consideration of advisory agreements for
Empower Funds, including the services and support provided to Empower Funds, including the Fund and its shareholders. Additionally, the Board recognized that its evaluation process is evolutionary and that the factors
considered and emphasis placed on relevant factors may change in recognition of changing circumstances in the mutual fund marketplace.
In its deliberations, the Board
did not identify any single factor as being determinative. Rather, the Board’s approval was based on each Director’s business judgment after a comprehensive consideration of the information as a whole.
Individual Directors may have weighed certain factors differently and assigned varying degrees of materiality to information considered by the Board. The Independent Directors were assisted throughout the evaluation
process by independent legal counsel.
Based upon its review of the
Advisory Agreement and the information provided to it, the Board concluded that the Advisory Agreement was reasonable in light of the services performed, fees charged and such other matters as the Directors considered
relevant in the exercise of their business judgment. The principal factors and conclusions that formed the basis for the Directors’ determinations to approve the continuation of the Advisory Agreement are
discussed below.
Nature, Extent and Quality of
Services
The Board considered the nature,
extent and quality of services provided and to be provided to the Fund by ECM. Among other things, the Board considered ECM’s organizational history and ownership, personnel, experience, resources and
performance track record, its ability to provide or obtain such services as may be necessary in managing, acquiring and disposing of investments on behalf of the Fund, and its ability to provide research and to obtain
and evaluate the economic, statistical and financial data relevant to the investment policies of the Fund. With respect to personnel, the Board noted that ECM’s affiliate, Empower Retirement, LLC
(“Empower”) provides employees, including various management professionals, who provide services on behalf of ECM - which does not have its own employees - pursuant to an intercompany agreement between ECM
and Empower whereby Empower provides employees, office space, and various other corporate services for ECM. (Each of Empower and ECM is an indirect wholly-owned subsidiary of Empower Annuity Insurance Company of
America (“Empower of America”). References herein to personnel, services, activities and resources of ECM should be understood generally as including Empower.)
The Board reviewed the
qualifications, education, experience, tenure and responsibilities of the senior personnel serving the Fund and the portfolio management team responsible for the day-to-day management of the Fund, as well as the
organization’s efforts to attract, retain and motivate capable personnel to serve the Fund. The Board also considered ECM’s reputation for management of its investment strategies and its decision-making
process regarding asset allocation and investments.
In addition, the Board
considered ECM’s overall financial condition and ability to carry out its obligations to the Fund, its technical resources and operational capabilities, including for investment administration functions, fund
accounting services and financial reporting, as well as the controls, internal audit reviews and third-party assessments relating to such operations and services. Also considered by the Board was ECM’s risk
management framework, cybersecurity program and controls relating to enterprise resiliency. The Board also took into account various organizational, business and personnel developments and initiatives, including
resource and process enhancements.
As part of its assessment of the
nature, extent and quality of services, the Board evaluated information regarding ECM’s regulatory and compliance environment and compliance policies and procedures. The Board considered ECM’s compliance
program resources and history, reports from the Chief Compliance Officer about ECM’s oversight of compliance with applicable laws and regulations and compliance-related resources devoted by ECM in support of the
Fund’s obligations pursuant to Rule 38a-1 under the 1940 Act, as well as a recent restructuring of the compliance function at ECM. The Board also considered ECM’s efforts generally to ensure that
third-party programs and vendors used to service the Fund - including for purposes of regulatory compliance support - are monitored effectively.
Consideration also was given to
the fact that the Board meets with representatives of ECM each year to discuss portfolio management strategies and performance. Additionally, the quality of ECM’s communications with the Board, as well as
ECM’s responsiveness to the Board, were taken into account. Also considered was ECM’s response to market volatility, changing circumstances in the mutual fund industry and investor sentiment, regulatory
developments, economic indicators, labor market data and unemployment rates, monetary and fiscal policy developments, including interest rate expectations and inflation, and emerging issues. In this regard, the Board
received information on the impacts of macroeconomic and geopolitical developments on ECM generally and/or the Fund, and considered how monitoring and analysis of such developments informs ECM’s performance of
its services to the Fund.
