIM) |
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Municipal |
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Municipal |
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Municipal |
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Municipal |
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management |
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(assumes only the |
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(assumes all of |
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Bond Trust |
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Securities |
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Trust |
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Income |
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fee increase is |
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Merger with IMC |
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the Mergers are |
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(IMC) |
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(IMS) |
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(IMT) |
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Trust (IIM) |
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approved) |
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is completed) |
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completed) |
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Shareholder Fees (Fees paid
directly from your investment) |
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Maximum Sales Charge (Load) Imposed
on Purchases (as a percentage of
offering price) (e) |
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None |
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None |
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None |
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None |
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None |
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None |
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None |
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Dividend Reinvestment Plan (f) |
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None |
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None |
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None |
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None |
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None |
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None |
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None |
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Annual Fund Operating Expenses
(expenses that you pay each year as
a percentage of the value of your
investment) |
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Management Fees |
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0.41 |
% |
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0.27 |
% |
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0.40 |
% |
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0.40 |
% |
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0.82 |
% (g) |
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0.82 |
% (g) |
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0.82 |
% (g) |
Interest and Related Expenses (h) |
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0.69 |
% |
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0.04 |
% |
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0.56 |
% |
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0.55 |
% |
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0.55 |
% |
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0.57 |
% |
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0.53 |
% |
Other Expenses |
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0.38 |
% |
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0.20 |
% |
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0.12 |
% |
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0.13 |
% |
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0.13 |
% |
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0.14 |
% |
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0.12 |
% |
Total Annual Fund Operating Expenses |
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1.48 |
% |
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0.51 |
% |
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1.08 |
% |
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1.08 |
% |
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1.50 |
% |
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1.53 |
% |
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1.47 |
% |
Fee Waiver and/or Expense Reimbursement |
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0.00 |
% |
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0.00 |
% |
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0.00 |
% |
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0.00 |
% |
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0.00 |
% |
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0.43 |
% (i) |
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0.47 |
% (j) |
Total Annual Fund Operating
Expenses after Fee Waiver and/or
Expense Reimbursement |
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1.48 |
% |
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0.51 |
% |
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1.08 |
% |
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1.08 |
% |
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1.50 |
% |
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1.10 |
% |
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1.00 |
% |
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(a) |
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Expense ratios are estimated amounts for the current fiscal year. VMTP Shares do not bear
any transaction or operating expenses of the Funds. |
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(b) |
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Expense ratios are estimated amounts for the current fiscal year, restated to reflect the
advisory fee increase described in Proposal 3. |
|
(c) |
|
Pro forma numbers are estimated as if the Merger had been completed as of March 1, 2011 and
do not include estimated Merger costs. The costs of the Merger of IMC borne by such Fund and
the Acquiring Fund are estimated to be $110,000 and $70,000, respectively, which the Adviser
estimates would be recouped by IMC Common Shareholders in 10 months or less and by Acquiring
Fund Common Shareholders in five months or less. For more information on the Merger costs to
be borne by the Funds, see Costs of the Mergers below. |
|
(d) |
|
Pro forma numbers are estimated as if the Mergers had been completed as of March 1, 2011 and
do not include estimated Merger costs. The costs of completing all of the Mergers borne by
IMC and the Acquiring Fund are estimated to be $110,000 and $70,000, respectively, which the
Adviser estimates would be recouped by IMC Common Shareholders in 10 months or less and by
Acquiring Fund Common Shareholders in five months or less. IMS and IMT are not bearing any
Merger costs. For more information on the Merger costs to be borne by the Funds, see Costs
of the Mergers below. |
|
(e) |
|
Common Shares of each Fund purchased on the secondary market are not subject to sales
charges, but may be subject to brokerage commissions or other charges. |
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(f) |
|
Each participant in a Funds dividend reinvestment plan pays a proportionate share of the
brokerage commissions incurred with respect to open market purchases in connection with such
plan. For each Funds last fiscal year, participants in the plan incurred brokerage
commissions representing $0.03 per Common Share. |
|
(g) |
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Assumes that Proposal 3 is approved and the increased advisory fee is implemented. |
|
(h) |
|
Interest and Related Expenses includes interest and other costs of providing leverage to the
Funds, such as the costs to maintain lines of credit, establish and administer floating rate
note obligations, and, for the Acquiring Fund, IMC and IMT, the costs to issue and administer
preferred shares. Interest and Related Expenses reflect the interest and other costs
associated with the issuance of Variable Rate Muni Term Preferred Shares, which occurred after
February 29, 2012, each Funds most recent fiscal year end. |
|
(i) |
|
If the Merger with IMC is the only Merger to close, the Adviser has contractually agreed, for
at least two years from the closing date of the Merger, to waive advisory fees and/or
reimburse expenses to the extent necessary to limit the Acquiring Funds Total Annual Fund
Operating Expenses After Fee Waiver and/or Expense Reimbursement (which excludes certain items
discussed below) to 0.52% of average daily net assets. In determining the Advisers
obligation to waive advisory fees and/or reimburse expenses, the following expenses are not
taken into account, and could cause Total Annual Fund Operating Expenses After Fee Waiver
and/or Expense Reimbursement to exceed the limit reflected above: (i) interest; (ii) taxes;
(iii) dividend expense on short sales; (iv) extraordinary or non-routine items, including
litigation expenses; and (v) expenses that the Fund has incurred but did not actually pay
because of an expense offset arrangement. Unless the Board and the Adviser mutually agree to
amend or continue the fee waiver agreement, it will terminate two years from the closing date
of the Merger. |
|
(j) |
|
If all of the Mergers are completed or if Mergers are completed for either or both of IMS
and IMT, the Adviser has contractually agreed, for at least two years from the closing date of
the Mergers, to waive advisory fees and/or reimburse expenses to the extent necessary to limit
the Acquiring Funds Total Annual Fund Operating Expenses After Fee Waiver and/or Expense
Reimbursement (which excludes certain items discussed below) to 0.46% of average daily net
assets. In determining the Advisers obligation to waive advisory fees and/or reimburse
expenses, the following expenses are not taken into account, and could cause Total Annual Fund
Operating Expenses After Fee Waiver and/or Expense Reimbursement to exceed the limit reflected
above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary or
non-routine items, including litigation expenses; and (v) expenses that the Fund has incurred
but did not actually pay because of an expense offset arrangement. Unless the Board and the
Adviser mutually agree to amend or continue the fee waiver agreement, it will terminate two
years from the closing date of the Mergers. |
9
How do the management, investment adviser and other service providers of the Funds compare?
Each Fund is overseen by a Board composed of the same individuals and each Funds affairs are
managed by the same officers, as described in Exhibit E. The Adviser, a registered investment
adviser, serves as investment adviser for each Fund pursuant to an investment advisory agreement
that contains substantially identical terms (except for fees, in the event that Proposal 3 is
approved) for each Fund. The Adviser oversees the management of each Funds portfolio, manages
each Funds business affairs and provides certain clerical, bookkeeping and other administrative
services. The Adviser has acted as an investment adviser since its organization in 1976. As of
March 31, 2012, the Adviser had $309.2 billion in assets under management. The Adviser is located
at 1555 Peachtree Street, N.E., Atlanta, Georgia 30309.
The Adviser is an indirect, wholly-owned subsidiary of Invesco Ltd. (Invesco). Invesco is a
leading independent global investment management company, dedicated to helping people worldwide
build their financial security. Invesco provides a comprehensive array of enduring solutions for
retail, institutional and high-net-worth clients around the world. Invesco had $672.8 billion in
assets under management as of March 31, 2012. Invesco is organized under the laws of Bermuda, and
its common shares are listed and traded on the Exchange under the symbol IVZ. Invesco is located
at 1555 Peachtree Street, N.E., Atlanta, Georgia 30309.
All of the ordinary business expenses incurred in the operations of a Fund are borne by the
Fund unless specifically provided otherwise in the advisory agreement. Expenses borne by the Funds
include but are not limited to brokerage commissions, taxes, legal, accounting, auditing, or
governmental fees, the cost of preparing share certificates, custodian, transfer and shareholder
service agent costs, 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, and the fees and other expenses incurred by the Funds in connection with membership
in investment company organizations.
A discussion of the basis for each Boards 2011 approval of each Funds investment advisory
agreements is included in the Funds semiannual report for the six months ended August 31, 2011. A
discussion of the basis for each Boards most recent approval of each Funds investment advisory
agreements will be included in the Funds semiannual report for the six months ending August 31,
2012, if any.
The contractual advisory fee rate of the Acquiring Fund will, if Proposal 3 is approved by
shareholders, be higher than the contractual advisory fee rate of any Target Fund. The following
table compares the advisory fee rates of the Funds.
|
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|
|
|
|
|
|
IMS |
|
|
|
|
|
|
|
|
(Common Shares |
|
Acquiring Fund |
|
|
IMC |
|
IMT |
|
only) |
|
(IIM) |
Contractual Fee Rate |
|
0.27% of managed assets |
|
0.27% of managed assets |
|
0.27% of net assets |
|
0.55% of managed assets* |
|
Net Effective Fee Rate** |
|
0.41% |
|
0.40% |
|
0.27% |
|
0.82%* |
|
|
|
* |
|
Assumes approval and implementation of the Amendment discussed in Proposal 3. If Proposal 3
is not approved, the Acquiring Funds contractual advisory fee rate will remain 0.27% and its net
effective fee rate will remain at 0.40%. |
|
** |
|
Varies based on the amount of financial leverage used by the Fund. |
Contractual fee rates and net effective fee rates differ because of differences in how the
contractual rate is applied. IMS calculates its advisory fee as a percentage of the Funds net
assets, which generally means the Funds assets minus its liabilities. Each of IMC, IMT and the
Acquiring Fund calculates its advisory fee as a percentage of its managed assets, which for this
purpose means the Funds net assets, plus assets attributable to outstanding preferred shares and
the amount of any borrowings incurred for the purpose of leverage (whether or not such borrowed
amounts are reflected in the Funds financial statements for purposes of generally accepted
accounting principles). As a result, the actual amount paid by IMC, IMT and the Acquiring Fund, as
a percentage of NAV, will typically exceed the contractual rate. Because managed assets exceed
net assets for a Fund that has preferred shares, even if the Funds contractual advisory fee
rates were the same, the advisory fees paid by the
10
Acquiring Fund as a percentage of NAV will
exceed the advisory fees as a percentage of NAV paid by IMS. For more information, see the table
above under How do the Funds expenses compare?
Contingent on the completion of all of the Mergers or if Mergers are completed for either or
both of IMS and IMT, the Adviser has contractually agreed for at least two years from the closing
date of the Mergers to waive advisory fees and/or reimburse expenses to the extent necessary to
limit total annual operating expenses of the Acquiring Fund to 0.46%, subject to certain
exclusions. If the Merger with IMC is the only Merger to close, the
Adviser has contractually agreed for at least two years from the closing date of the Mergers to
waive advisory fees and/or reimburse expenses to the extent necessary to limit total annual
operating expenses of the Acquiring Fund to 0.52%, subject to certain exclusions.
Each Funds advisory agreement provides that the Adviser may delegate any and all of its
rights, duties, and obligations to one or more wholly-owned affiliates of Invesco as sub-advisers
(the Invesco Sub-Advisers). Pursuant to each Funds Master Intergroup Sub-Advisory Contract, the
Invesco Sub-Advisers may be appointed by the Adviser from time to time to provide discretionary
investment management services, investment advice, and/or order execution services. Each Invesco
Sub-Adviser is registered with the SEC as an investment adviser.
Other key service providers to the Target Funds, including the administrator, transfer agent,
custodian, and auditor, provide substantially the same services to the Acquiring Fund. Each Fund
has entered into a master administrative services agreement with the Adviser, pursuant to which the
Adviser performs or arranges for the provision of accounting and other administrative services to
the Funds that are not required to be performed by the Adviser under its investment advisory
agreements with the Funds. The custodian for the Funds is State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02110-2801. The transfer agent and dividend paying agent
for the Funds is Computershare Trust Company, N.A., P.O. Box 43078, Providence, Rhode Island
02940-3078.
Does the Acquiring Fund have the same portfolio managers as the Target Funds?
Yes. The portfolio management team for the Target Funds is the same as the portfolio
management team for the Acquiring Fund. Information on the portfolio managers of the Funds is
included below under Additional Information About the Funds and the Mergers Portfolio Managers.
How do the distribution policies of the Funds compare?
Each Fund declares and pays monthly dividends from net investment income to Common
Shareholders. The Acquiring Fund, IMC and IMT declare daily and pay monthly dividends from net
investment income to VMTP Shareholders. Distributions from net realized capital gain, if any, are
generally paid annually and are distributed on a pro rata basis to Common Shareholders and to
IMCs, IMTs and the Acquiring Funds VMTP Shareholders. Each Fund may also declare and pay
capital gains distributions more frequently, if necessary, in order to reduce or eliminate federal
excise or income taxes on the Fund. Each Fund offers a dividend reinvestment plan for Common
Shareholders, which is more fully described in the Funds shareholder reports.
Will there be any tax consequences resulting from the Mergers?
Each Merger is designed to qualify as a tax-free reorganization for federal income tax
purposes and each Fund anticipates receiving a legal opinion to that effect (although there can be
no assurance that the Internal Revenue Service will adopt a similar position). This means that the
shareholders of each Target Fund will recognize no gain or loss for federal income tax purposes
upon the exchange of all of their shares in such Target Fund for shares in the Acquiring Fund.
Shareholders should consult their tax advisor about state and local tax consequences of the
Mergers, if any, because the information about tax consequences in this Proxy Statement relates
only to the federal income tax consequences of the Mergers.
Prior to the closing of each Merger, each Target Fund will declare to its Common Shareholders
one or more dividends, and the Acquiring Fund may, but is not required to, declare to its Common
Shareholders a dividend, payable at or near the time of closing to their respective shareholders to
the extent necessary to avoid entity level tax or as otherwise deemed desirable. Such
distributions, if made, are anticipated to be made in the 2012 calendar year and, to the extent a
distribution is not an exempt-interest dividend (as defined in the Code), the distribution may be
taxable to shareholders in such year for federal income tax purposes. It is anticipated that Fund
distributions will be primarily dividends that are exempt from regular federal income tax, although
a portion of such dividends may be taxable to shareholders as ordinary
11
income or capital gains. To
the extent the distribution is attributable to ordinary income or capital gains, such ordinary
income and capital gains will be allocated to Common Shareholders and VMTP Shareholders in
accordance with each classs proportionate share of the total dividends paid by the Fund during the
year. In certain circumstances, each of IMC, IMT and the Acquiring Fund will make additional
payments to VMTP Shareholders to offset the tax effects of such taxable distributions.
In addition, Skadden, Arps, Slate, Meagher & Flom LLP will deliver an opinion to IMC, IMT and
the Acquiring Fund, subject to certain representations, assumptions and conditions, to the effect
that the Acquiring Fund
VMTP Shares received in the Merger by holders of VMTP Shares of IMC and IMT will qualify as equity
of the Acquiring Fund for federal income tax purposes.
When are the Mergers expected to occur?
If shareholders of a Target Fund and the Acquiring Fund approve the Merger and the
Redomestications (Proposal 1), it is anticipated that the Merger will occur in the third quarter of
2012.
What will happen if shareholders of a Fund do not approve a Merger?
If a Merger is not approved by shareholders or is for other reasons unable to be completed,
the applicable Fund will continue to operate and the Funds Board will consider other possible
courses of action for the Fund.
Where can I find more information about the Funds and the Mergers?
The remainder of this Proxy Statement contains additional information about the Funds and the
Mergers, as well as information on the other proposals to be voted on at the Meeting. You are
encouraged to read the entire document. Additional information about each Fund can be found in the
statement of additional information (SAI) to the registration statement for the Acquiring Funds
Common Shares on Form N-14, dated June 8, 2012 (which is not part of this Proxy Statement and is not
incorporated by reference herein), and in each Funds shareholder reports. If you need any
assistance, or have any questions regarding the Mergers or how to vote, please call Invesco Client
Services at (800) 341-2929.
ADDITIONAL INFORMATION ABOUT THE FUNDS AND THE MERGERS
Principal Investment Strategies
The following section compares the principal investment strategies of the Target Funds with
the principal investment strategies of the Acquiring Fund and highlights any key differences. In
addition to the principal investment strategies described below, each Fund may use other investment
strategies and is also subject to certain additional investment policies and limitations, which are
described in the SAI and in each Funds shareholder reports. The cover page of this Proxy
Statement describes how you can obtain copies of these documents.
Investment Strategies. Under normal circumstances, each Fund will invest at least 80% of its
net assets in municipal obligations. The policy stated in the foregoing sentence is a fundamental
policy of each Fund and may not be changed without approval of a majority of the Funds outstanding
voting securities, as defined in the 1940 Act. Under normal market conditions, the Adviser seeks
to achieve each Funds investment objective by investing at least 80% of the Funds net assets in
investment grade municipal securities. Investment grade securities are: (i) securities rated BBB-
or higher by Standard & Poors Financial Services LLC, a subsidiary of The McGraw-Hill Companies,
Inc. (S&P) or Baa3 or higher by Moodys Investors Service, Inc. (Moodys) or an equivalent
rating by another nationally recognized statistical rating organization (NRSRO), (ii) comparably
rated short term securities, or (iii) unrated municipal securities determined by the Adviser to be
of comparable quality at the time of purchase.
Under normal market conditions, each Fund may invest up to 20% of its net assets in municipal
securities rated below investment grade or that are unrated but determined by the Adviser to be of
comparable quality at the time of purchase. Lower-grade securities are commonly referred to as
junk bonds and involve greater risks than investments in higher-grade securities. Each Fund does
not purchase securities that are in default or rated in categories lower than B- by S&P or B3 by
Moodys or unrated securities of comparable quality.
Each Fund may invest up to 20% of its net assets in taxable or tax-exempt fixed income
securities rated at least investment grade by an NRSRO or, if not rated, determined by the Adviser
to be of comparable quality, including obligations of the U.S. government, its respective agencies
or instrumentalities, and other fixed income
12
obligations, and, during periods in which the Adviser
believes that changes in economic, financial or political conditions make it advisable to do so, to
an unlimited extent in such investments for temporary defensive purposes.
The foregoing percentage and rating limitations apply at the time of acquisition of a security
based on the last previous determination of each Funds net asset value. Any subsequent change in
any rating by a rating service or change in percentages resulting from market fluctuations or other
changes in the Funds total assets will not require elimination of any security from the Funds
portfolio.
Each Fund may invest all or a substantial portion of its total assets in municipal securities
that may subject certain investors to the federal alternative minimum tax and, therefore, a
substantial portion of the income produced by the Fund may be taxable for such investors under the
federal alternative minimum tax. Accordingly, each Fund may not be a suitable investment for
investors who are already subject to the federal alternative minimum tax or could become subject to
the federal alternative minimum tax as a result of an investment in a Fund.
The Adviser buys and sells securities for each Fund with a view towards seeking a high level
of current income exempt from federal income taxes, subject to reasonable credit risk. As a
result, each Fund will not necessarily invest in the highest yielding municipal securities
permitted by its investment policies if the Adviser determines that market risks or credit risks
associated with such investments would subject the Funds portfolio to undue risk. The potential
realization of capital gains or losses resulting from possible changes in interest rates will not
be a major consideration and frequency of portfolio turnover generally will not be a limiting
factor if the Adviser considers it advantageous to purchase or sell securities.
Each Fund intends to emphasize investments in municipal obligations with long-term maturities
because such long-term obligations generally produce higher income than short-term obligations,
although such longer-term obligations are more susceptible to market fluctuations resulting from
changes in interest rates than shorter-term obligations. The average weighted maturity of each
Funds portfolio, as well as the emphasis on longer-term obligations, may vary depending upon the
market conditions.
The Adviser employs a bottom-up, research-driven approach to identify securities that have
attractive risk/reward characteristics for the sectors in which the Fund invests. The Adviser also
integrates macroeconomic analysis and forecasting into its evaluation and ranking of various
sectors and individual securities. Finally, the Acquiring Fund, IMC and IMT employ leverage in an
effort to enhance their income and total return. Sell decisions are based on: (i) a deterioration
or likely deterioration of an individual issuers capacity to meet its debt obligations on a timely
basis; (ii) a deterioration or likely deterioration of the broader fundamentals of a particular
industry or sector; and (iii) opportunities in the secondary or primary market to exchange into a
security with better relative value.
Municipal Obligations. Municipal obligations are securities issued by or on behalf of states,
territories or possessions of the United States, the District of Columbia and their cities,
counties, 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 Adviser does not conduct its own analysis of the tax
status of the interest paid by municipal securities held by the Fund, but will rely on the opinion
of counsel to the issuer of each such instrument.
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. Certain types of municipal securities are issued to obtain funding for privately
operated facilities.
The yields of municipal securities depend on, among other things, general money market
conditions, general conditions of the municipal securities market, size of a particular offering,
the maturity of the obligation and rating of the issue. There is no limitation as to the maturity
of the municipal securities in which each Fund may invest. The ratings of S&P and Moodys
represent their opinions of the quality of the municipal securities they undertake to rate. These
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.
The two principal classifications of municipal securities are general obligation and revenue
or special delegation securities. General obligation securities are secured by the issuers pledge
of its faith, credit and taxing
13
power for the payment of principal and interest. Revenue
securities 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. Industrial development bonds are usually revenue securities, the credit quality of
which is normally directly related to the credit standing of the industrial user involved.
Within these principal classifications of municipal securities, there are a variety of types
of municipal securities in which each Fund may invest, including:
|
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|
Variable rate securities, which bear rates of interest that are adjusted
periodically according to formulae intended to reflect market rates of interest. |
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|
Municipal notes, including tax, revenue and bond anticipation notes of short
maturity, generally less than three years, which are issued to obtain temporary funds
for various public purposes. |
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|
Variable rate demand notes, which are obligations that contain a floating or
variable interest rate adjustment formula and which are subject to a right of demand
for payment of the principal balance plus accrued interest either at any time or at
specified intervals. The interest rate on a variable rate demand note may be based on
a known lending rate, such as a banks prime rate, and may be adjusted when such rate
changes, or the interest rate may be a market rate that is adjusted at specified
intervals. The adjustment formula maintains the value of the variable rate demand note
at approximately the par value of such note at the adjustment date. |
|
|
|
|
Municipal leases, which are obligations issued by state and local governments or
authorities to finance the acquisition of equipment and facilities. Certain municipal
lease obligations may include non-appropriation clauses which provide that the
municipality has no obligation to make lease or installment purchase payments in future
years unless money is appropriated for such purpose on a yearly basis. |
|
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|
Private activity bonds, which are issued by, or on behalf of, public authorities to
finance privately operated facilities. |
|
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|
Participation certificates, which are obligations issued by state or local
governments or authorities to finance the acquisition of equipment and facilities.
They may represent participations in a lease, an installment purchase contract or a
conditional sales contract. |
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|
Municipal securities that may not be backed by the faith, credit and taxing power of
the issuer. |
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|
Municipal securities that are privately placed and that may have restrictions on a
Funds ability to resell, such as timing restrictions or requirements that the
securities only be sold to qualified institutional investors. |
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Municipal securities that are insured by financial insurance companies. |
Derivatives. Each Fund may use derivative instruments for a variety of purposes, including
hedging, risk management, portfolio management or to earn income. Derivatives are financial
instruments whose value is based on the value of another underlying asset, interest rate, index or
financial instrument. The derivative instruments and techniques that each Fund principally uses
include:
Futures. A futures contract is a standardized agreement between two parties to buy or
sell a specific quantity of an underlying instrument at a specific price at a specific future time.
The value of a futures contract tends to increase and decrease in tandem with the value of the
underlying instrument. Futures contracts are bilateral agreements, with both the purchaser and the
seller equally obligated to complete the transaction. Depending on the terms of the particular
contract, futures contracts are settled through either physical delivery of the underlying
instrument on the settlement date or by payment of a cash settlement amount on the settlement date.
Swaps. A swap contract is an agreement between two parties pursuant to which the
parties exchange payments at specified dates on the basis of a specified notional amount, with the
payments calculated by reference to specified securities, indexes, reference rates, currencies or
other instruments. Most swap agreements provide that when the period payment dates for both parties
are the same, the payments are made on a net basis (i.e., the two payment streams are netted out,
with only the net amount paid by one party to the other). A Funds obligations or rights under a
swap contract entered into on a net basis will generally be equal only to the net amount to be paid
or received under the agreement, based on the relative values of the positions held by each
counterparty.
Inverse Floating Rate Obligations. Each Fund may invest in inverse floating rate obligations.
Inverse floating rate obligations are variable debt instruments that pay interest at rates that
move in the opposite direction of
14
prevailing interest rates. Because the interest rate paid to
holders of such obligations is generally determined by subtracting a variable or floating rate
from a predetermined amount, the interest rate paid to holders of such obligations will decrease as
such variable or floating rate increases and increase as such variable or floating rate decreases.
The inverse floating rate obligations in which each Fund may invest include derivative instruments
such as residual interest bonds (RIBs) or tender option bonds (TOBs). Such instruments are
typically created by a special purpose trust that holds long-term fixed rate bonds and sells two
classes of beneficial interests: short-term
floating rate interests, which are sold to third party investors, and inverse floating
residual interests, which are purchased by a Fund. The short-term floating rate interests have
first priority on the cash flow from the bond held by the special purpose trust and a Fund (as
holder of the inverse floating residual interests) is paid the residual cash flow from the bond
held by the special purpose trust.
When-Issued and Delayed Delivery Transactions. Each Fund may purchase and sell securities on
a when-issued and delayed delivery basis, which means that a Fund buys or sells a security with
payment and delivery taking place in the future. The payment obligation and the interest rate are
fixed at the time a Fund enters into the commitment. No income accrues on such securities until
the date a Fund actually takes delivery of the securities.
Preferred Shares. The Acquiring Fund, IMC and IMT use leverage in the form of preferred
shares. IMS however, does not. Dividends on the preferred shares will typically be comparable to
the yields on investment grade short-term municipal securities, although the assets attributable to
the preferred shares will generally be invested in longer-term municipal securities, which
typically have higher yields than short-term municipal securities. Assuming such a yield
differential, this leveraged capital structure enables a Fund to pay a potentially higher yield on
the Common Shares than similar investment companies that do not use leverage.
As required by the 1940 Act, the Acquiring Fund, IMC and IMT will generally maintain an asset
coverage of the value of the respective Funds total assets, less all liabilities and indebtedness
of the Fund not represented by the preferred shares, of 200% of the aggregate liquidation value of
the preferred shares. In addition, under the terms of the Acquiring Funds, IMCs and IMTs
outstanding VMTP Shares, each respective Fund is required to maintain minimum asset coverage of
225%.
Portfolio Turnover. Each Fund may sell securities without regard to the length of time they
have been held to take advantage of new investment opportunities, yield differentials, or for other
reasons. Each Funds portfolio turnover rate may vary from year to year. A high portfolio
turnover rate (100% or more) would increase a Funds transaction costs (including brokerage
commissions and dealer costs), which would adversely impact the Funds performance. Higher
portfolio turnover may result in the realization of more short-term capital gains than if a Fund
had lower portfolio turnover. Additionally, in a declining market, portfolio turnover may create
realized capital losses. The turnover rate will not be a limiting factor, however, if the Adviser
considers portfolio changes appropriate.
Temporary Defensive Strategy. When market conditions dictate a more defensive investment
strategy, each Fund may, on a temporary basis, hold cash or invest a portion or all of its assets
in high-quality, short-term municipal securities. If such municipal securities are not available
or, in the judgment of the Adviser, do not afford sufficient protection against adverse market
conditions, a Fund may invest in taxable instruments. Such taxable securities may include
securities issued or guaranteed by the U.S. government, its agencies or instrumentalities, other
investment grade quality fixed income securities, prime commercial paper, certificates of deposit,
bankers acceptances and other obligations of domestic banks, repurchase agreements and money
market funds (including money market funds affiliated with the Adviser). In taking a defensive
position, a Fund would temporarily not be pursuing its principal investment strategies and may not
achieve its investment objective.
Zero Coupon / PIK Bonds. Each Fund may invest in securities not producing immediate cash
income, including zero coupon securities or pay-in-kind (PIK) securities, when their effective
yield over comparable instruments producing cash income makes these investments attractive. PIK
securities are debt securities that pay interest through the issuance of additional securities.
Zero coupon securities are debt securities that do not entitle the holder to any periodic payment
of interest prior to maturity or a specified date when the securities begin paying current
interest. They are issued and traded at a discount from their face amounts or par value, which
discount varies depending on the time remaining until cash payments begin, prevailing interest
rates, liquidity of the security and the perceived credit quality of the issuer. The securities do
not entitle the holder to any periodic payments of interest prior to maturity, which prevents any
reinvestment of interest payments at prevailing interest rates if prevailing interest rates rise.
On the other hand, because there are no periodic interest payments to be reinvested prior to
maturity, zero coupon securities eliminate the reinvestment risk and may lock in a favorable rate
of return to maturity if interest rates drop. In addition, each Fund would be required to
distribute the income on these
15
instruments as it accrues, even though the Fund will not receive all
of the income on a current basis or in cash. Thus, the Fund may have to sell other investments,
including when it may not be advisable to do so, to make income distributions to the Common
Shareholders.
As required by Rule 35d-1 under the 1940 Act, in addition to the investment strategies and
policies discussed above, each Fund has a fundamental policy to invest, under normal circumstances,
at least 80% of its total assets in investments the income from which is exempt from federal income
tax.
Principal Risks of an Investment in the Funds
A comparison of the principal risks associated with the Funds investment strategies is
included above under How do the Funds principal risks compare? The following table provides
further information on the principal risks that apply to the Funds investment in the portfolios.
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Principal Risk |
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Funds Subject to Risk |
Municipal Securities Risk.
Under normal market conditions,
longer-term municipal securities
generally provide a higher yield
than shorter-term municipal
securities. The Adviser may adjust
the average maturity of the Funds
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
yields of municipal securities may
move differently and adversely
compared to the yields of the
overall debt securities markets.
Certain kinds of municipal
securities are subject to specific
risks that could cause a decline in
the value of those securities:
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All Funds |
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Lease Obligations. Certain lease
obligations contain
non-appropriation clauses that
provide that the governmental
issuer has no obligation to make
future payments under the lease or
contract unless money is
appropriated for that purpose by
the appropriate legislative body on
an annual or other periodic basis.
Consequently, continued lease
payments on those lease obligations
containing non-appropriation
clauses are dependent on future
legislative actions. If these
legislative actions do not occur,
the holders of the lease obligation
may experience difficulty in
exercising their rights, including
disposition of the property. |
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Private Activity Bonds. The issuers
of private activity bonds in which
the Fund may invest may be
negatively impacted by conditions
affecting either the general credit
of the user of the private activity
project or the project itself.
Conditions such as regulatory and
environmental restrictions and
economic downturns may lower the
need for these facilities and the
ability of users of the project to
pay for the facilities. Private
activity bonds may also pay
interest subject to the alternative
minimum tax. |
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In 2011, S&P lowered its long-term
sovereign credit rating on the U.S.
to AA+ from AAA with a negative
outlook. Following S&Ps downgrade
of the long-term sovereign credit
rating on the U.S., the major
rating agencies have also placed
many municipalities on review for
potential downgrades, which could
impact the market price, liquidity
and volatility of the municipal
securities held by the Fund in its
portfolio. If the universe of
municipal securities meeting the
Funds ratings and credit quality
requirements shrinks, it may be
more difficult for the Fund to meet
its investment objective and the
Funds investments may become more
concentrated in fewer issues.
Future downgrades by other rating
agencies could have significant
adverse effects on the economy
generally and could result in
significant adverse impacts on
municipal issuers and the Fund. |
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Many state and municipal
governments that issue securities
are under significant economic and
financial stress and may not be
able to satisfy their obligations.
In response to the national
economic downturn, governmental
cost burdens have been and may
continue to be reallocated among
federal, state and local
governments. The ability of
municipal issuers to make timely
payments of interest and principal
may be diminished during general
economic downturns and as
governmental cost burdens are
reallocated among federal, state
and local governments. Also, as a
result of the downturn and related
unemployment, declining income and
loss of property values, many state
and local governments have
experienced significant reductions
in revenues and consequently
difficulties meeting ongoing
expenses. As a result, certain of
these state and local governments
may have difficulty paying or
default in the payment of principal
or interest on their outstanding
debt, |
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Principal Risk |
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Funds Subject to Risk |
may experience ratings
downgrades of their debt. The
taxing power of any governmental
entity may be limited by provisions
of state constitutions or laws and
an entitys credit will depend on
many factors, including the
entitys tax base, the extent to
which the entity relies on federal
or state aid, and other factors
which are beyond the entitys
control. In addition, laws enacted
in the future by Congress or state
legislatures or referenda could
extend the time for payment of
principal and/or interest, or
impose other constraints on
enforcement of such obligations or
on the ability of municipalities to
levy taxes. |
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In addition, municipalities might
seek protection under the
bankruptcy laws, thereby affecting
the repayment of their outstanding
debt. Issuers of municipal
securities might seek protection
under the bankruptcy laws. In the
event of bankruptcy of such an
issuer, holders of municipal
securities could experience delays
in collecting principal and
interest and such holders may not
be able to collect all principal
and interest to which they are
entitled. Certain provisions of
the U.S. Bankruptcy Code governing
such bankruptcies are unclear.
Further, the application of state
law to municipal securities issuers
could produce varying results among
the states or among municipal
securities issuers within a state.
These uncertainties could have a
significant impact on the prices of
the municipal securities in which
the Fund invests. The value of
municipal securities generally may
be affected by uncertainties in the
municipal markets as a result of
legislation or litigation,
including legislation or litigation
that changes the taxation of
municipal securities or the rights
of municipal securities holders in
the event of a bankruptcy. To
enforce its rights in the event of
a default in the payment of
interest or repayment of principal,
or both, the Fund may take
possession of and manage the assets
securing the issuers obligations
on such securities, which may
increase the Funds operating
expenses. Any income derived from
the Funds ownership or operation
of such assets may not be
tax-exempt and could jeopardize the
Funds status as a regulated
investment company under the
Internal Revenue Code. |
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The U.S. economy may be in the
process of deleveraging, with
individuals, companies and
municipalities reducing
expenditures and paying down
borrowings. In such event, the
number of municipal borrowers and
the amount of outstanding municipal
securities may contract,
potentially without corresponding
reductions in investor demand for
municipal securities. As a result,
the Fund may have fewer investment
alternatives, may invest in
securities that it previously would
have declined and may concentrate
its investments in a smaller number
of issuers. |
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Insurance Risk. Financial
insurance guarantees that interest
payments on a bond will be made on
time and that principal will be
repaid when the bond matures.
Insured municipal obligations would
generally be assigned a lower
rating if the rating were based
primarily on the credit quality of
the issuer without regard to the
insurance feature. If the
claims-paying ability of the
insurer were downgraded, the
ratings on the municipal
obligations it insures may also be
downgraded. Insurance does not
protect the Fund against losses
caused by declines in a bonds
value due to a change in market
conditions.
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All Funds |
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Market Risk. Market risk is the
possibility that the market values
of securities owned by the Fund
will decline. The net asset value
of the Fund will change with
changes in the value of its
portfolio securities, and the value
of the Funds investments can be
expected to fluctuate over time.
The financial markets in general
are subject to volatility and may
at times experience extreme
volatility and uncertainty, which
may affect all investment
securities, including debt
securities and derivative
instruments. Volatility may be
greater during periods of general
economic uncertainty.
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All Funds |
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Interest Rate Risk. Because the
Fund invests primarily in fixed
income municipal securities, the
net asset value of the 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. These risks may be
greater in the current market
environment because certain
interest rates are near
historically low levels.
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All Funds |
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Principal Risk |
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Funds Subject to Risk |
Credit Risk. Credit risk refers to
an issuers ability to make timely
payments of interest and principal
when due. 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 affected
by general economic downturns and
as relative governmental cost
burdens are allocated and
reallocated among federal, state
and local governmental units.
Private activity bonds used to
finance projects, such as
industrial development and
pollution control, may also be
negatively impacted by the general
credit of the user of the project.
Nonpayment would result in a
reduction of income to the Fund,
and a potential decrease in the net
asset value of the Fund. The
Adviser continuously monitors the
issuers of securities held in the
Fund.
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All Funds |
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The Fund will rely on the Advisers
judgment, analysis and experience
in evaluating the creditworthiness
of an issuer. In its analysis, the
Adviser may consider the credit
ratings of NRSROs in evaluating
securities, although the Adviser
does not rely primarily on these
ratings. Credit ratings of NRSROs
evaluate only the safety of
principal and interest payments,
not the market risk. In addition,
ratings are general and not
absolute standards of quality, and
the creditworthiness of an issuer
may decline significantly before an
NRSRO lowers the issuers rating.
A rating downgrade does not require
the Fund to dispose of a security. |
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Medium-grade obligations (for
example, bonds rated BBB by S&P)
possess speculative characteristics
so that changes in economic
conditions or other circumstances
are more likely to lead to a
weakened capacity of the issuer to
make principal and interest
payments than in the case of
higher-rated securities. Securities
rated below investment grade are
considered speculative by NRSROs
with respect to the issuers
continuing ability to pay interest
and principal. |
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Income Risk. The income you receive
from the Fund is based primarily on
prevailing interest rates, which
can vary widely over the short and
long term. If interest rates
decrease, your income from the Fund
may decrease as well.
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All Funds |
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Call Risk. If interest rates fall,
it is possible that issuers of
securities with high interest rates
will prepay or call their
securities before their maturity
dates. In this event, the proceeds
from the called securities would
likely be reinvested by the Fund in
securities bearing the new, lower
interest rates, resulting in a
possible decline in the Funds
income and distributions to
shareholders.
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All Funds |
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Market Segment Risk. The Fund
generally considers investments in
municipal securities issued by
governments or political
subdivisions not to be subject to
industry concentration policies
(because such issuers are not in
any industry). The Fund may,
however, invest in municipal
securities issued by entities
having similar characteristics. For
example, the issuers may be located
in the same geographic area or may
pay their interest obligations from
revenue of similar projects, such
as hospitals, airports, utility
systems and housing finance
agencies. This may make the Funds
investments more susceptible to
similar economic, political or
regulatory occurrences, which could
increase the volatility of the
Funds net asset value. The Fund
may invest more than 25% of its
total assets in a segment of the
municipal securities market with
similar characteristics if the
Adviser determines that the yields
available from obligations in a
particular segment justify the
additional risks of a larger
investment in that segment. The
Fund may not, however, invest more
than 25% of its total assets in
municipal securities, such as many
private activity bonds or
industrial development revenue
bonds, issued for non-governmental
entities that are in the same
industry.
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All Funds |
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The Fund has no policy limiting its
investments in municipal securities
whose issuers are located in the
same state. If the Fund were to
invest a significant portion of its
total assets in issuers located in
the same state, it would be more
susceptible to adverse economic,
business or regulatory conditions
in that state. |
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Principal Risk |
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Funds Subject to Risk |
Tax Risk. To qualify for the
favorable U.S. federal income tax
treatment generally accorded to
regulated investment companies,
among other things, the Fund must
derive in each taxable year at
least 90% of its gross income from
certain prescribed sources. 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 federal income
tax at regular corporate rates
without any deduction for
distributions to shareholders, and
all distributions from the Fund
(including underlying distributions
attributable to tax-exempt interest
income) would be taxable to
shareholders as ordinary dividends
to the extent of the Funds current
and accumulated earnings and
profits.
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All Funds |
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The value of the Funds investments
and its net asset value may be
adversely affected by changes in
tax rates and policies. Because
interest income from municipal
securities is normally not subject
to regular federal income taxation,
the attractiveness of municipal
securities in relation to other
investment alternatives is affected
by changes in federal income tax
rates or changes in the tax-exempt
status of interest income from
municipal securities. Any proposed
or actual changes in such rates or
exempt status, therefore, can
significantly affect the demand for
and supply, liquidity and
marketability of municipal
securities. This could, in turn,
affect the Funds net asset value
and ability to acquire and dispose
of municipal securities at
desirable yield and price levels.
Additionally, the Fund may not be a
suitable investment for individual
retirement accounts, for other
tax-exempt or tax-deferred accounts
or for investors who are not
sensitive to the federal income tax
consequences of their investments. |
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The Fund may invest all or a
substantial portion of its total
assets in municipal securities
subject to the federal alternative
minimum tax. Accordingly, an
investment in the Fund could cause
shareholders to be subject to (or
result in an increased liability
under) the federal alternative
minimum tax. As a result, the Fund
may not be a suitable investment
for investors who are already
subject to the federal alternative
minimum tax or who could become
subject to the federal alternative
minimum tax as a result of an
investment in the Fund. |
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Subsequent to the Funds
acquisition of a municipal
security, the security may be
determined to pay, or to have paid,
taxable income. As a result, the
treatment of dividends previously
paid or to be paid by the Fund as
exempt-interest dividends could
be adversely affected, subjecting
the Funds shareholders to
increased federal income tax
liabilities. |
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For federal income tax purposes,
distributions of ordinary taxable
income (including any net
short-term capital gain) will be
taxable to shareholders as ordinary
income (and not eligible for
favorable taxation as qualified
dividend income), and capital gain
dividends will be taxed at
long-term capital gain rates. In
certain circumstances, the Fund
will make payments to holders of
VMTP Shares, if applicable, to
offset the tax effects of a taxable
distribution. |
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Generally, to the extent a Funds
distributions are derived from
interest on municipal securities of
a particular state (and, in some
cases qualifying obligations of
U.S. territories and possessions),
its distributions are exempt from
the personal income tax of that
state. In some cases, the Funds
shares may (to the extent
applicable) also be exempt from
personal property taxes of such
state. However, some states
require that the Fund meet certain
thresholds with respect to the
portion of its portfolio consisting
of municipal securities of such
state in order for such exemption
to apply. |
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Risks of Using Derivative
Instruments. A derivative
instrument often has risks similar
to its underlying instrument and
may have additional risks,
including imperfect correlation
between the value of the derivative
and the underlying instrument or
instrument being hedged, risks of
default by the other party to
certain transactions, magnification
of losses incurred due to changes
in the market value of the
securities, instruments, indices or
interest rates to which they
relate, and risks that the
derivatives may not be liquid. The
use of derivatives involves risks
that are different from, and
potentially greater than, the risks
associated with other portfolio
investments. Derivatives may
involve the use of highly
specialized instruments that
require investment techniques and
risk analyses different from
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All Funds |
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Principal Risk |
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Funds Subject to Risk |
those
associated with other portfolio
investments. Certain derivative
transactions may give rise to a
form of leverage. Leverage
associated with derivative
transactions may cause the Fund to
liquidate portfolio positions when
it may not be advantageous to do so
to satisfy its obligations or to
meet earmarking or segregation
requirements, pursuant to
applicable SEC rules and
regulations, or may cause the Fund
to be more volatile than if the
Fund had not been leveraged. The
Fund could suffer losses related to
its derivative positions as a
result of unanticipated market
movements, which losses may
potentially be unlimited. Although
the Adviser may seek to use
derivatives to further the Funds
investment objective, the Fund is
not required to use derivatives and
may choose not to do so and there
is no assurance that the use of
derivatives will achieve this
result. |
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Counterparty Risk. The Fund will
be subject to credit risk with
respect to the counterparties to
the derivative transactions entered
into by the Fund. If a counterparty
becomes bankrupt or otherwise fails
to perform its obligations under a
derivative contract due to
financial difficulties, the Fund
may experience significant delays
in obtaining any recovery under the
derivative contract in bankruptcy
or other reorganization proceeding.
The Fund may obtain only a limited
recovery or may obtain no recovery
in such circumstances. |
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Futures Risk. A decision as to
whether, when and how to use
futures involves the exercise of
skill and judgment and even a
well-conceived futures transaction
may be unsuccessful because of
market behavior or unexpected
events. In addition to the
derivatives risks discussed above,
the prices of futures can be highly
volatile, using futures can lower
total return, and the potential
loss from futures can exceed the
Funds initial investment in such
contracts. |
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Swaps Risk. Swap agreements are
not entered into or traded on
exchanges and there is no central
clearing or guaranty function for
swaps. Therefore, swaps are subject
to credit risk or the risk of
default or non-performance by the
counterparty. Swaps could result in
losses if interest rate or credit
quality changes are not correctly
anticipated by the Fund or if the
reference index, security or
investments do not perform as
expected. |
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Tax Risk. The use of derivatives
may generate taxable income. In
addition, the Funds use of
derivatives may be limited by the
requirements for taxation as a
regulated investment company or the
Funds intention to pay dividends
that are exempt from federal income
taxes. The tax treatment of
derivatives may be adversely
affected by changes in legislation,
regulations or other legal
authority, subjecting the Funds
shareholders to increased federal
income tax liabilities. |
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Inverse Floating Rate Obligations
Risk. Like most other fixed-income
securities, the value of inverse
floating rate obligations will
decrease as interest rates
increase. They are more volatile,
however, than most other
fixed-income securities because the
coupon rate on an inverse floating
rate obligation typically changes
at a multiple of the change in the
relevant index rate. Thus, any rise
in the index rate (as a consequence
of an increase in interest rates)
causes a correspondingly greater
drop in the coupon rate of an
inverse floating rate obligation
while a drop in the index rate
causes a correspondingly greater
increase in the coupon of an
inverse floating rate obligation.
Some inverse floating rate
obligations may also increase or
decrease substantially because of
changes in the rate of prepayments.
Inverse floating rate obligations
tend to underperform the market for
fixed rate bonds in a rising
interest rate environment, but tend
to outperform the market for fixed
rate bonds when interest rates
decline or remain relatively
stable. Inverse floating rate
obligations have varying degrees of
liquidity.
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All Funds |
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The Fund generally invests in
inverse floating rate obligations
that include embedded leverage,
thus exposing the Fund to greater
risks and increased costs. The
market value of a leveraged
inverse floating rate obligation
generally will fluctuate in
response to changes in market rates
of interest to a greater extent
than the value of an unleveraged
investment. The extent of increases
and decreases in the value of
inverse floating rate obligations
generally will be larger than
changes in an equal principal
amount of a fixed rate security
having similar credit quality,
redemption provisions and maturity,
which may cause the |
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Principal Risk |
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Funds Subject to Risk |
Funds net
asset value to be more volatile
than if it had not invested in
inverse floating rate obligations. |
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In certain instances, the
short-term floating rate interests
created by a special purpose trust
may not be able to be sold to third
parties or, in the case of holders
tendering (or putting) such
interests for repayment of
principal, may not be able to be
remarketed to third parties. In
such cases, the special purpose
trust holding the long-term fixed
rate bonds may be collapsed. In the
case of inverse floating rate
obligations created by the Fund,
the Fund would then be required to
repay the principal amount of the
tendered securities. During times
of market volatility, illiquidity
or uncertainty, the Fund could be
required to sell other portfolio
holdings at a disadvantageous time
to raise cash to meet that
obligation. |
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The use of short-term floating rate
obligations may require the Fund to
segregate or earmark cash or liquid
assets to cover its obligations.
Securities so segregated or
earmarked will be unavailable for
sale by the Fund (unless replaced
by other securities qualifying for
segregation requirements), which
may limit the Funds flexibility
and may require that the Fund sell
other portfolio investments at a
time when it may be disadvantageous
to sell such assets. |
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Risks of Investing in Lower-Grade
Securities. Securities that are in
the lower-grade categories
generally offer higher yields than
are offered by higher-grade
securities of similar maturities,
but they also generally involve
greater risks, such as greater
credit risk, market risk,
volatility and liquidity risk. In
addition, the amount of available
information about the financial
condition of certain lower-grade
issuers may be less extensive than
other issuers, making the Fund more
dependent on the Advisers credit
analysis than a fund investing only
in higher-grade securities. To
minimize the risks involved in
investing in lower-grade
securities, the Fund does not
purchase securities that are in
default or rated in categories
lower than B- by S&P or B3 by
Moodys or unrated securities of
comparable quality.
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All Funds |
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Secondary market prices of
lower-grade securities generally
are less sensitive than
higher-grade securities to changes
in interest rates and are more
sensitive to general adverse
economic changes or specific
developments with respect to the
particular issuers. A significant
increase in interest rates or a
general economic downturn may
significantly affect the ability of
municipal issuers of lower-grade
securities to pay interest and to
repay principal, or to obtain
additional financing, any of which
could severely disrupt the market
for lower-grade municipal
securities and adversely affect the
market value of such securities.
Such events also could lead to a
higher incidence of default by
issuers of lower-grade securities.
In addition, changes in credit
risks, interest rates, the credit
markets or periods of general
economic uncertainty can be
expected to result in increased
volatility in the price of the
lower-grade securities and the net
asset value of the Fund. Adverse
publicity and investor perceptions,
whether or not based on rational
analysis, may affect the value,
volatility and liquidity of
lower-grade securities. |
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In the event that an issuer of
securities held by the Fund
experiences difficulties in the
timely payment of principal and
interest and such issuer seeks to
restructure the terms of its
borrowings, the Fund may incur
additional expenses and may
determine to invest additional
assets with respect to such issuer
or the project or projects to which
the Funds securities relate.
Further, the Fund may incur
additional expenses to the extent
that it is required to seek
recovery upon a default in the
payment of interest or the
repayment of principal on its
portfolio holdings and the Fund may
be unable to obtain full recovery
on such amounts. |
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Investments in debt obligations
that are at risk of or in default
present special tax issues for the
Fund. Federal income tax rules are
not entirely clear about issues
such as when the Fund may cease to
accrue interest, original issue
discount or market discount, when
and to what extent deductions may
be taken for bad debts or worthless
securities, how payments received
on obligations in default should be
allocated between principal and
interest and whether certain
exchanges of debt obligations in a
workout context are taxable. These
and other issues will be addressed
by the Fund, in the event it
invests in or holds such
securities, in order to seek to
ensure that it distributes
sufficient income to preserve its
status as a regulated investment
company. |
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21
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Principal Risk |
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Funds Subject to Risk |
Liquidity Risk. Liquidity relates
to the ability of a fund to sell a
security in a timely manner at a
price which reflects the value of
that security. The amount of
available information about the
financial condition of municipal
securities issuers is generally
less extensive than that for
corporate issuers with publicly
traded securities, and the market
for municipal securities is
generally considered to be less
liquid than the market for
corporate debt obligations. Certain
municipal securities in which the
Fund may invest, such as special
obligation bonds, lease
obligations, participation
certificates and variable rate
instruments, may be particularly
less liquid. To the extent the
Fund owns or may acquire illiquid
or restricted securities, these
securities may involve special
registration requirements,
liabilities and costs, and
liquidity and valuation
difficulties.
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All Funds |
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The effects of adverse publicity
and investor perceptions may be
more pronounced for securities for
which no established retail market
exists as compared with the effects
on securities for which such a
market does exist. An economic
downturn or an increase in interest
rates could severely disrupt the
market for such securities and
adversely affect the value of
outstanding securities or the
ability of the issuers to repay
principal and interest. Further,
the Fund may have more difficulty
selling such securities in a timely
manner and at their stated value
than would be the case for
securities for which an established
retail market does exist. |
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The markets for lower-grade
securities may be less liquid than
the markets for higher-grade
securities. To the extent that
there is no established retail
market for some of the lower-grade
securities in which the Fund may
invest, trading in such securities
may be relatively inactive. Prices
of lower-grade securities may
decline rapidly in the event a
significant number of holders
decide to sell. Changes in
expectations regarding an
individual issuer of lower-grade
securities generally could reduce
market liquidity for such
securities and make their sale by
the Fund at their current valuation
more difficult. |
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From time to time, the Funds
investments may include securities
as to which the Fund, by itself or
together with other funds or
accounts managed by the Adviser,
holds a major portion or all of an
issue of municipal securities.
Because there may be relatively few
potential purchasers for such
investments and, in some cases,
there may be contractual
restrictions on resales, the Fund
may find it more difficult to sell
such securities at a time when the
Adviser believes it is advisable to
do so. |
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Preferred Shares Risk. The Funds
use of leverage through preferred
shares may result in higher
volatility of the net asset value
of the Common Shares, and
fluctuations in the dividend rates
on the preferred shares (which are
expected to reflect yields on
short-term municipal securities)
may affect the yield to the Common
Shareholders. So long as the Fund
is able to realize a higher net
return on its investment portfolio
than the then current dividend rate
of the preferred shares, the effect
of the leverage provided by the
preferred shares will be to cause
the Common Shareholders to realize
a higher current rate of return
than if the Fund were not so
leveraged. On the other hand, to
the extent that the then current
dividend rate on the preferred
Shares approaches the net return on
the Funds investment portfolio,
the benefit of leverage to the
Common Shareholders will be
reduced, and if the then current
dividend rate on the preferred
shares were to exceed the net
return on the Funds portfolio, the
Funds leveraged capital structure
would result in a lower rate of
return to the Common Shareholders
than if the Fund were not so
structured.
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Acquiring Fund, IMC & IMT |
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Similarly, because any decline in
the net asset value of the Funds
investments will be borne entirely
by the Common Shareholders, the
effect of leverage in a declining
market would result in a greater
decrease in net asset value to the
Common Shareholders than if the
Fund were not so leveraged. Any
such decrease would likely be
reflected in a decline in the
market price for Common Shares. If
the Funds current investment
income were not sufficient to meet
dividend requirements on the
preferred Shares, the Fund might
have to liquidate certain of its
investments in order to meet
required dividend payments, thereby
reducing the net asset value
attributable to the Funds Common
Shares. |
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22
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Principal Risk |
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Funds Subject to Risk |
The amount of preferred shares
outstanding from time to time may
vary, depending on the Advisers
analysis of conditions in the
municipal securities market and
interest rate movements. Management
of the amount of outstanding
preferred shares places greater
reliance on the ability of the
Adviser to predict trends in
interest rates than if the Fund did
not use leverage. In the event the
Adviser later determines that all
or a portion of such preferred
shares should be reissued so as to
increase the amount of leverage, no
assurance can be given that the
Fund will subsequently be able to
reissue preferred shares on terms
and/or with dividend rates that are
beneficial to the Common
Shareholders. Further, redemption
and reissuance of the preferred
shares, and any related trading of
the Funds portfolio securities,
results in increased transaction
costs to the Fund and its Common
Shareholders. Because the Common
Shareholders bear these expenses,
changes to the Funds outstanding
leverage and any losses resulting
from related portfolio trading will
have a proportionately larger
impact on the Common Shares net
asset value and market price. |
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In addition, the Fund is not
permitted to declare any cash
dividend or other distribution on
its Common Shares unless, at the
time of such declaration, the Fund
has an asset coverage of at least
200%, as required by the 1940 Act
(determined after deducting the
amount of such dividend or
distribution). In addition, under
the terms of the Funds VMTP
Shares, the Fund is required to
maintain minimum asset coverage of
225%. This prohibition on the
payment of dividends or other
distributions might impair the
ability of the Fund to maintain its
qualification as a regulated
investment company for federal
income tax purposes. The Fund
intends, however, to the extent
possible, to purchase or redeem
VMTP Shares from time to time to
maintain an asset coverage of the
VMTP Shares of at least 225%.
If a determination were made by the
IRS to treat the Funds preferred
shares as debt rather than equity
for U.S. federal income tax
purposes, the Common Shareholders
might be subject to increased
federal income tax liabilities. |
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Unrated Securities Risk. Many
lower-grade securities are not
listed for trading on any national
securities exchange, and many
issuers of lower-grade securities
choose not to have a rating
assigned to their obligations by
any NRSRO. As a result, the Funds
portfolio may consist of a higher
portion of unlisted or unrated
securities as compared with an
investment company that invests
solely in higher-grade, listed
securities. Unrated securities are
usually not as attractive to as
many buyers as are rated
securities, a factor which may make
unrated securities less marketable.
These factors may limit the
ability of the Fund to sell such
securities at their fair value.
The Fund may be more reliant on the
Advisers judgment and analysis in
evaluating the creditworthiness of
an issuer of unrated securities.
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All Funds |
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When-Issued and Delayed Delivery
Risks. When-issued and delayed
delivery transactions are subject
to market risk as the value or
yield of a security at delivery may
be more or less than the purchase
price or the yield generally
available on securities when
delivery occurs. In addition, the
Fund is subject to counterparty
risk because it relies on the buyer
or seller, as the case may be, to
consummate the transaction, and
failure by the other party to
complete the transaction may result
in the Fund missing the opportunity
of obtaining a price or yield
considered to be advantageous.
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All Funds |
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Zero Coupon / PIK Bond Risk.
Prices on non-cash-paying
instruments may be more sensitive
to changes in the issuers
financial condition, fluctuations
in interest rates and market
demand/supply imbalances than
cash-paying securities with similar
credit ratings, and thus may be
more speculative than are
securities that pay interest
periodically in cash. These
securities are also subject to the
risk of default. These securities
may subject the Fund to greater
market risk than a fund that does
not own these types of securities.
Special tax considerations are
associated with investing in
non-cash-paying instruments, such
as zero coupon or PIK securities.
The Adviser will weigh these
concerns against the expected total
returns from such instruments.
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All Funds |
The risks associated with an investment in VMTP Shares are identical for IMC, IMT and the
Acquiring Fund.
23
Portfolio Managers
Thomas Byron, Robert Stryker and Robert Wimmel are the portfolio managers for the Funds.
Mr. Byron, Portfolio Manager, has been associated with Invesco and/or its affiliates since
2010. Mr. Byron was associated with the Funds previous investment adviser or its investment
advisory affiliates in an investment
management capacity from 1981 to 2010 and began managing the Funds in 2009. Mr. Byron earned
a B.S. in finance from Marquette University and an M.B.A. in finance from DePaul University.
Mr. Stryker, Portfolio Manager, has been associated with Invesco and/or its affiliates since
2010. Mr. Stryker was associated with the Funds previous investment adviser or its investment
advisory affiliates in an investment management capacity from 1994 to 2010 and began managing the
Funds in 2009. Mr. Stryker earned a B.S. in finance from the University of Illinois, Chicago.
Mr. Wimmel, Portfolio Manager, has been associated with Invesco and/or its affiliates since
2010. Mr. Wimmel was associated with the Funds previous investment adviser or its investment
advisory affiliates in an investment management capacity from 1996 to 2010 and began managing the
Funds in 2009. Mr. Wimmel earned a B.A. in anthropology from the University of Cincinnati and an
M.A. in economics from the University of Illinois, Chicago.
The SAI provides additional information about the portfolio managers compensation, other
accounts managed by the portfolio managers, and the portfolio managers ownership of securities in
each Fund.
Trading of VMTP Shares
VMTP Shares are a new issue of securities and there is currently no established trading market
for such shares. No Fund intends to apply for a listing of the VMTP Shares on a securities
exchange or an automated dealer quotation system or to seek to facilitate transfers by retaining a
remarketing or other similar agent with respect to the VMTP Shares. Accordingly, there can be no
assurance as to the development or liquidity of any market for the VMTP Shares. The VMTP Shares
are not registered under the Securities Act or any other applicable securities law. Accordingly,
the VMTP Shares are subject to restrictions on transferability and resale. The VMTP Shares are
offered for sale only pursuant to Rule 144A under the Securities Act, and may not be offered, sold
or otherwise transferred except in compliance with the registration requirements of the Securities
Act or any other applicable securities law, pursuant to an exemption therefrom or in a transaction
not subject thereto and in each case in compliance with contractual conditions applicable to
transfers of VMTP Shares.
Capital Structures of the Funds
Each Fund is currently organized as a Massachusetts business trust. The Acquiring Fund was
organized on March 12, 1992, IMC was organized on February 26, 1990, IMS was organized on October
14, 1993, and IMT was organized on October 2, 1991. As discussed under Proposal 1, before the
closing of the Mergers, the Funds will be reorganized as Delaware statutory trusts, which will all
have identical governing documents and capital structures, except that IMS has no outstanding VMTP
Shares. (Proposal 1 discusses the material differences between each Funds current Massachusetts
business trust structure and its proposed Delaware statutory trust structure.) The Funds
governing documents will therefore be substantially identical immediately prior to the Mergers with
the exception of any provisions governing outstanding VMTP Shares, which will be substantially
identical among the Acquiring Fund, IMC and IMT but will not apply to IMS. Each such Delaware
statutory trust will have the same structure, except that IMS has no outstanding VMTP Shares while
the Acquiring Fund, IMC and IMT have outstanding VMTP Shares.
Description of Securities to be Issued
Before any Merger can be completed, each merging Fund must have completed a redomestication to
a Delaware statutory trust, as discussed in Proposal 1. Accordingly, the following discussion
reflects that each Fund would be a Delaware statutory trust as of the time of its Merger. A
discussion of the changes a Fund would undergo as part of a Redomestication is included under
Proposal 1.
VMTP Shares. Each of IMC, IMT and the Acquiring Fund has an outstanding class of VMTP Shares.
The terms of the VMTP Shares of IMC, IMT and the Acquiring Fund are identical. As of the closing
of a Merger, the
24
Acquiring Fund will be authorized by its Amended and Restated Agreement and
Declaration of Trust to issue an unlimited number of preferred shares. In a Merger, VMTP Shares of
IMC and IMT will be exchanged for VMTP Shares of the Acquiring Fund.
The Funds have entered into a Redemption and Paying Agent Agreement with Deutsche Bank Trust
Company Americas. The Redemption and Paying Agent serves as the Funds transfer agent, registrar,
dividend
disbursing agent, paying agent and redemption price disbursing agent and calculation agent in
connection with the payment of dividends with respect to VMTP Shares, and carry out certain other
procedures provided in the Redemption and Paying Agent Agreement.
The currently outstanding VMTP Shares of IMC, IMT and the Acquiring Fund have a long-term
issue credit rating of Aa1 from Moodys and AAA from Fitch Ratings, a part of the Fitch Group,
which is a majority-owned subsidiary of Fimalac, S.A. (Fitch), and it is a condition of closing
of each Merger that the VMTP Shares of the Acquiring Fund be rated at least AA-/Aa3 by each rating
agency that is rating, at the request of the Acquiring Fund, such VMTP Shares. An explanation of
the significance of ratings may be obtained from the rating agencies. Generally, rating agencies
base their ratings on such material and information, and such of their own investigations, studies
and assumptions, as they deem appropriate. The ratings of the VMTP Shares should be evaluated
independently from similar ratings of other securities. A rating of a security is not a
recommendation to buy, sell or hold securities and may be subject to review, revision, suspension,
reduction or withdrawal at any time by the assigning rating agency.
Dividends on the VMTP Shares are declared daily and generally paid monthly on the first (1st)
business day of each month. For each rate period, the dividend rate on VMTP Shares will, except as
otherwise provided in the Statement of Preferences, be equal to the rate per annum that results
from the sum of the (1) Securities Industry and Financial Markets Association (SIFMA) Municipal
Swap Index and (2) the ratings spread as determined pursuant to the rate determination process set
forth in the Statement of Preferences. VMTP Shares rank on a parity with each other, with shares
of any other Series of VMTP Shares and with shares of any other series of preferred shares as to
the payment of dividends by a Fund.
Each of IMC, IMT and the Acquiring Fund does not intend to apply for a listing of the VMTP
Shares on a securities exchange or an automated dealer quotation system or to seek to facilitate
transfers by retaining a remarketing or other similar agent with respect to the VMTP Shares.
Accordingly, there can be no assurance as to the development or liquidity of any market for the
VMTP Shares. The VMTP Shares are not registered under the Securities Act. Accordingly, the VMTP
Shares are subject to restrictions on transferability and resale.
Unless otherwise approved in writing by a Fund, VMTP Shareholders may sell, transfer or
otherwise dispose of VMTP Shares only in whole shares and only to persons it reasonably believes
are either (i) qualified institutional buyers (QIBs) that are registered closed-end management
investment companies, the shares of which are traded on a national securities exchange (Closed-End
Funds), banks (and their direct or indirect wholly-owned subsidiaries), insurance companies,
Broker-Dealers (as defined the Statement of Preferences), Foreign Entities (as defined in the
Statement of Preferences) (and their direct or indirect wholly-owned subsidiaries), companies that
are included in the S&P 500 Index (and their direct or indirect wholly-owned subsidiaries) or
registered open-end management investment companies or (ii) tender option bond trusts in which all
Beneficial Owners are QIBs that are Closed-End Funds, banks (and their direct or indirect
wholly-owned subsidiaries), insurance companies, Broker-Dealers, Foreign Entities (and their direct
or indirect wholly-owned subsidiaries), companies that are included in the S&P 500 Index (and their
direct or indirect wholly-owned subsidiaries) or registered open-end management investment
companies, in each case, in accordance with Rule 144A of the Securities Act or another available
exemption from registration under the Securities Act, in a manner not involving any public offering
within the meaning of Section 4(2) of the Securities Act. Any transfer in violation of the
foregoing restrictions will be void ab initio and any transferee of VMTP Shares transferred in
violation of the foregoing restrictions shall be deemed to agree to hold all payments it received
on any such improperly transferred VMTP Shares in trust for the benefit of the transferor of such
VMTP Shares. The foregoing restrictions on transfer will not apply to any VMTP Shares registered
under the Securities Act pursuant to the registration rights agreement entered into by a Fund or
any subsequent transfer of such VMTP Shares thereafter.
Each IMC, IMT and the Acquiring Fund is required to redeem, out of funds legally available
therefor under applicable law and otherwise in accordance with applicable law, all outstanding VMTP
Shares on June 1, 2015 or
25
such later date to which it may be extended, if any, in accordance with
the provisions of the Statement of Preferences.
Subject to certain conditions, VMTP Shares may be redeemed at any time, at the option of a
Fund (as a whole or from time to time, in part), out of funds legally available therefor under
applicable law and otherwise in accordance with applicable law, at a redemption price equal to the
sum of (i) the liquidation preference, (ii)
accumulated but unpaid dividends thereon (whether or not declared) to, but not including, the date
fixed for redemption and (iii) the redemption premium, if any, in respect of such VMTP Share.
VMTP Shares will rank on a parity with each other and with shares of any other series of
preferred shares as to the distribution of assets upon the dissolution, liquidation or winding up
of the affairs of a Fund, whether voluntary or involuntary. After the payment of the full
preferential amounts, VMTP Shareholders as such will have no right or claim to any of the remaining
assets of a Fund.
Except as otherwise provided in the Declaration of Trust or as otherwise required by law, (i)
each VMTP Shareholder is entitled to one vote for each VMTP Share held by such VMTP Shareholder on
each matter submitted to a vote of shareholders of a Fund, and (ii) the holders of outstanding
preferred shares, including each VMTP Share, and Common Shares will vote together as a single
class; provided, however, that the holders of outstanding preferred shares, including VMTP Shares,
voting as a class, to the exclusion of the holders of all other securities and classes of shares of
beneficial interests of the Fund, will be entitled to elect two trustees of the Fund at all times,
each preferred share, including each VMTP Share, entitled to one vote. Subject to the rights of
the holders of preferred shares during a Voting Period (as defined in the Statement of
Preferences), the holders of outstanding preferred shares, including VMTP Shares, and outstanding
Common Shares, voting together as a single class, will elect the balance of the trustees.
The VMTP Shares, including the Acquiring Fund VMTP Shares to be issued in the Mergers, are
issued in book-entry form, as global securities. The global securities will be deposited with, or
on behalf of, The Depository Trust Company (DTC) and registered in the name of Cede & Co., the
nominee of DTC. Beneficial interests in the global securities will be held only through DTC and
any of its participants.
The foregoing is a brief description of the terms of the VMTP Shares. This description does
not purport to be complete and is subject to and qualified in its entirety by reference to the more
detailed description of the VMTP Shares in the Statement of Preferences of each of IMC, IMT and the
Acquiring Fund, which is available upon request by any VMTP Shareholder, and the form of Statement
of Preferences of the Acquiring Fund (after giving effect to its Redomestication) attached hereto
as Exhibit L.
Common Shares. Each Common Share represents an equal proportionate interest with each other
Common Share of the Fund, with each such share entitled to equal dividend, liquidation, redemption
and voting rights. The Acquiring Fund, IMC and IMT also have outstanding VMTP Shares that vote
separately from Common Shares in some circumstances. Each Funds Common Shares have no preemptive,
conversion or exchange rights, nor any right to cumulative voting.
As of the closing of a Merger, the Acquiring Fund will be authorized by its Amended and
Restated Agreement and Declaration of Trust to issue an unlimited number of Acquiring Fund Common
Shares, with no par value.
Dividends and Distributions from the Acquiring Fund, IMC and IMT. The dividend and
distribution policies of IMC and IMT are identical to those of the Acquiring Fund. The Acquiring
Fund intends to make regular monthly distributions of all or a portion of its net investment income
after payment of dividends on the Acquiring Funds preferred shares outstanding to holders of the
Acquiring Funds Common Shares. The Acquiring Funds net investment income consists of all interest
income accrued on portfolio assets less all expenses of the Acquiring Fund. The Acquiring Fund is
required to allocate net capital gains and other taxable income, if any, received by the Acquiring
Fund among its shareholders on a pro rata basis in the year for which such capital gains and other
income is realized. In certain circumstances, the Acquiring Fund will make additional payments to
preferred shareholders to offset the tax effects of such taxable distributions.
26
While there are any preferred shares of the Acquiring Fund outstanding, the Acquiring Fund may
not declare any cash dividend or other distribution on its Common Shares, unless at the time of
such declaration, (i) all accrued preferred shares dividends have been paid, (ii) to the extent
necessary, the Fund has redeemed all of the preferred shares subject to mandatory redemption under
the terms of the preferred shares, and (iii) the value of the Acquiring Funds total assets
(determined after deducting the amount of such dividend or other distribution), less all
liabilities and indebtedness of the Fund, is at least 200% of the liquidation preference of the
outstanding preferred shares (expected to equal the aggregate original purchase price of the
outstanding preferred shares plus any accrued
and unpaid dividends thereon, whether or not earned or declared on a cumulative basis), as
required by the 1940 Act. This limitation on the Acquiring Funds ability to make distributions on
its Common Shares could in certain circumstances impair the ability of the Acquiring Fund to
maintain its qualification for taxation as a regulated investment company under the Code. The
Acquiring Fund intends, however, to the extent possible, to purchase or redeem preferred shares
from time to time to maintain compliance with such asset coverage requirements and may pay special
dividends to the holders of the preferred shares in certain circumstances in connection with any
such impairment of the Acquiring Funds status as a regulated investment company under the Code.
The tax treatment and characterization of the Acquiring Funds distributions may vary
significantly from time to time because of the varied nature of its investments. The Acquiring Fund
will indicate the proportion of its capital gains distributions that constitute long-term and
short-term gains annually. The ultimate tax characterization of the Acquiring Funds distributions
made in a calendar or fiscal year cannot finally be determined until after the end of that fiscal
year. As a result, there is a possibility that the Acquiring Fund may make total distributions
during a calendar or fiscal year in an amount that exceeds the Acquiring Funds net investment
income and net capital gains for the relevant fiscal year and its previously undistributed earnings
and profits from prior years. In such situations, the amount by which the Acquiring Funds total
distributions exceed its net investment income and net capital gains generally will be treated as a
tax-free return of capital reducing the amount of a shareholders tax basis in such shareholders
shares, with any amounts exceeding such basis treated as gain from the sale of shares.
Various factors will affect the level of the Acquiring Funds net investment income, such as
the rate at which dividends are payable on outstanding VMTP Shares, the Acquiring Funds asset mix,
its level of retained earnings, the amount of leverage utilized by it and the effects thereof and
the movement of interest rates for municipal bonds. These factors, among others, may result in the
Acquiring Funds level of net investment income being different from the level of net investment
income for IMC and IMT if the Mergers were not completed. To permit the Acquiring Fund to maintain
more stable monthly distributions, it may from time to time distribute less than the entire amount
earned in a particular period. The income would be available to supplement future distributions. As
a result, the distributions paid by the Acquiring Fund for any particular month may be more or less
than the amount actually earned by the Fund during that month. Undistributed earnings will add to
the Acquiring Funds net asset value and, correspondingly, distributions from undistributed
earnings and from capital, if any, will deduct from the Funds net asset value. Although it does
not now intend to do so, the Board may change the Acquiring Funds dividend policy and the amount
or timing of the distributions based on a number of factors, including the amount of the Funds
undistributed net investment income and historical and projected investment income and the amount
of the expenses and dividend rates on the outstanding VMTP Shares.
Dividends and Distributions from IMS. IMS declares and pays dividends of net investment
income, if any, monthly, and capital gains distributions, if any, at least annually. IMS may also
declare and pay capital gains distributions more than once per year as permitted by law. IMS
shareholders who own certificated shares will not receive dividend payments from the Acquiring Fund
until their certificates are tendered. IMS Common Shareholders will, shortly after the closing of
their Funds Merger, receive instructions on how to tender any outstanding share certificates.
Provisions for Delaying or Preventing Changes in Control. Each Funds governing documents
contain provisions designed to prevent or delay changes in control of that Fund. As of the time of
the Mergers, each Funds governing documents will provide that such Funds Board of Trustees may
cause the Fund to merge or consolidate with or into other entities; cause the Fund to sell, convey
and transfer all or substantially all of the assets of the Fund; cause the Fund to convert to a
different type of entity; or cause the Fund to convert from a closed-end fund to an open-end fund,
each only so long as such action has previously received the approval of either (i) the Board,
followed by the affirmative vote of the holders of not less than 75% of the outstanding shares
entitled to vote; or (ii) the affirmative vote of at least two thirds (66 2/3%) of the Board and an
affirmative Majority Shareholder Vote (which generally means the vote of a majority of the
outstanding voting securities as defined in the 1940 Act of
27
the Fund, with each class and series
of shares voting together as a single class, except to the extent otherwise required by the 1940
Act). Under each Funds governing documents that will be applicable as of the time of the Merger,
shareholders will have no right to call special meetings of shareholders or to remove Trustees. In
addition, each Funds Board is divided into three classes, each of which stands for election only
once in three years. As a result of this system, only those Trustees in one class may be changed
in any one year, and it would require two years or more to change a majority of the Trustees.
Pending Litigation
On January 17, 2011, a Consolidated Amended Shareholder Derivative Complaint entitled Curbow
Family, LLC, et al. v. Morgan Stanley Investment Advisors, Inc., was filed on behalf of the
Acquiring Fund and Invesco Municipal Premium Income Trust (PIA) (collectively, the Trusts)
against Morgan Stanley Investment Advisors, Inc., Morgan Stanley and certain current and former
executive officers of the Trusts (collectively, the Defendants) alleging that they breached their
fiduciary duties to common shareholders by causing the Trusts to redeem Auction Rate Preferred
Securities (ARPS) at their liquidation value. Specifically, the shareholders claim that the
board and officers had no obligation to provide liquidity to the ARPS shareholders, the redemptions
were improperly motivated to benefit the prior adviser by preserving business relationships with
the ARPS holders, i.e., institutional investors, and the market value and fair value of the ARPS
were less than par at the time they were redeemed. The Complaint alleges that the redemption of
the ARPS occurred at the expense of the Trusts and their common shareholders. This Complaint
amends and consolidates two separate complaints that were filed by Curbow Family LLC and Elsie Mae
Melms Revocable Living Trust on July 22, 2010 and August 3, 2010, respectively. Each of the Trusts
initially received a demand letter from the plaintiffs on April 8, 2010. Plaintiffs seek judgment
that: 1) orders Defendants to refrain from redeeming any ARPS at their liquidation value using
Trusts assets; 2) awards monetary damages against all Defendants, individually, jointly or
severally, in favor of the Trusts, for all losses and damages allegedly suffered as a result of the
redemptions of ARPS at their liquidation value; 3) grants appropriate equitable relief to remedy
the Defendants breaches of fiduciary duties; and 4) awards to plaintiffs the costs and
disbursements of the action. The Board of each of the Trusts formed a Special Litigation Committee
(SLC) to investigate these claims and to make a recommendation to the Board regarding whether
pursuit of these claims is in the best interests of the Trusts. After reviewing the findings of
the SLC, the Board announced on July 12, 2011, that it had adopted the SLCs recommendation to seek
dismissal of the action. The Trusts filed a motion to dismiss on October 4, 2011, which remains
pending. Plaintiffs filed a motion on November 28, 2011 asking the court to hold the motion to
dismiss in abeyance while plaintiffs conduct limited discovery. The plaintiffs request for
discovery has been briefed and the courts decision whether plaintiffs are entitled to discovery is
pending. This matter is pending.
Management of the Adviser and each of the Funds believe that the outcome of the proceedings
described above will have no material adverse effect on the Funds or on the ability of the Adviser
to provide ongoing services to the Funds.
Portfolio Turnover
The Funds historical portfolio turnover rates are similar. Because the Funds have similar
investment policies, management does not expect to dispose of a material amount of portfolio
securities of any Fund in connection with the Mergers. No securities of the Target Funds need be
sold in order for the Acquiring Fund to comply with its investment restrictions or policies. The
Funds will continue to buy and sell securities in the normal course of their operations.
Terms and Conditions of the Mergers
The terms and conditions under which a Merger may be consummated are set forth in the Merger
Agreement. Significant provisions of the Merger Agreement are summarized below; however, this
summary is qualified in its entirety by reference to the Merger Agreement, a form of which is
attached as Exhibit D.
In each Merger, a Target Fund will merge with and into the Acquiring Fund pursuant to the
Merger Agreement and in accordance with the Delaware Statutory Trust Act. As a result of each
Merger, all of the assets and liabilities of the merging Target Fund will become assets and
liabilities of the Acquiring Fund, and the Target Funds shareholders will become shareholders of
the Acquiring Fund.
28
Under the terms of the Merger Agreement, the Acquiring Fund will issue new Acquiring Fund
Common Shares in exchange for Target Fund Common Shares. The number of Acquiring Fund Common
Shares issued will be based on the relative NAVs and shares outstanding of the Acquiring Fund and
the applicable Target Fund as of the business day immediately preceding the Mergers closing date.
All Acquiring Fund Common Shares issued pursuant to the Merger Agreement will be fully paid and
non-assessable, and will be listed for trading on the Exchange. The terms of the Acquiring Fund
Common Shares to be issued in each Merger will be identical to the terms of the Acquiring Fund
Common Shares already outstanding.
Under the terms of the Merger Agreement, the Acquiring Fund will also issue new Acquiring Fund
VMTP Shares in exchange for VMTP Shares of IMC and IMT. The number of additional Acquiring Fund
VMTP Shares issued for the Mergers with IMC and IMT will equal the number of outstanding VMTP
Shares IMC and IMT, and such Acquiring Fund VMTP Shares will have liquidation preferences, rights,
and privileges substantially identical to those of the then outstanding VMTP Shares for the merging
Target Funds.
Prior to the closing of each Merger, each Target Fund will declare to its Common Shareholders
one or more dividends, and the Acquiring Fund may, but is not required to, declare to its Common
Shareholders a dividend, payable at or near the time of closing to their respective shareholders to
the extent necessary to avoid entity level tax or as otherwise deemed desirable. Such
distributions, if made, are anticipated to be made in the 2012 calendar year and, to the extent a
distribution is not an exempt-interest dividend (as defined in the Code), the distribution may be
taxable to shareholders in such year for federal income tax purposes. It is anticipated that Fund
distributions will be primarily dividends that are exempt from regular federal income tax, although
a portion of such dividends may be taxable to shareholders as ordinary income or capital gains. To
the extent the distribution is attributable to ordinary income or capital gains, such ordinary
income and capital gains will be allocated to Common Shareholders and VMTP Shareholders in
accordance with each classs proportionate share of the total dividends paid by the Fund during the
year. In certain circumstances, each of IMC, IMT and the Acquiring Fund will make additional
payments to VMTP Shareholders to offset the tax effects of such taxable distributions.
If shareholders approve the Mergers and if all of the closing conditions set forth in the
Merger Agreement are satisfied or waived, including the condition that each Fund complete its
Redomestication (Proposal 1), consummation of the Mergers (the Closing) is expected to occur in
the third quarter of 2012 on a date mutually agreed upon by the Funds (the Closing Date). The
passage of Proposal 3 is not a condition to the Mergers.
Each Fund will be required to make representations and warranties in the Merger Agreement that
are customary in matters such as the Mergers.
If shareholders of a Fund do not approve a Merger or if a Merger does not otherwise close, the
Board will consider what additional action to take, including allowing the Fund to continue
operating as it currently does. The Merger Agreement may be terminated and the Merger may be
abandoned at any time by mutual agreement of the parties. The Merger Agreement may be amended or
modified in a writing signed by the parties.
Additional Information About the Funds
As of the time of the Mergers, each Fund will be a newly organized Delaware statutory trust,
as discussed in Proposal 1. Each Fund is registered under the 1940 Act, as a diversified,
closed-end management investment company. Diversified means that the Fund is limited in the
amount it can invest in a single issuer. A closed-end fund (unlike an open-end or mutual fund)
does not continuously sell and redeem its shares; in the case of the Funds, Common Shares are
bought and sold on the Exchange. A management investment company is managed by an investment
adviser the Adviser in the case of the Funds that buys and sells portfolio securities on
behalf of the investment company.
Federal Income Tax Matters Associated with Investment in the Funds
The following information is meant as a general summary of certain federal income tax matters
for U.S. shareholders. Investors should rely on their own tax advisor for advice about the
particular federal, state and local tax consequences to them of investing in the Funds (for
purposes of this section, the Fund).
29
The Fund has elected to be treated and intends to qualify each year (including the taxable
year in which the Merger occurs) as a regulated investment company (RIC) under Subchapter M of
the Code. In order to qualify as a RIC, the Fund must satisfy certain requirements regarding the
sources of its income, the diversification of its assets and the distribution of its income. As a
RIC, the Fund is not expected to be subject to federal income tax on the income and gains it
distributes to its shareholders. If, for any taxable year, the Fund does not qualify for taxation
as a RIC, it will be treated as a U.S. corporation subject to U.S. federal income tax, thereby
subjecting any income earned by the Fund to tax at the corporate level and to a further tax at the
shareholder level when such income is distributed. In lieu of losing its status as a RIC, 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, for taxable years of the Fund with respect to which
the extended due date of the return is after December 22, 2010.
The Code imposes a 4% nondeductible excise tax on the Fund to the extent it does not
distribute by the end of any calendar year at least the sum of (i) 98% of its taxable ordinary
income for that year, and (ii) 98.2% of its capital gain net income (both long-term and short-term)
for the one-year period ending, as a general rule, on October 31 of that year. For this purpose,
however, any ordinary income or capital gain net income retained by the Fund that is subject to
corporate income tax will be considered to have been distributed by year-end. In addition, the
minimum amounts that must be distributed in any year to avoid the excise tax will be increased or
decreased to reflect any underdistribution or overdistribution, as the case may be, from the
previous year. The Fund anticipates that it will pay such dividends and will make such
distributions as are necessary in order to avoid or minimize the application of this excise tax.
The Fund primarily invests in municipal securities. Thus, substantially all of the Funds
dividends paid to you from net investment income should qualify as exempt-interest dividends. A
shareholder treats an exempt-interest dividend as interest on state and local bonds exempt from
regular federal income tax. Exempt-interest dividends from interest earned on municipal securities
of a state, or its political subdivisions, generally are exempt from that states personal income
tax. Most states, however, do not grant tax-free treatment to interest from municipal securities
of other states.
Federal income tax law imposes an alternative minimum tax with respect to corporations,
individuals, trusts and estates. Interest on certain municipal obligations, such as certain private
activity bonds, is included as an item of tax preference in determining the amount of a taxpayers
alternative minimum taxable income. To the extent that the Fund receives income from such municipal
obligations, a portion of the dividends paid by the Fund, although exempt from regular federal
income tax, will be taxable to shareholders to the extent that their tax liability is determined
under the federal alternative minimum tax. The Fund will annually provide a report indicating the
percentage of the Funds income attributable to municipal obligations subject to the federal
alternative minimum tax. Corporations are subject to special rules in calculating their federal
alternative minimum taxable income with respect to interest from such municipal obligations.
In addition to exempt-interest dividends, the Fund may also distribute to its shareholders
amounts that are treated as long-term capital gain or ordinary income (which may include short-term
capital gains). These distributions may be subject to federal, state and local taxation, depending
on a shareholders situation. If so, they are taxable whether or not such distributions are
reinvested. Net capital gain distributions (the excess of net long-term capital gain over net
short-term capital loss) are generally taxable at rates applicable to long-term capital gains
regardless of how long a shareholder has held its shares. Long-term capital gains are currently
taxable to noncorporate shareholders at a maximum federal income tax rate of 15%. Absent further
legislation, the maximum 15% rate on long-term capital gains will cease to apply to taxable years
beginning after December 31, 2012. The Fund does not expect that any part of its distributions to
shareholders from its investments will qualify for the dividends-received deduction available to
corporate shareholders or as qualified dividend income available to noncorporate shareholders.
Distributions by the Fund in excess of the Funds current and accumulated earnings and profits
will be treated as a return of capital to the extent of the shareholders tax basis in its shares
and will reduce such basis. Any such amount in excess of that basis will be treated as gain from
the sale of shares, as discussed below.
As a RIC, the Fund will not be subject to federal income tax in any taxable year on the income
and gains it distributes to shareholders provided that it meets certain distribution requirements.
The Fund may retain for
30
investment some (or all) of its net capital gain. If the Fund retains any
net capital gain or investment company taxable income, it will be subject to tax at regular
corporate rates on the amount retained. If the Fund retains any net capital gain, it may designate
the retained amount as undistributed capital gains in a notice to its shareholders who, if subject
to federal income tax on long-term capital gains, (i) will be required to include in income for
federal income tax purposes, as long-term capital gain, their share of such undistributed amount;
(ii) will be entitled to credit their proportionate shares of the federal income tax paid by the
Fund on such undistributed amount against their federal income tax liabilities, if any; and (iii)
may claim refunds to the extent the credit exceeds such liabilities. For federal income tax
purposes, the basis of shares owned by a shareholder of the Fund will be increased by an amount
equal
to the difference between the amount of undistributed capital gains included in the
shareholders gross income and the tax deemed paid by the shareholder under clause (ii) of the
preceding sentence.
The IRS currently requires that a RIC that has two or more classes of stock allocate to each
such class proportionate amounts of each type of its income (such as exempt interest, ordinary
income and capital gains). Accordingly, the Fund designates dividends made with respect to the
Common Shares and, if applicable, the VMTP Shares as consisting of particular types of income
(e.g., exempt interest, net capital gain and ordinary income) in accordance with each classs
proportionate share of the total dividends paid by the Fund during the year. A classs
proportionate share of a particular type of income is determined according to the percentage of
total dividends paid by the RIC to such class.
Dividends declared by the Fund to shareholders of record in October, November or December and
paid during the following January may be treated as having been received by shareholders in the
year the distributions were declared.
At the time of an investors purchase of Fund shares, a portion of the purchase price may be
attributable to realized or unrealized appreciation in the Funds portfolio or to undistributed
ordinary income or capital gains of the Fund. Consequently, subsequent distributions by the Fund
with respect to these shares from such appreciation, income or gains may be taxable to such
investor even if the net asset value of the investors shares is, as a result of the
distributions, reduced below the investors cost for such shares and the distributions economically
represent a return of a portion of the investment.
Each shareholder will receive an annual statement summarizing the shareholders dividend and
capital gains distributions.
The redemption, sale or exchange of shares normally will result in capital gain or loss to
shareholders who hold their shares as capital assets. Generally, a shareholders gain or loss will
be long-term capital gain or loss if the shares have been held for more than one year. The gain or
loss on shares held for one year or less will generally be treated as short-term capital gain or
loss. Present law taxes both long-term and short-term capital gains of corporations at the same
rates applicable to ordinary income. Long-term capital gains are currently taxable to noncorporate
shareholders at a maximum federal income tax rate of 15%. As noted above, absent further
legislation, the maximum 15% rate on long-term capital gains will cease to apply to taxable years
beginning after December 31, 2012. Any loss on the sale of shares that have been held for six
months or less will be disallowed to the extent of any distribution of exempt-interest dividends
received with respect to such shares and any remaining loss will be treated as a long-term capital
loss to the extent of any long-term capital gain distributed to you by the Fund on those shares.
Any loss realized on a sale or exchange of shares of a Fund will be disallowed to the extent those
shares of the Fund are replaced by other substantially identical shares of the Fund or other
substantially identical stock or securities (including through reinvestment of dividends) within a
period of 61 days beginning 30 days before and ending 30 days after the date of disposition of the
original shares. In that event, the basis of the replacement shares of the Fund will be adjusted to
reflect the disallowed loss.
Under Treasury regulations, if a shareholder recognizes a loss with respect to Fund shares of
$2 million or more for an individual shareholder, or $10 million or more for a corporate
shareholder, in any single taxable year (or of certain greater amounts over a combination of
years), generally the shareholder must file with the IRS a disclosure statement on Form 8886.
Shareholders that are exempt from U.S. federal income tax, such as retirement plans that are
qualified under Section 401 of the Code, generally are not subject to U.S. federal income tax on
otherwise-taxable Fund dividends or distributions, or on sales or exchanges of Fund shares unless
the Fund shares are debt-financed property within the meaning of the Code.
31
Any interest on indebtedness incurred or continued to purchase or carry the Funds shares to
which exempt-interest dividends are allocated is not deductible. Under certain applicable rules,
the purchase or ownership of shares may be considered to have been made with borrowed funds even
though such funds are not directly used for the purchase or ownership of the shares. In addition,
if you receive Social Security or certain railroad retirement benefits, you may be subject to U.S.
federal income tax on a portion of such benefits as a result of receiving investment income,
including exempt-interest dividends and other distributions paid by the Fund.
Investments in debt obligations that are at risk of or in default present special tax issues
for the Fund. Federal income tax rules are not entirely clear about issues such as when the Fund
may cease to accrue interest, original issue discount or market discount, when and to what extent
deductions may be taken for bad debts or worthless securities, how payments received on obligations
in default should be allocated between principal and interest and whether certain exchanges of debt
obligations in a workout context are taxable. These and other issues will be addressed by the Fund,
in the event it invests in or holds such securities, in order to seek to ensure that it distributes
sufficient income to preserve its status as a RIC.
If the Fund invests in certain pay-in-kind securities, zero coupon securities, deferred
interest securities or, in general, any other securities with original issue discount (or with
market discount if the Fund elects to include market discount in income currently), the Fund must
accrue income on such investments for each taxable year, which generally will be prior to the
receipt of the corresponding cash payments. However, the Fund must distribute to shareholders, at
least annually, all or substantially all of its investment company taxable income (determined
without regard to the deduction for dividends paid), including such accrued income, to qualify as a
RIC and to avoid federal income and excise taxes. Therefore, the Fund may have to dispose of its
portfolio securities under disadvantageous circumstances to generate cash, or may have to leverage
itself by borrowing the cash, to satisfy these distribution requirements.
The Fund may hold or acquire municipal obligations that are market discount bonds. A market
discount bond is a security acquired in the secondary market at a price below its redemption value
(or its adjusted issue price if it is also an original issue discount bond). If the Fund invests in
a market discount bond, it will be required to treat any gain recognized on the disposition of such
market discount bond as ordinary taxable income to the extent of the accrued market discount.
By law, if you do not provide the Fund with your proper taxpayer identification number and
certain required certifications, you may be subject to backup withholding on any distributions of
income, capital gains, or proceeds from the sale of your shares. The Fund also must withhold if the
IRS instructs it to do so. When withholding is required, the amount will be 28% of any
distributions or proceeds paid, including exempt interest dividends (for distributions and proceeds
paid after December 31, 2012, the rate is scheduled to rise to 31% unless the 28% rate is extended
or made permanent).
For taxable years beginning after December 31, 2012, an additional 3.8% Medicare tax will be
imposed on certain net 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) of US individuals, estates and trusts to the extent that such persons modified
adjusted gross income (in the case of an individual) or adjusted gross income (in the case of an
estate or trust) exceeds a threshold amount.
The description of certain federal tax provisions above relates only to U.S. federal income
tax consequences for shareholders who are U.S. persons, i.e., generally, U.S. citizens or residents
or U.S. corporations, partnerships, trusts or estates, and who are subject to U.S. federal income
tax and hold their shares as capital assets. Except as otherwise provided, this description does
not address the special tax rules that may be applicable to particular types of investors, such as
financial institutions, insurance companies, securities dealers, other regulated investment
companies, or tax-exempt or tax-deferred plans, accounts or entities. Investors other than U.S.
persons may be subject to different U.S. federal income tax treatment, including a non-resident
alien U.S. withholding tax at the rate of 30% or any lower applicable treaty rate on amounts
treated as ordinary dividends from the Fund, special certification requirements to avoid U.S.
backup withholding and claim any treaty benefits and U.S. estate tax. Shareholders should consult
their own tax advisors on these matters and on state, local, foreign and other applicable tax laws.
Under recently enacted legislation and administrative guidance, the relevant withholding agent
may be required to withhold 30% of any (a) income dividends paid after December 31, 2013 and (b)
certain capital gains
32
distributions and the proceeds of a sale of shares paid after December 31,
2014 to (i) a foreign financial institution unless such foreign financial institution agrees to
verify, report and disclose certain of its U.S. accountholders and meets certain other specified
requirements or (ii) a non-financial foreign entity that is the beneficial owner of the payment
unless such entity certifies that it does not have any substantial U.S. owners or provides the
name, address and taxpayer identification number of each substantial U.S. owner and such entity
meets certain other specified requirements.
Board Considerations in Approving the Mergers
On June 1, 2010, Invesco acquired the retail fund management business of Morgan Stanley, which
included 32 Morgan Stanley and Van Kampen branded closed-end funds. This transaction filled gaps
in Invescos product line and has enabled Invesco to expand its investment offerings to retail
customers. The transaction also resulted in product overlap. The Mergers proposed in this Proxy
Statement are part of a larger group of mergers across Invescos fund platform that began in early
2011. The larger group of mergers is designed to put forth Invescos most compelling investment
processes and strategies, reduce product overlap and create scale in the resulting funds.
Each Funds Board created an ad hoc committee (the Ad Hoc Merger Committee) to consider each
Merger and to assist the Board in its consideration of such Merger. The Ad Hoc Merger Committee
met separately two times, on October 17, 2011 and November 18, 2011 to discuss each proposed
Merger. Two separate meetings of each Funds Board were also held to review and consider each
Merger, including presentations by the Ad Hoc Merger Committee on its deliberations and,
ultimately, recommendations. The trustees who are not interested persons, as that term is
defined in the 1940 Act, of the Funds (the Independent Trustees) held a separate meeting in
conjunction with the November 29-30, 2011 meeting of the full Boards to consider these matters.
The Independent Trustees have been advised on this matter by independent legal counsel to the
Independent Trustees. The Boards requested and received from the Adviser written materials
containing relevant information about the Funds and the proposed Mergers, including fee and expense
information on an actual and pro forma estimated basis, and comparative portfolio composition and
performance data.
The Boards reviewed, among other information they deemed relevant, information comparing the
following for each Fund: (1) investment objectives, policies and restrictions; (2) portfolio
management; (3) portfolio composition; (4) comparative short-term and long-term investment
performance and distribution yields; (5) current expense ratios and expense structures, including
contractual investment advisory fees on a net asset basis and on a managed assets basis; (6)
expected federal income tax consequences to the Funds, including any impact on capital loss carry
forwards; (7) relative asset size; and (8) trading information such as trading premiums/discounts
and bid/ask spreads.
The Boards considered the benefits to each Fund of (i) combining with a similar fund to create
a larger fund, (ii) with respect to IMS and IMT, the Advisers paying all of the Merger costs, and
(iii) the expected tax free nature of the Merger for each Fund and its shareholders for federal
income tax purposes. The Boards also considered that the potential benefits to the Funds of the
Mergers might include (1) benefits resulting from the larger size of the combined fund, including
the potential for (i) increased attention from the investment community, (ii) increased trading
volume and tighter spreads and improved premium/discount levels for the combined funds Common
Shares, (iii) improved purchasing power and more efficient transaction costs, and (iv) increased
diversification of portfolio investments; (2) maintaining consistent portfolio management teams,
processes and investment objectives; and (3) reducing market confusion caused by similar product
offerings. In addition, each Target Funds Board considered the Acquiring Funds contractual
advisory fee rate in light of the benefits of retaining the Adviser as the Acquiring Funds
investment adviser, the services provided, and those expected to be provided, to the Acquiring Fund
by the Adviser, and the terms and conditions of the Acquiring Funds advisory agreement.
The Board of each Fund also considered that:
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the combined fund on a pro forma basis had a higher Common Share distribution yield
(as a percentage of net asset value) than IMS, but a slightly lower Common Share
distribution yield (as a percentage of net asset value) than IMC and IMT, even after
giving effect to the higher management fees and the total expense ratio (for IMS and
IMT only) that will apply to the combined fund; |
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as of July 31, 2011, the Acquiring Funds Common Shares had traded at an average
discount of -3.07% to its net asset value over the preceding 52-week period and, over
the same period, the Target |
33
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Funds Common Shares had traded at average discounts of
-1.69% (IMC), -4.46% (IMS) and -1.93% (IMT); |
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as of July 31, 2011, the Acquiring Funds Common Shares traded at an average
discount of -6.70% to its net asset value for the preceding month and, over the same
period, the Target Funds Common Shares had traded at average discounts of -2.40%
(IMC), -6.40% (IMS) and -4.30% (IMT); and |
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the average daily trading volume for the Acquiring Funds Common Shares was almost
five times higher than the average daily trading volume of IMCs Common Shares, more
than three times higher than the average daily trading volume of IMSs Common Shares,
and approximately 75% higher than the average daily trading volume of IMTs Common
Shares. |
The Boards also considered the Mergers in the context of the larger group of mergers, which
were designed to rationalize the Invesco funds in a way that can enhance visibility in the market
place. The Boards discussed with the Adviser the possible alternatives to the Mergers, including
liquidation and maintaining the status quo, among other alternatives.
The Boards further considered that (i) the investment objective, strategies and related risks
of each Target Fund and the Acquiring Fund are substantially the same; (ii) the Funds have the same
portfolio management team; (iii) shareholders would become shareholders of a single larger Fund;
(iv) the Advisers agreement to limit the Acquiring Funds total expenses if a Merger is completed,
as disclosed above on a pro forma basis, for at least two years from the closing date of the
Merger; and (v) the Advisers representation that, because of the similarity between the Funds
investment objectives and strategies, the costs associated with repositioning each Funds
investment portfolio in connection with a Merger would be minimal.
Based upon the information and considerations described above, the Boards unanimously
concluded that the Mergers are in the best interests of the Funds and that no dilution of net asset
value would result to the shareholders of the Funds from the Mergers. Consequently, the Boards
unanimously approved the Merger Agreement and each Merger on November 29, 2011.
The discussion above summarizes certain information regarding the Funds considered by the
Boards of the Acquiring Fund and the Target Funds, respectively, which was accurate as of the time
of the Boards consideration of the Mergers. There can be no assurance that the information
considered by the Boards, including with respect to the Funds trading at a premium or discount,
remains accurate as of the date hereof or at the closing of the Mergers.
Federal Income Tax Considerations of the Mergers
The following is a general summary of the material U.S. federal income tax considerations of
the Mergers and is based upon the current provisions of the Code, the existing U.S. Treasury
Regulations thereunder, current administrative rulings of the IRS and published judicial decisions,
all of which are subject to change. These considerations are general in nature and individual
shareholders should consult their own tax advisors as to the federal, state, local, and foreign tax
considerations applicable to them and their individual circumstances. These same considerations
generally do not apply to shareholders who hold their shares in a tax-deferred account.
Each Merger is intended to be a tax-free reorganization pursuant to Section 368(a) of the
Code. As described above, the Mergers will occur following the Redomestication of each Target Fund
and the Acquiring Fund. The principal federal income tax considerations that are expected to
result from the Merger of each Target Fund into the Acquiring Fund are as follows:
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no gain or loss will be recognized by the Target Fund or the shareholders of the
Target Fund as a result of the Merger; |
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no gain or loss will be recognized by the Acquiring Fund as a result of the Merger; |
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the aggregate tax basis of the shares of the Acquiring Fund to be received by a
shareholder of the Target Fund will be the same as the shareholders aggregate tax
basis of the shares of the Target Fund; and |
34
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the holding period of the shares of the Acquiring Fund received by a shareholder of
the Target Fund will include the period that a shareholder held the shares of the
Target Fund (provided that such shares of the Target Fund are capital assets in the
hands of such shareholder as of the Closing). |
Neither the Target Funds nor the Acquiring Fund have requested or will request an advance
ruling from the IRS as to the federal tax consequences of the Mergers. As a condition to Closing,
Stradley Ronon Stevens & Young, LLP will render a favorable opinion to each Target Fund and the
Acquiring Fund as to the foregoing federal income
tax consequences of each Merger, which opinion will be conditioned upon, among other things,
the accuracy, as of the Closing Date, of certain representations of each Target Fund and the
Acquiring Fund upon which Stradley Ronon Stevens & Young, LLP will rely in rendering its opinion.
Such opinion of counsel may state that no opinion is expressed as to the effect of the Mergers on
the Target Funds, the Acquiring Fund or any Target Fund shareholder with respect to any transferred
asset as to which any unrealized gain or loss is required to be recognized for federal income tax
purposes at the end of a taxable year (or on the termination or transfer thereof) under a
mark-to-market system of accounting. A copy of the opinion will be filed with the SEC and will be
available for public inspection. See Where to Find Additional Information. In addition,
Skadden, Arps, Slate, Meagher & Flom LLP will deliver an opinion to the Acquiring Fund, IMC and
IMT, subject to certain representations, assumptions and conditions, to the effect that the
Acquiring Fund VMTP Shares received in the Mergers by holders of VMTP Shares of the IMC or IMT will
qualify as equity in the Acquiring Fund for federal income tax purposes.
Opinions of counsel are not binding upon the IRS or the courts. If a Merger is consummated
but the IRS or the courts determine that the Merger does not qualify as a tax-free reorganization
under the Code, and thus is taxable, the Target Fund would recognize gain or loss on the transfer
of its assets to the Acquiring Fund and each shareholder of the Target Fund would recognize a
taxable gain or loss equal to the difference between its tax basis in its Target Fund shares and
the fair market value of the shares of the Acquiring Fund it receives. The failure of one Merger
to qualify as a tax-free reorganization would not adversely affect any other Merger.
Prior to the closing of each Merger, each Target Fund will declare to its Common Shareholders
one or more dividends, and the Acquiring Fund may, but is not required to, declare to its Common
Shareholders a dividend, payable at or near the time of closing to their respective shareholders to
the extent necessary to avoid entity level tax or as otherwise deemed desirable. Such
distributions, if made, are anticipated to be made in the 2012 calendar year and, to the extent a
distribution is not an exempt-interest dividend (as defined in the Code), the distribution may be
taxable to shareholders in such year for federal income tax purposes. It is anticipated that Fund
distributions will be primarily dividends that are exempt from regular federal income tax, although
a portion of such dividends may be taxable to shareholders as ordinary income or capital gains. To
the extent the distribution is attributable to ordinary income or capital gains, such ordinary
income and capital gains will be allocated to Common Shareholders and VMTP Shareholders in
accordance with each classs proportionate share of the total dividends paid by the Fund during the
year. In certain circumstances, each of IMC, IMT and the Acquiring Fund will make additional
payments to VMTP Shareholders to offset the tax effects of such taxable distributions.
Each Fund may invest all or a substantial portion of its total assets in municipal securities
that may subject certain investors to the federal alternative minimum tax (AMT bonds) and,
therefore, a substantial portion of the income produced by each Fund may be taxable for such
investors under the federal alternative minimum tax. If the Acquiring Fund following the Mergers
has a greater portion of its portfolio investments in AMT bonds than a Target Fund, a greater
portion of the dividends paid by the Acquiring Fund to shareholders of the Target Fund,
post-Closing, may be taxable under the federal alternative minimum tax. However, the portion of a
Funds total assets invested in AMT bonds on the Closing Date or in the future and the portion of
income subject to federal alternative minimum tax cannot be known in advance. See the Schedule of
Investments available in each Funds Annual Report for the portion of a Funds total assets that
are invested in AMT bonds at February 29, 2012.
The tax attributes, including capital loss carryovers, of the Target Funds move to the
Acquiring Fund in the Mergers. The capital loss carryovers of the Target Funds and the Acquiring
Fund are available to offset future gains recognized by the combined Fund, subject to limitations
under the Code. Where these limitations apply, all or a portion of a Funds capital loss
carryovers may become unavailable the effect of which may be to accelerate the recognition of
taxable gain to the combined Fund and its shareholders post-Closing. Under one such limitation, if
a Fund has built-in gains at the time of Closing that are realized by the combined Fund in the
five-year period following a Merger, such built-in gains, when realized, may not be offset by the
losses (including any capital loss carryovers and built in losses) of the other Fund. It is not
anticipated that other limitations on use of a Funds
35
capital loss carryovers, if any, would be
material, although that depends on the facts at the time of Closing of each Merger. At February
29, 2012, IMC has aggregate capital loss carryovers of $0.8 million, IMT has aggregate capital loss
carryovers of $6.4 million, IMS has aggregate capital loss carryovers of $2.9 million, and the
Acquiring Fund has aggregate capital loss carryovers of $8.1 million. For more information with
respect to each Funds capital loss carryovers, please refer to the Funds shareholder report.
Shareholders of a Target Fund will receive a proportionate share of any taxable income and
gains realized by the Acquiring Fund and not distributed to its shareholders prior to the Merger
when such income and gains are eventually distributed by the Acquiring Fund. As a result,
shareholders of a Target Fund may receive a greater amount of taxable distributions than they would
have had the Merger not occurred. In addition, if the Acquiring Fund following the Mergers has
proportionately greater unrealized appreciation in its portfolio investments as a percentage of its
net asset value than a Target Fund, shareholders of the Target Fund, post-Closing, may receive
greater amounts of taxable gain as such portfolio investments are sold than they otherwise might
have if the Mergers had not occurred. At February 29, 2012, the unrealized appreciation
(depreciation) in value of the portfolio investments of each Target Fund on a tax basis as a
percentage of its net asset value is 11% for IMC, 12% for IMT, and 7% for IMS, compared to that of
the Acquiring Fund of 12%, and 11% on a combined basis.
After the Mergers, shareholders will continue to be responsible for tracking the adjusted tax
basis and holding period of their shares for federal income tax purposes.
Tax Treatment of the VMTP Shares of the Acquiring Fund
The Acquiring Fund expects that the VMTP Shares issued by the Acquiring Fund in a Merger in
exchange for VMTP Shares of IMC or IMT will be treated as equity of the Acquiring Fund for U.S.
federal income tax purposes. Each of IMC, IMT and the Acquiring Fund has received a private letter
ruling from the IRS to the effect that VMTP Shares issued by it prior to its Redomestication and
Merger will be treated as equity of such Fund for U.S. federal income tax purposes. Skadden, Arps,
Slate, Meagher & Flom LLP (Special VMTP Federal Income Tax Counsel) is of the opinion that, and
as a condition to the closing of the Mergers will deliver to IMC, IMT and the Acquiring Fund an
opinion that, the VMTP Shares issued by the Acquiring Fund in a Merger in exchange for VMTP Shares
of IMC or IMT will be treated as equity of the Acquiring Fund for U.S. federal income tax purposes.
An opinion of counsel is not binding on the IRS or any court. Thus, no assurance can be given
that the IRS would not assert, or that a court would not sustain, a position contrary to Special
VMTP Federal Income Tax Counsels opinion.
The discussion herein assumes that the VMTP Shares issued by the Acquiring Fund in a Merger in
exchange for VMTP Shares of IMC or IMT will be treated as equity of the Acquiring Fund for U.S.
federal income tax purposes.
Where to Find More Information
The SAI and each Funds shareholder reports contain further information on the Funds,
including their investment policies, strategies and risks.
THE BOARD OF EACH FUND UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE
APPROVAL OF PROPOSAL 2.
PROPOSAL 3: APPROVAL OF AN AMENDMENT TO THE ADVISORY AGREEMENT FOR THE ACQUIRING FUND
Background
Shareholders of the Acquiring Fund are being asked to approve an amendment (the Amendment)
to the Acquiring Funds investment advisory agreement (the Advisory Agreement) with the Adviser.
Under the Amendment, the investment advisory fee rate payable by the Acquiring Fund to the Adviser
would increase, as described further below. No other amendment is proposed to be made to the
Advisory Agreement. The Acquiring Funds operations and the manner in which the Adviser manages
the Acquiring Fund will not change as a result of the Amendment. The Board of the Acquiring Fund
has unanimously approved the Amendment. The SEC website
36
at www.sec.gov contains the Acquiring
Funds filings with the SEC, including the Advisory Agreement, which was included as an exhibit to
the Acquiring Funds Form N-SAR filed December 30, 2010.
The increase in fee rate reflects the increase in the nature and quality of services provided
to the Acquiring Fund following its migration from its prior investment adviser to the Invesco
platform. During the time that the Acquiring Fund was managed by its prior investment adviser, the
Acquiring Fund was supported by a small number
of portfolio managers and trader/analysts, in contrast to the five lead portfolio managers, 13
municipal bond portfolio managers, 13 municipal analysts, and three traders/assistants that Invesco
currently dedicates to support the Acquiring Fund and similarly managed funds within the Invesco
fund complex. In contrast, under the Acquiring Funds prior investment adviser, which launched the
Acquiring Fund, dedicated portfolio managers were not necessarily provided to manage the Acquiring
Fund, and all trading and servicing was provided by a broker-dealer entity affiliated with the
Acquiring Funds prior investment adviser. Through the Adviser, the Acquiring Fund has access to a
wider range of proprietary and external fee-based software and research services, which resources
provide support to the Acquiring Fund. In addition, the fee increase will support the addition of
additional personnel, software and research services dedicated to support the Acquiring Fund and
similarly managed Invesco funds. The Acquiring Funds Board believes that the proposed advisory
fee is reflective of the additional services provided or to be provided to the Acquiring Fund
through the Adviser, as compared to (i) funds managed by other investment managers, (ii) similar
funds managed by the Adviser, and (iii) the fee that the Adviser would propose for the Acquiring
Fund if it were to be launched today. The Amendment would also lead to greater consistency of fee
structures across the closed-end funds that are part of the Invesco fund complex and resolve
disparate pricing between the legacy Morgan Stanley and Van Kampen closed-end funds and standard
Invesco pricing. As discussed further below, the Acquiring Funds Board has determined that the
Acquiring Funds fee under the Amendment would be reasonable relative to the level of services
provided to the Acquiring Fund.
Under the 1940 Act, shareholder approval is required before the Acquiring Fund can amend the
Advisory Agreement to increase advisory fees. If shareholders of the Acquiring Fund do not approve
the Amendment, the Acquiring Fund will continue operating pursuant to the Advisory Agreement as
currently in effect. If shareholders of the Acquiring Fund approve the Amendment and the Merger of
a Target Fund into the Acquiring Fund is completed, shareholders of the merged Target Fund will be
subject to the amended Advisory Agreement after the Merger. The Mergers are not contingent on
approval of this Proposal 3, and this Proposal 3 is not contingent on the approval of the Mergers.
Changes to Investment Advisory Fee Rate
The Amendment would increase the investment advisory fee rate payable by the Acquiring Fund to
the Adviser. The current investment advisory fee rate for the Acquiring Fund is 0.27% as a
percentage of average weekly net assets, and the proposed investment advisory fee rate is 0.55% as
a percentage of average weekly net assets. When calculating net assets for purposes of calculating
investment advisory fees, assets attributable to outstanding VMTP Shares issued by the Acquiring
Fund are not deducted and an amount up to the aggregate amount of any other borrowings incurred for
the purpose of leverage is included. This method of calculating the Acquiring Funds assets, which
will not be changed by the Amendment, is sometimes referred to as managed assets.
The aggregate amounts actually paid by the Acquiring Fund to the Adviser under the Advisory
Agreement for the Acquiring Funds last fiscal year, the amounts that would have been paid if the
Amendment had been in effect, and the difference between the aggregate advisory fees paid and pro
forma advisory fees paid are set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Difference Between Aggregate |
|
|
|
|
|
|
Advisory Fees Paid and Pro |
Aggregate Advisory Fees Paid |
|
Pro Forma Advisory Fees Paid |
|
Forma Advisory Fees Paid |
$1,260,269 |
|
$ |
2,564,179 |
|
|
$ |
1,303,910 |
|
37
During its most recent fiscal year, the Acquiring Fund paid administrative fees in the amount
of $121,958 under its administration agreement with the Adviser. During its most recent fiscal
year, the Acquiring Fund paid $1,382,227 to the Adviser and its affiliated persons.
The table below provides a summary of the current expenses of the Acquiring Fund and also
shows estimated expenses on a pro forma basis giving effect to the Amendment. The pro forma
expense ratios show projected estimated expenses, but actual expenses could be greater or less than
those shown.
Expense Table and Expense Examples for the Acquiring Funds Common Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma (b) |
|
|
|
Current (a) |
|
|
(assumes Amendment is approved) |
|
Shareholder Fees (Fees paid
directly from your investment) |
|
|
|
|
|
|
|
|
Maximum Sales Charge (Load) Imposed
on Purchases (as a percentage of
offering price) (c) |
|
None |
|
|
None |
|
Dividend Reinvestment Plan (d) |
|
None |
|
|
None |
|
|
|
|
|
|
|
|
|
|
Annual Fund Operating Expenses
(expenses that you pay each year as
a percentage of the value of your
investment) |
|
|
|
|
|
|
|
|
Management Fees |
|
|
0.40 |
% |
|
|
0.82 |
% (e) |
Interest and Related Expenses (f) |
|
|
0.55 |
% |
|
|
0.55 |
% |
Other Expenses |
|
|
0.13 |
% |
|
|
0.13 |
% |
Total Annual Fund Operating Expenses |
|
|
1.08 |
% |
|
|
1.50 |
% |
|
|
|
(a) |
|
Expense ratios are estimated amounts for the current fiscal year. VMTP Shares do not bear
any transaction or operating expenses of the Acquiring Fund. |
|
(b) |
|
Expense ratios are estimated amounts for the current fiscal year, restated to reflect the
advisory fee increase described in Proposal 3. Pro forma numbers are estimated as if the
Amendment had been approved by shareholders and effective as of March 1, 2011. |
|
(c) |
|
Common Shares of the Acquiring Fund purchased on the secondary market are not subject to
sales charges, but may be subject to brokerage commissions or other charges. |
|
(d) |
|
Each participant in the Acquiring Funds dividend reinvestment plan pays a proportionate
share of the brokerage commissions incurred with respect to open market purchases in
connection with such plan. For the Acquiring Funds last fiscal year, participants in the
plan incurred brokerage commissions representing $0.03 per Common Share. |
|
(e) |
|
Assumes that Proposal 3 is approved and the increased advisory fee is implemented. |
|
(f) |
|
Interest and Related Expenses includes interest and other costs of providing leverage to the
Acquiring Fund, such as the costs to maintain lines of credit, issue and administer preferred
shares, and establish and administer floating rate note obligations. Interest and Related
Expenses reflect the interest and other costs associated with the issuance of Variable Rate
Muni Term Preferred Shares, which occurred after February 29, 2012, each Funds most recent
fiscal year end. |
Description of the Advisory Agreement
The Advisory Agreement is dated as of June 1, 2010 and was last approved by shareholders of
the Acquiring Fund at a joint special meeting of such shareholders that was held on April 16, 2010,
as adjourned, in connection with the acquisition of the retail fund business of Morgan Stanley,
which resulted in the termination of the Acquiring Funds prior investment advisory agreement with
the Acquiring Funds prior investment adviser. At a meeting held on June 15, 2011, the Board,
including a majority of the independent Trustees, reviewed and approved the continuation of the
Advisory Agreement. None of the provisions of the Advisory Agreement summarized below will be
affected by the Amendment. Additional information about the Adviser is provided in Proposal 2,
under How do the management, investment adviser and other services providers of the Funds
compare?
Duties and Obligations. The Advisory Agreement provides that, subject to the direction and
control of the Board, the Adviser shall (i) act as investment adviser for and supervise and manage
the investment and reinvestment of the Acquiring Funds assets, (ii) supervise the investment
program of the Acquiring Fund and the composition of its investment portfolio, and (iii) decide on
and arrange for the purchase and sale of securities and other assets held in the investment
portfolio of the Acquiring Fund. In addition, the Advisory Agreement provides that the Adviser
shall take, on behalf of the Acquiring Fund, all actions that appear to the Adviser to be necessary
to carry into effect such purchase and sale programs and supervisory functions.
38
Delegation to Sub-Advisers. Under the terms of the Advisory Agreement, the Adviser may
delegate any or all of its rights, duties or obligations under the Advisory Agreement to several
affiliated subadvisers, in accordance with Master Intergroup Sub-Advisory Contracts and applicable
law.
Term and Termination. Assuming approval by the Acquiring Funds Shareholders, the amended
Advisory Agreement shall continue in force and effect for an initial term of one year. The
Advisory Agreement shall continue from year to year only if approved annually (i) by the Board or
the holders of a majority of the outstanding voting securities of the Acquiring Fund, and (ii) by a
majority of the Trustees who are not interested persons of any party to the Advisory Agreement,
by vote cast in person at a meeting called for the purpose of voting on such approval.
The Advisory Agreement may be terminated (i) at any time by vote of the Board or by vote of a
majority of the outstanding voting securities of the Acquiring Fund upon giving 60 days notice to
the Adviser (which notice may be waived by the Adviser), or (ii) by the Adviser on 60 days written
notice to the Acquiring Fund (which notice may be waived by the Acquiring Fund). The Advisory
Agreement also immediately terminates in the event of its assignment, as defined in the 1940 Act.
Limitation of Liability. The Advisory Agreement provides that the Adviser will not be liable
for any error of judgment or mistake of law or for any loss suffered by the Adviser or by the
Acquiring Fund in connection with the performance of the Advisory Agreement, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of compensation for services
or a loss resulting from willful misfeasance, bad faith, gross negligence or reckless disregard of
obligations or duties under the Advisory Agreement on the part of the Adviser.
Additional Information about the Adviser
Principal Executive Officer and Board of Directors. Martin L. Flanagan serves as an advisor
to the board of directors of the Adviser. The following table shows the current members of the
board of directors of the Adviser and their positions with the Adviser:
|
|
|
Name |
|
Title |
Mark G. Armour
|
|
Co-President & Co-Chief Executive Officer |
Philip A. Taylor
|
|
Co-President & Co-Chief Executive Officer |
Kevin M. Carome
|
|
Secretary |
Loren M. Starr
|
|
Director |
The address of each member of the board of directors of the Adviser is 1555 Peachtree Street,
N.E., Atlanta, Georgia 30309.
Relationship with the Funds. Martin L. Flanagan, Chief Executive Officer of Invesco and an
advisor to the directors of the Adviser, and Philip A. Taylor, Director, Co-President & Co-Chief
Executive Officer of the Adviser, each serve as a Trustee of the Acquiring Fund. No other Trustee
of a Fund is an officer, employee, director, general partner or shareholder of the Adviser or has
any material direct or indirect interest in the Adviser or any other person controlling, controlled
by or under common control with the Adviser. As a result of Mr. Flanagans and Mr. Taylors
position with the Adviser, Messrs. Flanagan and Taylor could each be considered to have a material
interest in the Amendment.
Other Funds Managed. The Adviser also acts as investment adviser to other registered
investment companies that have similar investment objectives to the Acquiring Fund. The table
below sets forth certain information with respect to such investment companies. The Adviser has
waived, reduced, or otherwise agreed to reduce its compensation under the advisory agreement
applicable to each fund listed below. The funds listed below are, like the Acquiring Fund, part of
a larger group of proposed mergers and fee increases. If all of such mergers and fee increases are
approved and completed, none of the funds listed below would have an advisory fee less than the fee
proposed for the Acquiring Fund.
39
|
|
|
|
|
|
|
|
|
|
|
Net Assets as of |
|
Annual Rate of |
Name of Fund |
|
February 29, 2012 |
|
Advisory Fees |
Invesco Value Municipal Bond Trust (IMC) |
|
$ |
61,626,757 |
|
|
|
0.27 |
%** |
Invesco Value Municipal Securities (IMS) |
|
$ |
99,510,631 |
|
|
|
0.27 |
%* |
Invesco Value Municipal Trust (IMT) |
|
$ |
270,271,617 |
|
|
|
0.27 |
%** |
Invesco Quality Municipal Income Trust (IQI) |
|
$ |
326,271,421 |
|
|
|
0.27 |
%** |
Invesco Quality Municipal Investment Trust (IQT) |
|
$ |
202,475,282 |
|
|
|
0.27 |
%** |
Invesco Quality Municipal Securities (IQM) |
|
$ |
209,425,189 |
|
|
|
0.27 |
%** |
|
|
|
* |
|
As a percentage of average weekly net assets. |
|
** |
|
As a percentage of average weekly net assets. For the purpose of calculating the advisory
fee, the liquidation preference of any preferred shares issued by the fund will not be
deducted from the funds total assets. In addition, an amount up to the aggregate amount of
any other borrowings may be included in the funds advisory fee calculation. |
Board Considerations in Approving the Advisory Agreement and the Amendment
At in-person meetings on June 14-15, 2011, the Acquiring Funds Board unanimously approved the
Advisory Agreement. At a meeting on November 30, 2011, the Board unanimously approved the
Amendment. The Board held various meetings and discussions with management of the Adviser and
reviewed and considered materials regarding the Acquiring Fund, the Adviser, and other matters
considered by the Board to be material in connection with the approval of the Advisory Agreement
and the Amendment.
In considering the Amendment, the Board considered, among other things, that except for the
investment advisory fee rates payable, the Amendment will make no changes to the Advisory
Agreement. The Adviser stated its belief that, although the current management fees may have been
adequate for the services provided by the Acquiring Funds prior adviser at the time the Acquiring
Fund was launched, such fees do not fairly compensate the Adviser for the services it currently
provides in supporting the Acquiring Fund. The Adviser noted that during the time that the
Acquiring Fund was managed by its previous investment adviser, the Acquiring Fund was supported by
a small number of portfolio managers and trader/analysts, in contrast to the five lead portfolio
managers, 13 municipal bond portfolio managers, 13 municipal analysts and three traders/assistants
that the Adviser has dedicated to support the Acquiring Fund and similarly managed funds within the
Invesco fund complex. The Adviser explained to the Board that the Acquiring Fund was created and
launched by the Acquiring Funds prior investment adviser through its proprietary broker-dealer and
was used as a method to provide the prior investment advisers smaller clients, who did not
otherwise have access to the municipal bond market in their individual accounts, with access to a
diversified portfolio of municipal bonds. At the prior investment adviser, dedicated portfolio
managers were not necessarily provided to manage the Acquiring Fund, and all trading and servicing
was provided by the prior advisers affiliated broker-dealer entity. In contrast, the Adviser
utilizes a wide range of proprietary and external fee-based software and research services in
managing the Acquiring Fund. The Board considered managements assertion that the proposed
advisory fee is reflective of the additional services provided to the Acquiring Fund by or through
Invesco. The Adviser also provided the Board with materials in support of the view that the
proposed advisory fee is consistent with the Acquiring Funds Lipper peer group and universe
averages, with other similar funds managed by the Adviser and with the fee the Adviser would
propose for the Acquiring Fund if it were to be launched today. The Adviser noted that the
Amendment is designed to achieve consistent fee structures across the closed-end funds in the
Invesco fund complex and to resolve disparate pricing between the legacy Morgan Stanley and Van
Kampen closed-end funds. The Board determined that the Acquiring Funds fee under the Amendment is
fair and reasonable.
The Board, including the Independent Trustees, requested and evaluated materials from, and was
provided materials and information regarding the Amendment by, the Adviser. The Board, at meetings
held on October 25, 2011 and November 29, 2011, reviewed the materials provided in connection with
their consideration of the Amendment and discussed them with representatives of the Adviser. The
Board also considered information that they had previously received in connection with their most
recent consideration and approval of the Advisory Agreement with the Adviser on June 14-15, 2011.
The Board also consulted with the Independent Trustees independent legal counsel. The Board,
including the Independent Trustees, unanimously approved the Amendment as being fair and reasonable
and recommended its approval by shareholders.
The factors considered by the Board in approving the Advisory Agreement and the Amendment and
recommending approval of the Amendment included, among others, the following:
40
|
|
|
The expected benefits of continuing to retain the Adviser as the Acquiring
Funds investment adviser; |
|
|
|
|
The services provided, and those expected to be provided, to the Acquiring Fund
by the Adviser; |
|
|
|
|
The terms and conditions of the Advisory Agreement remaining the same except
for the fee rate being changed by the Amendment; |
|
|
|
|
The impact of the proposed change in investment advisory fee rate on the
Acquiring Funds total expense ratio; and |
|
|
|
|
That the Adviser, and not the Acquiring Fund, would bear the costs of
obtaining shareholder approval of the Amendment. |
Nature, Extent and Quality of Services. The Board reviewed the advisory services provided to
the Acquiring Fund by the Adviser under the Advisory Agreement, the performance of the Adviser in
providing these services, and the credentials and experience of the officers and employees of the
Adviser who provide these services, including the Acquiring Funds portfolio manager or managers.
The Boards review of the qualifications of the Adviser to provide advisory services included the
Boards consideration of the Advisers performance and investment process oversight, independent
credit analysis and investment risk management.
The Board also considered the prior relationship between the Adviser and the Acquiring Fund,
as well as the Boards knowledge of the Advisers operations, and concluded that it is beneficial
to maintain the current relationship, in part, because of such prior relationship and knowledge.
The Board also considered services that the Adviser and its affiliates provide to the Acquiring
Fund, such as various back office support functions, equity and fixed income trading operations,
internal audit, and legal and compliance. The Board also considered that the nature, extent and
quality of services proposed to be provided after the Amendment were not expected to change.
Investment Performance. The Board considered the Acquiring Funds performance. The Board
compared the Acquiring Funds performance during the past one, three and five calendar years to the
performance of funds in the Lipper performance universe and against the Lipper Closed-End
Insured Municipal Debt Funds (Leveraged) Index. The Board noted that the Acquiring Funds
performance was in the third quintile of its performance universe for the one year period (during
which the Adviser managed the Acquiring Fund) and the second quintile for the three and five year
periods (the first quintile being the best performing funds and the fifth quintile being the worst
performing funds). The Board noted that the Acquiring Funds performance was above the performance
of the Index for the one, three and five year periods. The Trustees also reviewed more recent
performance and this review did not change their conclusions.
Investment Advisory Fee Rates and Other Expenses. The Board considered that the contractual
investment advisory fee rates payable by the Acquiring Fund would increase under the Amendment.
The Board noted that the Acquiring Funds contractual advisory fee rate under the Advisory
Agreement was below the median contractual advisory fee rate of funds in its expense group. The
Board considered that the advisory fee under the Amendment is consistent with those of the
Acquiring Funds Lipper peer group and universe averages and with other similar funds managed by
the Adviser. The Board noted that the Adviser has contractually agreed to waive fees and/or limit
expenses of the Acquiring Fund for at least two years from the closing date of the Mergers in an
amount necessary to limit total annual operating expenses to a specified percentage of average
daily net assets for the Acquiring Fund.
Economies of Scale. The Board noted that the Acquiring Fund shares directly in economies of
scale through lower fees charged by third party service providers based on the combined size of the
Invesco funds and other clients advised by the Adviser. The Board noted that the Acquiring Funds
advisory fee schedule has no breakpoints, but that breakpoints are uncommon for closed-end funds.
Profitability and Financial Resources. The Board reviewed information from the Adviser
concerning the costs of the advisory and other services that the Adviser and its affiliates provide
to the Acquiring Fund and the profitability of the Adviser and its affiliates in providing these
services. The Board reviewed with the Adviser the methodology used to prepare the profitability
information. The Board considered the profitability of the Adviser in connection with managing the
Acquiring Fund and the Invesco funds. The Board noted that the Adviser continues to operate at a
net profit from services the Adviser and its subsidiaries provide to the Acquiring Fund and the
Invesco funds. The Board concluded that the level of profits realized by the Adviser and its
affiliates from providing services to the Acquiring Fund were not excessive and would not be
excessive under the Amendment
41
given the nature, quality and extent of the services provided to the Acquiring Fund. The Board
received and accepted information from the Adviser demonstrating that it is financially sound and
has the resources necessary to perform its obligations under the Advisory Agreement.
Collateral Benefits to the Adviser and its Affiliates. The Board considered various other
benefits received by the Adviser and its affiliates from the relationship with the Acquiring Fund,
including the fees received for their provision of administrative and transfer agency services to
the Acquiring Fund. The Board considered the performance of the Adviser and its affiliates in
providing these services and the organizational structure employed to provide these services. The
Board also considered that these services are provided to the Acquiring Fund pursuant to written
contracts that are reviewed and approved on an annual basis by the Board; that the services are
required for the operation of the Acquiring Fund; that the Adviser and its affiliates can provide
services, the nature and quality of which are at least equal to those provided by others offering
the same or similar services; that the fees for such services are fair and reasonable in light of
the usual and customary charges by others for services of the same nature and quality; and that the
Amendment would have no effect on the foregoing factors.
The Board concluded, within the context of its overall conclusions regarding the Amendment,
that the factors described above were sufficient to warrant the approval of the Amendment. In
their deliberations, the Trustees did not identify any single item that was paramount or
controlling and individual trustees may have attributed different weights to various factors.
Based on the foregoing, the Trustees approved the Amendment and concluded that the proposed
investment advisory fee rate thereunder is fair and reasonable. Accordingly, the Board approved
the Amendment and recommends that shareholders of the Acquiring Fund vote FOR the approval of
Proposal 3.
THE ACQUIRING FUND BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR
THE APPROVAL OF PROPOSAL 3.
PROPOSAL 4: ELECTION OF TRUSTEES BY EACH FUND
At the Meeting, VMTP Shareholders and Common Shareholders, as applicable, of each Fund, voting
together as a single class, will vote on the election of the following six nominees for election as
Trustees: James T. Bunch, Bruce L. Crockett, Rodney F. Dammeyer, Jack M. Fields, Martin L. Flanagan
and Carl Frischling. All nominees have consented to being named in this Proxy Statement and have
agreed to serve if elected.
The group of Trustees standing for election in any given year is the same for each Fund. The
following table indicates the Trustees in each such group and the period for which each group
currently serves:
|
|
|
|
|
Group I* |
|
Group II** |
|
Group III*** |
Albert R. Dowden
|
|
David C. Arch
|
|
James T. Bunch |
Prema Mathai-Davis
|
|
Frank S. Bayley
|
|
Bruce L. Crockett |
Hugo F. Sonnenschein
|
|
Larry Soll
|
|
Rodney F. Dammeyer |
Raymond Stickel, Jr.
|
|
Philip A. Taylor
|
|
Jack M. Fields |
|
|
Wayne W. Whalen
|
|
Martin L. Flanagan |
|
|
|
|
Carl Frischling |
|
|
|
* |
|
Currently serving until the year 2013 Annual Meeting or until their successors have been
duly elected and qualified. |
|
** |
|
Currently serving until the year 2014 Annual Meeting or until their successors have been duly
elected and qualified. |
|
*** |
|
If elected, to serve until the year 2015 Annual Meeting or until their successors have been
duly elected and qualified. |
If elected, each nominee will serve until the later of the Funds annual meeting of
shareholders in 2015 or until his or her successor has been duly elected and qualified, or his or
her earlier retirement, resignation or removal. As in the past, only one class of Trustees is
being submitted to shareholders of each Fund for election at the Meeting. The Declaration of Trust
of each Fund provides that the Board shall be divided into three classes, which must be as nearly
equal in number as possible. For each Fund, the Trustees of only one class are elected at each
42
annual meeting, so that the regular term of only one class of Trustees will expire annually and any
particular Trustee stands for election only once in each three-year period. This type of
classification may prevent replacement of a majority of Trustees of a Fund for up to a two-year
period. The foregoing is subject to the provisions of the 1940 Act, applicable state law, each
Funds Declaration of Trust and each Funds bylaws.
Prema Mathai-Davis and Frank S. Bayley, who are not part of the group of Trustees standing for
election at the Meeting, have been designated to be elected solely by the holders of the VMTP
Shares of the applicable Fund.
Common Shares of each Fund are also expected to vote on the election of the Trustee nominees,
and their votes will be counted together as a single class with the VMTP Shares.
The business and affairs of the Funds are managed under the direction of their Boards of
Trustees. Below is information on the Trustees qualifications and experience.
Interested Trustees.
Martin L. Flanagan. 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 Franklins
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 Anderson & Co. Mr. Flanagan is a chartered
financial analyst and a certified public accountant. He serves as vice chairman of the Investment
Company Institute and is a member of the executive board at the SMU Cox School of Business. The
Board of each Fund believes that Mr. Flanagans long experience as an executive in the investment
management area benefits the Funds.
Philip A. Taylor. Mr. Taylor has been the head of Invescos North American retail business as
Senior Managing Director since April 2006. He previously served as chief executive officer of
Invesco Trimark Investments since January 2002. Mr. Taylor joined Invesco in 1999 as senior vice
president of operations and client services and later became executive vice president and chief
operating officer. Mr. Taylor was president of Canadian retail broker Investors Group Securities
from 1994 to 1997 and managing partner of Meridian Securities, an execution and clearing broker,
from 1989 to 1994. He held various management positions with Royal Trust, now part of Royal Bank
of Canada, from 1982 to 1989. He began his career in consumer brand management in the U.S. and
Canada with Richardson-Vicks, now part of Procter & Gamble. The Board of each Fund believes that
Mr. Taylors long experience in the investment management business benefits the Funds.
Wayne W. Whalen. Mr. Whalen is Of Counsel and, prior to 2010, was a partner in the law firm
of Skadden, Arps, Slate, Meagher & Flom LLP. Mr. Whalen is a Director of the Mutual Fund Directors
Forum, a nonprofit membership organization for investment company directors, Chairman and Director
of the Abraham Lincoln Presidential Library Foundation and Director of the Stevenson Center for
Democracy. From 1995 to 2010, Mr. Whalen served as Director and Trustee of investment companies in
the Van Kampen Funds complex. The Board of each Fund believes that Mr. Whalens experience as a
law firm partner and his experience as a director of investment companies benefits the Funds.
Independent Trustees.
David C. Arch. Formerly, Mr. Arch was the Chairman and Chief Executive Officer of Blistex,
Inc., a consumer health care products manufacturer. Mr. Arch is a member of the Heartland Alliance
Advisory Board, a nonprofit organization serving human needs based in Chicago and member of the
Board of the Illinois Manufacturers Association. Mr. Arch is also a member of the Board of
Visitors, Institute for the Humanities, University of Michigan. From 1984 to 2010, Mr. Arch served
as Director or Trustee of investment companies in the Van Kampen funds complex. The Board of each
Fund believes that Mr. Archs experience as the CEO of a public company and his experience with
investment companies benefits the Funds.
43
Frank S. Bayley. Mr. Bayley is a business consultant in San Francisco. He is Chairman and a
Director of the C. D. Stimson Company, a private investment company in Seattle. Mr. Bayley serves
as a Trustee of the Seattle Art Museum, a Trustee of San Francisco Performances, and a Trustee and
Overseer of The Curtis Institute of Music in Philadelphia. He also serves on the East Asian Art
Committee of the Philadelphia Museum of Art and the Visiting Committee for Art of Asia, Oceana and
Africa of the Museum of Fine Arts, Boston. Mr. Bayley is a retired partner of the international
law firm of Baker & McKenzie LLP, where his practice focused on business acquisitions and venture
capital transactions. Prior to joining Baker & McKenzie LLP in 1986, he was a partner of the San
Francisco law firm of Chickering & Gregory. He received his A.B. from Harvard College in 1961, his
LL.B. from Harvard Law School in 1964, and his LL.M. from Boalt Hall at the University of
California, Berkeley, in 1965. Mr. Bayley served as a Trustee of the Badgley Funds from inception
in 1998 until dissolution in 2007. The Board of each Fund believes that Mr. Bayleys experience as
a business consultant and a lawyer benefits the Funds.
James T. Bunch. From 1988 to 2010, Mr. Bunch was Founding Partner of Green Manning & Bunch,
Ltd., a leading investment banking firm located in Denver, Colorado. Green Manning & Bunch is a
FINRA-registered investment bank specializing in mergers and acquisitions, private financing of
middle-market companies and corporate finance advisory services. Immediately prior to forming
Green Manning & Bunch, Mr. Bunch was Executive Vice President, General Counsel, and a Director of
Boettcher & Company, then the leading investment banking firm in the Rocky Mountain region. Mr.
Bunch began his professional career as a practicing attorney. He joined the prominent Denver-based
law firm of Davis Graham & Stubbs in 1970 and later rose to the position of Chairman and Managing
Partner of the firm. At various other times during his career, Mr. Bunch has served as Chair of
the NASD Business District Conduct Committee, and Chair of the Colorado Bar Association Ethics
Committee. In June 2010, Mr. Bunch became the Managing Member of Grumman Hill Group LLC, a family
office private equity investment manager. The Board of each Fund believes that Mr. Bunchs
experience as an investment banker and investment management lawyer benefits the Funds.
Bruce L. Crockett. Mr. Crockett has more than 30 years of experience in finance and general
management in the banking, aerospace and telecommunications industries. From 1992 to 1996, he
served as president, chief executive officer and a director of COMSAT Corporation, an international
satellite and wireless telecommunications company. Mr. Crockett has also served, since 1996, as
chairman of Crockett Technologies Associates, a strategic consulting firm that provides services to
the information technology and communications industries. Mr. Crockett also serves on the Board of
Directors of ACE Limited, a Zurich-based insurance company. He is a life trustee of the University
of Rochester Board of Directors. The Board of each Fund elected Mr. Crockett to serve as its
Independent Chair because of his extensive experience in managing public companies and familiarity
with investment companies.
Rodney F. Dammeyer. Since 2001, Mr. Dammeyer has been Chairman of CAC, LLC, a private company
offering capital investment and management advisory services. Previously, Mr. Dammeyer served as
Managing Partner at Equity Group Corporate Investments; Chief Executive Officer of Anixter
International; Senior Vice President and Chief Financial Officer of Household International, Inc.;
and Executive Vice President and Chief Financial Officer of Northwest Industries, Inc. Mr.
Dammeyer was a Partner of Arthur Andersen & Co., an international accounting firm. Mr. Dammeyer
currently serves as a Director of Quidel Corporation and Stericycle, Inc. Previously, Mr. Dammeyer
served as a Trustee of The Scripps Research Institute; and a Director of Ventana Medical Systems,
Inc.; GATX Corporation; TheraSense, Inc.; TeleTech Holdings Inc.; and Arris Group, Inc. From 1987
to 2010, Mr. Dammeyer served as Director or Trustee of investment companies in the Van Kampen funds
complex. The Board of each Fund believes that Mr. Dammeyers experience in executive positions at
a number of public companies, his accounting experience and his experience serving as a director of
investment companies benefits the Funds.
Albert R. Dowden. Mr. Dowden retired at the end of 1998 after a 24-year career with Volvo
Group North America, Inc. and Volvo Cars of North America, Inc. Mr. Dowden joined Volvo as general
counsel in 1974 and was promoted to increasingly senior positions until 1991 when he was appointed
president, chief executive officer and director of Volvo Group North America and senior vice
president of Swedish parent company AB Volvo. Since retiring, Mr. Dowden continues to serve on the
board of the Reich & Tang Funds and also serves on the boards of Homeowners of America Insurance
Company and its parent company, as well as Natures Sunshine Products, Inc. and The Boss Group.
Mr. Dowdens charitable endeavors currently focus on Boys & Girls Clubs where he has been active
for many years, as well as several other not-for-profit organizations. Mr. Dowden began his career
as an
44
attorney with a major international law firm, Rogers & Wells (1967-1976), which is now Clifford
Chance. The Board of each Fund believes that Mr. Dowdens extensive experience as a corporate
executive benefits the Funds.
Jack M. Fields. Mr. Fields served as a member of Congress, representing the 8th Congressional
District of Texas from 1980 to 1997. As a member of Congress, Mr. Fields served as Chairman of the
House Telecommunications and Finance Subcommittee, which has jurisdiction and oversight of the
Federal Communications Commission and the Securities and Exchange Commission. Mr. Fields
co-sponsored the National Securities Markets Improvements Act of 1996, and played a leadership role
in enactment of the Private Securities Litigation Reform Act of 1995. Mr. Fields currently serves
as Chief Executive Officer of the Twenty-First Century Group in Washington, D.C., a bipartisan
Washington consulting firm specializing in Federal government affairs. Mr. Fields also serves as a
Director of Insperity (formerly known as Administaff) (NYSE: ASF), a premier professional employer
organization with clients nationwide. In addition, Mr. Fields sits on the Board of the Discovery
Channel Global Education Fund, a nonprofit organization dedicated to providing educational
resources to people in need around the world through the use of technology. The Board of each Fund
believes that Mr. Fields experience in the House of Representatives, especially concerning
regulation of the securities markets, benefits the Funds.
Carl Frischling. Mr. Frischling is senior partner of the Financial Services Group of Kramer
Levin. He is a pioneer in the field of bank-related mutual funds and has counseled clients in
developing and structuring comprehensive mutual fund complexes. Mr. Frischling also advises mutual
funds and their independent trustees/directors on their fiduciary obligations under federal
securities laws. Prior to his practicing law, he was chief administrative officer and general
counsel of a large mutual fund complex that included a retail and institutional sales force,
investment counseling and an internal transfer agent. During his ten years with the organization,
he developed business expertise in a number of areas within the financial services complex. He
served on the Investment Company Institute board and was involved in ongoing matters with all of
the regulatory areas overseeing this industry. Mr. Frischling is a board member of the Mutual Fund
Directors Forum. He also serves as a Trustee of the Reich & Tang Funds, a registered investment
company. Mr. Frischling serves as a Trustee of the Yorkville Youth Athletic Association and is a
member of the Advisory Board of Columbia University Medical Center. The Board of each Fund
believes that Mr. Frischlings experience as an investment management lawyer and his long
involvement with investment companies benefits the Funds.
Dr. Prema Mathai-Davis. Prior to her retirement in 2000, Dr. Mathai-Davis served as Chief
Executive Officer of the YWCA of the USA. 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 of the New
York Metropolitan Transportation Authority of New York, the largest regional transportation network
in the U.S. Dr. Mathai-Davis also serves 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.
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 of each Fund believes that Dr. Mathai-Davis extensive experience in running
public and charitable institutions benefits the Funds.
Dr. Larry Soll. Formerly, Dr. Soll was chairman of the board (1987 to 1994), chief executive
officer (1982 to 1989; 1993 to 1994), and president (1982 to 1989) of Synergen Corp., a
biotechnology company, in Boulder, Colorado. He was also a faculty member at the University of
Colorado (1974-1980). The Board of each Fund believes that Dr. Solls experience as a chairman of
a public company and in academia benefits the Funds.
Hugo F. Sonnenschein. Mr. Sonnenschein is the Distinguished Service Professor and President
Emeritus of the University of Chicago and the Adam Smith Distinguished Service Professor in the
Department of Economics at the University of Chicago. Until July 2000, Mr. Sonnenschein served as
President of the University of Chicago. Mr. Sonnenschein is a Trustee of the University of
Rochester and a member of its investment committee. He is also a member of the National Academy of
Sciences and the American Philosophical Society, and a Fellow of the American Academy of Arts and
Sciences. From 1994 to 2010, Mr. Sonnenschein served as Director or Trustee of investment
companies in the Van Kampen funds complex. The Board of each Fund believes that Mr. Sonnenscheins
experiences in academia and in running a university, and his experience as a director of investment
companies benefits the Funds.
45
Raymond Stickel, Jr. Mr. Stickel retired after a 35-year career with Deloitte & Touche. For
the last five years of his career, he was the managing partner of the investment management
practice for the New York, New Jersey and Connecticut region. In addition to his management role,
he directed audit and tax services to several mutual fund clients. Mr. Stickel began his career
with Touche Ross & Co. in Dayton, Ohio, became a partner in 1976 and managing partner of the office
in 1985. He also started and developed an investment management practice in the Dayton office that
grew to become a significant source of investment management talent for Touche Ross & Co. In Ohio,
he served as the audit partner on numerous mutual funds and on public and privately held companies
in other industries. Mr. Stickel has also served on Touche Ross & Co.s Accounting and Auditing
Executive Committee. The Board of each Fund believes that Mr. Stickels experience as a partner in
a large accounting firm working with investment managers and investment companies, and his status
as an Audit Committee Financial Expert, benefits the Funds.
Additional biographical information regarding the Trustees can be found in Exhibit F.
Information on the Boards leadership structure, role in risk oversight, and committees and
meetings can be found in Exhibit G. Information on the remuneration of Trustees can be found in
Exhibit H. Information on the executive officers of the Funds is available in Exhibit E.
Information on the Funds independent registered public accounting firm is available in Exhibit I.
THE BOARD OF EACH FUND UNANIMOUSLY RECOMMENDS A VOTE FOR ALL OF THE
NOMINEES.
VOTING INFORMATION
How to Vote Your Shares
There are several ways you can vote your shares, including in person at the Meeting, by mail,
by telephone, or via the Internet. The proxy card that accompanies this Proxy Statement provides
detailed instructions on how you may vote your shares.
If you properly fill in and sign your proxy card and send it to us in time to vote at the
Meeting, your proxy (the individuals named on your proxy card) will vote your shares as you have
directed. If you sign your proxy card but do not make specific choices, your proxy will vote your
shares FOR each Proposal and FOR ALL of the Trustee nominees, in accordance with the
recommendations of the Board of your Fund, and in the proxys best judgment on other matters.
Why are you sending me the Proxy Statement?
You are receiving this Proxy Statement because you own VMTP Shares of a Fund as of the Record
Date and have the right to vote on the very important proposals described herein concerning your
Fund. This Proxy Statement contains information that shareholders of the Funds should know before
voting on the proposals.
About the Proxy Statement and the Meeting
We are sending you this Proxy Statement and the enclosed proxy card because the Board is
soliciting your proxy to vote at the Meeting and at any adjournments or postponements of the
Meeting. This Proxy Statement gives you information about the business to be conducted at the
Meeting. Fund shareholders may vote by appearing in person at the Meeting and following the
instructions below. You do not need to attend the Meeting to vote, however. Instead, you may
simply complete, sign, and return the enclosed proxy card or vote by following the instructions on
the enclosed proxy card to vote via telephone or the Internet.
Shareholders of record of the Funds as of the close of business on the Record Date are
entitled to vote at the Meeting. The number of outstanding shares of each class of each Fund on
the Record Date can be found at Exhibit J. Each shareholder is entitled to one vote for each full
share held and a proportionate fractional vote for each fractional share held. The Acquiring Fund,
IMC and IMT expect that Common Shares will also be voted at the Meeting. This Proxy Statement is
not a solicitation for any votes of the Common Shares of the Acquiring Fund, IMC or IMT.
46
Attendance at the Meeting is generally limited to shareholders and their authorized
representatives. All shareholders must bring an acceptable form of identification, in order to
attend the Meeting in person.
Proxies will have the authority to vote and act on behalf of shareholders at any adjournment
of the Meeting. It is the intention of the persons named in the enclosed proxy card to vote the
shares represented by them for each proposal and for all of the Trustee nominees, unless the proxy
card is marked otherwise. If a shareholder gives a proxy, the shareholder may revoke the
authorization at any time before it is exercised by sending in another proxy card with a later date
or by notifying the Secretary of the Fund in writing at the address of the Fund set forth on the
cover page of this Proxy Statement before the Meeting that the shareholder has revoked its proxy.
In addition, although merely attending the Meeting will not revoke your proxy, if a shareholder is
present at the Meeting, the shareholder may withdraw the proxy and vote in person.
Quorum Requirement and Adjournment
A quorum of shareholders is necessary to hold a valid shareholder meeting of each Fund. Under
the governing documents of each Fund, the holders of a majority of the Funds shares issued and
outstanding and entitled to vote at the Meeting, present in person or represented by proxy, shall
be requisite and shall constitute a quorum for the transaction of business.
If a quorum is not present at the Meeting, the chairman of the Meeting or the shareholders
present or represented by proxy and entitled to vote at the Meeting shall have the power to adjourn
the Meeting from time to time. The shareholders present in person or represented by proxy at the
Meeting and entitled to vote at the Meeting also shall have the power to adjourn the Meeting from
time to time if the vote required to approve or reject any proposal described herein is not
obtained (with proxies being voted for or against adjournment consistent with the votes for and
against the proposal for which the required vote has not been obtained). The affirmative vote of
the holders of a majority of a Funds shares then present in person or represented by proxy shall
be required to adjourn the Meeting.
In the event that a shareholder of a Fund present at the Meeting objects to the holding of a
joint meeting and moves for an adjournment of the meeting of such Fund to a time immediately after
the Meeting so that such Funds meeting may be held separately, the persons named as proxies will
vote in favor of such adjournment.
Abstentions and broker non-votes (described below) are counted as present and will be included
for purposes of determining whether a quorum is present for each Fund at the Meeting, but are not
considered votes cast at the Meeting. Abstentions and broker non-votes will have the same effect as
a vote against Proposal 1, 2, 3, or 4, because their approval requires the affirmative vote of a
percentage of the outstanding shares of the applicable Fund or of a certain proportion of the
shares present at the Meeting, as opposed to a percentage of votes cast. A proxy card marked
withhold with respect to the election of Trustees would have the same effect as an abstention.
Broker non-votes occur when a proposal that is routine (such as the election of trustees) is
voted on at a meeting alongside a proposal that is non-routine (such as the Redomestication or
Merger proposals). Under New York Stock Exchange rules, brokers may generally vote in their
discretion on routine proposals, but are generally not able to vote on a non-routine proposal in
the absence of express voting instructions from beneficial owners. As a result, where both routine
and non-routine proposals are voted on at the same meeting, proxies voted by brokers on the routine
proposals are considered votes present but are not votes on any non-routine proposals. Because
both routine and non-routine proposals will be voted on at the Meeting, the Funds anticipate
receiving broker non-votes with respect to Proposals 1, 2, and 3. No broker non-votes are
anticipated with respect to Proposal 4 because it is considered a routine proposal on which brokers
typically may vote in their discretion.
Votes Necessary to Approve the Proposals
Common Shares of each Fund and VMTP Shares of the Acquiring Fund, IMC and IMT are entitled to
vote at the Meeting. This Proxy Statement is not a solicitation for any votes of the Common Shares
of any Fund. The Acquiring Fund, IMC and IMT will solicit the vote of their Common Shares via a
separate proxy statement. VMTP Shares are subject to a voting trust requiring that certain voting
rights of the VMTP Shares must be exercised as directed by an unaffiliated third party. Votes by
VMTP Shares to elect Trustees are subject to the voting trust, but votes regarding the
Redomestications and the Mergers are not subject to the voting trust.
47
Each Funds Board has unanimously approved the Funds Plan of Redomestication discussed in
Proposal 1. Shareholder approval of the Plan of Redomestication by a Fund requires the affirmative
vote of the holders of a majority of each of the Common Shares and VMTP Shares, if applicable,
outstanding and entitled to vote, voting as separate classes, of such Fund. Proposal 1 may be
approved and implemented for a Fund regardless of whether shareholders approve any other Proposal
applicable to the Fund.
Each Funds Board has unanimously approved the Funds Plan of Merger discussed in Proposal 2.
Shareholder approval of the Plan of Merger for each Merger requires the affirmative vote of the
holders of a majority of each of the Common Shares and VMTP Shares, if applicable, outstanding and
entitled to vote, voting as separate classes, of the applicable Target Fund and the Acquiring Fund.
Proposal 2 may be approved and implemented for a Target Fund only if Proposal 1 is also approved
by both such Target Fund and the Acquiring Fund and regardless of whether shareholders approve any
other Proposal applicable to such Funds.
The Acquiring Funds Board has unanimously approved the amendment to the advisory agreement
discussed in Proposal 3. Proposal 3 must be approved by holders of the lesser of (1) 67% of the
Common Shares and VMTP Shares (voting together) of the Acquiring Fund represented at the Meeting,
if the holders of more than 50% of the outstanding Common Shares and VMTP Shares of the Acquiring
Fund are represented at the Meeting, or (2) more than 50% of the outstanding Common Shares and VMTP
Shares (voting together) of the Acquiring Fund. Proposal 3 may be approved and implemented
regardless of whether shareholders approve any other Proposal applicable to the Acquiring Fund.
With respect to Proposal 4, the affirmative vote of a majority of the Common Shares and VMTP
Shares, if applicable, voting together, of each Fund represented in person or by proxy and entitled
to vote at the Meeting at which a quorum, as described above, is present is required to elect each
nominee for Trustee of such Fund. Proposal 4 may be approved and implemented for a Fund regardless
of whether shareholders approve any other Proposal applicable to the Fund.
Proxy Solicitation
The Funds have engaged the services of Computershare Fund Services (the Solicitor) to assist
in the solicitation of proxies for the Meeting. Costs of this proxy solicitation are estimated to
be $10,000 for IMC and IMS, $20,000 for IMT and $40,000 for the Acquiring Fund. The VMTP
Shareholders are not expected to bear any of these costs. The Funds officers may also solicit
proxies but will not receive any additional or special compensation for any such solicitation.
Under the agreement with the Solicitor, the Solicitor will be paid a project management fee as
well as telephone solicitation expenses incurred for reminder calls, outbound telephone voting,
confirmation of telephone votes, inbound telephone contact, obtaining shareholders telephone
numbers, and providing additional materials upon shareholder request. The agreement also provides
that the Solicitor shall be indemnified against certain liabilities and expenses, including
liabilities under the federal securities laws.
OTHER MATTERS
Share Ownership by Large Shareholders, Management and Trustees
Information on each person who as of the Record Date, to the knowledge of each Fund, owned 5%
or more of the outstanding shares of a class of such Fund can be found at Exhibit K. Information
regarding Trustee ownership of shares of the Funds and of shares of all registered investment
companies in the Invesco fund complex overseen by such Trustee can be found at Exhibit F. To the
best knowledge of each Fund, the ownership of shares of such Fund by executive officers and
Trustees of such Fund as a group constituted less than 1% of each outstanding class of shares of
such Fund as of the Record Date.
Annual Meetings of the Funds
If a Merger is completed, the merged Target Fund will not hold an annual meeting in 2013. If
a Merger does not take place, that Target Funds Board will announce the date of such Target Funds
2013 annual meeting. The Acquiring Fund will hold an annual meeting in 2013 regardless of whether
a Merger is consummated.
48
Shareholder Proposals
Shareholder proposals intended to be presented at the year 2013 annual meeting of shareholders
for a Fund pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the
Exchange Act), must be received by the Funds Secretary at the Funds principal executive offices
by February 18, 2013 in order to be considered for inclusion in the Funds proxy statement and
proxy card relating to that meeting. Timely submission of a proposal does not necessarily mean
that such proposal will be included in the Funds proxy statement. Pursuant to each Funds
governing documents as anticipated to be in effect before the 2013 annual meeting, if a shareholder
wishes to make a proposal at the year 2013 annual meeting of shareholders without having the
proposal included in a Funds proxy statement, then such proposal must be received by the Funds
Secretary at the Funds principal executive offices not earlier than March 19, 2013 and not later
than April 18, 2013. If a shareholder fails to provide timely notice, then the persons named as
proxies in the proxies solicited by the Board for the 2013 annual meeting of shareholders may
exercise discretionary voting power with respect to any such proposal. Any shareholder who wishes
to submit a proposal for consideration at a meeting of such shareholders Fund should send such
proposal to the Funds Secretary at 1555 Peachtree Street, N.E., Atlanta, Georgia 30309, Attn:
Secretary.
Shareholder Communications
Shareholders may send communications to each Funds Board. Shareholders should send
communications intended for a Board or for a Trustee by addressing the communication directly to
the Board or individual Trustee and/or otherwise clearly indicating that the communication is for
the Board or individual Trustee and by sending the communication to either the office of the
Secretary of the applicable Fund or directly to such Trustee at the address specified for such
Trustee in Exhibit F. Other shareholder communications received by any Fund not directly addressed
and sent to the Board will be reviewed and generally responded to by management, and will be
forwarded to the Board only at managements discretion based on the matters contained therein.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 30(h) of the 1940 Act and Section 16(a) of the Exchange Act require each of the Funds
Trustees, officers, and investment advisers, affiliated persons of the investment advisers, and
persons who own more than 10% of a registered class of a Funds equity securities to file forms
with the SEC and the Exchange reporting their affiliation with the Fund and reports of ownership
and changes in ownership of such securities. These persons and entities are required by SEC
regulations to furnish such Fund with copies of all such forms they file. Based on a review of
these forms furnished to each Fund, each Fund believes that during its last fiscal year, its
Trustees, its officers, the Adviser and affiliated persons of the Adviser complied with the
applicable filing requirements.
Other Meeting Matters
Management of each Fund does not intend to present, and does not have reason to believe that
others will present, any other items of business at the Meeting. The Funds know of no business
other than the proposals described in this Proxy Statement that will, or are proposed to, be
presented for consideration at the Meeting. If any other matters are properly presented, the
persons named on the enclosed proxy cards shall vote proxies in accordance with their best
judgment.
WHERE TO FIND ADDITIONAL INFORMATION
This Proxy Statement does not contain all the information set forth in the annual and
semi-annual reports filed by the Funds as such documents have been filed with the SEC. The
financial highlights of each Fund for the year ended February 29, 2012 are available in the Funds
annual report for the year ended February 29, 2012 on Form N-CSR. The SAI (which is part of the
registration statement for the Acquiring Funds Common Shares and is not incorporated herein by
reference or deemed to be part of this Proxy Statement) includes additional information about the
Funds. The SEC file number of each Fund, which contains the Funds shareholder reports and other
filings with the SEC, is 811-06590 for the Acquiring Fund, 811-06053 for IMC, 811-07109 for IMS and
811-06434 for IMT.
Each Fund is subject to the informational requirements of the Exchange Act and the 1940 Act
and in accordance therewith, each Fund files reports and other information with the SEC. Reports,
proxy materials,
49
registration statements and other information filed may be inspected without charge and copied
at the public reference facilities maintained by the SEC at Room 1580, 100 F Street, N.E.,
Washington, D.C. 20549. Copies of such material may also be obtained from the Public Reference
Section of the SEC at 100 F Street, N.E., Washington, D.C. 20549, at the prescribed rates. The SEC
maintains a website at www.sec.gov that contains information regarding the Funds and other
registrants that file electronically with the SEC. Reports, proxy materials and other information
concerning the Funds can also be inspected at the Exchange.
50
EXHIBIT A
Form of Agreement and Plan of Redomestication
A-1
EXHIBIT B
Comparison of Governing Documents
The Acquiring Fund, IMC and IMT are each a Massachusetts business trust (each a MA Trust and
together, the MA Trusts). Under Proposal 1, if approved, each MA Trust will reorganize into a
newly formed Delaware statutory trust (a DE Trust). The following is a discussion of certain
provisions of the governing instruments and governing laws of each MA Trust and its corresponding
DE Trust, but is not a complete description thereof. Further information about each Funds
governance structure is contained in the Funds shareholder reports and its governing documents.
Shares. The Trustees of the MA Trusts have the power to issue shares, including preferred
shares, without shareholder approval. The governing documents of the MA Trusts indicate that the
amount of common shares that a MA Trust may issue is unlimited. Preferred shares are limited to
the amount set forth in the Declarations (defined below). Shares of the MA Trusts have no
preemptive rights.
The Trustees of the DE Trusts have the power to issue shares, including preferred shares,
without shareholder approval. The governing documents of the DE Trusts indicate that the amount of
common and preferred shares that a DE Trust may issue is unlimited. Shares of the DE Trusts have
no preemptive rights.
Organization. The MA Trusts are organized as Massachusetts business trusts, under the laws of
the Commonwealth of Massachusetts. Each MA Trust is governed by its Declaration of Trust (a
Declaration) and its bylaws, each as may be amended, and its business and affairs are managed
under the supervision of its Board of Trustees.
Each DE Trust is organized as a Delaware statutory trust pursuant to the Delaware Statutory
Trust Act (Delaware Act). Each DE Trust is governed by its Amended and Restated Agreement and
Declaration of Trust (also, a Declaration and together with the Declaration of each MA Trust, the
Declarations) and its bylaws, and its business and affairs are managed under the supervision of
its Board of Trustees.
Composition of the Board of Trustees. The Boards of Trustees of both the MA Trusts and the DE
Trusts are divided into three classes, with the election of each class staggered so that each class
is only up for election once every three years.
Shareholder Meetings and Rights of Shareholders to Call a Meeting. The stock exchanges on
which a MA Trusts shares are currently, and a DE Trusts shares will be, listed require annual
meetings to elect trustees.
The governing instruments for each MA Trust provide that special meetings of
shareholders may be called by the Chair or a majority of the Trustees. In addition, special
meetings of shareholders may also be called by the Secretary of a MA Trust upon written request of
shareholders holding and entitled to vote not less than a majority of all the votes entitled to be
cast at such meeting for matters that do not require a separate vote by each class of shares.
The bylaws of the DE Trusts authorize the Trustees to call a meeting of the shareholders for
the election of Trustees. The bylaws of the DE Trusts also authorize a meeting of shareholders
held for any purpose determined by the Trustees. The bylaws of the DE Trusts state that
shareholders have no power to call a special meeting of shareholders.
Submission of Shareholder Proposals. The federal securities laws, which apply to all of the
MA Trusts and the DE Trusts, require that certain conditions be met to present any proposal at a
shareholder meeting. The matters to be considered and brought before an annual or special meeting
of shareholders of the MA Trusts and the DE Trusts are limited to only those matters, including the
nomination and election of Trustees, that are properly brought before the meeting. For proposals
submitted by shareholders, the bylaws of the MA Trusts and the DE Trusts contain provisions which
require that notice be given to the DE Trust or MA Trust, respectively, by an otherwise eligible
shareholder in advance of the annual or special shareholder meeting in order for the shareholder to
present a proposal at any such meeting and requires shareholders to provide certain information in
connection with the proposal. These requirements are intended to provide the Board the opportunity
to better evaluate the proposal and
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provide additional information to shareholders for their consideration in connection with the
proposal. Failure to satisfy the requirements of these advance notice provisions means that a
shareholder may not be able to present a proposal at the annual or special shareholder meeting.
In general, for nominations and any other proposals to be properly brought before an annual
meeting of shareholders by a shareholder of a MA Trust, written notice must be delivered to the
Secretary of the MA Trust not less than 60 days, nor more than 90 days, prior to the first
anniversary of the preceding years annual meeting. If the annual meeting is not scheduled to be
held within a period that commences 30 days before such anniversary and ends 30 days after such
anniversary, the written notice must be delivered by the later of the 60th day prior to
the meeting or the 10th day following the public announcement or disclosure of the
meeting date. If the number of Trustees to be elected to the Board is increased and either all of
the nominees for Trustee or the size of the increased Board are not publicly announced or disclosed
at least 70 days prior to the first anniversary of the preceding years annual meeting, written
notice will be considered timely if delivered to the Secretary of the MA Trust no later than the
10th date after such public announcement or disclosure. With respect to the nomination
of individuals for election to the Board of Trustees at a special shareholder meeting, written
notice must be delivered by a shareholder of the MA Trust to the Secretary of the MA Trust no later
than the 10th date after such meeting is publicly announced or disclosed.
For nominations and any other proposals to be properly brought before an annual meeting of
shareholders by a shareholder of a DE Trust, written notice must be delivered to the Secretary of
the DE Trust not less than 90 days, nor more than 120 days, prior to the first anniversary of the
preceding years annual meeting. If the annual meeting is not scheduled to be held within a period
that commences 30 days before such anniversary and ends 30 days after such anniversary (an Other
Annual Meeting Date), the written notice must be delivered by the later of the 90th day
prior to the meeting or the 10th day following the public announcement or disclosure of
the meeting date provided, however, that if the Other Annual Meeting Date was disclosed in the
proxy statement for the prior years annual meeting, the dates for receipt of the written notice
shall be calculated based on the Other Annual Meeting Date and disclosed in the proxy statement for
the prior years annual meeting. If the number of Trustees to be elected to the Board is increased
and either all of the nominees for Trustee or the size of the increased Board are not publicly
announced or disclosed at least 70 days prior to the first anniversary of the preceding years
annual meeting, written notice will be considered timely if delivered to the Secretary of the DE
Trust no later than the 10th date after such public announcement or disclosure. With
respect to the nomination of individuals for election to the Board of Trustees at a special
shareholder meeting, written notice must be delivered by a shareholder of the DE Trust to the
Secretary of the DE Trust no later than the 10th date after such meeting is publicly
announced or disclosed. Specific information, as set forth in the bylaws, about the nominee, the
shareholder making the nomination, and the proposal must also be delivered, and updated as
necessary if proposed at an annual meeting, by the shareholder of the DE Trust. The shareholder or
a qualified representative must also appear at the annual or special meeting of shareholders to
present about the nomination or proposed business.
Quorum. The governing instruments of the MA Trusts provide that a quorum will exist if
shareholders representing a majority of the issued and outstanding shares entitled to vote at a
shareholder meeting are present in person or represented by proxy.
The bylaws of each DE Trust provide that a quorum will exist if shareholders representing a
majority of the outstanding shares entitled to vote are present or represented by proxy, except
when a larger quorum is required by applicable law or the requirements of any securities exchange
on which shares are listed for trading, in which case the quorum must comply with such
requirements.
Number of Votes; Aggregate Voting. The governing instruments of the MA Trusts and the
Declaration and bylaws of the DE Trusts provide that each shareholder is entitled to one vote for
each whole share held as to any matter on which the shareholder is entitled to vote, and a
proportionate fractional vote for each fractional share held. The MA Trusts and the DE Trusts do
not provide for cumulative voting for the election or removal of Trustees.
The governing instruments of the MA Trusts generally provide that all share classes vote by
class or series of the MA Trust, except as otherwise provided by applicable law, the governing
instruments or resolution of the Trustees.
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The Declarations for the DE Trusts generally provide that all shares are voted as a single
class, except when required by applicable law, the governing instruments, or when the Trustees have
determined that the matter affects the interests of one or more classes, in which case only the
shareholders of all such affected classes are entitled to vote on the matter.
Derivative Actions. Shareholders of each MA Trust have the power to vote as to whether or not
a court action, proceeding or claim should or should not be brought or maintained derivatively or
as a class action on behalf of the MA Trust or its shareholders.
The Declarations for the DE Trusts state that a shareholder may bring a derivative action on
behalf of a DE Trust only if several conditions are met. These conditions include, among other
things, a pre-suit demand upon the Board of Trustees and, unless a demand is not required,
shareholders who hold at least a majority of the outstanding shares must join in the demand for the
Board of Trustees to commence an action, and the Board of Trustees must be afforded a reasonable
amount of time to consider such shareholder request and to investigate the basis of the claim.
Right to Vote. The 1940 Act provides that shareholders of a fund have the power to vote with
respect to certain matters: specifically, for the election of trustees, the selection of auditors
(under certain circumstances), approval of investment advisory agreements and plans of
distribution, and amendments to policies, goals or restrictions deemed to be fundamental.
Shareholders also have the right to vote on certain matters affecting a fund or a particular share
class thereof under their respective governing instruments and applicable state law. The following
summarizes the matters on which shareholders have the right to vote as well as the minimum
shareholder vote required to approve the matter. For matters on which shareholders of a MA Trust
or DE Trust do not have the right to vote, the Trustees may nonetheless determine to submit the
matter to shareholders for approval. Where referenced below, the phrase Majority Shareholder
Vote means the vote required by the 1940 Act, which is the lesser of (a) 67% or more of the shares
present at the meeting, if the holders of more than 50% of a funds outstanding shares are present
or represented by proxy; or (b) more than 50% of a funds outstanding shares.
Election and Removal of Trustees. The shareholders of the MA Trusts are entitled to
vote, under certain circumstances, for the election and the removal of Trustees. Subject to the
rights of the preferred shareholders, if any, the Trustees of the MA Trusts are elected by an
affirmative vote of a majority of the outstanding shares present in person or represented by proxy.
However, the preferred shareholders, if any, voting as a class elect at least two Trustees at all
times. Preferred shareholders, if any, may also elect a majority of Trustees if dividends on the
preferred shares have been unpaid for an amount equal to two full years of dividends. Any Trustees
of the MA Trusts may be removed at any meeting of shareholders by a vote of 80% of the outstanding
shares of the class or classes of shares of beneficial interest that elected such Trustee.
With regard to the DE Trusts, Trustees are elected by the affirmative vote of a majority of
the outstanding shares of the DE Trust present in person or by proxy and entitled to vote at a
meeting of the shareholders at which a quorum is present. Preferred shareholders, voting as a
separate class, solely elect at least two Trustees by the affirmative vote of a majority of the
outstanding preferred shares. Under certain circumstances, as set forth by the Trustees in
accordance with the Declaration, holders of preferred shares may elect at least a majority of the
Boards Trustees. The Declaration and bylaws of the DE Trusts do not provide shareholders with the
ability to remove Trustees.
Amendment of Governing Instruments. Except as described below, the Trustees of the MA
Trusts and DE Trusts have the right to amend, from time to time, the governing instruments. For
the MA Trusts, the Trustees have the power to alter, amend or repeal the bylaws or adopt new
bylaws, provided that bylaws adopted by shareholders may only be altered, amended or repealed by
the shareholders, or by a majority of shares represented in person or by proxy. For the DE Trusts,
the bylaws may be altered, amended, or repealed by the Trustees, without the vote or approval of
shareholders.
For the MA Trusts, shareholder approval is required to amend the Declaration, except that the
Trustees may make changes necessary to comply with applicable law and to effect provisions
regarding preferred shares, and may make certain other non-material changes, such as to correct a
mistake, without shareholder approval. When shareholder approval is required, the vote needed to
effect an amendment is a majority of the common shares and preferred shares outstanding and
entitled to vote, voting as separate classes, or by an instrument in writing, without a
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meeting, signed by a majority of the Trustees and consented to by the holders of not less than a
majority of each of such common shares and preferred shares. Notwithstanding the foregoing, any
amendment to the Declaration that would reduce the amount payable upon liquidation of the MA Trusts
or diminishing or eliminating shareholder voting rights pertaining thereto requires the approval of
two-thirds of the class or classes of shareholders so affected. In addition, any amendment that
would change or repeal the sections in the Declaration governing merger of the MA Trusts or
conversion of the MA Trusts to open-end funds requires the affirmative vote of 80% of each of the
common shares and preferred shares, voting as separate classes.
For the DE Trusts, the Board generally may amend the Declaration without shareholder approval,
except: (i) any amendment to the Declaration approved by the Board that would reduce the
shareholders rights to indemnification requires the vote of shareholders owning at least 75% of
the outstanding shares; (ii) any amendments to the Declaration that would change shareholder voting
rights, declassify the Board or change the minimum or maximum number of Trustees permitted require
the affirmative vote or consent by the Board of Trustees followed by the affirmative vote or
consent of shareholders owning at least 75% of the outstanding shares, unless such amendments have
been previously approved, adopted or authorized by the affirmative vote of at least 66 2/3% of the
Board of Trustees, in which case an affirmative Majority Shareholder Vote is required (the DE
Trusts Voting Standard).
Mergers, Reorganizations, and Conversions. The governing instruments of the MA Trusts
provide that a merger, consolidation, conversion to an open-end company, or sale of assets requires
the affirmative vote of not less than 80% of the common shares and preferred shares, if any,
outstanding and entitled to vote, voting as separate classes. Reorganization or incorporation
requires the approval of the holders of a majority of each of the common shares and preferred
shares, if any, outstanding and entitled to vote, voting as separate classes. If the merger,
consolidation, sale, lease or exchange is recommended by the Trustees, the vote or written consent
of the holders of a majority of the common shares and preferred shares, if any, outstanding and
entitled to vote, voting as separate classes, is sufficient authorization.
For the DE Trusts, any such merger, consolidation, conversion, reorganization, or
reclassification requires approval pursuant to the DE Trusts Voting Standard. The vote required
is in addition to the vote or consent of shareholders otherwise required by law or by the terms of
any class of preferred shares or any agreement between the Trust and any national securities
exchange.
Principal Shareholder Transactions. The MA Trusts require a vote or consent of 80% of
the common shares or preferred shares, if any, outstanding and entitled to vote, voting as separate
classes, where a principal shareholder of a fund (i.e., any corporation, person or other entity
which is the beneficial owner, directly or indirectly, of more than 5% of the funds outstanding
shares) is the party to certain transactions.
The DE Trusts require a vote pursuant to the DE Trusts Voting Standard for certain principal
shareholder transactions. The vote required is in addition to the vote or consent of shareholders
otherwise required by law or by the terms of any class of preferred shares or any agreement between
the Trust and any national securities exchange.
Termination of the Trust. The termination of the Acquiring Fund or IMT requires the
affirmative vote of not less than 80% of the common shares and preferred shares, if any,
outstanding and entitled to vote, voting as separate classes, at any meeting of shareholders, or an
instrument in writing, without a meeting, signed by a majority of the Trustees and consented to by
an affirmative vote of a majority of the outstanding shares of such MA Trust.
The termination of IMC requires the affirmative vote of not less than 80% of the common shares
and preferred shares, if any, outstanding and entitled to vote, voting as separate classes, at any
meeting of shareholders, or an instrument in writing, without a meeting, signed by a majority of
the Trustees and consented to by affirmative vote of not less than two-thirds of the outstanding
shares of IMC.
The DE Trusts may be dissolved upon a vote pursuant to the DE Trusts Voting Standard. The
vote required is in addition to the vote or consent of shareholders otherwise required by law or by
the terms of any class of preferred shares or any agreement between a DE Trust and any national
securities exchange. In addition, to spare
B-4
shareholders the expense of a shareholder meeting in connection with the dissolution of a
Fund, if the affirmative vote of at least 75% of the Board approves the dissolution, shareholder
approval is not required.
Liability of Shareholders. The Massachusetts statute governing business trusts does not
include an express provision relating to the limitation of liability of the shareholders of a
Massachusetts business trust. However, the Declarations for the MA Trusts provide that no
shareholder will be personally liable in connection with the acts, obligations or affairs of the MA
Trusts. Consistent with Section 3803 of the Delaware Act, the Declarations of the DE Trusts
generally provide that shareholders will not be subject to personal liability for the acts or
obligations of the DE Trust.
Liability of Trustees and Officers. Consistent with the 1940 Act, the governing instruments
for both the DE Trusts and the MA Trusts generally provide that no Trustee or officer of a DE Trust
and no Trustee, officer, employee or agent of a MA Trust is subject to any personal liability in
connection with the assets or affairs of the DE Trust and the MA Trust, respectively, except for
liability arising from his or her own willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office (Disabling Conduct).
Indemnification. The MA Trusts generally indemnify every person who is or has been a Trustee
or officer of the Trust to the fullest extent permitted by law against all liability and against
all expenses reasonably incurred or paid by them in connection with any claim, action, suit or
proceeding in which they becomes involved as a party or otherwise by virtue of their being or
having been a Trustee or officer and against amounts paid or incurred by them in the settlement
thereof.
The Trustees, officers, employees or agents of a DE Trust (Covered Persons) are indemnified
by the DE Trust to the fullest extent permitted by the Delaware Act, the bylaws and other
applicable law. The bylaws provide that every Covered Person is indemnified by the DE Trust for
expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred in any
proceeding to which such Covered Person is made a party or is threatened to be made a party, or is
involved as a witness, by reason of the fact that such person is a Covered Person. For proceedings
not by or in the right of the DE Trust (i.e., derivative lawsuits), every Covered Person is
indemnified by the DE Trust for expenses actually and reasonably incurred in the investigation,
defense or settlement in any proceeding to which such Covered Person is made a party or is
threatened to be made a party, or is involved as a witness, by reason of the fact that such person
is a Covered Person. No Covered Person is indemnified for any expenses, judgments, fines, amounts
paid in settlement, or other liability or loss arising by reason of Disabling Conduct or for any
proceedings by such Covered Person against the Trust. The termination of any proceeding by
conviction, or a plea of nolo contendere or its equivalent, or an entry of an order of probation
prior to judgment, creates a rebuttable presumption that the person engaged in Disabling Conduct.
A DE Trust is indemnified by any common shareholder who brings an action against the Trust for
all costs, expenses, penalties, fines or other amounts arising from such action to the extent that
the shareholder is not the prevailing party. The DE Trust is permitted to redeem shares of and set
off against any distributions to the shareholder for such amounts liable by the shareholder to the
DE Trust.
B-5
EXHIBIT C
Comparison of State Laws
The laws governing Massachusetts business trusts and Delaware statutory trusts have similar
effect, but they differ in certain respects. Both the Massachusetts business trust law (MA
Statute) and the Delaware statutory trust act (DE Statute) permit a trusts governing instrument
to contain provisions relating to shareholder rights and removal of trustees, and provide trusts
with the ability to amend or restate the trusts governing instruments. However, the MA Statute is
silent on many of the salient features of a Massachusetts business trust (a MA Trust) whereas the
DE Statute provides guidance and offers a significant amount of operational flexibility to Delaware
statutory trusts (a DE Trust). The DE Statute provides explicitly that the shareholders and
trustees of a Delaware Trust are not liable for obligations of the trust to the same extent as
under corporate law, while under the MA Statute, shareholders and trustees could potentially be
liable for trust obligations. The DE Statute authorizes the trustees to take various actions
without requiring shareholder approval if permitted by a Funds governing instruments. For
example, trustees may have the power to amend the Delaware trust instrument, merge or consolidate a
Fund with another entity, and to change the Delaware trusts domicile, in each case without a
shareholder vote.
The following is a discussion of only certain material differences between the DE Statute and
MA Statute, as applicable, and is not a complete description of them. Further information about
each Funds current trust structure is contained in such Funds organizational documents and in
relevant state law.
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Delaware Statutory Trust |
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Massachusetts Business Trust |
Governing Documents/Governing
Body
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A DE Trust is formed by the filing of a
certificate of trust with the Delaware
Secretary of State. A DE Trust is an
unincorporated association organized
under the DE Statute whose operations are
governed by its governing document (which
may consist of one or more documents).
Its business and affairs are managed by
or under the direction of one or more
trustees. As described in this chart, DE
Trusts are granted a significant amount
of organizational and operational
flexibility. Delaware law makes it easy
to obtain needed shareholder approvals,
and also permits the management of a DE
Trust to take various actions without
being required to make state filings or
obtain shareholder approval.
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A MA Trust is created by the trustees
execution of a written declaration of
trust. A MA Trust is required to file
the declaration of trust with the
Secretary of the Commonwealth of
Massachusetts and with the clerk of every
city or town in Massachusetts where the
trust has a usual place of business. A
MA Trust is a voluntary association with
transferable shares of beneficial
interests, organized under the MA
Statute. A MA Trust is considered to be
a hybrid, having characteristics of both
corporations and common law trusts. A MA
Trusts operations are governed by a
trust document and bylaws. The business
and affairs of a MA Trust are managed by
or under the direction of a board of
trustees.
MA Trusts are also granted a significant
amount of organizational and operational
flexibility. The MA Statute is silent on
most of the salient features of MA
Trusts, thereby allowing trustees to
freely structure the MA Trust. The MA
Statute does not specify what information
must be contained in the declaration of
trust, nor does it require a registered
officer or agent for service of process. |
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Ownership Shares of
Interest
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Under both the DE Statute and the MA
Statute, the ownership interests in a DE
Trust and MA Trust are denominated as
beneficial interests and are held
by beneficial owners. |
C-1
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Delaware Statutory Trust |
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Massachusetts Business Trust |
Series and Classes
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Under the DE Statute, the governing
document may provide for classes, groups
or series of shares, having such relative
rights, powers and duties as shareholders
set forth in the governing document.
Such classes, groups or series may be
described in a DE Trusts governing
document or in resolutions adopted by its
trustees.
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The MA Statute is silent as to any
requirements for the creation of such
series or classes. |
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Shareholder Voting
Rights
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Under the DE Statute, the governing
document may set forth any provision
relating to trustee and shareholder
voting rights, including the withholding
of such rights from certain trustees or
shareholders. If voting rights are
granted, the governing document may
contain any provision relating to the
exercise of voting rights. No state
filing is necessary and, unless required
by the governing document, shareholder
approval is not needed.
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There is no provision in the MA Statute
addressing voting by the shareholders of
a MA Trust. |
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Quorum
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Under the DE Statute, the governing
document may set forth any provision
relating to quorum requirements at
meetings of shareholders.
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There is no provision in the MA Statute
addressing quorum requirements at
meetings of shareholders of a MA Trust. |
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Shareholder Meetings
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Neither the DE Statute nor the MA
Statute mandates an annual shareholders
meeting. |
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Organization of
Meetings
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Neither the DE Statute nor the MA
Statute contain provisions relating
to the organization of shareholder
meetings. |
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Record Date
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Under the DE Statute, the governing
document may provide for record dates.
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There is no record date provision in the
MA Statute. |
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Qualification and
Election of
Trustees
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Under the DE Statute, the governing
documents may set forth the manner in
which trustees are elected and qualified.
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The MA Statute does not contain
provisions relating to the election and
qualification of trustees of a MA Trust. |
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Removal of Trustees
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Under the DE Statute, the governing
documents of a DE Trust may contain any
provision relating to the removal of
trustees; provided, however, that there
shall at all times be at least one
trustee of a DE Trust.
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The MA Statute does not contain
provisions relating to the removal of
trustees. |
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Restrictions on
Transfer
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Neither the DE Statute nor the MA
Statute contain provisions relating
to the ability of a DE Trust or MA
Trust, as applicable, to restrict
transfers of beneficial interests. |
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Preemptive Rights
and Redemption of
Shares
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Under each of the DE Statute and the
MA Statute, a governing document may
contain any provision relating to the
rights, duties and obligations of
the shareholders. |
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Liquidation Upon
Dissolution or
Termination Events
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Under the DE Statute, a DE Trust that has
dissolved shall first pay or make
reasonable provision to pay all known
claims and obligations, including those
that are contingent, conditional and
unmatured, and all known claims and
obligations for which the claimant is
unknown. Any remaining assets shall be
distributed to the shareholders or as
otherwise provided in the governing
document.
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The MA Statute has no provisions
pertaining to the liquidation of a MA
Trust. |
C-2
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Delaware Statutory Trust |
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Massachusetts Business Trust |
Shareholder
Liability
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Under the DE Statute, except to the
extent otherwise provided in the
governing document of a DE Trust,
shareholders of a DE Trust are entitled
to the same limitation of personal
liability extended to shareholders of a
private corporation organized for profit
under the General Corporation Law of the
State of Delaware.
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The MA Statute does not include an
express provision relating to the
limitation of liability of the
shareholders of a MA Trust. The
shareholders of a MA Trust could
potentially be held personally liable for
the obligations of the trust,
notwithstanding an express provision in
the governing document stating that the
shareholders are not personally liable in
connection with trust property or the
acts, obligations or affairs of the MA
Trust. |
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Trustee/Director
Liability
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Subject to the provisions in the
governing document, the DE Statute
provides that a trustee or any other
person managing the DE Trust, when acting
in such capacity, will not be personally
liable to any person other than the DE
Trust or a shareholder of the DE Trust
for any act, omission or obligation of
the DE Trust or any trustee. To the
extent that at law or in equity a trustee
has duties (including fiduciary duties)
and liabilities to the DE Trust and its
shareholders, such duties and liabilities
may be expanded or restricted by the
governing document.
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The MA Statute does not include an
express provision limiting the liability
of the trustee of a MA Trust. The
trustees of a MA Trust could potentially
be held personally liable for the
obligations of the trust. |
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Indemnification
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Subject to such standards and
restrictions as may be contained in the
governing document of a DE Trust, the DE
Statute authorizes a DE Trust to
indemnify and hold harmless any trustee,
shareholder or other person from and
against any and all claims and demands.
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The MA Statute is silent as to the
indemnification of trustees, officers and
shareholders. |
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Insurance
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Neither the DE Statute nor the MA Statute
contain provisions regarding insurance. |
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Shareholder Right
of Inspection
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Under the DE Statute, except to the
extent otherwise provided in the
governing document of a DE Trust and
subject to reasonable standards
established by the trustees, each
shareholder has the right, upon
reasonable demand for any purpose
reasonably related to the shareholders
interest as a shareholder, to obtain from
the DE Trust certain information
regarding the governance and affairs of
the DE Trust, including a current list of
the name and last known address of each
beneficial owner and trustee. In
addition, the DE Statute permits the
trustees of a DE Trust to keep
confidential from shareholders for such
period of time as deemed reasonable any
information that the trustees in good
faith believe would not be in the best
interest of the DE Trust to disclose or
that could damage the DE Trust or that
the DE Trust is required by law or by
agreement with a third party to keep
confidential.
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There is no provision in the MA Statute
relating to shareholder inspection
rights. |
C-3
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Delaware Statutory Trust |
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Massachusetts Business Trust |
Derivative Actions
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Under the DE Statute, a shareholder may
bring a derivative action if trustees
with authority to do so have refused to
bring the action or if a demand upon the
trustees to bring the action is not
likely to succeed. A shareholder may
bring a derivative action only if the
shareholder is a shareholder at the time
the action is brought and: (a) was a
shareholder at the time of the
transaction complained about or (b)
acquired the status of shareholder by
operation of law or pursuant to the
governing document from a person who was
a shareholder at the time of the
transaction. A shareholders right to
bring a derivative action may be subject
to such additional standards and
restrictions, if any, as are set forth in
the governing document.
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There is no provision under the MA
Statute regarding derivative actions. |
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Arbitration of
Claims
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The DE Statute provides flexibility as to
providing for arbitration pursuant to the
governing documents of a DE Trust.
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There is no provision under the MA
Statute regarding arbitration. |
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Amendments to
Governing Documents
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The DE Statute provides broad flexibility
as to the manner of amending and/or
restating the governing document of a DE
Trust. Amendments to the declaration
that do not change the information in the
DE Trusts certificate of trust are not
required to be filed with the Delaware
Secretary of State.
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The MA Statute provides broad flexibility
as to the manner of amending and/or
restating the governing document of a MA
Trust. The MA Statute provides that the
trustees shall, within thirty days after
the adoption of any amendment to the
declaration of trust, file a copy with
the Secretary of the Commonwealth of
Massachusetts and with the clerk of every
city or town in Massachusetts where the
trust has a usual place of business. |
C-4
EXHIBIT D
Form of Agreement and Plan of Merger
D-1
EXHIBIT E
Executive Officers of the Funds
The following information relates to the executive officers of the Funds. Each officer also
serves in the same capacity for all or a number of the other investment companies advised by the
Adviser or affiliates of the Adviser. The officers of the Funds are appointed annually by the
Trustees and serve for one year or until their respective successors are chosen and qualified. The
address of each officer is 1555 Peachtree Street, N.E., Atlanta, Georgia 30309.
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|
|
Name, Year of Birth and |
|
|
|
|
Position(s) Held with the Fund |
|
Officer Since |
|
Principal Occupation(s) During Past 5 Years |
Russell C. Burk 1958
Senior Vice President
and Senior
Officer
|
|
|
2010 |
|
|
Senior Vice President and Senior Officer, The Invesco Funds. |
|
|
|
|
|
|
|
John M. Zerr 1962
Senior Vice President,
Chief
Legal Officer and
Secretary
|
|
|
2010 |
|
|
Director, Senior Vice President, Secretary and General Counsel,
Invesco Management Group, Inc. (formerly known as Invesco Aim
Management Group, Inc.) and Van Kampen Exchange Corp.; Senior
Vice President, Invesco Advisers, Inc. (formerly known as Invesco
Institutional (N.A.), Inc.) (registered investment adviser);
Senior Vice President and Secretary, Invesco Distributors, Inc.
(formerly known as Invesco Aim Distributors, Inc.); Director,
Vice President and Secretary, Invesco Investment Services, Inc.
(formerly known as Invesco Aim Investment Services, Inc.) and IVZ
Distributors, Inc. (formerly known as INVESCO Distributors,
Inc.); Director and Vice President, INVESCO Funds Group, Inc.;
Senior Vice President, Chief Legal Officer and Secretary, The
Invesco Funds; Manager, Invesco PowerShares Capital Management
LLC; Director, Secretary and General Counsel, Invesco Investment
Advisers LLC (formerly known as Van Kampen Asset Management);
Secretary and General Counsel, Van Kampen Funds Inc.; and Chief
Legal Officer, PowerShares Exchange-Traded Fund Trust,
PowerShares Exchange-Traded Fund Trust II, PowerShares India
Exchange-Traded Fund Trust and PowerShares Actively Managed
Exchange-Traded Fund Trust. |
|
|
|
|
|
|
|
|
|
|
|
|
|
Formerly: Director and Secretary, Van Kampen Advisors Inc.;
Director, Vice President, Secretary and General Counsel, Van
Kampen Investor Services Inc.; Director, Invesco Distributors,
Inc. (formerly known as Invesco Aim Distributors, Inc.);
Director, Senior Vice President, General Counsel and Secretary,
Invesco 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.; Chief Operating
Officer and General Counsel, Liberty Ridge Capital, Inc. (an
investment adviser); Vice President and Secretary, PBHG Funds (an
investment company) and PBHG Insurance Series Fund (an investment
company); Chief Operating Officer, General Counsel and Secretary,
Old Mutual Investment Partners (a broker-dealer); General Counsel
and Secretary, Old Mutual Fund Services (an administrator) and
Old Mutual Shareholder Services (a shareholder servicing center);
Executive Vice President, General Counsel and Secretary, Old
Mutual Capital, Inc. (an investment adviser); and Vice President
and Secretary, Old Mutual Advisors Funds (an investment company). |
|
|
|
|
|
|
|
Sheri Morris 1964
Vice President,
Treasurer and
Principal
Financial Officer
|
|
|
2010 |
|
|
Vice President, Treasurer and Principal Financial Officer, The
Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly
known as Invesco Institutional (N.A.), Inc.) (registered
investment adviser); Treasurer, PowerShares Exchange-Traded Fund
Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares
India Exchange-Traded Fund Trust and PowerShares Actively Managed
Exchange-Traded Fund Trust. |
E-1
|
|
|
|
|
|
|
Name, Year of Birth and |
|
|
|
|
Position(s) Held with the Fund |
|
Officer Since |
|
Principal Occupation(s) During Past 5 Years |
|
|
|
|
|
|
Formerly: Vice President, Invesco Advisers, Inc., Invesco Aim
Capital Management, Inc. and Invesco Aim Private Asset
Management, Inc.; Assistant Vice President and Assistant
Treasurer, The Invesco Funds and Assistant Vice President,
Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and
Invesco Aim Private Asset Management, Inc. |
|
|
|
|
|
|
|
Karen Dunn Kelley 1960
Vice President
|
|
|
2010 |
|
|
Head of Invescos World Wide
Fixed Income and Cash
Management Group; Senior Vice
President, Invesco Management
Group, Inc. (formerly known
as Invesco Aim Management
Group, Inc.) and Invesco
Advisers, Inc. (formerly
known as Invesco
Institutional (N.A.), Inc.)
(registered investment
adviser); Executive Vice
President, Invesco
Distributors, Inc. (formerly
known as Invesco Aim
Distributors, Inc.);
Director, Invesco Mortgage
Capital Inc.; Vice President,
The Invesco Funds (other than
AIM Treasurers Series Trust
(Invesco Treasurers Series
Trust) and Short-Term
Investments Trust); and
President and Principal
Executive Officer, The
Invesco Funds (AIM
Treasurers Series Trust
(Invesco Treasurers Series
Trust) and Short-Term
Investments Trust only). |
|
|
|
|
|
|
|
|
|
|
|
|
|
Formerly: Senior Vice
President, Van Kampen
Investments Inc.; Vice
President, Invesco Advisers,
Inc. (formerly known as
Invesco Institutional (N.A.),
Inc.); Director of Cash
Management and Senior Vice
President, Invesco Advisers,
Inc. and Invesco Aim Capital
Management, Inc.; President
and Principal Executive
Officer, Tax-Free Investments
Trust; Director and
President, Fund Management
Company; Chief Cash
Management Officer, Director
of Cash Management, Senior
Vice President, and Managing
Director, Invesco Aim Capital
Management, Inc.; Director of
Cash Management, Senior Vice
President, and Vice
President, Invesco Advisers,
Inc. and The Invesco Funds
(AIM Treasurers Series Trust
(Invesco Treasurers Series
Trust), Short-Term
Investments Trust and
Tax-Free Investments Trust
only). |
|
|
|
|
|
|
|
Yinka Akinsola 1977
Anti-Money Laundering
Compliance Officer
|
|
|
2011 |
|
|
Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc.
(formerly known as Invesco Institutional (N.A.), Inc.)
(registered investment adviser); Invesco Distributors, Inc.
(formerly known as Invesco Aim Distributors, Inc.), Invesco
Investment Services, Inc. (formerly known as Invesco Aim
Investment Services, Inc.), Invesco Management Group, Inc., The
Invesco Funds, Invesco Van Kampen Closed-End Funds, Van Kampen
Exchange Corp. and Van Kampen Funds Inc.
Formerly: Regulatory Analyst III, Financial Industry Regulatory
Authority (FINRA). |
|
|
|
|
|
|
|
Todd L. Spillane 1958
Chief Compliance Officer
|
|
|
2010 |
|
|
Senior Vice President, Invesco Management Group, Inc. (formerly
known as Invesco Aim Management Group, Inc.) and Van Kampen
Exchange Corp.; Senior Vice President and Chief Compliance
Officer, Invesco Advisers, Inc. (registered investment adviser)
(formerly known as Invesco Institutional (N.A.), Inc.); Chief
Compliance Officer, The Invesco Funds; Vice President, Invesco
Distributors, Inc. (formerly known as Invesco Aim Distributors,
Inc.) and Invesco Investment Services, Inc. (formerly known as
Invesco Aim Investment Services, Inc.). |
|
|
|
|
|
|
|
|
|
|
|
|
|
Formerly: Chief Compliance Officer, Invesco Van Kampen Closed-End
Funds, PowerShares Exchange-Traded Fund Trust, PowerShares
Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded
Fund Trust, and PowerShares Actively Managed Exchange-Traded Fund
Trust; Senior Vice President, Van Kampen Investments Inc.; Senior
Vice President and Chief Compliance Officer, Invesco Advisers,
Inc. and Invesco Aim Capital Management, Inc.; Chief Compliance
Officer, INVESCO Private Capital Investments, Inc. (holding
company), and Invesco Private Capital, Inc. (registered
investment adviser); Invesco |
E-2
|
|
|
|
|
|
|
Name, Year of Birth and |
|
|
|
|
Position(s) Held with the Fund |
|
Officer Since |
|
Principal Occupation(s) During Past 5 Years |
|
|
|
|
|
|
Global Asset Management (N.A.),
Inc., Invesco Senior Secured Management, Inc. (registered
investment adviser) and Van Kampen Investor Services Inc.; Vice
President, Invesco Aim Capital Management, Inc. and Fund
Management Company. |
E-3
EXHIBIT F
Information Regarding the Funds Trustees
The business and affairs of the Funds are managed under the direction of the Board. The tables
below list the incumbent Trustees and nominees for Trustee, their principal occupations, other
directorships held by them during the past five years, and any affiliations with the Adviser or its
affiliates. The term Fund Complex includes each of the investment companies advised by the
Adviser as of the Record Date. Trustees of the Funds generally serve three-year terms or until
their successors are duly elected and qualified. The address of each Trustee is 1555 Peachtree
Street, N.E., Atlanta, Georgia 30309.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
|
|
|
|
|
|
|
Portfolios in |
|
|
Name, Year of Birth |
|
|
|
|
|
|
|
Fund Complex |
|
Other Trusteeship(s) |
and Position(s) Held |
|
Trustee |
|
Principal Occupation(s) During Past |
|
Overseen by |
|
Held by Trustee Over |
with the Funds |
|
Since |
|
5 Years |
|
Trustee |
|
Past 5 Years |
Interested Trustees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Martin L.
Flanagan(1)
1960
Trustee
|
|
|
2010 |
|
|
Executive Director,
Chief Executive
Officer and
President, Invesco
Ltd. (ultimate
parent of Invesco
and a global
investment
management firm);
Advisor to the
Board, Invesco
Advisers, Inc.
(formerly known as
Invesco
Institutional
(N.A.), Inc.);
Trustee, The
Invesco Funds; Vice
Chair, Investment
Company Institute;
and Member of
Executive Board,
SMU Cox School of
Business.
|
|
|
133 |
|
|
None. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Formerly: Chairman,
Invesco Advisers,
Inc. (registered
investment
adviser); Director,
Chairman, Chief
Executive Officer
and President, 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
and Chief Financial
Officer, Franklin
Resources, Inc.
(global investment
management
organization). |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Philip A.
Taylor(2)
1954
Trustee, President and
Principal Executive
Officer
|
|
|
2010 |
|
|
Head of North
American Retail and
Senior Managing
Director, Invesco
Ltd.; Director,
Co-Chairman,
Co-President and
Co-Chief Executive
Officer, Invesco
Advisers, Inc.
(formerly known as
Invesco
Institutional
(N.A.), Inc.)
(registered
investment
adviser); Director,
Chairman, Chief
Executive Officer
and President,
Invesco Management
Group, Inc.
(formerly Invesco
Aim Management
Group, Inc.)
(financial services
holding company);
Director and
President, INVESCO
Funds Group, Inc.
(registered
investment adviser
and registered
transfer agent);
Director and
Chairman, Invesco
Investment
Services, Inc
(formerly known as
Invesco Aim
|
|
|
133 |
|
|
None. |
F-1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
|
|
|
|
|
|
|
Portfolios in |
|
|
Name, Year of Birth |
|
|
|
|
|
|
|
Fund Complex |
|
Other Trusteeship(s) |
and Position(s) Held |
|
Trustee |
|
Principal Occupation(s) During Past |
|
Overseen by |
|
Held by Trustee Over |
with the Funds |
|
Since |
|
5 Years |
|
Trustee |
|
Past 5 Years |
|
|
|
|
|
|
Investment
Services, Inc.)
(registered
transfer agent) and
IVZ Distributors,
Inc. (formerly
known as INVESCO
Distributors, Inc.)
(registered broker
dealer); Director,
President and
Chairman, Invesco
Inc. (holding
company) and
Invesco Canada
Holdings Inc.
(holding company);
Chief Executive
Officer, Invesco
Corporate Class
Inc. (corporate
mutual fund
company) and
Invesco Canada Fund
Inc. (corporate
mutual fund
company); Director,
Chairman and Chief
Executive Officer,
Invesco Canada Ltd.
(formerly known as
Invesco Trimark
Ltd./Invesco
Trimark Ltèe)
(registered
investment adviser
and registered
transfer agent);
Trustee, President
and Principal
Executive Officer,
The Invesco Funds
(other than AIM
Treasurers Series
Trust (Invesco
Treasurers Series
Trust) and
Short-Term
Investments Trust);
Trustee and
Executive Vice
President, The
Invesco Funds (AIM
Treasurers Series
Trust (Invesco
Treasurers Series
Trust) and
Short-Term
Investments Trust
only); Director,
Invesco Investment
Advisers LLC
(formerly known as
Van Kampen Asset
Management);
Director, Chief
Executive Officer
and President, Van
Kampen Exchange
Corp. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Formerly: Director
and Chairman, Van
Kampen Investor
Services Inc.;
Director, Chief
Executive Officer
and President, 1371
Preferred Inc.
(holding company)
and Van Kampen
Investments Inc.;
Director and
President, AIM GP
Canada Inc.
(general partner
for limited
partnerships) and
Van Kampen Advisors
Inc.; Director and
Chief Executive
Officer, Invesco
Trimark Dealer Inc.
(registered broker
dealer); Director,
Invesco
Distributors, Inc.
(formerly known as
Invesco Aim
Distributors, Inc.)
(registered broker
dealer); Manager,
Invesco PowerShares
Capital Management
LLC; Director,
Chief Executive
Officer and
President, Invesco
Advisers, Inc.;
Director, Chairman,
Chief Executive
Officer and
President, Invesco
Aim Capital
Management, Inc.;
President, Invesco
Trimark Dealer Inc.
and Invesco Trimark
Ltd./Invesco
Trimark Ltèe;
Director and
President, AIM
Trimark Corporate
Class Inc. and AIM
Trimark Canada Fund
Inc.; Senior
Managing Director,
Invesco Holding
Company Limited;
Trustee and
Executive Vice
President, Tax-Free
Investments Trust;
Director and
Chairman, Fund
Management Company
(former registered
broker dealer);
President and
Principal Executive
Officer, The
Invesco Funds (AIM
Treasurers Series
Trust (Invesco
Treasurers Series
Trust), Short-Term
Investments Trust
and Tax-Free
Investments Trust
only); President,
AIM Trimark Global
Fund Inc. and AIM
Trimark Canada Fund
Inc. |
|
|
|
|
|
|
F-2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
|
|
|
|
|
|
|
Portfolios in |
|
|
Name, Year of Birth |
|
|
|
|
|
|
|
Fund Complex |
|
Other Trusteeship(s) |
and Position(s) Held |
|
Trustee |
|
Principal Occupation(s) During Past |
|
Overseen by |
|
Held by Trustee Over |
with the Funds |
|
Since |
|
5 Years |
|
Trustee |
|
Past 5 Years |
Wayne W.
Whalen(3)
1939
Trustee
|
|
|
2010 |
|
|
Of Counsel, and
prior to 2010,
partner in the law
firm of Skadden,
Arps, Slate,
Meagher & Flom LLP,
legal counsel to
certain funds in
the Fund Complex.
|
|
|
151 |
|
|
Trustee/Managing
General Partner of
funds in the Fund
Complex. Director
of the Mutual Fund
Directors Forum, a
nonprofit
membership
organization for
investment company
directors.
Chairman and
Director for the
Abraham Lincoln
Presidential
Library Foundation
and Director of the
Stevenson Center
for Democracy. |
|
|
|
|
|
|
|
|
|
|
|
|
|
Independent Trustees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce L. Crockett
1944
Trustee and Chair
|
|
|
2010 |
|
|
Chairman, Crockett
Technology
Associates
(technology
consulting
company).
|
|
|
133 |
|
|
ACE Limited
(insurance
company); and
Investment Company
Institute. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Formerly: Director,
Captaris (unified
messaging
provider);
Director, President
and Chief Executive
Officer COMSAT
Corporation; and
Chairman, Board of
Governors of
INTELSAT
(international
communications
company). |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David C. Arch 1945
Trustee
|
|
|
2010 |
|
|
Retired. Chairman
and Chief Executive
Officer of Blistex
Inc., a consumer
health care
products
manufacturer.
|
|
|
151 |
|
|
Member of the
Heartland Alliance
Advisory Board, a
nonprofit
organization
serving human needs
based in Chicago.
Board member of the
Illinois
Manufacturers
Association. Member
of the Board of
Visitors, Institute
for the Humanities,
University of
Michigan. |
|
|
|
|
|
|
|
|
|
|
|
|
|
Frank S. Bayley 1939
Trustee
|
|
|
2010 |
|
|
Retired.
Formerly: Director,
Badgley Funds, Inc.
(registered
investment company)
(2 portfolios) and
Partner, law firm
of Baker &
McKenzie.
|
|
|
133 |
|
|
Director and
Chairman, C.D.
Stimson Company (a
real estate
investment
company). |
|
|
|
|
|
|
|
|
|
|
|
|
|
James T. Bunch 1942
Trustee
|
|
|
2010 |
|
|
Managing Member,
Grumman Hill Group
LLC (family office
private equity
management).
Formerly: Founder,
Green, Manning &
Bunch Ltd.
(investment banking
firm)(1988-2010);
Executive
Committee, United
States Golf
Association; and
Director, Policy
Studies, Inc. and
Van Gilder
Insurance
Corporation.
|
|
|
133 |
|
|
Vice Chairman of
Board of Governors,
Western Golf
Association; Chair
Elect of Evans
Scholars Foundation
and Director,
Denver Film
Society. |
F-3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
|
|
|
|
|
|
|
Portfolios in |
|
|
Name, Year of Birth |
|
|
|
|
|
|
|
Fund Complex |
|
Other Trusteeship(s) |
and Position(s) Held |
|
Trustee |
|
Principal Occupation(s) During Past |
|
Overseen by |
|
Held by Trustee Over |
with the Funds |
|
Since |
|
5 Years |
|
Trustee |
|
Past 5 Years |
Rodney F. Dammeyer
1940
Trustee
|
|
|
2010 |
|
|
Chairman of CAC,
LLC, a private
company offering
capital investment
and management
advisory services.
Formerly: Prior to
January 2004,
Director of
TeleTech Holdings
Inc.; Prior to
2002, Director of
Arris Group, Inc.;
Prior to 2001,
Managing Partner at
Equity Group
Corporate
Investments. Prior
to 1995, Vice
Chairman of Anixter
International.
Prior to 1985,
experience includes
Senior Vice
President and Chief
Financial Officer
of Household
International, Inc,
Executive Vice
President and Chief
Financial Officer
of Northwest
Industries, Inc.
and Partner of
Arthur Andersen &
Co.
|
|
|
151 |
|
|
Director of Quidel
Corporation and
Stericycle, Inc.
Prior to May 2008,
Trustee of The
Scripps Research
Institute. Prior to
February 2008,
Director of Ventana
Medical Systems,
Inc. Prior to April
2007, Director of
GATX Corporation.
Prior to April
2004, Director of
TheraSense, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
Albert R. Dowden
1941
Trustee
|
|
|
2010 |
|
|
Director of a
number of public
and private
business
corporations,
including the Boss
Group, Ltd.
(private investment
and management);
Reich & Tang Funds
(5 portfolios)
(registered
investment
company); and
Homeowners of
America Holding
Corporation/Homeowners
of
America Insurance
Company (property
casualty company).
|
|
|
133 |
|
|
Board of Natures
Sunshine Products,
Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Formerly: Director,
Continental Energy
Services, LLC (oil
and gas pipeline
service); Director,
CompuDyne
Corporation
(provider of
product and
services to the
public security
market) and
Director, Annuity
and Life Re
(Holdings), Ltd.
(reinsurance
company); Director,
President and Chief
Executive Officer,
Volvo Group North
America, Inc.;
Senior Vice
President, AB
Volvo; Director of
various public and
private
corporations;
Chairman, DHJ
Media, Inc.;
Director Magellan
Insurance Company;
and Director, The
Hertz Corporation,
Genmar Corporation
(boat
manufacturer),
National Media
Corporation;
Advisory Board of
Rotary Power
International
(designer,
manufacturer, and
seller of rotary
power engines); and
Chairman, Cortland
Trust, Inc.
(registered
investment
company). |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jack M. Fields 1952
Trustee
|
|
|
2010 |
|
|
Chief Executive
Officer, Twenty
First Century
Group, Inc.
(government affairs
company); and Owner
and Chief Executive
Officer, Dos
Angelos Ranch, L.P.
(cattle, hunting,
corporate
entertainment),
Discovery Global
Education Fund
(non-profit) and
Cross Timbers Quail
Research Ranch
(non-profit).
|
|
|
133 |
|
|
Insperity (formerly
known as
Administaff). |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Formerly: Chief
Executive Officer,
Texana Timber LP
(sustainable
forestry company)
and member of the
U.S. House of
Representatives. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carl Frischling 1937
Trustee
|
|
|
2010 |
|
|
Partner, law firm
of Kramer Levin
Naftalis and
Frankel LLP.
|
|
|
133 |
|
|
Director, Reich &
Tang Funds (6
portfolios). |
|
|
|
|
|
|
|
|
|
|
|
|
|
Prema Mathai-Davis
1950
Trustee
|
|
|
2010 |
|
|
Retired.
Formerly: Chief
Executive Officer,
YWCA of the U.S.A.
|
|
|
133 |
|
|
None. |
F-4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
|
|
|
|
|
|
|
Portfolios in |
|
|
Name, Year of Birth |
|
|
|
|
|
|
|
Fund Complex |
|
Other Trusteeship(s) |
and Position(s) Held |
|
Trustee |
|
Principal Occupation(s) During Past |
|
Overseen by |
|
Held by Trustee Over |
with the Funds |
|
Since |
|
5 Years |
|
Trustee |
|
Past 5 Years |
Larry Soll 1942
Trustee
|
|
|
2010 |
|
|
Retired.
Formerly, Chairman,
Chief Executive
Officer and
President, Synergen
Corp. (a
biotechnology
company).
|
|
|
133 |
|
|
None. |
|
|
|
|
|
|
|
|
|
|
|
|
|
Hugo F. Sonnenschein
1940
Trustee
|
|
|
2010 |
|
|
Distinguished
Service Professor
and President
Emeritus of the
University of
Chicago and the
Adam Smith
Distinguished
Service Professor
in the Department
of Economics at the
University of
Chicago. Prior to
July 2000,
President of the
University of
Chicago.
|
|
|
151 |
|
|
Trustee of the
University of
Rochester and a
member of its
investment
committee. Member
of the National
Academy of
Sciences, the
American
Philosophical
Society and a
fellow of the
American Academy of
Arts and Sciences. |
|
|
|
|
|
|
|
|
|
|
|
|
|
Raymond Stickel, Jr.
1944
Trustee
|
|
|
2010 |
|
|
Retired.
Formerly, Director,
Mainstay VP Series
Funds, Inc. (25
portfolios) and
Partner, Deloitte &
Touche.
|
|
|
133 |
|
|
None. |
|
|
|
(1) |
|
Mr. Flanagan is considered an interested person of the Funds because he is an adviser to
the board of directors of the Adviser, and an officer and a director of Invesco Ltd., the
ultimate parent company of the Adviser. |
|
(2) |
|
Mr. Taylor is considered an interested person of the Funds because he is an officer and a
director of the Adviser. |
|
(3) |
|
Mr. Whalen is considered an interested person of the Funds because he is Of Counsel at the
law firm that serves as legal counsel to the Invesco Van Kampen closed-end funds, for which
the Adviser also serves as investment adviser. |
Trustee Ownership of Fund Shares
The following table shows each Board members ownership of shares of the Funds and of shares
of all registered investment companies overseen by such Board member in the Fund Complex as of
December 31, 2011.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate Dollar Range of |
|
|
|
|
|
|
|
|
Equity Securities in All |
|
|
|
|
|
|
Dollar Range of |
|
Registered Investment |
|
|
Dollar Range of |
|
|
|
Equity Securities in |
|
Companies Overseen by |
|
|
Equity Securities in |
|
Dollar Range of Equity |
|
Acquiring Fund |
|
Board Member in Family |
Name |
|
IMC |
|
Securities in IMT |
|
(IIM) |
|
of Investment Companies |
Interested Trustees |
|
|
|
|
|
|
|
|
Martin L. Flanagan |
|
None |
|
None |
|
None |
|
Over $100,000 |
Philip A. Taylor |
|
None |
|
None |
|
None |
|
None |
Wayne W. Whalen |
|
None |
|
None |
|
None |
|
Over $100,000 |
Independent Trustees |
|
|
|
|
|
|
|
|
Bruce L. Crockett |
|
None |
|
None |
|
None |
|
Over $100,000 |
David C. Arch |
|
None |
|
None |
|
None |
|
Over $100,000 |
Frank S. Bayley |
|
None |
|
None |
|
None |
|
Over $100,000 |
James T. Bunch |
|
None |
|
None |
|
None |
|
Over $100,000 |
Rodney Dammeyer |
|
None |
|
None |
|
None |
|
Over $100,000 |
Prema Mathai-Davis |
|
None |
|
None |
|
None |
|
Over $100,000 |
Albert R. Dowden |
|
None |
|
None |
|
None |
|
Over $100,000 |
Jack M. Fields |
|
None |
|
None |
|
None |
|
Over $100,000 |
Carl Frischling |
|
None |
|
None |
|
None |
|
Over $100,000 |
Larry Soll |
|
None |
|
None |
|
None |
|
Over $100,000 |
Hugo F. Sonnenschein |
|
None |
|
None |
|
None |
|
Over $100,000 |
Raymond Stickel, Jr. |
|
None |
|
None |
|
None |
|
Over $100,000 |
F-5
EXHIBIT G
Board Leadership Structure, Role in Risk Oversight, and Committees and Meetings of the Funds
Board Leadership Structure
The Board will be composed of fifteen Trustees, including twelve 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. The Board met twelve
times during the twelve months ended February 29, 2012. As discussed below, the Board has
established committees to assist the Board in performing its oversight responsibilities.
The Board has appointed an Independent Trustee to serve in the role of Chairman. The
Chairmans primary role is to participate in the preparation of the agenda for meetings of the
Board and the identification of information to be presented to the Board and matters to be acted
upon by the Board. The Chairman also presides at all meetings of the Board and acts as a liaison
with service providers, officers, attorneys, and other Trustees generally between meetings. The
Chairman may perform such other functions as may be requested by the Board from time to time.
Except for any duties specified herein or pursuant to a Funds charter documents, the designation
of Chairman does not impose on such Independent Trustee any duties, obligations or liability that
is greater than the duties, obligations or liability otherwise imposed on such person as a member
of the Board.
The Board believes that its leadership structure, which includes an Independent Trustee as
Chairman, allows for effective communication between the Trustees and fund management, among the
Boards Trustees and among its Independent Trustees. The existing Board structure, including its
committee structure, provides the Independent Trustees with effective control over Board governance
while also providing insight from the two non-Independent Trustees who are active officers of the
Funds investment adviser. The Boards leadership structure promotes dialogue and debate, which
the Board believes will allow for the proper consideration of matters deemed important to the Funds
and their shareholders and result in effective decision-making.
Board Role in Risk Oversight
The Board considers risk management issues as part of its general oversight responsibilities
throughout the year at regular meetings of the Investments Committee, Audit Committee, Compliance
Committee, and Valuation, Distribution and Proxy Oversight Committee (each as defined and further
described below). These committees in turn report to the full Board and recommend actions and
approvals for the full Board to take.
Invesco prepares regular reports that address certain investment, valuation and compliance
matters, and the Board as a whole or the committees may 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. In addition, the Audit Committee of the Board meets regularly with Invesco Ltd.s internal
audit group to review reports on their examinations of functions and processes within the Adviser
that affect the Funds.
The Investments Committee and its sub-committees receive regular written reports describing
and analyzing the investment performance of the Funds. In addition, the portfolio managers of the
Funds meet regularly with the sub-committees of the Investments Committee to discuss portfolio
performance, including investment risk, such as the impact on the Funds of the investment in
particular 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 Funds risk profile, the
Board generally is consulted in advance with respect to such change.
The Adviser provides regular written reports to the Valuation, Distribution and Proxy
Oversight Committee that enable the Valuation, Distribution and Proxy Oversight Committee to
monitor the number of fair valued securities in a particular portfolio, the reasons for the fair
valuation and the methodology used to arrive at the fair value. Such reports also include
information concerning illiquid securities within a Funds portfolio. In addition, the Audit
Committee reviews valuation procedures and pricing results with the Funds independent auditors in
connection with the Audit Committees review of the results of the audit of the Funds year-end
financial statement.
G-1
The Compliance Committee receives regular compliance reports prepared by the Advisers
compliance group and meets regularly with the Funds Chief Compliance Officer (CCO) to discuss
compliance issues, including compliance risks. As required under U.S. Securities and Exchange
Commission (SEC) rules, the Independent Trustees meet at least quarterly in executive session with
the CCO, and the Funds CCO prepares and presents an annual written compliance report to the Board.
The Compliance Committee recommends and the Board adopts compliance policies and procedures for the
Funds and approves such procedures for the Funds service providers. The compliance policies and
procedures are specifically designed to detect, prevent and correct violations of the federal
securities laws.
Board Committees and Meetings
The standing committees of the Board are the Audit Committee, the Compliance Committee, the
Governance Committee, the Investments Committee, and the Valuation, Distribution and Proxy Voting
Oversight Committee (the Committees).
The members of the Audit Committee are Messrs. David C. Arch, Frank S. Bayley, James T. Bunch,
Bruce L. Crockett, Rodney Dammeyer (Vice Chair), Raymond Stickel, Jr. (Chair) and Dr. Larry Soll.
The Audit Committees primary purposes are to: (i) oversee qualifications, independence and
performance of the independent registered public accountants; (ii) appoint independent registered
public accountants for the Funds; (iii) pre-approve all permissible audit and non-audit services
that are provided to Funds by their independent registered public accountants to the extent
required by Section 10A(h) and (i) of the Exchange Act; (iv) pre-approve, in accordance with Rule
2-01(c)(7)(ii) of Regulation S-X, certain non-audit services provided by the Funds independent
registered public accountants to the Adviser and certain affiliates of the Adviser; (v) review the
audit and tax plans prepared by the independent registered public accountants; (vi) review the
Funds audited financial statements; (vii) review the process that management uses to evaluate and
certify disclosure controls and procedures in Form N-CSR; (viii) review the process for preparation
and review of the Funds shareholder reports; (ix) review certain tax procedures maintained by the
Funds; (x) review modified or omitted officer certifications and disclosures; (xi) review any
internal audits of the Funds; (xii) establish procedures regarding questionable accounting or
auditing matters and other alleged violations; (xiii) set hiring policies for employees and
proposed employees of the Funds who are employees or former employees of the independent registered
public accountants; and (xiv) remain informed of (a) the Funds accounting systems and controls,
(b) regulatory changes and new accounting pronouncements that affect the Funds net asset value
calculations and financial statement reporting requirements, and (c) communications with regulators
regarding accounting and financial reporting matters that pertain to the Funds. Each member of the
Audit Committee is an Independent Trustee and each meets the additional independence requirements
for audit committee members as defined by Exchange listing standards. The Audit Committee held
eight meetings during the twelve months ended February 29, 2012.
The members of the Compliance Committee are Messrs. Bayley, Bunch, Dammeyer (Vice Chair),
Stickel and Dr. Soll (Chair). The Compliance Committee is responsible for: (i) recommending to the
Board and the Independent Trustees the appointment, compensation and removal of the Funds CCO;
(ii) recommending to the Independent Trustees the appointment, compensation and removal of the
Funds Senior Officer appointed pursuant to the terms of the Assurances of Discontinuance entered
into by the New York Attorney General, Invesco and INVESCO Funds Group, Inc.; (iii) reviewing any
report prepared by a third party who is not an interested person of the Adviser, upon the
conclusion by such third party of a compliance review of the Adviser; (iv) reviewing all reports on
compliance matters from the Funds CCO, (v) reviewing all recommendations made by the Senior
Officer regarding the Advisers compliance procedures, (vi) reviewing all reports from the Senior
Officer of any violations of state and federal securities laws, the Colorado Consumer Protection
Act, or breaches of the Advisers fiduciary duties to Fund shareholders and of the Advisers Code
of Ethics; (vii) overseeing all of the compliance policies and procedures of the Funds and their
service providers adopted pursuant to Rule 38a-1 of the 1940 Act; (viii) from time to time,
reviewing certain matters related to redemption fee waivers and recommending to the Board whether
or not to approve such matters; (ix) receiving and reviewing quarterly reports on the activities of
the Advisers Internal Compliance Controls Committee; (x) reviewing all reports made by the
Advisers CCO; (xi) reviewing and recommending to the Independent Trustees whether to approve
procedures to investigate matters brought to the attention of the Advisers ombudsman; (xii) risk
management oversight with respect to the Funds and, in connection therewith, receiving and
overseeing risk management reports from Invesco Ltd. that are applicable to the Funds or
G-2
their service providers; and (xiii) overseeing potential conflicts of interest that are reported to
the Compliance Committee by the Adviser, the CCO, the Senior Officer and/or the Compliance
Consultant. The Compliance Committee held six meetings during the twelve months ended February 29,
2012.
The members of the Governance Committee are Messrs. Arch, Crockett, Albert R. Dowden (Chair),
Jack M. Fields (Vice Chair), Carl Frischling, Hugo F. Sonnenschein and Dr. Prema Mathai-Davis. The
Governance Committee is responsible for: (i) nominating persons who will qualify as Independent
Trustees for (a) election as Trustees in connection with meetings of shareholders of the Funds that
are called to vote on the election of Trustees, and (b) appointment by the Board as Trustees in
connection with filling vacancies that arise in between meetings of shareholders; (ii) reviewing
the size of the Board, and recommending to the Board whether the size of the Board shall be
increased or decreased; (iii) nominating the Chair of the Board; (iv) monitoring the composition of
the Board and each committee of the Board, and monitoring the qualifications of all Trustees; (v)
recommending persons to serve as members of each committee of the Board (other than the Compliance
Committee), as well as persons who shall serve as the chair and vice chair of each such committee;
(vi) reviewing and recommending the amount of compensation payable to the Independent Trustees;
(vii) overseeing the selection of independent legal counsel to the Independent Trustees; (viii)
reviewing and approving the compensation paid to independent legal counsel to the Independent
Trustees; (ix) reviewing and approving the compensation paid to counsel and other advisers, if any,
to the Committees of the Board; and (x) reviewing as they deem appropriate administrative and/or
logistical matters pertaining to the operations of the Board. Each member of the Governance
Committee is an Independent Trustee and each meets the additional independence requirements for
nominating committee members as defined by Exchange listing standards. The Governance Committees
charter is available at www.invesco.com/us.
The Governance Committee will consider nominees recommended by a shareholder to serve as
Trustee, provided: (i) that such person 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 each Funds bylaws require
that any shareholder of a Fund desiring to nominate a Trustee for election at a shareholder meeting
must submit to the Funds Secretary the nomination in writing not later than the close of business
on the later of the 60th day prior to such shareholder meeting or the tenth day following the day
on which public announcement is made of the shareholder meeting and not earlier than the close of
business on the 90th day prior to the shareholder meeting. The Governance Committee held six
meetings during the twelve months ended February 29, 2012.
The members of the Investments Committee are Messrs. Arch, Bayley (Chair), Bunch (Vice Chair),
Crockett, Dammeyer, Dowden, Fields, Martin L. Flanagan, Frischling, Sonnenschein (Vice Chair),
Stickel, Philip A. Taylor, Wayne W. Whalen, and Drs. Mathai-Davis (Vice Chair) and Soll. The
Investments Committees primary purposes are to: (i) assist the Board in its oversight of the
investment management services provided by the Adviser and the Sub-Advisers; and (ii) review all
proposed and existing advisory and sub-advisory arrangements for the Funds, and to recommend what
action the full Boards and the Independent Trustees take regarding the approval of all such
proposed arrangements and the continuance of all such existing arrangements.
The Investments Committee has established three sub-committees (the Sub-Committees). The
Sub-Committees are responsible for: (i) reviewing the performance, fees and expenses of the Funds
that have been assigned to a particular Sub-Committee (for each Sub-Committee, the Designated
Funds), unless the Investments Committee takes such action directly; (ii) reviewing with the
applicable portfolio managers from time to time the investment objective(s), policies, strategies
and limitations of the Designated Funds; (iii) evaluating the investment advisory, sub-advisory and
distribution arrangements in effect or proposed for the Designated Funds, unless the Investments
Committee takes such action directly; (iv) being familiar with the registration statements and
periodic shareholder reports applicable to their Designated Funds; and (v) such other
investment-related matters as the Investments Committee may delegate to the Sub-Committees from
time to time. The Investments Committee held six meetings during the twelve months ended February
29, 2012.
The members of the Valuation, Distribution and Proxy Oversight Committee are Messrs. Dowden,
Fields, Frischling (Chair), Sonnenschein (Vice Chair), Whalen and Dr. Mathai-Davis. The primary
purposes of the Valuation, Distribution and Proxy Oversight Committee are: (a) to address issues
requiring action or oversight by
G-3
the Board (i) in the valuation of the Funds portfolio securities consistent with the Pricing
Procedures, (ii) in oversight of the creation and maintenance by the principal underwriters of the
Funds of an effective distribution and marketing system to build and maintain an adequate asset
base and to create and maintain economies of scale for the Funds, (iii) in the review of existing
distribution arrangements for the Funds under Rule 12b-1 and Section 15 of the 1940 Act, and (iv)
in the oversight of proxy voting on portfolio securities of the Funds; and (b) to make regular
reports to the full Board.
The Valuation, Distribution and Proxy Oversight Committee is responsible for: (a) with regard
to valuation, (i) developing an understanding of the valuation process and the Pricing Procedures,
(ii) reviewing the Pricing Procedures and making recommendations to the full Board with respect
thereto, (iii) reviewing the reports described in the Pricing Procedures and other information from
the Adviser regarding fair value determinations made pursuant to the Pricing Procedures by the
Advisers internal valuation committee and making reports and recommendations to the full Board
with respect thereto, (iv) receiving the reports of the Advisers internal valuation committee
requesting approval of any changes to pricing vendors or pricing methodologies as required by the
Pricing Procedures and the annual report of the Adviser evaluating the pricing vendors, approving
changes to pricing vendors and pricing methodologies as provided in the Pricing Procedures, and
recommending annually the pricing vendors for approval by the full Board, (v) upon request of the
Adviser, assisting the Advisers internal valuation committee or the full Board in resolving
particular fair valuation issues, (vi) reviewing the reports described in the Procedures for
Determining the Liquidity of Securities (the Liquidity Procedures) and other information from the
Adviser regarding liquidity determinations made pursuant to the Liquidity Procedures by the Adviser
and making reports and recommendations to the full Board with respect thereto, and (vii) overseeing
actual or potential conflicts of interest by investment personnel or others that could affect their
input or recommendations regarding pricing or liquidity issues; (b) with regard to distribution and
marketing, (i) developing an understanding of mutual fund distribution and marketing channels and
legal, regulatory and market developments regarding distribution, (ii) reviewing periodic
distribution and marketing determinations and annual approval of distribution arrangements and
making reports and recommendations to the full Board with respect thereto, and (iii) reviewing
other information from the principal underwriters to the Funds regarding distribution and marketing
of the Funds and making recommendations to the full Board with respect thereto; and (c) with regard
to proxy voting, (i) overseeing the implementation of the Proxy Voting Guidelines (the
Guidelines) and the Proxy Policies and Procedures (the Proxy Procedures) by the Adviser and the
Sub-Advisers, reviewing the Quarterly Proxy Voting Report and making recommendations to the full
Board with respect thereto, (ii) reviewing the Guidelines and the Proxy Procedures and information
provided by the Adviser and the Sub-Advisers regarding industry developments and best practices in
connection with proxy voting and making recommendations to the full Board with respect thereto, and
(iii) in implementing its responsibilities in this area, assisting the Adviser in resolving
particular proxy voting issues. The Valuation, Distribution and Proxy Oversight Committee was
formed effective January 1, 2008. It succeeded the Valuation Committee, which existed prior to
2008. The Valuation, Distribution and Proxy Oversight Committee held six meetings during the
twelve months ended February 29, 2012.
Trustees are encouraged to attend shareholder meetings, but the Board has no set policy
requiring Board member attendance at meetings. During each Funds last fiscal year, each of the
Trustees during the period such Trustee served as a Trustee attended at least 75% of the meetings
of the Board and all committee meetings thereof of which such Trustee was a member.
G-4
EXHIBIT H
Remuneration of the Funds Trustees
Each Trustee who is not affiliated with the Adviser 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 consists of an annual retainer component and a meeting fee
component. The Chair of the Board and Chairs and Vice Chairs of certain committees receive
additional compensation for their services.
The Trustees have adopted a retirement plan funded by the Funds for the Trustees who are not
affiliated with the Adviser. The Trustees also have adopted a retirement policy that permits each
non-Invesco-affiliated Trustee to serve until December 31 of the year in which the Trustee turns
75. A majority of the Trustees may extend from time to time the retirement date of a Trustee.
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 Trustees 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 Trustees 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 Trustees 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 death
or 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 Trustees 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 Trustees 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 Trustees 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 Trustees years of credited service after June 1, 2010, the first component of
the annual retirement benefit will equal 75% of the compensation amount described in the preceding
paragraph. Thereafter, for the period of time equal to the Former Van Kampen
H-1
Trustees 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.
Deferred Compensation Agreements. Edward K. Dunn (a former Trustee of funds in the Invesco Funds
complex), Messrs. Crockett, Fields and Frischling, and Drs. Mathai-Davis and Soll (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.
Set forth below is information regarding compensation paid or accrued for each Trustee of the
Funds.
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|
|
|
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|
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|
|
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|
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|
|
|
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|
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|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension or |
|
Estimated |
|
Compensation |
|
|
|
|
|
|
|
|
|
|
Aggregate |
|
Retirement |
|
Annual |
|
Before |
|
|
|
|
|
|
|
|
|
|
Compensation |
|
Benefits |
|
Benefits from |
|
Deferral from |
|
|
Aggregate |
|
Aggregate |
|
from the |
|
Accrued by |
|
Invesco Funds |
|
Invesco Funds |
|
|
Compensation |
|
Compensation |
|
Acquiring |
|
All Invesco |
|
Upon |
|
Paid to |
Name of Trustee |
|
from IMC(1) |
|
from IMT(1) |
|
Fund (IIM)(1) |
|
Funds(2) |
|
Retirement(3) |
|
Trustee(4) |
Interested Trustees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Martin L. Flanagan |
|
None |
|
|
None |
|
|
None |
|
|
None |
|
|
None |
|
|
None |
|
Philip A. Taylor |
|
None |
|
|
None |
|
|
None |
|
|
None |
|
|
None |
|
|
None |
|
Wayne W. Whalen |
|
$ |
1,058 |
|
|
$ |
1,248 |
|
|
$ |
1,311 |
|
|
$ |
304,730 |
|
|
$ |
195,000 |
|
|
$ |
399,000 |
|
Independent Trustees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David C. Arch |
|
|
1,114 |
|
|
|
1,312 |
|
|
|
1,378 |
|
|
|
164,973 |
|
|
|
195,000 |
|
|
|
412,250 |
|
Frank S. Bayley |
|
|
1,545 |
|
|
|
1,998 |
|
|
|
12,122 |
|
|
|
236,053 |
|
|
|
195,000 |
|
|
|
420,000 |
|
James T. Bunch |
|
|
1,164 |
|
|
|
1,374 |
|
|
|
11,418 |
|
|
|
302,877 |
|
|
|
195,693 |
|
|
|
385,000 |
|
Bruce L. Crockett |
|
|
2,611 |
|
|
|
3,326 |
|
|
|
13,536 |
|
|
|
227,797 |
|
|
|
195,000 |
|
|
|
693,500 |
|
Rodney F. Dammeyer |
|
|
1,104 |
|
|
|
1,301 |
|
|
|
1,366 |
|
|
|
290,404 |
|
|
|
195,000 |
|
|
|
412,250 |
|
Albert R. Dowden |
|
|
1,844 |
|
|
|
2,558 |
|
|
|
12,766 |
|
|
|
296,156 |
|
|
|
195,000 |
|
|
|
415,000 |
|
Jack M. Fields |
|
|
1,068 |
|
|
|
1,260 |
|
|
|
2,266 |
|
|
|
313,488 |
|
|
|
195,000 |
|
|
|
307,250 |
|
Carl Frischling(5) |
|
|
1,230 |
|
|
|
1,452 |
|
|
|
1,525 |
|
|
|
233,415 |
|
|
|
195,000 |
|
|
|
356,000 |
|
Prema Mathai-Davis |
|
|
1,137 |
|
|
|
1,342 |
|
|
|
2,353 |
|
|
|
302,911 |
|
|
|
195,000 |
|
|
|
330,000 |
|
Larry Soll |
|
|
1,659 |
|
|
|
2,201 |
|
|
|
3,103 |
|
|
|
342,675 |
|
|
|
216,742 |
|
|
|
375,750 |
|
Hugo F. Sonnenschein |
|
|
1,132 |
|
|
|
1,334 |
|
|
|
1,401 |
|
|
|
290,404 |
|
|
|
195,000 |
|
|
|
412,200 |
|
Raymond Stickel, Jr. |
|
|
1,940 |
|
|
|
2,672 |
|
|
|
3,853 |
|
|
|
230,451 |
|
|
|
195,000 |
|
|
|
399,250 |
|
|
|
|
(1) |
|
For the fiscal year ended February 29, 2012. The total amount of compensation
deferred by all Trustees of the Acquiring Fund, IMC and IMT during the fiscal year ended
February 29, 2012, including earnings, was $7,524, $4,212 and $5,023, respectively. |
|
(2) |
|
For the year ended December 31, 2011. During the fiscal year ended February 29,
2012, the total amount of expenses allocated to the Acquiring Fund, IMC and IMT in respect of
such retirement benefits was $8,947, $1,657 and $7,164, respectively. |
H-2
|
|
|
(3) |
|
For the year ended December 31, 2011. These amounts represent the estimated annual
benefits payable by the Funds upon the Trustees retirement and assumes each Trustee serves
until his or her normal retirement date. |
|
(4) |
|
For the year ended December 31, 2011. All Trustees, except Messrs. Arch, Dammeyer,
Sonnenschein and Whalen, currently serve as Trustees of 133 portfolios in the Invesco fund
complex. Messrs. Arch, Dammeyer, Sonnenschein and Whalen currently serve as Trustees of 151
portfolios in the Invesco fund complex. |
|
(5) |
|
During the fiscal year ended February 29, 2012, the Acquiring Fund, IMC, IMT paid
$7,663, $1,022 and $1,258, respectively, in legal fees to Kramer Levin Naftalis & Frankel LLP
for services rendered by such firm as counsel to the Independent Trustees of the Funds. Mr.
Frischling is a partner of such firm. |
H-3
EXHIBIT I
Independent Auditor Information
Independent Registered Public Accounting Firm
The Audit Committee of the Board of Trustees of each Fund appointed, and the Board of Trustees
ratified and approved, PricewaterhouseCoopers LLP (PwC) as the independent registered public
accounting firm of the Fund for fiscal years ending after May 31, 2010. Prior to May 31, 2010, each
Fund was audited by a different independent registered public accounting firm (the Prior
Auditor). The Board of Trustees selected a new independent auditor in connection with the
appointment of Invesco Advisers as investment adviser to the Fund (New Advisory Agreement).
Effective June 1, 2010, the Prior Auditor resigned as the independent registered public accounting
firm of the Fund.
The Prior Auditors report on the financial statements of each Fund for the prior two years
did not contain an adverse opinion or a disclaimer of opinion, and was not qualified or modified as
to uncertainty, audit scope or accounting principles. During the period the Prior Auditor was
engaged, there were no disagreements with the Prior Auditor on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedures which, if not
resolved to the Prior Auditors satisfaction, would have caused it to make reference to that matter
in connection with its report.
Audit and Other Fees
The Funds and Covered Entities (the Adviser, excluding sub-advisers unaffiliated with the
Adviser, and any entity controlling, controlled by or under common control with the Adviser that
provides ongoing services to the Funds) were billed the amounts listed below by PwC during each
Funds last two fiscal years. Effective February 28, 2011, the fiscal year end of each Fund was
changed to the last day in February.
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Audit Fees |
|
|
|
|
Fiscal Year |
|
|
|
|
|
Audit Related |
|
|
|
|
|
All Other |
|
Total Non-Audit |
|
|
Fund |
|
End |
|
Audit Fees |
|
Fees(1) |
|
Tax Fees(2) |
|
Fees |
|
Fees |
|
Total |
IMC |
|
|
02/29/12 |
|
|
$ |
36,300 |
|
|
$ |
5,000 |
|
|
$ |
4,100 |
|
|
$ |
0 |
|
|
$ |
9,100 |
|
|
$ |
45,400 |
|
|
|
11/01/10 to 02/28/11 |
|
$ |
19,250 |
|
|
$ |
4,000 |
|
|
$ |
2,300 |
|
|
$ |
0 |
|
|
$ |
6,300 |
|
|
$ |
25,550 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IMT |
|
|
02/29/12 |
|
|
$ |
36,300 |
|
|
$ |
5,000 |
|
|
$ |
4,100 |
|
|
$ |
0 |
|
|
$ |
9,100 |
|
|
$ |
45,400 |
|
|
|
11/01/10 to 02/28/11 |
|
$ |
19,250 |
|
|
$ |
4,000 |
|
|
$ |
2,300 |
|
|
$ |
0 |
|
|
$ |
6,300 |
|
|
$ |
25,550 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquiring Fund
(IIM) |
|
|
02/29/12 |
|
|
$ |
36,300 |
|
|
$ |
5,000 |
|
|
$ |
4,300 |
|
|
$ |
0 |
|
|
$ |
9,300 |
|
|
$ |
45,600 |
|
|
|
11/01/10 to 02/28/11 |
|
$ |
19,250 |
|
|
$ |
4,000 |
|
|
$ |
2,300 |
|
|
$ |
0 |
|
|
$ |
6,300 |
|
|
$ |
25,550 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Covered Entities |
|
|
02/29/12 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
|
11/01/10 to 02/28/11 |
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
|
|
(1) |
|
Includes fees billed for agreed upon procedures related to auction rate preferred securities. |
|
(2) |
|
Includes fees billed for reviewing tax returns. |
The Audit Committee of each Board has considered whether the provision of non-audit
services performed by PwC to such Funds and Covered Entities is compatible with maintaining PwCs
independence in performing audit services. Each Funds Audit Committee also is required to
pre-approve services to Covered Entities to the extent that the services are determined to have a
direct impact on the operations or financial reporting of such Fund. 100% of such services were
pre-approved by the Audit Committee pursuant to the Audit Committees pre-approval policies and
procedures. Each Boards pre-approval policies and procedures are included as part of the Boards
I-1
Audit Committee charter, which is available at www.invesco.com/us. The members of each Funds
Audit Committee are David C. Arch, Frank S. Bayley, James T. Bunch, Bruce L. Crockett, Rodney
Dammeyer, Raymond Stickel, Jr., and Dr. Larry Soll.
The Audit Committee of each Fund reviewed and discussed the last audited financial statements
of each Fund with management and with PwC. In the course of its discussions, each Funds Audit
Committee has discussed with PwC its judgments as to the quality, not just the acceptability, of
such Funds accounting principles and such other matters as are required to be discussed with the
Audit Committee by Statement on Auditing Standards No. 114 (The Auditors Communication With Those
Charged With Governance). Each Funds Audit Committee received the written disclosures and the
letter from PwC required under Public Company Accounting Oversight Boards Ethics & Independence
Rule 3526 and has discussed with PwC its independence with respect to such Fund. Each Fund knows
of no direct financial or material indirect financial interest of PwC in such Fund. Based on this
review, the Audit Committee recommended to the Board of each Fund that such Funds audited
financial statements be included in such Funds Annual Report to Shareholders for the most recent
fiscal year for filing with the SEC.
It is not expected that representatives of PwC will attend the Meeting. In the event
representatives of PwC do attend the Meeting, they will have the opportunity to make a statement if
they desire to do so and will be available to answer appropriate questions.
I-2
EXHIBIT J
Outstanding Shares of the Funds
As of the Record Date, there were the following number of shares outstanding of each Fund:
|
|
|
|
|
|
|
Fund |
|
Share Class |
|
Number of Shares Outstanding |
|
IMC |
|
Common Shares |
|
|
3,942,543 |
|
IMC |
|
VMTP Shares |
|
|
160 |
|
IMT |
|
Common Shares |
|
|
17,484,370 |
|
IMT |
|
VMTP Shares |
|
|
559 |
|
Acquiring Fund (IIM) |
|
Common Shares |
|
|
20,694,674 |
|
Acquiring Fund (IIM) |
|
VMTP Shares |
|
|
712 |
|
J-1
EXHIBIT K
Ownership of the Funds
Significant Holders
Listed below are the name, address and percent ownership of each person who as of the Record
Date, to the best knowledge of the Funds owned 5% or more of the outstanding shares of a class of a
Fund. A shareholder who owns beneficially 25% or more of the outstanding securities of a Fund is
presumed to control the Fund as defined in the 1940 Act. Such control may affect the voting
rights of other shareholders.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
|
Name and Address |
|
Fund |
|
Class of Shares |
|
Shares Owned |
|
|
Percent Owned* |
|
First Trust Portfolios
L.P., First Trust Advisors L.P.,
The Charger Corporation
120 East Liberty Drive, Suite 400
Wheaton, Illinois 60187 |
|
IMC |
|
Common Shares |
|
|
463,465 |
|
|
|
11.8 |
% |
First Trust Portfolios L.P.,
First Trust Advisors L.P., The
Charger Corporation
120 East Liberty Drive, Suite 400
Wheaton, Illinois 60187 |
|
IMT |
|
Common Shares |
|
|
2,591,234 |
|
|
|
14.8 |
% |
First Trust Portfolios L.P.,
First Trust Advisors L.P., The
Charger Corporation
120 East Liberty Drive, Suite 400
Wheaton, Illinois 60187 |
|
Acquiring Fund (IIM) |
|
Common Shares |
|
|
2,661,176 |
|
|
|
12.9 |
% |
JPMorgan Chase Bank, National
Association
383 Madison Avenue, Floor 8
New York, NY 10179 |
|
IMC |
|
VMTP |
|
|
160 |
** |
|
|
100 |
% |
JPMorgan Chase Bank, National
Association
383 Madison Avenue, Floor 8
New York, NY 10179 |
|
IMT |
|
VMTP |
|
|
559 |
** |
|
|
100 |
% |
JPMorgan Chase Bank, National
Association
383 Madison Avenue, Floor 8
New York, NY 10179 |
|
Acquiring Fund (IIM) |
|
VMTP |
|
|
712 |
** |
|
|
100 |
% |
|
|
|
* |
|
Based on filings made by such owners with the SEC. Each Fund has no knowledge of whether all
or any portion of the shares reported or owned of record are also owned beneficially. |
|
** |
|
VMTP Shares are subject to a voting trust requiring that certain voting rights of the VMTP
Shares must be exercised as directed by an unaffiliated third party. |
K-1
Exhibit L
Statement of Preferences of VMTP Shares of the Acquiring Fund
L-1
EVERY SHAREHOLDERS VOTE IS IMPORTANT!
VOTE THIS PROXY CARD TODAY!
|
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|
EASY VOTING OPTIONS: |
|
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VOTE ON THE INTERNET
Log on to:
www.proxy-direct.com
Follow the on-screen instructions
available 24 hours |
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|
VOTE BY TELEPHONE
Call 1-800-337-3503
Follow the recorded instructions
available 24 hours |
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|
VOTE BY MAIL
Vote, sign and date your
Proxy Card and return it in the
postage-paid envelope |
Please detach at perforation before mailing.
|
|
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|
|
INVESCO VALUE MUNICIPAL INCOME
TRUST (the Fund)
PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES (the Board)
PROXY FOR THE JOINT ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JULY 17, 2012 |
|
PREFERRED
SHARES |
|
|
The undersigned holder of Preferred Shares of the Fund hereby appoints Philip A. Taylor, John M. Zerr, Sheri S. Morris, Peter A. Davidson, and Stephen R. Rimes,
and any one of them separately, proxies with full power of substitution in each, and hereby authorizes them to represent and to vote, as designated on the reverse of
this proxy card, at the Joint Annual Meeting of Shareholders on July 17, 2012, at 1:00 p.m., Eastern Time, and at any adjournment or postponement thereof, all of the
Preferred Shares of the Fund which the undersigned would be entitled
to vote if personally present. IF THIS PROXY IS SIGNED AND RETURNED WITH NO
CHOICE INDICATED, THE SHARES WILL BE VOTED FOR THE APPROVAL OF EACH
PROPOSAL, FOR ALL OF THE NOMINEES, AND IN THE
DISCRETION OF THE PROXIES UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
|
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VOTE VIA THE INTERNET: www.proxy-direct.com
VOTE VIA THE TELEPHONE: 1-800-337-3503 |
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|
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON
THIS PROXY CARD. When signing as executor, administrator, attorney, trustee or guardian or as custodian for a minor,
please give full title as such. If a corporation, limited liability company,
or partnership, please sign in full entity name and indicate the
signers position with the entity. |
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Signature
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|
2012 |
|
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|
|
Date |
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|
PLEASE VOTE VIA INTERNET OR TELEPHONE OR MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING
THE ENCLOSED ENVELOPE.
EVERY SHAREHOLDERS VOTE IS IMPORTANT
VOTE THIS PROXY CARD TODAY!
Important Notice Regarding the Availability of Proxy Materials for the Joint Annual
Meeting of Shareholders to Be Held on July 17, 2012.
The Proxy Statement for this meeting is available at:
[________]
Please detach at perforation before mailing.
This proxy is solicited on behalf of the Board. The Board recommends voting FOR each proposal and FOR ALL of the nominees.
TO
VOTE, MARK A BOX BELOW IN BLUE OR BLACK INK. Example:
n
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FOR |
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AGAINST |
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ABSTAIN |
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Proposal 1: Approval of an Agreement and Plan of Redomestication
that provides for the reorganization of the Fund as a Delaware statutory trust. |
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Proposal 2(b)(i): Approval of an Agreement and Plan of Merger
that provides for Invesco Value Municipal Bond Trust to merge with and into the Fund. |
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Proposal 2(b)(ii): Approval of an Agreement and Plan
of Merger that provides for Invesco Value Municipal Securities to merge with and into the Fund. |
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Proposal 2(b)(iii): Approval of an Agreement and Plan of
Merger that provides for Invesco Value Municipal Trust to merge with and into the Fund. |
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Proposal 3: Approval of an amendment to the Funds
advisory agreement that increases the Funds advisory fee. |
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FOR
ALL
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WITHHOLD
ALL
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FOR ALL
EXCEPT |
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Proposal 4: Election of Trustees The Board recommends a vote FOR ALL of the nominees listed: |
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01. James T. Bunch 03. Rodney F. Dammeyer 05. Martin L. Flanagan |
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02. Bruce L. Crockett
04. Jack M. Fields 06. Carl Frischling |
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INSTRUCTIONS: To withhold authority to vote for any individual nominee(s), mark the box FOR ALL EXCEPT
and write each nominees number on the line provided below.
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PROXIES ARE AUTHORIZED TO VOTE, IN THEIR DISCRETION, UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING AND
IN ACCORDANCE WITH THE VOTING STANDARDS SET FORTH IN THE PROXY STATEMENT WITH RESPECT TO ANY ADJOURNMENT OR
POSTPONEMENT OF THE MEETING.
PLEASE SIGN AND DATE ON THE REVERSE SIDE
EVERY SHAREHOLDERS VOTE IS IMPORTANT!
VOTE THIS PROXY CARD TODAY!
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EASY VOTING OPTIONS: |
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VOTE ON THE INTERNET
Log on to:
www.proxy-direct.com
Follow the on-screen instructions
available 24 hours |
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VOTE BY TELEPHONE
Call 1-800-337-3503
Follow the recorded instructions
available 24 hours |
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VOTE BY MAIL
Vote, sign and date your
Proxy Card and return it in the
postage-paid envelope |
Please detach at perforation before mailing.
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INVESCO VALUE MUNICIPAL BOND
TRUST (the Fund)
PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES (the Board)
PROXY FOR THE JOINT ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JULY 17, 2012 |
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PREFERRED
SHARES |
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The undersigned holder of Preferred Shares of the Fund hereby appoints Philip A. Taylor, John M. Zerr, Sheri S. Morris, Peter A. Davidson, and Stephen R. Rimes,
and any one of them separately, proxies with full power of substitution in each, and hereby authorizes them to represent and to vote, as designated on the reverse of
this proxy card, at the Joint Annual Meeting of Shareholders on July 17, 2012, at 1:00 p.m., Eastern Time, and at any adjournment or postponement thereof, all of the
Preferred Shares of the Fund which the undersigned would be entitled
to vote if personally present. IF THIS PROXY IS SIGNED AND RETURNED WITH NO
CHOICE INDICATED, THE SHARES WILL BE VOTED FOR THE APPROVAL OF EACH
PROPOSAL, FOR ALL OF THE NOMINEES, AND IN THE
DISCRETION OF THE PROXIES UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
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VOTE VIA THE INTERNET: www.proxy-direct.com
VOTE VIA THE TELEPHONE: 1-800-337-3503 |
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NOTE: PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON
THIS PROXY CARD. When signing as executor, administrator, attorney, trustee or guardian or as custodian for a minor,
please give full title as such. If a corporation, limited liability company,
or partnership, please sign in full entity name and indicate the
signers position with the entity. |
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Signature
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2012 |
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Date |
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PLEASE VOTE VIA INTERNET OR TELEPHONE OR MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING
THE ENCLOSED ENVELOPE.
EVERY SHAREHOLDERS VOTE IS IMPORTANT
VOTE THIS PROXY CARD TODAY!
Important Notice Regarding the Availability of Proxy Materials for the Joint Annual
Meeting of Shareholders to Be Held on July 17, 2012.
The Proxy Statement for this meeting is available at:
[______]
Please detach at perforation before mailing.
This proxy is solicited on behalf of the Board. The Board recommends voting FOR each proposal and FOR ALL of the nominees.
TO
VOTE, MARK A BOX BELOW IN BLUE OR BLACK INK. Example:
n
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FOR |
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AGAINST |
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ABSTAIN |
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Proposal 1: Approval of an Agreement and Plan of Redomestication that
provides for the reorganization of the Fund as a Delaware statutory trust. |
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Proposal 2(a): Approval of an Agreement and Plan of
Merger that provides for the Fund to merge with and into Invesco Value Municipal Income Trust. |
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FOR
ALL
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WITHHOLD
ALL
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FOR ALL
EXCEPT |
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Proposal 4: Election of Trustees The Board recommends a vote FOR ALL of the nominees listed: |
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01. James T. Bunch 03. Rodney F. Dammeyer 05. Martin L. Flanagan |
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02. Bruce L. Crockett 04. Jack M. Fields 06. Carl Frischling |
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INSTRUCTIONS: To withhold authority to vote for any individual nominee(s), mark the box FOR ALL EXCEPT
and write each nominees number on the line provided below.
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PROXIES ARE AUTHORIZED TO VOTE, IN THEIR DISCRETION, UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING AND
IN ACCORDANCE WITH THE VOTING STANDARDS SET FORTH IN THE PROXY STATEMENT WITH RESPECT TO ANY ADJOURNMENT OR
POSTPONEMENT OF THE MEETING.
PLEASE SIGN AND DATE ON THE REVERSE SIDE
EVERY SHAREHOLDERS VOTE IS IMPORTANT!
VOTE THIS PROXY CARD TODAY!
|
|
|
|
|
|
|
EASY VOTING OPTIONS: |
|
|
|
|
|
|
|
|
|
VOTE ON THE INTERNET
Log on to:
www.proxy-direct.com
Follow the on-screen instructions
available 24 hours |
|
|
|
|
|
|
|
|
|
VOTE BY TELEPHONE
Call 1-800-337-3503
Follow the recorded instructions
available 24 hours |
|
|
|
|
|
|
|
|
|
VOTE BY MAIL
Vote, sign and date your
Proxy Card and return it in the
postage-paid envelope |
Please detach at perforation before mailing.
|
|
|
|
|
INVESCO VALUE MUNICIPAL
TRUST (the Fund)
PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES (the Board)
PROXY FOR THE JOINT ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JULY 17, 2012 |
|
PREFERRED
SHARES |
|
|
The undersigned holder of Preferred Shares of the Fund hereby appoints Philip A. Taylor, John M. Zerr, Sheri S. Morris, Peter A. Davidson, and Stephen R. Rimes,
and any one of them separately, proxies with full power of substitution in each, and hereby authorizes them to represent and to vote, as designated on the reverse of
this proxy card, at the Joint Annual Meeting of Shareholders on July 17, 2012, at 1:00 p.m., Eastern Time, and at any adjournment or postponement thereof, all of the
Preferred Shares of the Fund which the undersigned would be entitled
to vote if personally present. IF THIS PROXY IS SIGNED AND RETURNED WITH NO
CHOICE INDICATED, THE SHARES WILL BE VOTED FOR THE APPROVAL OF EACH
PROPOSAL, FOR ALL OF THE NOMINEES, AND IN THE
DISCRETION OF THE PROXIES UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
|
|
|
|
|
|
|
|
|
VOTE VIA THE INTERNET: www.proxy-direct.com
VOTE VIA THE TELEPHONE: 1-800-337-3503 |
|
|
|
|
|
|
|
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON
THIS PROXY CARD. When signing as executor, administrator, attorney, trustee or guardian or as custodian for a minor,
please give full title as such. If a corporation, limited liability company,
or partnership, please sign in full entity name and indicate the
signers position with the entity. |
|
|
|
|
|
|
Signature
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|
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|
2012 |
|
|
|
|
|
Date |
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|
|
|
PLEASE VOTE VIA INTERNET OR TELEPHONE OR MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING
THE ENCLOSED ENVELOPE.
EVERY SHAREHOLDERS VOTE IS IMPORTANT
VOTE THIS PROXY CARD TODAY!
Important Notice Regarding the Availability of Proxy Materials for the Joint Annual
Meeting of Shareholders to Be Held on July 17, 2012.
The Proxy Statement for this meeting is available at:
[_______]
Please detach at perforation before mailing.
This
proxy is solicited on behalf of the Board. The Board recommends
voting FOR each proposal and
FOR ALL of the nominees.
TO
VOTE, MARK A BOX BELOW IN BLUE OR BLACK INK. Example:
n
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FOR |
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AGAINST |
|
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ABSTAIN |
|
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Proposal 1: Approval of
an Agreement and Plan of Redomestication that provides for the reorganization of the Fund as a Delaware statutory trust. |
|
|
|
|
|
|
|
|
|
|
|
|
|
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Proposal 2(a): Approval of an Agreement and Plan of
Merger that provides for the Fund to merge with and into Invesco Value Municipal Income Trust. |
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|
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FOR
ALL
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WITHHOLD
ALL
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FOR ALL
EXCEPT |
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Proposal 4: Election of
Trustees The Board recommends a vote FOR ALL of the nominees listed: |
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|
|
|
|
|
|
|
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01. James T. Bunch 03. Rodney F. Dammeyer 05. Martin L. Flanagan |
|
|
|
|
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02. Bruce L. Crockett 04. Jack M. Fields 06. Carl Frischling |
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|
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|
|
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|
|
|
|
|
|
|
|
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|
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|
|
|
|
INSTRUCTIONS: To withhold authority to vote for any individual nominee(s), mark the
box FOR ALL EXCEPT
and write each nominees number on the line provided below. |
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PROXIES ARE AUTHORIZED TO VOTE, IN THEIR DISCRETION, UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING AND
IN ACCORDANCE WITH THE VOTING STANDARDS SET FORTH IN THE PROXY STATEMENT WITH RESPECT TO ANY ADJOURNMENT OR
POSTPONEMENT OF THE MEETING.
PLEASE SIGN AND DATE ON THE REVERSE SIDE