UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14C
Information Statement Pursuant to Section 14(c) of the
Securities Exchange Act of 1934
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LVIP Invesco Select Equity Income Managed Volatility Fund
a series of Lincoln Variable Insurance Products Trust
(Name of Registrant as Specified in its Charter)
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INFORMATION STATEMENT
Lincoln Variable Insurance Products Trust
LVIP Invesco Select Equity Income Managed Volatility Fund
(formerly LVIP Invesco Select Equity Managed Volatility Fund)
May 6, 2019
Dear Shareholder:
At a meeting of the Board of Trustees (the “Board”) of the Lincoln Variable Insurance Products Trust (the “Trust”), held on December3-4, 2018 (the “Meeting”), the Board approved new investmentsub-advisory agreements (each a“Sub-Advisory Agreement”, collectively, the“Sub-Advisory Agreements”) for the LVIP Invesco Select Equity Income Managed Volatility Fund (formerly, LVIP Invesco Select Equity Managed Volatility Fund) (the “Fund”) between the Fund’s investment adviser, Lincoln Investment Advisors Corporation (the “Adviser”), and Invesco Advisers, Inc. (“Invesco Advisers”) and Invesco Capital Management LLC (“Invesco Capital”).
The Trust has received an exemptive order (the “Order”) from the U.S. Securities and Exchange Commission (“SEC”) permitting the Adviser, subject to Board approval, including a majority of the Trustees who are not “interested persons” (“Independent Trustees”) of the Trust within the meaning of that term under the Investment Company Act of 1940, to enter into or materially amend the Fund’s investmentsub-advisory agreements without obtaining shareholder approval. Accordingly, approval of theSub-Advisory Agreements does not require a shareholder vote.
This document is for informational purposes only. You are not required
to take any action and you are not requested to send us a proxy with
respect to thissub-adviser change.
As a condition of relying on the Order, the Adviser is required to furnish Fund shareholders with an Information Statement when asub-advisory agreement is entered into or materially amended without a shareholder vote. This Information Statement provides information regarding theSub-Advisory Agreements.
I. | Background |
At the Meeting, the Adviser recommended, and the Board, including all of the Independent Trustees, approved, theSub-Advisory Agreements with the Invesco Advisers and Invesco Capital with respect to the Fund to be effective as of February 8, 2019. Under the terms of theSub-Advisory Agreements, the Invesco Advisers and Invesco Capital make investment decisions and continuously review, supervise and administer the Fund’s investment program with respect to the portion of the Fund’s assets allocated to the them.
II. | Board Considerations on theSub-Advisory Agreements |
At the Meeting the Board of the Trust met to consider, among other things, theSub-Advisory Agreements. The trustees who were not “interested persons” of the Trust (as such term is defined in the Investment Company Act of 1940) (the “Independent Trustees”) reported that they had reviewed materials provided by the Adviser and Invesco Advisers and Invesco Capital (the“Sub-Advisers”) prior to the meeting, and were advised by their independent legal counsel of their fiduciary duties pertaining to approval of investmentsub-advisory agreements and the factors that they should consider in evaluating such agreements. Among other information, the Adviser and theSub-Advisers provided information to
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assist the Independent Trustees in assessing the nature, extent and quality of services to be provided, including previous presentations by representatives of theSub-Advisers and theSub-Advisers’ responses to the Adviser’s request for proposal. The Independent Trustees and their independent legal counsel met separately from the “interested” trustee, Trust officers, and Lincoln National Life Insurance Company employees to consider the approval of theSub-Advisory Agreements. The Independent Trustees reported that they had considered, among others, the factors listed below and reached the following conclusions with respect to their recommendation to the Board.
The Board considered that the Fund would continue to be managed with an actively-managed risk-management overlay using up to 20% of the Fund’s net assets (the “Risk-Management Sleeve”). The Board further considered LIAC’s proposal to change the structure of the Fund with regard to the investment of the remainder of the Fund’s net assets (the “Equity Sleeve”) from a fund of funds structure, where the Equity Sleeve is invested in underlying funds, to asub-advised structure, where theSub-Advisers would manage the investments of the Equity Sleeve. The Board also considered the proposed changes to the Fund’s investment strategy to include exposure to Invesco Advisers’ Equity and Income and Diversified Dividend strategies and Invesco Capital’s Equal WeightedLarge-Cap Strategy and to remove exposure to Invesco Advisers’ Comstock strategy.
The Board determined that, given the totality of the information provided with respect to theSub-Advisory Agreements, the Board had received sufficient information to approve theSub-Advisory Agreements. In considering the approval of theSub-Advisory Agreements, the Board did not identify any single factor or group of factors asall-important or controlling and considered a variety of factors in its analysis including those discussed below. The Board did not allot a particular weight to any one factor or group of factors.
Sub-Advisory Agreements
Nature, Extent and Quality of Services and Performance. In considering the approval of theSub-Advisory Agreements between the Adviser and theSub-Advisers with respect to the Fund, the Board considered the nature, extent and quality of services to be provided by eachSub-Adviser under theSub-Advisory Agreements. The Board reviewed the services to be provided by eachSub-Adviser, the investment professionals proposed to service the Fund and the reputation, resources and investment approach of theSub-Advisers. The Board noted that Invesco Advisers and Invesco Capital manage the underlying funds in which the Fund invests, and that Invesco Capital and Invesco Advisers were affiliated companies. The Board considered the Adviser’s statement that the Fund has achieved sufficient scale in recent years, which has allowed the Adviser to negotiate asub-advisory fee directly with theSub-Advisers. The Board concluded that the services to be provided by theSub-Advisers were expected to be satisfactory.
Sub-Advisory Fee and Economies of Scale. The Board considered thesub-advisory fee schedules, which contain breakpoints. The Board noted that thesub-advisory fee schedules were negotiated between the Adviser and theSub-Advisers, each unaffiliated with the Adviser, and that the Adviser would compensate theSub-Advisers from its fee and concluded thesub-advisory fee schedules were reasonable.
Profitability and Fallout Benefits. The Board considered that thesub-advisory fee schedules were negotiated between the Adviser and theSub-Advisers, each unaffiliated with the Adviser, and that the Adviser would compensate theSub-Advisers from its fees. The Board reviewed materials provided by theSub-Advisers as to any additional benefits each of Invesco Advisers and Invesco Capital would receive and noted that theSub-Advisers stated that client transactions may be used to generate commissions to pay for research services.
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Overall Conclusions
Based on all the information considered and conclusions reached, the Board determined that the terms of theSub-Advisory Agreements are fair and reasonable, and that approval of eachSub-Advisory Agreement is in the best interests of the Fund.
III. | TheSub-Advisory Agreements |
EachSub-Advisory Agreement is dated February 8, 2019 and has an initialtwo-year term. Thereafter, continuance of theSub-Advisory Agreements will require the annual approval of the Board, including a majority of the Independent Trustees.
Under theSub-Advisory Agreements, theSub-Advisers make investment decisions and continuously review, supervise and administer the Fund’s investment program with respect to the portion of the Fund’s assets allocated to eachSub-Adviser. TheSub-Advisory Agreements can be terminated at any time, without the payment of any penalty, by: (a) the vote of a majority of the Fund’s outstanding voting securities; (b) the Adviser on at least sixty days’ written notice to Invesco Advisers and/or Invesco Capital; or (c) Invesco Advisers and/or Invesco Capital on at least sixty days’ written notice to the Adviser. TheSub-Advisory Agreements will also automatically terminate, without the payment of any penalty, in the event of their assignment, or delegation (unless the Adviser has by prior written consent agreed to the delegation), or in the event the investment management agreement between the Adviser and the Trust terminates.
IV. | Information About Invesco Advisers |
Invesco Advisers is located at 1555 Peachtree Street, N.E., Atlanta, Georgia 30309. Invesco Advisers is an indirect, wholly owned subsidiary of Invesco, Ltd. Invesco, Ltd is a publicly owned company whose shares are listed on the New York Stock Exchange (NYSE:IVZ). As of December 31, 2018, Invesco Advisers managed more than $888.2 billion in assets.
The following table provides the name and principal occupation of Invesco Advisers’ directors and executive officers. The principal address of each of the directors and executive officers is 1555 Peachtree St NE, Atlanta, Georgia 30309, unless otherwise noted.
Name | Principal Occupation | |
Greg McGreevey
| Senior Managing Director, Invesco Ltd.
| |
Loren Starr | Senior Managing Director, Invesco Ltd. | |
Kevin M. Carome | Senior Managing Director, Invesco Ltd. | |
Colin D. Meadows | Senior Managing Director, Invesco Ltd. | |
Phil Taylor 120 Bloor Street East Toronto, Ontario, M4W1B7 Canada | Vice Chair, Invesco Ltd. |
Comparable Funds
Invesco Advisers acts as investment adviser to the following mutual funds that have objectives similar to the portion of the Fund’s assets allocated to Invesco Advisers.
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Comparable Funds | Contractual Fee (including breakpoints) | Assets under Management December 31, 2018. | ||
Invesco Equity and Income | Confidential | $12,575 | ||
Invesco Diversified Dividend | Confidential | $18,499 |
Payments of Commissions to Affiliated Brokers
As of December 31, 2018, Invesco Advisers had the following affiliated broker-dealers:
Subsidiary Name |
Invesco Capital Markets, Inc. |
Invesco Distributors, Inc. |
The Fund did not pay any brokerage commissions to brokers affiliated with Invesco Advisers for the fiscal year ended December 31, 2018.
V. | Information About Invesco Capital |
Invesco Capital is located at 3500 Lacey Road, Suite 700, Downers Grove, Illinois 60515. Invesco Capital is an indirect, wholly owned subsidiary of Invesco, Ltd. As of November 30, 2018, Invesco Capital managed approximately $113.0 billion in assets in its family of exchange-traded registered management companies.
The table below provides the name and principal occupation of Invesco Capital’s directors and executive officers. The principal address of each of the directors and executive officers is at 3500 Lacey Road, Suite 700, Downers Grove, Illinois 60515, unless otherwise noted.
Name | Principal Occupation | |
Daniel E. Draper | President and Principal Executive Officer | |
Melanie Zimdars | Chief Compliance Officer | |
Steven M. Hill | Vice President and Treasurer | |
Peter Hubbard | Vice President | |
Sheri Morris 11 Greenway Plaza, Suite 1000 Houston, TX 77046 | Vice President | |
Anna Paglia | Secretary | |
Rudolf E. Reitmann | Vice President | |
David Warren 5140 Yonge Street, Suite 800 Toronto, Ontario M2N 6X7 Canada | Vice President |
Comparable Funds
Invesco Capital does not act as investment adviser orsub-adviser to other mutual funds that have objectives similar to the portion of the Fund’s assets allocated to Invesco Capital.
Payments of Commissions to Affiliated Brokers
As of December 31, 2018, Invesco Capital had the following affiliated broker-dealers:
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Subsidiary Name |
Invesco Capital Markets, Inc. |
Invesco Distributors, Inc. |
The Fund did not pay any brokerage commissions to brokers affiliated with Invesco Capital for the fiscal year ended December 31, 2018.
VI. | Purchases ofSub-Advisers’ Securities by Trustees |
To the knowledge of the Fund, no Trustee currently has any material interest in security holdings or transactions or proposed transactions involving theSub-Advisers or any entity controlling, controlled by or under common control with theSub-Advisers.
VII. | Ownership of Shares |
As of December 31, 2018, the Fund had 8,845 outstanding Standard Class shares and 12,998,387 outstanding Service Class shares. Because the Fund is an investment for variable annuity contracts and variable life insurance policies (“Variable Contracts”) offered by certain life insurance companies, the insurance companies are the record holders of the Fund’s shares. However, the owners of the Variable Contracts are the beneficial owners/shareholders and they direct the voting of the Fund’s shares.
As of December 31, 2018, to the knowledge of the Fund, no beneficial owner/shareholder of the Fund’s shares beneficially owned 5% or more of the shares.
As of December 31, 2018, the Trustees and officers of the Trust as a group beneficially owned less than 1% of the Fund’s outstanding shares.
VIII. Other Information
Investment Adviser
The Lincoln Investment Advisors Corporation serves as the Fund’s investment adviser and is located at 150 N.Radnor-Chester Road, Radnor, Pennsylvania 19087.
Principal Underwriter and Distributor
The Trust’s principal underwriter and distributor, Lincoln Financial Distributors, Inc. (“LFD”), is located at 130 N. Radnor-Chester Road, Radnor, Pennsylvania 19087. LFD is an affiliate of the Adviser. The Fund paid LFD $40,123 in12b-1 fees for the fiscal year ended December 31, 2018.
Broker-Dealers Affiliated with the Adviser
The Adviser has the following affiliated brokers: Lincoln Financial Advisors Corporation, Lincoln Financial Distributors, Inc., and Lincoln Financial Securities Corporation. The Fund does not trade securities through any broker affiliated with the Adviser and as a result, the Fund did not pay any brokerage commissions to these brokers for the fiscal year ended December 31, 2018.
Administrator
The Trust’s administrator, Lincoln National Life Insurance Company (“Lincoln Life”), is located at 1300 S. Clinton St., Fort Wayne, Indiana 46802. Lincoln Life is an affiliate of the Adviser. The Fund paid
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Lincoln Life $8,331 in reimbursed administrative servicing costs and contract holder servicing fees for the fiscal year ended December 31, 2018.
Householding
Only one copy of this Information Statement is mailed to households, even if more than one person in a household is a Fund shareholder of record, unless the Fund has received instructions to the contrary. If you need additional copies of this Information Statement, or if you do not want the mailing of an Information Statement to be combined with those for other members of your household in the future, or if you are receiving multiple copies and would rather receive just one copy for the household, please contact the Trust by calling1-800-454-6265 or by writing to the Trust at P.O. Box 2340, Fort Wayne, Indiana 46801 (regular mail) or 1300 S. Clinton Street, Fort Wayne, Indiana 46802 (express mail).
Financial Statements
Shareholders can obtain a copy of the Fund’s most recent Annual Report and Semi-Annual Report without charge, by calling1-800-454-6265 or by writing to the Trust at P.O. Box 2340, Fort Wayne, Indiana 46801 (regular mail) or 1300 S. Clinton Street, Fort Wayne, Indiana 46802 (express mail).
PLEASE RETAIN THIS INFORMATION STATEMENT FOR FUTURE REFERENCE
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