DEFA14A: Invesco QQQ Proposes Fee Cut, Modernizes ETF Structure

Invesco QQQ Trust shareholders are asked to vote on reclassifying the ETF to an open-end fund, reducing its expense ratio from 0.20% to 0.18%.

Summary

• Invesco is proposing to reclassify the QQQ ETF from a unit investment trust (UIT) to an open-end management investment company under the Investment Company Act of 1940.
• The reclassification, if approved, will reduce the QQQ expense ratio from 0.20% to 0.18%, estimated to save shareholders over $70 million annually.
• Shareholders are also asked to approve the election of nine (9) trustees to a newly established Board of Trustees, replacing the existing bank trustee.
• An investment advisory agreement between the Trust and Invesco Capital Management LLC also requires shareholder approval.
• The proposed changes will only take effect if all three proposals are approved by shareholders.
• The reclassification will not trigger any tax consequences for shareholders and will not change QQQ's investment objective to track the Nasdaq-100 Index.

Sentiment

Score: 9

Explanation: The filing presents overwhelmingly positive changes for shareholders, including reduced fees, enhanced governance, and no negative tax implications, aimed at modernizing the fund's structure to align with industry best practices.

Positives

• Reduced expense ratio from 0.20% to 0.18%, leading to estimated annual savings of over $70 million for shareholders.
• Enhanced reporting and oversight with semi-annual reports, Board oversight, and summary prospectuses.
• No tax impact for shareholders as a result of the reclassification.
• Continued exposure to the Nasdaq-100 companies, with no change to the investment objective or management team.
• Increased regulatory certainty and expanded investment flexibility by converting to an open-end fund structure.
• Access to practices such as securities lending and dividend reinvestment, which can potentially improve returns.

Risks

• If shareholders fail to vote their proxies, the Trust may not receive enough votes to proceed with the shareholder meeting, potentially leading to additional solicitations and costs.
• There are risks involved with investing in ETFs, including possible loss of money.
• Shares are not actively managed and are subject to risks similar to those of stocks, including short selling and margin maintenance requirements.
• The Fund's return may not match the return of the Underlying Index.
• Investments focused in a particular sector, such as technology, are subject to greater risk and are more greatly impacted by market volatility than more diversified investments.

Future Outlook

The proposed reclassification aims to modernize the QQQ ETF, enhance operational efficiency, and reduce shareholder costs. If approved, the fund will operate as an open-end fund, consistent with the vast majority of other current ETFs, offering increased regulatory certainty and expanded investment flexibility.

Management Comments

• Invesco recommends voting FOR all three proposals, believing the changes will modernize QQQ's structure, enhance operational efficiency, and reduce shareholder costs.
• Management states that by converting QQQ from a Unit Investment Trust (UIT) to an Open-End Fund, shareholders will benefit from increased regulatory certainty, expanded investment flexibility, and access to practices such as securities lending and dividend reinvestment that can improve returns.
• Invesco believes these changes are in the best interests of QQQ and its investors.

Industry Context

The proposed reclassification of Invesco QQQ from a unit investment trust (UIT) to an open-end fund aligns with broader industry trends, as the vast majority of other current ETFs already operate under an open-end fund structure. This modernization brings QQQ in line with industry best practices, offering enhanced governance and operational flexibility common in the modern ETF landscape.

Comparison to Industry Standards

• The proposed change from a Unit Investment Trust (UIT) to an Open-End Fund structure is consistent with how the vast majority of other current ETFs operate, indicating a move towards industry standard practices.
• The reduced expense ratio of 0.18% is competitive for a large-cap index-tracking ETF, particularly one focused on the Nasdaq-100, which typically commands slightly higher fees due to its specific market segment.

Management Changes

Corporate Governance

Stakeholder Impact

• Shareholders: Will benefit from a reduced expense ratio, estimated annual savings of over $70 million, enhanced reporting and oversight, and no tax impact from the reclassification. They are required to vote on the proposals.
• Invesco Capital Management LLC (Sponsor/Adviser): Will continue to manage the fund under a new investment advisory agreement, benefiting from the modernized structure and potentially increased operational efficiency.

Next Steps

• Shareholders of record as of August 15, 2025, are invited to vote on the proposals via proxy solicitation.
• Shareholders can vote by internet, touch-tone telephone, mail, or in person at the shareholder meeting.
• Votes must be received before or at the shareholder meeting on October 24, 2025, at 11:00 a.m. Central Time.
• Invesco encourages all shareholders to vote to ensure the proposals can move forward without additional solicitation costs.

Key Dates

Recommendation

The proposed changes are highly beneficial for Invesco QQQ shareholders, including a significant reduction in the expense ratio, enhanced governance, and no adverse tax consequences. Modernizing the fund's structure to an open-end ETF aligns it with industry best practices and offers potential for improved returns through new operational flexibilities. These positive developments are likely to improve the fund's attractiveness and long-term performance, making it a strong buy for investors.

Keywords

Invesco QQQ, ETF, Nasdaq-100, Expense Ratio, Unit Investment Trust, Open-End Fund, Proxy Vote, Shareholder Meeting, Investment Company Act of 1940, Corporate Governance, Financial Reporting