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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
INVESTMENT COMPANIES
Investment Company Act file number 811-09913
AIM Counselor Series Trust (Invesco Counselor Series Trust)
(Exact name of registrant as specified in charter)
11 Greenway Plaza, Suite 2500 Houston, Texas 77046
(Address of principal executive offices) (Zip code)
Philip A. Taylor 11 Greenway Plaza, Suite 2500 Houston, Texas 77046
(Name and address of agent for service)
Registrant’s telephone number, including area code: (713) 626-1919
Date of fiscal year end: 8/31
Date of reporting period: 8/31/11
Item 1. Reports to Stockholders.
![]() |
Annual Report to Shareholders | August 31, 2011 |
Invesco Core Plus Bond Fund
Nasdaq:
A: ACPSX § B: CPBBX § C: CPCFX § R: CPBRX § Y: CPBYX § Institutional: CPIIX
2 | Letters to Shareholders | |
4 | Performance Summary | |
4 | Management Discussion | |
6 | Long-Term Fund Performance | |
8 | Supplemental Information | |
9 | Schedule of Investments | |
27 | Financial Statements | |
29 | Notes to Financial Statements | |
40 | Financial Highlights | |
41 | Auditor’s Report | |
42 | Fund Expenses | |
43 | Approval of Investment Advisory and Sub-Advisory Agreements | |
45 | Tax Information | |
T-1 | Trustees and Officers |
Letters to Shareholders
![(PHOTO OF PHILIP TAYLOR)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8465702.jpg)
Philip Taylor
Dear Shareholders:
Enclosed is important information about your Fund and its performance. I encourage you to read this report to learn more about your Fund’s short- and long-term performance and its holdings as of the close of the reporting period. This report also includes useful information about your Fund’s management team and a discussion of how your Fund was managed during the reporting period.
Data indicated that economic growth in the U.S. and most of Europe was anemic during the reporting period. In the U.S., unemployment remained high, and the housing market remained weak. Concerns about European sovereign debt persisted. Nonetheless, equity markets rose in late 2010 and early 2011 as investors anticipated better news ahead. But contentious negotiations to raise the U.S. government’s debt ceiling heightened investor unease, and following the first-ever downgrade of U.S. creditworthiness in August, global stock markets declined as many investors sought safer havens.
Where you can get current information about your Fund
In light of economic uncertainty and market volatility, I suggest you check the timely market updates and commentary from many of our fund managers and other investment professionals at invesco.com/us. On our website, you also can obtain information about your account at any hour of the day or night. I invite you to visit and explore the tools and information we offer at invesco.com/us.
Our commitment to investment excellence
As we’ve seen over the last several years, market conditions can change – often suddenly and dramatically. That’s one reason financial advisers typically advise their clients to be well diversified and to maintain a long-term investment focus. While diversification can’t guarantee a profit or protect against loss, it can cushion the impact of dramatic market moves. Maintaining a long-term investment focus for your long-term goals – financing your retirement or your children’s education, for example – may help you avoid making rash investment decisions based on short-term market swings.
Invesco’s investment professionals apply these same principles to the funds they manage.
Invesco offers a broad array of traditional mutual funds, as well as other investment products, including single-country, sector, regional and global investments spanning equity, fixed income and alternative asset classes. Across our product line, investment excellence is our ultimate goal. Each of our funds is managed by specialized teams of investment professionals, and as a company, we maintain a single focus – investment management – that allows our fund managers to concentrate on doing what they do best: managing your money.
Our funds are managed strictly according to their stated investment objectives and strategies, with robust risk oversight using consistent, repeatable investment processes that don’t change in response to short-term market events. This disciplined approach can’t guarantee a profit; no investment can do that, since all involve some measure of risk. But it can ensure that your money is managed the way we said it would be, and that it’s managed with a long-term focus.
Our adherence to stated investment objectives and strategies allows your financial adviser to build a diversified portfolio that meets your individual risk tolerance and financial goals. It also means that when your goals change, your financial adviser will be able to find an Invesco fund that’s appropriate for your needs.
Questions?
If you have questions about your account, please contact one of our client service representatives at 800 959 4246. If you have a general Invesco-related question or comment for me, I invite you to email me directly at phil@invesco.com.
All of us at Invesco look forward to serving your investment management needs for many years to come. Thank you for investing with us.
Sincerely,
![(-s- Philip Taylor)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8465703.gif)
Philip Taylor
Senior Managing Director, Invesco Ltd.
Senior Managing Director, Invesco Ltd.
2 | Invesco Core Plus Bond Fund |
![(PHOTO OF BRUCE CROCKETT)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8465704.jpg)
Bruce Crockett
Dear Fellow Shareholders:
Although the world’s economies are gradually recovering from the financial crisis, it has not been a smooth path. Unrest in the Middle East, persistently weak job and housing markets in the U.S. and continued government balance sheet repair in Europe are contributing to a slow, labored march toward global recovery.
In this environment, investors face risks that could make it more difficult to achieve their long-term financial goals – a secure retirement, home ownership, a child’s college education. Although the markets are complex and dynamic, there are ways to simplify the process and potentially increase your odds of achieving your goals. The best approach is to create a solid financial plan that helps you save and invest in ways that anticipate your needs over the long term.
Your financial adviser can help you define your financial plan, develop an appropriate investment strategy and put you in a better position to achieve your financial goals over the long term. This can take some of the guesswork out of the process and help you make thoughtful investments. Your financial adviser also can help you better understand your tolerance for risk, so that your investment approach lets you sleep at night while getting you closer to your goals. Lastly, your financial adviser can develop an asset allocation strategy that seeks to balance your investment approach, providing some protection against a decline in the markets while allowing you to participate in rising markets. Invesco calls this type of approach “intentional investing.” It means thinking carefully, planning thoughtfully and acting deliberately.
While no investment can guarantee favorable returns, your Board remains committed to managing costs and enhancing the performance of Invesco’s funds as part of our Investor First orientation. We continue to oversee the funds with the same strong sense of responsibility for your money and your continued trust that we’ve always maintained.
Thanks to the approval of our fund shareholders, Invesco has made great progress in realigning our U.S. mutual fund product line following our acquisition of Morgan Stanley’s retail asset management business, including Van Kampen Investments. When completed, the realignment will reduce overlap in the product lineup, enhance efficiency across our product line and build a solid foundation for further growth to meet client and shareholder needs. I would like to thank those of you who voted your proxy, and I hope our shareholders haven’t been too inconvenienced by the process.
As always, please contact me at bruce@brucecrockett.com with any questions or concerns you may have. On behalf of your Board, we look forward to continuing to represent your interests and serving your needs.
Sincerely,
![(-s- Bruce L. Crockett)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8465705.gif)
Bruce L. Crockett
Independent Chair
Invesco Funds Board of Trustees
Independent Chair
Invesco Funds Board of Trustees
3 | Invesco Core Plus Bond Fund |
Management’s Discussion of Fund Performance
Performance summary
Invesco Core Bond Fund and Invesco Van Kampen Core Plus Fixed Income Fund merged into Invesco Core Plus Bond Fund, effective June 6, 2011. Performance discussed below reflects the results of Invesco Core Plus Bond Fund leading up to the merger and the results of the merged portfolio from June 6, 2011, through August 31, 2011.
For the reporting period ended August 31, 2011, Invesco Core Plus Bond Fund, at net asset value (NAV), underperformed the Fund’s broad market and style-specific index. Sector and security selection were the largest detractors from performance for the reporting period.
Your Fund’s long-term performance appears later in this report.
Fund vs. Indexes
Total returns, 8/31/10 to 8/31/11, at net asset value (NAV). Performance shown does not include applicable contingent deferred sales charges (CDSC) or front-end sales charges, which would have reduced performance.
Class A Shares | 3.10 | % | ||
Class B Shares | 2.43 | |||
Class C Shares | 2.33 | |||
Class R Shares | 2.94 | |||
Class Y Shares | 3.46 | |||
Institutional Class Shares | 3.46 | |||
Barclays Capital U.S. Aggregate Index▼ (Broad Market/Style-Specific Index) | 4.62 | |||
Lipper Intermediate Investment Grade Debt Funds Index▼ (Peer Group Index) | 4.52 | |||
▼ | Lipper Inc. |
How we invest
The Fund primarily invests its assets in investment grade fixed income securities generally represented by the Barclays Capital U.S. Aggregate Index (the benchmark index) including corporate bonds, U.S. Treasury and agency securities, mortgage-backed securities (MBS) and asset-backed securities. We seek to maintain a dollar-weighted average portfolio maturity of between three and 10 years. The Fund may invest up to 30% of its total assets in foreign debt securities, up to 20% in high yield debt securities (junk bonds), up to 30% in developing markets debt securities and up to 20% in currencies other than the U.S. dollar.
The Fund invests from time to time in derivative instruments such as futures contracts and swap agreements, including interest rate futures and credit default swaps. It can also engage in mortgage dollar roll transactions, a form of repurchase agreement activity in the to-be-announced (TBA) market for agency MBS. These strategies are implemented within the risk profile of the guidelines set forth in the prospectus.
We believe dynamic and complex fixed income markets may create opportunities for investors that are best captured by independent specialist decision makers interconnected as a global team. We use this philosophy in an effort to
Portfolio Composition
By security type
By security type
U.S. Dollar Denominated Bonds & Notes | 39.6 | % | ||
U.S. Government Sponsored | ||||
Mortgage-Backed Securities | 27.8 | |||
Asset-Backed Securities | 13.1 | |||
U.S. Treasury Securities | 12.4 | |||
U.S. Government Sponsored Agency Securities | 0.9 | |||
Municipal Obligations | 0.6 | |||
Non-U.S. Dollar Denominated Bonds & Notes | 0.4 | |||
Money Market Funds | 5.2 | |||
Total Net Assets | $457.5 million | |||
Total Number of Holdings* | 717 |
Top 10 Fixed Income Issuers* | ||||||||
1. | Federal Home Loan Mortgage Corp. | 17.6 | % | |||||
2. | Federal National | |||||||
Mortgage Association | 15.4 | |||||||
3. | U.S. Treasury Notes | 11.8 | ||||||
4. | Bear Stearns Commercial | |||||||
Mortgage Securities | 3.2 | |||||||
5. | U.S. Treasury Bonds | 3.1 | ||||||
6. | Wachovia Bank Commercial | |||||||
Mortgage Trust | 1.9 | |||||||
7. | Government National | |||||||
Mortgage Association | 1.3 | |||||||
8. | Enterprise Products Operating LLC | 1.2 | ||||||
9. | LB-UBS Commercial Mortgage Trust | 1.2 | ||||||
10. | Morgan Stanley | 1.0 |
generate a total return consisting of income and capital appreciation.
Our security selection is supported by a team of independent specialists. Team members conduct top-down macroeconomic as well as bottom-up analysis on individual securities. Recommendations are communicated to portfolio managers through proprietary technology that allows all investment professionals to communicate in a timely manner.
Portfolio construction begins with a well-defined Fund design that establishes the target investment vehicles for generating the desired “alpha” (the extra return above a specific benchmark) as well as the risk parameters for the Fund. Investment vehicles are evaluated for liquidity and risk versus relative value.
Sell decisions are based on:
n | A conscious decision to alter the Fund’s macro risk exposure (for example, duration, yield curve positioning, sector exposure). | |
n | The need to limit or reduce exposure to a particular sector or issuer. | |
n | Degradation of an issuer’s credit quality. | |
n | Realignment of a valuation target. | |
n | Presentation of a better relative value opportunity. | |
n | General liquidity needs of the Fund. |
Market conditions and your Fund
Global equity and bond markets were unsettled during the fiscal year, but the U.S. investment grade bond market, as measured by the Barclays Capital U.S. Aggregate Index, generated a positive total return for the 12 months ended August 31, 2011.
Global equity and bond markets were unsettled during the fiscal year, but the U.S. investment grade bond market, as measured by the Barclays Capital U.S. Aggregate Index, generated a positive total return for the 12 months ended August 31, 2011.
During the first part of the reporting period, interest rates trended higher as the U.S. economy appeared to be recovering and concerns about a “double-dip” recession were fading. As the fiscal year progressed, U.S. Treasury yields declined across the yield curve as risk aversion escalated amid signs of declining U.S. economic growth and corporate spreads widened as growing uncertainties about Greece and other European countries caused investors to scale back their allocations to riskier investments. At the close of the period, U.S. Treasury yields remained low in the face of the S&P credit rating downgrade of the U.S., and political and regulatory activity intensified market volatility for structured securities.
The Fund’s holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
* Excluding money market fund holdings.
4 | Invesco Core Plus Bond Fund |
The U.S. Federal Reserve’s federal funds target rate remained low within a range of zero to 0.25%.1 Real gross domestic product registered positive, although declining, growth during the reporting period with quarterly annualized increases of 2.3%, 0.4% and 1.3% for the fourth quarter of 2010 and the first and second quarters of 2011, respectively.2 Inflation, measured by the seasonally adjusted Consumer Price Index, edged higher. The 12-month change in the all items index edged up to 3.8% after holding at 3.6% for the preceding three months.3 In the labor markets, new hiring remained quite weak. Unemployment was off its October 2009 peak of 10.1%, but remained above 9.0% through August 2011.3
With this economic and market environment as a backdrop, the Fund generated positive returns at NAV for the 12-month reporting period in absolute terms, but underperformed its benchmark index. An overweight position in the financials sector and security selection in commercial mortgage-backed securities (CMBS) during the latter part of the reporting period contributed to underperformance.
Allocation decisions among credit sub-sectors during the period negated the benefits of our emphasis on non-government holdings overall. Out-of-index sector allocations to high yield and emerging markets, as well as an overweight position in CMBS, were helpful for both absolute and relative returns, especially during the first six months of the fiscal year. Conversely, the negative impact of a sustained overweight position in the financials sector during the second half of the year offset much of the benefit gained from out-of-index sector allocations and CMBS sector decisions.
Emphasis on higher coupon agency mortgage-backed securities (MBS) was a prominent contributor to performance in the agency MBS sector. Issue selection within many of the sectors represented in the benchmark index was beneficial to relative performance. Weakness of CMBS security selection, attributed to our bias toward less risky segments of this market, offset otherwise strong security selection for the period.
The Fund benefited from incremental income earned by dollar (mortgage) rolls, a type of repurchase transaction in the highly liquid TBA market for agency MBS. A dollar roll involves the Fund selling an MBS to a financial institution, with an agreement to repurchase a substantially similar security at an agreed upon price
and date. Excess portfolio cash resulting from the use of this strategy is subsequently invested in short-term instruments, and the income from these investments, together with any additional fee income received from this activity, generates income for the Fund.
The Fund also may use active duration and yield curve positioning for risk management and for generating alpha versus its benchmark index. Duration measures a portfolio’s price sensitivity to interest rate changes. Yield curve positioning refers to actively emphasizing points (maturities) along the yield curve with favorable risk/return expectations. The contribution to Fund performance from duration and yield curve positioning versus the benchmark index was mixed over the reporting period, but overall was slightly negative. Although the portfolio’s duration was slightly longer than the benchmark index on average, the timing of changes and the degree of variance from the benchmark index during the reporting period worked against relative returns. Buying and selling U.S. Treasury futures contracts was an important tool used for the management of interest rate risk and maintaining our targeted portfolio duration.
Part of our strategy to manage credit and currency risk in the portfolio during the volatile summer of 2011 entailed buying credit protection via credit default swap indices (CDX) and hedging the currency risk associated with non-dollar-denominated bonds. Credit risk management using CDX was implemented in July 2011 for approximately 2% of portfolio market value and helped diminish the negative effect of widening credit spreads during July and August 2011. The currency hedging activity was carried out on an as-needed basis and was effective in managing unwanted currency risk of non-dollar-denominated holdings.
Portfolio turnover during the reporting period was due to June fund merger-related repositioning, investor purchase and redemption activity, as well as being a normal outcome of our total return approach to investing that takes advantage of market opportunities as they arise.
Thank you for investing in Invesco Core Plus Bond Fund.
1 U.S. Federal Reserve
2 Bureau of Economic Analysis
3 Bureau of Labor Statistics
The views and opinions expressed in management’s discussion of Fund performance are those of Invesco Advisers, Inc. These views and opinions are subject to change at any time based on factors such as market and economic conditions. These views and opinions may not be relied upon as investment advice or recommendations, or as an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but Invesco Advisers, Inc. makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
See important Fund and, if applicable, index disclosures later in this report.
![(PHOTO OF CHARLES BURGE)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8465706.jpg)
Charles Burge
Portfolio manager, is manager of Invesco Core Plus Bond Fund. He joined Invesco in 2002. Mr. Burge earned a B.S. in economics from Texas A&M University and an M.B.A. in finance and accounting from Rice University.
![(PHOTO OF CLAUDIA CALICH)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8465707.jpg)
Claudia Calich
Portfolio manager, is manager of Invesco Core Plus Bond Fund. She joined Invesco in 2004. Ms. Calich earned a B.A. in economics from Susquehanna University and an M.A. in international economics from the International University of Japan in Niigata.
![(PHOTO OF JOHN CRADDOCK)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8465708.jpg)
John Craddock
Chartered Financial Analyst, portfolio manager, is manager of Invesco Core Plus Bond Fund. He joined Invesco in 1999. Mr. Craddock earned a B.S. in mechanical engineering from Clemson University and an M.B.A. from Georgia Tech’s Dupree School of Management with a concentration in finance.
![(PHOTO OF JOHN CRADDOCK)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8465709.jpg)
Peter Ehret
Chartered Financial Analyst, portfolio manager, is manager of Invesco Core Plus Bond Fund. Mr. Ehret joined Invesco in 2001. He graduated cum laude with a B.S. in economics from the University of Minnesota. He also earned an M.S. in real estate appraisal and investment analysis from the University of Wisconsin-Madison.
5 | Invesco Core Plus Bond Fund |
Your Fund’s Long-Term Performance
Results of a $10,000 Investment – Oldest Share Classes Since Inception
Index data from 5/31/09, Fund data from 6/3/09
Index data from 5/31/09, Fund data from 6/3/09
![(GRAPH)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8465710.gif)
Past performance cannot guarantee comparable future results.
The data shown in the chart include reinvested distributions, applicable sales charges and Fund expenses including management fees. Results for Class B shares are calculated as if a hypothetical
shareholder had liquidated his entire investment in the Fund at the close of the reporting period and paid the contingent deferred sales charges, if applicable. Index results include reinvested dividends, but they do not reflect sales charges. Performance of the peer group,
if applicable, reflects fund expenses and management fees; performance of a market index does not. Performance shown in the chart and table(s) does not reflect deduction of taxes a shareholder would pay on Fund distributions or sale of Fund shares.
continued from page 8
prepayment rates on underlying loans. Faster prepayments often happen when interest rates are falling. As a result, the Fund may reinvest these early payments at lower interest rates, thereby reducing the Fund’s income. Conversely, when interest rates rise, prepayments may happen more slowly, causing the security to lengthen in duration. Longer duration securities tend to be more volatile. Securities may be prepaid at a price less than the original purchase value. | ||
n | Non-diversification risk. The Fund is non-diversified and can invest a greater portion of its assets in a single issuer. A change in the value of the issuer could affect the value of the Fund more than if it was a diversified fund. | |
n | Reinvestment risk. Reinvestment risk is the risk that a bond’s cash flows (coupon income and principal repayment) will be reinvested at an interest rate below that on the original bond. | |
n | Swaps risk. 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. Swaps are subject to credit risk and counterparty risk. | ||
n | U.S. government obligations risk. Obligations issued by U.S. government agencies and instrumentalities may receive varying levels of support from the government, which could affect the Fund’s ability to recover should they default. |
About indexes used in this report
n | The Barclays Capital U.S. Aggregate Index is an unmanaged index considered representative of the U.S. investment-grade, fixed-rate bond market. | |
n | The Lipper Intermediate Investment Grade Debt Funds Index is an unmanaged index considered representative of intermediate investment grade debt funds tracked by Lipper. | |
n | The Fund is not managed to track the performance of any particular index, including the index(es) defined here, and consequently, the performance of the Fund may deviate significantly from the performance of the index(es). | |
n | A direct investment cannot be made in an index. Unless otherwise indicated, index results include reinvested dividends, and they do not reflect sales |
charges. Performance of the peer group, if applicable, reflects fund expenses; performance of a market index does not. |
Other information
n | The Chartered Financial Analyst® (CFA®) designation is globally recognized and attests to a charterholder’s success in a rigorous and comprehensive study program in the field of investment management and research analysis. | |
n | The returns shown in management’s discussion of Fund performance are based on net asset values calculated for shareholder transactions. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes, and as such, the net asset values for shareholder transactions and the returns based on those net asset values may differ from the net asset values and returns reported in the Financial Highlights. | |
n | Industry classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. |
6 | Invesco Core Plus Bond Fund |
Average Annual Total Returns
As of 8/31/11, including maximum applicable sales charges
Class A Shares | ||||
Inception (6/3/09) | 5.24 | % | ||
1 Year | -1.83 | |||
Class B Shares | ||||
Inception (6/3/09) | 5.51 | % | ||
1 Year | -2.50 | |||
Class C Shares | ||||
Inception (6/3/09) | 6.75 | % | ||
1 Year | 1.35 | |||
Class R Shares | ||||
Inception (6/3/09) | 7.28 | % | ||
1 Year | 2.94 | |||
Class Y Shares | ||||
Inception (6/3/09) | 7.82 | % | ||
1 Year | 3.46 | |||
Institutional Class Shares | ||||
Inception (6/3/09) | 7.82 | % | ||
1 Year | 3.46 |
Average Annual Total Returns
As of 6/30/11, the most recent calendar quarter-end, including maximum applicable sales charges
Class A Shares | ||||
Inception (6/3/09) | 4.98 | % | ||
1 Year | -0.67 | |||
Class B Shares | ||||
Inception (6/3/09) | 5.32 | % | ||
1 Year | -1.35 | |||
Class C Shares | ||||
Inception (6/3/09) | 6.68 | % | ||
1 Year | 2.55 | |||
Class R Shares | ||||
Inception (6/3/09) | 7.21 | % | ||
1 Year | 4.16 | |||
Class Y Shares | ||||
Inception (6/3/09) | 7.75 | % | ||
1 Year | 4.69 | |||
Institutional Class Shares | ||||
Inception (6/3/09) | 7.75 | % | ||
1 Year | 4.58 |
The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Please visit invesco.com/performance for the most recent month-end performance. Performance figures reflect reinvested distributions, changes in net asset value and the effect of the maximum sales charge unless otherwise stated. Investment return and principal value will fluctuate so that you may have a gain or loss when you sell shares.
The net annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Class A, Class B, Class C, Class R, Class Y and Institutional Class shares was 0.75%, 1.50%, 1.50%, 1.00%, 0.50% and 0.50%, respectively.1 The total annual Fund
operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Class A, Class B, Class C, Class R, Class Y and Institutional Class shares was 0.97%, 1.72%, 1.72%, 1.22%, 0.72% and 0.59%, respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.
Class A share performance reflects the maximum 4.75% sales charge, and Class B and Class C share performance reflects the applicable contingent deferred sales charge (CDSC) for the period involved. The CDSC on Class B shares declines from 5% beginning at the time of purchase to 0% at the beginning of the seventh year. The CDSC on Class C shares is 1% for the
first year after purchase. Class R, Y and Institutional Class shares do not have a front-end sales charge or a CDSC; therefore, performance is at net asset value.
The performance of the Fund’s share classes will differ primarily due to different sales charge structures and class expenses.
Had the adviser not waived fees and/or reimbursed expenses, performance would have been lower.
1 | Total annual Fund operating expenses after any contractual fee waivers and/or expense reimbursements by the adviser in effect through at least June 30, 2013. See current prospectus for more information. |
7 | Invesco Core Plus Bond Fund |
Invesco Core Plus Bond Fund’s investment objective is total return, comprised of current income and capital appreciation.
n | Unless otherwise stated, information presented in this report is as of August 31, 2011, and is based on total net assets. | |
n | Unless otherwise noted, all data provided by Invesco. | |
n | To access your Fund’s reports/prospectus, visit invesco.com/fundreports. |
About share classes
n | Class B shares may not be purchased or acquired by exchange from share classes other than Class B shares. Please see the prospectus for more information. | |
n | Class R shares are available only to certain retirement plans. Please see the prospectus for more information. | |
n | Class Y shares are available to only certain investors. Please see the prospectus for more information. | |
n | Institutional Class shares are offered exclusively to institutional investors, including defined contribution plans that meet certain criteria. Please see the prospectus for more information. |
Principal risks of investing in the Fund
n | Active trading risk. The Fund may engage in frequent trading of portfolio securities. Active trading results in added expenses and may result in a lower return and increased tax liability. | |
n | Counterparty risk. Many of the instruments that the Fund expects to hold may be subject to the risk that the other party to a contract will not fulfill its contractual obligations. | |
n | Credit risk. The issuer of instruments in which the Fund invests may be unable to meet interest and/or principal payments, thereby causing its instruments to decrease in value and lowering the issuer’s credit rating. | |
n | Currency/exchange rate risk. The dollar value of the Fund’s foreign investments will be affected by changes in the exchange rates between the dollar and the currencies in which those investments are traded. | |
n | Derivatives risk. Derivatives may be more difficult to purchase, sell or value than other investments and may be subject to market, interest rate, credit, leverage, counterparty and management risks. A fund investing in a derivative could lose more than the cash amount invested or incur higher taxes. |
Over-the-counter derivatives are also subject to counterparty risk, which is the risk that the other party to the contract will not fulfill its contractual obligation to complete the transaction with the Fund. |
n | Developing markets securities risk. Securities issued by foreign companies and governments located in developing countries may be affected more negatively by Inflation, devaluation of their currencies, higher transaction costs, delays in settlement, adverse political developments, the introduction of capital controls, withholding taxes, nationalization of private assets, expropriation, social unrest, war or lack of timely information than those in developed countries. | |
n | Dollar roll transactions risk. Dollar roll transactions involve the risk that the market value and yield of the securities retained by the Fund may decline below the price of the mortgage-related securities sold by the Fund that it is obligated to repurchase. | |
n | Foreign securities risk. The Fund’s foreign investments may be affected by changes in a foreign country’s exchange rates; political and social instability; changes in economic or taxation policies; difficulties when enforcing obligations; decreased liquidity; and increased volatility. Foreign companies may be subject to less regulation resulting in less publicly available information about the companies. | |
n | 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. | |
n | High yield bond (junk bond) risk. Junk bonds involve a greater risk of default or price changes due to changes in the credit quality of the issuer. The values of junk bonds fluctuate more than those of high-quality bonds in response to company, political, regulatory or economic developments. Values of junk |
bonds can decline significantly over short periods of time. | ||
n | Interest rate risk. Interest rate risk refers to the risk that bond prices generally fall as interest rates rise; conversely, bond prices generally rise as interest rates fall. Specific bonds differ in their sensitivity to changes in interest rates depending on their individual characteristics, including duration. | |
n | Leverage risk. Leverage exists when the Fund purchases or sells an instrument or enters into a transaction without investing cash in an amount equal to the full economic exposure of the instrument or transaction and the Fund could lose more than it invested. Leverage created from borrowing or certain types of transactions or instruments, including derivatives, may impair the Fund’s liquidity, cause it to liquidate positions at an unfavorable time, increase volatility or otherwise not achieve its intended objective. | |
n | Limited number of holdings risk. The Fund may invest a large percentage of its assets in a limited number of securities or other instruments, which could negatively affect the value of the Fund. | |
n | Liquidity risk. The Fund may hold illiquid securities that it is unable to sell at the preferred time or price and could lose its entire investment in such securities. | |
n | Management risk. The investment techniques and risk analysis used by the Fund’s portfolio managers may not produce the desired results. | |
n | Market risk. The prices of and the income generated by the Fund’s securities may decline in response to, among other things, investor sentiment; general economic and market conditions; regional or global instability; and currency and interest rate fluctuations. | |
n | Mortgage- and asset-backed securities risk. The Fund may invest in mortgage- and asset-backed securities that are subject to prepayment or call risk, which is the risk that the borrower’s payments may be received earlier or later than expected due to changes in |
This report must be accompanied or preceded by a currently effective Fund prospectus, which contains more complete information, including sales charges and expenses. Investors should read it carefully before investing.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
continued on page 6
Fund Nasdaq Symbols | ||||
Class A Shares | ACPSX | |||
Class B Shares | CPBBX | |||
Class C Shares | CPCFX | |||
Class R Shares | CPBRX | |||
Class Y Shares | CPBYX | |||
Institutional Class Shares | CPIIX |
8 | Invesco Core Plus Bond Fund |
Schedule of Investments(a)
August 31, 2011
Principal | ||||||||
Amount | Value | |||||||
U.S. Dollar Denominated Bonds & Notes–48.35% | ||||||||
Advertising–0.09% | ||||||||
WPP Finance (United Kingdom), Sr. Unsec. Gtd. Global Notes, 8.00%, 09/15/14 | $ | 365,000 | $ | 425,843 | ||||
Aerospace & Defense–0.07% | ||||||||
Alliant Techsystems Inc., Sr. Unsec. Gtd. Sub. Notes, 6.88%, 09/15/20 | 15,000 | 15,075 | ||||||
Bombardier Inc. (Canada), Sr. Unsec. Notes, 7.50%, 03/15/18(b) | 150,000 | 163,687 | ||||||
7.75%, 03/15/20(b) | 30,000 | 33,075 | ||||||
Huntington Ingalls Industries, Inc., Sr. Unsec. Gtd. Notes, 6.88%, 03/15/18(b) | 10,000 | 9,425 | ||||||
7.13%, 03/15/21(b) | 30,000 | 28,313 | ||||||
Spirit Aerosystems Inc., Sr. Unsec. Gtd. Global Notes, 6.75%, 12/15/20 | 10,000 | 10,000 | ||||||
TransDigm Inc., Sr. Unsec. Gtd. Sub. Notes, 7.75%, 12/15/18(b) | 10,000 | 10,250 | ||||||
Triumph Group, Inc., Sr. Unsec. Gtd. Sub. Global Notes, 8.00%, 11/15/17 | 70,000 | 72,625 | ||||||
342,450 | ||||||||
Agricultural Products–0.24% | ||||||||
Bunge Ltd. Finance Corp., Unsec. Gtd. Unsub. Notes, 4.10%, 03/15/16 | 245,000 | 256,114 | ||||||
Cargill, Inc., Sr. Unsec. Notes, 5.60%, 09/15/12(b) | 60,000 | 63,089 | ||||||
Corn Products International, Inc., Sr. Unsec. Notes, 3.20%, 11/01/15 | 75,000 | 78,364 | ||||||
6.63%, 04/15/37 | 635,000 | 713,091 | ||||||
1,110,658 | ||||||||
Airlines–1.79% | ||||||||
American Airlines Inc., Sr. Sec. Gtd. Notes, 7.50%, 03/15/16(b) | 5,000 | 4,588 | ||||||
American Airlines Pass Through Trust, Series 2001-2, Class A-2, Sec. Global Pass Through Ctfs., 7.86%, 10/01/11 | 2,100,000 | 2,103,938 | ||||||
Series 2011-1, Class A, Sr. Sec. Gtd. Pass Through Ctfs., 5.25%, 01/31/21 | 1,153,292 | 1,059,587 | ||||||
Series 2011-1, Class B, Sec. Gtd. Pass Through Ctfs., 7.00%, 01/31/18(b) | 392,392 | 347,267 | ||||||
Continental Airlines, Inc., Series 2007-1, Class C, Sec. Sub. Global Pass Through Ctfs., 7.34%, 04/19/14 | 17,126 | 16,955 | ||||||
Series 2009-1, Sec. Pass Through Ctfs., 9.00%, 07/08/16 | 1,568,749 | 1,717,780 | ||||||
Series 2009-2, Class B, Sec. Global Pass Through Ctfs., 9.25%, 05/10/17 | 4,472 | 4,439 | ||||||
Delta Air Lines, Inc., Series 2001-1, Class A-2, Sr. Sec. Pass Through Ctfs., 7.11%, 09/18/11 | 2,080,000 | 2,080,416 | ||||||
Series 2002-1, Class C, Sec. Notes, 12.25%, 03/15/15(b) | 25,000 | 26,563 | ||||||
Sr. Sec. Notes, 9.50%, 09/15/14(b) | 2,000 | 2,060 | ||||||
Series 2010-1, Class B, Sec. Pass Through Ctfs., 6.38%, 01/02/16(b) | 85,000 | 77,775 | ||||||
Series 2010-2, Class B, Sec. Pass Through Ctfs., 6.75%, 11/23/15(b) | 10,000 | 9,200 | ||||||
Series 2002-1, Class C, Sec. Pass Through Ctfs., 7.78%, 01/02/12 | 92 | 92 | ||||||
Series 2009-1, Class A, Sr. Sec. Pass Through Ctfs., 7.75%, 12/17/19 | 598,290 | 630,448 | ||||||
UAL Corp., Series 2007-1, Class A, Sec. Gtd. Global Pass Through Ctfs., 6.64%, 07/02/22 | 68,062 | 66,658 | ||||||
Series 2009-1, Sr. Sec. Gtd. Global Pass Through Ctfs., 10.40%, 11/01/16 | 9,091 | 9,955 | ||||||
Series 2009-2A, Sec. Gtd. Global Pass Through Ctfs., 9.75%, 01/15/17 | 4,447 | 4,880 | ||||||
US Airways Pass Through Trust–Series 1998-1, Class C, Sec. Pass Through Ctfs., 6.82%, 01/30/14 | 29,320 | 26,902 | ||||||
8,189,503 | ||||||||
Alternative Carriers–0.06% | ||||||||
Cogent Communications Group, Inc., Sr. Sec. Gtd. Notes, 8.38%, 02/15/18(b) | 30,000 | 31,500 | ||||||
Level 3 Communications Inc., Sr. Unsec. Notes, 11.88%, 02/01/19(b) | 20,000 | 20,900 | ||||||
Level 3 Escrow, Inc., Sr. Unsec. Notes, 8.13%, 07/01/19(b) | 10,000 | 9,750 | ||||||
Level 3 Financing, Inc., Sr. Unsec. Gtd. Global Notes, 9.25%, 11/01/14 | 113,000 | 114,130 | ||||||
Sr. Unsec. Gtd. Notes, 9.38%, 04/01/19(b) | 110,000 | 109,450 | ||||||
285,730 | ||||||||
Aluminum–0.02% | ||||||||
Century Aluminum Co., Sr. Sec. Gtd. Sub. Notes, 8.00%, 05/15/14 | 88,500 | 90,547 | ||||||
Apparel Retail–0.19% | ||||||||
Express LLC/Express Finance Corp., Sr. Unsec. Gtd. Global Notes, 8.75%, 03/01/18 | 19,000 | 20,092 | ||||||
Gap, Inc. (The), Sr. Unsec. Notes, 5.95%, 04/12/21 | 677,000 | 643,996 | ||||||
J Crew Group, Inc., Sr. Unsec. Gtd. Global Notes, 8.13%, 03/01/19 | 80,000 | 71,200 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
9 Invesco Core Plus Bond Fund
Principal | ||||||||
Amount | Value | |||||||
Apparel Retail–(continued) | ||||||||
Limited Brands Inc., Sr. Unsec. Gtd. Global Notes, 8.50%, 06/15/19 | $ | 5,000 | $ | 5,663 | ||||
Sr. Unsec. Gtd. Notes, 6.63%, 04/01/21 | 120,000 | 122,400 | ||||||
863,351 | ||||||||
Apparel, Accessories & Luxury Goods–0.06% | ||||||||
Hanesbrands Inc., Sr. Unsec. Gtd. Global Notes, 6.38%, 12/15/20 | 80,000 | 79,200 | ||||||
Jones Group/Apparel Group Holdings/Appeal Group USA/Footwear Accessories Retail, Sr. Unsec. Notes, 6.88%, 03/15/19 | 117,000 | 110,857 | ||||||
Quiksilver Inc., Sr. Unsec. Gtd. Global Notes, 6.88%, 04/15/15 | 100,000 | 93,500 | ||||||
283,557 | ||||||||
Asset Management & Custody Banks–0.01% | ||||||||
First Data Corp., Sr. Sec. Gtd. Notes, 7.38%, 06/15/19(b) | 9,000 | 8,505 | ||||||
State Street Capital Trust III, Jr. Unsec. Gtd. Sub. Variable Rate Bonds, 5.24%(c)(d) | 15,000 | 14,911 | ||||||
23,416 | ||||||||
Auto Parts & Equipment–0.04% | ||||||||
Allison Transmission Inc., Sr. Unsec. Gtd Notes, 7.13%, 05/15/19(b) | 121,000 | 114,345 | ||||||
Dana Holding Corp., Sr. Unsec. Notes, 6.50%, 02/15/19 | 5,000 | 4,937 | ||||||
6.75%, 02/15/21 | 60,000 | 59,250 | ||||||
Tenneco Inc., Sr. Gtd. Global Notes, 6.88%, 12/15/20 | 15,000 | 15,300 | ||||||
193,832 | ||||||||
Automobile Manufacturers–0.54% | ||||||||
Ford Motor Co., Sr. Unsec. Global Notes, 7.45%, 07/16/31 | 163,000 | 179,300 | ||||||
FUEL Trust, Sec. Notes 3.98%, 06/15/16(b) | 2,300,000 | 2,276,680 | ||||||
2,455,980 | ||||||||
Automotive Retail–0.48% | ||||||||
Advance Auto Parts, Inc., Sr. Unsec. Gtd. Notes, 5.75%, 05/01/20 | 1,180,000 | 1,312,940 | ||||||
O’Reilly Automotive, Inc., Sr. Unsec. Gtd. Notes, 4.88%, 01/14/21 | 830,000 | 889,650 | ||||||
2,202,590 | ||||||||
Biotechnology–0.00% | ||||||||
STHI Holding Corp., Sec. Gtd. Notes, 8.00%, 03/15/18(b) | 10,000 | 9,900 | ||||||
Brewers–0.41% | ||||||||
Anheuser-Busch InBev Worldwide, Inc., Sr. Unsec. Gtd. Global Notes, 5.38%, 11/15/14 | 125,000 | 141,211 | ||||||
3.00%, 10/15/12 | 1,670,000 | 1,713,840 | ||||||
1,855,051 | ||||||||
Broadcasting–0.70% | ||||||||
Clear Channel Communications, Inc., Sr. Sec. Gtd. Global Notes 9.00%, 03/01/21 | 88,000 | 72,600 | ||||||
COX Communications, Inc., Sr. Unsec. Notes, 9.38%, 01/15/19(b) | 25,000 | 33,810 | ||||||
8.38%, 03/01/39(b) | 1,220,000 | 1,640,665 | ||||||
Discovery Communications LLC, Sr. Unsec. Gtd. Global Notes, 6.35%, 06/01/40 | 1,275,000 | 1,442,953 | ||||||
3,190,028 | ||||||||
Building Products–0.13% | ||||||||
Associated Materials LLC, Sr. Sec. Gtd. Global Notes, 9.13%, 11/01/17 | 80,000 | 70,000 | ||||||
Building Materials Corp. of America, Sr. Sec. Gtd. Notes, 7.50%, 03/15/20(b) | 110,000 | 112,750 | ||||||
Sr. Unsec. Notes, 6.88%, 08/15/18(b) | 36,000 | 35,640 | ||||||
Gibraltar Industries Inc.–Series B, Sr. Unsec. Gtd. Sub. Global Notes, 8.00%, 12/01/15 | 45,000 | 44,438 | ||||||
Nortek Inc., Sr. Gtd. Notes, 8.50%, 04/15/21(b) | 182,000 | 157,430 | ||||||
Roofing Supply Group LLC/Roofing Supply Finance Inc., Sr. Sec. Notes, 8.63%, 12/01/17(b) | 120,000 | 117,000 | ||||||
USG Corp., Sr. Unsec. Gtd. Notes, 9.75%, 08/01/14(b) | 5,000 | 4,875 | ||||||
Sr. Unsec. Notes, 9.75%, 01/15/18 | 35,000 | 31,456 | ||||||
573,589 | ||||||||
Cable & Satellite–1.36% | ||||||||
British Sky Broadcasting Group PLC (United Kingdom), Sr. Unsec. Gtd. Notes, 9.50%, 11/15/18(b) | 25,000 | 33,926 | ||||||
Cablevision Systems Corp., Sr. Unsec. Global Notes, 8.63%, 09/15/17 | 105,000 | 112,219 | ||||||
Comcast Corp., Sr. Unsec. Gtd. Global Notes, 6.50%, 01/15/15 | 20,000 | 22,964 | ||||||
Sr. Unsec. Gtd. Notes, 6.45%, 03/15/37 | 80,000 | 88,999 | ||||||
DIRECTV Holdings LLC/ DIRECTV Financing Co., Inc., Sr. Unsec. Gtd. Global Notes, 7.63%, 05/15/16 | 2,175,000 | 2,339,484 | ||||||
EH Holding Corp., Sr. Sec. Gtd. Notes, 6.50%, 06/15/19(b) | 11,000 | 11,055 | ||||||
Sr. Unsec. Gtd. Notes, 7.63%, 06/15/21(b) | 26,000 | 26,000 | ||||||
Intelsat Jackson Holdings S.A. (Luxembourg), Sr. Unsec. Gtd. Notes, 7.50%, 04/01/21(b) | 115,000 | 112,125 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
10 Invesco Core Plus Bond Fund
Principal | ||||||||
Amount | Value | |||||||
Cable & Satellite–(continued) | ||||||||
Kabel BW Erste Beteiligungs GmbH/Kabel Baden-Wurttemberg GmbH & Co. KG (Germany), Sr. Sec. Gtd. Notes, 7.50%, 03/15/19(b) | $ | 150,000 | $ | 152,250 | ||||
NBC Universal Media LLC, Sr. Unsec. Global Notes, 2.10%, 04/01/14 | 775,000 | 788,353 | ||||||
5.15%, 04/30/20 | 350,000 | 387,904 | ||||||
5.95%, 04/01/41 | 740,000 | 795,490 | ||||||
Time Warner Cable, Inc., Sr. Unsec. Gtd. Notes, 5.00%, 02/01/20 | 680,000 | 725,500 | ||||||
5.88%, 11/15/40 | 400,000 | 416,541 | ||||||
Virgin Media Secured Finance PLC (United Kingdom), Sr. Sec. Gtd. Notes, 5.25%, 01/15/21(b) | 200,000 | 217,798 | ||||||
6,230,608 | ||||||||
Casinos & Gaming–0.11% | ||||||||
Ameristar Casinos Inc., Sr. Unsec. Gtd. Notes, 7.50%, 04/15/21(b) | 15,000 | 15,337 | ||||||
Caesars Entertainment Operating Co. Inc., Sec. Gtd. Global Notes, 10.00%, 12/15/18 | 65,000 | 51,675 | ||||||
Sr. Sec. Gtd. Global Notes, 12.75%, 04/15/18 | 15,000 | 13,275 | ||||||
Sr. Unsec. Gtd. Global Bonds, 5.63%, 06/01/15 | 5,000 | 3,625 | ||||||
CityCenter Holdings LLC/CityCenter Finance Corp., Sec. Gtd. PIK Notes, 10.75%, 01/15/17(b) | 5,277 | 5,165 | ||||||
MGM Resorts International, Sr. Unsec. Gtd. Global Notes, 6.63%, 07/15/15 | 150,000 | 138,375 | ||||||
Sr. Unsec. Gtd. Notes, 10.00%, 11/01/16(b) | 10,000 | 10,263 | ||||||
Pinnacle Entertainment, Inc., Sr. Unsec. Gtd. Global Notes, 8.63%, 08/01/17 | 35,000 | 36,575 | ||||||
Seneca Gaming Corp., Sr. Unsec. Gtd. Notes, 8.25%, 12/01/18(b) | 19,000 | 19,000 | ||||||
Snoqualmie Entertainment Authority, Sr. Sec. Floating Rate Notes, 4.18%, 02/01/14(b)(d) | 5,000 | 4,450 | ||||||
Sr. Sec. Notes, 9.13%, 02/01/15(b) | 30,000 | 29,100 | ||||||
Wynn Las Vegas LLC/Wynn Las Vegas Capital Corp., Sec. Gtd. First Mortgage Global Notes, 7.75%, 08/15/20 | 125,000 | 136,875 | ||||||
Sr. Sec. Gtd. First Mortgage Global Notes, 7.88%, 11/01/17 | 20,000 | 21,744 | ||||||
485,459 | ||||||||
Coal & Consumable Fuels–0.04% | ||||||||
Adaro Indonesia PT (Indonesia), Sr. Unsec. Gtd. Notes 7.63%, 10/22/19(b) | 100,000 | 108,000 | ||||||
Alpha Natural Resources Inc., Sr. Unsec. Gtd. Notes, 6.00%, 06/01/19 | 5,000 | 4,950 | ||||||
6.25%, 06/01/21 | 2,000 | 1,965 | ||||||
Arch Coal, Inc., Sr. Unsec. Gtd. Notes, 7.25%, 10/01/20 | 12,000 | 12,150 | ||||||
CONSOL Energy Inc., Sr. Unsec. Gtd. Global Notes, 8.25%, 04/01/20 | 35,000 | 37,800 | ||||||
164,865 | ||||||||
Communications Equipment–0.51% | ||||||||
Avaya, Inc., Sr. Sec. Gtd. Notes, 7.00%, 04/01/19(b) | 130,000 | 118,950 | ||||||
Motorola Solutions Inc., Sr. Unsec. Global Notes, 8.00%, 11/01/11 | 2,195,000 | 2,218,101 | ||||||
2,337,051 | ||||||||
Computer & Electronics Retail–0.48% | ||||||||
Best Buy Co. Inc., Sr. Unsec. Global Notes, 6.75%, 07/15/13 | 2,010,000 | 2,173,181 | ||||||
RadioShack Corp., Sr. Gtd. Notes, 6.75%, 05/15/19(b) | 4,000 | 3,730 | ||||||
Rent-A-Center, Inc., Sr. Unsec. Gtd. Global Notes, 6.63%, 11/15/20 | 35,000 | 34,125 | ||||||
2,211,036 | ||||||||
Computer Hardware–0.00% | ||||||||
SunGard Data Systems, Inc., Sr. Unsec. Gtd. Global Notes, 7.63%, 11/15/20 | 12,000 | 11,640 | ||||||
Computer Storage & Peripherals–0.02% | �� | |||||||
Seagate HDD Cayman, Sr. Unsec. Gtd. Notes, 7.75%, 12/15/18(b) | 70,000 | 70,700 | ||||||
7.00%, 11/01/21(b) | 7,000 | 6,668 | ||||||
77,368 | ||||||||
Construction & Engineering–0.04% | ||||||||
Dycom Investments, Inc., Sr. Unsec. Gtd. Sub. Global Notes, 7.13%, 01/15/21 | 5,000 | 5,150 | ||||||
Great Lakes Dredge & Dock Corp., Sr. Unsec. Gtd. Notes, 7.38%, 02/01/19(b) | 10,000 | 9,550 | ||||||
MasTec, Inc., Sr. Unsec. Gtd. Global Notes, 7.63%, 02/01/17 | 75,000 | 75,375 | ||||||
Tutor Perini Corp., Sr. Unsec. Gtd. Global Notes, 7.63%, 11/01/18 | 100,000 | 89,250 | ||||||
179,325 | ||||||||
Construction & Farm Machinery & Heavy Trucks–0.07% | ||||||||
Chrysler Group LLC, Sr. Sec. Gtd. Notes, 8.00%, 06/15/19(b) | 200,000 | 173,000 | ||||||
Commercial Vehicle Group, Inc., Sr. Sec. Gtd. Notes, 7.88%, 04/15/19(b) | 51,000 | 48,705 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
11 Invesco Core Plus Bond Fund
Principal | ||||||||
Amount | Value | |||||||
Construction & Farm Machinery & Heavy Trucks–(continued) | ||||||||
Manitowoc Co., Inc. (The), Sr. Unsec. Gtd. Notes, 8.50%, 11/01/20 | $ | 35,000 | $ | 35,000 | ||||
Navistar International Corp., Sr. Unsec. Gtd. Notes, 8.25%, 11/01/21 | 76,000 | 78,660 | ||||||
Titan International Inc., Sr. Sec. Gtd. Global Notes 7.88%, 10/01/17 | 5,000 | 5,275 | ||||||
340,640 | ||||||||
Construction Materials–0.04% | ||||||||
Building Materials Corp. of America, Sr. Unsec. Notes, 6.75%, 05/01/21(b) | 11,000 | 10,615 | ||||||
Ply Gem Industries, Inc., Sr. Sec. Gtd. Global Notes, 8.25%, 02/15/18 | 80,000 | 69,600 | ||||||
Texas Industries, Inc., Sr. Unsec. Gtd. Global Notes, 9.25%, 08/15/20 | 125,000 | 114,062 | ||||||
194,277 | ||||||||
Consumer Finance–0.28% | ||||||||
Ally Financial, Inc., Sr. Unsec. Gtd. Global Notes, 8.00%, 03/15/20 | 80,000 | 81,800 | ||||||
7.50%, 09/15/20 | 185,000 | 184,075 | ||||||
8.00%, 11/01/31 | 10,000 | 9,775 | ||||||
National Money Mart Co. (Canada), Sr. Unsec. Gtd. Global Notes, 10.38%, 12/15/16 | 25,000 | 26,437 | ||||||
SLM Corp., Sr. Unsec. Medium-Term Global Notes, 6.25%, 01/25/16 | 355,000 | 361,154 | ||||||
Series A, Sr. Unsec. Medium-Term Notes, 5.00%, 10/01/13 | 615,000 | 617,257 | ||||||
1,280,498 | ||||||||
Data Processing & Outsourced Services–0.04% | ||||||||
CoreLogic, Inc., Sr. Unsec. Gtd. Notes, 7.25%, 06/01/21(b) | 178,000 | 168,210 | ||||||
Department Stores–0.22% | ||||||||
Macy’s Retail Holdings, Inc., Sr. Unsec. Gtd. Notes, 5.35%, 03/15/12 | 955,000 | 974,100 | ||||||
Sears Holdings Corp., Sr. Sec. Gtd. Notes, 6.63%, 10/15/18(b) | 45,000 | 37,575 | ||||||
1,011,675 | ||||||||
Distillers & Vintners–0.00% | ||||||||
Constellation Brands, Inc., Sr. Unsec. Gtd. Global Notes, 7.25%, 05/15/17 | 20,000 | 21,250 | ||||||
Diversified Banks–5.70% | ||||||||
Abbey National Treasury Services PLC (United Kingdom), Sr. Unsec. Gtd. Global Notes, 2.88%, 04/25/14 | 440,000 | 421,749 | ||||||
Sr. Unsec. Gtd. Medium-Term Euro Notes, 3.88%, 11/10/14(b) | 420,000 | 409,719 | ||||||
Akbank TAS (Turkey), Sr. Unsec. Notes, 5.13%, 07/22/15(b) | 100,000 | 101,304 | ||||||
6.50%, 03/09/18(b) | 200,000 | 208,319 | ||||||
Alfa Bank OJSC Via Alfa Bond Issuance PLC (Ireland), Sr. Sec. Gtd. Loan Participation Notes 7.75%, 04/28/21(b) | 200,000 | 194,466 | ||||||
ANZ National Int’l Ltd. (New Zealand), Sr. Unsec. Gtd. Notes, 2.38%, 12/21/12(b) | 1,080,000 | 1,099,249 | ||||||
Banco Bradesco S.A. (Brazil), Sr. Unsec. Notes, 4.10%, 03/23/15(b) | 415,000 | 423,892 | ||||||
Banco de Credito del Peru (Peru), Sr. Unsec. Notes, 4.75%, 03/16/16(b) | 100,000 | 98,153 | ||||||
BanColombia S.A. (Colombia), Sr. Unsec. Notes 5.95%, 06/03/21(b) | 250,000 | 253,356 | ||||||
Bangkok Bank PCL (Thailand), Sr. Unsec. Notes 4.80%, 10/18/20(b) | 100,000 | 98,115 | ||||||
Bank of Nova Scotia (Canada), Sr. Unsec. Global Notes, 2.38%, 12/17/13 | 1,525,000 | 1,571,130 | ||||||
3.40%, 01/22/15 | 50,000 | 53,255 | ||||||
Barclays Bank PLC (United Kingdom), Unsec. Sub. Global Notes, 5.14%, 10/14/20 | 810,000 | 745,226 | ||||||
Credit Suisse (Switzerland), Sub. Global Notes, 5.40%, 01/14/20 | 545,000 | 547,949 | ||||||
Development Bank of Kazakhstan JSC (Kazakhstan), Sr. Unsec. Notes, 5.50%, 12/20/15(b) | 500,000 | 517,125 | ||||||
GTB Finance B.V. (Netherlands), Sr. Unsec. Gtd. Notes, 7.50%, 05/19/16(b) | 200,000 | 206,974 | ||||||
HBOS PLC (United Kingdom)–Series G, Unsec. Sub. Medium-Term Notes, 6.75%, 05/21/18(b) | 1,360,000 | 1,278,178 | ||||||
HSBC Finance Corp., Sr. Unsec. Global Notes, 7.00%, 05/15/12 | 115,000 | 119,077 | ||||||
Sr. Unsec. Sub. Notes, 6.68%, 01/15/21(b) | 531,000 | 522,521 | ||||||
ICICI Bank Ltd. (India), Sr. Unsec. Notes, 4.75%, 11/25/16(b) | 200,000 | 196,635 | ||||||
ING Bank N.V. (Netherlands), Sr. Unsec. Notes, 3.00%, 09/01/15(b) | 255,000 | 253,458 | ||||||
Itau Unibanco Holding S.A. (Brazil), Sub. Notes 6.20%, 12/21/21(b) | 200,000 | 205,186 | ||||||
Lloyds TSB Bank PLC (United Kingdom), Sr. Unsec. Gtd. Global Notes, 4.88%, 01/21/16 | 2,040,000 | 2,048,631 | ||||||
Sr. Unsec. Gtd. Medium-Term Notes, 5.80%, 01/13/20(b) | 725,000 | 721,788 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
12 Invesco Core Plus Bond Fund
Principal | ||||||||
Amount | Value | |||||||
Diversified Banks–(continued) | ||||||||
Unsec. Gtd. Sub. Medium-Term Notes, 6.50%, 09/14/20(b) | $ | 955,000 | $ | 929,203 | ||||
Nordea Bank A.B. (Sweden), Sr. Unsec. Notes, 4.88%, 01/27/20(b) | 575,000 | 626,665 | ||||||
RBS Capital Trust II, Jr. Unsec. Gtd. Sub. Global Bonds, 6.43%(c)(e) | 11,000 | 5,995 | ||||||
Royal Bank of Scotland PLC (The) (United Kingdom), Sr. Unsec. Gtd. Global Notes, 4.88%, 03/16/15 | 975,000 | 981,500 | ||||||
Series 2, Sr. Unsec. Gtd. Global Notes, 3.40%, 08/23/13 | 475,000 | 471,774 | ||||||
Santander U.S. Debt S.A. Unipersonal (Spain), Sr. Unsec. Gtd. Notes, 3.72%, 01/20/15(b) | 700,000 | 644,729 | ||||||
Societe Generale S.A. (France), Sr. Unsec. Medium-Term Notes, 5.20%, 04/15/21(b) | 1,500,000 | 1,356,393 | ||||||
Sr. Unsec. Notes, 2.50%, 01/15/14(b) | 1,940,000 | 1,837,213 | ||||||
Standard Chartered Bank (United Kingdom), Unsec. Sub. Notes, 6.40%, 09/26/17(b) | 420,000 | 466,183 | ||||||
Standard Chartered PLC (United Kingdom), Sr. Unsec. Notes, 5.50%, 11/18/14(b) | 1,880,000 | 2,051,294 | ||||||
3.85%, 04/27/15(b) | 775,000 | 799,699 | ||||||
U.S. Bancorp., Sr. Unsec. Notes, 2.00%, 06/14/13 | 45,000 | 46,020 | ||||||
U.S. Bank N.A., Sub. Variable Rate Notes, 3.78%, 04/29/20(d) | 1,400,000 | 1,474,169 | ||||||
VTB Bank OJSC Via VTB Capital S.A. (Luxembourg), Sr. Unsec. Loan Participation Notes, 6.32%, 02/22/18(b) | 1,415,000 | 1,437,147 | ||||||
6.55%, 10/13/20(b) | 660,000 | 657,393 | ||||||
26,080,832 | ||||||||
Diversified Capital Markets–0.67% | ||||||||
UBS AG (Switzerland), Sr. Unsec. Floating Rate Medium-Term Global Notes, 1.40%, 02/23/12(d) | 1,000,000 | 1,004,525 | ||||||
Sr. Unsec. Global Notes, 5.88%, 12/20/17 | 200,000 | 211,604 | ||||||
Sr. Unsec. Medium-Term Bank Notes, 3.88%, 01/15/15 | 560,000 | 577,937 | ||||||
Sr. Unsec. Medium-Term Global Notes, 5.75%, 04/25/18 | 1,200,000 | 1,269,847 | ||||||
3,063,913 | ||||||||
Diversified Chemicals–0.01% | ||||||||
Huntsman International LLC, Sr. Unsec. Gtd. Sub. Global Notes, 8.63%, 03/15/21 | 35,000 | 36,838 | ||||||
Diversified Metals & Mining–0.36% | ||||||||
Anglo American Capital PLC (United Kingdom), Sr. Unsec. Gtd. Notes, 9.38%, 04/08/19(b) | 170,000 | 228,200 | ||||||
Freeport-McMoRan Copper & Gold, Inc., Sr. Unsec. Notes, 8.38%, 04/01/17 | 850,000 | 917,468 | ||||||
Midwest Vanadium Pty Ltd. (Australia), Sr. Sec. Gtd. Notes, 11.50%, 02/15/18(b) | 5,000 | 4,719 | ||||||
Southern Copper Corp., Sr. Unsec. Global Notes, 5.38%, 04/16/20 | 150,000 | 159,037 | ||||||
6.75%, 04/16/40 | 225,000 | 229,524 | ||||||
Thompson Creek Metals Co., Inc. (Canada), Sr. Unsec. Gtd. Notes, 7.38%, 06/01/18(b) | 2,000 | 1,830 | ||||||
Vedanta Resources PLC (United Kingdom), Sr. Unsec. Notes, 9.50%, 07/18/18(b) | 100,000 | 101,818 | ||||||
1,642,596 | ||||||||
Diversified REIT’s–0.94% | ||||||||
Dexus Diversified Trust/Dexus Office Trust (Australia), Sr. Unsec. Gtd. Notes, 5.60%, 03/15/21(b) | 2,765,000 | 3,036,967 | ||||||
Qatari Diar Finance QSC (Qatar), Unsec. Gtd. Unsub. Notes, 5.00%, 07/21/20(b) | 1,175,000 | 1,282,654 | ||||||
4,319,621 | ||||||||
Diversified Support Services–0.14% | ||||||||
Cintas Corp. No. 2, Sr. Unsec. Gtd. Notes, 4.30%, 06/01/21 | 80,000 | 86,810 | ||||||
International Lease Finance Corp., Sr. Unsec. Global Notes, 8.63%, 09/15/15 | 5,000 | 5,109 | ||||||
5.75%, 05/15/16 | 400,000 | 368,750 | ||||||
8.75%, 03/15/17 | 85,000 | 87,285 | ||||||
6.25%, 05/15/19 | 100,000 | 90,750 | ||||||
638,704 | ||||||||
Drug Retail–0.13% | ||||||||
CVS Pass-Through Trust, Sec. Global Pass Through Ctfs., 6.04%, 12/10/28 | 216,034 | 237,297 | ||||||
Sec. Pass Through Ctfs., 8.35%, 07/10/31(b) | 284,237 | 369,025 | ||||||
606,322 | ||||||||
Electric Utilities–2.30% | ||||||||
DCP Midstream LLC, Sr. Unsec. Notes, 9.75%, 03/15/19(b) | 1,254,000 | 1,709,495 | ||||||
Dubai Electricity & Water Authority (Vietnam), Sr. Unsec. Notes, 7.38%, 10/21/20(b) | 200,000 | 205,500 | ||||||
Enel Finance International N.V. (Luxembourg), Sr. Unsec. Gtd. Notes, 3.88%, 10/07/14(b) | 1,270,000 | 1,279,598 | ||||||
Indiana Michigan Power Co.–Series I, Sr. Unsec. Notes, 7.00%, 03/15/19 | 1,025,000 | 1,285,067 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
13 Invesco Core Plus Bond Fund
Principal | ||||||||
Amount | Value | |||||||
Electric Utilities–(continued) | ||||||||
LSP Energy L.P./LSP Batesville Funding Corp.–Series D, Sr. Sec. Bonds, 8.16%, 07/15/25 | $ | 5,000 | $ | 3,625 | ||||
Majapahit Holding B.V. (Netherlands), Sr. Unsec. Gtd. Notes 7.75%, 01/20/20(b) | 100,000 | 119,191 | ||||||
Ohio Power Co.–Series M, Sr. Unsec. Notes, 5.38%, 10/01/21 | 2,715,000 | 3,145,366 | ||||||
PPL Electric Utilities Corp., Sec. First Mortgage Bonds, 6.25%, 05/15/39 | 770,000 | 968,831 | ||||||
Southern Co.–Series A, Sr. Unsec. Notes, 5.30%, 01/15/12 | 60,000 | 60,959 | ||||||
Virginia Electric & Power Co., Sr. Unsec. Notes, 5.10%, 11/30/12 | 780,000 | 821,114 | ||||||
5.00%, 06/30/19 | 800,000 | 913,636 | ||||||
10,512,382 | ||||||||
Electrical Components & Equipment–0.01% | ||||||||
Belden Inc., Sr. Gtd. Sub. Global Notes, 9.25%, 06/15/19 | 5,000 | 5,325 | ||||||
Polypore International, Inc., Sr. Unsec. Gtd. Global Notes, 7.50%, 11/15/17 | 55,000 | 55,000 | ||||||
60,325 | ||||||||
Electronic Components–0.06% | ||||||||
Corning, Inc., Sr. Unsec. Notes, 6.63%, 05/15/19 | 85,000 | 103,851 | ||||||
7.25%, 08/15/36 | 135,000 | 163,159 | ||||||
267,010 | ||||||||
Electronic Manufacturing Services–0.02% | ||||||||
Sanmina-SCI Corp., Sr. Unsec. Gtd. Notes, 7.00%, 05/15/19(b) | 122,000 | 114,070 | ||||||
Environmental & Facilities Services–0.26% | ||||||||
Clean Harbors, Inc., Sr. Sec. Gtd. Global Notes, 7.63%, 08/15/16 | 35,000 | 37,100 | ||||||
Waste Management, Inc., Sr. Unsec. Gtd. Notes, 5.00%, 03/15/14 | 1,050,000 | 1,148,223 | ||||||
1,185,323 | ||||||||
Forest Products–0.00% | ||||||||
Millar Western Forest Products Ltd. (Canada), Sr. Unsec. Notes, 8.50%, 04/01/21(b) | 20,000 | 15,600 | ||||||
Gas Utilities–0.02% | ||||||||
Ferrellgas L.P./Ferrellgas Finance Corp., Sr. Unsec. Global Notes, 6.50%, 05/01/21 | 50,000 | 45,125 | ||||||
Suburban Propane Partners, L.P./Suburban Energy Finance Corp., Sr. Unsec. Notes, 7.38%, 03/15/20 | 40,000 | 41,100 | ||||||
86,225 | ||||||||
General Merchandise Stores–0.29% | ||||||||
Family Dollar Stores, Inc., Sr. Unsec. Notes, 5.00%, 02/01/21 | 1,350,000 | 1,338,609 | ||||||
Gold–1.31% | ||||||||
Barrick Gold Corp. (Canada), Sr. Unsec. Notes, 2.90%, 05/30/16(b) | 1,210,000 | 1,260,459 | ||||||
Gold Fields Orogen Holding BVI Ltd. (British Virgin Islands), Sr. Unsec. Gtd. Notes, 4.88%, 10/07/20(b) | 2,135,000 | 2,000,625 | ||||||
Kinross Gold Corp. (Canada), Sr. Unsec. Gtd. Notes, 5.13%, 09/01/21(b) | 1,365,000 | 1,355,410 | ||||||
6.88%, 09/01/41(b) | 1,365,000 | 1,398,963 | ||||||
6,015,457 | ||||||||
Health Care Distributors–0.04% | ||||||||
McKesson Corp., Sr. Unsec. Notes, 3.25%, 03/01/16 | 75,000 | 79,963 | ||||||
4.75%, 03/01/21 | 95,000 | 106,542 | ||||||
186,505 | ||||||||
Health Care Equipment–0.01% | ||||||||
CareFusion Corp., Sr. Unsec. Global Notes, 4.13%, 08/01/12 | 25,000 | 25,617 | ||||||
DJO Finance LLC/Corp., Sr. Unsec. Gtd. Notes, 7.75%, 04/15/18(b) | 4,000 | 3,720 | ||||||
Sr. Unsec. Gtd. Sub. Notes, 9.75%, 10/15/17(b) | 21,000 | 19,425 | ||||||
48,762 | ||||||||
Health Care Facilities–0.06% | ||||||||
HCA, Inc., Sr. Sec. Gtd. Global Notes, 7.88%, 02/15/20 | 42,000 | 44,625 | ||||||
Healthsouth Corp., Sr. Unsec. Gtd. Notes, 7.25%, 10/01/18 | 10,000 | 10,025 | ||||||
8.13%, 02/15/20 | 45,000 | 45,450 | ||||||
7.75%, 09/15/22 | 5,000 | 5,025 | ||||||
Select Medical Holdings Corp., Sr. Unsec. Floating Rate Global Notes, 6.21%, 09/15/15(d) | 9,000 | 8,280 | ||||||
Tenet Healthcare Corp., Sr. Unsec. Global Notes, 9.25%, 02/01/15 | 145,000 | 153,337 | ||||||
8.00%, 08/01/20 | 7,000 | 6,808 | ||||||
273,550 | ||||||||
Health Care Services–1.16% | ||||||||
Express Scripts, Inc., Sr. Unsec. Gtd. Global Notes, | ||||||||
5.25%, 06/15/12 | 50,000 | 51,665 | ||||||
6.25%, 06/15/14 | 2,525,000 | 2,815,335 | ||||||
Sr. Unsec. Gtd. Notes, 3.13%, 05/15/16 | 190,000 | 195,210 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
14 Invesco Core Plus Bond Fund
Principal | ||||||||
Amount | Value | |||||||
Health Care Services–(continued) | ||||||||
Highmark, Inc., Sr. Unsec. Notes, 4.75%, 05/15/21(b) | $ | 785,000 | $ | 840,365 | ||||
6.13%, 05/15/41(b) | 730,000 | 784,355 | ||||||
Medco Health Solutions, Inc., Sr. Unsec. Notes, 2.75%, 09/15/15 | 585,000 | 598,123 | ||||||
5,285,053 | ||||||||
Health Care Technology–0.01% | ||||||||
MedAssets, Inc., Sr. Unsec. Gtd. Notes, 8.00%, 11/15/18(b) | 45,000 | 44,213 | ||||||
Home Furnishings–0.00% | ||||||||
American Standard Americas, Sr. Sec. Notes, 10.75%, 01/15/16(b) | 20,000 | 16,700 | ||||||
Home Improvement Retail–0.00% | ||||||||
Michaels Stores, Inc., Sr. Unsec. Gtd. Global Notes, 7.75%, 11/01/18 | 5,000 | 4,750 | ||||||
Homebuilding–0.11% | ||||||||
Beazer Homes USA, Inc., Sr. Unsec. Gtd. Global Notes, 6.88%, 07/15/15 | 80,000 | 58,400 | ||||||
8.13%, 06/15/16 | 27,000 | 19,035 | ||||||
Corp. GEO S.A.B. de C.V. (Mexico), Sr. Unsec. Gtd. Notes 9.25%, 06/30/20(b) | 250,000 | 250,748 | ||||||
K. Hovnanian Enterprises Inc., Sr. Sec. Gtd. Global Notes, 10.63%, 10/15/16 | 165,000 | 147,675 | ||||||
Lennar Corp., Sr. Unsec. Gtd. Global Notes, 6.95%, 06/01/18 | 20,000 | 18,500 | ||||||
494,358 | ||||||||
Hotels, Resorts & Cruise Lines–1.19% | ||||||||
Hyatt Hotels Corp., Sr. Unsec. Notes, 5.75%, 08/15/15(b) | 2,415,000 | 2,601,967 | ||||||
6.88%, 08/15/19(b) | 120,000 | 135,190 | ||||||
Royal Caribbean Cruises Ltd., Sr. Unsec. Global Notes, 7.50%, 10/15/27 | 20,000 | 19,200 | ||||||
Starwood Hotels & Resorts Worldwide, Inc., Sr. Unsec. Notes, 7.15%, 12/01/19 | 5,000 | 5,500 | ||||||
Wyndham Worldwide Corp., Sr. Unsec. Notes, 7.38%, 03/01/20 | 1,035,000 | 1,152,084 | ||||||
5.63%, 03/01/21 | 1,530,000 | 1,551,038 | ||||||
5,464,979 | ||||||||
Household Products–0.01% | ||||||||
Central Garden & Pet Co., Sr. Gtd. Sub. Notes, 8.25%, 03/01/18 | 65,000 | 63,700 | ||||||
Independent Power Producers & Energy Traders–0.07% | ||||||||
AES Corp. (The), Sr. Unsec. Global Notes, 7.75%, 10/15/15 | 10,000 | 10,500 | ||||||
8.00%, 10/15/17 | 80,000 | 84,400 | ||||||
AES Gener S.A. (Chile), Unsec. Unsub. Notes, 5.25%, 08/15/21(b) | 200,000 | 202,092 | ||||||
Dynegy Holdings Inc., Sr. Unsec. Global Notes, 7.75%, 06/01/19 | 20,000 | 12,300 | ||||||
309,292 | ||||||||
Industrial Conglomerates–0.94% | ||||||||
General Electric Capital Corp., Sr. Unsec. Notes, 2.25%, 11/09/15 | 65,000 | 65,474 | ||||||
Hutchison Whampoa International Ltd. (Hong Kong), Sr. Unsec. Gtd. Notes, 7.63%, 04/09/19(b) | 925,000 | 1,130,813 | ||||||
Unsec. Gtd. Notes, 5.75%, 09/11/19(b) | 1,000,000 | 1,106,825 | ||||||
Unsec. Gtd. Sub. Variable Rate Notes, 6.00%(b)(c)(d) | 200,000 | 203,500 | ||||||
Metalloinvest Finance Ltd. (Ireland), Sr. Unsec. Gtd. Notes, 6.50%, 07/21/16(b) | 200,000 | 196,160 | ||||||
Sigma Alimentos S.A. de C.V. (Mexico), Sr. Unsec. Notes, 5.63%, 04/14/18(b) | 1,550,000 | 1,597,294 | ||||||
4,300,066 | ||||||||
Industrial Machinery–0.65% | ||||||||
Cleaver-Brooks, Inc., Sr. Sec. Notes, 12.25%, 05/01/16(b) | 15,000 | 15,075 | ||||||
Pentair, Inc., Sr. Unsec. Gtd. Notes, 5.00%, 05/15/21 | 2,810,000 | 2,944,402 | ||||||
SPX Corp., Sr. Unsec. Gtd. Global Notes, 6.88%, 09/01/17 | 20,000 | 20,800 | ||||||
2,980,277 | ||||||||
Industrial REIT’s–0.01% | ||||||||
DuPont Fabros Technology L.P., Sr. Unsec. Gtd. Global Notes, 8.50%, 12/15/17 | 30,000 | 32,100 | ||||||
Integrated Oil & Gas–0.48% | ||||||||
Lukoil International Finance B.V. (Netherlands), Sr. Unsec. Gtd. Notes, 7.25%, 11/05/19(b) | 100,000 | 109,806 | ||||||
Petrobras International Finance Co. (Brazil), Sr. Unsec. Gtd. Global Notes, 3.88%, 01/27/16 | 955,000 | 974,802 | ||||||
5.38%, 01/27/21 | 824,000 | 876,040 | ||||||
Petroleos de Venezuela S.A. (Venezuela), Sr. Unsec. Gtd. Notes, 8.50%, 11/02/17(b) | 200,000 | 144,350 | ||||||
Petroleos de Venezuela S.A. (Venezuela)-REGS, Sr. Unsec. Gtd. Euro Notes, 8.50%, 11/02/17(b) | 110,000 | 79,200 | ||||||
2,184,198 | ||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
15 Invesco Core Plus Bond Fund
Principal | ||||||||
Amount | Value | |||||||
Integrated Telecommunication Services–0.69% | ||||||||
AT&T Corp., Sr. Unsec. Gtd. Global Notes, 8.00%, 11/15/31 | $ | 13,000 | $ | 17,662 | ||||
AT&T, Inc., Sr. Unsec. Global Notes, 2.50%, 08/15/15 | 905,000 | 927,807 | ||||||
2.95%, 05/15/16 | 160,000 | 166,246 | ||||||
4.45%, 05/15/21 | 85,000 | 91,504 | ||||||
Indosat Palapa Co. B.V. (Netherlands), Sr. Unsec. Gtd. Notes, 7.38%, 07/29/20(b) | 200,000 | 223,206 | ||||||
Integra Telecom Holdings, Inc., Sr. Sec. Notes, 10.75%, 04/15/16(b) | 10,000 | 9,550 | ||||||
Intelsat Jackson Holdings S.A. (Luxembourg), Sr. Unsec. Gtd. Notes, 7.25%, 04/01/19(b) | 15,000 | 14,625 | ||||||
7.25%, 10/15/20(b) | 20,000 | 19,400 | ||||||
Telefonica Emisiones SAU (Spain), Sr. Unsec. Gtd. Global Notes, 5.46%, 02/16/21 | 415,000 | 406,021 | ||||||
Verizon Communications, Inc., Sr. Unsec. Global Notes, 8.95%, 03/01/39 | 305,000 | 458,923 | ||||||
Windstream Georgia Communications Corp., Sr. Unsec. Notes, 6.50%, 11/15/13 | 797,000 | 815,587 | ||||||
3,150,531 | ||||||||
Internet Retail–0.01% | ||||||||
Expedia, Inc., Sr. Unsec. Gtd. Global Notes, 8.50%, 07/01/16 | 45,000 | 49,528 | ||||||
Internet Software & Services–0.03% | ||||||||
Equinix, Inc., Sr. Unsec. Notes, 8.13%, 03/01/18 | 15,000 | 16,087 | ||||||
7.00%, 07/15/21 | 100,000 | 102,500 | ||||||
118,587 | ||||||||
Investment Banking & Brokerage–2.42% | ||||||||
Cantor Fitzgerald L.P., Bonds, 7.88%, 10/15/19(b) | 1,100,000 | 1,200,043 | ||||||
E*Trade Financial Corp., Sr. Unsec. Notes, 7.88%, 12/01/15 | 75,000 | 74,625 | ||||||
6.75%, 06/01/16 | 5,000 | 5,150 | ||||||
Goldman Sachs Group, Inc. (The), Sr. Unsec. Global Notes, | ||||||||
5.13%, 01/15/15 | 780,000 | 821,138 | ||||||
3.70%, 08/01/15 | 660,000 | 667,594 | ||||||
5.25%, 07/27/21 | 1,020,000 | 1,034,352 | ||||||
Unsec. Sub. Global Notes, 6.75%, 10/01/37 | 520,000 | 493,488 | ||||||
Jefferies Group Inc., Sr. Unsec. Notes, 8.50%, 07/15/19 | 1,325,000 | 1,581,405 | ||||||
Macquarie Group Ltd. (Australia), Sr. Unsec. Notes, 6.00%, 01/14/20(b) | 505,000 | 507,696 | ||||||
Morgan Stanley, Sr. Unsec. Global Notes, 4.00%, 07/24/15 | 450,000 | 448,687 | ||||||
Sr. Unsec. Medium-Term Global Notes, 6.00%, 05/13/14 | 955,000 | 1,008,707 | ||||||
Sr. Unsec. Notes, | ||||||||
2.88%, 01/24/14 | 100,000 | 99,216 | ||||||
3.45%, 11/02/15 | 2,010,000 | 1,939,428 | ||||||
5.75%, 01/25/21 | 985,000 | 1,013,418 | ||||||
Raymond James Financial, Inc., Sr. Unsec. Notes, 4.25%, 04/15/16 | 170,000 | 175,599 | ||||||
11,070,546 | ||||||||
Leisure Facilities–0.01% | ||||||||
AMC Entertainment, Inc., Sr. Gtd. Global Sub. Notes, 9.75%, 12/01/20 | 30,000 | 29,100 | ||||||
Speedway Motorsports, Inc., Sr. Unsec. Gtd. Global Notes, 6.75%, 02/01/19 | 25,000 | 24,000 | ||||||
53,100 | ||||||||
Life & Health Insurance–1.48% | ||||||||
Forethought Financial Group, Inc., Sr. Unsec. Notes, 8.63%, 04/15/21(b) | 50,000 | 49,687 | ||||||
Nationwide Financial Services, Sr. Unsec. Notes, 5.38%, 03/25/21(b) | 735,000 | 766,127 | ||||||
Pacific Life Global Funding, Sr. Sec. Notes, 5.15%, 04/15/13(b) | 1,385,000 | 1,465,996 | ||||||
Pacific LifeCorp., Sr. Unsec. Notes, 6.00%, 02/10/20(b) | 425,000 | 463,944 | ||||||
Prudential Financial, Inc., Jr. Unsec. Sub. Variable Rate Global Notes, 8.88%, 06/15/38(d) | 1,640,000 | 1,778,164 | ||||||
Series D, Sr. Unsec. Disc. Medium-Term Notes, 4.75%, 09/17/15 | 550,000 | 584,878 | ||||||
Sr. Unsec. Medium-Term Notes, | ||||||||
2.75%, 01/14/13 | 50,000 | 50,836 | ||||||
3.88%, 01/14/15 | 1,405,000 | 1,440,916 | ||||||
7.38%, 06/15/19 | 130,000 | 154,937 | ||||||
6,755,485 | ||||||||
Life Sciences Tools & Services–0.48% | ||||||||
Life Technologies Corp., Sr. Notes, 6.00%, 03/01/20 | 2,005,000 | 2,197,121 | ||||||
Patheon Inc. (Canada), Sr. Sec. Gtd. Notes, 8.63%, 04/15/17(b) | 5,000 | 4,788 | ||||||
2,201,909 | ||||||||
Managed Health Care–0.74% | ||||||||
CIGNA Corp., Sr. Unsec. Notes, 4.50%, 03/15/21 | 180,000 | 188,257 | ||||||
5.88%, 03/15/41 | 125,000 | 132,626 | ||||||
Coventry Health Care, Inc., Sr. Unsec. Notes, 5.45%, 06/15/21 | 70,000 | 75,730 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
16 Invesco Core Plus Bond Fund
Principal | ||||||||
Amount | Value | |||||||
Managed Health Care–(continued) | ||||||||
UnitedHealth Group, Inc., Sr. Unsec. Notes, 4.88%, 02/15/13 | $ | 2,120,000 | $ | 2,238,451 | ||||
WellPoint, Inc., Sr. Unsec. Global Notes, 3.70%, 08/15/21 | 750,000 | 751,896 | ||||||
3,386,960 | ||||||||
Marine–0.00% | ||||||||
Navios Maritime Acquisition Corp./Navios Acquisition Finance U.S. Inc. (Zambia), Sr. Sec. Gtd. Notes, 8.63%, 11/01/17(b) | 2,000 | 1,680 | ||||||
Mortgage Backed Securities–0.17% | ||||||||
U.S. Bank N.A., Sr. Unsec. Medium-Term Notes, 5.92%, 05/25/12 | 758,764 | 787,355 | ||||||
Movies & Entertainment–0.11% | ||||||||
AMC Entertainment, Inc., Sr. Unsec. Gtd. Global Notes, 8.75%, 06/01/19 | 80,000 | 80,300 | ||||||
Cinemark USA, Inc., Sr. Unsec. Gtd. Global Notes, 8.63%, 06/15/19 | 35,000 | 36,925 | ||||||
NAI Entertainment Holdings LLC, Sr. Sec. Notes, 8.25%, 12/15/17(b) | 30,000 | 30,900 | ||||||
Time Warner, Inc., Sr. Unsec. Gtd. Notes, 5.88%, 11/15/16 | 285,000 | 333,394 | ||||||
481,519 | ||||||||
Multi-Line Insurance–0.52% | ||||||||
American Financial Group, Inc., Sr. Unsec. Notes, 9.88%, 06/15/19 | 10,000 | 12,671 | ||||||
CNA Financial Corp., Sr. Unsec. Global Bonds, 5.88%, 08/15/20 | 20,000 | 20,924 | ||||||
Fairfax Financial Holdings Ltd. (Canada), Sr. Unsec. Notes, 5.80%, 05/15/21(b) | 3,000 | 2,921 | ||||||
Hartford Financial Services Group Inc., Jr. Unsec. Sub. Variable Rate Deb., 8.13%, 06/15/38(d) | 75,000 | 75,981 | ||||||
Health Care Service Corp., Sr. Unsec. Notes, 4.70%, 01/15/21(b) | 400,000 | 429,137 | ||||||
Liberty Mutual Group Inc., Jr. Unsec. Gtd. Sub. Bonds, 7.80%, 03/15/37(b) | 250,000 | 236,250 | ||||||
Sr. Unsec. Gtd. Notes, 5.00%, 06/01/21(b) | 5,000 | 4,881 | ||||||
Metropolitan Life Global Funding I, Sr. Sec. Global Notes, 5.13%, 04/10/13(b) | 1,460,000 | 1,546,472 | ||||||
Nationwide Mutual Insurance Co., Sub. Notes, 9.38%, 08/15/39(b) | 25,000 | 30,851 | ||||||
2,360,088 | ||||||||
Office REIT’s–0.15% | ||||||||
Digital Realty Trust L.P., Sr. Unsec. Gtd. Global Notes, 4.50%, 07/15/15 | 675,000 | 701,625 | ||||||
Office Services & Supplies–0.25% | ||||||||
IKON Office Solutions, Inc., Sr. Unsec. Notes, 6.75%, 12/01/25 | 5,000 | 4,838 | ||||||
Steelcase, Inc., Sr. Unsec. Notes, 6.38%, 02/15/21 | 1,090,000 | 1,162,350 | ||||||
1,167,188 | ||||||||
Oil & Gas Drilling–0.22% | ||||||||
Transocean, Inc., Sr. Unsec. Gtd. Global Notes, 4.95%, 11/15/15 | 930,000 | 1,004,033 | ||||||
Oil & Gas Equipment & Services–0.03% | ||||||||
Bristow Group, Inc., Sr. Unsec. Gtd. Global Notes, 7.50%, 09/15/17 | 15,000 | 15,450 | ||||||
Key Energy Services, Inc., Sr. Unsec. Gtd. Notes, 6.75%, 03/01/21 | 90,000 | 88,594 | ||||||
SESI, LLC, Sr. Unsec. Gtd. Notes, 6.38%, 05/01/19(b) | 12,000 | 11,940 | ||||||
115,984 | ||||||||
Oil & Gas Exploration & Production–0.51% | ||||||||
Anadarko Petroleum Corp., Sr. Unsec. Notes, 7.63%, 03/15/14 | 50,000 | 56,869 | ||||||
Chaparral Energy Inc., Sr. Unsec. Gtd. Global Notes, 8.25%, 09/01/21 | 125,000 | 119,375 | ||||||
Chesapeake Energy Corp., Sr. Unsec. Gtd. Notes, 6.63%, 08/15/20 | 16,000 | 16,780 | ||||||
6.13%, 02/15/21 | 5,000 | 5,081 | ||||||
Cimarex Energy Co., Sr. Unsec. Gtd. Notes, 7.13%, 05/01/17 | 5,000 | 5,169 | ||||||
Continental Resources, Inc., Sr. Unsec. Gtd. Global Notes, 8.25%, 10/01/19 | 20,000 | 21,675 | ||||||
7.13%, 04/01/21 | 50,000 | 51,438 | ||||||
Delta Petroleum Corp., Sr. Unsec. Gtd. Sub. Global Notes, 7.00%, 04/01/15 | 25,000 | 19,500 | ||||||
EXCO Resources, Inc., Sr. Unsec. Gtd. Notes, 7.50%, 09/15/18 | 107,000 | 102,720 | ||||||
Forest Oil Corp., Sr. Unsec. Gtd. Global Notes, 7.25%, 06/15/19 | 60,000 | 59,850 | ||||||
Gazprom Via Gaz Capital S.A. (Luxembourg), Sr. Unsec. Loan Participation Notes, 6.51%, 03/07/22(b) | 100,000 | 107,750 | ||||||
McMoRan Exploration Co., Sr. Unsec. Gtd. Notes, 11.88%, 11/15/14 | 10,000 | 10,625 | ||||||
Newfield Exploration Co., Sr. Unsec. Sub. Global Notes, 7.13%, 05/15/18 | 100,000 | 104,750 | ||||||
OGX Petroleo e Gas Participacoes S.A. (Brazil), Sr. Unsec. Gtd. Notes, 8.50%, 06/01/18(b) | 200,000 | 200,224 | ||||||
Pemex Project Funding Master Trust, Sr. Unsec. Gtd. Global Bonds, 6.63%, 06/15/35 | 340,000 | 371,256 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
17 Invesco Core Plus Bond Fund
Principal | ||||||||
Amount | Value | |||||||
Oil & Gas Exploration & Production–(continued) | ||||||||
Petrobras International Finance Co. (Brazil), Sr. Unsec. Gtd. Global Notes, 6.88%, 01/20/40 | $ | 625,000 | $ | 699,346 | ||||
Petrohawk Energy Corp., Sr. Unsec. Gtd. Global Notes, 7.25%, 08/15/18 | 25,000 | 29,250 | ||||||
Sr. Unsec. Gtd. Notes, 6.25%, 06/01/19(b) | 107,000 | 124,387 | ||||||
Petroleos Mexicanos (Mexico), Sr. Unsec. Gtd. Global Notes, 5.50%, 01/21/21 | 20,000 | 21,786 | ||||||
Plains Exploration & Production Co., Sr. Unsec. Gtd. Notes, 7.63%, 06/01/18 | 100,000 | 103,000 | ||||||
8.63%, 10/15/19 | 5,000 | 5,450 | ||||||
Range Resources Corp., Sr. Unsec. Gtd. Sub. Notes, 5.75%, 06/01/21 | 75,000 | 75,750 | ||||||
SM Energy Co., Sr. Unsec. Notes, 6.63%, 02/15/19(b) | 15,000 | 15,075 | ||||||
2,327,106 | ||||||||
Oil & Gas Refining & Marketing–0.02% | ||||||||
SunCoke Energy, Inc., Sr. Unsec. Gtd. Notes, 7.63%, 08/01/19(b) | 10,000 | 9,850 | ||||||
Tesoro Corp., Sr. Unsec. Gtd. Global Bonds, 6.50%, 06/01/17 | 20,000 | 20,375 | ||||||
United Refining Co., Sr. Sec. Gtd. Global Notes, 10.50%, 02/28/18 | 80,000 | 81,400 | ||||||
111,625 | ||||||||
Oil & Gas Storage & Transportation–2.38% | ||||||||
Chesapeake Midstream Partners L.P./CHKM Finance Corp., Sr. Unsec. Gtd. Notes, 5.88%, 04/15/21(b) | 43,000 | 41,280 | ||||||
Copano Energy LLC/Copano Energy Finance Co., Sr. Unsec. Gtd. Notes, 7.13%, 04/01/21 | 112,000 | 112,000 | ||||||
Energy Transfer Equity L.P., Sr. Sec. Gtd. Notes, 7.50%, 10/15/20 | 72,000 | 74,610 | ||||||
Enterprise Products Operating LLC, Sr. Unsec. Gtd. Global Notes, 5.25%, 01/31/20 | 150,000 | 163,547 | ||||||
Sr. Unsec. Gtd. Notes, | ||||||||
7.63%, 02/15/12 | 3,665,000 | 3,775,861 | ||||||
6.45%, 09/01/40 | 1,005,000 | 1,105,754 | ||||||
Series N, Sr. Unsec. Gtd. Notes, 6.50%, 01/31/19 | 420,000 | 491,626 | ||||||
Inergy L.P./Inergy Finance Corp., Sr. Unsec. Gtd. Notes, 6.88%, 08/01/21(b) | 10,000 | 9,513 | ||||||
MarkWest Energy Partners L.P./MarkWest Energy Finance Corp., Sr. Unsec. Gtd. Notes, 6.50%, 08/15/21 | 130,000 | 131,137 | ||||||
Overseas Shipholding Group, Inc., Sr. Unsec. Notes, 8.13%, 03/30/18 | 35,000 | 29,750 | ||||||
Regency Energy Partners L.P./Regency Energy Finance Corp., Sr. Unsec. Gtd. Notes, 6.88%, 12/01/18 | 25,000 | 25,656 | ||||||
Spectra Energy Capital LLC, Sr. Unsec. Gtd. Notes, 5.65%, 03/01/20 | 2,290,000 | 2,585,269 | ||||||
Targa Resources Partners L.P./Targa Resouces Partners Finance Corp., Sr. Unsec. Gtd. Notes, 6.88%, 02/01/21(b) | 25,000 | 24,438 | ||||||
Texas Eastern Transmission L.P., Sr. Unsec. Notes, 7.00%, 07/15/32 | 255,000 | 319,561 | ||||||
Williams Partners L.P., Sr. Unsec. Global Notes, 3.80%, 02/15/15 | 1,305,000 | 1,387,235 | ||||||
6.30%, 04/15/40 | 540,000 | 598,774 | ||||||
10,876,011 | ||||||||
Other Diversified Financial Services–4.70% | ||||||||
Bank of America Corp., Sr. Unsec. Global Notes, | ||||||||
4.50%, 04/01/15 | 40,000 | 40,528 | ||||||
3.70%, 09/01/15 | 700,000 | 688,252 | ||||||
6.50%, 08/01/16 | 10,000 | 10,756 | ||||||
Series L, Sr. Unsec. Medium-Term Global Notes, 7.63%, 06/01/19 | 220,000 | 249,294 | ||||||
Bear Stearns Cos., LLC (The), Unsec. Sub. Notes, 5.55%, 01/22/17 | 115,000 | 123,682 | ||||||
Citigroup, Inc., Sr. Unsec. Global Notes, | ||||||||
5.10%, 09/29/11 | 1,670,000 | 1,674,150 | ||||||
6.01%, 01/15/15 | 2,145,000 | 2,302,311 | ||||||
6.13%, 05/15/18 | 330,000 | 358,321 | ||||||
Sr. Unsec. Notes, 4.75%, 05/19/15 | 25,000 | 26,075 | ||||||
Countrywide Financial Corp., Sr. Unsec. Gtd. Medium-Term Global Notes, 5.80%, 06/07/12 | 1,510,000 | 1,535,775 | ||||||
ERAC USA Finance LLC, Unsec. Gtd. Notes, 5.80%, 10/15/12(b) | 300,000 | 315,520 | ||||||
2.25%, 01/10/14(b) | 2,000,000 | 2,027,018 | ||||||
General Electric Capital Corp., Sr. Unsec. Global Notes, 5.90%, 05/13/14 | 25,000 | 27,801 | ||||||
Series A, Sr. Unsec. Medium-Term Global Notes, 6.88%, 01/10/39 | 890,000 | 1,018,135 | ||||||
International Lease Finance Corp., Sr. Sec. Notes, 6.50%, 09/01/14(b) | 1,915,000 | 1,908,298 | ||||||
Sr. Unsec. Notes, 8.25%, 12/15/20 | 155,000 | 157,906 | ||||||
JPMorgan Chase & Co., Global Notes, 5.60%, 07/15/41 | 1,825,000 | 1,882,486 | ||||||
Sr. Unsec. Floating Rate Medium-Term Notes, 0.96%, 02/26/13(d) | 40,000 | 39,828 | ||||||
Sr. Unsec. Global Notes, | ||||||||
3.15%, 07/05/16 | 750,000 | 766,122 | ||||||
6.30%, 04/23/19 | 190,000 | 218,761 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
18 Invesco Core Plus Bond Fund
Principal | ||||||||
Amount | Value | |||||||
Other Diversified Financial Services–(continued) | ||||||||
JPMorgan Chase Capital XXVII–Series AA, Jr. Unsec. Gtd. Sub. Notes, 7.00%, 11/01/39 | $ | 2,325,000 | $ | 2,330,791 | ||||
Merrill Lynch & Co. Inc., Unsec. Sub. Global Notes, 6.11%, 01/29/37 | 215,000 | 183,859 | ||||||
Series C, Sr. Unsec. Medium-Term Global Notes, 5.45%, 02/05/13 | 3,530,000 | 3,612,264 | ||||||
Twin Reefs Pass-Through Trust, Sec. Pass Through Ctfs., 1.39% (Acquired 12/07/04-10/03/06; Cost $1,104,600)(b)(c)(f) | 1,110,000 | — | ||||||
21,497,933 | ||||||||
Packaged Foods & Meats–0.64% | ||||||||
Del Monte Foods Co., Sr. Unsec. Gtd. Notes, 7.63%, 02/15/19(b) | 15,000 | 15,000 | ||||||
Dole Food Co. Inc., Sr. Sec. Gtd. Notes, 8.00%, 10/01/16(b) | 5,000 | 5,200 | ||||||
Grupo Bimbo S.A.B. de C.V. (Mexico), Sr. Unsec. Gtd. Notes, 4.88%, 06/30/20(b) | 1,065,000 | 1,104,134 | ||||||
Kraft Foods, Inc., Sr. Unsec. Global Notes, 2.63%, 05/08/13 | 960,000 | 980,844 | ||||||
5.38%, 02/10/20 | 460,000 | 523,381 | ||||||
7.00%, 08/11/37 | 70,000 | 84,327 | ||||||
MHP S.A. (Luxembourg), Sr. Unsec. Gtd. Notes, 10.25%, 04/29/15(b) | 200,000 | 204,791 | ||||||
2,917,677 | ||||||||
Paper Packaging–0.00% | ||||||||
Cascades, Inc. (Canada), Sr. Unsec. Gtd. Global Notes, 7.88%, 01/15/20 | 10,000 | 9,725 | ||||||
Paper Products–0.13% | ||||||||
Boise Cascade LLC, Sr. Unsec. Gtd. Sub. Global Notes, 7.13%, 10/15/14 | 128,000 | 125,440 | ||||||
Clearwater Paper Corp., Sr. Unsec. Gtd. Global Notes, 7.13%, 11/01/18 | 20,000 | 20,000 | ||||||
Fibria Overseas Finance Ltd. (Cayman Islands), Sr. Unsec. Gtd. Notes, 7.50%, 05/04/20(b) | 100,000 | 103,925 | ||||||
6.75%, 03/03/21(b) | 200,000 | 199,468 | ||||||
Mercer International, Inc., Sr. Unsec. Gtd. Global Notes, 9.50%, 12/01/17 | 70,000 | 69,912 | ||||||
NewPage Corp., Sr. Sec. Gtd. Global Notes, 11.38%, 12/31/14 | 40,000 | 35,500 | ||||||
P.H. Glatfelter Co., Sr. Unsec. Gtd. Global Notes, 7.13%, 05/01/16 | 20,000 | 20,275 | ||||||
574,520 | ||||||||
Pharmaceuticals–0.08% | ||||||||
Elan Finance PLC/Corp. (Ireland), Sr. Unsec. Gtd. Global Notes, 8.75%, 10/15/16 | 100,000 | 103,125 | ||||||
Endo Pharmaceuticals Holdings, Inc., Sr. Unsec. Gtd. Notes, 7.00%, 12/15/20(b) | 75,000 | 75,750 | ||||||
Mylan, Inc., Sr. Unsec. Gtd. Notes, 6.00%, 11/15/18(b) | 35,000 | 34,650 | ||||||
NBTY, Inc., Sr. Unsec. Gtd. Global Notes, 9.00%, 10/01/18 | 20,000 | 21,100 | ||||||
Valeant Pharmaceuticals International, Sr. Unsec. Gtd. Notes, 6.75%, 10/01/17(b) | 30,000 | 27,975 | ||||||
7.00%, 10/01/20(b) | 5,000 | 4,525 | ||||||
6.75%, 08/15/21(b) | 100,000 | 88,250 | ||||||
355,375 | ||||||||
Publishing–0.01% | ||||||||
Nielsen Finance LLC/Co., Sr. Unsec Gtd. Global Notes, 7.75%, 10/15/18 | 50,000 | 51,875 | ||||||
Railroads–0.24% | ||||||||
CSX Corp., Sr. Unsec. Global Notes, 6.15%, 05/01/37 | 130,000 | 149,245 | ||||||
Sr. Unsec. Notes, 5.50%, 04/15/41 | 900,000 | 949,288 | ||||||
Kansas City Southern de Mexico S.A. de C.V. (Mexico), Sr. Unsec. Global Notes, 6.13%, 06/15/21 | 4,000 | 4,010 | ||||||
1,102,543 | ||||||||
Real Estate Services–0.01% | ||||||||
CB Richard Ellis Service Inc., Sr. Unsec. Gtd. Global Notes, 6.63%, 10/15/20 | 28,000 | 27,510 | ||||||
Regional Banks–0.67% | ||||||||
BB&T Capital Trust II, Jr. Unsec. Gtd. Sub. Global Trust Pfd. Capital Securities, 6.75%, 06/07/36 | 26,000 | 25,912 | ||||||
CIT Group, Inc., Sec. Gtd. Bonds, 7.00%, 05/02/17(b) | 145,000 | 141,737 | ||||||
Nationwide Building Society (United Kingdom), Sr. Unsec. Notes, 6.25%, 02/25/20(b) | 465,000 | 482,029 | ||||||
PNC Financial Services Group, Inc.–Series O, Jr. Unsec. Sub. Variable Rate Notes, 6.75%,(c)(d) | 20,000 | 19,350 | ||||||
PNC Funding Corp., Sr. Unsec. Gtd. Global Notes, 3.63%, 02/08/15 | 1,500,000 | 1,584,344 | ||||||
Sr. Unsec. Gtd. Notes, 6.70%, 06/10/19 | 330,000 | 397,440 | ||||||
Regions Financial Corp., Sr. Unsec. Notes, 5.75%, 06/15/15 | 225,000 | 212,625 | ||||||
Unsec. Sub. Notes, 7.38%, 12/10/37 | 10,000 | 8,550 | ||||||
Synovus Financial Corp., Unsec. Sub. Global Notes, 5.13%, 06/15/17 | 135,000 | 116,100 | ||||||
Zions Bancorp., Unsec. Sub. Notes, 6.00%, 09/15/15 | 60,000 | 60,300 | ||||||
3,048,387 | ||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
19 Invesco Core Plus Bond Fund
Principal | ||||||||
Amount | Value | |||||||
Research & Consulting Services–0.02% | ||||||||
FTI Consulting, Inc., Sr. Unsec. Gtd. Global Notes, 6.75%, 10/01/20 | $ | 102,000 | $ | 101,235 | ||||
Retail REIT’s–0.06% | ||||||||
WEA Finance LLC, Sr. Unsec. Gtd. Notes, 7.13%, 04/15/18(b) | 250,000 | 287,461 | ||||||
Semiconductor Equipment–0.06% | ||||||||
Amkor Technology, Inc., Sr. Unsec. Global Notes, 7.38%, 05/01/18 | 52,000 | 52,000 | ||||||
Sr. Unsec. Notes, 6.63%, 06/01/21(b) | 25,000 | 23,437 | ||||||
Freescale Semiconductor, Inc., Sr. Unsec. Gtd. Global Notes, 8.05%, 02/01/20 | 100,000 | 96,000 | ||||||
Sensata Technologies B.V. (Netherlands), Sr. Unsec. Gtd. Notes, 6.50%, 05/15/19(b) | 105,000 | 101,325 | ||||||
272,762 | ||||||||
Semiconductors–0.01% | ||||||||
Freescale Semiconductor, Inc., Sr. Sec. Gtd. Notes, 9.25%, 04/15/18(b) | 55,000 | 58,025 | ||||||
Sovereign Debt–1.64% | ||||||||
Argentina Bonos (Argentina), Sr. Unsec. Bonds, 7.00%, 10/03/15 | 400,000 | 382,610 | ||||||
Bahrain Government International Bond (Supranational), Sr. Unsec. Bonds, 5.50%, 03/31/20(b) | 100,000 | 97,563 | ||||||
Dominican Republic International Bond (Other), Sr. Unsec. Notes, 9.04%, 01/23/18(b) | 65,579 | 73,119 | ||||||
Guatemala Government Bond (Supranational), Sr. Unsec. Bonds, 8.13%, 10/06/19(b)(g) | 150,000 | 181,498 | ||||||
Guatemala Government Bond (Mult. Countries)-REGS, Sr. Unsec. Euro Bonds, 8.13%, 10/06/19(b)(g) | 90,000 | 108,450 | ||||||
Hungary Government International Bond (Hungary), Sr. Unsec. Global Notes, 6.38%, 03/29/21 | 200,000 | 205,000 | ||||||
Indonesia Government International Bond (Indonesia), Sr. Unsec. Bonds, 6.63%, 02/17/37(b) | 300,000 | 354,750 | ||||||
Lithuania Government International Bond (Lithuania), Notes, 6.13%, 03/09/21(b) | 100,000 | 107,208 | ||||||
Mexico Government International Bond (Mexico)–Series A, Sr. Unsec. Medium-Term Global Notes, 6.05%, 01/11/40 | 300,000 | 345,000 | ||||||
Pakistan Government International Bond (Pakistan), Unsec. Bonds, 6.88%, 06/01/17(b) | 175,000 | 142,625 | ||||||
Peruvian Government International Bond (Peru), Sr. Unsec. Global Bonds, 8.75%, 11/21/33 | 136,000 | 201,219 | ||||||
Poland Government International Bond (Poland), Sr. Unsec. Global Notes, 5.13%, 04/21/21 | 20,000 | 20,825 | ||||||
Provincia de Buenos Aires (Argentina), Sr. Unsec. Notes, 11.75%, 10/05/15(b) | 300,000 | 299,081 | ||||||
Republic of Iraq (Supranational), Bonds, 5.80%, 01/15/28(b) | 250,000 | 223,125 | ||||||
Republic of Latvia (Latvia), Sr. Unsec. Notes, 5.25%, 06/16/21(b) | 200,000 | 198,699 | ||||||
Republic of Serbia, Sr. Unsec. Bonds, 6.75%, 11/01/24(b) | 67,500 | 69,947 | ||||||
Russian Foreign Bond (Russia), Sr. Unsec. Euro Bonds, 3.63%, 04/29/15(b) | 1,700,000 | 1,744,200 | ||||||
5.00%, 04/29/20(b) | 600,000 | 633,675 | ||||||
South Africa Government International Bond (South Africa), Sr. Unsec. Global Notes, 5.88%, 05/30/22 | 100,000 | 116,005 | ||||||
Sri Lanka Government International Bond (Sri Lanka), Sr. Unsec. Notes, 6.25%, 10/04/20(b) | 150,000 | 151,125 | ||||||
Turkey Government International Bond (Turkey), Sr. Unsec. Global Bonds, 5.63%, 03/30/21 | 150,000 | 159,188 | ||||||
Sr. Unsec. Global Notes., 6.75%, 05/30/40 | 100,000 | 109,500 | ||||||
Ukraine Government International Bond (Ukraine), Sr. Unsec. Notes, 6.75%, 11/14/17(b) | 150,000 | 150,525 | ||||||
7.95%, 02/23/21(b) | 200,000 | 206,000 | ||||||
Uruguay Government International Bond (Uruguay), Unsec. Global Notes, 8.00%, 11/18/22 | 250,000 | 330,625 | ||||||
Venezuela Government International Bond (Venezuela), Sr. Unsec. Global Bonds., 9.25%, 09/15/27 | 600,000 | 420,321 | ||||||
REGS, Sr. Unsec. Euro Bonds, 9.00%, 05/07/23(b) | 140,000 | 96,950 | ||||||
Vietnam Government International Bond, Sr. Unsec. Bonds, 6.75%, 01/29/20(b) | 100,000 | 103,748 | ||||||
Wakala Global Sukuk BHD (Malaysia), Bonds, 2.99%, 07/06/16(b) | 250,000 | 255,164 | ||||||
7,487,745 | ||||||||
Specialized Finance–0.69% | ||||||||
National Rural Utilities Cooperative Finance Corp., Sr. Sec. Collateral Trust Global Bonds, 10.38%, 11/01/18 | 2,130,000 | 3,052,237 | ||||||
Sr. Sec. Collateral Trust Notes, 2.63%, 09/16/12 | 25,000 | 25,543 | ||||||
Waha Aerospace B.V. (Netherlands), Unsec. Gtd. Unsub. Bonds 3.93%, 07/28/20(b) | 90,000 | 93,647 | ||||||
3,171,427 | ||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
20 Invesco Core Plus Bond Fund
Principal | ||||||||
Amount | Value | |||||||
Specialized REIT’s–1.31% | ||||||||
Entertainment Properties Trust, Sr. Unsec. Gtd. Sub. Global Notes, 7.75%, 07/15/20 | $ | 3,880,000 | $ | 4,363,049 | ||||
Host Hotels & Resorts L.P., Sr. Gtd. Global Notes, 6.00%, 11/01/20 | 70,000 | 69,300 | ||||||
Sr. Unsec. Notes, 5.88%, 06/15/19(b) | 5,000 | 4,963 | ||||||
MPT Operating Partnership L.P./MPT Finance Corp., Sr. Unsec. Gtd. Notes, 6.88%, 05/01/21(b) | 10,000 | 9,575 | ||||||
Omega Healthcare Investors, Inc., Sr. Unsec. Gtd. Global Notes., 6.75%, 10/15/22 | 20,000 | 19,200 | ||||||
Senior Housing Properties Trust, Sr. Unsec. Notes,, 4.30%, 01/15/16 | 1,495,000 | 1,490,328 | ||||||
Ventas Realty L.P./Ventas Capital Corp., Sr. Unsec. Gtd. Notes, 4.75%, 06/01/21 | 50,000 | 48,242 | ||||||
6,004,657 | ||||||||
Specialty Chemicals–0.05% | ||||||||
Ferro Corp., Sr. Unsec. Notes, 7.88%, 08/15/18 | 90,000 | 91,237 | ||||||
NewMarket Corp., Sr. Unsec. Gtd. Global Notes, 7.13%, 12/15/16 | 100,000 | 102,187 | ||||||
PolyOne Corp., Sr. Unsec. Notes, 7.38%, 09/15/20 | 42,000 | 43,418 | ||||||
236,842 | ||||||||
Steel–0.96% | ||||||||
AK Steel Corp., Sr. Unsec. Gtd. Notes, 7.63%, 05/15/20 | 45,000 | 41,400 | ||||||
ArcelorMittal (Luxembourg), Sr. Unsec. Global Notes, | ||||||||
3.75%, 08/05/15 | 30,000 | 29,601 | ||||||
6.13%, 06/01/18 | 845,000 | 893,429 | ||||||
5.50%, 03/01/21 | 280,000 | 274,693 | ||||||
7.00%, 10/15/39 | 1,225,000 | 1,184,609 | ||||||
6.75%, 03/01/41 | 280,000 | 268,710 | ||||||
FMG Resources Pty Ltd. (Australia), Sr. Unsec. Gtd. Notes, 7.00%, 11/01/15(b) | 40,000 | 40,350 | ||||||
6.38%, 02/01/16(b) | 75,000 | 72,938 | ||||||
United States Steel Corp., Sr. Unsec. Notes, 7.00%, 02/01/18 | 75,000 | 72,000 | ||||||
Vale Overseas Ltd. (Brazil), Sr. Unsec. Gtd. Global Notes, 4.63%, 09/15/20 | 730,000 | 752,717 | ||||||
6.88%, 11/10/39 | 655,000 | 743,372 | ||||||
4,373,819 | ||||||||
Systems Software–0.03% | ||||||||
Allen Systems Group, Inc., Sec. Gtd. Notes, 10.50%, 11/15/16(b) | 40,000 | 37,300 | ||||||
Vangent, Inc., Sr. Unsec. Gtd. Sub. Global Notes, 9.63%, 02/15/15 | 79,000 | 82,950 | ||||||
120,250 | ||||||||
Textiles–0.02% | ||||||||
Levi Strauss & Co., Sr. Unsec. Global Notes, 7.63%, 05/15/20 | 100,000 | 97,000 | ||||||
Tires & Rubber–0.03% | ||||||||
Cooper Tire & Rubber Co., Sr. Unsec. Notes, 8.00%, 12/15/19 | 115,000 | 115,575 | ||||||
Goodyear Tire & Rubber Co. (The), Sr. Unsec. Gtd Notes, 8.25%, 08/15/20 | 5,000 | 5,275 | ||||||
120,850 | ||||||||
Tobacco–0.42% | ||||||||
Altria Group, Inc., Sr. Unsec. Gtd. Global Notes, 4.75%, 05/05/21 | 1,845,000 | 1,922,144 | ||||||
Trading Companies & Distributors–0.03% | ||||||||
H&E Equipment Services, Inc., Sr. Unsec. Gtd. Global Notes, 8.38%, 07/15/16 | 105,000 | 104,738 | ||||||
Interline Brands, Inc., Sr. Unsec. Gtd. Global Notes, 7.00%, 11/15/18 | 7,000 | 6,965 | ||||||
RSC Equipment Rental, Inc./RSC Holdings III LLC, Sr. Unsec. Gtd. Global Notes, 8.25%, 02/01/21 | 5,000 | 4,700 | ||||||
116,403 | ||||||||
Trucking–0.24% | ||||||||
Avis Budget Car Rental LLC/Avis Budget Finance, Inc., Sr. Unsec. Gtd. Global Notes, 8.25%, 01/15/19 | 105,000 | 101,850 | ||||||
Hertz Corp. (The), Sr. Unsec. Gtd. Notes, 6.75%, 04/15/19(b) | 80,000 | 75,600 | ||||||
7.38%, 01/15/21(b) | 25,000 | 24,062 | ||||||
Ryder System, Inc., Sr. Unsec. Medium-Term Notes, 3.15%, 03/02/15 | 860,000 | 894,065 | ||||||
1,095,577 | ||||||||
Wireless Telecommunication Services–1.09% | ||||||||
America Movil S.A.B de C.V. (Mexico), Sr. Unsec. Gtd. Global Notes, 6.13%, 03/30/40 | 1,115,000 | 1,214,413 | ||||||
American Tower Corp., Sr. Unsec. Global Notes, 4.63%, 04/01/15 | 430,000 | 465,275 | ||||||
Sr. Unsec. Notes, 4.50%, 01/15/18 | 100,000 | 102,622 | ||||||
Clearwire Communications LLC/Clearwire Finance Inc., Sr. Sec. Gtd. Notes, 12.00%, 12/01/15(b) | 130,000 | 123,500 | ||||||
Cricket Communications, Inc., Sr. Unsec. Gtd. Global Notes, 7.75%, 10/15/20 | 142,000 | 127,090 | ||||||
Sr. Unsec. Notes, 7.75%, 10/15/20(b) | 5,000 | 4,525 | ||||||
Crown Castle Towers LLC, Sr. Sec. Gtd. Notes, 3.21%, 08/15/15(b) | 25,000 | 25,750 | ||||||
4.88%, 08/15/20(b) | 1,835,000 | 1,942,806 | ||||||
Digicel Group Ltd. (Bermuda), Sr. Unsec. Notes, 8.88%, 01/15/15(b) | 200,000 | 199,750 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
21 Invesco Core Plus Bond Fund
Principal | ||||||||
Amount | Value | |||||||
Wireless Telecommunication Services–(continued) | ||||||||
MetroPCS Wireless, Inc., Sr. Unsec. Gtd. Notes, 7.88%, 09/01/18 | $ | 5,000 | $ | 5,091 | ||||
6.63%, 11/15/20 | 80,000 | 75,200 | ||||||
SBA Telecommunications, Inc., Sr. Unsec. Gtd. Global Notes, 8.25%, 08/15/19 | 95,000 | 99,987 | ||||||
Sprint Capital Corp., Sr. Unsec. Gtd. Global Notes, 6.90%, 05/01/19 | 182,000 | 177,450 | ||||||
Sprint Nextel Corp., Sr. Unsec. Notes, 8.38%, 08/15/17 | 5,000 | 5,263 | ||||||
VimpelCom Holdings B.V. (Netherlands), Sr. Unsec. Gtd. Notes, 7.50%, 03/01/22(b) | 200,000 | 191,712 | ||||||
Wind Acquisition Finance S.A. (Luxembourg), Sr. Sec. Gtd. Notes, 11.75%, 07/15/17(b) | 200,000 | 208,000 | ||||||
4,968,434 | ||||||||
Total U.S. Dollar Denominated Bonds & Notes (Cost $212,604,022) | 221,223,293 | |||||||
U.S. Government Sponsored Mortgage-Backed Securities–34.03% | ||||||||
Collateralized Mortgage Obligations–0.77% | ||||||||
Fannie Mae REMICS, Series 2003-109, Class CX, Pass Through Ctfs., 4.00%, 07/25/16 | 82,063 | 82,172 | ||||||
Series 2003-41, Class 1B, Pass Through Ctfs., 7.00%, 05/25/33 | 43,287 | 9,805 | ||||||
Series 2003-64, Class JI, Pass Through Ctfs., 6.00%, 07/25/33 | 83,389 | 14,495 | ||||||
Series 2005-35, Class AC, Pass Through Ctfs., 4.00%, 08/25/18 | 362,300 | 369,111 | ||||||
FDIC Structured Sale Gtd. Notes,–Series 2010-S1, Class 1A, Floating Rate Pass Through Ctfs., 0.77%, 02/25/48(b)(d) | 1,298,254 | 1,300,947 | ||||||
Freddie Mac REMICS, Series 2575, Class��KA, Pass Through Ctfs., 5.00%, 11/15/17 | 172,224 | 179,836 | ||||||
Series 2611, Class HA, Pass Through Ctfs., 4.00%, 10/15/21 | 1,147,110 | 1,157,737 | ||||||
Series 2937, Class JD, Pass Through Ctfs., 5.00%, 03/15/28 | 370,967 | 372,333 | ||||||
Series 3339, Class PC, Pass Through Ctfs., 5.00%, 05/15/32 | 16,388 | 16,513 | ||||||
3,502,949 | ||||||||
Federal Home Loan Mortgage Corp. (FHLMC)–18.28% | ||||||||
Pass Through Ctfs., | ||||||||
6.00%, 08/01/14 to 02/01/34 | 999,907 | 1,112,478 | ||||||
5.50%, 05/01/16 to 04/01/37 | 3,581,375 | 3,943,770 | ||||||
6.50%, 05/01/16 to 09/01/36 | 2,898,233 | 3,311,424 | ||||||
7.00%, 06/01/16 to 10/01/34 | 3,596,643 | 4,191,642 | ||||||
7.50%, 04/01/17 to 05/01/35 | 1,528,304 | 1,810,506 | ||||||
8.50%, 08/01/31 | 147,223 | 178,765 | ||||||
8.00%, 08/01/32 | 123,219 | 146,845 | ||||||
5.00%, 07/01/34 to 06/01/40 | 8,342,175 | 9,002,955 | ||||||
Pass Through Ctfs., ARM, | ||||||||
5.93%, 12/01/36(d) | 553,302 | 589,770 | ||||||
6.08%, 02/01/37(d) | 206,489 | 218,384 | ||||||
5.54%, 05/01/37(d) | 705,855 | 752,701 | ||||||
Pass Through Ctfs., TBA, | ||||||||
4.50%, 09/01/41(h) | 18,205,000 | 19,217,653 | ||||||
5.00%, 09/01/41(h) | 8,050,000 | 8,655,010 | ||||||
5.50%, 09/01/41(h) | 20,000,000 | 21,818,754 | ||||||
6.00%, 09/01/41(h) | 7,850,000 | 8,692,650 | ||||||
83,643,307 | ||||||||
Federal National Mortgage Association (FNMA)–13.67% | ||||||||
Pass Through Ctfs., | ||||||||
7.50%, 11/01/15 to 08/01/37 | 2,153,311 | 2,534,367 | ||||||
7.00%, 12/01/15 to 02/01/34 | 1,853,431 | 2,139,204 | ||||||
6.50%, 05/01/16 to 01/01/37 | 818,986 | 936,704 | ||||||
6.00%, 05/01/17 to 10/01/39 | 566,065 | 627,677 | ||||||
5.00%, 03/01/18 to 12/01/39 | 5,358,301 | 5,793,319 | ||||||
5.50%, 11/01/18 to 06/01/40 | 3,351,133 | 3,678,136 | ||||||
8.00%, 08/01/21 to 04/01/33 | 289,646 | 339,829 | ||||||
9.50%, 04/01/30 | 80,138 | 96,571 | ||||||
8.50%, 10/01/32 | 239,236 | 282,220 | ||||||
Pass Through Ctfs., ARM, | ||||||||
2.44%, 05/01/35(d) | 1,109,271 | 1,168,252 | ||||||
5.69%, 01/01/37(d) | 496,685 | 529,275 | ||||||
5.49%, 03/01/38(d) | 272,000 | 290,541 | ||||||
Pass Through Ctfs., TBA, | ||||||||
3.50%, 09/01/26(h) | 3,505,000 | 3,658,344 | ||||||
4.50%, 09/01/26(h) | 5,250,000 | 5,596,992 | ||||||
4.00%, 10/01/26 to 09/01/41(h) | 18,285,000 | 19,060,187 | ||||||
5.00%, 09/01/41(h) | 6,445,000 | 6,941,763 | ||||||
6.00%, 09/01/41(h) | 8,000,000 | 8,856,252 | ||||||
62,529,633 | ||||||||
Government National Mortgage Association (GNMA)–1.31% | ||||||||
Pass Through Ctfs., | ||||||||
7.50%, 06/15/23 to 05/15/32 | 81,266 | 94,575 | ||||||
9.00%, 07/15/24 to 10/15/24 | 28,167 | 33,600 | ||||||
8.50%, 02/15/25 | 8,220 | 8,485 | ||||||
8.00%, 08/15/25 to 11/15/29 | 127,223 | 148,789 | ||||||
6.56%, 01/15/27 | 182,880 | 210,513 | ||||||
7.00%, 04/15/28 to 09/15/32 | 653,055 | 768,166 | ||||||
6.00%, 11/15/28 to 02/15/33 | 256,401 | 290,270 | ||||||
6.50%, 01/15/29 to 09/15/34 | 388,886 | 446,776 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
22 Invesco Core Plus Bond Fund
Principal | ||||||||
Amount | Value | |||||||
Government National Mortgage Association (GNMA)–(continued) | ||||||||
5.50%, 06/15/35 | $ | 388,735 | $ | 435,469 | ||||
5.00%, 07/15/35 to 08/15/35 | 238,363 | 264,002 | ||||||
Pass Through Ctfs., ARM, | ||||||||
2.38%, 01/20/25 to 05/20/25(d) | 122,970 | 127,540 | ||||||
3.00%, 06/20/25(d) | 12,495 | 13,028 | ||||||
Pass Through Ctfs., TBA, 4.50%, 09/01/41(h) | 2,925,000 | 3,165,398 | ||||||
6,006,611 | ||||||||
Total U.S. Government Sponsored Mortgage-Backed Securities (Cost $151,343,994) | 155,682,500 | |||||||
Asset-Backed Securities–16.05% | ||||||||
ARI Fleet Lease Trust–Series 2010-A, Class A, Floating Rate Pass Through Ctfs., 1.66%, 08/15/18(b)(d) | 203,711 | 204,942 | ||||||
Banc of America Merrill Lynch Commercial Mortgage Inc., Series 2003-1, Class A2, Pass Through Ctfs., 4.65%, 09/11/36 | 40,000 | 41,317 | ||||||
Series 2005-6, Class A3, Variable Rate Pass Through Ctfs., 5.37%, 09/10/47(d) | 67,375 | 68,340 | ||||||
Banc of America Mortgage Securities Inc.–Series 2005-12, Class A2, Floating Rate Pass Through Ctfs., 1.12%, 01/25/36(d) | 1,414,618 | 1,150,211 | ||||||
Bear Stearns Adjustable Rate Mortgage Trust–Series 2003-6, Class 1A3, Variable Rate Pass Through Ctfs., 2.44%, 08/25/33(d) | 1,106,840 | 1,062,214 | ||||||
Bear Stearns Commercial Mortgage Securities, Series 2004-PWR6, Class A4, Pass Through Ctfs., 4.52%, 11/11/41 | 1,870,000 | 1,883,281 | ||||||
Series 2004-PWR6, Class A6, Pass Through Ctfs., 4.83%, 11/11/41 | 1,405,000 | 1,516,808 | ||||||
Series 2005-PWR8, Class A4, Pass Through Ctfs., 4.67%, 06/11/41 | 2,675,000 | 2,861,042 | ||||||
Series 2005-T18, Class A4, Variable Rate Pass Through Ctfs., 4.93%, 02/13/42(d) | 45,000 | 48,557 | ||||||
Series 2006-PW11, Class A4, Variable Rate Pass Through Ctfs., 5.62%, 03/11/39(d) | 2,948,000 | 3,245,894 | ||||||
Series 2006-PW11, Class AAB, Variable Rate Pass Through Ctfs., 5.62%, 03/11/39(d) | 36,277 | 38,044 | ||||||
Series 2006-T24, Class A3, Pass Through Ctfs., 5.53%, 10/12/41 | 1,500,000 | 1,533,477 | ||||||
Series 2006-T24, Class A4, Pass Through Ctfs., 5.54%, 10/12/41 | 3,040,000 | 3,369,405 | ||||||
Chase Issuance Trust–Series 2007-A17, Class A, Pass Through Ctfs., 5.12%, 10/15/14 | 2,560,000 | 2,692,146 | ||||||
Citibank Credit Card Issuance Trust–Series 2009-A5, Class A5, Pass Through Ctfs., 2.25%, 12/23/14 | 3,050,000 | 3,119,180 | ||||||
Citigroup Commercial Mortgage Trust–Series 2006-C4, Class A3, Variable Rate Pass Through Ctfs., 5.92%, 03/15/49(d) | 625,000 | 677,361 | ||||||
Citigroup Mortgage Loan Trust, Inc.–Series 2004-UST1, Class A4, Variable Rate Pass Through Ctfs., 2.27%, 08/25/34(d) | 3,175,504 | 3,031,291 | ||||||
Commercial Mortgage Ctfs.–Series 2001-J2A, Class A2F, Floating Rate Pass Through Ctfs., 0.71%, 07/16/34(b)(d) | 1,072 | 1,072 | ||||||
Countrywide Asset-Backed Ctfs., Series 2003-1, Class 3A, Floating Rate Pass Through Ctfs., 0.90%, 06/25/33(d) | 301,266 | 210,534 | ||||||
Series 2007-4, Class A1B, Pass Through Ctfs., 5.81%, 09/25/37 | 586,071 | 574,318 | ||||||
Countrywide Home Loan Mortgage Pass Through Trust–Series 2007-13, Class A10, Pass Through Ctfs., 6.00%, 08/25/37 | 1,820,000 | 1,482,816 | ||||||
Credit Suisse Mortgage Capital Ctfs., Series 2009-2R, Class 1A11, Floating Rate Pass Through Ctfs., 2.72%, 09/26/34(b)(d) | 1,556,183 | 1,469,429 | ||||||
Series 2010-6R, Class 1A1, Pass Through Ctfs., 5.50%, 02/27/37(b) | 792,698 | 818,461 | ||||||
DBUBS Mortgage Trust–Series 2011-LC1A, Class C, Variable Rate Pass Through Ctfs., 5.73%, 11/10/46(b)(d) | 2,000,000 | 1,818,939 | ||||||
Discover Card Master Trust–Series 2010-A1, Class A1, Floating Rate Pass Through Ctfs., 0.86%, 09/15/15(d) | 1,175,000 | 1,184,439 | ||||||
First Horizon Alternative Mortgage Securities, Series 2005-FA8, Class 2A1, Pass Through Ctfs., 5.00%, 11/25/20 | 777,562 | 710,661 | ||||||
Series 2006-FA5, Class A3, Pass Through Ctfs., 6.25%, 08/25/36 | 705,418 | 497,111 | ||||||
GE Capital Credit Card Master Note Trust–Series 2010-3, Class A, Pass Through Ctfs., 2.21%, 06/15/16 | 70,000 | 71,787 | ||||||
GS Mortgage Securities Corp. II, Series 2005-GG4, Class A4A, Pass Through Ctfs., 4.75%, 07/10/39 | 2,760,000 | 2,952,355 | ||||||
Series 2010-C1, Class C, Variable Rate Pass Through Ctfs., 5.64%, 08/10/43(b)(d) | 600,000 | 540,989 | ||||||
Harborview Mortgage Loan Trust–Series 2005-9, Class 2A1C, Floating Rate Pass Through Ctfs., 0.66%, 06/20/35(d) | 65,992 | 45,333 | ||||||
JP Morgan Chase Commercial Mortgage Securities Corp.–Series 2006-LDP9, Class A3, Pass Through Ctfs., 5.34%, 05/15/47 | 900,000 | 943,682 | ||||||
LB-UBS Commercial Mortgage Trust, Series 2005-C1, Class A4, Pass Through Ctfs., 4.74%, 02/15/30 | 780,000 | 837,638 | ||||||
Series 2005-C3, Class A3, Pass Through Ctfs., 4.65%, 07/15/30 | 18,027 | 18,155 | ||||||
Series 2005-C3, Class A5, Pass Through Ctfs., 4.74%, 07/15/30 | 3,000,000 | 3,238,509 | ||||||
Series 2006-C1, Class A4, Pass Through Ctfs., 5.16%, 02/15/31 | 845,000 | 916,069 | ||||||
Series 2006-C7, Class A3, Pass Through Ctfs., 5.35%, 11/15/38 | 300,000 | 315,498 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
23 Invesco Core Plus Bond Fund
Principal | ||||||||
Amount | Value | |||||||
Lehman Mortgage Trust–Series 2006-1, Class 3A5, Pass Through Ctfs., 5.50%, 02/25/36 | $ | 902,440 | $ | 857,302 | ||||
Morgan Stanley Capital I, Series 2005-HQ5, Class A3, Pass Through Ctfs., 5.01%, 01/14/42 | 46,755 | 46,911 | ||||||
Series 2005-HQ7, Class A4, Variable Rate Pass Through Ctfs., 5.37%, 11/14/42(d) | 35,000 | 38,236 | ||||||
Series 2005-T17, Class A4, Pass Through Ctfs., 4.52%, 12/13/41 | 26,200 | 26,232 | ||||||
Series 2005-T19, Class A4A, Pass Through Ctfs., 4.89%, 06/12/47 | 2,638,000 | 2,863,461 | ||||||
Series 2008-T29, Class A1, Pass Through Ctfs., 6.23%, 01/11/43 | 864,177 | 893,473 | ||||||
Nissan Auto Lease Trust–Series 2009-B, Class A3, Pass Through Ctfs., 2.07%, 01/15/15 | 5,837 | 5,842 | ||||||
Provident Bank Home Equity Loan Trust–Series 2000-2, Class A1, Floating Rate Pass Through Ctfs., 0.76%, 08/25/31(d) | 460,067 | 242,461 | ||||||
RBSCF Trust–Series 2010-RR3, Class MS4A, Variable Rate Pass Through Ctfs., 4.97%, 04/16/40(b)(d) | 3,600,000 | 3,794,938 | ||||||
Renaissance Home Equity Loan Trust–Series 2007-2, Class AV1, Floating Rate Pass Through Ctfs., 0.33%, 06/25/37(d) | 23,572 | 23,257 | ||||||
Santander Drive Auto Receivables Trust–Series 2011-1, Class D, Pass Through Ctfs., 4.01%, 02/15/17 | 1,545,000 | 1,555,429 | ||||||
Specialty Underwriting & Residential Finance–Series 2004-BC2, Class A2, Floating Rate Pass Through Ctfs., 0.49%, 05/25/35(d) | 41,645 | 32,501 | ||||||
Structured Adjustable Rate Mortgage Loan Trust–Series 2007-3, Class 4A2, Variable Rate Pass Through Ctfs., 5.34%, 04/25/47(d) | 1,100,000 | 587,285 | ||||||
Structured Asset Investment Loan Trust–Series 2003-BC12, Class 3A, Floating Rate Pass Through Ctfs., 0.96%, 11/25/33(d) | 51,777 | 44,943 | ||||||
Suntrust Alternative Loan Trust–Series 2005-1F, Class 2A8, Pass Through Ctfs., 6.00%, 12/25/35 | 1,031,474 | 721,925 | ||||||
TIAA Seasoned Commercial Mortgage Trust–Series 2007-C4, Class A2, Variable Rate Pass Through Ctfs., 5.67%, 08/15/39(d) | 720,000 | 734,620 | ||||||
USAA Auto Owner Trust–Series 2009-1, Class A3, Pass Through Ctfs., 3.02%, 06/17/13 | 495,451 | 497,555 | ||||||
Wachovia Bank Commercial Mortgage Trust, Series 2005-C18, Class A4, Pass Through Ctfs., 4.94%, 04/15/42 | 3,670,000 | 3,952,190 | ||||||
Series 2005-C21, Class A4, Variable Rate Pass Through Ctfs., 5.38%, 10/15/44(d) | 1,520,000 | 1,661,404 | ||||||
Series 2005-C21, Class AJ, Variable Rate Pass Through Ctfs., 5.38%, 10/15/44(d) | 1,515,000 | 1,383,837 | ||||||
Series 2005-C21, Class AM, Variable Rate Pass Through Ctfs., 5.38%, 10/15/44(d) | 1,680,000 | 1,659,628 | ||||||
WaMu Mortgage Pass Through Ctfs., Series 2003-AR8, Class A, Floating Rate Pass Through Ctfs., 2.48%, 08/25/33(d) | 2,519,798 | 2,387,219 | ||||||
Series 2005-AR10, Class 1A3, Variable Rate Pass Through Ctfs., 2.52%, 09/25/35(d) | 525,000 | 397,885 | ||||||
Wells Fargo Mortgage Backed Securities Trust, Series 2004-K, Class 1A2, Floating Rate Pass Through Ctfs., 2.76%, 07/25/34(d) | 1,377,024 | 1,378,758 | ||||||
Series 2004-Z, Class 2A1, Floating Rate Pass Through Ctfs., 2.74%, 12/25/34(d) | 2,664,314 | 2,441,595 | ||||||
Total Asset-Backed Securities (Cost $66,620,027) | 73,420,192 | |||||||
U.S. Treasury Securities–15.21% | ||||||||
U.S. Treasury Bills–0.29% | ||||||||
0.08%, 11/17/11(i)(j) | 830,000 | 829,991 | ||||||
0.10%, 11/17/11(i)(j) | 500,000 | 499,994 | ||||||
1,329,985 | ||||||||
U.S. Treasury Notes–11.82% | ||||||||
4.50%, 04/30/12 | 11,200,000 | 11,527,688 | ||||||
1.88%, 02/28/14 | 8,010,000 | 8,334,155 | ||||||
2.25%, 05/31/14 | 19,595,000 | 20,648,231 | ||||||
2.63%, 07/31/14 | 4,300,000 | 4,588,234 | ||||||
2.38%, 10/31/14 | 1,875,000 | 1,992,774 | ||||||
2.13%, 11/30/14 | 625,000 | 659,766 | ||||||
2.63%, 12/31/14 | 2,000,000 | 2,145,938 | ||||||
1.25%, 08/31/15 | 350,000 | 359,023 | ||||||
2.00%, 04/30/16 | 1,000,000 | 1,053,906 | ||||||
1.75%, 05/31/16 | 2,150,000 | 2,239,359 | ||||||
2.75%, 05/31/17 | 400,000 | 434,625 | ||||||
3.63%, 08/15/19 | 100,000 | 114,000 | ||||||
54,097,699 | ||||||||
U.S. Treasury Bonds–3.10% | ||||||||
6.25%, 05/15/30 | 2,000,000 | 2,886,875 | ||||||
5.38%, 02/15/31 | 2,505,000 | 3,304,643 | ||||||
3.50%, 02/15/39 | 940,000 | 927,956 | ||||||
4.25%, 05/15/39 | 20,000 | 22,475 | ||||||
4.50%, 08/15/39 | 1,405,000 | 1,642,752 | ||||||
3.88%, 08/15/40 | 50,000 | 52,609 | ||||||
4.75%, 02/15/41 | 2,500,000 | 3,042,188 | ||||||
4.38%, 05/15/41 | 2,000,000 | 2,293,750 | ||||||
14,173,248 | ||||||||
Total U.S. Treasury Securities (Cost $66,076,330) | 69,600,932 | |||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
24 Invesco Core Plus Bond Fund
Principal | ||||||||
Amount | Value | |||||||
U.S. Government Sponsored Agency Securities–1.06% | ||||||||
Federal Home Loan Mortgage Corp. (FHLMC)–1.06% | ||||||||
Sr. Unsec. Global Notes, 5.50%, 08/23/17 | $ | 2,740,000 | $ | 3,351,049 | ||||
Sr. Unsec. Global Notes, 6.25%, 07/15/32 | 1,080,000 | 1,483,236 | ||||||
Total U.S. Government Sponsored Agency Securities (Cost $4,261,654) | 4,834,285 | |||||||
Municipal Obligations–0.70% | ||||||||
California (State of); Series 2010, Various Purpose Unlimited Taxable GO Bonds, 5.75%, 03/01/17 | 565,000 | 644,563 | ||||||
Georgia (State of) Municipal Electric Authority; Series 2010 A, Taxable Build America RB, 6.64%, 04/01/57 | 1,415,000 | 1,443,527 | ||||||
Series 2010, Build America RB, 6.66%, 04/01/57 | 550,000 | 554,147 | ||||||
New Jersey (State of) Transportation Trust Fund Authority; Series 2010 C, Taxable Build America RB, 5.75%, 12/15/28 | 525,000 | 539,112 | ||||||
Total Municipal Obligations (Cost $3,060,742) | 3,181,349 | |||||||
Non-U.S. Dollar Denominated Bonds & Notes–0.49%(k) | ||||||||
Brazil–0.02% | ||||||||
Itau Unibanco Holding S.A., Sr. Unsec. Notes, 10.50%, 11/23/15(b) | BRL | 150,000 | 100,371 | |||||
Canada–0.01% | ||||||||
Gateway Casinos & Entertainment Ltd., Sec. Gtd. Notes, 8.88%, 11/15/17(b) | CAD | 49,000 | 52,298 | |||||
Colombia–0.06% | ||||||||
Colombia Government International Bond, Sr. Unsec. Global Bonds, 7.75%, 04/14/21 | COP | 413,000,000 | 273,371 | |||||
Germany–0.06% | ||||||||
Kabel Deutschland Vetrieb und Service GmbH & Co. K.G., Sr. Sec. Notes, 6.50%, 06/29/18(b) | EUR | 100,000 | 141,363 | |||||
KION Finance S.A., Sr. Sec. Gtd Notes, 7.88%, 04/15/18(b) | EUR | 100,000 | 119,990 | |||||
261,353 | ||||||||
Ireland–0.05% | ||||||||
Nara Cable Funding Ltd., Sr. Sec. Notes, 8.88%, 12/01/18(b) | EUR | 100,000 | 126,097 | |||||
RusHydro Finance Ltd., Sr. Sec. Medium-Term Euro Loan Participation Notes, 7.88%, 10/28/15 | RUB | 2,800,000 | 97,708 | |||||
223,805 | ||||||||
Malaysia–0.02% | ||||||||
Malaysia Government Bond–Series 0409, Sr. Unsec. Bonds, 3.74%, 02/27/15 | MYR | 250,000 | 85,459 | |||||
Mexico–0.08% | ||||||||
Mexican Bonos, Series M, Bonds, 8.00%, 06/11/20 | MXN | 2,000,000 | 186,016 | |||||
Series M10, Bonds, 7.75%, 12/14/17 | MXN | 350,000 | 32,098 | |||||
Series M20, Bonds, 10.00%, 12/05/24 | MXN | 1,300,000 | 139,581 | |||||
357,695 | ||||||||
Netherlands–0.05% | ||||||||
Goodyear Dunlop Tires Europe B.V., Sr. Unsec. Gtd. Notes, 6.75%, 04/15/19(b) | EUR | 100,000 | 134,719 | |||||
Ziggo Bond Co. B.V., Sr. Sec. Gtd. Notes, 8.00%, 05/15/18(b) | EUR | 75,000 | 105,889 | |||||
240,608 | ||||||||
Peru–0.02% | ||||||||
Peruvian Government International Bond, Sr. Unsec. Notes, 8.60%, 08/12/17(b) | PEN | 210,000 | 90,893 | |||||
South Korea–0.02% | ||||||||
Export-Import Bank of Korea, Sr. Unsec. Notes, 4.00%, 11/26/15(b) | PHP | 3,300,000 | 76,857 | |||||
United Kingdom–0.06% | ||||||||
Bakkavor Finance 2 PLC, Sr. Sec. Gtd. Notes, 8.25%, 02/15/18(b) | GBP | 100,000 | 114,478 | |||||
Odeon & UCI Finco PLC, Sr. Sec. Gtd. Notes, 9.00%, 08/01/18(b) | GBP | 100,000 | 149,389 | |||||
263,867 | ||||||||
United States–0.04% | ||||||||
Morgan Stanley, Sr. Unsec. Notes, 10.09%, 05/03/17(b) | BRL | 340,000 | 205,611 | |||||
Total Non-U.S. Dollar Denominated Bonds & Notes (Cost $2,331,704) | 2,232,188 | |||||||
Shares | ||||||||
Preferred Stocks–0.01% | ||||||||
Consumer Finance–0.01% | ||||||||
Ally Financial, Inc., Series A, 8.50% Pfd. | 510 | 10,516 | ||||||
Series G, 7.00% Pfd.(b) | 4 | 3,044 | ||||||
GMAC Capital Trust I–Series 2, 8.13% Pfd. | 555 | 11,849 | ||||||
25,409 | ||||||||
Industrial REIT’s–0.00% | ||||||||
DuPont Fabros Technology, Inc. Series B, 7.63% Pfd. | 200 | 4,962 | ||||||
Regional Banks–0.00% | ||||||||
Zions Bancorp. Series C, 9.50% Pfd.(b) | 200 | 5,080 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
25 Invesco Core Plus Bond Fund
Shares | Value | |||||||
Tires & Rubber–0.00% | ||||||||
Goodyear Tire & Rubber Co. (The) $2.94 Conv. Pfd. | 165 | $ | 7,412 | |||||
Total Preferred Stocks (Cost $48,933) | 42,863 | |||||||
Money Market Funds–6.37% | ||||||||
Liquid Assets Portfolio–Institutional Class(l) | 14,573,674 | 14,573,674 | ||||||
Premier Portfolio–Institutional Class(l) | 14,573,673 | 14,573,673 | ||||||
Total Money Market Funds (Cost $29,147,347) | 29,147,347 | |||||||
TOTAL INVESTMENTS–122.27% (Cost $535,494,753) | 559,364,949 | |||||||
OTHER ASSETS LESS LIABILITIES–(22.27)% | (101,880,159 | ) | ||||||
NET ASSETS–100.00% | $ | 457,484,790 | ||||||
Investment Abbreviations:
ARM | – Adjustable Rate Mortgage | |
BRL | – Brazilian Real | |
CAD | – Canadian Dollar | |
Conv. | – Convertible | |
COP | – Colombian Peso | |
Ctfs. | – Certificates | |
Deb. | – Debentures | |
EUR | – Euro | |
GBP | – British Pound | |
GO | – General Obligation | |
Gtd. | – Guaranteed | |
Jr. | – Junior | |
MXN | – Mexican Peso | |
MYR | – Malaysian Ringgit | |
PEN | – Peru Nuevo Sol | |
Pfd. | – Preferred | |
PHP | – Philippine Peso | |
PIK | – Payment in Kind | |
RB | – Revenue Bonds | |
REGS | – Regulation S | |
REIT | – Real Estate Investment Trust | |
REMICS | – Real Estate Mortgage Investment Conduits | |
RUB | – Russian Rouble | |
Sec. | – Secured | |
Sr. | – Senior | |
Sub. | – Subordinated | |
TBA | – To Be Announced | |
Unsec. | – Unsecured | |
Unsub. | – Unsubordinated |
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. | |
(b) | Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended. The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The aggregate value of these securities at August 31, 2011 was $82,794,718, which represented 18.10% of the Trust’s Net Assets. | |
(c) | Perpetual bond with no specified maturity date. | |
(d) | Interest or dividend rate is redetermined periodically. Rate shown is the rate in effect on August 31, 2011. | |
(e) | Interest payments have been suspended under European Union agreement for 24 months beginning April 30, 2010. | |
(f) | Defaulted security. Currently, the issuer is partially or fully in default with respect to interest payments. The value of this security at August 31, 2011 represented 0.00% of the Fund’s Net Assets. | |
(g) | Security has an irrevocable call by the issuer or mandatory put by the holder. Maturity date reflects such call or put. | |
(h) | Security purchased on a forward commitment basis. This security is subject to dollar roll transactions. See Note 1J. | |
(i) | Security traded on a discount basis. The interest rate shown represents the discount rate at the time of purchase by the Fund. | |
(j) | All or a portion of the value was pledged as collateral to cover margin requirements for open futures contracts. See Note 1M and Note 4. | |
(k) | Foreign denominated security. Principal amount is denominated in currency indicated. | |
(l) | The money market fund and the Fund are affiliated by having the same investment adviser. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
26 Invesco Core Plus Bond Fund
Statement of Assets and Liabilities
August 31, 2011
Assets: | ||||
Investments, at value (Cost $506,347,406) | $ | 530,217,602 | ||
Investments in affiliated money market funds, at value and cost | 29,147,347 | |||
Total investments, at value (Cost $535,494,753) | 559,364,949 | |||
Foreign currencies, at value (Cost $165,338) | 164,707 | |||
Receivable for: | ||||
Investments sold | 13,112,507 | |||
Fund shares sold | 752,989 | |||
Dividends and interest | 4,557,116 | |||
Fund expenses absorbed | 128,452 | |||
Principal paydowns | 76,226 | |||
Unrealized appreciation on swap agreements | 87,406 | |||
Investment for trustee deferred compensation and retirement plans | 29,919 | |||
Other assets | 24,222 | |||
Total assets | 578,298,493 | |||
Liabilities: | ||||
Payable for: | ||||
Investments purchased | 119,436,741 | |||
Fund shares reacquired | 568,993 | |||
Amount due custodian | 6,165 | |||
Dividends | 156,219 | |||
Foreign currency contracts outstanding | 8,544 | |||
Variation margin | 31,692 | |||
Accrued fees to affiliates | 259,094 | |||
Accrued other operating expenses | 263,381 | |||
Trustee deferred compensation and retirement plans | 62,160 | |||
Premiums received on swap agreements | 20,714 | |||
Total liabilities | 120,813,703 | |||
Net assets applicable to shares outstanding | $ | 457,484,790 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 529,551,515 | ||
Undistributed net investment income | 262,719 | |||
Undistributed net realized gain (loss) | (96,350,550 | ) | ||
Unrealized appreciation | 24,021,106 | |||
$ | 457,484,790 | |||
Net assets: | ||||
Class A | $ | 225,416,586 | ||
Class B | $ | 24,401,034 | ||
Class C | $ | 33,476,012 | ||
Class R | $ | 2,300,786 | ||
Class Y | $ | 5,234,073 | ||
Institutional Class | $ | 166,656,299 | ||
Shares outstanding, $0.01 par value per share, with an unlimited number of shares authorized: | ||||
Class A | 21,264,423 | |||
Class B | 2,302,352 | |||
Class C | 3,158,808 | |||
Class R | 217,105 | |||
Class Y | 493,601 | |||
Institutional Class | 15,726,914 | |||
Class A: | ||||
Net asset value per share | $ | 10.60 | ||
Maximum offering price per share | ||||
(Net asset value of $10.60 divided by 95.25%) | $ | 11.13 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 10.60 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 10.60 | ||
Class R: | ||||
Net asset value and offering price per share | $ | 10.60 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 10.60 | ||
Institutional Class: | ||||
Net asset value and offering price per share | $ | 10.60 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
27 Invesco Core Plus Bond Fund
Statement of Operations
For the year ended August 31, 2011
Investment income: | ||||
Interest | $ | 4,627,535 | ||
Dividends from affiliated money market funds | 4,013 | |||
Total investment income | 4,631,548 | |||
Expenses: | ||||
Advisory fees | 517,822 | |||
Administrative services fees | 50,000 | |||
Custodian fees | 20,135 | |||
Distribution fees: | ||||
Class A | 146,724 | |||
Class B | 65,213 | |||
Class C | 81,002 | |||
Class R | 3,149 | |||
Transfer agent fees — A, B, C, R and Y | 217,365 | |||
Transfer agent fees — Institutional | 165 | |||
Trustees’ and officers’ fees and benefits | 14,761 | |||
Registration and filing fees | 68,152 | |||
Other | 89,235 | |||
Total expenses | 1,273,723 | |||
Less: Fees waived, expenses reimbursed and expense offset arrangement(s) | (396,095 | ) | ||
Net expenses | 877,628 | |||
Net investment income | 3,753,920 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain (loss) from: | ||||
Investment securities | 2,948,197 | |||
Foreign currencies | 7,613 | |||
Foreign currency contracts | (3,674 | ) | ||
Futures contracts | (1,024,706 | ) | ||
Swap agreements | (10,689 | ) | ||
1,916,741 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | (2,357,186 | ) | ||
Foreign currencies | (6,640 | ) | ||
Foreign currency contracts | (8,544 | ) | ||
Futures contracts | 90,542 | |||
Swap agreements | 87,406 | |||
(2,194,422 | ) | |||
Net realized and unrealized gain (loss) | (277,681 | ) | ||
Net increase in net assets resulting from operations | $ | 3,476,239 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
28 Invesco Core Plus Bond Fund
Statement of Changes in Net Assets
For the years ended August 31, 2011 and 2010
2011 | 2010 | |||||||
Operations: | ||||||||
Net investment income | $ | 3,753,920 | $ | 198,401 | ||||
Net realized gain | 1,916,741 | 152,692 | ||||||
Change in net unrealized appreciation (depreciation) | (2,194,422 | ) | 232,044 | |||||
Net increase in net assets resulting from operations | 3,476,239 | 583,137 | ||||||
Distributions to shareholders from net investment income: | ||||||||
Class A | (2,136,426 | ) | (194,225 | ) | ||||
Class B | (189,459 | ) | (21,593 | ) | ||||
Class C | (236,568 | ) | (16,420 | ) | ||||
Class R | (20,998 | ) | (6,254 | ) | ||||
Class Y | (23,561 | ) | (5,893 | ) | ||||
Institutional Class | (1,613,593 | ) | (5,318 | ) | ||||
Total distributions from net investment income | (4,220,605 | ) | (249,703 | ) | ||||
Distributions to shareholders from net realized gains: | ||||||||
Class A | (112,008 | ) | (25,492 | ) | ||||
Class B | (14,844 | ) | (3,459 | ) | ||||
Class C | (13,430 | ) | (2,577 | ) | ||||
Class R | (2,158 | ) | (1,019 | ) | ||||
Class Y | (1,898 | ) | (847 | ) | ||||
Institutional Class | (1,619 | ) | (762 | ) | ||||
Total distributions from net realized gains | (145,957 | ) | (34,156 | ) | ||||
Share transactions–net: | ||||||||
Class A | 218,551,835 | 4,108,451 | ||||||
Class B | 23,586,221 | 718,206 | ||||||
Class C | 32,838,422 | 598,636 | ||||||
Class R | 2,155,216 | 40,961 | ||||||
Class Y | 5,079,304 | 12,808 | ||||||
Institutional Class | 166,735,618 | 6,079 | ||||||
Net increase in net assets resulting from share transactions | 448,946,616 | 5,485,141 | ||||||
Net increase in net assets | 448,056,293 | 5,784,419 | ||||||
Net assets: | ||||||||
Beginning of year | 9,428,497 | 3,644,078 | ||||||
End of year (includes undistributed net investment income of $262,719 and $(2,086), respectively) | $ | 457,484,790 | $ | 9,428,497 | ||||
Notes to Financial Statements
August 31, 2011
NOTE 1—Significant Accounting Policies
Invesco Core Plus Bond Fund (the “Fund”), is a series portfolio of AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end series management investment company consisting of twelve separate portfolios, each authorized to issue an unlimited number of shares of beneficial interest. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class.
29 Invesco Core Plus Bond Fund
The Fund’s investment objective is total return, comprised of current income and capital appreciation.
The Fund currently consists of six different classes of shares: Class A, Class B, Class C, Class R, Class Y and Institutional Class. Class A shares are sold with a front-end sales charge unless certain waiver criteria are met and under certain circumstances load waived shares may be subject to contingent deferred sales charges (“CDSC”). Class C shares are sold with a CDSC. Class R, Class Y and Institutional Class shares are sold at net asset value. Effective November 30, 2010, new or additional investments in Class B shares are no longer permitted. Existing shareholders of Class B shares may continue to reinvest dividends and capital gains distributions in Class B shares until they convert. Also, shareholders in Class B shares will be able to exchange those shares for Class B shares of other Invesco Funds offering such shares until they convert. Generally, Class B shares will automatically convert to Class A shares on or about the month-end which is at least eight years after the date of purchase. Redemption of Class B shares prior to conversion date will be subject to a CDSC.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. | |
Debt obligations (including convertible bonds) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations, including commercial paper, having 60 days or less to maturity are recorded at amortized cost which approximates value. Debt securities are subject to interest rate and credit risks. In addition, all debt securities involve some risk of default with respect to interest and/or principal payments. | ||
A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”). | ||
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded. | ||
Swap agreements are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service are valued based on a model which may include end of day net present values, spreads, ratings, industry, and company performance. | ||
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trade is not the current value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economical upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards. | ||
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including Corporate Loans. | ||
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value. | ||
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments. | ||
B. | Securities Transactions and Investment Income — Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded on the accrual basis from settlement date. Paydown gains and losses on mortgage and asset-backed securities are recorded as adjustments to interest income. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. Bond premiums and discounts are amortized and/or accreted for financial reporting purposes. | |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held. |
30 Invesco Core Plus Bond Fund
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund’s net asset value and, accordingly, they reduce the Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser. | ||
The Fund allocates realized and unrealized capital gains and losses to a class based on the relative net assets of each class. The Fund allocates income to a class based on the relative value of the settled shares of each class. | ||
C. | Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. | |
D. | Distributions — Distributions from income are declared daily and paid monthly. Distributions from net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to treat a portion of the proceeds from redemptions as distributions for federal income tax purposes. | |
E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. | |
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period. | ||
F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund are charged to the operations of such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses attributable to the Institutional Class are charged to such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses relating to all other classes are allocated among those classes based on relative net assets. All other expenses are allocated among the classes based on relative net assets. | |
G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. | |
H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. | |
I. | Other Risks — The Funds may invest in obligations issued by agencies and instrumentalities of the U.S. Government that may vary in the level of support they receive from the government. The government may choose not to provide financial support to government sponsored agencies or instrumentalities if it is not legally obligated to do so. In this case, if the issuer defaulted, the underlying fund holding securities of such issuer might not be able to recover its investment from the U.S. Government. Many securities purchased by the Fund are not guaranteed by the U.S. Government. | |
J. | Dollar Roll and Forward Commitment Transactions — The Fund may engage in dollar roll and forward commitment transactions with respect to mortgage-backed securities issued by GNMA, FNMA and FHLMC. Forward commitment transactions are often conducted on a to be announced (“TBA”) basis. In a TBA mortgage-backed transaction, the seller does not specify the particular securities to be delivered. Rather, a Fund agrees to accept any security that meets specified terms, such as an agreed upon issuer, coupon rate and terms of the underlying mortgages. TBA mortgage-backed transactions generally settle once a month on a specific date. | |
In a dollar roll transaction, the Fund sells a mortgage-backed security held in the Fund to a financial institution such as a bank or broker-dealer, and simultaneously agrees to purchase a substantially similar security (same type, coupon and maturity) from the institution at an agreed upon price and future date. The mortgage-backed securities to be purchased will bear the same coupon as those sold, but generally will be collateralized by different pools of mortgages with different prepayment histories. Based on the typical structure of dollar roll transactions by the Fund, the dollar roll transactions are accounted for as financing transactions in which the Fund receives compensation as either a “fee” or a “drop”. “Fee” income which is agreed upon amongst the parties at the commencement of the dollar roll and the “drop” which is the difference between the selling price and the repurchase price of the mortgage-backed securities are amortized to income. During the period between the sale and purchase settlement dates, the Fund will not be entitled to receive interest and principal payments on securities purchased and not yet settled. Proceeds of the sale may be invested in short-term instruments, and the income from these investments, together with any additional fee income received on the sale, could generate income for the Fund exceeding the yield on the security sold. Dollar roll transactions are considered borrowings under the 1940 Act. |
31 Invesco Core Plus Bond Fund
Forward commitment transactions involve commitments by the Fund to acquire or sell TBA mortgage-backed securities from/to a financial institution, such as a bank or broker-dealer at a specified future date and amount. The TBA mortgage-backed security is marked to market until settlement and the unrealized appreciation or depreciation is recorded in the statement of operations. | ||
At the time the Fund enters into the dollar roll or forward commitment transaction, mortgage-backed securities or other liquid assets held by the Fund having a dollar value equal to the purchase price or in an amount sufficient to honor the forward commitment will be segregated. | ||
Dollar roll transactions involve the risk that the market value of the securities retained by the Fund may decline below the price of the securities that the Fund has sold but is obligated to purchase under the agreement. In the event that the buyer of securities in a dollar roll transaction files for bankruptcy or becomes insolvent, the Fund’s use of the proceeds from the sale of the securities may be restricted pending a determination by the other party, or its trustee or receiver, whether to enforce the Fund’s obligation to purchase the securities. The return earned by the Fund with the proceeds of the dollar roll transaction may not exceed the return on the securities sold. | ||
Forward commitment transactions involve the risk that a counter-party to the transaction may fail to complete the transaction. If this occurs, the Fund may lose the opportunity to purchase or sell the security at the agreed upon price. Settlement dates of forward commitment transactions may be a month or more after entering into these transactions and as a result the market values of the securities may vary from the purchase or sale prices. Therefore, forward commitment transactions may increase the Fund’s overall interest rate exposure. | ||
K. | Foreign Currency Translations — Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. | |
The Fund may invest in foreign securities which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. | ||
L. | Foreign Currency Contracts — The Fund may enter into foreign currency contracts to manage or minimize currency or exchange rate risk. The Fund may also enter into foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to “lock in” the U.S. dollar price of that security. A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The use of foreign currency contracts does not eliminate fluctuations in the price of the underlying securities the Fund owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statement of Operations. The primary risks associated with foreign currency contracts include failure of the counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities. | |
M. | Futures Contracts — The Fund may enter into futures contracts to manage exposure to interest rate, equity and market price movements and/or currency risks. A futures contract is an agreement between two parties to purchase or sell a specified underlying security, currency or commodity (or delivery of a cash settlement price, in the case of an index future) for a fixed price at a future date. The Fund currently invests only in exchange-traded futures and they are standardized as to maturity date and underlying financial instrument. Initial margin deposits required upon entering into futures contracts are satisfied by the segregation of specific securities or cash as collateral at the futures commission merchant (broker). During the period the futures contracts are open, changes in the value of the contracts are recognized as unrealized gains or losses by recalculating the value of the contracts on a daily basis. Subsequent or variation margin payments are received or made depending upon whether unrealized gains or losses are incurred. These amounts are reflected as receivables or payables on the Statement of Assets and Liabilities. When the contracts are closed or expire, the Fund recognizes a realized gain or loss equal to the difference between the proceeds from, or cost of, the closing transaction and the Fund’s basis in the contract. The net realized gain (loss) and the change in unrealized gain (loss) on futures contracts held during the period is included on the Statement of Operations. The primary risks associated with futures contracts are market risk and the absence of a liquid secondary market. If the Fund were unable to liquidate a futures contract and/or enter into an offsetting closing transaction, the Fund would continue to be subject to market risk with respect to the value of the contracts and continue to be required to maintain the margin deposits on the futures contracts. Futures contracts have minimal counterparty risk since the exchange’s clearinghouse, as counterparty to all exchange-traded futures, guarantees the futures against default. Risks may exceed amounts recognized in the Statement of Assets and Liabilities. | |
N. | Swap Agreements — The Fund may enter into various swap transactions, including interest rate, total return, index, currency exchange rate and credit default swap contracts (“CDS”) for investment purposes or to manage interest rate, currency or credit risk. | |
Interest rate, total return, index, and currency exchange rate swap agreements are two-party contracts entered into primarily to exchange the returns (or differentials in rates of returns) earned or realized on particular predetermined investments or instruments. The gross returns to be exchanged or “swapped” between the parties are calculated with respect to a notional amount, i.e., the return on or increase in value of a particular dollar amount invested at a particular interest rate or return of an underlying asset, in a particular foreign currency, or in a “basket” of securities representing a particular index. |
32 Invesco Core Plus Bond Fund
A CDS is an agreement between two parties (“Counterparties”) to exchange the credit risk of an issuer. A buyer of a CDS is said to buy protection by paying a fixed payment over the life of the agreement and in some situations an upfront payment to the seller of the CDS. If a defined credit event occurs (such as payment default or bankruptcy), the Fund as a protection buyer would cease paying its fixed payment, the Fund would deliver eligible bonds issued by the reference entity to the seller, and the seller would pay the full notional value, or the “par value”, of the referenced obligation to the Fund. A seller of a CDS is said to sell protection and thus would receive a fixed payment over the life of the agreement and an upfront payment, if applicable. If a credit event occurs, the Fund as a protection seller would cease to receive the fixed payment stream, the Fund would pay the buyer “par value” or the full notional value of the referenced obligation, and the Fund would receive the eligible bonds issued by the reference entity. In turn, these bonds may be sold in order to realize a recovery value. Alternatively, the seller of the CDS and its counterparty may agree to net the notional amount and the market value of the bonds and make a cash payment equal to the difference to the buyer of protection. If no credit event occurs, the Fund receives the fixed payment over the life of the agreement. As the seller, the Fund would effectively add leverage to its portfolio because, in addition to its total net assets, the Fund would be subject to investment exposure on the notional amount of the CDS. In connection with these agreements, cash and securities may be identified as collateral in accordance with the terms of the respective swap agreements to provide assets of value and recourse in the event of default under the swap agreement or bankruptcy/insolvency of a party to the swap agreement. If a counterparty becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties, the Fund may experience significant delays in obtaining any recovery in a bankruptcy or other reorganization proceeding. The Fund may obtain only limited recovery or may obtain no recovery in such circumstances. | ||
Implied credit spreads represent the current level at which protection could be bought or sold given the terms of the existing CDS contract and serve as an indicator of the current status of the payment/performance risk of the CDS. An implied spread that has widened or increased since entry into the initial contract may indicate a deteriorating credit profile and increased risk of default for the reference entity. A declining or narrowing spread may indicate an improving credit profile or decreased risk of default for the reference entity. Alternatively, credit spreads may increase or decrease reflecting the general tolerance for risk in the credit markets. | ||
Changes in the value of swap agreements are recognized as unrealized gains (losses) in the Statement of Operations by “marking to market” on a daily basis to reflect the value of the swap agreement at the end of each trading day. Payments received or paid at the beginning of the agreement are reflected as such on the Statement of Assets and Liabilities and may be referred to as upfront payments. The Fund accrues for the fixed payment stream and amortizes upfront payments, if any, on swap agreements on a daily basis with the net amount, recorded as a component of realized gain (loss) on the Statement of Operations. A liquidation payment received or made at the termination of a swap agreement is recorded as realized gain (loss) on the Statement of Operations. The Fund segregates liquid securities having a value at least equal to the amount of the potential obligation of a Fund under any swap transaction. The Fund’s maximum risk of loss from counterparty risk, either as the protection seller or as the protection buyer, is the value of the contract. The risk may be mitigated by having a master netting arrangement between the Fund and the counterparty and by the posting of collateral by the counterparty to cover the Fund’s exposure to the counterparty. Entering into these agreements involves, to varying degrees, lack of liquidity and elements of credit, market, and counterparty risk in excess of amounts recognized on the Statement of Assets and Liabilities. Such risks involve the possibility that a swap is difficult to sell or liquidate; the counterparty does not honor its obligations under the agreement and unfavorable interest rates and market fluctuations. | ||
O. | Collateral — To the extent the Fund has pledged or segregated a security as collateral and that security is subsequently sold, it is the Fund’s practice to replace such collateral no later than the next business day. |
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser based on the annual rate of the Fund’s average daily net assets as follows:
Average Daily Net Assets | Rate | |||
First $500 million | 0 | .45% | ||
Next $500 million | 0 | .425% | ||
Next $1.5 billion | 0 | .40% | ||
Next $2.5 billion | 0 | .375% | ||
Over $5 billion | 0 | .35% | ||
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide discretionary investment management services to the Fund based on the percentage of assets allocated to such Sub-Adviser(s).
Effective June 6, 2011, the Adviser has contractually agreed, through at least June 30, 2013, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Class A, Class B, Class C, Class R, Class Y and Institutional Class shares to 0.75%, 1.50%, 1.50%, 1.00%, 0.50% and 0.50%, respectively, of average daily net assets. Prior to June 6, 2011, the Adviser had contractually agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit total annual fund operating expenses after fee waiver and/or reimbursement (excluding certain items discussed below) of Class A, Class B, Class C, Class R, Class Y and Institutional Class shares to 0.90%, 1.65%, 1.65%, 1.15%, 0.65% and 0.65%, respectively of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or
33 Invesco Core Plus Bond Fund
non-routine items; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless the Board of Trustees and Invesco mutually agree to amend or continue the fee waiver agreement, it will terminate on June 30, 2013.
Further, the Adviser has contractually agreed, through at least June 30, 2012, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the year ended August 31, 2011, the Adviser waived advisory fees of $178,565 and reimbursed Class specific expenses of $170,804, $18,979, $23,574, $1,833, $1,896 and $165 for Class A, Class B, Class C, Class R, Class Y and Institutional Class shares, respectively.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco for certain administrative costs incurred in providing accounting services to the Fund. For the year ended August 31, 2011, expenses incurred under the agreement are shown in the Statement of Operations as administrative services fees.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (“IIS”) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. IIS may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. All fees payable by IIS to intermediaries that provide omnibus account services or sub-accounting are charged back to the Fund, subject to certain limitations approved by the Trust’s Board of Trustees. For the year ended August 31, 2011, expenses incurred under the agreement are shown in the Statement of Operations as transfer agent fees.
The Trust has entered into master distribution agreements with Invesco Distributors, Inc. (“IDI”) to serve as the distributor for the Class A, Class B, Class C, Class R, Class Y and Institutional Class shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund’s Class A, Class B, Class C and Class R shares (collectively the “Plans”). The Fund, pursuant to the Plans, pays IDI compensation at the annual rate of 0.25% of the Fund’s average daily net assets of Class A shares, 1.00% of the average daily net assets of Class B and Class C shares and 0.50% of the average daily net assets of Class R shares. Of the Plan payments, up to 0.25% of the average daily net assets of each class of shares may be paid to furnish continuing personal shareholder services to customers who purchase and own shares of such classes. Any amounts not paid as a service fee under the Plans would constitute an asset-based sales charge. Rules of the Financial Industry Regulatory Authority (“FINRA”) impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. For the year ended August 31, 2011, expenses incurred under the Plans are shown in the Statement of Operations as distribution fees.
Front-end sales commissions and CDSC (collectively the “sales charges”) are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the year ended August 31, 2011, IDI advised the Fund that IDI retained $38,382 in front-end sales commissions from the sale of Class A shares and $1,234, $10,171 and $2,202 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of the Adviser, Invesco Ltd., IIS and/or IDI.
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3) generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
Level 1 — | Prices are determined using quoted prices in an active market for identical assets. | |
Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. | |
Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of August 31, 2011. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
34 Invesco Core Plus Bond Fund
During the year ended August 31, 2011, there were no significant transfers between investment levels.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 29,187,166 | $ | 3,044 | $ | — | $ | 29,190,210 | ||||||||
U.S. Treasury Securities | — | 69,600,932 | — | 69,600,932 | ||||||||||||
U.S. Government Sponsored Securities | — | 160,516,785 | — | 160,516,785 | ||||||||||||
Corporate Debt Securities | — | 223,455,481 | — | 223,455,481 | ||||||||||||
Asset-Backed Securities | — | 73,420,192 | — | 73,420,192 | ||||||||||||
Municipal Obligations | — | 3,181,349 | — | 3,181,349 | ||||||||||||
$ | 29,187,166 | $ | 530,177,783 | $ | — | $ | 559,364,949 | |||||||||
Foreign Currency Contracts* | — | (8,544 | ) | — | (8,544 | ) | ||||||||||
Futures* | 74,620 | — | — | 74,620 | ||||||||||||
Swap Agreements* | — | 87,406 | — | 87,406 | ||||||||||||
Total Investments | $ | 29,261,786 | $ | 530,256,645 | $ | — | $ | 559,518,431 | ||||||||
* | Unrealized appreciation (depreciation). |
NOTE 4—Derivative Investments
The Fund has implemented the required disclosures about derivative instruments and hedging activities in accordance with GAAP. This disclosure is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position and financial performance. The enhanced disclosure has no impact on the results of operations reported in the financial statements.
Value of Derivative Instruments at Period-End
The table below summarizes the value of the Fund’s derivative instruments, detailed by primary risk exposure, held as of August 31, 2011:
Value | ||||||||
Risk Exposure/Derivative Type | Assets | Liabilities | ||||||
Credit risk | ||||||||
Swap Agreements(a) | $ | 87,406 | $ | — | ||||
Currency risk | ||||||||
Foreign Currency Contracts(b) | 5,093 | (13,637 | ) | |||||
Interest rate risk | ||||||||
Futures Contracts(c) | 74,620 | — | ||||||
(a) | Values are disclosed on the Statement of Assets and Liabilities under Unrealized appreciation on swap agreements. | |
(b) | Values are disclosed on the Statement of Assets and Liabilities under Foreign currency contracts outstanding. | |
(c) | Includes cumulative appreciation (depreciation) of futures contracts. Only current day’s variation margin receivable (payable) is reported within the Statement of Assets and Liabilities. |
Effect of Derivative Instruments for the year ended August 31, 2011
The table below summarizes the gains (losses) on derivative instruments, detailed by primary risk exposure, recognized in earnings during the period:
Location of Gain (Loss) on | ||||||||||||
Statement of Operations | ||||||||||||
Swap | Foreign Currency | |||||||||||
Futures* | Agreements* | Contracts* | ||||||||||
Realized Gain (Loss) | ||||||||||||
Credit risk | $ | — | $ | (10,689 | ) | $ | — | |||||
Currency risk | — | — | (3,674 | ) | ||||||||
Interest rate risk | (1,024,706 | ) | — | — | ||||||||
Change in Unrealized Appreciation (Depreciation) | ||||||||||||
Credit risk | $ | — | $ | 87,406 | $ | — | ||||||
Currency risk | — | — | (8,544 | ) | ||||||||
Interest rate risk | 90,542 | — | — | |||||||||
Total | $ | (934,164 | ) | $ | 76,717 | $ | (12,218 | ) | ||||
* | The average notional value of futures, swap agreements and foreign currency contracts outstanding during the period was $3,953,775, $799,549 and $180,421, respectively. |
35 Invesco Core Plus Bond Fund
Open Foreign Currency Contracts | ||||||||||||||||||||||
Unrealized | ||||||||||||||||||||||
Settlement | Contract to | Notional | Appreciation | |||||||||||||||||||
Date | Counterparty | Deliver | Receive | Value | (Depreciation) | |||||||||||||||||
09/16/11 | Morgan Stanley | COP | 440,510,000 | USD | 245,000 | $ | 247,502 | $ | (2,502 | ) | ||||||||||||
11/09/11 | RBC Dain Rauscher, Inc. | EUR | 433,000 | USD | 610,549 | 621,684 | (11,135 | ) | ||||||||||||||
11/17/11 | Morgan Stanley | GBP | 159,000 | USD | 263,048 | 257,955 | 5,093 | |||||||||||||||
Total foreign currency contracts | $ | (8,544 | ) | |||||||||||||||||||
Currency Abbreviations:
COP – Colombian Peso | ||
GBP – British Pound Sterling | ||
EUR – Euro | ||
USD – U.S. Dollar |
Open Futures Contracts | ||||||||||||||||
Unrealized | ||||||||||||||||
Number of | Expiration | Notional | Appreciation | |||||||||||||
Contracts | Month | Value | (Depreciation) | |||||||||||||
Long Contracts | ||||||||||||||||
U.S. Ultra Bond | 70 | December-2011 | $ | 10,020,938 | $ | (63,585 | ) | |||||||||
U.S. 5 Year Notes | 4 | December-2011 | 490,187 | 610 | ||||||||||||
Subtotal | $ | 10,511,125 | $ | (62,975 | ) | |||||||||||
Short Contracts | ||||||||||||||||
U.S. 10 Year Treasury | 290 | December-2011 | $ | 37,419,063 | $ | 137,595 | ||||||||||
Total | $ | 47,930,188 | $ | 74,620 | ||||||||||||
Open Credit Default Swap Agreements | ||||||||||||||||||||||||||
Value | ||||||||||||||||||||||||||
Notional | Unrealized | |||||||||||||||||||||||||
Buy/Sell | Pay/Receive | Expiration | Implied | Amount | Appreciation | |||||||||||||||||||||
Counterparty | Reference Entity | Protection | Fixed Rate | Date | Credit Spread(a) | (000) | (Depreciation) | |||||||||||||||||||
Bank of America, N.A. | CDX North America Investment Grade Index | Buy | 1.00 | %(b) | 06/20/16 | 1.15 | % | $ | 9,585 | $ | 87,406 | |||||||||||||||
(a) | Implied credit spreads represent the current level at which protection could be bought or sold given the terms of the existing credit default swap contract and serve as an indicator of the current status of the payment/performance risk of the credit default swap contract. An implied credit spread that has widened or increased since entry into the initial contract may indicate a deteriorating credit profile and increased risk of default for the reference entity. A declining or narrowing spread may indicate an improving credit profile or decreased risk of default for the reference entity. Alternatively, credit spreads may increase or decrease reflecting the general tolerance for risk in the credit markets generally. | |
(b) | Unamortized premium at period-end of $20,714. |
NOTE 5—Expense Offset Arrangement(s)
The expense offset arrangement is comprised of transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions. For the year ended August 31, 2011, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $279.
NOTE 6—Trustees’ and Officers’ Fees and Benefits
“Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and “Trustees’ and Officers’ Fees and Benefits” also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. “Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
During the year ended August 31, 2011, the Fund paid legal fees of $1,766 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A partner of that firm is a Trustee of the Trust.
36 Invesco Core Plus Bond Fund
NOTE 7—Cash Balances
The Fund may borrow for leveraging in an amount up to 5% of the Fund’s total assets (excluding the amount borrowed) at the time the borrowing is made. In doing so, the Fund is permitted to temporarily carry a negative or overdrawn balance in its account with The State Street Bank and Trust Company, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate. A Fund may not purchase additional securities when any borrowings from banks exceeds 5% of the Fund’s total assets.
NOTE 8—Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended August 31, 2011 and 2010:
2011 | 2010 | |||||||
Ordinary income | $ | 4,331,065 | $ | 283,859 | ||||
Long-term capital gain | 35,497 | — | ||||||
Total distributions | $ | 4,366,562 | $ | 283,859 | ||||
Tax Components of Net Assets at Period-End:
2011 | ||||
Undistributed ordinary income | $ | 1,362,994 | ||
Undistributed long-term gain | 227,942 | |||
Net unrealized appreciation — investments | 23,175,724 | |||
Net unrealized appreciation — other investments | 82,332 | |||
Temporary book/tax differences | (59,197 | ) | ||
Capital loss carryforward | (96,856,520 | ) | ||
Shares of beneficial interest | 529,551,515 | |||
Total net assets | $ | 457,484,790 | ||
The difference between book-basis and tax-basis unrealized appreciation is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund’s net unrealized appreciation difference is attributable primarily to wash sales, the treatment of bond premium amortization, straddle loss deferrals and mortgage-backed dollar rolls.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund’s temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions. Under these limitation rules, the Fund is limited to utilizing $84,481,773 of capital loss carryforward in the fiscal year ending August 31, 2012.
The Fund utilized $243,680 of capital loss carryforward in the current period to offset net realized capital gain for federal income tax purposes. The Fund has a capital loss carryforward as of August 31, 2011 which expires as follows:
Capital Loss | ||||
Expiration | Carryforward* | |||
August 31, 2013 | $ | 25,477 | ||
August 31, 2014 | 89,789 | |||
August 31, 2015 | 13,284,149 | |||
August 31, 2016 | 83,457,105 | |||
Total capital loss carryforward | $ | 96,856,520 | ||
* | Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. To the extent that unrealized gains as of June 6, 2011, the date of reorganizations of Invesco Core Bond Fund and Invesco Van Kampen Core Plus Fixed Income Fund into the Fund are realized on securities held in each fund at such date of reorganizations, the capital loss carryforward may be further limited for up to five years from the date of the reorganizations. |
37 Invesco Core Plus Bond Fund
NOTE 9—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended August 31, 2011 was $44,317,197 and $20,374,237, respectively. Cost of investments on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed Federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investment Securities on a Tax Basis | ||||
Aggregate unrealized appreciation of investment securities | $ | 27,120,382 | ||
Aggregate unrealized (depreciation) of investment securities | (3,944,658 | ) | ||
Net unrealized appreciation of investment securities | $ | 23,175,724 | ||
Cost of investments for tax purposes is $536,189,225. |
NOTE 10—Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of gains/losses on dollar rolls and bond premium amortization, on August 31, 2011, undistributed net investment income was increased by $899,340 and undistributed net realized gain (loss) was decreased by $899,340. Further, primarily as a result of differing book/tax treatment of capital loss carryforward acquired in the reorganizations of Invesco Core Bond Fund and Invesco Van Kampen Core Plus Fixed Income Fund into the Fund, undistributed net investment income was decreased by $167,850, undistributed net realized gain (loss) was decreased by $97,340,965 and shares of beneficial interest increased by $97,508,815. These reclassifications had no effect on the net assets of the Fund.
38 Invesco Core Plus Bond Fund
NOTE 11—Share Information
Summary of Share Activity | ||||||||||||||||
Year ended | Year ended | |||||||||||||||
August 31, 2011(a) | August 31, 2010 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Class A | 3,555,224 | $ | 37,571,601 | 473,287 | $ | 4,957,006 | ||||||||||
Class B | 290,130 | 3,142,492 | 90,484 | 943,362 | ||||||||||||
Class C | 830,507 | 8,927,924 | 73,730 | 773,555 | ||||||||||||
Class R | 38,733 | 411,788 | 3,891 | 40,441 | ||||||||||||
Class Y | 385,873 | 4,594,680 | 3,631 | 38,392 | ||||||||||||
Institutional Class | 275,983 | 2,304,800 | — | — | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Class A | 173,838 | 1,840,925 | 20,806 | 216,953 | ||||||||||||
Class B | 15,791 | 167,169 | 2,149 | 22,398 | ||||||||||||
Class C | 19,819 | 209,824 | 1,761 | 18,357 | ||||||||||||
Class R | 1,778 | 18,825 | 697 | 7,259 | ||||||||||||
Class Y | 1,723 | 18,262 | 644 | 6,703 | ||||||||||||
Institutional Class | 151,933 | 1,610,096 | 584 | 6,079 | ||||||||||||
Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||
Class A | 134,643 | 1,421,518 | 2,004 | 21,070 | ||||||||||||
Class B | (134,644 | ) | (1,421,518 | ) | (2,004 | ) | (21,070 | ) | ||||||||
Issued in connection with acquisitions:(b) | ||||||||||||||||
Class A | 18,804,831 | 199,749,992 | — | — | ||||||||||||
Class B | 2,274,003 | 24,149,182 | — | — | ||||||||||||
Class C | 2,652,673 | 28,169,016 | — | — | ||||||||||||
Class R | 197,182 | 2,093,222 | — | — | ||||||||||||
Class Y | 124,611 | 806,833 | — | — | ||||||||||||
Institutional Class | 17,608,624 | 187,448,352 | — | — | ||||||||||||
Reacquired: | ||||||||||||||||
Class A | (2,075,980 | ) | (22,032,201 | ) | (104,344 | ) | (1,086,578 | ) | ||||||||
Class B | (231,759 | ) | (2,451,104 | ) | (21,771 | ) | (226,484 | ) | ||||||||
Class C | (422,772 | ) | (4,468,342 | ) | (18,543 | ) | (193,276 | ) | ||||||||
Class R | (34,795 | ) | (368,619 | ) | (629 | ) | (6,739 | ) | ||||||||
Class Y | (31,966 | ) | (340,471 | ) | (3,116 | ) | (32,287 | ) | ||||||||
Institutional Class | (2,320,283 | ) | (24,627,630 | ) | — | — | ||||||||||
Net increase in share activity | 42,285,700 | $ | 448,946,616 | 523,261 | $ | 5,485,141 | ||||||||||
(a) | There is an entity that is a record owner of more than 5% of the outstanding shares of the Fund and owns 23% of the outstanding shares of the Fund. IDI has an agreement with this entity to sell Fund shares. The Fund, Invesco and/or Invesco affiliates may make payments to this entity, which is considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by this entity are also owned beneficially. |
In addition, 36% of the outstanding shares of the Fund are owned by affiliated mutual funds. Affiliated mutual funds are mutual funds that are advised by Invesco. |
(b) | As of the opening of business on June 6, 2011, the Fund acquired all the net assets of Invesco Core Bond Fund and Invesco Van Kampen Core Plus Fixed Income Fund pursuant to a plan of reorganization approved by the Trustees of the Fund on November 10, 2010 and by the shareholders of Invesco Core Bond Fund and Invesco Van Kampen Core Plus Fixed Income Fund, respectively on April 14, 2011. The acquisition was accomplished by a tax-free exchange of 41,661,924 shares of the Fund for 38,907,567 shares outstanding of Invesco Core Bond Fund and 9,040,046 shares outstanding of Invesco Van Kampen Core Plus Fixed Income Fund as of the close of business on June 3, 2011. Each class of shares of Invesco Core Bond Fund and Invesco Van Kampen Core Plus Fixed Income Fund was exchanged for the like class of shares of the Fund based on the relative net asset value of Invesco Core Bond Fund and Invesco Van Kampen Core Plus Fixed Income Fund to the net asset value of the Fund on the close of business, June 3, 2011. Invesco Core Bond Fund’s net assets as of the close of business on June 3, 2011 of $354,673,244 including $21,363,557 of unrealized appreciation and Invesco Van Kampen Core Plus Fixed Income Fund’s net assets as of the close of business on June 3, 2011 of $87,743,353 including $4,538,159 of unrealized appreciation, were combined with the net assets of the Fund. The net assets of the Fund immediately before the acquisition were $17,795,783. The net assets of the Fund immediately following the reorginization were $460,212,380. |
39 Invesco Core Plus Bond Fund
NOTE 12—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Ratio of | Ratio of | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net gains | expenses | expenses | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
(losses) | to average | to average net | Ratio of net | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset | on securities | Dividends | Distributions | net assets | assets without | investment | ||||||||||||||||||||||||||||||||||||||||||||||||||
value, | Net | (both | Total from | from net | from net | Net asset | Net assets, | with fee waivers | fee waivers | income | ||||||||||||||||||||||||||||||||||||||||||||||
beginning | investment | realized and | investment | investment | realized | Total | value, end | Total | end of period | and/or expenses | and/or expenses | to average | Portfolio | |||||||||||||||||||||||||||||||||||||||||||
of period | income(a) | unrealized) | operations | income | gains | distributions | of period | return(b) | (000s omitted) | absorbed | absorbed | net assets | turnover(c) | |||||||||||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | $ | 10.75 | $ | 0.35 | $ | (0.03 | ) | $ | 0.32 | $ | (0.32 | ) | $ | (0.15 | ) | $ | (0.47 | ) | $ | 10.60 | 3.10 | % | $ | 225,417 | 0.75 | %(d) | 1.20 | %(d) | 3.27 | %(d) | 138 | % | ||||||||||||||||||||||||
Year ended 08/31/10 | 10.29 | 0.37 | 0.65 | 1.02 | (0.49 | ) | (0.07 | ) | (0.56 | ) | 10.75 | 10.26 | 7,219 | 0.87 | 5.61 | 3.55 | 78 | |||||||||||||||||||||||||||||||||||||||
Year ended 08/31/09(e) | 10.00 | 0.09 | 0.27 | 0.36 | (0.07 | ) | — | (0.07 | ) | 10.29 | 3.58 | 2,882 | 0.84 | (f) | 12.89 | (f) | 3.47 | (f) | 43 | |||||||||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 10.74 | 0.27 | (0.02 | ) | 0.25 | (0.24 | ) | (0.15 | ) | (0.39 | ) | 10.60 | 2.43 | 24,401 | 1.50 | (d) | 1.95 | (d) | 2.52 | (d) | 138 | |||||||||||||||||||||||||||||||||||
Year ended 08/31/10 | 10.29 | 0.29 | 0.64 | 0.93 | (0.41 | ) | (0.07 | ) | (0.48 | ) | 10.74 | 9.34 | 954 | 1.62 | 6.36 | 2.80 | 78 | |||||||||||||||||||||||||||||||||||||||
Year ended 08/31/09(e) | 10.00 | 0.07 | 0.27 | 0.34 | (0.05 | ) | — | (0.05 | ) | 10.29 | 3.39 | 205 | 1.59 | (f) | 13.64 | (f) | 2.72 | (f) | 43 | |||||||||||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 10.74 | 0.27 | (0.02 | ) | 0.25 | (0.24 | ) | (0.15 | ) | (0.39 | ) | 10.60 | 2.43 | 33,476 | 1.50 | (d) | 1.95 | (d) | 2.52 | (d) | 138 | |||||||||||||||||||||||||||||||||||
Year ended 08/31/10 | 10.29 | 0.29 | 0.64 | 0.93 | (0.41 | ) | (0.07 | ) | (0.48 | ) | 10.74 | 9.34 | 844 | 1.62 | 6.36 | 2.80 | 78 | |||||||||||||||||||||||||||||||||||||||
Year ended 08/31/09(e) | 10.00 | 0.07 | 0.27 | 0.34 | (0.05 | ) | — | (0.05 | ) | 10.29 | 3.39 | 223 | 1.59 | (f) | 13.64 | (f) | 2.72 | (f) | 43 | |||||||||||||||||||||||||||||||||||||
Class R | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 10.74 | 0.32 | (0.02 | ) | 0.30 | (0.29 | ) | (0.15 | ) | (0.44 | ) | 10.60 | 2.94 | 2,301 | 1.00 | (d) | 1.45 | (d) | 3.02 | (d) | 138 | |||||||||||||||||||||||||||||||||||
Year ended 08/31/10 | 10.29 | 0.34 | 0.64 | 0.98 | (0.46 | ) | (0.07 | ) | (0.53 | ) | 10.74 | 9.88 | 153 | 1.12 | 5.86 | 3.30 | 78 | |||||||||||||||||||||||||||||||||||||||
Year ended 08/31/09(e) | 10.00 | 0.08 | 0.27 | 0.35 | (0.06 | ) | — | (0.06 | ) | 10.29 | 3.51 | 105 | 1.09 | (f) | 13.14 | (f) | 3.22 | (f) | 43 | |||||||||||||||||||||||||||||||||||||
Class Y | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 10.74 | 0.37 | (0.01 | ) | 0.36 | (0.35 | ) | (0.15 | ) | (0.50 | ) | 10.60 | 3.46 | 5,234 | 0.50 | (d) | 0.95 | (d) | 3.52 | (d) | 138 | |||||||||||||||||||||||||||||||||||
Year ended 08/31/10 | 10.29 | 0.40 | 0.63 | 1.03 | (0.51 | ) | (0.07 | ) | (0.58 | ) | 10.74 | 10.43 | 144 | 0.62 | 5.36 | 3.80 | 78 | |||||||||||||||||||||||||||||||||||||||
Year ended 08/31/09(e) | 10.00 | 0.09 | 0.27 | 0.36 | (0.07 | ) | — | (0.07 | ) | 10.29 | 3.64 | 126 | 0.59 | (f) | 12.64 | (f) | 3.72 | (f) | 43 | |||||||||||||||||||||||||||||||||||||
Institutional Class | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 10.74 | 0.37 | (0.01 | ) | 0.36 | (0.35 | ) | (0.15 | ) | (0.50 | ) | 10.60 | 3.46 | 166,656 | 0.50 | (d) | 0.66 | (d) | 3.52 | (d) | 138 | |||||||||||||||||||||||||||||||||||
Year ended 08/31/10 | 10.29 | 0.40 | 0.64 | 1.04 | (0.52 | ) | (0.07 | ) | (0.59 | ) | 10.74 | 10.43 | 115 | 0.62 | 5.29 | 3.80 | 78 | |||||||||||||||||||||||||||||||||||||||
Year ended 08/31/09(e) | 10.00 | 0.09 | 0.27 | 0.36 | (0.07 | ) | — | (0.07 | ) | 10.29 | 3.64 | 104 | 0.59 | (f) | 12.68 | (f) | 3.72 | (f) | 43 | |||||||||||||||||||||||||||||||||||||
(a) | Calculated using average shares outstanding. | |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges and is not annualized for periods less than one year, if applicable. | |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. For the period ending August 31, 2011, the portfolio turnover calculation excludes the value of securities purchased of $390,261,951 and sold of $29,803,473 in the effort to realign the Fund’s portfolio holdings after the reorganization of Invesco Core Bond Fund and Invesco Van Kampen Core Plus Fixed Income Fund into the Fund. | |
(d) | Ratios are based on average daily net assets (000’s) of $58,690, $6,521, $8,100, $630, $651 and $40,479 for Class A, Class B, Class C, Class R, Class Y and Institutional Class shares, respectively | |
(e) | Commencement date of June 3, 2009. | |
(f) | Annualized. |
40 Invesco Core Plus Bond Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Counselor Series Trust (Invesco Counselor Series Trust)
and Shareholders of Invesco Core Plus Bond Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Invesco Core Plus Bond Fund (one of the funds constituting AIM Counselor Series Trust (Invesco Counselor Series Trust), hereafter referred to as the “Fund”) at August 31, 2011, the results of its operations for the year then ended, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at August 31, 2011 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
October 26, 2011
Houston, Texas
41 Invesco Core Plus Bond Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments or contingent deferred sales charges on redemptions, and redemption fees, if any; and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period March 1, 2011 through August 31, 2011.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the hypothetical information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
HYPOTHETICAL | ||||||||||||||||||||||||||||||
ACTUAL | (5% annual return before expenses) | |||||||||||||||||||||||||||||
Beginning | Ending | Expenses | Ending | Expenses | Annualized | |||||||||||||||||||||||||
Account Value | Account Value | Paid During | Account Value | Paid During | Expense | |||||||||||||||||||||||||
Class | (03/01/11) | (08/31/11)1 | Period2 | (08/31/11) | Period2 | Ratio | ||||||||||||||||||||||||
Class A | $ | 1,000.00 | $ | 1,034.20 | $ | 3.85 | $ | 1,021.42 | $ | 3.82 | 0.75 | % | ||||||||||||||||||
Class B | 1,000.00 | 1,030.40 | 7.68 | 1,017.64 | 7.63 | 1.50 | ||||||||||||||||||||||||
Class C | 1,000.00 | 1,030.40 | 7.68 | 1,017.64 | 7.63 | 1.50 | ||||||||||||||||||||||||
Class R | 1,000.00 | 1,032.90 | 5.12 | 1,020.16 | 5.09 | 1.00 | ||||||||||||||||||||||||
Class Y | 1,000.00 | 1,035.50 | 2.57 | 1,022.68 | 2.55 | 0.50 | ||||||||||||||||||||||||
Institutional | 1,000.00 | 1,035.50 | 2.57 | 1,022.68 | 2.55 | 0.50 | ||||||||||||||||||||||||
1 | The actual ending account value is based on the actual total return of the Fund for the period March 1, 2011 through August 31, 2011, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund’s expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half year. |
42 Invesco Core Plus Bond Fund
Approval of Investment Advisory and Sub-Advisory Contracts |
The Board of Trustees (the Board) of AIM Counselor Series Trust (Invesco Counselor Series Trust) is required under the Investment Company Act of 1940, as amended, to approve annually the renewal of the Invesco Core Plus Bond Fund (the Fund) investment advisory agreement with Invesco Advisers, Inc. (Invesco Advisers) and the Master Intergroup Sub-Advisory Contract for Mutual Funds (the sub-advisory contracts) with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers). During contract renewal meetings held on June 14-15, 2011, the Board as a whole, and the disinterested or “independent” Trustees, who comprise 80% of the Board, voting separately, approved the continuance of the Fund’s investment advisory agreement and the sub-advisory contracts for another year, effective July 1, 2011. In doing so, the Board considered the process that it follows in reviewing and approving the Fund’s investment advisory agreement and sub-advisory contracts and the information that it is provided. The Board determined that the Fund’s investment advisory agreement and the sub-advisory contracts are in the best interests of the Fund and its shareholders and the compensation to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is responsible for overseeing the management of a number of the series portfolios of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies and limitations and investment risks of these funds. The Sub-Committees meet regularly and at designated contract renewal meetings each year to conduct a review of the performance, fees, expenses and other matters related to their assigned Invesco Funds. Each Sub-Committee recommends to the Investments Committee, which in turn recommends to the full Board, whether to approve the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Trustees receive comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and an independent company, Lipper, Inc. (Lipper). The Trustees also receive an independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. The independent Trustees are assisted in their annual evaluation of the Fund’s investment advisory agreement by the Senior Officer and by independent legal counsel. The independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in private sessions with the Senior Officer and counsel.
In evaluating the fairness and reasonableness of the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Trustees also considered information provided in connection with fund acquisitions approved by the Trustees to rationalize the Invesco Funds product range following the acquisition of the retail mutual fund business of Morgan Stanley (the Morgan Stanley Transaction). The Trustees recognized that the advisory fees for the Invesco Funds include advisory fees that are the result of years of review and negotiation between the Trustees and Invesco Advisers as well as advisory fees inherited from Morgan Stanley and Van Kampen funds acquired in the Morgan Stanley Transaction. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these same arrangements throughout the year and in prior years. One Trustee may have weighed a particular piece of information differently than another Trustee.
The discussion below serves as the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 15, 2011, and may not reflect consideration of factors that became known to the Board after that date, including, for example, changes to the Fund’s performance, advisory fees, expense limitations and/or fee waivers.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers, with whom the Board met during the year. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s consideration of Invesco Advisers’ performance and investment process oversight, independent credit analysis and investment risk management.
In determining whether to continue the Fund’s investment advisory agreement, the Board considered the prior relationship between Invesco Advisers and the Fund, as well as the Board’s knowledge of Invesco Advisers’ operations, and concluded that it is beneficial to maintain the current relationship, in part, because of such knowledge. The Board also considered services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution and legal and compliance. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and the advisory services are provided in accordance with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services provided by the Affiliated Sub-Advisers under the sub-advisory contracts and the credentials and experience of the officers and employees of the Affiliated Sub-Advisers who provide these services. The Board noted that the Affiliated Sub-Advisers have offices and personnel that are located in financial centers around the world. As a result, the Affiliated Sub-Advisers can provide research and investment analysis on the markets and economies of various countries in which the Fund invests and make recommendations on securities of companies located in such countries. The Board concluded that the sub-advisory contracts benefit the Fund and its shareholders by permitting Invesco Advisers to use the resources and talents of the Affiliated Sub-Advisers in managing the Fund. The Board concluded that the nature, extent and quality of the services provided by the Affiliated Sub-Advisers are appropriate and satisfactory and in accordance with the terms of the Fund’s sub-advisory contracts.
B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
The Board noted that the Fund recently began operations and that only one calendar year of comparative performance data was available. The Board compared the Fund’s performance during
43 Invesco Core Plus Bond Fund
the past calendar year to the performance of funds in the Lipper performance universe and against the Lipper Intermediate Investment Grade Debt Funds Index. The Board noted that performance of Class A shares of the Fund was in the fourth quintile of the performance universe for the one year period (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board noted that performance of Class A shares of the Fund was below the performance of the Index for the one year period. The Senior Officer noted that the Fund was launched to include exposure to high yield and emerging markets strategies, but that the size of the Fund had prevented it from fully implementing the intended strategy. Although the independent written evaluation of the Fund’s Senior Officer only considered Fund performance through the most recent calendar year, the Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
C. | Advisory and Sub-Advisory Fees and Fee Waivers |
The Board compared the Fund’s contractual advisory fee rate to the contractual advisory fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the contractual advisory fee rate for Class A shares of the Fund was below the median contractual advisory fee rate of funds in the expense group. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using audited financial data from the most recent annual report of each fund in the expense group that was publicly available as of the end of the past calendar year and including only one fund per investment adviser. The Board noted that comparative data is as of varying dates, which may affect the comparability of data during times of market volatility.
The Board noted that Invesco Advisers and the Affiliated Sub-Advisers do not manage other mutual funds in a manner substantially similar to the management of the Fund.
The Board considered the fees charged by Invesco Advisers and the Affiliated Sub-Advisers to other client accounts with investment strategies comparable to those of the Fund. The Board noted that Invesco Advisers or the Affiliated Sub-Advisers may charge lower fees to large institutional clients solely for investment management services. Invesco Advisers reviewed with the Board the significantly greater scope of services it provides to the Invesco Funds relative to other client accounts. These additional services include provision of administrative services, officers and office space, oversight of service providers, preparation of annual registration statement updates and financial information and regulatory compliance under the Investment Company Act of 1940, as amended. Invesco Advisers also reviewed generally the higher frequency of shareholder purchases and redemptions in the Invesco Funds relative to the flow of assets for other client accounts. Invesco Advisers advised the Board that advance notice of redemptions is often provided to Invesco Advisers by institutional clients. The Board did note that sub-advisory fees charged by the Affiliated Sub-Advisers to manage the Invesco Funds and to manage other client accounts were often more comparable. The Board concluded that the aggregate services provided to the Invesco Funds were sufficiently different from those provided to institutional clients, and the Board did not place significant weight on these fee comparisons.
The Board noted that Invesco Advisers has contractually agreed to waive fees and/or limit expenses of the Fund through at least June 30, 2013 in an amount necessary to limit total annual operating expenses to a specified percentage of average daily net assets for each class of the Fund. The Board also considered the effect this fee waiver would have on the Fund’s total estimated expenses.
The Board also considered the services provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the allocation of fees between Invesco Advisers and the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board noted that Invesco Advisers provides services to sub-advised Invesco Funds, including oversight of the Affiliated Sub-Advisers as well as the additional services described above other than day-to-day that Invesco Advisers provides services to sub-advised Invesco Funds, including oversight of the Affiliated Sub-Advisers as well as the additional services described above other than day-to-day portfolio management. The Board also noted that the sub-advisory fees have no direct effect on the Fund or its shareholders, as they are paid by Invesco Advisers to the Affiliated Sub-Advisers.
Based upon the information and considerations described above, the Board concluded that the Fund’s advisory and sub-advisory fees are fair and reasonable.
D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule. The Board also noted that the 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 Invesco Advisers.
E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the profitability of Invesco Advisers and its affiliates in providing these services. The Board reviewed with Invesco Advisers the methodology used to prepare the profitability information. The Board considered the profitability of Invesco Advisers in connection with managing the Fund and the Invesco Funds. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its subsidiaries provide to the Fund and the Invesco Funds. The Board concluded that the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund is not excessive given the nature, quality and extent of the services provided to the Invesco Funds. The Board considered whether Invesco Advisers and each Affiliated Sub-Adviser are financially sound and have the resources necessary to perform their obligations under the investment advisory agreement and sub-advisory contracts. The Board concluded that Invesco Advisers and each Affiliated Sub-Adviser have the financial resources necessary to fulfill these obligations.
F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund, including the fees received for their provision of administrative, transfer agency and distribution services to the Fund. The Board considered the performance of Invesco Advisers 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 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 Fund; that Invesco Advisers 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; and 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.
The Board considered the benefits realized by Invesco Advisers and the Affiliated Sub-Advisers as a result of portfolio brokerage transactions executed through “soft dollar” arrangements. The Board noted that soft dollar arrangements shift the payment obligation for research and execution services from Invesco Advisers and the Affiliated Sub-Advisers to the Invesco Funds and therefore may reduce Invesco Advisers’ and the Affiliated Sub-Advisers’ expenses. The Board concluded that the soft dollar arrangements are appropriate. The Board also concluded that, based on their review and representations made by the Chief Compliance Officer of the Invesco Funds, these arrangements are consistent with regulatory requirements.
The Board considered that the Fund’s uninvested cash and cash collateral from any securities lending arrangements may be invested in money market funds advised by Invesco Advisers pursuant to procedures approved by the Board. The Board noted that Invesco Advisers receives advisory fees from these affiliated money market funds attributable to such investments, although Invesco Advisers has contractually agreed to waive through varying periods the advisory fees payable by the Invesco Funds. The waiver is in an amount equal to 100% of the net advisory fee Invesco Advisers receives from the affiliated money market funds with respect to the Fund’s investment in the affiliated money market funds of uninvested cash, but not cash collateral. The Board concluded that the Fund’s investment of uninvested cash and cash collateral from any securities lending arrangements in the affiliated money market funds is in the best interests of the Fund and its shareholders.
44 Invesco Core Plus Bond Fund
Tax Information
Form 1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific state’s requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended August 31, 2011:
Federal and State Income Tax | ||||
Long-Term Capital Gain Dividends | $ | 35,497 | ||
Qualified Dividend Income* | 0.00% | |||
Corporate Dividends Received Deduction* | 0.00% | |||
U.S. Treasury Obligations | 10.87% |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Fund’s fiscal year. |
45 Invesco Core Plus Bond Fund
Trustees and Officers
The address of each trustee and officer is AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”), 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Number of Funds | ||||||||
in Fund Complex | ||||||||
Name, Year of Birth and | Trustee and/ | Principal Occupation(s) | Overseen by | Other Directorship(s) | ||||
Position(s) Held with the Trust | or Officer Since | During Past 5 Years | Trustee | Held by Trustee | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 — 1960 Trustee | 2007 | 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 | 143 | 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. Taylor2 — 1954 Trustee, President and Principal Executive Officer | 2006 | 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 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 Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust); Trustee and Executive Vice President, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s 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 Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Tax-Free Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. | 143 | None | ||||||
Wayne W. Whalen3 — 1939 Trustee | 2010 | Of Counsel, and prior to 2010, partner in the law firm of Skadden, Arps, Slate, Meagher & Flom LLP, legal counsel to funds in the Fund Complex | 161 | Director of the Abraham Lincoln Presidential Library Foundation | ||||
Independent Trustees | ||||||||
Bruce L. Crockett — 1944 Trustee and Chair | 2003 | Chairman, Crockett Technology Associates (technology consulting company) Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer COMSAT Corporation; and Chairman, Board of Governors of INTELSAT (international communications company) | 143 | ACE Limited (insurance company); and Investment Company Institute | ||||
1 | Mr. Flanagan is considered an interested person of the Trust because he is an officer of the adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the adviser to the Trust. |
2 | Mr. Taylor is considered an interested person of the Trust because he is an officer and a director of the adviser to, and a director of the principal underwriter of, the Trust. |
3 | Mr. Whalen has been deemed to be an interested person of the Trust because of his prior service as counsel to the predecessor funds of certain Invesco open-end funds and his affiliation with the law firm that served as counsel to such predecessor funds and continues to serve as counsel to the Invesco Van Kampen closed-end funds. |
T-1 Invesco Core Plus Bond Fund
Trustees and Officers—(continued)
The address of each trustee and officer is AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”), 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Number of Funds | ||||||||
in Fund Complex | ||||||||
Name, Year of Birth and | Trustee and/ | Principal Occupation(s) | Overseen by | Other Directorship(s) | ||||
Position(s) Held with the Trust | or Officer Since | During Past 5 Years | Trustee | Held by Trustee | ||||
Independent Trustees | ||||||||
David C. Arch — 1945 Trustee | 2010 | Chairman and Chief Executive Officer of Blistex Inc., a consumer health care products manufacturer. | 161 | 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 | ||||
Bob R. Baker — 1936 Trustee | 1983 | Retired | 143 | None | ||||
Formerly: President and Chief Executive Officer, AMC Cancer Research Center; and Chairman and Chief Executive Officer, First Columbia Financial Corporation | ||||||||
Frank S. Bayley — 1939 Trustee | 2003 | Retired Formerly: Director, Badgley Funds, Inc. (registered investment company) (2 portfolios) and Partner, law firm of Baker & McKenzie | 143 | Director and Chairman, C.D. Stimson Company (a real estate investment company) | ||||
James T. Bunch — 1942 Trustee | 2000 | 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 | 143 | Vice Chairman, Board of Governors, Western Golf Association/Evans Scholars Foundation and Director, Denver Film Society | ||||
Rodney Dammeyer — 1940 Trustee | 2010 | President 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. | 161 | 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 | 2003 | 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) | 161 | Board of Nature’s 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 | 2003 | 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) | 143 | Administaff | ||||
Formerly: Chief Executive Officer, Texana Timber LP (sustainable forestry company) and member of the U.S. House of Representatives | ||||||||
Carl Frischling — 1937 Trustee | 2003 | Partner, law firm of Kramer Levin Naftalis and Frankel LLP | 143 | Director, Reich & Tang Funds (6 portfolios) | ||||
Prema Mathai-Davis — 1950 Trustee | 2003 | Retired | 143 | None | ||||
Formerly: Chief Executive Officer, YWCA of the U.S.A. | ||||||||
Larry Soll — 1942 Trustee | 1997 | Retired | 143 | None | ||||
Formerly, Chairman, Chief Executive Officer and President, Synergen Corp. (a biotechnology company) | ||||||||
T-2 Invesco Core Plus Bond Fund
Trustees and Officers—(continued)
The address of each trustee and officer is AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”), 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Number of Funds | ||||||||
in Fund Complex | ||||||||
Name, Year of Birth and | Trustee and/ | Principal Occupation(s) | Overseen by | Other Directorship(s) | ||||
Position(s) Held with the Trust | or Officer Since | During Past 5 Years | Trustee | Held by Trustee | ||||
Independent Trustees | ||||||||
Hugo F. Sonnenschein — 1940 Trustee | 2010 | President Emeritus and Honorary Trustee 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. | 161 | 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 | 2005 | Retired Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios) and Partner, Deloitte & Touche | 143 | None | ||||
Other Officers | ||||||||
Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer of Invesco Funds | N/A | N/A | ||||
John M. Zerr — 1962 Senior Vice President, Chief Legal Officer and Secretary | 2006 | 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 | N/A | N/A | ||||
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) | ||||||||
Lisa O. Brinkley — 1959 Vice President | 2004 | Global Compliance Director, Invesco Ltd.; Chief Compliance Officer, Invesco Investment Services, Inc.(formerly known as Invesco Aim Investment Services, Inc.); and Vice President, The Invesco Funds Formerly: Chief Compliance Officer, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) and Van Kampen Investor Services Inc.; Senior Vice President, Invesco Management Group, Inc.; Senior Vice President and Chief Compliance Officer, Invesco Advisers, Inc. and The Invesco Funds; Vice President and Chief Compliance Officer, Invesco Aim Capital Management, Inc. and Invesco Distributors, Inc.; Vice President, Invesco Investment Services, Inc. and Fund Management Company | N/A | N/A | ||||
Sheri Morris — 1964 Vice President, Treasurer and Principal Financial Officer | 2003 | 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) | N/A | N/A | ||||
Formerly: 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, 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. | ||||||||
T-3 Invesco Core Plus Bond Fund
Trustees and Officers—(continued)
The address of each trustee and officer is AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”), 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Number of Funds | ||||||||
in Fund Complex | ||||||||
Name, Year of Birth and | Trustee and/ | Principal Occupation(s) | Overseen by | Other Directorship(s) | ||||
Position(s) Held with the Trust | or Officer Since | During Past 5 Years | Trustee | Held by Trustee | ||||
Other Officers | ||||||||
Karen Dunn Kelley — 1960 Vice President | 2003 | Head of Invesco’s 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 Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust); and President and Principal Executive Officer, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust only). | N/A | N/A | ||||
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 Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Tax-Free Investments Trust only) | ||||||||
Lance A. Rejsek — 1967 Anti-Money Laundering Compliance Officer | 2005 | 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.), The Invesco Funds, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management) and Van Kampen Funds Inc. | N/A | N/A | ||||
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Investor Services Inc., Fund Management Company, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc. | ||||||||
Todd L. Spillane — 1958 Chief Compliance Officer | 2006 | 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, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, INVESCO Private Capital Investments, Inc. (holding company) and Invesco Private Capital, Inc. (registered investment adviser); Vice President, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.), Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.). Formerly: 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 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 | N/A | N/A | ||||
The Statement of Additional Information of the Trust includes additional information about the Fund’s Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Fund’s prospectus for information on the Fund’s sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 2500 Houston, TX 77046-1173 | Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 | Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 2500 Houston, TX 77046-1173 | Auditors PricewaterhouseCoopers LLP 1201 Louisiana Street, Suite 2900 Houston, TX 77002-5678 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2600 One Commerce Square Philadelphia, PA 19103 | Counsel to the Independent Trustees Kramer, Levin, Naftalis & Frankel LLP 1177 Avenue of the Americas New York, NY 10036-2714 | Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 2500 Houston, TX 77046-1173 | Custodian State Street Bank and Trust Company 225 Franklin Boston, MA 02110-2801 |
T-4 Invesco Core Plus Bond Fund
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Invesco mailing information
Send general correspondence to Invesco Investment Services, Inc., P.O. Box 219078, Kansas City, MO 64121-9078.
Invesco privacy policy
You share personal and financial information with us that is necessary for your transactions and your account records. We take very seriously the obligation to keep that information confidential and private.
Invesco collects nonpublic personal information about you from account applications or other forms you complete and from your transactions with us or our affiliates. We do not disclose information about you or our former customers to service providers or other third parties except to the extent necessary to service your account and in other limited circumstances as permitted by law. For example, we use this information to facilitate the delivery of transaction confirmations, financial reports, prospectuses and tax forms.
Even within Invesco, only people involved in the servicing of your accounts and compliance monitoring have access to your information. To ensure the highest level of confidentiality and security, Invesco maintains physical, electronic and procedural safeguards that meet or exceed federal standards. Special measures, such as data encryption and authentication, apply to your communications with us on our website. More detail is available to you at invesco.com/privacy.
Important notice regarding delivery of security holder documents
To reduce Fund expenses, only one copy of most shareholder documents may be mailed to shareholders with multiple accounts at the same address (Householding). Mailing of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact Invesco Investment Services, Inc. at 800 959 4246 or contact your financial institution. We will begin sending you individual copies for each account within 30 days after receiving your request.
Fund holdings and proxy voting information
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is available at invesco.com/completeqtrholdings. Shareholders can also look up the Fund’s Forms N-Q on the SEC website at sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-09913 and 333-36074.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov.
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Information regarding how the Fund voted proxies related to its portfolio securities during the 12 months ended June 30, 2011, is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov.
Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the U.S. distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
CPB-AR-1 | Invesco Distributors, Inc. |
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Annual Report to Shareholders | August 31, 2011 |
Invesco Floating Rate Fund
Nasdaq:
A: AFRAX § C: AFRCX § R: AFRRX § Y: AFRYX § Institutional: AFRIX
A: AFRAX § C: AFRCX § R: AFRRX § Y: AFRYX § Institutional: AFRIX
2 | Letters to Shareholders | |
4 | Performance Summary | |
4 | Management Discussion | |
6 | Long-Term Fund Performance | |
8 | Supplemental Information | |
9 | Schedule of Investments | |
27 | Financial Statements | |
30 | Notes to Financial Statements | |
37 | Financial Highlights | |
38 | Auditor’s Report | |
39 | Fund Expenses | |
40 | Approval of Investment Advisory and Sub-Advisory Agreements | |
42 | Tax Information | |
T-1 | Trustees and Officers |
Letters to Shareholders
![(PHOTO OF PHILIP TAYLOR)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8466802.jpg)
Philip Taylor
Dear Shareholders:
Enclosed is important information about your Fund and its performance. I encourage you to read this report to learn more about your Fund’s short- and long-term performance and its holdings as of the close of the reporting period. This report also includes useful information about your Fund’s management team and a discussion of how your Fund was managed during the reporting period.
Data indicated that economic growth in the U.S. and most of Europe was anemic during the reporting period. In the U.S., unemployment remained high, and the housing market remained weak. Concerns about European sovereign debt persisted. Nonetheless, equity markets rose in late 2010 and early 2011 as investors anticipated better news ahead. But contentious negotiations to raise the U.S. government’s debt ceiling heightened investor unease, and following the first-ever downgrade of U.S. creditworthiness in August, global stock markets declined as many investors sought safer havens.
Where you can get current information about your Fund
In light of economic uncertainty and market volatility, I suggest you check the timely market updates and commentary from many of our fund managers and other investment professionals at invesco.com/us. On our website, you also can obtain information about your account at any hour of the day or night. I invite you to visit and explore the tools and information we offer at invesco.com/us.
Our commitment to investment excellence
As we’ve seen over the last several years, market conditions can change – often suddenly and dramatically. That’s one reason financial advisers typically advise their clients to be well diversified and to maintain a long-term investment focus. While diversification can’t guarantee a profit or protect against loss, it can cushion the impact of dramatic market moves. Maintaining a long-term investment focus for your long-term goals – financing your retirement or your children’s education, for example – may help you avoid making rash investment decisions based on short-term market swings.
Invesco’s investment professionals apply these same principles to the funds they manage.
Invesco offers a broad array of traditional mutual funds, as well as other investment products, including single-country, sector, regional and global investments spanning equity, fixed income and alternative asset classes. Across our product line, investment excellence is our ultimate goal. Each of our funds is managed by specialized teams of investment professionals, and as a company, we maintain a single focus – investment management – that allows our fund managers to concentrate on doing what they do best: managing your money.
Our funds are managed strictly according to their stated investment objectives and strategies, with robust risk oversight using consistent, repeatable investment processes that don’t change in response to short-term market events. This disciplined approach can’t guarantee a profit; no investment can do that, since all involve some measure of risk. But it can ensure that your money is managed the way we said it would be, and that it’s managed with a long-term focus.
Our adherence to stated investment objectives and strategies allows your financial adviser to build a diversified portfolio that meets your individual risk tolerance and financial goals. It also means that when your goals change, your financial adviser will be able to find an Invesco fund that’s appropriate for your needs.
Questions?
If you have questions about your account, please contact one of our client service representatives at 800 959 4246. If you have a general Invesco-related question or comment for me, I invite you to email me directly at phil@invesco.com.
All of us at Invesco look forward to serving your investment management needs for many years to come. Thank you for investing with us.
Sincerely,
![-s- Philip Taylor](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8466803.gif)
Philip Taylor
Senior Managing Director, Invesco Ltd.
Senior Managing Director, Invesco Ltd.
2 | Invesco Floating Rate Fund |
![(PHOTO OF BRUCE CROCKETT)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8466804.jpg)
Bruce Crockett
Dear Fellow Shareholders:
Although the world’s economies are gradually recovering from the financial crisis, it has not been a smooth path. Unrest in the Middle East, persistently weak job and housing markets in the U.S. and continued government balance sheet repair in Europe are contributing to a slow, labored march toward global recovery.
In this environment, investors face risks that could make it more difficult to achieve their long-term financial goals – a secure retirement, home ownership, a child’s college education. Although the markets are complex and dynamic, there are ways to simplify the process and potentially increase your odds of achieving your goals. The best approach is to create a solid financial plan that helps you save and invest in ways that anticipate your needs over the long term.
Your financial adviser can help you define your financial plan, develop an appropriate investment strategy and put you in a better position to achieve your financial goals over the long term. This can take some of the guesswork out of the process and help you make thoughtful investments. Your financial adviser also can help you better understand your tolerance for risk, so that your investment approach lets you sleep at night while getting you closer to your goals. Lastly, your financial adviser can develop an asset allocation strategy that seeks to balance your investment approach, providing some protection against a decline in the markets while allowing you to participate in rising markets. Invesco calls this type of approach “intentional investing.” It means thinking carefully, planning thoughtfully and acting deliberately.
While no investment can guarantee favorable returns, your Board remains committed to managing costs and enhancing the performance of Invesco’s funds as part of our Investor First orientation. We continue to oversee the funds with the same strong sense of responsibility for your money and your continued trust that we’ve always maintained.
Thanks to the approval of our fund shareholders, Invesco has made great progress in realigning our U.S. mutual fund product line following our acquisition of Morgan Stanley’s retail asset management business, including Van Kampen Investments. When completed, the realignment will reduce overlap in the product lineup, enhance efficiency across our product line and build a solid foundation for further growth to meet client and shareholder needs. I would like to thank those of you who voted your proxy, and I hope our shareholders haven’t been too inconvenienced by the process.
As always, please contact me at bruce@brucecrockett.com with any questions or concerns you may have. On behalf of your Board, we look forward to continuing to represent your interests and serving your needs.
Sincerely,
![-s- Bruce L. Crockett](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8466805.gif)
Bruce L. Crockett
Independent Chair
Invesco Funds Board of Trustees
Independent Chair
Invesco Funds Board of Trustees
3 | Invesco Floating Rate Fund |
Management’s Discussion of Fund Performance
Performance summary
For the fiscal year ended August 31, 2011, Invesco Floating Rate Fund, Class A shares at net asset value (NAV) returned 3.07%, underperforming the CS Leveraged Loan Index. The Fund’s focus on more liquid loans detracted from performance. The Fund invests in lower rated fixed income instruments, primarily senior secured corporate loans.
Your Fund’s long-term performance appears later in this report.
Fund vs. Indexes
Total returns, 8/31/10 to 8/31/11, at net asset value (NAV). Performance shown does not include applicable contingent deferred sales charges (CDSC) or front-end sales charges, which would have reduced performance.
Class A Shares | 3.07 | % | ||
Class C Shares | 2.41 | |||
Class R Shares | 2.68 | |||
Class Y Shares | 3.19 | |||
Institutional Class Shares | 3.40 | |||
Barclays Capital U.S. Aggregate Index ▼ (Broad Market Index) | 4.62 | |||
CS Leveraged Loan Index § (Style-Specific Index) | 3.44 | |||
S&P/LSTA Leveraged Loan Index ◆ (Former Style-Specific Index) | 2.79 | |||
Lipper Loan Participation Funds Category Average ▼ (Peer Group) | 2.62 | |||
▼ Lipper Inc.; § Invesco, Bloomberg L.P.; ◆ Invesco, Standard & Poor’s |
The Fund has elected to use the CS Leveraged Loan Index as its style-specific benchmark because it reflects the Fund’s investment style more appropriately than the S&P/LSTA Leveraged Loan Index. |
How we invest
We believe a highly diversified pool of bank loans from the broadest spectrum of issuers and consisting of the highest credit quality available in line with portfolio objectives has the best risk-reward potential.
Our credit analysts review all holdings and prospective holdings.
Key consideration is given to the following:
n | Management. Factors include direct operating experience in managing this business, management depth and incentives and track record operating in a leveraged environment. |
n | Industry position and dynamics. Factors include the company’s industry position, life cycle phase of the industry, barriers to entry and current industry capacity and utilization. |
n | Asset quality. Considerations may include valuations of hard and intangible assets, how easily those assets can be converted to cash and appropriateness to leverage those assets. |
n | Divisibility. This factor focuses on operating and corporate structures, ability to divide easily and efficiently, examination of non-core assets and valuation of multiple brand names. |
n | Sponsors. Considerations include the firm’s track record of quality transactions, access to additional capital and control or ownership of the sponsoring firm. |
n | Cash flow. We examine the firm’s sales and earnings breakdown by product, divisions and subsidiaries. We look at the predictability of corporate earnings and the cash requirement of the business and conduct an examination of business cycles, seasonality, international pressures and other factors. |
n | Recovery and loan-to-value. These factors focus on further examination of the default probability and the rate of recovery associated with loans. |
The portfolio is constructed using a conservative bias to help manage credit risk, while focusing on optimization of return relative to appropriate benchmarks. We constantly monitor the holdings in the portfolio and conduct daily, weekly and monthly meetings with portfolio managers and analysts, as well as with firms and loan sponsors.
Our active sell discipline considers two key factors for each portfolio position:
n | Company objective. Will unfavorable industry trends, poor performance or lack of access to capital cause the company to underperform? |
n | Investment objective. Has the earnings potential or price potential been met or exceeded, or do better relative valuation opportunities exist in the market? |
Portfolio Composition†
By credit quality, based on total investments
Baa2 | 1.3 | % | ||
Baa3 | 2.2 | |||
Ba1 | 5.2 | |||
Ba2 | 12.0 | |||
Ba3 | 26.6 | |||
B1 | 21.5 | |||
B2 | 10.3 | |||
B3 | 2.3 | |||
Caa1 | 1.4 | |||
Caa2 | 0.6 | |||
Caa3 | 0.1 | |||
Ca or lower | 0.1 | |||
Non-Rated | 10.9 | |||
Equity | 1.4 | |||
Money Market Funds | 4.1 |
† | Source: Moody’s. A credit rating is an assessment provided by a nationally recognized statistical rating organization (NRSRO) of the creditworthiness of an issuer with respect to debt obligations, including specific securities, money market instruments or other debts. Ratings are measured on a scale that generally ranges from Aaa (highest) to C (lowest); ratings are subject to change without notice. “Non-Rated” indicates the debtor was not rated, and should not be interpreted as indicating low quality. For more information on Moody’s rating methodology, please visit moodys.com and select “Rating Methodologies” under Research and Ratings on the homepage. |
Top 10 Issuers*
1. | Reynolds Group Holdings Ltd. | 2.6 | % | |||||
2. | Mediacom Communications Corp. | 1.7 | ||||||
3. | Calpine Corp. | 1.7 | ||||||
4. | Level 3 Communications, Inc. | 1.5 | ||||||
5. | Asurion Corp. | 1.4 | ||||||
6. | Univision Communications, Inc. | 1.4 | ||||||
7. | Community Health Systems | 1.3 | ||||||
8. | Graham Packaging Company, L.P. | 1.2 | ||||||
9. | MetroPCS Communications, Inc. | 1.1 | ||||||
10. | Capital Automotive REIT | 1.1 |
Total Net Assets | $894.9 million | |
Total Number of Holdings* | 540 |
The Fund’s holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
*Excluding money market fund holdings.
4 | Invesco Floating Rate Fund |
Market conditions and your Fund
For much of the fiscal year ended August 31, 2011, the bank loan market continued on the path to recovery which began at the start of 2009. This recovery, while not uninterrupted, stalled in July following the onset of global anxiety associated principally with European sovereign debt concerns, and while the leveraged loan market did not sell off to the same extent as other asset classes, leveraged loans were not immune from a decline.
This weakness in leveraged loans occurred against a backdrop of a default rate that was extremely low. Through August 31, 2011, the trailing 12-month loan default rate, as measured by Standard & Poor’s Leveraged Commentary & Data (S&P LCD) was 0.28% year-to-date, a level well below the average 12-month default rate of 3.58% and far below the November 2009 peak of 10.81%.1 This benign default rate environment was offset by weaker-than-expected economic reports, a downgrade of U.S. debt by S&P, and a challenging U.S. fiscal and monetary environment. At the same time that investors grew more cautious, the selling we witnessed appeared orderly, and there was an absence of forced or panic selling. Furthermore, there appeared to be a deep level of support from hedge funds and cross-over buyers who left the loan market following price appreciation that lowered returns below the target levels of these types of investors. On a market technical basis, loan issuance was generally less than demand, which contributed to broad price increases for much of the Fund’s fiscal year.
While the Fund underperformed the CS Leveraged Loan Index for the fiscal year, it is important to remember that the benchmark has no fees or expenses. The Fund’s focus on larger, more liquid loans at times hurt its performance during the reporting period as these loans sold off to a greater extent than less liquid ones. The Fund’s return for the fiscal year was primarily driven by underweighting certain sectors such as the directory sector as well as the decision to continue to hold some equity positions acquired in connection with some debt restructurings.
The Fund was managed with a view toward taking advantage of what appeared to be an expanding economy, a low default environment, and strong demand for floating rate assets from investors concerned about how rising
interest rates would affect the market value of longer maturity fixed income investments. As the U.S. economy showed increasing signs of weakness, we acted to reduce the volatility of the portfolio by proactively increasing our cash position and shifting the Fund out of riskier assets.
We also sought to balance capital appreciation opportunities in the Fund with current income. Therefore, we were willing to buy the loans of some distressed companies when we felt that valuations were compelling. In terms of industry allocation, we focused on segments where we felt there was likely to be revenue stability with limited downside potential from outside shocks. Accordingly, we had overweight positions in telecommunication services, cable and paper and packaging, while we had underweight positions in electronics, financials, publishing and health care.
As always, we appreciate your continued participation in Invesco Floating Rate Fund.
1 S&P LCD
The views and opinions expressed in management’s discussion of Fund performance are those of Invesco Advisers, Inc. These views and opinions are subject to change at any time based on factors such as market and economic conditions. These views and opinions may not be relied upon as investment advice or recommendations, or as an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but Invesco Advisers, Inc. makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
See important Fund and, if applicable, index disclosures later in this report.
![(PHOTO OF TOM EWALD)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8466806.jpg)
Tom Ewald
Portfolio manager, is lead manager of Invesco Floating Rate Fund. Mr. Ewald joined Invesco in 2000 as a credit analyst and was promoted to portfolio manager of certain other funds in 2001. Prior to joining Invesco, Mr. Ewald was a portfolio manager at another firm. Mr. Ewald earned an A.B. from Harvard College and an M.B.A. from the Darden School of Business at the University of Virginia.
![(PHOTO OF GREG STOECKLE)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8466807.jpg)
Greg Stoeckle
Portfolio manager, is manager of Invesco Floating Rate Fund. Mr. Stoeckle joined Invesco in 1999 and has held several senior management positions within the bank loan group. He began his investment career in 1987 as a credit analyst for another firm. Mr. Stoeckle earned a B.S. from Ursinus College and an M.B.A. from Saint Joseph’s University.
5 | Invesco Floating Rate Fund |
Your Fund’s Long-Term Performance
Results of a $10,000 Investment – Oldest Share Class since Inception
Index data from 4/30/97, Fund data from 5/1/97
![(PERFORMANCE GRAPH)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8466808.gif)
Past performance cannot guarantee comparable future results.
During the reporting period, the Fund has elected to use the CS Leveraged Loan Index as its style-specific index rather than the S&P/LSTA Leveraged Loan Index because it reflects the Fund’s investment style more appropriately than the S&P/LSTA Leveraged Loan Index. Because this is the first reporting period since we have adopted the new index, SEC guidelines require that we compare performance to both the old and new indexes.
The data shown in the chart include reinvested distributions, applicable sales charges and Fund expenses including management fees. Index results include reinvested dividends, but they do not reflect sales charges. Performance of the peer group, if applicable, reflects fund expenses and management fees; performance of a market index does not. Performance shown in the chart and table(s) does not reflect deduction of taxes a shareholder would pay on Fund distributions or sale of Fund shares.
This chart, which is a logarithmic chart, presents the fluctuations in the value of
the Fund and its indexes. We believe that a logarithmic chart is more effective than other types of charts in illustrating changes in value during the early years shown in the chart. The vertical axis, the one that indicates the dollar value of an investment, is constructed with each segment representing a percent change in the value of the investment. In this chart, each segment represents a doubling, or 100% change, in the value of the investment. In other words, the space between $5,000 and $10,000 is the same size as the space between $10,000 and $20,000, and so on.
continued from page 8
n | Management risk. The investment techniques and risk analysis used by the Fund’s portfolio managers may not produce the desired results. |
n | Market risk. The prices of and the income generated by the Fund’s securities may decline in response to, among other things, investor sentiment; general economic and market conditions; regional or global instability; and currency and interest rate fluctuations. |
n | Non-diversification risk. The Fund is non-diversified and can invest a greater portion of its assets in a single issuer. A change in the value of the issuer could affect the value of the Fund more than if it was a diversified fund. |
n | Prepayment risk. An issuer’s ability to prepay principal on a loan or debt |
security prior to maturity can limit the Fund’s potential gains. Prepayments may require the Fund to replace the loan or debt security with a lower yielding security, adversely affecting the Fund’s yield. |
About indexes used in this report
n | The Barclays Capital U.S. Aggregate Index is an unmanaged index considered representative of the U.S. investment-grade, fixed-rate bond market. |
n | The CS Leveraged Loan Index represents tradable, senior-secured, U.S. dollar-denominated non-investment-grade loans. |
n | The S&P/LSTA Leveraged Loan Index is a weekly total return index that tracks the |
current outstanding balance and spread over LIBOR for fully funded term loans. | ||
n | The Lipper Loan Participation Funds Category Average represents an average of all of the funds in the Lipper Loan Participation Funds category. | |
n | The Fund is not managed to track the performance of any particular index, including the index(es) defined here, and consequently, the performance of the Fund may deviate significantly from the performance of the index(es). | |
n | A direct investment cannot be made in an index. Unless otherwise indicated, index results include reinvested dividends, and they do not reflect sales charges. Performance of the peer group, if applicable, reflects fund expenses; performance of a market index does not. |
continued on page 7
6 | Invesco Floating Rate Fund |
Average Annual Total Returns
As of 8/31/11, including maximum applicable
sales charges
sales charges
Class A Shares | ||||||||
Inception (5/1/97) | 3.57 | % | ||||||
10 | Years | 2.95 | ||||||
5 | Years | 1.32 | ||||||
1 | Year | 0.52 | ||||||
Class C Shares | ||||||||
Inception (3/31/00) | 2.77 | % | ||||||
10 | Years | 2.78 | ||||||
5 | Years | 1.25 | ||||||
1 | Year | 1.43 | ||||||
Class R Shares | ||||||||
10 | Years | 3.08 | % | |||||
5 | Years | 1.60 | ||||||
1 | Year | 2.68 | ||||||
Class Y Shares | ||||||||
10 | Years | 3.25 | % | |||||
5 | Years | 1.91 | ||||||
1 | Year | 3.19 | ||||||
Institutional Shares | ||||||||
10 | Years | 3.39 | % | |||||
5 | Years | 2.17 | ||||||
1 | Year | 3.40 |
On April 13, 2006, the Fund reorganized from a Closed-End Fund to an Open-End Fund. Performance shown for Class A shares prior to that date is that of the Closed-End Fund’s Class B shares and includes the management and 12b-1 fees applicable to B shares. The Closed-End Fund’s B-share performance reflects any applicable fee waivers or expense reimbursements.
On April 13, 2006, the Fund reorganized from a Closed-End Fund to an Open-End Fund. Performance shown for Class C shares prior to that date is that of the Closed-End Fund’s Class C shares and includes the management and 12b-1 fees applicable to C shares. The Closed-End Fund’s C-share performance reflects any applicable fee waivers or expense reimbursements.
Class R shares incepted on April 13, 2006. Performance shown prior to that
Average Annual Total Returns
As of 6/30/11, the most recent calendar quarter-end, including maximum applicable sales charges
Class A Shares | ||||||||
Inception (5/1/97) | 3.95 | % | ||||||
10 | Years | 3.42 | ||||||
5 | Years | 2.46 | ||||||
1 | Year | 7.47 | ||||||
Class C Shares | ||||||||
Inception (3/31/00) | 3.23 | % | ||||||
10 | Years | 3.26 | ||||||
5 | Years | 2.40 | ||||||
1 | Year | 8.72 | ||||||
Class R Shares | ||||||||
10 | Years | 3.57 | % | |||||
5 | Years | 2.78 | ||||||
1 | Year | 10.10 | ||||||
Class Y Shares | ||||||||
10 | Years | 3.73 | % | |||||
5 | Years | 3.08 | ||||||
1 | Year | 10.67 | ||||||
Institutional Shares | ||||||||
10 | Years | 3.86 | % | |||||
5 | Years | 3.33 | ||||||
1 | Year | 10.60 |
date is that of Class A shares and includes the 12b-1 fees applicable to Class A shares. Class A share performance reflects any applicable fee waivers or expense reimbursements.
Class Y shares incepted on October 3, 2008. Performance shown prior to that date is that of Class A shares and includes the 12b-1 fees applicable to Class A shares. Class A share performance reflects any applicable fee waivers or expense reimbursements.
Institutional Class shares incepted on April 13, 2006. Performance shown prior to that date is that of Class A shares and includes the 12b-1 fees applicable to Class A shares. Class A share performance reflects any applicable fee waivers or expense reimbursements.
The performance data quoted represent past performance and
cannot guarantee comparable future results; current performance may be lower or higher. Please visit invesco.com/performance for the most recent month-end performance. Performance figures reflect reinvested distributions, changes in net asset value and the effect of the maximum sales charge unless otherwise stated. Investment return and principal value will fluctuate so that you may have a gain or loss when you sell shares.
The total annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Class A, Class C, Class R, Class Y and Institutional Class shares was 1.14%, 1.64%, 1.39%, 0.89% and 0.81%, respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.
Class A share performance reflects the maximum 2.50% sales charge and Class C share performance reflects the applicable contingent deferred sales charge (CDSC) for the period involved. The CDSC on Class C shares is 1% for the first year after purchase. Class R, Class Y and Institutional Class shares do not have a front-end sales charge or a CDSC; therefore, performance is at net asset value.
The performance of the Fund’s share classes will differ primarily due to different sales charge structures and class expenses.
A redemption fee of 2% will be imposed on certain redemptions or exchanges out of the Fund within 31 days of purchase. Exceptions to the redemption fee are listed in the Fund’s prospectus.
Had the adviser not waived fees and/or reimbursed expenses in the past, performance would have been lower.
continued from page 6
Other information
n | The returns shown in management’s discussion of Fund performance are based on net asset values calculated for shareholder transactions. Generally accepted accounting principles require adjustments to be made to the net |
assets of the Fund at period end for financial reporting purposes, and as such, the net asset values for shareholder transactions and the returns based on those net asset values may differ from the net asset values and returns reported in the Financial Highlights. |
n | Industry classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. |
7 Invesco Floating Rate Fund
Invesco Floating Rate Fund’s investment objective is total return, comprised of current income and capital appreciation.
n | Unless otherwise stated, information presented in this report is as of August 31, 2011, and is based on total net assets. | |
n | Unless otherwise noted, all data provided by Invesco. | |
n | To access your Fund’s reports/prospectus, visit invesco.com/fundreports. |
About share classes
n | As of the close of business on April 13, 2006, Invesco Floating Rate Fund reorganized from a Closed-End Fund to an Open-End Fund. Information presented for Class A shares prior to the reorganization includes financial data for Class B shares of the Closed-End Fund. Information presented for Class C shares prior to the reorganization includes financial data for Class C shares of the Closed-End Fund. | |
n | On July 27, 2006, all Class B1 shares converted into Class A shares. | |
n | Class R shares are available only to certain retirement plans. Please see the prospectus for more information. | |
n | Class Y shares are available only to certain investers. Please see the prospectus for more information. | |
n | Institutional Class shares are offered exclusively to institutional investors, including defined contribution plans that meet certain criteria. Please see the prospectus for more information. |
Principal risks of investing in the Fund
n | Active trading risk. The Fund engages in frequent trading of portfolio securities. Active trading results in added expenses and may result in a lower return and increased tax liability. | |
n | Collateralized loan obligations risk. In addition to the normal interest rate, default and other risk of fixed income securities, collateralized loan obligations carry additional risks, including the possibility that distributions from collateral securities will not be adequate to make interest or other payments, the quality of the collateral may decline in value or default, the Fund may invest in collateralized loan obligations that are subordinate to other classes, values may be volatile, and disputes with the issuer may produce unexpected investment results. | |
n | Credit linked notes risk. Risks of credit linked notes include those risks associated with the underlying reference obligation including but not limited to market risk, interest rate risk, credit risk, default risk and foreign |
currency risk. In the case of a credit linked note created with credit default swaps, the structure will be “funded” such that the par amount of the security will represent the maximum loss that could be incurred on the investment and no leverage is introduced. An investor in a credit linked note bears counterparty risk or the risk that the issuer of the credit linked note will default or become bankrupt and not make timely payment of principal and interest of the structured security. | ||
n | Credit risk. The issuer of instruments in which the Fund invests may be unable to meet interest and/or principal payments, thereby causing its instruments to decrease in value and lowering the issuer’s credit rating. | |
n | Defaulted securities risk. Defaulted securities involve the substantial risk that principal will not be repaid. Defaulted securities and any securities received in an exchange for such securities may be subject to restrictions on resale. | |
n | Derivatives risk. Derivatives may be more difficult to purchase, sell or value than other investments and may be subject to market, interest rate, credit, leverage, counterparty and management risks. A fund investing in a derivative could lose more than the cash amount invested or incur higher taxes. Over-the-counter derivatives are also subject to counterparty risk, which is the risk that the other party to the contract will not fulfill its contractual obligation to complete the transaction with the Fund. | |
n | Floating rate risk. The Fund may invest in senior secured floating rate loans and debt securities that require collateral. There is a risk that the value of the collateral may not be sufficient to cover the amount owed, collateral securing a loan may be found invalid, and collateral may be used to pay other outstanding obligations of the borrower under applicable law or may be difficult to sell. There is also the risk that the collateral may be difficult to liquidate, or that a majority of the collateral may be illiquid. |
n | Foreign securities risk. The Fund’s foreign investments may be affected by changes in a foreign country’s exchange rates; political and social instability; changes in economic or taxation policies; difficulties when enforcing obligations; decreased liquidity; and increased volatility. Foreign companies may be subject to less regulation resulting in less publicly available information about the companies. | |
n | Industry focus risk. To the extent the Fund invests in securities issued or guaranteed by companies in the banking and financial services industries, the Fund’s performance will depend on the overall condition of those industries, which may be affected by the following factors: the supply of short-term financing; changes in government regulation and interest rates; and overall economy. | |
n | Interest rate risk. Interest rate risk refers to the risk that bond prices generally fall as interest rates rise; conversely, bond prices generally rise as interest rates fall. Specific bonds differ in their sensitivity to changes in interest rates depending on their individual characteristics, including duration. | |
n | Leverage risk. Leverage exists when the Fund purchases or sells an instrument or enters into a transaction without investing cash in an amount equal to the full economic exposure of the instrument or transaction and the Fund could lose more than it invested. | |
Leverage created from borrowing or certain types of transactions or instruments, including derivatives, may impair the Fund’s liquidity, cause it to liquidate positions at an unfavorable time, increase volatility or otherwise not achieve its intended objective. | ||
n | Liquidity risk. The majority of the Fund’s assets are likely to be invested in loans and securities that are less liquid than those traded on national exchanges. In the event the Fund voluntarily or involuntarily liquidates portfolio assets during periods of infrequent trading, it may not receive full value for those assets. |
continued on page 6
This report must be accompanied or preceded by a currently effective Fund prospectus, which contains more complete information, including sales charges and expenses. Investors should read it carefully before investing.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
Fund Nasdaq Symbols
Class A Shares | AFRAX | |||
Class C Shares | AFRCX | |||
Class R Shares | AFRRX | |||
Class Y Shares | AFRYX | |||
Institutional Class Shares | AFRIX |
8 Invesco Floating Rate Fund
Schedule of Investments(a)
August 31, 2011
Interest | Maturity | Principal | ||||||||||||||
Rate | Date | Amount | Value | |||||||||||||
Senior Secured Floating Rate Interest Loans–89.29%(b)(c) | ||||||||||||||||
Advertising–0.50% | ||||||||||||||||
Advantage Sales & Marketing Inc. | ||||||||||||||||
First Lien Term Loan B | 5.25 | % | 12/17/17 | $ | 1,444,397 | $ | 1,366,400 | |||||||||
Second Lien Term Loan | 9.25 | % | 06/18/18 | 530,670 | 508,117 | |||||||||||
Affinion Group, Inc., Term Loan B | 5.00 | % | 10/10/16 | 2,710,260 | 2,461,269 | |||||||||||
Lamar Media Corp., Term Loan B | 4.00 | % | 12/30/16 | 147,353 | 143,730 | |||||||||||
4,479,516 | ||||||||||||||||
Aerospace & Defense–1.81% | ||||||||||||||||
Aero Technology Supply | ||||||||||||||||
Revolver Loan (Acquired 01/28/11-04/19/11; Cost $497,455) | 11.25 | % | 03/12/13 | 497,455 | 494,968 | |||||||||||
Term Loan | 11.25 | % | 03/12/13 | 565,174 | 551,045 | |||||||||||
Term Loan | 10.75 | % | 03/12/15 | 1,302,428 | 1,276,379 | |||||||||||
ARINC Inc., Second Lien Term Loan (Acquired 01/10/11; Cost $1,108,001) | 6.23 | % | 10/25/15 | 1,142,269 | 1,123,707 | |||||||||||
Dubai Aerospace Enterprise | ||||||||||||||||
Term Loan B1 | 5.26 | % | 07/31/14 | 270,718 | 255,829 | |||||||||||
Term Loan B2 | 5.22-5.26 | % | 07/31/14 | 260,117 | 245,810 | |||||||||||
DynCorp International, Term Loan | 6.25 | % | 07/07/16 | 1,876,109 | 1,795,202 | |||||||||||
Hawker Beechcraft Corp., Term Loan | 2.22-2.25 | % | 03/26/14 | 964,892 | 709,679 | |||||||||||
IAP Worldwide Services, Inc., Term Loan B | 9.25 | % | 12/30/12 | 3,294,965 | 3,216,709 | |||||||||||
Sequa Corp., Term Loan B | 3.50-3.51 | % | 12/03/14 | 5,312,579 | 4,989,415 | |||||||||||
SI Organization, Inc., Term Loan B | 4.50 | % | 11/22/16 | 666,499 | 606,514 | |||||||||||
Wyle Laboratories, Inc., Term Loan | 5.75 | % | 03/26/17 | 974,279 | 936,116 | |||||||||||
16,201,373 | ||||||||||||||||
Agricultural Products–0.01% | ||||||||||||||||
Darling International Inc., Term Loan | 5.00 | % | 12/16/16 | 110,418 | 109,728 | |||||||||||
Air Freight & Logistics–0.15% | ||||||||||||||||
CEVA Group PLC, Term Loan B | 0.15-5.25 | % | 08/31/16 | 1,476,033 | 1,355,492 | |||||||||||
Airlines–0.55% | ||||||||||||||||
Delta Air Lines, Inc. | ||||||||||||||||
Revolver Loan(d) | 0 | % | 03/28/13 | 1,500,000 | 1,406,250 | |||||||||||
Term Loan B | 4.25 | % | 03/07/16 | 1,625,946 | 1,493,838 | |||||||||||
Term Loan B | 5.50 | % | 04/20/17 | 2,208,640 | 2,052,202 | |||||||||||
4,952,290 | ||||||||||||||||
Airport Services–0.08% | ||||||||||||||||
Hertz Corp. | ||||||||||||||||
LOC | 1.00 | % | 03/11/18 | 551,589 | 515,736 | |||||||||||
Term Loan B | 3.75 | % | 03/11/18 | 237,374 | 225,804 | |||||||||||
741,540 | ||||||||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
9 Invesco Floating Rate Fund
Interest | Maturity | Principal | ||||||||||||||
Rate | Date | Amount | Value | |||||||||||||
Alternative Carriers–1.47% | ||||||||||||||||
Level 3 Communications, Inc. | ||||||||||||||||
Add On Term Loan B | 11.50 | % | 03/13/14 | $ | 204,533 | $ | 213,823 | |||||||||
Term Loan | 2.49-2.50 | % | 03/13/14 | 13,903,226 | 12,943,903 | |||||||||||
13,157,726 | ||||||||||||||||
Aluminum–0.02% | ||||||||||||||||
Noranda Aluminum, Inc., Term Loan B | 1.97 | % | 05/18/14 | 149,035 | 143,074 | |||||||||||
Apparel Retail–0.75% | ||||||||||||||||
Destination Maternity Corp., Term Loan B (Acquired 03/09/07; Cost $77,492) | 2.47-2.50 | % | 03/13/13 | 77,492 | 76,717 | |||||||||||
DSW Inc., Term Loan | 4.22 | % | 03/02/12 | 3,000,000 | 2,844,990 | |||||||||||
J. Crew Group, Inc., Term Loan B | 4.75 | % | 03/07/18 | 4,247,810 | 3,807,121 | |||||||||||
6,728,828 | ||||||||||||||||
Apparel, Accessories & Luxury Goods–0.29% | ||||||||||||||||
Levi Strauss & Co., Term Loan | 2.47 | % | 03/27/14 | 3,000,000 | 2,617,500 | |||||||||||
Application Software–0.10% | ||||||||||||||||
Rovi Corp. | ||||||||||||||||
Term Loan A | 2.75 | % | 02/07/16 | 588,819 | 571,154 | |||||||||||
Term Loan B | 4.00 | % | 02/07/18 | 337,558 | 327,431 | |||||||||||
898,585 | ||||||||||||||||
Auto Parts & Equipment–2.83% | ||||||||||||||||
Armored AutoGroup Inc., Term Loan B | 6.00 | % | 11/05/16 | 1,036,229 | 948,150 | |||||||||||
Autoparts Holdings Ltd., First Lien Term Loan | 6.50 | % | 07/28/17 | 515,727 | 508,635 | |||||||||||
DEI Holdings, Inc., Term Loan B | 7.00-7.50 | % | 07/13/17 | 1,966,102 | 1,931,696 | |||||||||||
Delphi Automotive LLP, Tranche B | 3.50 | % | 03/31/17 | 674,913 | 657,618 | |||||||||||
Federal-Mogul Corp. | ||||||||||||||||
Delay Draw Term Loan C2 | 2.14-2.16 | % | 12/27/15 | 619,095 | 564,541 | |||||||||||
Term Loan B | 2.14-2.16 | % | 12/27/14 | 1,556,063 | 1,419,907 | |||||||||||
Goodyear Tire & Rubber Co. (The), Second Lien Term Loan | 1.94 | % | 04/30/14 | 6,535,343 | 6,094,207 | |||||||||||
Key Safety Systems, Inc. | ||||||||||||||||
Revolver Loan(d) | 0 | % | 03/08/13 | 122,500 | 106,060 | |||||||||||
Revolver Loan | 2.46 | % | 03/08/13 | 1,877,500 | 1,625,530 | |||||||||||
Term Loan B | 2.46-2.47 | % | 03/08/14 | 3,332,831 | 3,021,761 | |||||||||||
Metaldyne, LLC, Term Loan B | 5.25 | % | 05/18/17 | 2,767,483 | 2,638,324 | |||||||||||
MetoKote Corp., Term Loan | 9.00 | % | 11/27/11 | 1,980,983 | 1,962,412 | |||||||||||
Sensata Technologies, Inc., Term Loan B | 4.00 | % | 05/12/18 | 1,355,835 | 1,310,076 | |||||||||||
Tenneco, Inc., Term Loan B | 4.75 | % | 06/03/16 | 2,574,000 | 2,538,620 | |||||||||||
25,327,537 | ||||||||||||||||
Automobile Manufacturers–1.24% | ||||||||||||||||
Ford Motor Co., Term Loan | 2.96 | % | 12/15/13 | 3,789,699 | 3,740,755 | |||||||||||
General Motors Co. LLC | ||||||||||||||||
Revolver Loan(d) | 0 | % | 10/27/15 | 2,256,330 | 2,023,646 | |||||||||||
Revolver Loan(e) | — | 10/27/15 | 5,997,910 | 5,379,376 | ||||||||||||
11,143,777 | ||||||||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
10 Invesco Floating Rate Fund
Interest | Maturity | Principal | ||||||||||||||
Rate | Date | Amount | Value | |||||||||||||
Automotive Retail–0.67% | ||||||||||||||||
KAR Holdings, Inc., Term Loan B | 5.00 | % | 05/19/17 | $ | 6,315,566 | $ | 6,035,313 | |||||||||
Broadcasting–9.08% | ||||||||||||||||
AMC Networks Inc., Term Loan B | 4.00 | % | 12/31/18 | 1,177,661 | 1,142,331 | |||||||||||
Atlantic Broadband, Inc., Term Loan B | 4.00 | % | 03/08/16 | 66,226 | 63,080 | |||||||||||
Bresnan Communications, LLC, Term Loan B | 4.50 | % | 12/14/17 | 1,711,816 | 1,642,428 | |||||||||||
Charter Communications, Inc. | ||||||||||||||||
Term Loan B1 | 2.23 | % | 03/06/14 | 14,600 | 14,261 | |||||||||||
Term Loan C | 3.50 | % | 09/06/16 | 9,470,497 | 9,073,068 | |||||||||||
Citadel Broadcasting Corp., Term Loan B | 4.25 | % | 12/30/16 | 567,457 | 561,547 | |||||||||||
Clear Channel Communications, Inc. | ||||||||||||||||
Term Loan B(e) | — | 01/29/16 | 625,000 | 471,291 | ||||||||||||
Term Loan B | 3.87 | % | 01/29/16 | 3,686,541 | 2,779,892 | |||||||||||
CSC Holdings, Inc. | ||||||||||||||||
Incremental Term Loan B2 | 1.97 | % | 03/29/16 | 1,167,870 | 1,113,862 | |||||||||||
Incremental Term Loan B3 | 1.97 | % | 03/29/16 | 2,829,238 | 2,679,826 | |||||||||||
FoxCo Acquisition LLC, Term Loan B | 4.75 | % | 07/14/15 | 369,201 | 350,512 | |||||||||||
Gray Television Inc., Term Loan B | 3.71 | % | 12/31/14 | 101,956 | 94,200 | |||||||||||
Harron Communications, L.P., Term Loan B | 5.25 | % | 10/06/17 | 2,681,619 | 2,587,763 | |||||||||||
High Plains Broadcasting, LLC, Term Loan | 9.00 | % | 09/14/16 | 427,113 | 421,988 | |||||||||||
Insight Communications Co., Term Loan B | 1.94-2.00 | % | 04/06/14 | 1,070,444 | 1,054,056 | |||||||||||
Intelsat, Ltd., Tranche B | 5.25 | % | 04/02/18 | 8,927,346 | 8,603,730 | |||||||||||
Local TV LLC, Term Loan B | 2.23 | % | 05/07/13 | 768,876 | 699,677 | |||||||||||
Mediacom Communications Corp. | ||||||||||||||||
Add on Term Loan | 5.50 | % | 03/31/17 | 3,150,446 | 3,028,367 | |||||||||||
Term Loan D1 | 1.94 | % | 01/31/15 | 1,981,473 | 1,748,650 | |||||||||||
Term Loan D2 | 1.94 | % | 01/31/15 | 274,052 | 241,851 | |||||||||||
Term Loan E | 4.50 | % | 10/23/17 | 1,993,210 | 1,866,143 | |||||||||||
Term Loan F | 4.50 | % | 10/23/17 | 7,959,631 | 7,541,750 | |||||||||||
Midcontinent Communications, Term Loan | 4.00 | % | 12/31/16 | 77,957 | 76,154 | |||||||||||
NDS Group Ltd., Term Loan B | 4.00 | % | 03/10/18 | 1,686,212 | 1,563,962 | |||||||||||
NEP II, Inc., Term Loan B2 | 3.50 | % | 02/16/17 | 4,148,252 | 3,847,503 | |||||||||||
Newport Television, LLC, Term Loan | 9.00 | % | 09/14/16 | 1,562,588 | 1,543,837 | |||||||||||
Raycom Media, Inc., Term Loan B | 4.50 | % | 05/31/17 | 2,134,250 | 2,022,202 | |||||||||||
TWCC Holding Corp., Term Loan B | 4.25 | % | 02/11/17 | 4,542,680 | 4,400,721 | |||||||||||
Univision Communications Inc., Extended Term Loan B1 | 4.47 | % | 03/31/17 | 13,950,569 | 12,074,218 | |||||||||||
UPC Broadband Holding B.V., Term Loan X | 3.69 | % | 12/31/17 | 5,500,000 | 5,089,783 | |||||||||||
WaveDivision Holdings, LLC, Term Loan B | 2.51-2.55 | % | 06/30/14 | 373,668 | 351,248 | |||||||||||
WOW! | ||||||||||||||||
First Lien Term Loan | 2.71-4.75 | % | 06/30/14 | 353,333 | 325,950 | |||||||||||
First Lien Term Loan A | 6.71-8.75 | % | 06/28/14 | 2,343,504 | 2,208,753 | |||||||||||
81,284,604 | ||||||||||||||||
Building Products–0.72% | ||||||||||||||||
Champion Window Manufacturing Inc., Term Loan | 7.50 | % | 12/31/13 | 1,121,264 | 1,048,382 | |||||||||||
CPG International, Inc., Term Loan B | 6.00 | % | 02/18/17 | 2,006,264 | 1,885,888 | |||||||||||
Custom Building Products, Inc., Term Loan | 5.75 | % | 03/19/15 | 1,799,197 | 1,695,743 | |||||||||||
JMC Steel Group Inc., Term Loan | 4.75 | % | 04/01/17 | 787,199 | 745,135 | |||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
11 Invesco Floating Rate Fund
Interest | Maturity | Principal | ||||||||||||||
Rate | Date | Amount | Value | |||||||||||||
Building Products–(continued) | ||||||||||||||||
Nortek, Inc., Term Loan B | 5.25-6.25 | % | 04/26/17 | $ | 1,060,455 | $ | 970,316 | |||||||||
United Subcontractors, Inc., Term Loan | 4.25 | % | 06/30/15 | 107,501 | 96,751 | |||||||||||
6,442,215 | ||||||||||||||||
Casinos & Gaming–4.08% | ||||||||||||||||
BLB Investors, LLC, Term Loan | 8.50 | % | 11/05/15 | 3,532,804 | 3,521,764 | |||||||||||
Boyd Gaming Corp. | ||||||||||||||||
Revolver Loan(e) | — | 05/24/12 | 5,562,500 | 5,346,953 | ||||||||||||
Revolver Loan(e) | — | 12/17/15 | 3,058,319 | 2,664,561 | ||||||||||||
Term Loan | 3.72 | % | 12/17/15 | 481,013 | 443,333 | |||||||||||
Caesars Entertainment Operating Co. Inc. | ||||||||||||||||
Term Loan B1 | 3.25 | % | 01/28/15 | 3,896,701 | 2,726,822 | |||||||||||
Term Loan B3 | 3.25 | % | 01/28/15 | 2,215,768 | 1,919,409 | |||||||||||
Cannery Casino | ||||||||||||||||
Delay Draw Term Loan | 4.47 | % | 05/18/13 | 1,505,286 | 1,412,463 | |||||||||||
Second Lien Term Loan | 4.47 | % | 05/18/14 | 1,084,000 | 929,530 | |||||||||||
Term Loan B | 4.47 | % | 05/18/13 | 1,427,128 | 1,339,124 | |||||||||||
CCM Merger Corp., Term Loan | 7.00 | % | 03/01/17 | 2,353,827 | 2,292,039 | |||||||||||
Isle of Capri Casinos, Inc., Term Loan B | 4.75 | % | 11/01/13 | 2,020,201 | 1,949,493 | |||||||||||
Las Vegas Sands Corp. | ||||||||||||||||
Delay Draw Term Loan 1 | 2.72 | % | 11/23/16 | 252 | 235 | |||||||||||
Delay Draw Term Loan 2 | 2.72 | % | 11/23/15 | 2,949,909 | 2,749,315 | |||||||||||
Term Loan B | 2.72 | % | 11/23/16 | 1,629,427 | 1,518,626 | |||||||||||
Penn National Gaming, Inc., Term Loan B | 3.75 | % | 07/16/18 | 1,879,008 | 1,837,670 | |||||||||||
Venetian Macau US Finance Co. LLC | ||||||||||||||||
Delay Draw Term Loan B | 4.73 | % | 05/25/12 | 1,797,344 | 1,786,120 | |||||||||||
Term Loan B | 4.73 | % | 05/27/13 | 4,102,491 | 4,070,020 | |||||||||||
36,507,477 | ||||||||||||||||
Coal & Consumable Fuels–0.48% | ||||||||||||||||
Oxbow Carbon LLC, Term Loan B1 | 3.72-3.75 | % | 05/08/16 | 4,483,855 | 4,298,896 | |||||||||||
Commercial Printing–0.54% | ||||||||||||||||
Cenveo, Inc., Term Loan B | 6.25 | % | 12/21/16 | 3,488,727 | 3,366,622 | |||||||||||
Flint Group Holdings S.A.R.L. | ||||||||||||||||
Term Loan B5 | 4.71 | % | 12/31/14 | 795,787 | 719,192 | |||||||||||
Term Loan C5 | 4.71 | % | 12/31/14 | 813,772 | 735,447 | |||||||||||
4,821,261 | ||||||||||||||||
Commodity Chemicals–0.76% | ||||||||||||||||
Ashland Inc., Term Loan B | 3.75 | % | 08/23/18 | 1,315,772 | 1,293,450 | |||||||||||
Houghton International, Inc., Term Loan B1 | 6.75 | % | 01/29/16 | 2,897,493 | 2,868,518 | |||||||||||
Univar Corp., Term Loan B | 5.00 | % | 06/30/17 | 2,848,341 | 2,648,958 | |||||||||||
6,810,926 | ||||||||||||||||
Communications Equipment–1.46% | ||||||||||||||||
Avaya Inc., Term Loan B3 | 4.81 | % | 10/26/17 | 475,004 | 412,575 | |||||||||||
CommScope, Inc., Term Loan B | 5.00 | % | 01/14/18 | 1,007,027 | 972,411 | |||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
12 Invesco Floating Rate Fund
Interest | Maturity | Principal | ||||||||||||||
Rate | Date | Amount | Value | |||||||||||||
Communications Equipment–(continued) | ||||||||||||||||
Consolidated Communications, Inc. | ||||||||||||||||
Delay Draw Term Loan | 2.73 | % | 12/31/14 | $ | 1,000,000 | $ | 910,000 | |||||||||
Term Loan B | 2.73 | % | 12/31/14 | 3,000,000 | 2,730,000 | |||||||||||
NTELOS Holdings Corporations, Term Loan B | 4.00 | % | 08/07/15 | 5,935,780 | 5,703,305 | |||||||||||
TowerCo LLC, Term Loan B | 5.25 | % | 02/02/17 | 2,427,833 | 2,350,956 | |||||||||||
13,079,247 | ||||||||||||||||
Computer Hardware–0.01% | ||||||||||||||||
Quantum Corp., Term Loan B | 3.75 | % | 07/12/14 | 99,067 | 98,283 | |||||||||||
Construction & Farm Machinery & Heavy Trucks–0.22% | ||||||||||||||||
Manitowoc Company, Inc. (The), Term Loan B | 4.25 | % | 11/13/17 | 2,016,722 | 1,946,136 | |||||||||||
Construction Materials–0.12% | ||||||||||||||||
Hillman Group (The), Term Loan B | 5.00 | % | 05/27/16 | 1,105,732 | 1,078,089 | |||||||||||
Data Processing & Outsourced Services–3.14% | ||||||||||||||||
Affiliated Media Group Inc., Term Loan | 8.50 | % | 03/19/14 | 2,433,236 | 2,363,281 | |||||||||||
First Data Corp. | ||||||||||||||||
Delay Draw Term Loan | 2.97 | % | 09/24/14 | 1,489,402 | 1,288,332 | |||||||||||
Term Loan | 4.22 | % | 03/24/18 | 1,562,500 | 1,316,656 | |||||||||||
Term Loan B1 | 2.97 | % | 09/24/14 | 1,090,173 | 963,898 | |||||||||||
Term Loan B2 | 2.97 | % | 09/24/14 | 1,000,000 | 883,750 | |||||||||||
Term Loan B3 | 2.97 | % | 09/24/14 | 2,987,310 | 2,640,036 | |||||||||||
iPayment, Inc., Term Loan | 5.75 | % | 05/08/17 | 3,336,989 | 3,190,996 | |||||||||||
NCO Financial Systems, Inc., Term Loan B | 8.00 | % | 05/15/13 | 6,386,304 | 6,262,602 | |||||||||||
Transunion Corp., Term Loan B | 4.75 | % | 02/10/18 | 728,882 | 695,353 | |||||||||||
West Corp. | ||||||||||||||||
Term Loan B4 | 4.50 | % | 07/15/16 | 221,398 | 211,545 | |||||||||||
Term Loan B5 | 4.50 | % | 07/15/16 | 8,631,873 | 8,247,755 | |||||||||||
28,064,204 | ||||||||||||||||
Diversified Chemicals–0.29% | ||||||||||||||||
Celanese US Holdings LLC, Prefunded LOC | 0.19 | % | 04/02/14 | 490,939 | 466,392 | |||||||||||
NuSil Technology LLC, Term Loan B | 5.25 | % | 04/07/17 | 575,261 | 549,374 | |||||||||||
Phillips Plastic Corp., Term Loan | 7.25 | % | 02/12/17 | 641,486 | 638,279 | |||||||||||
Solutia Inc., Term Loan | 3.50 | % | 08/01/17 | 990,588 | 950,970 | |||||||||||
2,605,015 | ||||||||||||||||
Diversified Metals & Mining–0.27% | ||||||||||||||||
Walter Energy, Inc., Term Loan B | 4.00 | % | 04/02/18 | 2,518,743 | 2,421,141 | |||||||||||
Diversified Real Estate Activities–0.79% | ||||||||||||||||
Lake Las Vegas Resort | ||||||||||||||||
Revolver Loan(d)(Acquired 07/15/10; Cost $32,231) | 0 | % | 12/31/12 | 32,231 | 31,909 | |||||||||||
Revolver Loan(e)(Acquired 08/16/10-08/31/11; Cost $5,105) | — | 12/31/12 | 5,105 | 5,054 | ||||||||||||
Revolver Loan (Acquired 07/15/10-08/15/11; Cost $93,139) | 15.00 | % | 12/31/12 | 93,139 | 92,208 | |||||||||||
RE/MAX LLC, Term Loan B | 5.50 | % | 04/16/16 | 2,160,731 | 2,031,087 | |||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
13 Invesco Floating Rate Fund
Interest | Maturity | Principal | ||||||||||||||
Rate | Date | Amount | Value | |||||||||||||
Diversified Real Estate Activities–(continued) | ||||||||||||||||
Realogy Corp. | ||||||||||||||||
Credit Link Term Loan | 0.04 | % | 10/10/13 | $ | 95,693 | $ | 85,198 | |||||||||
Term Loan | 4.52 | % | 10/10/16 | 4,876,907 | 4,047,857 | |||||||||||
Term Loan B | 3.27 | % | 10/10/13 | 759,713 | 676,414 | |||||||||||
6,969,727 | ||||||||||||||||
Diversified REIT’s–1.08% | ||||||||||||||||
Capital Automotive REIT, Term Loan B | 5.00 | % | 03/13/17 | 10,240,462 | 9,626,035 | |||||||||||
Diversified Support Services–1.27% | ||||||||||||||||
Bankruptcy Management Solutions, Inc. | ||||||||||||||||
First Lien Term Loan B | 7.50 | % | 08/20/14 | 46,040 | 21,946 | |||||||||||
Second Lien Term Loan | 8.25 | % | 08/20/15 | 18,601 | 1,535 | |||||||||||
Brock Holdings III, Inc., First Lien Term Loan B | 6.00 | % | 03/16/17 | 2,545,337 | 2,278,077 | |||||||||||
Central Parking Corp. | ||||||||||||||||
Second Lien Term Loan | 4.75 | % | 11/22/14 | 25,522 | 18,419 | |||||||||||
Syn LOC | 0.10 | % | 05/22/14 | 63,036 | 53,265 | |||||||||||
Term Loan B | 2.63 | % | 05/22/14 | 139,036 | 117,485 | |||||||||||
Merrill Corp. | ||||||||||||||||
Second Lien Term Loan | 13.75-14.00 | % | 11/15/13 | 1,134,981 | 1,095,257 | |||||||||||
Term Loan | 7.50 | % | 12/24/12 | 5,798,537 | 5,653,573 | |||||||||||
Nuance Communications, Inc., Term Loan C | 3.23 | % | 03/31/16 | 2,210,918 | 2,126,903 | |||||||||||
11,366,460 | ||||||||||||||||
Drug Retail–1.27% | ||||||||||||||||
General Nutrition Centers, Inc., Term Loan B | 4.25 | % | 03/02/18 | 2,362,191 | 2,249,987 | |||||||||||
NBTY, Inc., Term Loan B | 4.25 | % | 10/01/17 | 3,521,783 | 3,402,923 | |||||||||||
Pantry, Inc. (The) | ||||||||||||||||
Delay Draw Term Loan | 1.98 | % | 05/15/14 | 20,627 | 20,124 | |||||||||||
Term Loan B | 1.98 | % | 05/15/14 | 72,059 | 70,302 | |||||||||||
Rite Aid Corp., Tranche 2 | 1.96-1.98 | % | 06/04/14 | 4,050,030 | 3,728,580 | |||||||||||
Rite Aid Corp., Tranche 5 | 4.50 | % | 03/03/18 | 2,000,000 | 1,860,000 | |||||||||||
11,331,916 | ||||||||||||||||
Education Services–0.03% | ||||||||||||||||
Bright Horizon Family Solutions, Inc., Term Loan B | 4.23-6.25 | % | 05/28/15 | 240,133 | 229,808 | |||||||||||
Electric Utilities–2.81% | ||||||||||||||||
AES Corp., Term Loan B | 4.25 | % | 05/27/18 | 4,091,321 | 3,950,170 | |||||||||||
Bicent Power LLC, Second Lien Term Loan | 4.25 | % | 07/10/14 | 250,400 | 11,059 | |||||||||||
BRSP LLC, Term Loan B | 7.50 | % | 06/24/14 | 2,771,186 | 2,667,267 | |||||||||||
Calpine Corp., Term Loan B | 4.50 | % | 04/01/18 | 6,492,229 | 6,023,879 | |||||||||||
GreatPoint Energy, Term Loan B1 | 4.25 | % | 03/10/17 | 765,215 | 741,302 | |||||||||||
NE Energy, Inc. | ||||||||||||||||
Second Lien Term Loan | 4.75 | % | 05/01/14 | 315,000 | 289,276 | |||||||||||
Term Loan B | 2.75 | % | 11/01/13 | 1,651,975 | 1,577,637 | |||||||||||
NRG Energy, Inc., Term Loan | 4.00 | % | 07/01/18 | 3,351,503 | 3,244,975 | |||||||||||
NSG Holdings II, LLC | ||||||||||||||||
Syn LOC | 1.75 | % | 06/15/14 | 26,570 | 25,773 | |||||||||||
Term Loan | 1.75 | % | 06/15/14 | 46,065 | 44,683 | |||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
14 Invesco Floating Rate Fund
Interest | Maturity | Principal | ||||||||||||||
Rate | Date | Amount | Value | |||||||||||||
Electric Utilities–(continued) | ||||||||||||||||
TPF Generation Holdings, LLC | ||||||||||||||||
First Lien Term Loan | 0.15 | % | 12/15/11 | $ | 93,227 | $ | 88,379 | |||||||||
Second Lien Term Loan | 4.50 | % | 12/15/14 | 267,000 | 250,980 | |||||||||||
Syn LOC D | 0.15 | % | 12/15/13 | 297,394 | 281,929 | |||||||||||
Term Loan | 2.25 | % | 12/15/13 | 532,965 | 505,251 | |||||||||||
TXU Corp. | ||||||||||||||||
Extended Term Loan B | 4.71-4.77 | % | 10/10/17 | 345,939 | 255,810 | |||||||||||
Term Loan B | 3.71-3.77 | % | 10/10/14 | 8,419,386 | 5,221,342 | |||||||||||
25,179,712 | ||||||||||||||||
Electrical Components & Equipment–0.13% | ||||||||||||||||
Aeroflex Inc., Term Loan B | 4.25 | % | 05/09/18 | 1,195,976 | 1,118,238 | |||||||||||
Food Distributors–2.40% | ||||||||||||||||
Aramark Corp. | ||||||||||||||||
Syn LOC | 0.04 | % | 01/26/14 | 82,161 | 78,012 | |||||||||||
Term Loan | 2.12 | % | 01/26/14 | 1,103,105 | 1,047,398 | |||||||||||
Bolthouse Farms (Wm.), Inc., First Lien Term Loan | 5.50-5.75 | % | 02/11/16 | 1,978,406 | 1,933,892 | |||||||||||
Dean Foods Co. | ||||||||||||||||
Term Loan A | 3.23 | % | 04/02/14 | �� | 1,281,174 | 1,223,925 | ||||||||||
Term Loan B | 3.25 | % | 04/02/16 | 393,625 | 367,712 | |||||||||||
Term Loan B | 3.48-3.50 | % | 04/02/17 | 4,161,704 | 3,958,822 | |||||||||||
JBS USA, LLC, Term Loan B | 4.25 | % | 05/25/18 | 2,909,255 | 2,785,612 | |||||||||||
Pierre Foods Inc. | ||||||||||||||||
First Lien Term Loan | 7.00 | % | 09/30/16 | 4,505,126 | 4,384,073 | |||||||||||
Second Lien Term Loan | 11.25 | % | 09/30/17 | 244,128 | 240,313 | |||||||||||
Pinnacle Foods Group, Inc. (Aurora Foods) | ||||||||||||||||
Revolver Loan(d) | 0 | % | 04/02/13 | 1,000,000 | 795,000 | |||||||||||
Term Loan B | 2.69 | % | 04/02/14 | 2,738,767 | 2,582,424 | |||||||||||
Term Loan D | 6.00 | % | 04/02/14 | 2,057,338 | 2,037,619 | |||||||||||
21,434,802 | ||||||||||||||||
Food Retail–1.17% | ||||||||||||||||
Dunkin’ Brands, Inc., Term Loan B2 | 4.00 | % | 11/23/17 | 266,786 | 258,005 | |||||||||||
OSI Restaurant Partners, LLC | ||||||||||||||||
Prefunded Revolver Credit | 0.07 | % | 06/14/13 | 1,568,097 | 1,451,886 | |||||||||||
Term Loan | 2.56 | % | 06/14/14 | 3,759,350 | 3,480,745 | |||||||||||
Quizno’s Corp. (The), First Lien Term Loan B | 4.97 | % | 05/05/13 | 12,331 | 9,947 | |||||||||||
Roundy’s Supermarkets Inc., Extended Term Loan | 5.50 | % | 11/03/13 | 3,227,905 | 3,098,805 | |||||||||||
SUPERVALU Inc. | ||||||||||||||||
Term Loan B2 | 3.47 | % | 10/05/15 | 1,207,652 | 1,133,176 | |||||||||||
Term Loan B3 | 4.50 | % | 04/30/18 | 1,111,173 | 1,041,325 | |||||||||||
10,473,889 | ||||||||||||||||
Gas Utilities–0.73% | ||||||||||||||||
Obsidian Energy Co., LLC, Term Loan | 7.00 | % | 11/02/15 | 2,250,196 | 2,238,946 | |||||||||||
Star West Generation LLC, Term Loan B | 6.00 | % | 05/17/18 | 4,482,263 | 4,319,781 | |||||||||||
6,558,727 | ||||||||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
15 Invesco Floating Rate Fund
Interest | Maturity | Principal | ||||||||||||||
Rate | Date | Amount | Value | |||||||||||||
Health Care Distributors–1.36% | ||||||||||||||||
IMS Health, Inc., Term Loan B | 4.50 | % | 08/26/17 | $ | 6,363,153 | $ | 6,145,756 | |||||||||
Warner Chilcott PLC | ||||||||||||||||
Term Loan B1 | 4.25 | % | 03/15/18 | 2,864,148 | 2,757,645 | |||||||||||
Term Loan B2 | 4.25 | % | 03/15/18 | 1,432,074 | 1,380,613 | |||||||||||
Term Loan B3 | 4.25 | % | 03/15/18 | 1,969,102 | 1,898,342 | |||||||||||
12,182,356 | ||||||||||||||||
Health Care Equipment–2.42% | ||||||||||||||||
Alere Inc., Term Loan B | 4.50 | % | 06/30/17 | 7,960,379 | 7,540,469 | |||||||||||
Biomet, Inc., Term Loan | 3.22-3.25 | % | 03/25/15 | 6,829,780 | 6,525,308 | |||||||||||
Carestream Health, Inc., Term Loan B | 5.00 | % | 02/25/17 | 6,269,515 | 5,158,902 | |||||||||||
CONMED Corp., Term Loan (Acquired 04/13/06-02/04/10; Cost $818,114) | 1.73 | % | 04/13/13 | 875,824 | 858,308 | |||||||||||
DJO Finance LLC, Term Loan | 3.22 | % | 05/20/14 | 1,662,115 | 1,559,537 | |||||||||||
21,642,524 | ||||||||||||||||
Health Care Facilities–3.52% | ||||||||||||||||
Community Health Systems | ||||||||||||||||
Delay Draw Term Loan | 2.47-2.57 | % | 07/25/14 | 248,058 | 231,359 | |||||||||||
Extended Term Loan | 3.72-3.82 | % | 01/25/17 | 7,908,717 | 7,271,077 | |||||||||||
Term Loan B | 2.47-2.57 | % | 07/25/14 | 4,493,788 | 4,191,266 | |||||||||||
DaVita Inc., Term Loan B | 4.50 | % | 10/20/16 | 8,025,914 | 7,826,952 | |||||||||||
Golden Living, Term Loan B | 5.00 | % | 05/04/18 | 3,431,128 | 3,079,437 | |||||||||||
HCA, Inc. | ||||||||||||||||
Term Loan B2 | 3.50 | % | 03/31/17 | 38,708 | 36,627 | |||||||||||
Term Loan B3 | 3.50 | % | 05/01/18 | 353,696 | 333,652 | |||||||||||
HCR ManorCare, Inc., Term Loan B | 5.00 | % | 04/06/18 | 2,868,110 | 2,455,819 | |||||||||||
Health Management Associates, Inc., Term Loan B | 2.00 | % | 02/28/14 | 1,719,591 | 1,619,107 | |||||||||||
Kindred Healthcare, Inc., Term Loan B | 5.25 | % | 06/01/18 | 471,152 | 435,227 | |||||||||||
Surgery Center Holdings Inc., Term Loan B | 6.50 | % | 02/06/17 | 1,466,807 | 1,430,137 | |||||||||||
Universal Health Services, Inc., Term Loan B | 4.00 | % | 11/15/16 | 2,715,086 | 2,598,012 | |||||||||||
31,508,672 | ||||||||||||||||
Health Care Services–1.24% | ||||||||||||||||
Fresenius Medical Care Holdings, Inc. | ||||||||||||||||
Term Loan D1 | 3.50 | % | 09/10/14 | 221,156 | 217,950 | |||||||||||
Term Loan D2 | 3.50 | % | 09/10/14 | 126,330 | 124,499 | |||||||||||
Genoa Healthcare LLC | ||||||||||||||||
Second Lien Term Loan (Acquired 08/23/05-06/08/11; Cost $811,191) | 11.50 | % | 02/10/13 | 839,491 | 835,293 | |||||||||||
Term Loan B | 6.25 | % | 08/10/12 | 87,100 | 83,290 | |||||||||||
Gentiva Health Services, Inc., Term Loan B1 | 4.75 | % | 08/17/16 | 2,584,636 | 2,289,987 | |||||||||||
Harlan Sprague Dawley, Inc., Term Loan B | 3.73-3.77 | % | 07/11/14 | 2,578,974 | 2,338,008 | |||||||||||
Medpace, Inc., Term Loan B | 6.50 | % | 06/17/17 | 2,483,497 | 2,384,158 | |||||||||||
Sun Healthcare Group, Inc., Term Loan | 7.50 | % | 10/18/16 | 1,177,309 | 1,080,187 | |||||||||||
Trizetto Group, Inc., Term Loan B | 4.75 | % | 05/02/18 | 1,617,455 | 1,510,299 | |||||||||||
United Surgical Partners International, Inc., Term Loan B | 2.23 | % | 04/18/14 | 269,310 | 248,438 | |||||||||||
11,112,109 | ||||||||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
16 Invesco Floating Rate Fund
Interest | Maturity | Principal | ||||||||||||||
Rate | Date | Amount | Value | |||||||||||||
Health Care Supplies–0.38% | ||||||||||||||||
Bausch & Lomb Inc. | ||||||||||||||||
Delay Draw Term Loan | 3.47 | % | 04/26/15 | $ | 99,855 | $ | 94,207 | |||||||||
Revolver Loan(d) | 0 | % | 10/25/13 | 1,480,000 | 1,376,400 | |||||||||||
Revolver Loan | 2.97 | % | 10/25/13 | 520,000 | 483,600 | |||||||||||
Term Loan B | 3.47-3.50 | % | 04/26/15 | 408,481 | 385,377 | |||||||||||
Catalent Pharma Solutions, Term Loan | 2.47 | % | 04/10/14 | 1,225,662 | 1,090,840 | |||||||||||
3,430,424 | ||||||||||||||||
Home Furnishings–0.47% | ||||||||||||||||
National Bedding Co., LLC, Second Lien Term Loan | 5.31 | % | 02/28/14 | 4,580,185 | 4,190,869 | |||||||||||
Hotels, Resorts & Cruise Lines–0.33% | ||||||||||||||||
American Gaming Systems | ||||||||||||||||
Delay Draw Term Loan | 3.23 | % | 05/14/13 | 501,656 | 382,513 | |||||||||||
Term Loan B | 3.23 | % | 05/14/13 | 3,337,787 | 2,545,063 | |||||||||||
Centaur Gaming, Second Lien Term Loan(f)(I) | 14.25 | % | 10/30/13 | 129,555 | 2,591 | |||||||||||
2,930,167 | ||||||||||||||||
Household Appliances–0.29% | ||||||||||||||||
Goodman Global, Inc. | ||||||||||||||||
First Lien Term Loan B | 5.75 | % | 10/28/16 | 2,332,290 | 2,304,384 | |||||||||||
Second Lien Term Loan | 9.00 | % | 10/30/17 | 295,104 | 298,424 | |||||||||||
2,602,808 | ||||||||||||||||
Household Products–3.47% | ||||||||||||||||
Amscan Inc., Term Loan B | 6.75 | % | 12/02/17 | 4,899,447 | 4,715,718 | |||||||||||
Nice-Pak Products Inc., Term Loan | 3.25-5.25 | % | 06/18/14 | 563,319 | 542,195 | |||||||||||
Prestige Brands, Inc., Term Loan B | 4.75 | % | 03/24/16 | 825,080 | 814,082 | |||||||||||
Reynolds Group Holdings Ltd. | ||||||||||||||||
Term Loan B | 6.50 | % | 02/09/18 | 5,208,604 | 5,010,673 | |||||||||||
Term Loan C(d) | 0 | % | 08/09/18 | 14,004,660 | 13,488,308 | |||||||||||
Term Loan C | 6.50 | % | 08/09/18 | 534,529 | 514,821 | |||||||||||
Spectrum Brands, Inc., Term Loan B | 5.00 | % | 06/17/16 | 4,348,402 | 4,181,271 | |||||||||||
Sun Products Corp. (The) | ||||||||||||||||
Second Lien Term Loan | 4.48 | % | 10/26/14 | 1,000,000 | 846,665 | |||||||||||
Term Loan B | 2.23 | % | 04/25/14 | 1,000,000 | 926,430 | |||||||||||
31,040,163 | ||||||||||||||||
Housewares & Specialties–0.14% | ||||||||||||||||
Springs Window Fashions, LLC, Term Loan B | 6.00 | % | 05/31/17 | 1,293,488 | 1,249,296 | |||||||||||
Human Resource & Employment Services–0.57% | ||||||||||||||||
Koosharem Corp. | ||||||||||||||||
First Lien Term Loan | 10.25 | % | 06/30/14 | 730,271 | 514,841 | |||||||||||
Second Lien Term Loan (Acquired 07/18/07-06/30/11; Cost $358,251) | 11.50 | % | 12/31/14 | 358,251 | 179,126 | |||||||||||
Kronos Inc. | ||||||||||||||||
First Lien Term Loan | 2.00 | % | 06/11/14 | 1,262,060 | 1,228,148 | |||||||||||
First Lien Term Loan | 6.00 | % | 06/11/15 | 3,255,649 | 3,151,892 | |||||||||||
5,074,007 | ||||||||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
17 Invesco Floating Rate Fund
Interest | Maturity | Principal | ||||||||||||||
Rate | Date | Amount | Value | |||||||||||||
Industrial Conglomerates–0.21% | ||||||||||||||||
BakerCorp International, Inc., Term Loan | 5.00 | % | 06/01/18 | $ | 1,973,327 | $ | 1,888,227 | |||||||||
Industrial Machinery–0.34% | ||||||||||||||||
Husky Injection Molding Systems Ltd., Term Loan | 6.50 | % | 06/29/18 | 762,741 | 740,950 | |||||||||||
Rexnord Corp., Term Loan B | 2.75-2.81 | % | 07/19/13 | 1,370,563 | 1,318,879 | |||||||||||
Terex Corp., Term Loan | 5.50 | % | 04/28/17 | 986,902 | 972,098 | |||||||||||
3,031,927 | ||||||||||||||||
Insurance Brokers–0.74% | ||||||||||||||||
Crawford & Co., Term Loan | 5.00 | % | 10/30/13 | 3,255,655 | 3,182,403 | |||||||||||
Sedgwick Claims Management Services, Inc., Term Loan B | 5.00 | % | 12/31/16 | 2,998,747 | 2,803,828 | |||||||||||
Swett & Crawford Group, Inc. | ||||||||||||||||
First Lien Term Loan | 2.47 | % | 04/03/14 | 373,983 | 311,341 | |||||||||||
Second Lien Term Loan | 5.72 | % | 10/03/14 | 105,200 | 69,827 | |||||||||||
USI Holdings Corp., Term Loan B | 2.73 | % | 05/05/14 | 312,832 | 285,068 | |||||||||||
6,652,467 | ||||||||||||||||
Integrated Oil & Gas–0.21% | ||||||||||||||||
Glenn Pool Oil & Gas Trust I, Term Loan | 4.50 | % | 05/02/16 | 1,890,924 | 1,876,743 | |||||||||||
Integrated Telecommunication Services–1.01% | ||||||||||||||||
Integra Telecom, Inc., Term Loan B | 9.25 | % | 04/15/15 | 1,598,523 | 1,514,601 | |||||||||||
Knology, Inc., Term Loan B | 4.00 | % | 08/18/17 | 2,604,285 | 2,487,092 | |||||||||||
PAETEC Holding Corp., Term Loan B | 5.00 | % | 05/31/18 | 977,871 | 972,982 | |||||||||||
Syniverse Technologies, Term Loan B | 5.25 | % | 12/21/17 | 4,142,469 | 4,059,619 | |||||||||||
9,034,294 | ||||||||||||||||
Internet Software & Services–0.33% | ||||||||||||||||
DG Fastchannel, Inc., Term Loan B | 5.75 | % | 07/26/18 | 1,768,339 | 1,724,131 | |||||||||||
Network Solutions, LLC, Term Loan B | 2.48 | % | 03/07/14 | 529,043 | 518,462 | |||||||||||
SkillSoft PLC, Term Loan B | 6.50 | % | 05/26/17 | 769,455 | 747,653 | |||||||||||
2,990,246 | ||||||||||||||||
IT Consulting & Other Services–0.98% | ||||||||||||||||
SunGard Data Systems, Inc. | ||||||||||||||||
Incremental Term Loan B | 3.71 | % | 02/28/14 | 1,931,365 | 1,851,697 | |||||||||||
Term Loan B | 3.84-3.89 | % | 02/28/16 | 7,297,301 | 6,950,680 | |||||||||||
8,802,377 | ||||||||||||||||
Leisure Facilities–1.57% | ||||||||||||||||
24 Hour Fitness Worldwide Inc., Term Loan B | 6.75 | % | 04/22/16 | 6,215,473 | 5,892,268 | |||||||||||
AMF Group | ||||||||||||||||
First Lien Term Loan B | 2.72 | % | 06/08/13 | 1,296,534 | 1,089,089 | |||||||||||
Second Lien Term Loan | 6.47 | % | 12/08/13 | 66,603 | 52,949 | |||||||||||
Chester Downs & Marina, LLC, Term Loan B | 12.38 | % | 07/29/16 | 258,417 | 258,417 | |||||||||||
Live Nation Entertainment, Inc., Term Loan B | 4.50 | % | 11/06/16 | 1,866,163 | 1,783,734 | |||||||||||
Regal Entertainment Group, Term Loan B | 3.50 | % | 08/23/17 | 1,020,470 | 973,278 | |||||||||||
Six Flags Inc., Term Loan B | 5.25 | % | 06/30/16 | 4,076,832 | 4,008,892 | |||||||||||
14,058,627 | ||||||||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
18 Invesco Floating Rate Fund
Interest | Maturity | Principal | ||||||||||||||
Rate | Date | Amount | Value | |||||||||||||
Leisure Products–0.20% | ||||||||||||||||
Golden Nugget, Inc., Second Lien Term Loan | 3.48 | % | 12/31/14 | $ | 116,593 | $ | 81,032 | |||||||||
Panavision Inc., Second Lien Term Loan (Acquired 07/26/06; Cost $9,500) | 7.96 | % | 03/30/12 | 9,500 | 5,202 | |||||||||||
Sabre Holdings Corp., Term Loan | 2.22-2.25 | % | 09/30/14 | 230,055 | 198,183 | |||||||||||
SRAM LLC, First Lien Term Loan B | 4.75-5.75 | % | 06/07/18 | 1,579,450 | 1,520,220 | |||||||||||
1,804,637 | ||||||||||||||||
Marine–0.28% | ||||||||||||||||
Dockwise Ltd. | ||||||||||||||||
Term Loan B1 | 2.00 | % | 01/11/15 | 231,557 | 209,173 | |||||||||||
Term Loan B2 | 2.00 | % | 01/11/15 | 980,696 | 888,349 | |||||||||||
Term Loan C | 2.87 | % | 01/11/16 | 214,741 | 195,057 | |||||||||||
Term Loan C2 | 2.87 | % | 01/11/16 | 980,696 | 888,349 | |||||||||||
US Shipping LLC, Term Loan | 2.50-9.20 | % | 08/07/13 | 417,736 | 306,602 | |||||||||||
2,487,530 | ||||||||||||||||
Metal & Glass Containers–2.17% | ||||||||||||||||
BWAY Holding Company | ||||||||||||||||
Term Loan B | 4.50-5.50 | % | 02/23/18 | 5,143,326 | 4,886,160 | |||||||||||
Term Loan C | 4.50-5.50 | % | 02/23/18 | 456,640 | 433,809 | |||||||||||
Exopack Holding Corp., Term Loan B | 6.50 | % | 05/31/17 | 2,831,355 | 2,689,788 | |||||||||||
Graham Packaging Company, L.P. | ||||||||||||||||
Term Loan C | 6.75 | % | 04/05/14 | 4,049,299 | 4,029,052 | |||||||||||
Term Loan D | 6.00 | % | 09/23/16 | 6,560,499 | 6,528,615 | |||||||||||
MAUSER Corp. | ||||||||||||||||
Term Loan B2 | 2.60 | % | 06/13/15 | 500,000 | 421,668 | |||||||||||
Term Loan C2 | 2.85 | % | 06/13/16 | 500,000 | 424,168 | |||||||||||
19,413,260 | ||||||||||||||||
Movies & Entertainment–0.66% | ||||||||||||||||
Alpha III, Term Loan B2 | 2.65 | % | 12/31/13 | 5,625,931 | 5,310,485 | |||||||||||
Zuffa LLC, Term Loan | 2.31 | % | 06/19/15 | 654,901 | 625,431 | |||||||||||
5,935,916 | ||||||||||||||||
Oil & Gas Drilling–0.21% | ||||||||||||||||
Ram Energy Inc., Term Loan (Acquired 03/15/11; Cost $1,833,989) | 11.00 | % | 09/13/16 | 1,871,417 | 1,862,060 | |||||||||||
Oil & Gas Equipment & Services–0.23% | ||||||||||||||||
CCS Corp. | ||||||||||||||||
Delay Draw Term Loan | 3.25 | % | 11/14/14 | 954,633 | 854,401 | |||||||||||
Term Loan B | 3.25 | % | 11/14/14 | 220,117 | 197,006 | |||||||||||
Willbros Group, Inc., Term Loan B | 9.50 | % | 06/30/14 | 980,941 | 968,679 | |||||||||||
2,020,086 | ||||||||||||||||
Oil & Gas Refining & Marketing–0.63% | ||||||||||||||||
Big West Oil LLC, Term Loan B | 7.00 | % | 03/31/16 | 932,931 | 930,599 | |||||||||||
CITGO Petroleum Corp., Term Loan B | 8.00 | % | 06/24/15 | 850,561 | 854,104 | |||||||||||
Gary-Williams Energy Corp., Term Loan B | 11.75 | % | 11/13/14 | 669,287 | 662,594 | |||||||||||
Western Refining, Inc., Term Loan B | 7.50 | % | 03/15/17 | 3,174,960 | 3,146,529 | |||||||||||
5,593,826 | ||||||||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
19 Invesco Floating Rate Fund
Interest | Maturity | Principal | ||||||||||||||
Rate | Date | Amount | Value | |||||||||||||
Oil & Gas Storage & Transportation–0.21% | ||||||||||||||||
Sem Group L.P., Term Loan B | 5.75 | % | 06/17/18 | $ | 1,909,336 | $ | 1,907,741 | |||||||||
Other Diversified Financial Services–0.12% | ||||||||||||||||
Fifth Third Processing Solutions LLC, Term Loan B | 4.50 | % | 11/03/16 | 359,569 | 348,559 | |||||||||||
Tomkins PLC, Term Loan B | 4.25 | % | 09/29/16 | 722,637 | 698,147 | |||||||||||
1,046,706 | ||||||||||||||||
Packaged Foods & Meats–2.10% | ||||||||||||||||
DelMonte Corp., Term Loan | 4.50 | % | 03/08/18 | 8,032,285 | 7,618,623 | |||||||||||
Dole Foods Co., Inc. | ||||||||||||||||
Term Loan B2 | 5.00-6.00 | % | 07/08/18 | 1,605,198 | 1,554,634 | |||||||||||
Term Loan C2 | 5.00-6.00 | % | 07/08/18 | 2,981,082 | 2,887,177 | |||||||||||
DS Waters of America, Inc., Incremental Term Loan | 2.47 | % | 10/27/12 | 5,162,002 | 4,744,215 | |||||||||||
Farley’s & Sathers Candy Company, Inc., Term Loan B | 6.50 | % | 03/30/18 | 2,007,990 | 1,987,910 | |||||||||||
18,792,559 | ||||||||||||||||
Paper Packaging–0.06% | ||||||||||||||||
Ranpak Corp., Term Loan B | 4.75 | % | 04/20/17 | 571,430 | 559,287 | |||||||||||
Paper Products–0.08% | ||||||||||||||||
Xerium Technologies, Inc., Term Loan B | 5.50 | % | 05/26/17 | 693,518 | 674,879 | |||||||||||
Personal Products–0.54% | ||||||||||||||||
FTD Group, Inc., Term Loan B | 4.75 | % | 06/11/18 | 2,365,931 | 2,274,251 | |||||||||||
Revlon, Inc., Term Loan B | 4.75 | % | 11/19/17 | 1,011,251 | 972,065 | |||||||||||
Topps Company Inc. (The), Term Loan B | 2.96 | % | 10/12/14 | 1,714,644 | 1,628,911 | |||||||||||
4,875,227 | ||||||||||||||||
Pharmaceuticals–2.52% | ||||||||||||||||
Capsugel, Inc., Term Loan | 5.25 | % | 08/01/18 | 2,324,103 | 2,260,190 | |||||||||||
Grifols, S.A., U.S. Term Loan B | 6.00 | % | 11/23/16 | 3,271,033 | 3,212,155 | |||||||||||
Nycomed US Inc. | ||||||||||||||||
Term Loan A1 | 3.22 | % | 12/29/13 | 475,572 | 471,016 | |||||||||||
Term Loan A2 | 3.22 | % | 12/29/13 | 1,267,426 | 1,255,284 | |||||||||||
Term Loan A3 | 3.22 | % | 12/29/13 | 23,908 | 23,679 | |||||||||||
Term Loan A4 | 3.22 | % | 12/29/13 | 15,230 | 15,084 | |||||||||||
Term Loan A5 | 3.22 | % | 12/29/13 | 74,021 | 73,311 | |||||||||||
Term Loan B2 | 3.97 | % | 12/29/14 | 2,595,894 | 2,566,106 | |||||||||||
Term Loan C2 | 4.72 | % | 12/29/15 | 2,595,105 | 2,578,302 | |||||||||||
Quintiles Transnational Corp., Term Loan B | 5.00 | % | 06/08/18 | 2,706,661 | 2,530,728 | |||||||||||
RPI Finance Trust, Term Loan | 4.00 | % | 05/09/18 | 7,786,955 | 7,582,547 | |||||||||||
22,568,402 | ||||||||||||||||
Publishing–1.78% | ||||||||||||||||
Endurance Business Media, Inc., First Lien Term Loan | 6.50 | % | 12/14/14 | 63,480 | 19,044 | |||||||||||
F & W Publications, Inc., Term Loan (Acquired 11/19/09; Cost $43,601) | 7.75 | % | 06/09/14 | 50,469 | 45,675 | |||||||||||
Gatehouse Media, Inc. | ||||||||||||||||
Delay Draw Term Loan | 2.23 | % | 08/28/14 | 593,562 | 177,178 | |||||||||||
Term Loan | 2.48 | % | 08/28/14 | 254,335 | 75,919 | |||||||||||
Term Loan B | 2.23 | % | 08/28/14 | 995,336 | 297,108 | |||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
20 Invesco Floating Rate Fund
Interest | Maturity | Principal | ||||||||||||||
Rate | Date | Amount | Value | |||||||||||||
Publishing–(continued) | ||||||||||||||||
Hanley Wood LLC, Term Loan | 2.56 | % | 03/08/14 | $ | 318,450 | $ | 160,817 | |||||||||
Interactive Data Corp., Term Loan | 4.50 | % | 02/11/18 | 2,910,934 | 2,770,860 | |||||||||||
Tribune Company, Term Loan B(f) | 5.25 | % | 06/04/14 | 15,661,594 | 9,462,187 | |||||||||||
VNU N.V., Term Loan | 3.46 | % | 05/02/16 | 3,082,808 | 2,911,974 | |||||||||||
15,920,762 | ||||||||||||||||
Real Estate Management & Development–1.00% | ||||||||||||||||
CB Richard Ellis Group, Inc. | ||||||||||||||||
Term Loan C | 3.47 | % | 03/05/18 | 337,471 | 324,141 | |||||||||||
Term Loan D | 3.71 | % | 09/04/19 | 8,987,193 | 8,641,770 | |||||||||||
8,965,911 | ||||||||||||||||
Research & Consulting Services–0.51% | ||||||||||||||||
IMG Worldwide, Inc., Term Loan B | 5.50 | % | 06/16/16 | 4,873,058 | 4,531,944 | |||||||||||
Restaurants–0.79% | ||||||||||||||||
Burger King Holdings, Inc., Term Loan B | 4.50 | % | 10/19/16 | 7,321,906 | 6,978,692 | |||||||||||
Sbarro, Inc. | ||||||||||||||||
Delay Draw Term Loan(d) | 0 | % | 10/05/11 | 12,479 | 12,479 | |||||||||||
Delay Draw Term Loan | 8.75 | % | 10/05/11 | 12,479 | 12,479 | |||||||||||
Second Lien Term Loan | 8.75 | % | 10/05/11 | 5,824 | 5,824 | |||||||||||
Term Loan | 8.75 | % | 10/05/11 | 27,454 | 27,454 | |||||||||||
7,036,928 | ||||||||||||||||
Semiconductors–0.31% | ||||||||||||||||
Freescale Semiconductor, Inc., Term Loan | 4.44 | % | 12/01/16 | 2,367,459 | 2,164,260 | |||||||||||
Microsemi Corp., Term Loan B1 | 4.00 | % | 11/02/17 | 605,908 | 582,684 | |||||||||||
2,746,944 | ||||||||||||||||
Specialized Consumer Services–1.81% | ||||||||||||||||
Jacobson Corp., Term Loan B | 2.73 | % | 06/19/14 | 1,375,779 | 1,268,008 | |||||||||||
LPL Investment Holdings Inc., Term Loan | 5.25 | % | 06/28/17 | 2,380,077 | 2,374,127 | |||||||||||
ServiceMaster Company (The) | ||||||||||||||||
Delay Draw Term Loan | 2.72 | % | 07/24/14 | 423,500 | 394,030 | |||||||||||
Syn LOC | 0.12 | % | 07/24/14 | 5,000,000 | 4,550,000 | |||||||||||
Term Loan B | 2.69-2.76 | % | 07/24/14 | 4,989,954 | 4,642,728 | |||||||||||
TASC Inc., Term Loan B | 4.50 | % | 12/18/15 | 3,161,963 | 3,010,442 | |||||||||||
16,239,335 | ||||||||||||||||
Specialized Finance–1.63% | ||||||||||||||||
Clarke American Corp., Term Loan B | 2.72-2.75 | % | 06/30/14 | 3,320,976 | 2,786,847 | |||||||||||
Mondrian Investment Partners Ltd., Term Loan | 5.50 | % | 07/12/18 | 1,528,788 | 1,473,369 | |||||||||||
MoneyGram International, Inc., Term Loan B | 4.50 | % | 11/17/17 | 1,281,960 | 1,233,886 | |||||||||||
MSCI Inc., Term Loan B1 | 3.75 | % | 03/14/17 | 463,644 | 455,143 | |||||||||||
Nuveen Investments, LLC | ||||||||||||||||
First Lien Term Loan | 5.75-5.81 | % | 05/13/17 | 6,662,470 | 6,262,755 | |||||||||||
Term Loan | 3.25 | % | 11/13/14 | 1,248,699 | 1,162,332 | |||||||||||
RJO Holdings Corp., Term Loan | 6.21 | % | 12/10/15 | 1,666,667 | 1,233,333 | |||||||||||
14,607,665 | ||||||||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
21 Invesco Floating Rate Fund
Interest | Maturity | Principal | ||||||||||||||
Rate | Date | Amount | Value | |||||||||||||
Specialty Chemicals–2.06% | ||||||||||||||||
Hexion Specialty Chemicals, Inc. | ||||||||||||||||
Credit Linked Deposit | 0.09 | % | 05/05/13 | $ | 87,966 | $ | 81,369 | |||||||||
Term Loan C5 | 4.00 | % | 05/05/15 | 3,072,879 | 2,780,955 | |||||||||||
Term Loan C7 | 4.00 | % | 05/05/15 | 4,159,520 | 3,743,568 | |||||||||||
Huntsman ICI Chemicals LLC | ||||||||||||||||
Term Loan B | 1.77 | % | 04/21/14 | 1,050,235 | 997,729 | |||||||||||
Term Loan C | 2.47 | % | 06/30/16 | 2,399,381 | 2,243,422 | |||||||||||
OMNOVA Solutions Inc., Term Loan | 5.75 | % | 05/31/17 | 4,197,860 | 4,103,408 | |||||||||||
PQ Corp. | ||||||||||||||||
First Lien Term Loan B | 6.00 | % | 05/06/17 | 1,588,193 | 1,532,607 | |||||||||||
Term Loan | 3.48-3.51 | % | 07/30/14 | 3,179,097 | 2,930,333 | |||||||||||
18,413,391 | ||||||||||||||||
Specialty Stores–1.21% | ||||||||||||||||
Academy Sports and Outdoors, Term Loan | 6.00 | % | 08/03/18 | 2,020,959 | 1,931,532 | |||||||||||
Claire’s Stores, Inc., Term Loan B | 3.00 | % | 05/29/14 | 503,304 | 440,600 | |||||||||||
Guitar Center, Inc., Term Loan | 5.50 | % | 04/10/17 | 2,500,000 | 2,164,588 | |||||||||||
Gymboree Corp., Term Loan B | 5.00 | % | 02/23/18 | 101,737 | 91,098 | |||||||||||
Mattress Firm, Term Loan B | 2.50 | % | 01/18/14 | 301,112 | 277,023 | |||||||||||
Michaels Stores, Inc. | ||||||||||||||||
Term Loan | 2.50 | % | 10/31/13 | 904,458 | 860,140 | |||||||||||
Term Loan B2 | 4.75 | % | 07/31/16 | 795,210 | 752,666 | |||||||||||
PETCO Animal Supplies, Inc., Term Loan B | 4.50 | % | 11/24/17 | 4,561,928 | 4,311,022 | |||||||||||
10,828,669 | ||||||||||||||||
Systems Software–0.43% | ||||||||||||||||
Bentley Systems, Inc., Term Loan B | 5.75 | % | 02/11/17 | 679,410 | 655,631 | |||||||||||
Datatel, Inc., First Lien Term Loan | 5.00 | % | 02/18/17 | 2,353,457 | 2,328,452 | |||||||||||
Dealer Comp-rey, Term Loan B | 3.75 | % | 04/21/18 | 927,347 | 880,053 | |||||||||||
3,864,136 | ||||||||||||||||
Technology Distributors–0.04% | ||||||||||||||||
Windstream Corp., Term Loan B2 | 2.97-3.00 | % | 12/17/15 | 341,435 | 328,631 | |||||||||||
Textiles–0.07% | ||||||||||||||||
Warnaco Group, Inc., Term Loan B | 3.75 | % | 06/17/18 | 676,244 | 661,029 | |||||||||||
Trucking–0.49% | ||||||||||||||||
Kenan Advantage Group, Inc., Term Loan B | 4.50 | % | 06/11/16 | 1,525,917 | 1,527,443 | |||||||||||
Swift Transportation Corp., Term Loan B | 6.00 | % | 12/16/16 | 2,974,372 | 2,852,913 | |||||||||||
4,380,356 | ||||||||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
22 Invesco Floating Rate Fund
Interest | Maturity | Principal | ||||||||||||||
Rate | Date | Amount | Value | |||||||||||||
Wireless Telecommunication Services–4.25% | ||||||||||||||||
Asurion Corp. | ||||||||||||||||
Second Lien Term Loan | 9.00 | % | 05/24/19 | $ | 4,370,360 | $ | 4,217,397 | |||||||||
Term Loan B | 5.50 | % | 05/24/18 | 8,391,028 | 7,892,056 | |||||||||||
Cellular South, Inc., Term Loan B | 4.50 | % | 07/27/17 | 2,121,484 | 2,073,751 | |||||||||||
FairPoint Communications, Inc., Term Loan | 6.50 | % | 01/22/16 | 2,930,734 | 2,441,668 | |||||||||||
Global Tel*Link, Term Loan | 5.00 | % | 11/10/16 | 1,795,930 | 1,715,113 | |||||||||||
MetroPCS Communications, Inc. | ||||||||||||||||
Term Loan B2 | 4.07 | % | 11/03/16 | 2,931,208 | 2,757,168 | |||||||||||
Term Loan B3 | 4.00 | % | 03/17/18 | 7,332,511 | 6,910,928 | |||||||||||
RCN Corp., Term Loan | 6.50 | % | 08/26/16 | 5,979,378 | 5,746,601 | |||||||||||
Securus Technologies, Inc., Term Loan B | 5.25 | % | 05/31/17 | 2,741,203 | 2,662,393 | |||||||||||
U.S. TelePacific, Term Loan B | 5.75 | % | 02/23/17 | 1,644,862 | 1,596,889 | |||||||||||
38,013,964 | ||||||||||||||||
Total Senior Secured Floating Rate Interest Loans (Cost $839,574,689) | 799,019,171 | |||||||||||||||
Bonds & Notes–3.72% | ||||||||||||||||
Airlines–0.05% | ||||||||||||||||
Continental Airlines Inc., Sr. Sec. Gtd. Notes(g) | 6.75 | % | 09/15/15 | 460,000 | 451,950 | |||||||||||
Broadcasting–0.03% | ||||||||||||||||
AMC Networks Inc., Sr. Unsec. Gtd. Notes(g) | 7.75 | % | 07/15/21 | 289,000 | 299,115 | |||||||||||
Commodity Chemicals–0.42% | ||||||||||||||||
Lyondell Chemical Co., Sr. Sec. Gtd. Notes | 11.00 | % | 05/01/18 | 3,385,930 | 3,781,661 | |||||||||||
Communications Equipment–0.12% | ||||||||||||||||
Goodman Networks, Inc., Sr. Sec. Notes(g) | 12.13 | % | 07/01/18 | 1,050,000 | 1,047,375 | |||||||||||
Diversified Real Estate Activities–0.04% | ||||||||||||||||
Realogy Corp., Sr. Sec. Gtd. Notes(g) | 7.88 | % | 02/15/19 | 399,000 | 333,165 | |||||||||||
Health Care Facilities–0.40% | ||||||||||||||||
HCA, Inc., Sr. Sec. Gtd. Notes | 6.50 | % | 02/15/20 | 3,568,000 | 3,603,680 | |||||||||||
Household Products–0.44% | ||||||||||||||||
Reynolds Group Holdings Ltd., Sr. Sec. Notes(g) | 7.88 | % | 08/15/19 | 3,955,000 | 3,974,775 | |||||||||||
Independent Power Producers & Energy Traders–1.38% | ||||||||||||||||
Calpine Corp., | ||||||||||||||||
Sr. Sec. Gtd. Notes(g) | 7.88 | % | 01/15/23 | 3,426,258 | 3,511,914 | |||||||||||
Sr. Sec. Notes(g) | 7.25 | % | 10/15/17 | 2,633,000 | 2,672,495 | |||||||||||
Sr. Sec. Notes(g) | 7.50 | % | 02/15/21 | 2,577,695 | 2,622,805 | |||||||||||
NRG Energy, Inc., Sr. Unsec. Gtd. Notes(g) | 7.63 | % | 05/15/19 | 3,628,000 | 3,546,370 | |||||||||||
12,353,584 | ||||||||||||||||
Integrated Telecommunication Services–0.07% | ||||||||||||||||
PAETEC Holding Corp., Sr. Sec. Gtd. Global Notes | 8.88 | % | 06/30/17 | 578,000 | 619,905 | |||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
23 Invesco Floating Rate Fund
Interest | Maturity | Principal | ||||||||||||||
Rate | Date | Amount | Value | |||||||||||||
Metal & Glass Containers–0.26% | ||||||||||||||||
Berry Plastics Holding Corp., | ||||||||||||||||
Sec. Gtd. Floating Rate Global Notes(h) | 4.12 | % | 09/15/14 | $ | 996,000 | $ | 866,520 | |||||||||
Sr. Sec. Gtd. Floating Rate Global Notes(h) | 5.03 | % | 02/15/15 | 1,512,000 | 1,425,060 | |||||||||||
2,291,580 | ||||||||||||||||
Oil & Gas Refining & Marketing–0.32% | ||||||||||||||||
Western Refining, Inc., Sr. Sec. Gtd. Floating Rate Notes(g)(h) | 10.75 | % | 06/15/14 | 2,750,000 | 2,853,125 | |||||||||||
Paper Products–0.19% | ||||||||||||||||
Verso Paper Holdings, LLC, | ||||||||||||||||
Series B, Sr. Sec. Gtd. Floating Rate Global Notes(h) | 4.00 | % | 08/01/14 | 228,000 | 189,240 | |||||||||||
Sr. Sec. Gtd. Notes | 11.50 | % | 07/01/14 | 1,428,000 | 1,524,390 | |||||||||||
1,713,630 | ||||||||||||||||
Total Bonds & Notes (Cost $32,608,816) | 33,323,545 | |||||||||||||||
Shares | ||||||||||||||||
Common Stocks & Other Equity Interests–1.36% | ||||||||||||||||
Aerospace & Defense–0.21% | ||||||||||||||||
ACTS Aero Technical Support & Services, Inc.(i) | 122,977 | 1,844,661 | ||||||||||||||
Auto Parts & Equipment–0.02% | ||||||||||||||||
Dayco Products, LLC(i) | 856 | 38,948 | ||||||||||||||
Dayco Products, LLC(i) | 3,261 | 148,376 | ||||||||||||||
187,324 | ||||||||||||||||
Broadcasting–0.34% | ||||||||||||||||
ION Media Networks, Inc.(i) | 4,471 | 3,017,925 | ||||||||||||||
New Vision Television – Class A, Wts., expiring 09/30/14(i) | 1,027 | 0 | ||||||||||||||
New Vision Television – Class B, Wts., expiring 09/30/14(i) | 5,707 | 0 | ||||||||||||||
3,017,925 | ||||||||||||||||
Building Products–0.17% | ||||||||||||||||
Masonite Worldwide Holdings (Canada)(i) | 53,093 | 1,513,150 | ||||||||||||||
Casinos & Gaming–0.02% | ||||||||||||||||
BLB Worldwide Holdings, Inc.(i) | 18,663 | 185,081 | ||||||||||||||
Commodity Chemicals–0.35% | ||||||||||||||||
LyondellBasell Industries N.V. (Netherlands)–Class A(i) | 89,865 | 3,113,822 | ||||||||||||||
Construction & Engineering–0.01% | ||||||||||||||||
United Subcontractors, Inc.(i) | 4,587 | 36,694 | ||||||||||||||
Diversified Real Estate Activities–0.02% | ||||||||||||||||
Lake Las Vegas Resort Class A(i) | 518 | 209,976 | ||||||||||||||
Lake Las Vegas Resort Class B(i) | 4 | 1,674 | ||||||||||||||
Lake Las Vegas Resort Warrant C, expiring 07/15/15(i) | 17 | 0 | ||||||||||||||
Lake Las Vegas Resort Warrant D, expiring 07/15/15(i) | 24 | 0 | ||||||||||||||
Lake Las Vegas Resort Warrant E, expiring 07/15/15(i) | 27 | 0 | ||||||||||||||
Lake Las Vegas Resort Warrant F, expiring 07/15/15(i) | 30 | 0 | ||||||||||||||
Lake Las Vegas Resort Warrant G, expiring 07/15/15(i) | 34 | 0 | ||||||||||||||
211,650 | ||||||||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
24 Invesco Floating Rate Fund
Shares | Value | |||||||||||||||
Diversified Support Services–0.00% | ||||||||||||||||
Bankruptcy Management Solutions, Inc.(i) | 214 | $ | 1 | |||||||||||||
Bankruptcy Management Solutions, Inc. – Wts., expiring 10/01/17(i) | 18 | 0 | ||||||||||||||
1 | ||||||||||||||||
Environmental & Facilities Services–0.17% | ||||||||||||||||
Safety-Kleen Holdco, Inc. (Acquired 12/24/03; Cost $2,062,077)(g)(i)(j) | 150,812 | 1,520,637 | ||||||||||||||
Integrated Telecommunication Services–0.03% | ||||||||||||||||
FairPoint Communications Inc.(i) | 44,928 | 287,988 | ||||||||||||||
Leisure Products–0.00% | ||||||||||||||||
True Temper Sports Inc.(i) | 2,971 | 24,481 | ||||||||||||||
Marine–0.00% | ||||||||||||||||
US Shipping LLC(i) | 87,805 | 0 | ||||||||||||||
US Shipping LLC(i) | 6,189 | 0 | ||||||||||||||
0 | ||||||||||||||||
Oil & Gas Storage & Transportation–0.02% | ||||||||||||||||
SemGroup Corp.(i) | 6,668 | 152,897 | ||||||||||||||
Paper Products–0.00% | ||||||||||||||||
Xerium Technologies, Inc.(i) | 1,766 | 25,007 | ||||||||||||||
Publishing–0.00% | ||||||||||||||||
Endurance Business Media, Inc.(i) | 124 | 1,235 | ||||||||||||||
F&W Publications, Inc.(i) | 288 | 36 | ||||||||||||||
F&W Publications, Inc.–Wts., expiring 12/09/17(i) | 496 | 62 | ||||||||||||||
1,333 | ||||||||||||||||
Total Common Stocks & Other Equity Interests (Cost $17,952,279) | 12,122,651 | |||||||||||||||
Interest | Maturity | Principal | ||||||||||||||
Rate | Date | Amount | ||||||||||||||
Asset-Backed Securities–1.00% | ||||||||||||||||
CLO Bank Loans–0.61% | ||||||||||||||||
Apidos Quattro CDO, Series 2006-QA, Class E, Jr. Sub. Floating Rate Notes(g)(h) | 3.85 | % | 01/20/19 | $ | 408,000 | 312,120 | ||||||||||
Ares CLO Funds (Cayman Islands), Series 2007-11A, Class D, Mezzanine Floating Rate Notes(g)(h) | 3.25 | % | 10/11/21 | 724,000 | 466,980 | |||||||||||
Atrium CDO Corp., Series 4A, Class D2, Sub. Bonds(g) | 9.18 | % | 06/18/19 | 205,000 | 186,550 | |||||||||||
Columbus Nova CLO Ltd., Series 2007-1A, Class E, Mezzanine Floating Rate Notes(g)(h) | 3.89 | % | 05/16/19 | 1,093,000 | 729,577 | |||||||||||
Flagship CLO, Series 2007-1A, Class E, Mezzanine Floating Rate Notes(g)(h) | 5.06 | % | 06/10/21 | 1,153,648 | 804,670 | |||||||||||
Halcyon Loan Investors CLO Ltd., Series 2007-2A, Class D, Mezzanine Floating Rate Notes,(g)(h) | 3.85 | % | 04/24/21 | 917,000 | 631,813 | |||||||||||
ING Investment Management CLO Ltd., Series 2006-3A, Class D, Sub. Floating Rate Notes(g)(h) | 3.75 | % | 12/13/20 | 1,188,000 | 744,876 | |||||||||||
Madison Park Funding I Ltd., Series 2007-4A, Class E, Sub. Floating Rate Notes(g)(h) | 3.85 | % | 03/22/21 | 730,585 | 484,378 | |||||||||||
Sierra CLO Ltd., Series 2006-2A, Class B2L, Sub. Floating Rate Notes(h) | 3.75 | % | 01/22/21 | 733,000 | 575,405 | |||||||||||
Silverado CLO Ltd., Series 2006-2A, Class D, Sub. Floating Rate Notes(g)(h) | 4.00 | % | 10/16/20 | 886,000 | 574,128 | |||||||||||
5,510,497 | ||||||||||||||||
Collateralized Mortgage Obligations–0.39% | ||||||||||||||||
Banc of America Large Loan Inc., Series 2010, Class HLTN, Floating Rate Pass Through Ctfs.(g)(h) | 1.96 | % | 11/15/15 | 3,877,030 | 3,464,137 | |||||||||||
Total Asset-Backed Securities (Cost $9,952,432) | 8,974,634 | |||||||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
25 Invesco Floating Rate Fund
Shares | Value | |||||||||||||||
Money Market Funds–4.10% | ||||||||||||||||
Liquid Assets Portfolio–Institutional Class(k) | 18,349,720 | $ | 18,349,720 | |||||||||||||
Premier Portfolio–Institutional Class(k) | 18,349,719 | 18,349,719 | ||||||||||||||
Total Money Market Funds (Cost $36,699,439) | 36,699,439 | |||||||||||||||
TOTAL INVESTMENTS–99.47% (Cost $936,787,655) | 890,139,440 | |||||||||||||||
OTHER ASSETS LESS LIABILITIES–0.53% | 4,765,557 | |||||||||||||||
NET ASSETS–100.00% | $ | 894,904,997 | ||||||||||||||
Investment Abbreviations:
CDO | – Collateralized Debt Obligation | |
CLO | – Collateralized Loan Obligation | |
Gtd. | – Guaranteed | |
Jr. | – Junior | |
LOC | – Letter of Credit | |
REIT | – Real Estate Investment Trust | |
Sec. | – Secured | |
Sr. | – Senior | |
Sub. | – Subordinated | |
Syn LOC | – Synthetic Letter of Credit | |
Wts. | – Warrants |
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. | |
(b) | Senior secured corporate loans and senior secured debt securities are, at present, not readily marketable, not registered under the Securities Act of 1933, as amended and may be subject to contractual and legal restrictions on sale. Senior secured corporate loans and senior secured debt securities in the Fund’s portfolio generally have variable rates which adjust to a base, such as the London Inter-Bank Offered Rate (“LIBOR”), on set dates, typically every 30 days but not greater than one year; and/or have interest rates that float at a margin above a widely recognized base lending rate such as the Prime Rate of a designated U.S. bank. | |
(c) | Senior secured floating rate interests often require prepayments from excess cash flow or permit the borrower to repay at its election. The degree to which borrowers repay, whether as a contractual requirement or at their election, cannot be predicted with accuracy. As a result, the actual remaining maturity may be substantially less than the stated maturities shown. However, it is anticipated that the senior secured floating rate interests will have an expected average life of three to five years. | |
(d) | All or a portion of this holding is subject to unfunded loan commitments. Interest rate will be determined at time of funding. See Note 7. | |
(e) | This floating rate interest will settle after August 31, 2011, at which time the interest rate will be determined. | |
(f) | Defaulted security. Currently, the issuer is partially or fully in default with respect to interest payments. The aggregate value of these securities at August 31, 2011 was $9,464,778, which represented 1.06% of the Fund’s Net Assets. | |
(g) | Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended. The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The aggregate value of these securities at August 31, 2011 was $31,232,955, which represented 3.49% of the Trust’s Net Assets. | |
(h) | Interest or dividend rate is redetermined periodically. Rate shown is the rate in effect on August 31, 2011. | |
(i) | Non-income producing security. | |
(j) | Acquired as part of a bankruptcy restructuring. | |
(k) | The money market fund and the Fund are affiliated by having the same investment adviser. | |
(l) | Subsequent to period-end the security was deemed worthless for tax purposes. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
26 Invesco Floating Rate Fund
Statement of Assets and Liabilities
August 31, 2011
Assets: | ||||
Investments, at value (Cost $900,088,216) | $ | 853,440,001 | ||
Investments in affiliated money market funds, at value and cost | 36,699,439 | |||
Total investments, at value (Cost $936,787,655) | 890,139,440 | |||
Cash | 1,166,459 | |||
Receivable for: | ||||
Investments sold | 64,686,529 | |||
Fund shares sold | 1,151,962 | |||
Investments matured | 99,237 | |||
Dividends and interest | 4,764,344 | |||
Investment for trustee deferred compensation and retirement plans | 25,415 | |||
Other assets | 242,472 | |||
Total assets | 962,275,858 | |||
Liabilities: | ||||
Payable for: | ||||
Investments purchased | 61,640,090 | |||
Fund shares reacquired | 2,927,173 | |||
Dividends | 2,312,509 | |||
Accrued fees to affiliates | 414,744 | |||
Accrued other operating expenses | 14,399 | |||
Trustee deferred compensation and retirement plans | 61,946 | |||
Total liabilities | 67,370,861 | |||
Net assets applicable to shares outstanding | $ | 894,904,997 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 969,825,009 | ||
Undistributed net investment income | 403,190 | |||
Undistributed net realized gain (loss) | (28,674,987 | ) | ||
Unrealized appreciation (depreciation) | (46,648,215 | ) | ||
$ | 894,904,997 | |||
Net assets: | ||||
Class A | $ | 450,750,091 | ||
Class C | $ | 267,796,451 | ||
Class R | $ | 1,491,227 | ||
Class Y | $ | 125,899,975 | ||
Institutional Class | $ | 48,967,253 | ||
Shares outstanding, $0.01 par value per share, with an unlimited number of shares authorized: | ||||
Class A | 61,280,573 | |||
Class C | 36,571,726 | |||
Class R | 202,324 | |||
Class Y | 17,145,131 | |||
Institutional Class | 6,655,758 | |||
Class A: | ||||
Net asset value per share | $ | 7.36 | ||
Maximum offering price per share | ||||
(Net asset value of $7.36 divided by 97.50%) | $ | 7.55 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 7.32 | ||
Class R: | ||||
Net asset value and offering price per share | $ | 7.37 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 7.34 | ||
Institutional Class: | ||||
Net asset value and offering price per share | $ | 7.36 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
27 Invesco Floating Rate Fund
Statement of Operations
For the year ended August 31, 2011
Investment income: | ||||
Interest | $ | 51,900,250 | ||
Dividends (net of foreign withholding taxes of $4,044) | 263,958 | |||
Dividends from affiliated money market funds | 83,704 | |||
Total investment income | 52,247,912 | |||
Expenses: | ||||
Advisory fees | 5,924,017 | |||
Administrative services fees | 257,504 | |||
Custodian fees | 23,177 | |||
Distribution fees: | ||||
Class A | 1,199,459 | |||
Class C | 1,943,500 | |||
Class R | 7,250 | |||
Interest, facilities and maintenance fees | 73,148 | |||
Transfer agent fees — A, C, R and Y | 591,208 | |||
Transfer agent fees — Institutional | 2,103 | |||
Trustees’ and officers’ fees and benefits | 37,330 | |||
Other | 186,915 | |||
Total expenses | 10,245,611 | |||
Less: Fees waived, expenses reimbursed and expense offset arrangement(s) | (113,566 | ) | ||
Net expenses | 10,132,045 | |||
Net investment income | 42,115,867 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain from investment securities | 3,254,086 | |||
Change in net unrealized appreciation (depreciation) of investment securities | (32,747,303 | ) | ||
Net realized and unrealized gain (loss) | (29,493,217 | ) | ||
Net increase in net assets resulting from operations | $ | 12,622,650 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
28 Invesco Floating Rate Fund
Statement of Changes in Net Assets
For the years ended August 31, 2011 and 2010
2011 | 2010 | |||||||
Operations: | ||||||||
Net investment income | $ | 42,115,867 | $ | 27,537,634 | ||||
Net realized gain | 3,254,086 | 9,257,677 | ||||||
Change in net unrealized appreciation (depreciation) | (32,747,303 | ) | 10,038,366 | |||||
Net increase in net assets resulting from operations | 12,622,650 | 46,833,677 | ||||||
Distributions to shareholders from net investment income: | ||||||||
Class A | (21,622,255 | ) | (16,089,153 | ) | ||||
Class C | (10,387,775 | ) | (7,057,402 | ) | ||||
Class R | (61,928 | ) | (35,865 | ) | ||||
Class Y | (6,645,821 | ) | (2,187,865 | ) | ||||
Institutional Class | (3,168,407 | ) | (2,198,237 | ) | ||||
Total distributions from net investment income | (41,886,186 | ) | (27,568,522 | ) | ||||
Share transactions–net: | ||||||||
Class A | 106,565,026 | 129,615,443 | ||||||
Class C | 86,405,542 | 80,508,401 | ||||||
Class R | 456,201 | 634,904 | ||||||
Class Y | 37,146,862 | 72,830,983 | ||||||
Institutional Class | 12,014,497 | (3,020,369 | ) | |||||
Net increase in net assets resulting from share transactions | 242,588,128 | 280,569,362 | ||||||
Net increase in net assets | 213,324,592 | 299,834,517 | ||||||
Net assets: | ||||||||
Beginning of year | 681,580,405 | 381,745,888 | ||||||
End of year (includes undistributed net investment income of $403,190 and $185,047, respectively) | $ | 894,904,997 | $ | 681,580,405 | ||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
29 Invesco Floating Rate Fund
Statement of Cash Flows
For the year ended August 31, 2011
Cash provided by (used in) operating activities: | ||||
Net increase in net assets resulting from operations | $ | 12,622,650 | ||
Adjustments to reconcile net increase in net assets to net cash provided by (used in) operating activities: | ||||
Purchases of investments | (1,700,690,263 | ) | ||
Proceeds from disposition of investments and principal payments | 1,441,816,781 | |||
Increase in receivables and other assets | (2,207,156 | ) | ||
Amortization of premiums and accretion of discounts on investment securities | (8,236,457 | ) | ||
Decrease in accrued expenses and other payables | (69,427 | ) | ||
Change in net unrealized appreciation (depreciation) on investment securities | 32,747,303 | |||
Net realized gain from investment securities | (3,254,086 | ) | ||
Net cash provided by (used in) operating activities | (227,270,655 | ) | ||
Cash provided by financing activities: | ||||
Dividends paid to shareholders | (11,455,699 | ) | ||
Proceeds from shares of beneficial interest sold | 765,510,103 | |||
Disbursements from shares of beneficial interest reacquired | (547,553,320 | ) | ||
Decrease in payable for amount due custodian | (37,497 | ) | ||
Net cash provided by financing activities | 206,463,587 | |||
Net decrease in cash and cash equivalents | (20,807,068 | ) | ||
Cash and cash equivalents at beginning of period | 58,672,966 | |||
Cash and cash equivalents at end of period | $ | 37,865,898 | ||
Non-cash financing activities: | ||||
Value of shares of beneficial interest issued in reinvestment of dividends paid to shareholders | 28,997,142 | |||
Supplemental disclosure of cash flow information: | ||||
Cash paid during the year ended August 31, 2011 for interest, facilities and maintenance fees was $114,138. |
Notes to Financial Statements
August 31, 2011
NOTE 1—Significant Accounting Policies
Invesco Floating Rate Fund (the “Fund”), is a series portfolio of AIM Counselor Series Trust (Invesco Counselor Series Trust (the “Trust”). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end series management investment company consisting of twelve separate portfolios, each authorized to issue an unlimited number of shares of beneficial interest. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class.
The Fund’s investment objective is total return, comprised of current income and capital appreciation.
The Fund currently consists of five different classes of shares: Class A, Class C, Class R, Class Y and Institutional Class. Class A shares are sold with a front-end sales charge unless certain waiver criteria are met and under certain circumstances load waived shares may be subject to contingent deferred sales charges (“CDSC”). Class C shares are sold with a CDSC. Class R, Class Y and Institutional Class shares are sold at net asset value.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations — Senior secured floating rate loans and senior secured floating rate debt securities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may reflect appropriate factors such as ratings, tranche type, industry, company performance, spread, individual trading characteristics, institution-size trading in similar groups of securities and other market data. | |
Securities, including restricted securities, are valued according to the following policy. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market (but not securities reported on the NASDAQ Stock Exchange) are valued based on the prices furnished by independent pricing services, in which case the securities may be considered fair valued, or by market makers. Each security reported on the NASDAQ Stock Exchange is valued at the NASDAQ Official Closing Price (“NOCP”) as of the close of the customary trading session on the valuation date or absent a NOCP, at the closing bid price. |
30 Invesco Floating Rate Fund
Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”). | ||
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded. | ||
Debt obligations (including convertible bonds) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations, including commercial paper, having 60 days or less to maturity are recorded at amortized cost which approximates value. Debt securities are subject to interest rate and credit risks. In addition, all debt securities involve some risk of default with respect to interest and/or principal payments. | ||
Swap agreements are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service are valued based on a model which may include end of day net present values, spreads, ratings, industry, and company performance. | ||
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trade is not the current value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economical upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards. | ||
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including Corporate Loans. | ||
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value. | ||
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments. | ||
B. | Securities Transactions and Investment Income — Securities transaction are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded on the accrual basis from the settlement date. Facility fees received may be amortized over the life of the loan. Paydown gains and losses on mortgage and asset-backed securities are recorded as adjustments to interest income. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. Bond premiums and discounts are amortized and/or accreted for financial reporting purposes. | |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held. | ||
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund’s net asset value and, accordingly, they reduce the Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser. | ||
The Fund allocates realized and unrealized capital gains and losses to a class based on the relative net assets of each class. The Fund allocates income to a class based on the relative value of the settled shares of each class. | ||
C. | Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees |
31 Invesco Floating Rate Fund
and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. | ||
D. | Distributions — Distributions from income are declared daily and paid monthly. Distributions from net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to treat a portion of the proceeds from redemptions as distributions for federal income tax purposes. | |
E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. | |
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period. | ||
F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund are charged to the operations of such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses attributable to the Institutional Class are charged to such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses relating to all other classes are allocated among those classes based on relative net assets. All other expenses are allocated among the classes based on relative net assets. | |
G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. | |
H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. | |
I. | Other Risks — The Fund may invest all or substantially of its assets in senior secured floating rate loans, senior secured debt securities or other securities rated below investment grade. These securities are generally considered to have speculative characteristics and are subject to greater risk of loss of principal and interest than higher rated securities. The value of lower quality debt securities and floating rate loans can be more volatile due to increased sensitivity to adverse issuer, political, regulatory, market or economic developments. | |
The Fund invests in Corporate Loans from U.S. or non-U.S. companies (the “Borrowers”). The investment of the Fund in a Corporate Loan may take the form of participation interests or assignments. If the Fund purchases a participation interest from a syndicate of lenders (“Lenders”) or one of the participants in the syndicate (“Participant”), one or more of which administers the loan on behalf of all the Lenders (the “Agent Bank”), the Fund would be required to rely on the Lender that sold the participation interest not only for the enforcement of the Fund’s rights against the Borrower but also for the receipt and processing of payments due to the Fund under the Corporate Loans. As such, the Fund is subject to the credit risk of the Borrower and the Participant. Lenders and Participants interposed between the Fund and a Borrower, together with Agent Banks, are referred to as “Intermediate Participants”. | ||
J. | Bank Loan Risk Disclosures — Although the resale, or secondary market for floating rate loans has grown substantially over the past decade, both in overall size and number of market participants, there is no organized exchange or broad of trade on which floating rate loans are traded. Instead, the secondary market for floating rate loans is a private, unregulated interdealer or interbank resale market. Such a market may therefore be subject to irregular trading activity, wide bid/ask spreads, and extended trade settlement periods. Similar to other asset classes, bank loan funds may be exposed to counterparty credit risk, or the risk than an entity with which the Fund has unsettled or open transactions may fail to or be unable to perform on its commitments. The Fund manages counterparty credit risk by entering into transactions only with counterparties that they believe have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. | |
K. | Redemption Fees — The Fund has a 2% redemption fee that is to be retained by the Fund to offset transaction costs and other expenses associated with short-term redemptions and exchanges. The fee, subject to certain exceptions, is imposed on certain redemptions or exchanges of shares within 31 days of purchase. The redemption fee is recorded as an increase in shareholder capital and is allocated among the share classes based on the relative net assets of each class. Effective January 1, 2012, the Fund will eliminate the 2% redemption fee, if applicable, assessed on shares of the Fund redeemed or exchanged within 31 days of purchase. | |
L. | Cash and Cash Equivalents — For the purposes of the Statement of Cash Flows the Fund defines Cash and Cash Equivalents as cash (including foreign currency), money market funds and other investments held in lieu of cash and excludes investments made with cash collateral received. | |
M. | Securities Purchased on a When-Issued and Delayed Delivery Basis — The Fund may purchase and sell interests in Corporate Loans and Corporate Debt Securities and other portfolio securities on a when-issued and delayed delivery basis, with payment and delivery scheduled for a future date. No income accrues to the Fund on such interests or securities in connection with such transactions prior to the date the Fund actually takes delivery of such interests or securities. These transactions are subject to market fluctuations and are subject to the risk that the value at delivery may be more or less than the trade date purchase price. Although the Fund will generally purchase these securities with the intention of acquiring such securities, they may sell such securities prior to the settlement date. | |
N. | Interest, Facilities and Maintenance Fees — Interest, Facilities and Maintenance Fees include interest and related borrowing costs such as commitment fees and other expenses associated with lines of credit and interest and administrative expenses related to establishing and maintaining floating rate obligations, if any. |
32 Invesco Floating Rate Fund
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser based on the annual rate of the Fund’s average daily net assets as follows:
Average Daily Net Assets | Rate | |||
First $500 million | 0 | .65% | ||
Next $4.5 billion | 0 | .60% | ||
Next $5 billion | 0 | .575% | ||
Over $10 billion | 0 | .55% | ||
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide discretionary investment management services to the Fund based on the percentage of assets allocated to such Sub-Adviser(s).
The Adviser has contractually agreed, through at least December 31, 2011, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or reimbursement (excluding certain items discussed below) of Class A, Class C, Class R, Class Y and Institutional Class shares to 1.50%, 2.00%, 1.75%, 1.25% and 1.25% of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or reimbursement to exceed the numbers reflected above: (1) interest, facilities and maintenance fees; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless the Board of Trustees and Invesco mutually agree to amend or continue the fee waiver agreement, it will terminate on December 31, 2011. The Adviser did not waive fees and/or reimburse expenses during the period under this expense limitation.
Further, the Adviser has contractually agreed, through at least June 30, 2012, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the year ended August 31, 2011, the Adviser waived advisory fees of $110,890.
At the request of the Trustees of the Trust, Invesco Ltd. agreed to reimburse expenses incurred by the Fund in connection with market timing matters in the Invesco Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement are included in the Statement of Operations. For the year ended August 31, 2011, Invesco Ltd. reimbursed expenses of the Fund in the amount of $345.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco for certain administrative costs incurred in providing accounting services to the Fund. For the year ended August 31, 2011, expenses incurred under the agreement are shown in the Statement of Operations as administrative services fees.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (“IIS”) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. IIS may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. All fees payable by IIS to intermediaries that provide omnibus account services or sub-accounting are charged back to the Fund, subject to certain limitations approved by the Trust’s Board of Trustees. For the year ended August 31, 2011, expenses incurred under the agreement are shown in the Statement of Operations as transfer agent fees.
The Trust has entered into master distribution agreements with Invesco Distributors, Inc. (“IDI”) to serve as the distributor for the Class A, Class C, Class R, Class Y and Institutional Class shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund’s Class A, Class C and Class R shares (collectively the “Plans”). The Fund, pursuant to the Plans, pays IDI compensation at the annual rate of 0.25% of the Fund’s average daily net assets of Class A shares, 0.75% of the average daily net assets of Class C shares and 0.50% of the average daily net assets of Class R shares. Of the Plan payments, up to 0.25% of the average daily net assets of each class of shares may be paid to furnish continuing personal shareholder services to customers who purchase and own shares of such classes. Any amounts not paid as a service fee under the Plans would constitute an asset-based sales charge. Rules of the Financial Industry Regulatory Authority (“FINRA”) impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. For the year ended August 31, 2011, expenses incurred under the Plans are shown in the Statement of Operations as distribution fees.
Front-end sales commissions and CDSC (collectively the “sales charges”) are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the year ended August 31, 2011, IDI advised the Fund that IDI retained $272,132 in front-end sales commissions from the sale of Class A shares and $20,203 and $69,127 from Class A and Class C shares, respectively, for CDSC imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of the Adviser, Invesco Ltd., IIS and/or IDI.
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods giving the highest priority
33 Invesco Floating Rate Fund
to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3) generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
Level 1 — | Prices are determined using quoted prices in an active market for identical assets. | |
Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. | |
Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of August 31, 2011. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
During the year ended August 31, 2011, there were no significant transfers between investment levels.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 41,792,303 | $ | 6,793,656 | $ | 236,131 | $ | 48,822,090 | ||||||||
Corporate Debt Securities | — | 832,342,716 | — | 832,342,716 | ||||||||||||
Asset-Backed Securities | — | 8,974,634 | — | 8,974,634 | ||||||||||||
Total Investments | $ | 41,792,303 | $ | 848,111,006 | $ | 236,131 | $ | 890,139,440 | ||||||||
NOTE 4—Expense Offset Arrangement(s)
The expense offset arrangements are comprised of (1) transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions and (2) custodian credits which result from periodic overnight cash balances at the custodian. For the year ended August 31, 2011, the Fund received credits from these arrangements, which resulted in the reduction of the Fund’s total expenses of $2,331.
NOTE 5—Trustees’ and Officers’ Fees and Benefits
“Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and “Trustees’ and Officers’ Fees and Benefits” also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. “Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
During the year ended August 31, 2011, the Fund paid legal fees of $3,325 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A partner of that firm is a Trustee of the Trust.
NOTE 6—Borrowings
The Fund is a party to a committed line of credit facility with a syndicate administered by JPMorgan Chase Bank. The Fund may borrow up to the lesser of (1) $50,000,000, or (2) the limits set by its prospectus for borrowings. The Fund is charged a commitment fee of 0.15% on the unused balance of the committed line and an up front fee 0.07% on the aggregate commitment. Prior to October 26, 2010, the commitment fee was 0.03%.
During the year ended August 31, 2011, the Fund had average borrowings for the 8 days the borrowings were outstanding of $8,150,000, with a weighted average interest rate of 1.73% and interest expense of $3,096.
Also, the Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
On September 20, 2011, the Board of Trustees of the Fund terminated the committed line of credit with JPMorgan Chase and approved a revolving line of credit agreement with SSB in which the Fund may borrow up to the lesser of (1) $150,000,000 or (2) the limits set by its prospectus for borrowings. The new agreement will expire on September 18, 2012.
34 Invesco Floating Rate Fund
NOTE 7—Unfunded Loan Commitments
As of August 31, 2011, the Fund had unfunded loan commitments, which could be extended at the option of the borrower, pursuant to the following loan agreements with the following borrowers:
Borrower | Principal Amount | Value | ||||||||
Bausch & Lomb, Inc. | Revolver Loan | $ | 1,480,000 | $ | 1,376,400 | |||||
Delta Air Lines, Inc. | Revolver Loan | 1,500,000 | 1,406,250 | |||||||
General Motors Co. LLC | Revolver Loan | 2,256,330 | 2,023,646 | |||||||
Key Safety Systems, Inc. | Revolver Loan | 122,500 | 106,060 | |||||||
Lake Las Vegas Resort | Revolver Loan | 32,231 | 31,909 | |||||||
Pinnacle Foods Group, Inc. (Aurora Foods) | Revolver Loan | 1,000,000 | 795,000 | |||||||
Sbarro, Inc. | Delay Draw Term Loan | 12,479 | 12,479 | |||||||
Reynolds Group Holdings Ltd. | Term Loan | 14,004,660 | 13,488,308 | |||||||
$ | 20,408,200 | $ | 19,240,052 | |||||||
NOTE 8—Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Years Ended August 31, 2011 and 2010:
2011 | 2010 | |||||||
Ordinary income | $ | 41,886,186 | $ | 27,568,522 | ||||
Tax Components of Net Assets at Period-End:
2011 | ||||
Undistributed ordinary income | $ | 386,363 | ||
Net unrealized appreciation (depreciation) — investments | (49,351,815 | ) | ||
Temporary book/tax differences | (59,427 | ) | ||
Capital loss carryforward | (25,895,133 | ) | ||
Shares of beneficial interest | 969,825,009 | |||
Total net assets | $ | 894,904,997 | ||
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund’s net unrealized appreciation (depreciation) difference is attributable primarily to wash sales.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund’s temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund utilized $3,834,279 of capital loss carryforward in the current period to offset net realized capital gain for federal income tax purposes. The Fund has a capital loss carryforward as of August 31, 2011 which expires as follows:
Capital Loss | ||||
Expiration | Carryforward* | |||
August 31, 2012 | $ | 2,745,717 | ||
August 31, 2013 | 5,482,284 | |||
August 31, 2014 | 2,498,917 | |||
August 31, 2016 | 1,685,685 | |||
August 31, 2017 | 13,482,530 | |||
Total capital loss carryforward | $ | 25,895,133 | ||
* | Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. |
35 Invesco Floating Rate Fund
NOTE 9—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended August 31, 2011 was $1,635,680,776 and $1,422,310,799, respectively. Cost of investments on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed Federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investment Securities on a Tax Basis | ||||
Aggregate unrealized appreciation of investment securities | $ | 5,103,448 | ||
Aggregate unrealized (depreciation) of investment securities | (54,455,263 | ) | ||
Net unrealized appreciation (depreciation) of investment securities | $ | (49,351,815 | ) | |
Cost of investments for tax purposes is $939,491,255. |
NOTE 10—Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of expired capital loss carryforward, on August 31, 2011, undistributed net investment income was decreased by $11,538, undistributed net realized gain (loss) was increased by $6,475,554 and shares of beneficial interest decreased by $6,464,016. This reclassification had no effect on the net assets of the Fund.
NOTE 11—Share Information
Summary of Share Activity | ||||||||||||||||
Year ended August 31, | ||||||||||||||||
2011(a) | 2010 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Class A | 51,924,957 | $ | 402,865,246 | 38,559,170 | $ | 287,610,728 | ||||||||||
Class C | 20,380,816 | 157,385,082 | 15,356,905 | 113,997,965 | ||||||||||||
Class R | 109,739 | 849,859 | 89,309 | 674,242 | ||||||||||||
Class Y | 17,975,403 | 139,258,574 | 13,290,665 | 99,476,271 | ||||||||||||
Institutional Class | 8,017,545 | 61,791,412 | 950,425 | 7,085,241 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Class A | 2,102,175 | 16,229,673 | 1,644,780 | 12,202,545 | ||||||||||||
Class C | 947,654 | 7,276,456 | 669,964 | 4,944,909 | ||||||||||||
Class R | 7,276 | 56,294 | 4,552 | 33,848 | ||||||||||||
Class Y | 365,792 | 2,813,264 | 212,445 | 1,578,879 | ||||||||||||
Institutional Class | 339,446 | 2,621,455 | 294,492 | 2,178,827 | ||||||||||||
Reacquired:(b) | ||||||||||||||||
Class A | (40,848,669 | ) | (312,529,893 | ) | (22,928,890 | ) | (170,197,830 | ) | ||||||||
Class C | (10,289,375 | ) | (78,255,996 | ) | (5,231,659 | ) | (38,434,473 | ) | ||||||||
Class R | (58,867 | ) | (449,952 | ) | (9,775 | ) | (73,186 | ) | ||||||||
Class Y | (13,724,851 | ) | (104,924,976 | ) | (3,826,963 | ) | (28,224,167 | ) | ||||||||
Institutional Class | (6,729,184 | ) | (52,398,370 | ) | (1,679,345 | ) | (12,284,437 | ) | ||||||||
Net increase in share activity | 30,519,857 | $ | 242,588,128 | 37,396,075 | $ | 280,569,362 | ||||||||||
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 61% of the outstanding shares of the Fund. IDI has an agreement with these entities to sell Fund shares. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. | |
(b) | Net of redemption fees of $122,957 and $51,484 allocated among the classes based on relative net assets of each class for the years ended August 31, 2011 and 2010, respectively. |
36 Invesco Floating Rate Fund
NOTE 12—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Ratio of | Ratio of | |||||||||||||||||||||||||||||||||||||||||||||||
Net gains | expenses | expenses | ||||||||||||||||||||||||||||||||||||||||||||||
(losses) | to average | to average net | Ratio of net | |||||||||||||||||||||||||||||||||||||||||||||
Net asset | on securities | Dividends | net assets | assets without | investment | |||||||||||||||||||||||||||||||||||||||||||
value, | Net | (both | Total from | from net | Net asset | Net assets, | with fee waivers | fee waivers | income | |||||||||||||||||||||||||||||||||||||||
beginning | investment | realized and | investment | investment | value, end | Total | end of period | and/or expenses | and/or expenses | to average | Portfolio | |||||||||||||||||||||||||||||||||||||
of period | income(a) | unrealized) | operations | income | of period(b) | return(c) | (000s omitted) | absorbed | absorbed | net assets | turnover(d) | |||||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | $ | 7.47 | $ | 0.35 | $ | (0.11 | ) | $ | 0.24 | $ | (0.35 | ) | $ | 7.36 | 3.07 | % | $ | 450,750 | 0.99 | %(e)(f) | 1.00 | %(e)(f) | 4.53 | %(e) | 152 | % | ||||||||||||||||||||||
Year ended 08/31/10 | 7.09 | 0.40 | 0.39 | (g) | 0.79 | (0.41 | ) | 7.47 | 11.28 | (g) | 359,476 | 1.12 | (f) | 1.14 | (f) | 5.34 | 106 | |||||||||||||||||||||||||||||||
Year ended 08/31/09 | 7.99 | 0.41 | (0.89 | ) | (0.48 | ) | (0.42 | ) | 7.09 | (4.97 | ) | 218,448 | 1.24 | (f) | 1.25 | (f) | 6.50 | 52 | ||||||||||||||||||||||||||||||
Year ended 08/31/08 | 8.67 | 0.53 | (0.68 | ) | (0.15 | ) | (0.53 | ) | 7.99 | (1.80 | ) | 141,803 | 1.36 | (f) | 1.37 | (f) | 6.36 | 66 | ||||||||||||||||||||||||||||||
Year ended 08/31/07 | 9.06 | 0.60 | (0.39 | ) | 0.21 | (0.60 | ) | 8.67 | 2.28 | 220,449 | 1.29 | (f) | 1.30 | (f) | 6.65 | 117 | ||||||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 7.44 | 0.31 | (0.12 | ) | 0.19 | (0.31 | ) | 7.32 | 2.41 | 267,796 | 1.49 | (e)(f) | 1.50 | (e)(f) | 4.03 | (e) | 152 | |||||||||||||||||||||||||||||||
Year ended 08/31/10 | 7.06 | 0.36 | 0.39 | (g) | 0.75 | (0.37 | ) | 7.44 | 10.75 | (g) | 189,966 | 1.62 | (f) | 1.64 | (f) | 4.84 | 106 | |||||||||||||||||||||||||||||||
Year ended 08/31/09 | 7.97 | 0.38 | (0.90 | ) | (0.52 | ) | (0.39 | ) | 7.06 | (5.61 | ) | 103,975 | 1.74 | (f) | 1.75 | (f) | 6.00 | 52 | ||||||||||||||||||||||||||||||
Year ended 08/31/08 | 8.65 | 0.48 | (0.68 | ) | (0.20 | ) | (0.48 | ) | 7.97 | (2.31 | ) | 68,452 | 1.86 | (f) | 1.87 | (f) | 5.86 | 66 | ||||||||||||||||||||||||||||||
Year ended 08/31/07 | 9.04 | 0.56 | (0.39 | ) | 0.17 | (0.56 | ) | 8.65 | 1.76 | 81,479 | 1.79 | (f) | 1.80 | (f) | 6.15 | 117 | ||||||||||||||||||||||||||||||||
Class R | ||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 7.49 | 0.33 | (0.12 | ) | 0.21 | (0.33 | ) | 7.37 | 2.68 | 1,491 | 1.24 | (e)(f) | 1.25 | (e)(f) | 4.28 | (e) | 152 | |||||||||||||||||||||||||||||||
Year ended 08/31/10 | 7.10 | 0.39 | 0.39 | (g) | 0.78 | (0.39 | ) | 7.49 | 11.15 | (g) | 1,080 | 1.37 | (f) | 1.39 | (f) | 5.09 | 106 | |||||||||||||||||||||||||||||||
Year ended 08/31/09 | 8.00 | 0.40 | (0.89 | ) | (0.49 | ) | (0.41 | ) | 7.10 | (5.19 | ) | 427 | 1.49 | (f) | 1.50 | (f) | 6.25 | 52 | ||||||||||||||||||||||||||||||
Year ended 08/31/08 | 8.66 | 0.51 | (0.66 | ) | (0.15 | ) | (0.51 | ) | 8.00 | (1.81 | ) | 330 | 1.61 | (f) | 1.62 | (f) | 6.11 | 66 | ||||||||||||||||||||||||||||||
Year ended 08/31/07 | 9.06 | 0.58 | (0.40 | ) | 0.18 | (0.58 | ) | 8.66 | 1.91 | 278 | 1.54 | (f) | 1.55 | (f) | 6.40 | 117 | ||||||||||||||||||||||||||||||||
Class Y | ||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 7.46 | 0.37 | (0.12 | ) | 0.25 | (0.37 | ) | 7.34 | 3.19 | 125,900 | 0.74 | (e)(f) | 0.75 | (e)(f) | 4.78 | (e) | 152 | |||||||||||||||||||||||||||||||
Year ended 08/31/10 | 7.07 | 0.42 | 0.39 | (g) | 0.81 | (0.42 | ) | 7.46 | 11.72 | (g) | 93,479 | 0.87 | (f) | 0.89 | (f) | 5.59 | 106 | |||||||||||||||||||||||||||||||
Year ended 08/31/09(h) | 7.29 | 0.41 | (0.24 | ) | 0.17 | (0.39 | ) | 7.07 | 3.48 | 20,176 | 1.00 | (f)(i) | 1.00 | (f)(i) | 6.74 | (i) | 52 | |||||||||||||||||||||||||||||||
Institutional Class | ||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 7.47 | 0.38 | (0.12 | ) | 0.26 | (0.37 | ) | 7.36 | 3.40 | 48,967 | 0.68 | (e)(f) | 0.69 | (e)(f) | 4.84 | (e) | 152 | |||||||||||||||||||||||||||||||
Year ended 08/31/10 | 7.09 | 0.42 | 0.39 | (g) | 0.81 | (0.43 | ) | 7.47 | 11.65 | (g) | 37,580 | 0.79 | (f) | 0.81 | (f) | 5.67 | 106 | |||||||||||||||||||||||||||||||
Year ended 08/31/09 | 7.99 | 0.44 | (0.89 | ) | (0.45 | ) | (0.45 | ) | 7.09 | (4.62 | ) | 38,720 | 0.88 | (f) | 0.89 | (f) | 6.86 | 52 | ||||||||||||||||||||||||||||||
Year ended 08/31/08 | 8.67 | 0.56 | (0.68 | ) | (0.12 | ) | (0.56 | ) | 7.99 | (1.46 | ) | 50,786 | 1.01 | (f) | 1.02 | (f) | 6.71 | 66 | ||||||||||||||||||||||||||||||
Year ended 08/31/07 | 9.06 | 0.63 | (0.39 | ) | 0.24 | (0.63 | ) | 8.67 | 2.62 | 48,138 | 0.95 | (f) | 0.96 | (f) | 6.99 | 117 | ||||||||||||||||||||||||||||||||
(a) | Calculated using average shares outstanding. | |
(b) | Includes redemption fees added to shares of beneficial interest which were less than $0.005 per share. | |
(c) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges and is not annualized for periods less than one year, if applicable. | |
(d) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. | |
(e) | Ratios are based on average daily net assets (000’s) of $479,784, $259,133, $1,450, $139,534 and $65,769 for Class A, Class C, Class R, Class Y and Institutional Class shares, respectively. | |
(f) | Ratio includes line of credit expense of 0.01%, 0.02%, 0.02%, 0.06% and 0.02% for the years ended August 31, 2011, August 31, 2010, August 31, 2009, August 31, 2008, and August 31, 2007, respectively. | |
(g) | Includes the impact of the valuation policy on Corporate Loans effective January 1, 2010. Had the policy change not occurred, Net gains on securities (both realized and unrealized) per share would have been $0.33, $0.33, $0.33, $0.33 and $0.33 for Class A, Class C, Class R, Class Y and Institutional Class shares, respectively, and total returns would have been lower. | |
(h) | Commencement date of October 3, 2008. | |
(i) | Annualized. |
37 Invesco Floating Rate Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Counselor Series Trust (Invesco Counselor Series Trust)
and Shareholders of Invesco Floating Rate Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Invesco Floating Rate Fund (one of the funds constituting AIM Counselor Series Trust (Invesco Counselor Series Trust), hereafter referred to as the “Fund”) at August 31, 2011, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, its cash flows for the year then ended and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at August 31, 2011 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
October 26, 2011
Houston, Texas
38 Invesco Floating Rate Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments or contingent deferred sales charges on redemptions, and redemption fees, if any; and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period March 1, 2011 through August 31, 2011.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the hypothetical information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
HYPOTHETICAL | ||||||||||||||||||||||||||||||
ACTUAL | (5% annual return before expenses) | |||||||||||||||||||||||||||||
Beginning | Ending | Expenses | Ending | Expenses | Annualized | |||||||||||||||||||||||||
Account Value | Account Value | Paid During | Account Value | Paid During | Expense | |||||||||||||||||||||||||
Class | (03/01/11) | (08/31/11)1 | Period2 | (08/31/11) | Period2 | Ratio | ||||||||||||||||||||||||
A | $ | 1,000.00 | $ | 958.50 | $ | 4.74 | $ | 1,020.37 | $ | 4.89 | 0.96 | % | ||||||||||||||||||
C | 1,000.00 | 955.80 | 7.25 | 1,017.80 | 7.48 | 1.47 | ||||||||||||||||||||||||
R | 1,000.00 | 956.20 | 6.02 | 1,019.06 | 6.21 | 1.22 | ||||||||||||||||||||||||
Y | 1,000.00 | 958.40 | 3.55 | 1,021.58 | 3.67 | 0.72 | ||||||||||||||||||||||||
Institutional | 1,000.00 | 960.00 | 3.26 | 1,021.88 | 3.36 | 0.66 | ||||||||||||||||||||||||
1 | The actual ending account value is based on the actual total return of the Fund for the period March 1, 2011 through August 31, 2011, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund’s expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half year. |
39 Invesco Floating Rate Fund
Approval of Investment Advisory and Sub-Advisory Contracts
The Board of Trustees (the Board) of AIM Counselor Series Trust (Invesco Counselor Series Trust) is required under the Investment Company Act of 1940, as amended, to approve annually the renewal of the Invesco Floating Rate Fund (the Fund) investment advisory agreement with Invesco Advisers, Inc. (Invesco Advisers) and the Master Intergroup Sub-Advisory Contract for Mutual Funds (the sub-advisory contracts) with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers). During contract renewal meetings held on June 14-15, 2011, the Board as a whole, and the disinterested or “independent” Trustees, who comprise 80% of the Board, voting separately, approved the continuance of the Fund’s investment advisory agreement and the sub-advisory contracts for another year, effective July 1, 2011. In doing so, the Board considered the process that it follows in reviewing and approving the Fund’s investment advisory agreement and sub-advisory contracts and the information that it is provided. The Board determined that the Fund’s investment advisory agreement and the sub-advisory contracts are in the best interests of the Fund and its shareholders and the compensation to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is responsible for overseeing the management of a number of the series portfolios of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies and limitations and investment risks of these funds. The Sub-Committees meet regularly and at designated contract renewal meetings each year to conduct a review of the performance, fees, expenses and other matters related to their assigned Invesco Funds. Each Sub-Committee recommends to the Investments Committee, which in turn recommends to the full Board, whether to approve the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Trustees receive comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and an independent company, Lipper, Inc. (Lipper). The Trustees also receive an independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. The independent Trustees are assisted in their annual evaluation of the Fund’s investment advisory agreement by the Senior Officer and by independent legal counsel. The independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in private sessions with the Senior Officer and counsel.
In evaluating the fairness and reasonableness of the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Trustees also considered information provided in connection with fund acquisitions approved by the Trustees to rationalize the Invesco Funds product range following the acquisition of the retail mutual fund business of Morgan Stanley (the Morgan Stanley Transaction). The Trustees recognized that the advisory fees for the Invesco Funds include advisory fees that are the result of years of review and negotiation between the Trustees and Invesco Advisers as well as advisory fees inherited from Morgan Stanley and Van Kampen funds acquired in the Morgan Stanley Transaction. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these same arrangements throughout the year and in prior years. One Trustee may have weighed a particular piece of information differently than another Trustee.
The discussion below serves as the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 15, 2011, and may not reflect consideration of factors that became known to the Board after that date, including, for example, changes to the Fund’s performance, advisory fees, expense limitations and/or fee waivers.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers, with whom the Board met during the year. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s consideration of Invesco Advisers’ performance and investment process oversight, independent credit analysis and investment risk management.
In determining whether to continue the Fund’s investment advisory agreement, the Board considered the prior relationship between Invesco Advisers and the Fund, as well as the Board’s knowledge of Invesco Advisers’ operations, and concluded that it is beneficial to maintain the current relationship, in part, because of such knowledge. The Board also considered services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution and legal and compliance. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and the advisory services are provided in accordance with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services provided by the Affiliated Sub-Advisers under the sub-advisory contracts and the credentials and experience of the officers and employees of the Affiliated Sub-Advisers who provide these services. The Board noted that the Affiliated Sub-Advisers have offices and personnel that are located in financial centers around the world. As a result, the Affiliated Sub-Advisers can provide research and investment analysis on the markets and economies of various countries in which the Fund invests and make recommendations on securities of companies located in such countries. The Board concluded that the sub-advisory contracts benefit the Fund and its shareholders by permitting Invesco Advisers to use the resources and talents of the Affiliated Sub-Advisers in managing the Fund. The Board concluded that the nature, extent and quality of the services provided by the Affiliated Sub-Advisers are appropriate and satisfactory and in accordance with the terms of the Fund’s sub-advisory contracts.
B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement as well as the sub-advisory contracts for the Fund, as Invesco Senior Secured Management, Inc. currently manages assets of the Fund.
The Board compared the Fund’s performance during the past one, three and five calendar years to the performance of funds in the Lipper performance universe and against the S&P/LSTA Leveraged Loan Index. The Board noted that performance of Class A shares of the Fund was in
40 Invesco Floating Rate Fund
the first quintile of the performance universe for the one year period, the fifth quintile for the three year period and the fourth quintile for the five year period (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board noted that the Fund’s performance was above the performance of the Index for the one, three and five year periods. Invesco Advisers advised the Board that underperformance in 2008 was due to the purchase of larger more liquid loans and second tier loans. Although the independent written evaluation of the Fund’s Senior Officer only considered Fund performance through the most recent calendar year, the Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
C. | Advisory and Sub-Advisory Fees and Fee Waivers |
The Board compared the Fund’s contractual advisory fee rate to the contractual advisory fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the contractual advisory fee rate for Class A shares of the Fund was below the median contractual advisory fee rate of funds in the expense group. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using audited financial data from the most recent annual report of each fund in the expense group that was publicly available as of the end of the past calendar year and including only one fund per investment adviser. The Board noted that comparative data is as of varying dates, which may affect the comparability of data during times of market volatility.
The Board noted that Invesco Advisers and the Affiliated Sub-Advisers do not manage other mutual funds in a manner substantially similar to the management of the Fund.
The Board also considered the fees charged by Invesco Advisers and the Affiliated Sub-Advisers to other client accounts with investment strategies comparable to those of the Fund. The Board noted that Invesco Advisers or the Affiliated Sub-Advisers may charge lower fees to large institutional clients solely for investment management services. Invesco Advisers reviewed with the Board the significantly greater scope of services it provides to the Invesco Funds relative to other client accounts. These additional services include provision of administrative services, officers and office space, oversight of service providers, preparation of annual registration statement updates and financial information and regulatory compliance under the Investment Company Act of 1940, as amended. Invesco Advisers also reviewed generally the higher frequency of shareholder purchases and redemptions in the Invesco Funds relative to the flow of assets for other client accounts. Invesco Advisers advised the Board that advance notice of redemptions is often provided to Invesco Advisers by institutional clients. The Board did note that sub-advisory fees charged by the Affiliated Sub-Advisers to manage the Invesco Funds and to manage other client accounts were often more comparable. The Board concluded that the aggregate services provided to the Invesco Funds were sufficiently different from those provided to institutional clients, and the Board did not place significant weight on these fee comparisons.
The Board noted that Invesco Advisers has contractually agreed to waive fees and/or limit expenses of the Fund through at least December 31, 2011 in an amount necessary to limit total annual operating expenses to a specified percentage of average daily net assets for each class of the Fund. The Board noted that at the current expense ratio for the Fund, this expense waiver does not have any impact.
The Board also considered the services provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the allocation of fees between Invesco Advisers and the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board noted that Invesco Advisers provides services to sub-advised Invesco Funds, including oversight of the Affiliated Sub-Advisers as well as the additional services described above other than day-to-day that Invesco Advisers provides services to sub-advised Invesco Funds, including oversight of the Affiliated Sub-Advisers as well as the additional services described above other than day-to-day portfolio management. The Board also noted that the sub-advisory fees have no direct effect on the Fund or its shareholders, as they are paid by Invesco Advisers to the Affiliated Sub-Advisers.
Based upon the information and considerations described above, the Board concluded that the Fund’s advisory and sub-advisory fees are fair and reasonable.
D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule. The Board also noted that the 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 Invesco Advisers.
E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the profitability of Invesco Advisers and its affiliates in providing these services. The Board reviewed with Invesco Advisers the methodology used to prepare the profitability information. The Board considered the profitability of Invesco Advisers in connection with managing the Fund and the Invesco Funds. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its subsidiaries provide to the Fund and the Invesco Funds. The Board concluded that the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund is not excessive given the nature, quality and extent of the services provided to the Invesco Funds. The Board considered whether Invesco Advisers and each Affiliated Sub-Adviser are financially sound and have the resources necessary to perform their obligations under the investment advisory agreement and sub-advisory contracts. The Board concluded that Invesco Advisers and each Affiliated Sub-Adviser have the financial resources necessary to fulfill these obligations.
F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund, including the fees received for their provision of administrative, transfer agency and distribution services to the Fund. The Board considered the performance of Invesco Advisers 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 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 Fund; that Invesco Advisers 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; and 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.
The Board considered the benefits realized by Invesco Advisers and the Affiliated Sub-Advisers as a result of portfolio brokerage transactions executed through “soft dollar” arrangements. The Board noted that soft dollar arrangements shift the payment obligation for research and execution services from Invesco Advisers and the Affiliated Sub-Advisers to the Invesco Funds and therefore may reduce Invesco Advisers’ and the Affiliated Sub-Advisers’ expenses. The Board concluded that the soft dollar arrangements are appropriate. The Board also concluded that, based on their review and representations made by the Chief Compliance Officer of the Invesco Funds, these arrangements are consistent with regulatory requirements.
The Board considered that the Fund’s uninvested cash and cash collateral from any securities lending arrangements may be invested in money market funds advised by Invesco Advisers pursuant to procedures approved by the Board. The Board noted that Invesco Advisers receives advisory fees from these affiliated money market funds attributable to such investments, although Invesco Advisers has contractually agreed to waive through varying periods the advisory fees payable by the Invesco Funds. The waiver is in an amount equal to 100% of the net advisory fee Invesco Advisers receives from the affiliated money market funds with respect to the Fund’s investment in the affiliated money market funds of uninvested cash, but not cash collateral. The Board concluded that the Fund’s investment of uninvested cash and cash collateral from any securities lending arrangements in the affiliated money market funds is in the best interests of the Fund and its shareholders.
41 Invesco Floating Rate Fund
Tax Information
Form 1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific state’s requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended August 31, 2011:
Federal and State Income Tax | ||||
Qualified Dividend Income* | 0.63% | |||
Corporate Dividends Received Deduction* | 0.00% |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Fund’s fiscal year. |
42 Invesco Floating Rate Fund
Trustees and Officers
The address of each trustee and officer is AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”), 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Number of Funds | ||||||||
in Fund Complex | ||||||||
Name, Year of Birth and | Trustee and/ | Principal Occupation(s) | Overseen by | Other Directorship(s) | ||||
Position(s) Held with the Trust | or Officer Since | During Past 5 Years | Trustee | Held by Trustee | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 — 1960 Trustee | 2007 | 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 | 143 | 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. Taylor2 — 1954 Trustee, President and Principal Executive Officer | 2006 | 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 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 Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust); Trustee and Executive Vice President, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s 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 Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Tax-Free Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. | 143 | None | ||||||
Wayne W. Whalen3 — 1939 Trustee | 2010 | Of Counsel, and prior to 2010, partner in the law firm of Skadden, Arps, Slate, Meagher & Flom LLP, legal counsel to funds in the Fund Complex | 161 | Director of the Abraham Lincoln Presidential Library Foundation | ||||
Independent Trustees | ||||||||
Bruce L. Crockett — 1944 Trustee and Chair | 2003 | Chairman, Crockett Technology Associates (technology consulting company) Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer COMSAT Corporation; and Chairman, Board of Governors of INTELSAT (international communications company) | 143 | ACE Limited (insurance company); and Investment Company Institute | ||||
1 | Mr. Flanagan is considered an interested person of the Trust because he is an officer of the adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the adviser to the Trust. |
2 | Mr. Taylor is considered an interested person of the Trust because he is an officer and a director of the adviser to, and a director of the principal underwriter of, the Trust. |
3 | Mr. Whalen has been deemed to be an interested person of the Trust because of his prior service as counsel to the predecessor funds of certain Invesco open-end funds and his affiliation with the law firm that served as counsel to such predecessor funds and continues to serve as counsel to the Invesco Van Kampen closed-end funds. |
T-1 Invesco Floating Rate Fund
Trustees and Officers—(continued)
The address of each trustee and officer is AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”), 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Number of Funds | ||||||||
in Fund Complex | ||||||||
Name, Year of Birth and | Trustee and/ | Principal Occupation(s) | Overseen by | Other Directorship(s) | ||||
Position(s) Held with the Trust | or Officer Since | During Past 5 Years | Trustee | Held by Trustee | ||||
Independent Trustees | ||||||||
David C. Arch — 1945 Trustee | 2010 | Chairman and Chief Executive Officer of Blistex Inc., a consumer health care products manufacturer. | 161 | 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 | ||||
Bob R. Baker — 1936 Trustee | 1983 | Retired | 143 | None | ||||
Formerly: President and Chief Executive Officer, AMC Cancer Research Center; and Chairman and Chief Executive Officer, First Columbia Financial Corporation | ||||||||
Frank S. Bayley — 1939 Trustee | 2003 | Retired Formerly: Director, Badgley Funds, Inc. (registered investment company) (2 portfolios) and Partner, law firm of Baker & McKenzie | 143 | Director and Chairman, C.D. Stimson Company (a real estate investment company) | ||||
James T. Bunch — 1942 Trustee | 2000 | 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 | 143 | Vice Chairman, Board of Governors, Western Golf Association/Evans Scholars Foundation and Director, Denver Film Society | ||||
Rodney Dammeyer — 1940 Trustee | 2010 | President 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. | 161 | 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 | 2003 | 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) | 161 | Board of Nature’s 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 | 2003 | 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) | 143 | Administaff | ||||
Formerly: Chief Executive Officer, Texana Timber LP (sustainable forestry company) and member of the U.S. House of Representatives | ||||||||
Carl Frischling — 1937 Trustee | 2003 | Partner, law firm of Kramer Levin Naftalis and Frankel LLP | 143 | Director, Reich & Tang Funds (6 portfolios) | ||||
Prema Mathai-Davis — 1950 Trustee | 2003 | Retired | 143 | None | ||||
Formerly: Chief Executive Officer, YWCA of the U.S.A. | ||||||||
Larry Soll — 1942 Trustee | 1997 | Retired | 143 | None | ||||
Formerly, Chairman, Chief Executive Officer and President, Synergen Corp. (a biotechnology company) | ||||||||
T-2 Invesco Floating Rate Fund
Trustees and Officers—(continued)
The address of each trustee and officer is AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”), 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Number of Funds | ||||||||
in Fund Complex | ||||||||
Name, Year of Birth and | Trustee and/ | Principal Occupation(s) | Overseen by | Other Directorship(s) | ||||
Position(s) Held with the Trust | or Officer Since | During Past 5 Years | Trustee | Held by Trustee | ||||
Independent Trustees | ||||||||
�� | ||||||||
Hugo F. Sonnenschein — 1940 Trustee | 2010 | President Emeritus and Honorary Trustee 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. | 161 | 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 | 2005 | Retired Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios) and Partner, Deloitte & Touche | 143 | None | ||||
Other Officers | ||||||||
Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer of Invesco Funds | N/A | N/A | ||||
John M. Zerr — 1962 Senior Vice President, Chief Legal Officer and Secretary | 2006 | 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 | N/A | N/A | ||||
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) | ||||||||
Lisa O. Brinkley — 1959 Vice President | 2004 | Global Compliance Director, Invesco Ltd.; Chief Compliance Officer, Invesco Investment Services, Inc.(formerly known as Invesco Aim Investment Services, Inc.); and Vice President, The Invesco Funds Formerly: Chief Compliance Officer, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) and Van Kampen Investor Services Inc.; Senior Vice President, Invesco Management Group, Inc.; Senior Vice President and Chief Compliance Officer, Invesco Advisers, Inc. and The Invesco Funds; Vice President and Chief Compliance Officer, Invesco Aim Capital Management, Inc. and Invesco Distributors, Inc.; Vice President, Invesco Investment Services, Inc. and Fund Management Company | N/A | N/A | ||||
Sheri Morris — 1964 Vice President, Treasurer and Principal Financial Officer | 2003 | 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) | N/A | N/A | ||||
Formerly: 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, 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. | ||||||||
T-3 Invesco Floating Rate Fund
Trustees and Officers—(continued)
The address of each trustee and officer is AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”), 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Number of Funds | ||||||||
in Fund Complex | ||||||||
Name, Year of Birth and | Trustee and/ | Principal Occupation(s) | Overseen by | Other Directorship(s) | ||||
Position(s) Held with the Trust | or Officer Since | During Past 5 Years | Trustee | Held by Trustee | ||||
Other Officers | ||||||||
Karen Dunn Kelley — 1960 Vice President | 2003 | Head of Invesco’s 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 Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust); and President and Principal Executive Officer, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust only). | N/A | N/A | ||||
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 Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Tax-Free Investments Trust only) | ||||||||
Lance A. Rejsek — 1967 Anti-Money Laundering Compliance Officer | 2005 | 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.), The Invesco Funds, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management) and Van Kampen Funds Inc. | N/A | N/A | ||||
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Investor Services Inc., Fund Management Company, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc. | ||||||||
Todd L. Spillane — 1958 Chief Compliance Officer | 2006 | 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, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, INVESCO Private Capital Investments, Inc. (holding company) and Invesco Private Capital, Inc. (registered investment adviser); Vice President, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.), Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.). Formerly: 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 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 | N/A | N/A | ||||
The Statement of Additional Information of the Trust includes additional information about the Fund’s Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Fund’s prospectus for information on the Fund’s sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 2500 Houston, TX 77046-1173 | Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 | Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 2500 Houston, TX 77046-1173 | Auditors PricewaterhouseCoopers LLP 1201 Louisiana Street, Suite 2900 Houston, TX 77002-5678 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2600 One Commerce Square Philadelphia, PA 19103 | Counsel to the Independent Trustees Kramer, Levin, Naftalis & Frankel LLP 1177 Avenue of the Americas New York, NY 10036-2714 | Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 2500 Houston, TX 77046-1173 | Custodian State Street Bank and Trust Company 225 Franklin Boston, MA 02110-2801 |
T-4 Invesco Floating Rate Fund
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Invesco mailing information
Send general correspondence to Invesco Investment Services, Inc., P.O. Box 219078, Kansas City, MO 64121-9078.
Invesco privacy policy
You share personal and financial information with us that is necessary for your transactions and your account records. We take very seriously the obligation to keep that information confidential and private.
Invesco collects nonpublic personal information about you from account applications or other forms you complete and from your transactions with us or our affiliates. We do not disclose information about you or our former customers to service providers or other third parties except to the extent necessary to service your account and in other limited circumstances as permitted by law. For example, we use this information to facilitate the delivery of transaction confirmations, financial reports, prospectuses and tax forms.
Even within Invesco, only people involved in the servicing of your accounts and compliance monitoring have access to your information. To ensure the highest level of confidentiality and security, Invesco maintains physical, electronic and procedural safeguards that meet or exceed federal standards. Special measures, such as data encryption and authentication, apply to your communications with us on our website. More detail is available to you at invesco.com/privacy.
Important notice regarding delivery of security holder documents
To reduce Fund expenses, only one copy of most shareholder documents may be mailed to shareholders with multiple accounts at the same address (Householding). Mailing of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact Invesco Investment Services, Inc. at 800 959 4246 or contact your financial institution. We will begin sending you individual copies for each account within 30 days after receiving your request.
Fund holdings and proxy voting information
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is available at invesco.com/completeqtrholdings. Shareholders can also look up the Fund’s Forms N-Q on the SEC website at sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-09913 and 333-36074.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov.
Information regarding how the Fund voted proxies related to its portfolio securities during the 12 months ended June 30, 2011, is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov.
Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the U.S. distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov.
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Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the U.S. distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
FLR-AR-1 | Invesco Distributors, Inc. |
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Annual Report to Shareholders | August 31, 2011 |
Invesco Select Real Estate Income Fund
Effective September 1, 2011, Invesco Select Real Estate Income Fund was renamed
Invesco Global Real Estate Income Fund.
Invesco Global Real Estate Income Fund.
Nasdaq:
A: ASRAX • B: SARBX • C: ASRCX • Y: ASRYX • Institutional: ASRIX
A: ASRAX • B: SARBX • C: ASRCX • Y: ASRYX • Institutional: ASRIX
2 | Letters to Shareholders | |
4 | Performance Summary | |
4 | Management Discussion | |
6 | Long-Term Fund Performance | |
8 | Supplemental Information | |
9 | Schedule of Investments | |
13 | Financial Statements | |
15 | Notes to Financial Statements | |
22 | Financial Highlights | |
24 | Auditor’s Report | |
25 | Fund Expenses | |
26 | Approval of Investment Advisory and Sub-Advisory Agreements | |
28 | Tax Information | |
T-1 | Trustees and Officers |
Letter to shareholders
![(PHOTO OF PHILIP TAYLOR)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464102.jpg)
Philip Taylor
Dear Shareholders:
Enclosed is important information about your Fund and its performance. I encourage you to read this report to learn more about your Fund’s short- and long-term performance and its holdings as of the close of the reporting period. This report also includes useful information about your Fund’s management team and a discussion of how your Fund was managed during the reporting period.
Data indicated that economic growth in the U.S. and most of Europe was anemic during the reporting period. In the U.S., unemployment remained high, and the housing market remained weak. Concerns about European sovereign debt persisted. Nonetheless, equity markets rose in late 2010 and early 2011 as investors anticipated better news ahead. But contentious negotiations to raise the U.S. government’s debt ceiling heightened investor unease, and following the first-ever downgrade of U.S. creditworthiness in August, global stock markets declined as many investors sought safer havens.
Where you can get current information about your Fund
In light of economic uncertainty and market volatility, I suggest you check the timely market updates and commentary from many of our fund managers and other investment professionals at invesco.com/us. On our website, you also can obtain information about your account at any hour of the day or night. I invite you to visit and explore the tools and information we offer at invesco.com/us.
Our commitment to investment excellence
As we’ve seen over the last several years, market conditions can change – often suddenly and dramatically. That’s one reason financial advisers typically advise their clients to be well diversified and to maintain a long-term investment focus. While diversification can’t guarantee a profit or protect against loss, it can cushion the impact of dramatic market moves. Maintaining a long-term investment focus for your long-term goals - financing your retirement or your children’s education, for example – may help you avoid making rash investment decisions based on short-term market swings.
Invesco’s investment professionals apply these same principles to the funds they manage.
Invesco offers a broad array of traditional mutual funds, as well as other investment products, including single-country, sector, regional and global investments spanning equity, fixed income and alternative asset classes. Across our product line, investment excellence is our ultimate goal. Each of our funds is managed by specialized teams of investment professionals, and as a company, we maintain a single focus – investment management – that allows our fund managers to concentrate on doing what they do best: managing your money.
Our funds are managed strictly according to their stated investment objectives and strategies, with robust risk oversight using consistent, repeatable investment processes that don’t change in response to short-term market events. This disciplined approach can’t guarantee a profit; no investment can do that, since all involve some measure of risk. But it can ensure that your money is managed the way we said it would be, and that it’s managed with a long-term focus.
Our adherence to stated investment objectives and strategies allows your financial adviser to build a diversified portfolio that meets your individual risk tolerance and financial goals. It also means that when your goals change, your financial adviser will be able to find an Invesco fund that’s appropriate for your needs.
Questions?
If you have questions about your account, please contact one of our client service representatives at 800 959 4246. If you have a general Invesco-related question or comment for me, I invite you to email me directly at phil@invesco.com.
All of us at Invesco look forward to serving your investment management needs for many years to come. Thank you for investing with us.
Sincerely,
![-s- PHILIP TAYLOR](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464103.gif)
Philip Taylor
Senior Managing Director, Invesco Ltd.
Senior Managing Director, Invesco Ltd.
2 | Invesco Select Real Estate Income Fund |
![(Bruce Crockett)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464104.jpg)
Bruce Crockett
Dear Fellow Shareholders:
Although the world’s economies are gradually recovering from the financial crisis, it has not been a smooth path. Unrest in the Middle East, persistently weak job and housing markets in the U.S. and continued government balance sheet repair in Europe are contributing to a slow, labored march toward global recovery.
In this environment, investors face risks that could make it more difficult to achieve their long-term financial goals - a secure retirement, home ownership, a child’s college education. Although the markets are complex and dynamic, there are ways to simplify the process and potentially increase your odds of achieving your goals. The best approach is to create a solid financial plan that helps you save and invest in ways that anticipate your needs over the long term.
Your financial adviser can help you define your financial plan, develop an appropriate investment strategy and put you in a better position to achieve your financial goals over the long term. This can take some of the guesswork out of the process and help you make thoughtful investments. Your financial adviser also can help you better understand your tolerance for risk, so that your investment approach lets you sleep at night while getting you closer to your goals. Lastly, your financial adviser can develop an asset allocation strategy that seeks to balance your investment approach, providing some protection against a decline in the markets while allowing you to participate in rising markets. Invesco calls this type of approach “intentional investing.” It means thinking carefully, planning thoughtfully and acting deliberately.
While no investment can guarantee favorable returns, your Board remains committed to managing costs and enhancing the performance of Invesco’s funds as part of our Investor First orientation. We continue to oversee the funds with the same strong sense of responsibility for your money and your continued trust that we’ve always maintained.
Thanks to the approval of our fund shareholders, Invesco has made great progress in realigning our U.S. mutual fund product line following our acguisition of Morgan Stanley’s retail asset management business, including Van Kampen Investments. When completed, the realignment will reduce overlap in the product lineup, enhance efficiency across our product line and build a solid foundation for further growth to meet client and shareholder needs. I would like to thank those of you who voted your proxy, and I hope our shareholders haven’t been too inconvenienced by the process.
As always, please contact me at bruce@brucecrockett.com with any questions or concerns you may have. On behalf of your Board, we look forward to continuing to represent your interests and serving your needs.
Sincerely,
![-s- Bruce Crockett](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464105.gif)
Bruce L. Crockett
Independent Chair
Invesco Funds Board of Trustees
Independent Chair
Invesco Funds Board of Trustees
3 | Invesco Select Real Estate Income Fund |
Management’s Discussion of Fund Performance
Performance summary
U.S. equity real estate investment trusts (REITs) delivered another year of double- digit performance for the 12 months ended August 31, 2011. However, they generally underperformed the stock market following strong prior fiscal-year relative performance. As a result, the Fund underperformed its broad market benchmark, the S&P 500 Index. The Fund also underperformed its style-specific benchmark, the Custom Select Real Estate Income Index, primarily because our positioning was underweight U.S. equity REITs which outperformed during the fiscal year.
Effective September 1, 2011, after the close of the 12 months covered by this report, Invesco Select Real Estate Income Fund became Invesco Global Real Estate Income Fund. In addition to the name change, the Fund’s prospectus was updated to permit the Fund to invest a greater percentage of its assets in non-U.S. securities. Also, the Fund’s benchmarks changed to reflect its expanded global strategy and it added a redemption fee for short term purchases.
Your Fund’s long-term performance appears later in this report.
Fund vs. Indexes
Total returns, 8/31/10 to 8/31/11, at net asset value (NAV). Performance shown does not include applicable contingent deferred sales charges (CDSC) or front-end sales charges, which would have reduced performance.
Class A Shares | 11.98 | % | ||
Class B Shares | 11.15 | |||
Class C Shares | 11.15 | |||
Class Y Shares | 12.28 | |||
Institution Class Shares | 12.52 | |||
S&P 500 Index▼ (Broad Market Index) | 18.48 | |||
Custom Select Real Estate Income Index■ (Style-Specific Index) | 14.97 | |||
Lipper Real Estate Funds Index▼ (Peer Group Index) | 14.00 | |||
▼Lipper Inc.; ■Invesco, Lipper Inc., Bloomberg L.P. |
How we invest
Your Fund holds primarily real estate-oriented securities. We focus on public securities whose value is driven by tangible assets. Our goal is to create a fund that will provide attractive current income. We use a fundamentals-driven investment process, including property market cycle analysis, property evaluation and management and structure review to identify securities with:
n | Attractive relative yields. | |
n | Favorable property market outlook. |
n | Reasonable valuations relative to peer investment alternatives. |
We attempt to manage risk by allocating assets between property related common stocks and fixed income securities, as well as diversifying by property types and geographic location and also limiting the size of any one holding.
We will consider selling a holding when:
n | Relative yields and/or valuation fall below desired levels. | |
n | Risk/return relationships change significantly. |
n | Company fundamentals change (property type, geography or management changes). | |
n | A more attractive investment opportunity is identified. |
Market conditions and your Fund
Equity markets were highly volatile during the fiscal year as investors weighed the competing issues of improved corporate profits, soft macroeconomic data and debt issues in Europe. In the U.S., corporate earnings increased, but often were overshadowed by concerns about high unemployment and a lack of consumer confidence. After generally rising through July, major equity indexes sold off precipitously in August as the U.S. received the first-ever downgrade to its credit rating from Standard & Poor’s. Also, the sovereign debt crisis unfolded in the eurozone, prompting fears of a “double-dip” recession.
Uncertainty created by the U.S. credit downgrade, combined with low consumer confidence and weak employment, added to concerns that the economic recovery was slowing. Even with the abrupt stock market sell-off in August, major equity indexes produced positive returns for the fiscal year, and all 10 sectors of the S&P 500 Index posted gains.1 The energy sector produced the highest returns, followed by consumer discretionary and health care. Financials produced the lowest returns, only slightly positive. U.S. REITs, as measured by the FTSE NAREIT All Equity REITs Index, underperformed six of the 10 sectors following strong outperformance during the prior fiscal year.
On an absolute basis, most property REIT sectors contributed positively to the Fund’s fiscal-year performance, with the exception of specialty property REITs.
Portfolio Composition
By property type
Diversified | 15.7 | % | ||
Mortgage-Backed Securities | 14.6 | |||
Office | 12.5 | |||
Healthcare | 9.8 | |||
Lodging-Resorts | 9.4 | |||
Industrial/Office - Mixed | 6.8 | |||
Shopping Centers | 5.3 | |||
Self Storage Facilities | 4.5 | |||
Freestanding | 3.5 | |||
Regional Malls | 3.1 | |||
Other Properties, Each Less Than 2% of Portfolio | 9.4 | |||
Money Market Funds Plus Other Assets Less Liabilities | 5.4 |
Top 10 Equity Holdings*
1. | Liberty Property Trust | 3.6 | % | |||||
2. | Hospitality Property Trust | 3.3 | ||||||
3. | Senior Housing Property Trust | 3.3 | ||||||
4. | National Retail Properties, Inc. | 2.8 | ||||||
5. | Kilroy Realty Corp. | 2.0 | ||||||
6. | Digital Realty Trust, Inc. | 1.6 | ||||||
7. | CBL & Associates Properties, Inc., Series D | 1.6 | ||||||
8. | SL Green Realty Corp., Series C | 1.5 | ||||||
9. | Vornado Realty Trust, Series I | 1.5 | ||||||
10. | Health Care REIT, Inc., Series I | 1.4 |
Total Net Assets | $293.3 million | |
Total Number of Holdings* | 140 |
The Fund’s holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
*Excluding money market fund holdings.
4 | Invesco Select Real Estate Income Fund |
The Fund’s holdings in the regional malls, apartments and diversified REIT sectors, in particular, enhanced performance during the reporting period. Only a small portion of the Fund, manufactured homes and timber REITs, and cash holdings, lagged other REIT sectors. Underperformance versus the FTSE NAREIT All Equity REITs Index was primarily the result of an underweight allocation to apartment REITs, overweight exposure to commercial mortgage backed securities (CMBS) and security selection in the office REIT sector. CMBS is a mortgage-backed fixed income security that is secured by the loan on a commercial property.
Top individual contributors to Fund performance during the fiscal year included Essex Property Trust and Simon Property Group. Essex Property Trust is a fully integrated REIT focused on West Coast multifamily residential properties. We sold our holdings in the stock prior to the fiscal year close as a result of more favorable yield alternatives. Simon Property Group is one of the largest real estate companies with interests in approximately 392 retail real estate properties in North America, Europe and Asia. We sold the stock following its strong performance as we believed it offered less favorable relative value compared with other investment alternatives.
Digital Realty Trust and Corporate Office Properties Trust were top equity detractors from Fund performance during the fiscal year. In the diversified/specialty sector, Digital Realty Trust, an integrated technology-related REIT, underperformed due to increasing investor concerns about the potential for increased construction in the data center market. Nevertheless, demand trends remained robust as data storage remains a priority for many companies. We not only continue to hold the stock at the close of the reporting period, but we added to our position following its share price weakness. Corporate Office Properties Trust is a specialty REIT that provides specialized tenant office space for the U.S. government and defense information technology sectors. We sold this holding during the first quarter of 2011 because it offered less attractive relative value within the office REIT sector.
In terms of positioning changes during the fiscal year, we decreased our exposure to U.S. common stocks (equity REITs) and increased our exposure to international common stocks given favorable relative value and higher yields. We also increased the Fund’s exposure
to CMBS, as we believe certain fixed income investments offer attractive yields and total return potential with lower volatility than equities. Additionally, fixed income securities with higher positioning within the capital structure, such as REIT corporate debt and preferred stocks, may provide an additional level of protection from potential fundamental or property value decline. Among common stocks, we favored certain international companies which may offer relatively more stable economic growth profiles than domestic companies, while also providing a high level of income.
The Fund has the flexibility to invest across equities and fixed income securities on a global basis, in an effort to take advantage of market dislocations driven by capital market influences rather than underlying commercial real estate fundamentals. We remain committed to owning quality real estate companies that we believe may benefit from relatively better sector trends. We continue to manage risk by holding a portfolio that is diversified by property type and geographic location. We also continue to favor lower-leveraged companies with above-average levels of dividend coverage in the portfolio.
We thank you for your continued investment in Invesco Select Real Estate Income Fund.
1 Lipper Inc.
The views and opinions expressed in management’s discussion of Fund performance are those of Invesco Advisers, Inc. These views and opinions are subject to change at any time based on factors such as market and economic conditions. These views and opinions may not be relied upon as investment advice or recommendations, or as an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but Invesco Advisers, Inc. makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
See important Fund and, if applicable, index disclosures later in this report.
![(JOE RODRIQUEZ, JR. PHOTO)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464106.jpg)
Joe Rodriquez, Jr.
Portfolio manager, is lead manager of Invesco Select Real Estate Income Fund. He is also head of real estate securities for Invesco Real Estate, overseeing all phases of the unit, including securities research and administration. Mr. Rodriguez joined Invesco in in 1990. He earned a B.B.A. in economics and finance as well as an M.B.A. in finance from Baylor University.
![(MARK BLACKBURN PHOTO)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464107.jpg)
Mark Blackburn
Chartered Financial Analyst, portfolio manager, is manager of Invesco Select Real Estate Income Fund. He joined Invesco in 1998. Mr. Blackburn earned a B.S. in accounting from Louisiana State University and an M.B.A. from Southern Methodist University. He is a Certified Public Accountant.
![(PAUL CURBO PHOTO)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464108.jpg)
Paul Curbo
Chartered Financial Analyst, portfolio manager, is manager of Invesco Select Real Estate Income Fund. He joined Invesco in 1998. Mr. Curbo earned a B.B.A. in finance from the University of Texas at Dallas.
![(DARIN TURNER PHOTO)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464109.jpg)
Darin Turner
Portfolio manager, is manager of Invesco Select Real Estate Income Fund. He joined Invesco in 2005. Mr. Turner earned a B.B.A. in finance from Baylor University, an M.S. in real estate from the University of Texas at Arlington and an M.B.A. specializing in investments from Southern Methodist University.
Assisted by the Real Estate Team
5 | Invesco Select Real Estate Income Fund |
Your Fund’s Long-Term Performance
Results of a $10,000 Investment – Oldest Share Class since Inception
Fund and index data from 5/31/02
![(PERFORMANCE CHART)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464110.gif)
Past performance cannot guarantee comparable future results.
The data shown in the chart include reinvested distributions, applicable sales charges and Fund expenses including management fees. Index results include reinvested dividends, but they do not reflect sales charges. Performance of the peer group, if applicable, reflects fund expenses and management fees; performance of a market index does not.
Performance shown in the chart and table(s) does not reflect deduction of taxes a shareholder would pay on Fund distributions or sale of Fund shares.
This chart, which is a logarithmic chart, presents the fluctuations in the value of the Fund and its indexes. We believe that a logarithmic chart is more effective than other types of charts in illustrating changes in value during the early years shown in the chart. The vertical axis, the
one that indicates the dollar value of an investment, is constructed with each segment representing a percent change in the value of the investment. In this chart, each segment represents a doubling, or 100% change, in the value of the investment. In other words, the space between $5,000 and $10,000 is the same size as the space between $10,000 and $20,000, and so on.
continued from page 8
n | The Wells Fargo Hybrid and Preferred Securities REIT Index measures the performance of U.S. preferred shares. |
n | After the close of the reporting period, the Fund elected to use, effective September 1, 2011, the MSCI World Index as its broad market benchmark, the Custom Global Real Estate Income Index as its style-specific benchmark and the Lipper Global Real Estate Funds Category Average as its peer group because those indexes reflect the Fund’s new investment style more appropriately than the S&P 500 Index, the Custom Select Real Estate Income Index and the Lipper Real Estate Funds Index, respectively. |
n | The MSCI World Index is an unmanaged index considered representative of stocks of developed countries. |
n | The Custom Global Real Estate Income Index, created by Invesco to serve as a benchmark for Invesco Global Real Estate Income Fund, is composed of the following indexes: the FTSE EPRA/NAREIT Developed Real Estate Index (50%) and the Wells |
Fargo Hybrid and Preferred Securities REIT Index (50%). |
n | The Lipper Global Real Estate Funds Category Average represents an average of all funds in the Lipper Global Real Estate Funds category. |
n | The FTSE EPRA/NAREIT Developed Real Estate Index is an unmanaged index considered representative of global real estate companies and REITs. |
n | The Fund is not managed to track the performance of any particular index, including the index(es) defined here, and consequently, the performance of the Fund may deviate significantly from the performance of the index(es). |
n | A direct investment cannot be made in an index. Unless otherwise indicated, index results include reinvested dividends, and they do not reflect sales charges. Performance of the peer group, if applicable, reflects fund expenses; performance of a market index does not. |
Other information
n | The Chartered Financial Analyst® (CFA®) designation is globally |
recognized and attests to a charterholder’s success in a rigorous and comprehensive study program in the field of investment management and research analysis. | ||
n | CPA® and Certified Public Accountant® are trademarks owned by the American Institute of Certified Public Accountants. | |
n | The returns shown in management’s discussion of Fund performance are based on net asset values calculated for shareholder transactions. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes, and as such, the net asset values for shareholder transactions and the returns based on those net asset values may differ from the net asset values and returns reported in the Financial Highlights. | |
n | Property type classifications used in this report are generally according to the FTSE National Association of Real Estate Investment Trusts (NAREIT) Equity REITs Index, which is exclusively owned by NAREIT. |
6 | Invesco Select Real Estate Income Fund |
Average Annual Total Returns | ||||
As of 8/31/11, including maximum applicable sales charges | ||||
Class A Shares | ||||
Inception (5/31/02) | 9.19 | % | ||
5 Years | 0.70 | |||
1 Year | 5.84 | |||
Class B Shares | ||||
Inception | 8.84 | % | ||
5 Years | 0.87 | |||
1 Year | 6.15 | |||
Class C Shares | ||||
Inception | 8.84 | % | ||
5 Years | 1.04 | |||
1 Year | 10.15 | |||
Class Y Shares | ||||
Inception | 9.91 | % | ||
5 Years | 1.94 | |||
1 Year | 12.28 | |||
Institutional Class Shares | ||||
Inception | 10.07 | % | ||
5 Years | 2.25 | |||
1 Year | 12.52 |
On March 12, 2007, the Fund reorganized from a closed-end Fund to an open-end Fund. Performance shown prior to that date is that of the closed-end Fund’s common shares and includes the fees applicable to common shares. The closed-end Fund’s common shares performance reflects any applicable fee waivers or expense reimbursements.
Class B shares incepted on March 9, 2007. Performance shown prior to that date is that of Class A shares, restated to reflect the higher 12b-1 fees applicable to Class B shares. Class A share performance reflects any applicable fee waivers or expense reimbursements.
Class C shares incepted on March 9, 2007. Performance shown prior to that date is that of Class A shares, restated to reflect the higher 12b-1 fees applicable to Class C shares. Class A share performance reflects any applicable fee waivers or expense reimbursements.
Class Y shares incepted on October 3, 2008. Performance shown prior to that date is that of Class A shares and includes the 12b-1 fees applicable to Class A shares. Class A share performance reflects any applicable fee waivers or expense reimbursements.
Average Annual Total Returns | ||||
As of 6/30/11, the most recent calendar quarter-end, including maximum applicable sales charges | ||||
Class A Shares | ||||
Inception (5/31/02) | 9.64 | % | ||
5 Years | 2.99 | |||
1 Year | 15.71 | |||
Class B Shares | ||||
Inception | 9.28 | % | ||
5 Years | 3.12 | |||
1 Year | 16.35 | |||
Class C Shares | ||||
Inception | 9.28 | % | ||
5 Years | 3.29 | |||
1 Year | 20.35 | |||
Class Y Shares | ||||
Inception | 10.36 | % | ||
5 Years | 4.23 | |||
1 Year | 22.61 | |||
Institutional Class Shares | ||||
Inception | 10.51 | % | ||
5 Years | 4.52 | |||
1 Year | 22.71 |
Institutional Class shares incepted on March 9, 2007. Performance shown prior to that date is that of Class A shares and includes the 12b-1 fees applicable to Class A shares. Class A share performance reflects any applicable fee waivers or expense reimbursements.
The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Please visit invesco.com/performance for the most recent month-end performance. Performance figures reflect reinvested distributions (reinvested at net asset value, except for periods prior to March 12, 2007 where reinvestments were made at the lower of the closed-end Fund’s net asset value or market price), changes in net asset value and the effect of the maximum sales charge unless otherwise stated. Investment return and principal value will fluctuate so that you may have a gain or loss when you sell shares.
The total annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Class A, Class B, Class C, Class Y and Institutional
Class shares was 1.40%, 2.15%, 2.15%, 1.15% and 0.95%, respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.
Class A share performance reflects the maximum 5.50% sales charge, and Class B and Class C share performance reflects the applicable contingent deferred sales charge (CDSC) for the period involved. The CDSC on Class B shares declines from 5% beginning at the time of purchase to 0% at the beginning of the seventh year. The CDSC on Class C shares is 1% for the first year after purchase.
The performance of the Fund’s share classes will differ primarily due to different sales charge structures and class expenses. Class Y and Institutional class shares do not have a front-end sales charge or a CDSC; therefore, performance is at net asset value.
Fund performance was positively impacted by a temporary 2% fee on redemptions that was in effect from March 12, 2007, to March 12, 2008. Without income from this temporary fee, returns would have been lower.
Effective September 1, 2011, a redemption fee of 2% was imposed on certain redemptions or exchanges out of the Fund within 31 days of purchase. Exceptions to the redemption fee are listed in the Fund’s prospectus.
Had the adviser not waived fees and/or reimbursed expenses in the past, performance would have been lower.
7 | Invesco Select Real Estate Income Fund |
Invesco Select Real Estate Income Fund’s investment objective is current income and, secondarily, capital appreciation.
n | Unless otherwise stated, information presented in this report is as of August 31, 2011, and is based on total net assets. | |
n | Unless otherwise noted, all data provided by Invesco. | |
n | To access your Fund’s reports/prospectus, visit invesco.com/fundreports. |
About share classes
n | On March 12, 2007, Invesco Select Real Estate Income Fund was reorganized from a closed-end Fund to an open-end Fund. Information presented for Class A shares prior to the reorganization included financial data for the closed-end Fund’s common shares. | |
n | Class B shares may not be purchased or acquired by exchange from share classes other than Class B shares. Please see the prospectus for more information. | |
n | Class Y shares are available to only certain investors. Please see the prospectus for more information. | |
n | Institutional Class shares are offered exclusively to institutional investors, including defined contribution plans that meet certain criteria. Please see the prospectus for more information. |
Principal risks of investing
in the Fund
in the Fund
n | Active trading risk. The Fund engages in frequent trading of portfolio securities. Active trading results in added expenses and may result in a lower return and increased tax liability. | |
n | Credit risk. The issuer of instruments in which the Fund invests may be unable to meet interest and/or principal payments, thereby causing its instruments to decrease in value and lowering the issuer’s credit rating. | |
n | Foreign securities risk. The Fund’s foreign investments may be affected by changes in a foreign country’s exchange rates; political and social instability; changes in economic or taxation policies; difficulties when enforcing obligations; decreased liquidity; and increased volatility. Foreign companies may be subject to less regulation resulting in less publicly available information about the companies. | |
n | High yield bond (junk bond) risk. Junk bonds involve a greater risk of default or price changes due to changes in the credit quality of the issuer. The values of junk bonds fluctuate more than those of high-quality bonds in response to company, political, regulatory or economic developments. Values of junk |
bonds can decline significantly over short periods of time. | ||
n | Interest rate risk. Interest rate risk refers to the risk that bond prices generally fall as interest rates rise; conversely, bond prices generally rise as interest rates fall. Specific bonds differ in their sensitivity to changes in interest rates depending on their individual characteristics, including duration. | |
n | Limited number of holdings risk. The Fund may invest a large percentage of its assets in a limited number of securities or other instruments, which could negatively affect the value of the Fund. | |
n | Liquidity risk. The Fund may hold illiquid securities that it is unable to sell at the preferred time or price and could lose its entire investment in such securities. | |
n | Management risk. The investment techniques and risk analysis used by the Fund’s portfolio managers may not produce the desired results. | |
n | Market risk. The prices of and the income generated by the Fund’s securities may decline in response to, among other things, investor sentiment; general economic and market conditions; regional or global instability; and currency and interest rate fluctuations. | |
n | Mortgage- and asset-backed securities risk. The Fund may invest in mortgage- and asset-backed securities that are subject to prepayment or call risk, which is the risk that the borrower’s payments may be received earlier or later than expected due to changes in prepayment rates on underlying loans. Faster prepayments often happen when interest rates are falling. As a result, the Fund may reinvest these early payments at lower interest rates, thereby reducing the Fund’s income. Conversely, when interest rates rise, prepayments may happen more slowly, causing the security to lengthen in duration. Longer duration securities tend to be more volatile. Securities may be prepaid at a price less than the original purchase value. | |
n | Non-diversification risk. The Fund is non-diversified and can invest a greater portion of its assets in a single issuer. A change in the value of the issuer could |
affect the value of the Fund more than if it was a diversified fund. | ||
n | REIT risk/real estate risk. Investments in real estate-related instruments may be affected by economic, legal, cultural, environmental or technological factors that affect property values, rents or occupancies of real estate related to the Fund’s holdings. Real estate companies, including real estate investment trusts (REITs) or similar structures, tend to be small and mid-cap companies, and their shares may be more volatile and less liquid. The value of investments in real estate-related companies may be affected by the quality of management, the ability to repay loans, the utilization of leverage and financial covenants related thereto, whether the company carries adequate insurance and environmental factors. If a real estate-related company defaults, the Fund may own real estate directly, which involves the following additional risks: environmental liabilities; difficulty in valuing and selling the real estate; and economic or regulatory changes. | |
n | Short sales risk. Short sales may cause the Fund to repurchase a security at a higher price, thereby causing a loss. As there is no limit on how much the price of the security can increase, the Fund’s exposure is unlimited. |
About indexes used in this report
n | The S&P 500® Index is an unmanaged index considered representative of the U.S. stock market. | |
n | The Custom Select Real Estate Income Index, created by Invesco to serve as a benchmark for Invesco Select Real Estate Income Fund, is composed of the following indexes: the FTSE NAREIT All Equity REIT Index (50%) and the Wells Fargo Hybrid and Preferred Securities REIT Index (50%). | |
n | The Lipper Real Estate Funds Index is an unmanaged index considered representative of real estate funds tracked by Lipper. | |
n | The FTSE NAREIT All Equity REITs Index is an unmanaged index considered representative of U.S. REITs. |
continued on page 6
This report must be accompanied or preceded by a currently effective Fund prospectus, which contains more complete information, including sales charges and expenses. Investors should read it carefully before investing.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
Fund Nasdaq Symbols
Class A Shares | ASRAX | |||
Class B Shares | SARBX | |||
Class C Shares | ASRCX | |||
Class Y Shares | ASRYX | |||
Institutional Class Shares | ASRIX |
8 Invesco Select Real Estate Income Fund
Schedule of Investments(a)
August 31, 2011
Shares | Value | |||||||
Real Estate Investment Trusts, Common Stocks & Other Equity Interests–43.36% | ||||||||
Apartments–0.73% | ||||||||
Advance Residence Investment (Japan) | 296 | $ | 618,567 | |||||
Canadian Apartment Properties REIT (Canada) | 71,800 | 1,514,319 | ||||||
2,132,886 | ||||||||
Diversified–9.20% | ||||||||
British Land Co. PLC (United Kingdom) | 227,669 | 1,992,623 | ||||||
Challenger Diversified Property Group (Australia) | 3,324,438 | 1,823,427 | ||||||
Charter Hall Group (Australia) | 308,878 | 647,420 | ||||||
Cohen & Steers Quality Income Realty Fund, Inc. | 201,773 | 1,797,797 | ||||||
Cominar REIT (Canada) | 73,600 | 1,653,764 | ||||||
Dexus Property Group (Australia) | 671,099 | 619,815 | ||||||
Digital Realty Trust, Inc. | 78,900 | 4,714,275 | ||||||
Dundee REIT (Canada) | 54,900 | 1,788,694 | ||||||
Fountainhead Property Trust (South Africa) | 1,541,965 | 1,488,213 | ||||||
Frasers Centrepoint Trust (Singapore) | 508,000 | 602,452 | ||||||
Goodman Property Trust (New Zealand) | 746,453 | 637,913 | ||||||
Kiwi Income Property Trust (New Zealand) | 2,293,202 | 2,009,917 | ||||||
Land Securities Group PLC (United Kingdom) | 248,750 | 2,974,873 | ||||||
Mirvac Group (Australia) | 1,184,498 | 1,533,270 | ||||||
Neuberger Berman Real Estate Securities Income Fund Inc. | 12,092 | 47,763 | ||||||
Stockland (Australia) | 190,845 | 613,053 | ||||||
United Urban Investment Corp. (Japan) | 478 | 576,590 | ||||||
Washington REIT | 47,300 | 1,463,462 | ||||||
26,985,321 | ||||||||
Freestanding–2.76% | ||||||||
National Retail Properties Inc. | 296,600 | 8,085,316 | ||||||
Healthcare–6.42% | ||||||||
Chartwell Seniors Housing REIT (Canada) | 170,700 | 1,255,275 | ||||||
Healthcare Realty Trust, Inc. | 125,800 | 2,200,242 | ||||||
LTC Properties, Inc. | 76,150 | 2,055,289 | ||||||
Omega Healthcare Investors, Inc. | 116,000 | 2,105,400 | ||||||
Senior Housing Properties Trust | 408,750 | 9,724,162 | ||||||
Ventas, Inc. | 27,700 | 1,481,396 | ||||||
18,821,764 | ||||||||
Industrial–1.40% | ||||||||
Ascendas REIT (Singapore) | 907,000 | 1,599,935 | ||||||
Segro PLC (United Kingdom) | 600,656 | 2,523,218 | ||||||
4,123,153 | ||||||||
Industrial/Office: Mixed–4.36% | ||||||||
Liberty Property Trust | 313,400 | 10,636,796 | ||||||
PS Business Parks, Inc. | 39,300 | 2,148,531 | ||||||
12,785,327 | ||||||||
Lodging-Resorts–4.04% | ||||||||
DiamondRock Hospitality Co. | 189,800 | 1,469,052 | ||||||
Hospitality Properties Trust | 417,600 | 9,805,248 | ||||||
RLJ Lodging Trust | 43,849 | 581,438 | ||||||
11,855,738 | ||||||||
Office–6.39% | ||||||||
Alstria Office REIT AG (Germany) | 65,928 | 885,805 | ||||||
AMP NZ Office Ltd. (New Zealand) | 2,851,322 | 2,091,918 | ||||||
Befimmo S.C.A. Sicafi (Belgium) | 8,429 | 693,318 | ||||||
CapitaCommercial Trust (Singapore) | 547,000 | 541,667 | ||||||
Commonwealth Property Office Fund (Australia) | 792,263 | 816,051 | ||||||
Government Properties Income Trust | 154,550 | 3,619,561 | ||||||
Intervest Offices (Belgium) | 43,310 | 1,316,301 | ||||||
Investa Office Fund (Australia) | 2,143,551 | 1,409,904 | ||||||
Japan Prime Realty Investment Corp. (Japan) | 223 | 622,026 | ||||||
Mack-Cali Realty Corp. | 93,400 | 2,909,410 | ||||||
Orix JREIT Inc. (Japan) | 99 | 478,305 | ||||||
Piedmont Office Realty Trust Inc.–Class A | 177,600 | 3,356,640 | ||||||
18,740,906 | ||||||||
Regional Malls–1.52% | ||||||||
CFS Retail Property Trust (Australia) | 900,183 | 1,739,358 | ||||||
Deutsche Euroshop AG (Germany) | 24,361 | 959,885 | ||||||
Fortune REIT (Singapore) | 1,365,000 | 662,706 | ||||||
Mercialys (France) | 3,971 | 164,856 | ||||||
Starhill Global REIT (Singapore) | 1,826,000 | 940,143 | ||||||
4,466,948 | ||||||||
Self Storage Facilities–1.07% | ||||||||
Public Storage | 25,500 | 3,155,115 | ||||||
Shopping Centers–4.46% | ||||||||
Artis REIT (Canada) | 125,800 | 1,753,825 | ||||||
Bunnings Warehouse Property Trust (Australia) | 612,443 | 1,141,471 | ||||||
Charter Hall Retail REIT (Australia) | 819,593 | 2,911,739 | ||||||
Eurocommercial Properties N.V. (Netherlands)(b) | 12,827 | 579,699 | ||||||
Federal Realty Investment Trust | 16,200 | 1,466,910 | ||||||
Inland Real Estate Corp. | 368,350 | 2,987,319 | ||||||
Weingarten Realty Investors | 91,500 | 2,229,855 | ||||||
13,070,818 | ||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
9 Invesco Select Real Estate Income Fund
Shares | Value | |||||||
Timber REIT’S–1.01% | ||||||||
Weyerhaeuser Co. | 164,000 | $ | 2,956,920 | |||||
Total Real Estate Investment Trusts, Common Stocks & Other Equity Interests (Cost $118,357,414) | 127,180,212 | |||||||
Preferred Stocks–28.50% | ||||||||
Diversified–6.46% | ||||||||
DuPont Fabros Technology, Inc., | ||||||||
Series A, 7.88% Pfd. | 80,000 | 2,008,000 | ||||||
Series B, 7.63% Pfd. | 80,000 | 1,984,800 | ||||||
Entertainment Properties Trust, Series E, 9.00% Pfd. | 85,000 | 2,337,500 | ||||||
Vornado Realty Trust, Series E, 7.00% Pfd. | 145,963 | 3,736,653 | ||||||
Series H, 6.75% Pfd. | 91,800 | 2,295,000 | ||||||
Series I, 6.63% Pfd. | 180,900 | 4,526,118 | ||||||
Series J, 6.88% Pfd. | 80,000 | 2,060,000 | ||||||
18,948,071 | ||||||||
Freestanding–0.78% | ||||||||
National Retail Properties Inc., Series C, 7.38% Pfd. | 90,450 | 2,289,290 | ||||||
Healthcare–1.39% | ||||||||
Health Care REIT, Inc., Series I, 6.50% Pfd. | 82,500 | 4,077,975 | ||||||
Industrial–0.02% | ||||||||
ProLogis, Inc., Series Q, 8.54% Pfd. | 950 | 54,803 | ||||||
Industrial/Office: Mixed–2.48% | ||||||||
PS Business Parks, Inc., | ||||||||
Series M, 7.20% Pfd. | 123,100 | 3,116,892 | ||||||
Series O, 7.38% Pfd. | 117,985 | 3,002,718 | ||||||
Series R, 6.88% Pfd. | 45,000 | 1,147,500 | ||||||
7,267,110 | ||||||||
Lodging-Resorts–5.38% | ||||||||
Eagle Hospitality Properties Trust Inc., Series A, 8.25% Pfd. | 195,800 | 1,010,817 | ||||||
Hersha Hospitality Trust, Series A, 8.00% Pfd. | 7,520 | 179,051 | ||||||
Hospitality Properties Trust, Series A, 7.00% Pfd. | 98,800 | 2,387,996 | ||||||
LaSalle Hotel Properties, Series D, 7.50% Pfd. | 62,833 | 1,532,497 | ||||||
Series G, 7.25% Pfd. | 116,950 | 2,827,851 | ||||||
Series H, 7.50% Pfd. | 103,900 | 2,496,717 | ||||||
Pebblebrook Hotel Trust, Series A, 7.88% Pfd. | 126,000 | 3,114,569 | ||||||
Sunstone Hotel Investors, Inc., Series A, 8.00% Pfd. | 60,000 | 1,425,000 | ||||||
Series D, 8.00% Pfd. | 36,000 | 810,000 | ||||||
15,784,498 | ||||||||
Manufactured Homes–0.04% | ||||||||
Equity Lifestyle Properties, Inc., Series A, 8.03% Pfd. | 4,400 | 112,200 | ||||||
Office–5.47% | ||||||||
BioMed Realty Trust, Inc., Series A, 7.38% Pfd. | 79,600 | 2,017,860 | ||||||
Brandywine Realty Trust, Series D, 7.38% Pfd. | 10,355 | 257,115 | ||||||
Corporate Office Properties Trust, Series J, 7.63% Pfd. | 22,000 | 551,760 | ||||||
Kilroy Realty Corp., Series E, 7.80% Pfd. | 58,195 | 1,462,440 | ||||||
Series F, 7.50% Pfd. | 232,500 | 5,752,050 | ||||||
SL Green Realty Corp., Series C, 7.63% Pfd. | 181,100 | 4,527,500 | ||||||
Series D, 7.88% Pfd. | 57,400 | 1,457,960 | ||||||
16,026,685 | ||||||||
Regional Malls–1.60% | ||||||||
CBL & Associates Properties, Inc., Series D, 7.38% Pfd. | 199,500 | 4,690,245 | ||||||
Residential Developers–1.03% | ||||||||
Essex Property Trust, Inc., Series H, 7.13% Pfd. | 120,000 | 3,031,500 | ||||||
Self Storage Facilities–3.41% | ||||||||
Public Storage, | ||||||||
Series H, 6.95% Pfd. | 34,500 | 880,440 | ||||||
Series L, 6.75% Pfd. | 62,400 | 1,596,816 | ||||||
Series M, 6.63% Pfd. | 87,300 | 2,230,515 | ||||||
Series O, 6.88% Pfd. | 23,100 | 647,493 | ||||||
Series Q, 6.50% Pfd. | 100,000 | 2,648,000 | ||||||
Series R, 6.35% Pfd. | 80,000 | 2,008,000 | ||||||
10,011,264 | ||||||||
Shopping Centers–0.44% | ||||||||
Kimco Realty Corp., Series H, 6.90% Pfd. | 50,000 | 1,294,000 | ||||||
Total Preferred Stocks (Cost $82,173,337) | 83,587,641 | |||||||
Principal | ||||||||
Amount | ||||||||
Mortgage-Backed Securities–14.57% | ||||||||
Banc of America Large Loan, Inc., Series 2006-BIX1, Class E, Floating Rate Pass Through Ctfs., 0.45%, 10/15/19(c)(d) | $ | 1,900,000 | 1,815,294 | |||||
Bear Stearns Commercial Mortgage Securities, Series 2005-PWR7, Class AJ, Variable Rate Pass Through Ctfs., 5.17%, 02/11/41(c) | 2,000,000 | 1,812,624 | ||||||
Series 2005-PWR8, Class AJ, Pass Through Ctfs., 4.75%, 06/11/41 | 1,200,000 | 1,068,198 | ||||||
Series 2005-T18, Class A2, Variable Rate Pass Through Ctfs., 4.56%, 02/13/42(c) | 51,435 | 51,413 | ||||||
Series 2005-T18, Class AJ, Variable Rate Pass Through Ctfs., 5.01%, 02/13/42(c) | 350,000 | 315,890 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
10 Invesco Select Real Estate Income Fund
Principal | ||||||||
Amount | Value | |||||||
Citigroup Commercial Mortgage Trust, Series 2006-T22, Class AJ, Variable Rate Pass Through Ctfs., 6.25%, 04/12/38(c) | $ | 2,900,000 | $ | 2,647,487 | ||||
Series 2005-EMG, Class D, Variable Rate Pass Through Ctfs., 5.03%, 09/20/51(c)(d) | 500,000 | 489,246 | ||||||
Series 2006-C5, Class AMP3, Variable Pass Through Ctfs., 5.68%, 10/15/49(c)(d) | 3,302,279 | 3,162,645 | ||||||
Commercial Mortgage Pass Through Ctfs., Series 2005-C6, Class AJ, Variable Rate Pass Through Ctfs., 5.21%, 06/10/44(c) | 2,000,000 | 1,760,113 | ||||||
Credit Suisse First Boston Mortgage Securities Corp., Series 2003-C3, Class G, Variable Rate Pass Through Ctfs., 4.62%, 05/15/38(c)(d) | 25,000 | 22,762 | ||||||
DLJ Commercial Mortgage Corp., Series 1998-CG1, Class B4, Variable Rate Pass Through Ctfs., 7.45%, 06/10/31(c)(d) | 340,000 | 360,565 | ||||||
GMAC Commercial Mortgage Securities Inc., Series 1998-C2, Class F, Pass Through Ctfs., 6.50%, 05/15/35(d) | 183,428 | 190,470 | ||||||
Greenwich Capital Commercial Funding Corp., Series 2005-GG3, Class AJ, Variable Rate Pass Through Ctfs., 4.86%, 08/10/42(c) | 400,000 | 368,329 | ||||||
GS Mortgage Securities Corp II, Series 2003-C1, Class J, Variable Pass Through Ctfs., 5.31%, 01/10/40(c)(d) | 900,000 | 840,240 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., Series 2002-CIB5, Class S2, Variable Pass Through Ctfs., 8.65%, 10/12/37(c)(d) | 1,905,183 | 1,972,040 | ||||||
LB-UBS Commercial Mortgage Trust, Series 2002-C7, Class B, Pass Through Ctfs., 5.08%, 01/15/36 | 96,000 | 97,667 | ||||||
Series 2005-C1, Class A2, Pass Through Ctfs., 4.31%, 02/15/30 | 68,624 | 68,725 | ||||||
Series 2005-C3, Class AJ, Pass Through Ctfs., 4.84%, 07/15/40 | 4,250,000 | 3,643,064 | ||||||
Series 2006-C4, Class AJ, Variable Rate Pass Through Ctfs., 6.09%, 06/15/38(c) | 5,260,000 | 4,202,990 | ||||||
Merrill Lynch Floating Trust, Series 2006-1, Class B, Floating Rate Pass Through Ctfs., 0.38%, 06/15/22(c)(d) | 1,950,000 | 1,867,777 | ||||||
Series 2006-1, Class D, Floating Rate Pass Through Ctfs., 0.41%, 06/15/22(c)(d) | 5,925,000 | 5,550,877 | ||||||
Merrill Lynch Mortgage Trust, Series 2004-MKB1, Class B, Variable Rate Pass Through Ctfs., 5.28%, 02/12/42(c) | 25,000 | 25,823 | ||||||
Series 2005-CIP1, Class AJ, Variable Rate Pass Through Ctfs., 5.14%, 07/12/38 | 2,850,000 | 2,412,927 | ||||||
Morgan Stanley Capital I, Series 2005-HQ7, Class AJ, Variable Rate Pass Through Ctfs., 5.37%, 11/14/42(c) | 5,060,000 | 4,544,750 | ||||||
Series 2006-IQ11, Class B, Variable Rate Pass Through Ctfs., 5.90%, 10/15/42(c) | 270,000 | 227,452 | ||||||
Wachovia Bank Commercial Mortgage Trust, Series 2003-C5, Class B, Pass Through Ctfs., 4.11%, 06/15/35 | 180,000 | 179,682 | ||||||
Series 2004-C15, Class 175B, Variable Rate Pass Through Ctfs., 6.04%, 10/15/41(c)(d) | 2,700,000 | 2,658,382 | ||||||
Series 2004-C15, Class 175C,, Variable Rate Pass Through Ctfs., 6.04%, 10/15/41(c)(d) | 396,000 | 384,677 | ||||||
Total Mortgage-Backed Securities (Cost $43,600,955) | 42,742,109 | |||||||
U.S. Dollar Denominated Bonds & Notes–4.26% | ||||||||
Health Care Facilities–0.57% | ||||||||
Brookdale Senior Living, Inc., Sr. Unsec. Conv. Notes, 2.75%, 06/15/18 | 2,000,000 | 1,667,500 | ||||||
Healthcare–2.00% | ||||||||
Omega Healthcare Investors, Inc., Sr. Unsec. Gtd. Global Notes, 7.00%, 01/15/16 | 2,000,000 | 2,042,500 | ||||||
Sr. Unsec. Gtd. Global Notes., 6.75%, 10/15/22 | 1,450,000 | 1,392,000 | ||||||
Senior Housing Properties Trust, Sr. Unsec. Notes, 8.63%, 01/15/12 | 1,509,000 | 1,541,066 | ||||||
Sr. Unsec. Notes, 4.30%, 01/15/16 | 900,000 | 897,188 | ||||||
5,872,754 | ||||||||
Office–0.63% | ||||||||
BR Properties SA (Brazil), Sr. Unsec. Gtd. Notes, 9.00%(d)(e) | 1,850,000 | 1,840,712 | ||||||
Shopping Centers–0.37% | ||||||||
Developers Diversified Realty Corp., Sr. Unsec. Medium-Term Notes, 7.50%, 07/15/18 | 1,000,000 | 1,090,000 | ||||||
Specialty Properties–0.69% | ||||||||
Host Hotels & Resorts L.P., Sr. Unsec. Gtd. Conv. Putable Notes, 2.63%, 04/15/12(d) | 2,000,000 | 2,010,000 | �� | |||||
Total U.S. Dollar Denominated Bonds & Notes (Cost $12,314,976) | 12,480,966 | |||||||
Non-U.S. Dollar Denominated Bonds & Notes–3.96%(f) | ||||||||
Australia–2.32% | ||||||||
Mirvac Group Finance Ltd., Sr. Unsec. Gtd. Medium-Term Notes, 8.00%, 09/16/16 | AUD | 2,000,000 | 2,208,723 | |||||
Stockland Trust Management Ltd., Sr. Unsec. Gtd. Medium-Term Notes, 7.50%, 07/01/16 | AUD | 2,250,000 | 2,509,656 | |||||
Westfield Retail Trust-DIP, Sr. Unsec. Gtd. Medium-Term Notes, 7.00%, 10/18/16 | AUD | 1,900,000 | 2,088,403 | |||||
6,806,782 | ||||||||
Canada–0.70% | ||||||||
Primaris REIT, Unsec. Sub. Conv., 5.40%, 11/30/18 | CAD | 2,000,000 | 2,042,692 | |||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
11 Invesco Select Real Estate Income Fund
Principal | ||||||||
Amount | Value | |||||||
Ireland–0.94% | ||||||||
Titan Europe PLC/ Ireland, Series 2005-CT1X, Class C, Floating Rate Pass Through Ctfs., 1.43%, 07/28/14 | GBP | 1,764,639 | $ | 2,750,805 | ||||
Total Non-U.S. Dollar Denominated Bonds & Notes (Cost $11,321,176) | 11,600,279 | |||||||
Shares | ||||||||
Money Market Funds–3.20% | ||||||||
Liquid Assets Portfolio–Institutional Class(g) | 4,697,036 | 4,697,036 | ||||||
Premier Portfolio–Institutional Class(g) | 4,697,035 | 4,697,035 | ||||||
Total Money Market Funds (Cost $9,394,071) | 9,394,071 | |||||||
TOTAL INVESTMENTS–97.85% (Cost $277,161,929) | 286,985,278 | |||||||
OTHER ASSETS LESS LIABILITIES–2.15% | 6,313,708 | |||||||
NET ASSETS–100.00% | $ | 293,298,986 | ||||||
Investment Abbreviations:
AUD | – Australian Dollar | |
CAD | – Canadian Dollar | |
Conv. | – Convertible | |
Ctfs. | – Certificates | |
DIP | – Debtor-in-possession | |
GBP | – British Pound | |
Gtd. | – Guaranteed | |
Pfd. | – Preferred | |
REIT | – Real Estate Investment Trust | |
Sr. | – Senior | |
Sub. | – Subordinated | |
Unsec. | – Unsecured |
Notes to Schedule of Investments:
(a) | Property type classifications used in this report are generally according to FSTE National Association of Real Estate Investment Trusts (“NAREIT”) Equity REITs Index, which is exclusively owned by NAREIT. | |
(b) | Non-income producing security. | |
(c) | Interest or dividend rate is redetermined periodically. Rate shown is the rate in effect on August 31, 2011. | |
(d) | Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended. The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The aggregate value of these securities at August 31, 2011 was $23,165,687, which represented 7.90% of the Trust’s Net Assets. | |
(e) | Perpetual bond with no specified maturity date. | |
(f) | Foreign denominated security. Principal amount is denominated in the currency indicated. | |
(g) | The money market fund and the Fund are affiliated by having the same investment adviser. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
12 Invesco Select Real Estate Income Fund
Statement of Assets and Liabilities
August 31, 2011
Assets: | ||||
Investments, at value (Cost $267,767,858) | $ | 277,591,207 | ||
Investments in affiliated money market funds, at value and cost | 9,394,071 | |||
Total investments, at value (Cost $277,161,929) | 286,985,278 | |||
Foreign currencies, at value (Cost $482,068) | 475,323 | |||
Receivable for: | ||||
Investments sold | 14,740,792 | |||
Fund shares sold | 1,469,519 | |||
Dividends and interest | 808,301 | |||
Investment for trustee deferred compensation and retirement plans | 26,529 | |||
Other assets | 21,491 | |||
Total assets | 304,527,233 | |||
Liabilities: | ||||
Payable for: | ||||
Investments purchased | 10,198,187 | |||
Fund shares reacquired | 700,990 | |||
Accrued fees to affiliates | 200,353 | |||
Accrued other operating expenses | 46,662 | |||
Trustee deferred compensation and retirement plans | 82,055 | |||
Total liabilities | 11,228,247 | |||
Net assets applicable to shares outstanding | $ | 293,298,986 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 287,548,936 | ||
Undistributed net investment income | 1,690,425 | |||
Undistributed net realized gain (loss) | (5,778,978 | ) | ||
Unrealized appreciation | 9,838,603 | |||
$ | 293,298,986 | |||
Net assets: | ||||
Class A | $ | 203,099,991 | ||
Class B | $ | 1,772,189 | ||
Class C | $ | 26,510,619 | ||
Class Y | $ | 26,138,895 | ||
Institutional Class | $ | 35,777,292 | ||
Shares outstanding, $0.01 par value per share, with an unlimited number of shares authorized: | ||||
Class A | 24,221,359 | |||
Class B | 211,894 | |||
Class C | 3,169,728 | |||
Class Y | 3,125,512 | |||
Institutional Class | 4,271,279 | |||
Class A: | ||||
Net asset value per share | $ | 8.39 | ||
Maximum offering price per share (Net asset value of $8.39 ¸ 94.50%) | $ | 8.88 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 8.36 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 8.36 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 8.36 | ||
Institutional Class: | ||||
Net asset value and offering price per share | $ | 8.38 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
13 Invesco Select Real Estate Income Fund
Statement of Operations
For the year ended August 31, 2011
Investment income: | ||||
Dividends (net of foreign withholding taxes of $252,311) | $ | 11,209,776 | ||
Dividends from affiliated money market funds | 8,111 | |||
Interest | 2,329,909 | |||
Total investment income | 13,547,796 | |||
Expenses: | ||||
Advisory fees | 1,980,726 | |||
Administrative services fees | 100,786 | |||
Custodian fees | 26,831 | |||
Distribution fees: | ||||
Class A | 440,989 | |||
Class B | 18,905 | |||
Class C | 223,357 | |||
Transfer agent fees — A, B, C and Y | 402,295 | |||
Transfer agent fees — Institutional | 36,386 | |||
Trustees’ and officers’ fees and benefits | 20,172 | |||
Other | 164,432 | |||
Total expenses | 3,414,879 | |||
Less: Fees waived, expenses reimbursed and expense offset arrangement(s) | (12,279 | ) | ||
Net expenses | 3,402,600 | |||
Net investment income | 10,145,196 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain (loss) from: | ||||
Investment securities | 31,930,148 | |||
Foreign currencies | (109,583 | ) | ||
31,820,565 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | (14,171,846 | ) | ||
Foreign currencies | 15,254 | |||
(14,156,592 | ) | |||
Net realized and unrealized gain | 17,663,973 | |||
Net increase in net assets resulting from operations | $ | 27,809,169 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
14 Invesco Select Real Estate Income Fund
Statement of Changes in Net Assets
For the years ended August 31, 2011 and 2010
2011 | 2010 | |||||||
Operations: | ||||||||
Net investment income | $ | 10,145,196 | $ | 7,657,804 | ||||
Net realized gain | 31,820,565 | 12,627,123 | ||||||
Change in net unrealized appreciation (depreciation) | (14,156,592 | ) | 16,465,933 | |||||
Net increase in net assets resulting from operations | 27,809,169 | 36,750,860 | ||||||
Distributions to shareholders from net investment income: | ||||||||
Class A | (6,385,644 | ) | (4,685,749 | ) | ||||
Class B | (55,232 | ) | (30,709 | ) | ||||
Class C | (635,236 | ) | (317,879 | ) | ||||
Class Y | (1,010,913 | ) | (484,837 | ) | ||||
Institutional Class | (1,576,407 | ) | (1,558,748 | ) | ||||
Total distributions from net investment income | (9,663,432 | ) | (7,077,922 | ) | ||||
Share transactions–net: | ||||||||
Class A | 43,730,695 | 32,864,761 | ||||||
Class B | (38,388 | ) | 832,365 | |||||
Class C | 8,493,706 | 10,729,487 | ||||||
Class Y | 2,300,978 | 17,204,765 | ||||||
Institutional Class | (5,027,618 | ) | (2,073,276 | ) | ||||
Net increase in net assets resulting from share transactions | 49,459,373 | 59,558,102 | ||||||
Net increase in net assets | 67,605,110 | 89,231,040 | ||||||
Net assets: | ||||||||
Beginning of year | 225,693,876 | 136,462,836 | ||||||
End of year (includes undistributed net investment income of $1,690,425 and $1,135,981, respectively) | $ | 293,298,986 | $ | 225,693,876 | ||||
Notes to Financial Statements
August 31, 2011
NOTE 1—Significant Accounting Policies
Invesco Select Real Estate Income Fund (the “Fund”) is a series portfolio of AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end series management investment company consisting of twelve separate portfolios, each authorized to issue an unlimited number of shares of beneficial interest.
The Fund’s investment objectives are high current income and secondarily, capital appreciation.
The Fund currently consists of five different classes of shares: Class A, Class B, Class C, Class Y and Institutional Class. Class A shares are sold with a front-end sales charge unless certain waiver criteria are met and under certain circumstances load waived shares may be subject to contingent deferred sales charges (“CDSC”). Class C shares are sold with a CDSC. Class Y and Institutional Class shares are sold at net asset value. Effective November 30, 2010, new or additional investments in Class B shares are no longer permitted. Existing shareholders of Class B shares may continue to reinvest dividends and capital gains distributions in Class B shares until they convert. Also, shareholders in Class B shares will be able to exchange those shares for Class B shares of other Invesco Funds offering such shares until they convert. Generally, Class B shares will automatically convert to Class A shares on or about the month-end which is at least eight years after the date of purchase. Redemption of Class B shares prior to conversion date will be subject to a CDSC.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. | |
A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean |
15 Invesco Select Real Estate Income Fund
between the last bid and ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”). | ||
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded. | ||
Debt obligations (including convertible bonds) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations, including commercial paper, having 60 days or less to maturity are recorded at amortized cost which approximates value. Debt securities are subject to interest rate and credit risks. In addition, all debt securities involve some risk of default with respect to interest and/or principal payments. | ||
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trade is not the current value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economical upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards. | ||
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices will be used to value debt obligations and Corporate Loans. | ||
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value. | ||
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments. | ||
B. | Securities Transactions and Investment Income — Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded on the accrual basis from settlement date. Paydown gains and losses on mortgage and asset-backed securities are recorded as adjustments to interest income. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. Bond premiums and discounts are amortized and/or accreted for financial reporting purposes. | |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held. | ||
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund’s net asset value and, accordingly, they reduce the Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser. | ||
The Fund recharacterizes distributions received from REIT investments based on information provided by the REIT into the following categories: ordinary income, long-term and short-term capital gains, and return of capital. If information is not available timely from the REIT, the recharacterization will be based on available information which may include the previous year’s allocation. If new or additional information becomes available from the REIT at a later date, a recharacterization will be made in the following year. The Fund records as dividend income the amount recharacterized as ordinary income and as realized gain the amount recharacterized as capital gain in the Statement of Operations, and the amount recharacterized as return of capital in the Statement of Changes in Net Assets. These recharacterizations are reflected in the accompanying financial statements. | ||
C. | Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees |
16 Invesco Select Real Estate Income Fund
and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. | ||
D. | Distributions — Distributions from income are declared and paid quarterly and are recorded on ex-dividend date. Distributions from net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to treat a portion of the proceeds from redemptions as distributions for federal income tax purposes. | |
E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. | |
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period. | ||
F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund are charged to the operations of such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses attributable to the Institutional Class are charged to such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses relating to all other classes are allocated among those classes based on relative net assets. All other expenses are allocated among the classes based on relative net assets. | |
G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. | |
H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. | |
I. | Other Risks — The Fund’s investments are concentrated in a comparatively narrow segment of the economy. Consequently, the Fund may tend to be more volatile than other mutual funds, and the value of the Fund’s investments may tend to rise and fall more rapidly. | |
Because the Fund concentrates its assets in the real estate industry, an investment in the Fund will be closely linked to the performance of the real estate markets. Property values may fall due to increasing vacancies or declining rents resulting from economic, legal, cultural or technological developments. |
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser based on the annual rate of the Fund’s average daily net assets as follows:
Average Daily Net Assets | Rate | |||
First $250 million | 0 | .75% | ||
Next $250 million | 0 | .74% | ||
Next $500 million | 0 | .73% | ||
Next $1.5 billion | 0 | .72% | ||
Next $2.5 billion | 0 | .71% | ||
Next $2.5 billion | 0 | .70% | ||
Next $2.5 billion | 0 | .69% | ||
Over $10 billion | 0 | .68% | ||
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide discretionary investment management services to the Fund based on the percentage of assets allocated to such Sub-Adviser(s).
The Adviser has contractually agreed, through at least December 31, 2011, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver (excluding certain items discussed below) of Class A, Class B, Class C, Class Y and Institutional Class shares to 2.00%, 2.75%, 2.75%, 1.75% and 1.75% of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless the Board of Trustees and Invesco mutually agree to amend or continue the fee waiver agreement, it will terminate on December 31, 2011. The Adviser did not waive fees and/or reimburse expenses during the period under this expense limitation.
17 Invesco Select Real Estate Income Fund
The Adviser has contractually agreed, through at least June 30, 2012, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the year ended August 31, 2011, the Adviser waived advisory fees of $11,161.
At the request of the Trustees of the Trust, Invesco Ltd. agreed to reimburse expenses incurred by the Fund in connection with market timing matters in the Invesco Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement are included in the Statement of Operations. For the year ended August 31, 2011, Invesco Ltd. reimbursed expenses of the Fund in the amount of $283.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco for certain administrative costs incurred in providing accounting services to the Fund. For the year ended August 31, 2011, expenses incurred under the agreement are shown in the Statement of Operations as administrative services fees.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (“IIS”) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. IIS may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. All fees payable by IIS to intermediaries that provide omnibus account services or sub-accounting are charged back to the Fund, subject to certain limitations approved by the Trust’s Board of Trustees. For the year ended August 31, 2011, expenses incurred under the agreement are shown in the Statement of Operations as transfer agent fees.
The Trust has entered into master distribution agreements with Invesco Distributors, Inc. (“IDI”) to serve as the distributor for the Class A, Class B, Class C, Class Y and Institutional Class shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund’s Class A, Class B and Class C shares (collectively the “Plans”). The Fund, pursuant to the Plans, pays IDI compensation at the annual rate of 0.25% of the Fund’s average daily net assets of Class A shares and 1.00% of the average daily net assets of Class B and Class C shares. Of the Plan payments, up to 0.25% of the average daily net assets of each class of shares may be paid to furnish continuing personal shareholder services to customers who purchase and own shares of such classes. Any amounts not paid as a service fee under the Plans would constitute an asset-based sales charge. Rules of the Financial Industry Regulatory Authority (“FINRA”) impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. For the year ended August 31, 2011, expenses incurred under the Plans are shown in the Statement of Operations as distribution fees.
Front-end sales commissions and CDSC (collectively the “sales charges”) are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the year ended August 31, 2011, IDI advised the Fund that IDI retained $52,643 in front-end sales commissions from the sale of Class A shares and $38, $1,392 and $1,892 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of Invesco, IIS and/or IDI.
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3) generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
Level 1 — | Prices are determined using quoted prices in an active market for identical assets. | |
Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. | |
Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of August 31, 2011. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
During the year ended August 31, 2011, there were no significant transfers between investment levels.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 193,942,973 | $ | 26,218,951 | $ | — | $ | 220,161,924 | ||||||||
Corporate Debt Securities | — | 21,330,440 | — | 21,330,440 | ||||||||||||
Mortgage-Backed Securities | — | 45,492,914 | — | 45,492,914 | ||||||||||||
$ | 193,942,973 | $ | 93,042,305 | $ | — | $ | 286,985,278 | |||||||||
18 Invesco Select Real Estate Income Fund
NOTE 4—Expense Offset Arrangement(s)
The expense offset arrangements are comprised of (1) transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions and (2) custodian credits which result from periodic overnight cash balances at the custodian. For the year ended August 31, 2011, the Fund received credits from these arrangements, which resulted in the reduction of the Fund’s total expenses of $835.
NOTE 5—Trustees’ and Officers’ Fees and Benefits
“Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and “Trustees’ and Officers’ Fees and Benefits” also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. “Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
During the year ended August 31, 2011, the Fund paid legal fees of $2,173 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 6—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with The State Street Bank and Trust Company, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 7—Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Years Ended August 31, 2011 and 2010:
2011 | 2010 | |||||||
Ordinary income | $ | 9,663,432 | $ | 7,077,922 | ||||
Tax Components of Net Assets at Period-End:
2011 | ||||
Undistributed ordinary income | $ | 3,310,443 | ||
Net unrealized appreciation — investments | 6,935,628 | |||
Net unrealized appreciation — other investments | 15,254 | |||
Temporary book/tax differences | (79,428 | ) | ||
Post-October deferrals | (109,546 | ) | ||
Capital loss carryforward | (4,322,301 | ) | ||
Shares of beneficial interest | 287,548,936 | |||
Total net assets | $ | 293,298,986 | ||
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund’s net unrealized appreciation difference is attributable primarily to wash sales and passive foreign investments.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund’s temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
19 Invesco Select Real Estate Income Fund
The Fund utilized $30,344,253 capital loss carryforward in the current period to offset net realized capital gain for federal income tax purposes. The Fund has a capital loss carryforward as of August 31, 2011 which expires as follows:
Capital Loss | ||||
Expiration | Carryforward* | |||
August 31, 2018 | $ | 4,322,301 | ||
* | Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. |
NOTE 8—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended August 31, 2011 was $300,757,524 and $259,499,895, respectively. Cost of investments on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed Federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investment Securities on a Tax Basis | ||||
Aggregate unrealized appreciation of investment securities | $ | 14,359,606 | ||
Aggregate unrealized (depreciation) of investment securities | (7,423,978 | ) | ||
Net unrealized appreciation of investment securities | $ | 6,935,628 | ||
Cost of investments for tax purposes is $280,049,650. |
NOTE 9—Reclassification of Permanent Differences (Pending)
Primarily as a result of differing book/tax treatment of foreign currency transactions and passive foreign investment companies, on August 31, 2011, undistributed net investment income was increased by $72,680 and undistributed net realized gain (loss) was decreased by $72,680. This reclassification had no effect on the net assets of the Fund.
20 Invesco Select Real Estate Income Fund
NOTE 10—Share Information
Summary of Share Activity | ||||||||||||||||
Year ended August 31, | ||||||||||||||||
2011(a) | 2010 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Class A | 10,732,994 | $ | 89,560,522 | 9,908,927 | $ | 71,310,905 | ||||||||||
Class B | 66,731 | 550,871 | 154,695 | 1,133,322 | ||||||||||||
Class C | 1,559,082 | 12,992,304 | 1,665,745 | 11,927,859 | ||||||||||||
Class Y | 1,599,691 | 13,212,606 | 3,080,777 | 22,003,408 | ||||||||||||
Institutional Class | 1,162,860 | 9,576,471 | 1,674,481 | 12,079,829 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Class A | 611,409 | 5,004,588 | 480,564 | 3,507,569 | ||||||||||||
Class B | 6,066 | 49,475 | 3,704 | 27,078 | ||||||||||||
Class C | 65,429 | 535,195 | 35,013 | 257,127 | ||||||||||||
Class Y | 99,207 | 808,386 | 48,005 | 356,587 | ||||||||||||
Institutional Class | 180,704 | 1,471,367 | 215,117 | 1,558,340 | ||||||||||||
Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||
Class A | 33,301 | 280,701 | 8,015 | 59,246 | ||||||||||||
Class B | (33,373 | ) | (280,701 | ) | (8,029 | ) | (59,246 | ) | ||||||||
Reacquired: | ||||||||||||||||
Class A | (6,149,335 | ) | (51,115,116 | ) | (5,752,142 | ) | (42,012,959 | ) | ||||||||
Class B | (43,772 | ) | (358,033 | ) | (37,046 | ) | (268,789 | ) | ||||||||
Class C | (608,844 | ) | (5,033,793 | ) | (197,317 | ) | (1,455,499 | ) | ||||||||
Class Y | (1,418,430 | ) | (11,720,014 | ) | (700,975 | ) | (5,155,230 | ) | ||||||||
Institutional Class | (1,930,006 | ) | (16,075,456 | ) | (2,134,077 | ) | (15,711,445 | ) | ||||||||
Net increase in share activity | 5,933,714 | $ | 49,459,373 | 8,445,457 | $ | 59,558,102 | ||||||||||
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 47% of the outstanding shares of the Fund. IDI has an agreement with these entities to sell Fund shares. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
21 Invesco Select Real Estate Income Fund
NOTE 11—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated. Information presented prior to March 12, 2007 includes financial data for the common shares of the Closed-End Fund.
Class A* | ||||||||||||||||||||||||
Eight months ended | Year ended | |||||||||||||||||||||||
Year ended August 31, | August 31, | December 31, | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||||||
Net asset value, beginning of period | $ | 7.77 | $ | 6.62 | $ | 8.38 | $ | 16.27 | $ | 17.35 | $ | 17.49 | ||||||||||||
Net investment income | 0.32 | (a) | 0.28 | (a) | 0.27 | (a) | 0.42 | (a) | 0.44 | (a) | 0.86 | |||||||||||||
Net gains (losses) on securities (both realized and unrealized) | 0.61 | 1.14 | (1.75 | ) | (1.54 | ) | (1.54 | ) | 3.88 | |||||||||||||||
Less distributions paid to preferred shareholders of Closed-End Fund from net investment income(b) | N/A | N/A | N/A | N/A | N/A | (0.20 | ) | |||||||||||||||||
Total from investment operations | 0.93 | 1.42 | (1.48 | ) | (1.12 | ) | (1.10 | ) | 4.54 | |||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Dividends from net investment income | (0.31 | ) | (0.27 | ) | (0.28 | ) | (0.65 | ) | (0.38 | ) | (0.89 | ) | ||||||||||||
Distributions from net realized gains | — | — | — | (6.18 | ) | (0.09 | ) | (3.84 | ) | |||||||||||||||
Total distributions | (0.31 | ) | (0.27 | ) | (0.28 | ) | (6.83 | ) | (0.47 | ) | (4.73 | ) | ||||||||||||
Increase from common shares of Closed-End Fund repurchased | N/A | N/A | N/A | N/A | — | 0.05 | ||||||||||||||||||
Redemption fees added to shares of beneficial interest | — | — | — | 0.06 | 0.49 | N/A | ||||||||||||||||||
Net asset value, end of period | $ | 8.39 | $ | 7.77 | $ | 6.62 | $ | 8.38 | $ | 16.27 | $ | 17.35 | ||||||||||||
Market value, end of period | N/A | N/A | N/A | N/A | N/A | $ | 16.67 | |||||||||||||||||
Total return at net asset value | 12.11 | %(c) | 21.85 | %(c) | (17.12 | )%(c) | (7.47 | )%(c)(d) | (3.59 | )%(c)(d) | 29.15 | %(e) | ||||||||||||
Total return at market value | N/A | N/A | N/A | N/A | N/A | 44.88 | %(e) | |||||||||||||||||
Ratios/supplemental data: | ||||||||||||||||||||||||
Net assets, end of period (000s omitted) | $ | 203,100 | $ | 147,568 | $ | 94,979 | $ | 111,529 | $ | 224,000 | $ | 678,394 | ||||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||||||
With fee waivers and/or expense reimbursements | 1.30 | %(f) | 1.37 | % | 1.73 | % | 1.32 | % | 1.08 | %(g) | 0.96 | %(h) | ||||||||||||
Without fee waivers and/or expense reimbursements | 1.30 | %(f) | 1.38 | % | 1.74 | % | 1.33 | % | 1.23 | %(g) | 1.33 | %(h) | ||||||||||||
Ratio of net investment income to average net assets | 3.83 | %(f) | 3.93 | % | 4.83 | % | 3.91 | % | 3.82 | %(g) | 4.59 | %(h) | ||||||||||||
Ratio of distributions to preferred shareholders of Closed-End Fund to average net applicable to common shares of Closed-End Fund | N/A | N/A | N/A | N/A | N/A | 1.30 | %(g) | |||||||||||||||||
Portfolio turnover rate(i) | 101 | % | 77 | % | 59 | % | 73 | % | 24 | % | 23 | % | ||||||||||||
* | Prior to March 12, 2007, the Fund operated as a Closed-End Fund. On such date, holders of common shares of Closed-End Fund received Class A shares of the Fund equal to the number of Closed-End Fund common shares they owed prior to the Reorganization. |
(a) | Calculated using average shares outstanding. | |
(b) | Based on average number of common shares outstanding of Closed-End Fund. | |
(c) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges and is not annualized for periods less than one year, if applicable. | |
(d) | Includes the impact of the temporary 2% redemption fee which was effective March 12, 2007 through March 11, 2008. | |
(e) | Total return at net asset value includes adjustments in accordance with accounting principles generally accepted in the United States of America and measures the changes in common shares’ value of closed-end over the period indicated, taking into account dividends as reinvested. Total return at market value is computed based upon the New York Stock Exchange market price of the Fund’s common shares and excludes the effects of brokerage commissions. Dividends and distributions, if any, are assumed for purposes of this calculation, to be reinvested at prices obtained under the Fund’s dividend reinvestment plan. | |
(f) | Ratios are based on average daily net assets (000’s omitted) of $176,396. | |
(g) | Annualized. | |
(h) | Ratios do not reflect the effect of dividend payments to preferred shareholders; income ratios reflect income earned on investments made with assets applicable to preferred shares of Closed-End Fund. | |
(i) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. |
22 Invesco Select Real Estate Income Fund
NOTE 11—Financial Highlights—(continued)
Ratio of | Ratio of | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net gains | expenses | expenses | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
(losses) | to average | to average net | Ratio of net | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset | on securities | Dividends | Distributions | net assets | assets without | investment | ||||||||||||||||||||||||||||||||||||||||||||||||||
value, | Net | (both | Total from | from net | from net | Net asset | Net assets, | with fee waivers | fee waivers | income | ||||||||||||||||||||||||||||||||||||||||||||||
beginning | investment | realized and | investment | investment | realized | Total | value, end | Total | end of period | and/or expenses | and/or expenses | to average | Portfolio | |||||||||||||||||||||||||||||||||||||||||||
of period | income(a) | unrealized) | operations | income | gains | distributions | of period | return(b) | (000s omitted) | absorbed | absorbed | net assets | turnover(c) | |||||||||||||||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | $ | 7.75 | $ | 0.26 | $ | 0.59 | $ | 0.85 | $ | (0.24 | ) | $ | — | $ | (0.24 | ) | $ | 8.36 | 11.15 | % | $ | 1,772 | 2.05 | %(d) | 2.05 | %(d) | 3.08 | %(d) | 101 | % | ||||||||||||||||||||||||||
Year ended 08/31/10 | 6.60 | 0.23 | 1.14 | 1.37 | (0.22 | ) | — | (0.22 | ) | 7.75 | 21.02 | 1,676 | 2.12 | 2.13 | 3.18 | 77 | ||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/09 | 8.37 | 0.23 | (1.77 | ) | (1.54 | ) | (0.23 | ) | — | (0.23 | ) | 6.60 | (17.91 | ) | 680 | 2.48 | 2.49 | 4.08 | 59 | |||||||||||||||||||||||||||||||||||||
Year ended 08/31/08 | 16.23 | 0.28 | (1.40 | )(e) | (1.12 | ) | (0.56 | ) | (6.18 | ) | (6.74 | ) | 8.37 | (8.01 | ) | 1,126 | 2.07 | 2.08 | 3.16 | 73 | ||||||||||||||||||||||||||||||||||||
Year ended 08/31/07(f) | 17.34 | 0.22 | (1.09 | )(e) | (0.87 | ) | (0.24 | ) | — | (0.24 | ) | 16.23 | (5.10 | ) | 162 | 2.04 | (g) | 2.04 | (g) | 2.86 | (g) | 24 | ||||||||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 7.75 | 0.26 | 0.59 | 0.85 | (0.24 | ) | — | (0.24 | ) | 8.36 | 11.15 | 26,511 | 2.05 | (d) | 2.05 | (d) | 3.08 | (d) | 101 | |||||||||||||||||||||||||||||||||||||
Year ended 08/31/10 | 6.60 | 0.23 | 1.14 | 1.37 | (0.22 | ) | — | (0.22 | ) | 7.75 | 21.02 | 16,692 | 2.12 | 2.13 | 3.18 | 77 | ||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/09 | 8.38 | 0.23 | (1.78 | ) | (1.55 | ) | (0.23 | ) | — | (0.23 | ) | 6.60 | (18.00 | ) | 4,296 | 2.48 | 2.49 | 4.08 | 59 | |||||||||||||||||||||||||||||||||||||
Year ended 08/31/08 | 16.23 | 0.29 | (1.40 | )(e) | (1.11 | ) | (0.56 | ) | (6.18 | ) | (6.74 | ) | 8.38 | (7.90 | ) | 1,932 | 2.07 | 2.08 | 3.16 | 73 | ||||||||||||||||||||||||||||||||||||
Year ended 08/31/07(f) | 17.34 | 0.22 | (1.09 | )(e) | (0.87 | ) | (0.24 | ) | — | (0.24 | ) | 16.23 | (5.10 | ) | 356 | 2.04 | (g) | 2.04 | (g) | 2.86 | (g) | 24 | ||||||||||||||||||||||||||||||||||
Class Y | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 7.75 | 0.34 | 0.60 | 0.94 | (0.33 | ) | — | (0.33 | ) | 8.36 | 12.28 | 26,139 | 1.05 | (d) | 1.05 | (d) | 4.08 | (d) | 101 | |||||||||||||||||||||||||||||||||||||
Year ended 08/31/10 | 6.60 | 0.31 | 1.13 | 1.44 | (0.29 | ) | — | (0.29 | ) | 7.75 | 22.21 | 22,047 | 1.12 | 1.13 | 4.18 | 77 | ||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/09(f) | 7.15 | 0.26 | (0.63 | ) | (0.37 | ) | (0.18 | ) | — | (0.18 | ) | 6.60 | (4.23 | ) | 2,755 | 1.53 | (g) | 1.53 | (g) | 5.03 | (g) | 59 | ||||||||||||||||||||||||||||||||||
Institutional Class | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 7.76 | 0.35 | 0.61 | 0.96 | (0.34 | ) | — | (0.34 | ) | 8.38 | 12.52 | 35,777 | 0.96 | (d) | 0.96 | (d) | 4.17 | (d) | 101 | |||||||||||||||||||||||||||||||||||||
Year ended 08/31/10 | 6.62 | 0.32 | 1.13 | 1.45 | (0.31 | ) | — | (0.31 | ) | 7.76 | 22.27 | 37,711 | 0.92 | 0.93 | 4.38 | 77 | ||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/09 | 8.39 | 0.31 | (1.77 | ) | (1.46 | ) | (0.31 | ) | — | (0.31 | ) | 6.62 | (16.75 | ) | 33,753 | 1.11 | 1.12 | 5.45 | 59 | |||||||||||||||||||||||||||||||||||||
Year ended 08/31/08 | 16.27 | 0.37 | (1.37 | )(e) | (1.00 | ) | (0.70 | ) | (6.18 | ) | (6.88 | ) | 8.39 | (6.91 | ) | 12,696 | 0.88 | 0.89 | 4.35 | 73 | ||||||||||||||||||||||||||||||||||||
Year ended 08/31/07(f) | 17.34 | 0.32 | (1.09 | )(e) | (0.77 | ) | (0.30 | ) | — | (0.30 | ) | 16.27 | (4.53 | ) | 10 | 0.89 | (g) | 0.89 | (g) | 4.01 | (g) | 24 | ||||||||||||||||||||||||||||||||||
(a) | Calculated using average shares outstanding. | |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges and is not annualized for periods less than one year, if applicable. | |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. | |
(d) | Ratios are based on average daily net assets (000’s omitted) of $1,890, $22,336, $25,588 and $38,078 for Class B, Class C, Class Y and Institutional Class shares, respectively. | |
(e) | Includes the impact of the temporary 2% redemption fee which was effective March 12, 2007 through March 11, 2008. Redemption fees added to shares of beneficial interest for Class B, Class C and Institutional Class shares were $0.05, $0.05 and $0.04 per share and $0.47, $0.47 and $0.48 per share for the year ended August 31, 2008 and the eight months ended August 31, 2007, respectively. | |
(f) | Commencement date of March 9, 2007 for Class B, Class C and Institutional Class shares and October 3, 2008 for Class Y shares. | |
(g) | Annualized. |
NOTE 12—Subsequent Event
Effective September 1, 2011, the Fund changed its name to Invesco Global Real Estate Income Fund.
23 Invesco Select Real Estate Income Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Counselor Series Trust (Invesco Counselor Series Trust)
and Shareholders of Invesco Select Real Estate Income Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Invesco Select Real Estate Income Fund (one of the funds constituting AIM Counselor Series Trust (Invesco Counselor Series Trust), hereafter referred to as the “Fund”) at August 31, 2011, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at August 31, 2011 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
October 26, 2011
Houston, Texas
24 Invesco Select Real Estate Income Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments or contingent deferred sales charges on redemptions, and redemption fees, if any; and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period March 1, 2011 through August 31, 2011.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the hypothetical information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
HYPOTHETICAL | ||||||||||||||||||||||||||||||
ACTUAL | (5% annual return before expenses) | |||||||||||||||||||||||||||||
Beginning | Ending | Expenses | Ending | Expenses | Annualized | |||||||||||||||||||||||||
Account Value | Account Value | Paid During | Account Value | Paid During | Expense | |||||||||||||||||||||||||
Class | (03/01/11) | (08/31/11)1 | Period2 | (08/31/11) | Period2 | Ratio | ||||||||||||||||||||||||
A | $ | 1,000.00 | $ | 1,003.60 | $ | 6.46 | $ | 1,018.75 | $ | 6.51 | 1.28 | % | ||||||||||||||||||
B | 1,000.00 | 999.70 | 10.23 | 1,014.97 | 10.31 | 2.03 | ||||||||||||||||||||||||
C | 1,000.00 | 999.70 | 10.23 | 1,014.97 | 10.31 | 2.03 | ||||||||||||||||||||||||
Y | 1,000.00 | 1,004.90 | 5.21 | 1,020.01 | 5.24 | 1.03 | ||||||||||||||||||||||||
Institutional | 1,000.00 | 1,006.40 | 4.80 | 1,020.42 | 4.84 | 0.95 | ||||||||||||||||||||||||
1 | The actual ending account value is based on the actual total return of the Fund for the period March 1, 2011 through August 31, 2011, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund’s expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half year. |
25 Invesco Select Real Estate Income Fund
Approval of Investment Advisory and Sub-Advisory Contracts
The Board of Trustees (the Board) of AIM Counselor Series Trust (Invesco Counselor Series Trust) is required under the Investment Company Act of 1940, as amended, to approve annually the renewal of the Invesco Select Real Estate Income Fund (the Fund) investment advisory agreement with Invesco Advisers, Inc. (Invesco Advisers) and the Master Intergroup Sub-Advisory Contract for Mutual Funds (the sub-advisory contracts) with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers). During contract renewal meetings held on June 14-15, 2011, the Board as a whole, and the disinterested or “independent” Trustees, who comprise 80% of the Board, voting separately, approved the continuance of the Fund’s investment advisory agreement and the sub-advisory contracts for another year, effective July 1, 2011. In doing so, the Board considered the process that it follows in reviewing and approving the Fund’s investment advisory agreement and sub-advisory contracts and the information that it is provided. The Board determined that the Fund’s investment advisory agreement and the sub-advisory contracts are in the best interests of the Fund and its shareholders and the compensation to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is responsible for overseeing the management of a number of the series portfolios of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies and limitations and investment risks of these funds. The Sub-Committees meet regularly and at designated contract renewal meetings each year to conduct a review of the performance, fees, expenses and other matters related to their assigned Invesco Funds. Each Sub-Committee recommends to the Investments Committee, which in turn recommends to the full Board, whether to approve the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Trustees receive comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and an independent company, Lipper, Inc. (Lipper). The Trustees also receive an independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. The independent Trustees are assisted in their annual evaluation of the Fund’s investment advisory agreement by the Senior Officer and by independent legal counsel. The independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in private sessions with the Senior Officer and counsel.
In evaluating the fairness and reasonableness of the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Trustees also considered information provided in connection with fund acquisitions approved by the Trustees to rationalize the Invesco Funds product range following the acquisition of the retail mutual fund business of Morgan Stanley (the Morgan Stanley Transaction). The Trustees recognized that the advisory fees for the Invesco Funds include advisory fees that are the result of years of review and negotiation between the Trustees and Invesco Advisers as well as advisory fees inherited from Morgan Stanley and Van Kampen funds acquired in the Morgan Stanley Transaction. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these same arrangements throughout the year and in prior years. One Trustee may have weighed a particular piece of information differently than another Trustee.
The discussion below serves as the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 15, 2011, and may not reflect consideration of factors that became known to the Board after that date, including, for example, changes to the Fund’s performance, advisory fees, expense limitations and/or fee waivers.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers, with whom the Board met during the year. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s consideration of Invesco Advisers’ performance and investment process oversight, independent credit analysis and investment risk management.
In determining whether to continue the Fund’s investment advisory agreement, the Board considered the prior relationship between Invesco Advisers and the Fund, as well as the Board’s knowledge of Invesco Advisers’ operations, and concluded that it is beneficial to maintain the current relationship, in part, because of such knowledge. The Board also considered services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution and legal and compliance. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and the advisory services are provided in accordance with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services provided by the Affiliated Sub-Advisers under the sub-advisory contracts and the credentials and experience of the officers and employees of the Affiliated Sub-Advisers who provide these services. The Board noted that the Affiliated Sub-Advisers have offices and personnel that are located in financial centers around the world. As a result, the Affiliated Sub-Advisers can provide research and investment analysis on the markets and economies of various countries in which the Fund invests and make recommendations on securities of companies located in such countries. The Board concluded that the sub-advisory contracts benefit the Fund and its shareholders by permitting Invesco Advisers to use the resources and talents of the Affiliated Sub-Advisers in managing the Fund. The Board concluded that the nature, extent and quality of the services provided by the Affiliated Sub-Advisers are appropriate and satisfactory and in accordance with the terms of the Fund’s sub-advisory contracts.
26 Invesco Select Real Estate Income Fund
B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
The Board compared the Fund’s performance during the past one, three and five calendar years to the performance of funds in the Lipper performance universe and against the Lipper Real Estate Funds Index. The Board noted that performance of Class A shares of the Fund was in the fifth quintile of the Lipper performance universe for the one year period and the first 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 performance of Class A shares of the Fund was below the performance of the Index for the one year period and above the performance of the Index for the three and five year periods. Invesco Advisers advised the Board that short and intermediate term performance had been challenged due to the quality bias of the Fund. Although the independent written evaluation of the Fund’s Senior Officer only considered Fund performance through the most recent calendar year, the Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
C. | Advisory and Sub-Advisory Fees and Fee Waivers |
The Board compared the Fund’s contractual advisory fee rate to the contractual advisory fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the contractual advisory fee rate for Class A shares of the Fund was below the median contractual advisory fee rate of funds in the expense group. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using audited financial data from the most recent annual report of each fund in the expense group that was publicly available as of the end of the past calendar year and including only one fund per investment adviser. The Board noted that comparative data is as of varying dates, which may affect the comparability of data during times of market volatility.
The Board noted that Invesco Advisers and the Affiliated Sub-Advisers do not advise other mutual funds or client accounts with investment strategies comparable to those of the Fund.
The Board also noted that Invesco Advisers has contractually agreed to waive fees and/or limit expenses of the Fund through at least December 31, 2011 in an amount necessary to limit total annual operating expenses to a specified percentage of average daily net assets for each class of the Fund. The Board noted that at the current expense ratio for the Fund, this expense waiver does not have any impact.
The Board also considered the services provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the allocation of fees between Invesco Advisers and the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board noted that Invesco Advisers provides services to sub-advised Invesco Funds, including oversight of the Affiliated Sub-Advisers as well as the additional services described above other than day-to-day portfolio management. The Board also noted that the sub-advisory fees have no direct effect on the Fund or its shareholders, as they are paid by Invesco Advisers to the Affiliated Sub-Advisers.
Based upon the information and considerations described above, the Board concluded that the Fund’s advisory and sub-advisory fees are fair and reasonable.
D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule. The Board also noted that the 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 Invesco Advisers.
E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the profitability of Invesco Advisers and its affiliates in providing these services. The Board reviewed with Invesco Advisers the methodology used to prepare the profitability information. The Board considered the profitability of Invesco Advisers in connection with managing the Fund and the Invesco Funds. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its subsidiaries provide to the Fund and the Invesco Funds. The Board concluded that the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund is not excessive given the nature, quality and extent of the services provided to the Invesco Funds. The Board considered whether Invesco Advisers and each Affiliated Sub-Adviser are financially sound and have the resources necessary to perform their obligations under the investment advisory agreement and sub-advisory contracts. The Board concluded that Invesco Advisers and each Affiliated Sub-Adviser have the financial resources necessary to fulfill these obligations.
F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund, including the fees received for their provision of administrative, transfer agency and distribution services to the Fund. The Board considered the performance of Invesco Advisers 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 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 Fund; that Invesco Advisers 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; and 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.
The Board considered the benefits realized by Invesco Advisers and the Affiliated Sub-Advisers as a result of portfolio brokerage transactions executed through “soft dollar” arrangements. The Board noted that soft dollar arrangements shift the payment obligation for research and execution services from Invesco Advisers and the Affiliated Sub-Advisers to the Invesco Funds and therefore may reduce Invesco Advisers’ and the Affiliated Sub-Advisers’ expenses. The Board concluded that the soft dollar arrangements are appropriate. The Board also concluded that, based on their review and representations made by the Chief Compliance Officer of the Invesco Funds, these arrangements are consistent with regulatory requirements.
The Board considered that the Fund’s uninvested cash and cash collateral from any securities lending arrangements may be invested in money market funds advised by Invesco Advisers pursuant to procedures approved by the Board. The Board noted that Invesco Advisers receives advisory fees from these affiliated money market funds attributable to such investments, although Invesco Advisers has contractually agreed to waive through at varying periods the advisory fees payable by the Invesco Funds. The waiver is in an amount equal to 100% of the net advisory fee Invesco Advisers receives from the affiliated money market funds with respect to the Fund’s investment in the affiliated money market funds of uninvested cash, but not cash collateral. The Board concluded that the Fund’s investment of uninvested cash and cash collateral from any securities lending arrangements in the affiliated money market funds is in the best interests of the Fund and its shareholders.
27 Invesco Select Real Estate Income Fund
Tax Information
Form 1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific state’s requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended August 31, 2011:
Federal and State Income Tax | ||||||||
Qualified Dividend Income* | 0% | |||||||
Corporate Dividends Received Deduction* | 0% |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Fund’s fiscal year. |
28 Invesco Select Real Estate Income Fund
Trustees and Officers
The address of each trustee and officer is AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”), 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Number of Funds | ||||||||
in Fund Complex | ||||||||
Name, Year of Birth and | Trustee and/ | Principal Occupation(s) | Overseen by | Other Directorship(s) | ||||
Position(s) Held with the Trust | or Officer Since | During Past 5 Years | Trustee | Held by Trustee | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 — 1960 Trustee | 2007 | 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 | 143 | 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. Taylor2 — 1954 Trustee, President and Principal Executive Officer | 2006 | 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 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 Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust); Trustee and Executive Vice President, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s 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 Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Tax-Free Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. | 143 | None | ||||||
Wayne W. Whalen3 — 1939 Trustee | 2010 | Of Counsel, and prior to 2010, partner in the law firm of Skadden, Arps, Slate, Meagher & Flom LLP, legal counsel to funds in the Fund Complex | 161 | Director of the Abraham Lincoln Presidential Library Foundation | ||||
Independent Trustees | ||||||||
Bruce L. Crockett — 1944 Trustee and Chair | 2003 | Chairman, Crockett Technology Associates (technology consulting company) Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer COMSAT Corporation; and Chairman, Board of Governors of INTELSAT (international communications company) | 143 | ACE Limited (insurance company); and Investment Company Institute | ||||
1 | Mr. Flanagan is considered an interested person of the Trust because he is an officer of the adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the adviser to the Trust. |
2 | Mr. Taylor is considered an interested person of the Trust because he is an officer and a director of the adviser to, and a director of the principal underwriter of, the Trust. |
3 | Mr. Whalen has been deemed to be an interested person of the Trust because of his prior service as counsel to the predecessor funds of certain Invesco open-end funds and his affiliation with the law firm that served as counsel to such predecessor funds and continues to serve as counsel to the Invesco Van Kampen closed-end funds. |
T-1 Invesco Select Real Estate Income Fund
Trustees and Officers—(continued)
The address of each trustee and officer is AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”), 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Number of Funds | ||||||||
in Fund Complex | ||||||||
Name, Year of Birth and | Trustee and/ | Principal Occupation(s) | Overseen by | Other Directorship(s) | ||||
Position(s) Held with the Trust | or Officer Since | During Past 5 Years | Trustee | Held by Trustee | ||||
Independent Trustees | ||||||||
David C. Arch — 1945 Trustee | 2010 | Chairman and Chief Executive Officer of Blistex Inc., a consumer health care products manufacturer. | 161 | 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 | ||||
Bob R. Baker — 1936 Trustee | 1983 | Retired | 143 | None | ||||
Formerly: President and Chief Executive Officer, AMC Cancer Research Center; and Chairman and Chief Executive Officer, First Columbia Financial Corporation | ||||||||
Frank S. Bayley — 1939 Trustee | 2003 | Retired Formerly: Director, Badgley Funds, Inc. (registered investment company) (2 portfolios) and Partner, law firm of Baker & McKenzie | 143 | Director and Chairman, C.D. Stimson Company (a real estate investment company) | ||||
James T. Bunch — 1942 Trustee | 2000 | 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 | 143 | Vice Chairman, Board of Governors, Western Golf Association/Evans Scholars Foundation and Director, Denver Film Society | ||||
Rodney Dammeyer — 1940 Trustee | 2010 | President 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. | 161 | 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 | 2003 | 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) | 161 | Board of Nature’s 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 | 2003 | 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) | 143 | Administaff | ||||
Formerly: Chief Executive Officer, Texana Timber LP (sustainable forestry company) and member of the U.S. House of Representatives | ||||||||
Carl Frischling — 1937 Trustee | 2003 | Partner, law firm of Kramer Levin Naftalis and Frankel LLP | 143 | Director, Reich & Tang Funds (6 portfolios) | ||||
Prema Mathai-Davis — 1950 Trustee | 2003 | Retired | 143 | None | ||||
Formerly: Chief Executive Officer, YWCA of the U.S.A. | ||||||||
Larry Soll — 1942 Trustee | 1997 | Retired | 143 | None | ||||
Formerly, Chairman, Chief Executive Officer and President, Synergen Corp. (a biotechnology company) | ||||||||
T-2 Invesco Select Real Estate Income Fund
Trustees and Officers—(continued)
The address of each trustee and officer is AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”), 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Number of Funds | ||||||||
in Fund Complex | ||||||||
Name, Year of Birth and | Trustee and/ | Principal Occupation(s) | Overseen by | Other Directorship(s) | ||||
Position(s) Held with the Trust | or Officer Since | During Past 5 Years | Trustee | Held by Trustee | ||||
Independent Trustees | ||||||||
Hugo F. Sonnenschein — 1940 Trustee | 2010 | President Emeritus and Honorary Trustee 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. | 161 | 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 | 2005 | Retired Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios) and Partner, Deloitte & Touche | 143 | None | ||||
Other Officers | ||||||||
Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer of Invesco Funds | N/A | N/A | ||||
John M. Zerr — 1962 Senior Vice President, Chief Legal Officer and Secretary | 2006 | 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 | N/A | N/A | ||||
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) | ||||||||
Lisa O. Brinkley — 1959 Vice President | 2004 | Global Compliance Director, Invesco Ltd.; Chief Compliance Officer, Invesco Investment Services, Inc.(formerly known as Invesco Aim Investment Services, Inc.); and Vice President, The Invesco Funds Formerly: Chief Compliance Officer, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) and Van Kampen Investor Services Inc.; Senior Vice President, Invesco Management Group, Inc.; Senior Vice President and Chief Compliance Officer, Invesco Advisers, Inc. and The Invesco Funds; Vice President and Chief Compliance Officer, Invesco Aim Capital Management, Inc. and Invesco Distributors, Inc.; Vice President, Invesco Investment Services, Inc. and Fund Management Company | N/A | N/A | ||||
Sheri Morris — 1964 Vice President, Treasurer and Principal Financial Officer | 2003 | 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) | N/A | N/A | ||||
Formerly: 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, 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. | ||||||||
T-3 Invesco Select Real Estate Income Fund
Trustees and Officers—(continued)
The address of each trustee and officer is AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”), 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Number of Funds | ||||||||
in Fund Complex | ||||||||
Name, Year of Birth and | Trustee and/ | Principal Occupation(s) | Overseen by | Other Directorship(s) | ||||
Position(s) Held with the Trust | or Officer Since | During Past 5 Years | Trustee | Held by Trustee | ||||
Other Officers | ||||||||
Karen Dunn Kelley — 1960 Vice President | 2003 | Head of Invesco’s 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 Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust); and President and Principal Executive Officer, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust only). | N/A | N/A | ||||
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 Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Tax-Free Investments Trust only) | ||||||||
Lance A. Rejsek — 1967 Anti-Money Laundering Compliance Officer | 2005 | 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.), The Invesco Funds, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management) and Van Kampen Funds Inc. | N/A | N/A | ||||
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Investor Services Inc., Fund Management Company, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc. | ||||||||
Todd L. Spillane — 1958 Chief Compliance Officer | 2006 | 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, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, INVESCO Private Capital Investments, Inc. (holding company) and Invesco Private Capital, Inc. (registered investment adviser); Vice President, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.), Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.). Formerly: 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 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 | N/A | N/A | ||||
The Statement of Additional Information of the Trust includes additional information about the Fund’s Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Fund’s prospectus for information on the Fund’s sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 2500 Houston, TX 77046-1173 | Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 | Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 2500 Houston, TX 77046-1173 | Auditors PricewaterhouseCoopers LLP 1201 Louisiana Street, Suite 2900 Houston, TX 77002-5678 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2600 One Commerce Square Philadelphia, PA 19103 | Counsel to the Independent Trustees Kramer, Levin, Naftalis & Frankel LLP 1177 Avenue of the Americas New York, NY 10036-2714 | Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 2500 Houston, TX 77046-1173 | Custodian State Street Bank and Trust Company 225 Franklin Boston, MA 02110-2801 |
T-4 Invesco Select Real Estate Income Fund
![()](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464111.gif)
Invesco mailing information
Send general correspondence to Invesco Investment Services, Inc., P.O. Box 219078, Kansas City, MO 64121-9078.
Invesco privacy policy
You share personal and financial information with us that is necessary for your transactions and your account records. We take very seriously the obligation to keep that information confidential and private.
Invesco collects nonpublic personal information about you from account applications or other forms you complete and from your transactions with us or our affiliates. We do not disclose information about you or our former customers to service providers or other third parties except to the extent necessary to service your account and in other limited circumstances as permitted by law. For example, we use this information to facilitate the delivery of transaction confirmations, financial reports, prospectuses and tax forms.
Even within Invesco, only people involved in the servicing of your accounts and compliance monitoring have access to your information. To ensure the highest level of confidentiality and security, Invesco maintains physical, electronic and procedural safeguards that meet or exceed federal standards. Special measures, such as data encryption and authentication, apply to your communications with us on our website. More detail is available to you at invesco.com/privacy.
Important notice regarding delivery of security holder documents
To reduce Fund expenses, only one copy of most shareholder documents may be mailed to shareholders with multiple accounts at the same address (Householding). Mailing of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact Invesco Investment Services, Inc. at 800 959 4246 or contact your financial institution. We will begin sending you individual copies for each account within 30 days after receiving your request.
Fund holdings and proxy voting information
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is available at invesco.com/completeqtrholdings. Shareholders can also look up the Fund’s Forms N-Q on the SEC website at sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-09913 and 333-36074.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov.![(INVESCO AIM LOGO)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464112.gif)
Information regarding how the Fund voted proxies related to its portfolio securities during the 12 months ended June 30, 2011, is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov.
Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the U.S. distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
![(INVESCO AIM LOGO)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464112.gif)
Information regarding how the Fund voted proxies related to its portfolio securities during the 12 months ended June 30, 2011, is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov.
Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the U.S. distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
GREI-AR-1 | Invesco Distributors, Inc. |
![]() |
Annual Report to Shareholders | August 31, 2011 |
Invesco Structured Core Fund
Nasdaq:
A: SCAUX • B: SBCUX • C: SCCUX • R: SCRUX • Y: SCAYX
Investor: SCNUX • Institutional: SCIUX
2 | Letters to Shareholders | |
4 | Performance Summary | |
4 | Management Discussion | |
6 | Long-Term Fund Performance | |
8 | Supplemental Information | |
9 | Schedule of Investments | |
12 | Financial Statements | |
14 | Notes to Financial Statements | |
22 | Financial Highlights | |
23 | Auditor’s Report | |
24 | Fund Expenses | |
25 | Approval of Investment Advisory and Sub-Advisory Agreements | |
27 | Tax Information | |
T-1 | Trustees and Officers |
Letters to Shareholders
![(PHOTO OF PHILIP TAYLOR)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464202.jpg)
Philip Taylor
Dear Shareholders:
Enclosed is important information about your Fund and its performance. I encourage you to read this report to learn more about your Fund’s short- and long-term performance and its holdings as of the close of the reporting period. This report also includes useful information about your Fund’s management team and a discussion of how your Fund was managed during the reporting period.
Data indicated that economic growth in the U.S. and most of Europe was anemic during the reporting period. In the U.S., unemployment remained high, and the housing market remained weak. Concerns about European sovereign debt persisted. Nonetheless, equity markets rose in late 2010 and early 2011 as investors anticipated better news ahead. But contentious negotiations to raise the U.S. government’s debt ceiling heightened investor unease, and following the first-ever downgrade of U.S. creditworthiness in August, global stock markets declined as many investors sought safer havens.
Where you can get current information about your Fund
In light of economic uncertainty and market volatility, I suggest you check the timely market updates and commentary from many of our fund managers and other investment professionals at invesco.com/us. On our website, you also can obtain information about your account at any hour of the day or night. I invite you to visit and explore the tools and information we offer at invesco.com/us.
Our commitment to investment excellence
As we’ve seen over the last several years, market conditions can change – often suddenly and dramatically. That’s one reason financial advisers typically advise their clients to be well diversified and to maintain a long-term investment focus. While diversification can’t guarantee a profit or protect against loss, it can cushion the impact of dramatic market moves. Maintaining a long-term investment focus for your long-term goals – financing your retirement or your children’s education, for example – may help you avoid making rash investment decisions based on short-term market swings.
Invesco’s investment professionals apply these same principles to the funds they manage.
Invesco offers a broad array of traditional mutual funds, as well as other investment products, including single-country, sector, regional and global investments spanning equity, fixed income and alternative asset classes. Across our product line, investment excellence is our ultimate goal. Each of our funds is managed by specialized teams of investment professionals, and as a company, we maintain a single focus – investment management – that allows our fund managers to concentrate on doing what they do best: managing your money.
Our funds are managed strictly according to their stated investment objectives and strategies, with robust risk oversight using consistent, repeatable investment processes that don’t change in response to short-term market events. This disciplined approach can’t guarantee a profit; no investment can do that, since all involve some measure of risk. But it can ensure that your money is managed the way we said it would be, and that it’s managed with a long-term focus.
Our adherence to stated investment objectives and strategies allows your financial adviser to build a diversified portfolio that meets your individual risk tolerance and financial goals. It also means that when your goals change, your financial adviser will be able to find an Invesco fund that’s appropriate for your needs.
Questions?
If you have questions about your account, please contact one of our client service representatives at 800 959 4246. If you have a general Invesco-related question or comment for me, I invite you to email me directly at phil@invesco.com.
All of us at Invesco look forward to serving your investment management needs for many years to come. Thank you for investing with us.
Sincerely,
![-s- PHILIP TAYLOR](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464203.gif)
Philip Taylor
Senior Managing Director, Invesco Ltd.
Senior Managing Director, Invesco Ltd.
2 | Invesco Structured Core Fund |
![(PHOTO OF BRUCE CROCKETT)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464204.jpg)
Bruce Crockett
Dear Fellow Shareholders:
Although the world’s economies are gradually recovering from the financial crisis, it has not been a smooth path. Unrest in the Middle East, persistently weak job and housing markets in the U.S. and continued government balance sheet repair in Europe are contributing to a slow, labored march toward global recovery.
In this environment, investors face risks that could make it more difficult to achieve their long-term financial goals – a secure retirement, home ownership, a child’s college education. Although the markets are complex and dynamic, there are ways to simplify the process and potentially increase your odds of achieving your goals. The best approach is to create a solid financial plan that helps you save and invest in ways that anticipate your needs over the long term.
Your financial adviser can help you define your financial plan, develop an appropriate investment strategy and put you in a better position to achieve your financial goals over the long term. This can take some of the guesswork out of the process and help you make thoughtful investments. Your financial adviser also can help you better understand your tolerance for risk, so that your investment approach lets you sleep at night while getting you closer to your goals. Lastly, your financial adviser can develop an asset allocation strategy that seeks to balance your investment approach, providing some protection against a decline in the markets while allowing you to participate in rising markets. Invesco calls this type of approach “intentional investing.” It means thinking carefully, planning thoughtfully and acting deliberately.
While no investment can guarantee favorable returns, your Board remains committed to managing costs and enhancing the performance of Invesco’s funds as part of our Investor First orientation. We continue to oversee the funds with the same strong sense of responsibility for your money and your continued trust that we’ve always maintained.
Thanks to the approval of our fund shareholders, Invesco has made great progress in realigning our U.S. mutual fund product line following our acquisition of Morgan Stanley’s retail asset management business, including Van Kampen Investments. When completed, the realignment will reduce overlap in the product lineup, enhance efficiency across our product line and build a solid foundation for further growth to meet client and shareholder needs. I would like to thank those of you who voted your proxy, and I hope our shareholders haven’t been too inconvenienced by the process.
As always, please contact me at bruce@brucecrockett.com with any questions or concerns you may have. On behalf of your Board, we look forward to continuing to represent your interests and serving your needs.
Sincerely,
![-s- BRUCE L. CROCKETT](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464205.gif)
Bruce L. Crockett
Independent Chair
Invesco Funds Board of Trustees
Independent Chair
Invesco Funds Board of Trustees
3 | Invesco Structured Core Fund |
Management’s Discussion of Fund Performance
Performance summary
For the fiscal year ended August 31, 2011, Invesco Structured Core Fund at net asset value (NAV) trailed the S&P 500 Index but outperformed the Lipper Large-Cap Core Funds Index. The Fund seeks to provide long term growth of capital by investing, typically, at least 80% of its assets in a diversified portfolio of securities of large-cap companies. Stock selection in the information technology (IT) and health care sectors contributed to the Fund’s positive performance. The consumer discretionary, consumer staples, industrials, materials and telecommunication services sectors detracted from overall performance.
Your Fund’s long-term performance appears later in this report.
Fund vs. Indexes
Total returns, 8/31/10 to 8/31/11, at net asset value (NAV). Performance shown does not include applicable contingent deferred sales charges (CDSC) or front-end sales charges, which would have reduced performance.
Class A Shares | 18.00 | % | ||
Class B Shares | 17.15 | |||
Class C Shares | 16.99 | |||
Class R Shares | 17.68 | |||
Class Y Shares | 18.24 | |||
Investor Class Shares | 17.76 | |||
Institutional Class Shares | 18.24 | |||
S&P500 Index ▼ (Broad Market/Style-Specific Index) | 18.48 | |||
Lipper Large-Cap Core Funds Index ▼ (Peer Group Index) | 16.94 |
▼ | Lipper Inc. |
How we invest
We manage your Fund to provide exposure to large-cap core equity stocks. The portfolio strives to outperform the S&P 500 Index while minimizing the amount of additional risk relative to the benchmark. The Fund can be used as a long-term allocation to large-cap stocks that complements other style-specific strategies within a diversified asset allocation strategy.
Our investment process integrates the following key steps:
n | Universe development | |
n | Stock rankings | |
n | Risk assessment | |
n | Portfolio construction | |
n | Trading |
While the companies included in the S&P 500 Index are used as a general guide
Portfolio Composition
By sector
Information Technology | 17.7 | % | ||
Health Care | 17.4 | |||
Energy | 13.5 | |||
Financials | 12.9 | |||
Consumer Discretionary | 9.9 | |||
Industrials | 7.4 | |||
Telecommunication Services | 7.4 | |||
Consumer Staples | 6.7 | |||
Materials | 5.8 | |||
Money Market Funds | ||||
Plus Other Assets Less Liabilities | 1.3 |
Total Net Assets | $354.3 million | |||
Total Number of Holdings* | 81 |
for developing the Fund’s investable universe, non-benchmark stocks may also be considered. Each stock in the universe is evaluated on four concepts: company earnings momentum, price trend, management action and relative valuation. The scores from these four concepts are combined to arrive at an overall alpha score (excess return forecast) for each stock. Each alpha score is relative to the other securities in the same industry. Stocks also are evaluated on a number of other factors to develop a stock-specific risk forecast and transaction cost forecast.
We then incorporate the alpha forecast, risk forecast and transaction cost forecast using an optimizer (a software tool) to build a portfolio that we believe is an optimal balance of the stocks’ potential risk and
Top 10 Equity Holdings*
1. | Apple Inc. | 5.1 | % | |||||
2. | Exxon Mobil Corp. | 4.8 | ||||||
3. | AT&T Inc. | 3.3 | ||||||
4. | General Electric Co. | 3.1 | ||||||
5. | Pfizer Inc. | 3.0 | ||||||
6. | Verizon Communications Inc. | 2.8 | ||||||
7. | Microsoft Corp. | 2.7 | ||||||
8. | Philip Morris International Inc. | 2.7 | ||||||
9. | UnitedHealth Group Inc. | 2.4 | ||||||
10. | Amgen Inc. | 2.3 |
The Fund’s holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
* Excluding money market fund holdings.
return. This portfolio is constructed according to certain constraints to increase the probability that the Fund’s relative performance and volatility remain within the Fund’s strategy guidelines. We continually monitor the portfolio and the overall investment process is repeated on a monthly basis to determine which companies should be bought or sold in the portfolio.
In terms of risk management, we seek to minimize any style biases in the portfolio. Active managers typically add value in one of, or a combination of, four areas: beta bias (relative volatility), style bias, stock selection and sector/industry over- and underweight. We attempt to add value through our stock selection decisions. Consequently, our risk management process seeks to neutralize the Fund’s exposure relative to the benchmark with regard to beta, style and sector/industry exposures.
Market conditions and your Fund
The fiscal year covered by this report began with the U.S. equity markets posting very strong results across most capitalization ranges. These gains were the result of continuing improvement in the overall U.S. economy. Third quarter 2010 gross domestic product was strong when initially reported and subsequently revised upward. But companies found themselves much too early in the recovery cycle to start testing pricing power. Also, improvement in retail sales over the previous year offered encouraging signs that the American consumer is willing to spend. The strong performance of equity markets continued during the beginning of 2011.
The market stumbled in May and June as ongoing concerns over slower economic growth and Greek sovereign-debt fears clouded the recovery picture. The expiration of the U.S. Federal Reserve’s bond buying program and congressional haggling over raising the debt ceiling also weighed heavily on the market. The uncertainty continued in July over concerns about job creation. The country’s ability to pay its debts became a growing issue throughout the month, as the battle between Congress and the White House over raising the debt ceiling grew to a fever pitch. With the threat of a downgrade from the major ratings agencies, the stakes were of the highest order.
Even though an agreement to raise the debt limit was reached at the eleventh hour, the fiscal year ended on a sour note. The fateful and unprecedented decision by Standard & Poor’s to downgrade U.S.
4 | Invesco Structured Core Fund |
government debt helped to precipitate a wave of selling and an increase in stock market volatility. The downgrade also caused most investors to lower their expectations for future economic growth. As a result, the U.S. dollar and oil fell, while gold and, ironically, U.S. Treasuries rallied.
All sectors in the broad market index, aside from the financials sector, posted positive returns for the reporting period. All investment styles posted positive returns, with small—cap stocks generally outperforming both mid-cap and large-cap stocks and growth stocks generally outpacing value stocks for the reporting period.
Regarding the results of Invesco Structured Core Fund, it is important to understand our investment process to better evaluate the drivers of our relative performance versus the benchmark. We generally evaluate performance based on the effect of our stock selection and risk management.
Our stock selection model, based on the four concepts (company earnings momentum, price trend, management action and relative value) that make up our alpha (excess return) forecast for stocks in our investment universe, was a contributor to Fund performance for the fiscal year. When selecting Fund holdings we also take into account our risk and transaction cost forecasts. We use our optimization software to assist in making investment decisions, based on our alpha forecast as well as our risk and transaction cost forecasts. Consequently, while our stock selection model may identify a stock with an attractive alpha forecast, the optimizer may indicate that its transaction costs are too high and/or its risk level is unacceptable.
All sectors in the Fund generated positive returns over the Fund’s fiscal year. Stock selection in the IT and health care sectors was particularly strong. Also contributing to Fund performance was positive stock selection in the financials sector. The consumer discretionary, consumer staples, industrials, materials and telecommunication services sectors detracted from overall Fund performance.
Among individual stocks, Apple and International Business Machines were top contributors in the IT sector. At the end of the reporting period, Steve Jobs, chief executive officer of Apple, announced his resignation from the company he founded. He named Tim Cook, Apple’s chief operating officer, as his successor. Holdings in the energy sector were also strong performers during the fiscal year. Top contributors in this sector included Exxon Mobil and Chevron.
While stock selection in the financials sector was strong on a relative basis, several holdings detracted from the Fund’s positive performance. Detractors included Citigroup and KeyCorp. Other detractors were telecommunication services company MetroPCS Communications and consumer discretionary company Interpublic Group. Interpublic Group is a global advertising and marketing services company specializing in consumer advertising, digital marketing, media planning and buying, public relations and specialized communications disciplines. We no longer held MetroPCS Communications at the end of the reporting period.
At the beginning of the fiscal year, the Fund’s underlying investment model struggled to add value compared to the benchmark index. Toward the end of the reporting period, the model began to generate more positive stock selection results. Our earnings momentum, management action and price trend concepts have been building positive momentum since early 2011. Our weakest concept, relative value, began to show small positive contributions starting in April 2011.
During the reporting period, the Fund invested in S&P 500 futures contracts, a derivative instrument, to gain exposure to the equity market. These futures contracts contributed to Fund performance.
Despite some meaningful challenges, the U.S. economy continued to grow over the 12 months ended August 31, 2011. U.S. equity markets, reflecting this economic expansion, posted some sizable gains over the reporting period. Some significant economic challenges remain, including housing weakness, unemployment, government and household deleveraging and Europe’s sovereign debt crisis. However, slower growth does not mean no growth or, worse, contraction.
We welcome new investors who joined the Fund during the fiscal year and thank all of our shareholders for your investment in Invesco Structured Core Fund.
The views and opinions expressed in management’s discussion of Fund performance are those of Invesco Advisers, Inc. These views and opinions are subject to change at any time based on factors such as market and economic conditions. These views and opinions may not be relied upon as investment advice or recommendations, or as an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but Invesco Advisers, Inc. makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
See important Fund and, if applicable, index disclosures later in this report.
![(RALPH COUTANT PHOTO)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464206.jpg)
Ralph Coutant
Chartered Financial Analyst, portfolio manager, is manager of Invesco Structured Core Fund. Mr. Coutant joined Invesco in 1999. He earned a B.S. in business administration from the University of New Hampshire.
![(GLEN MURPHY PHOTO)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464207.jpg)
Glen Murphy
Chartered Financial Analyst, portfolio manager, is manager of Invesco Structured Core Fund. Mr. Murphy joined Invesco in 1995. He earned a B.B.A. from the University of Massachusetts at Amherst and an M.S. in finance from Boston College.
![(DANIEL TSAI PHOTO)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464208.jpg)
Daniel Tsai
Chartered Financial Analyst, portfolio manager, is manager of Invesco Structured Core Fund. Mr. Tsai joined Invesco in 2000. He earned a B.S. in mechanical engineering from National Taiwan University and an M.S. in mechanical engineering from the University of Michigan. He also earned an M.S. in computer science from Wayne State University.
![(ANNE UNFLAT PHOTO)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464209.jpg)
Anne Unflat
Portfolio manager, is manager of Invesco Structured Core Fund. Ms. Unflat joined Invesco in 1988. She graduated magna cum laude from Queens College with a B.A. in economics. She earned an M.B.A. in finance from St. John’s University.
![(ANDREW WAISBURD PHOTO)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464210.jpg)
Andrew Waisburd
Portfolio manager, is manager of Invesco Structured Core Fund. Mr. Waisburd joined Invesco in 2008. He earned a B.S. in statistics from Cornell University and both an M.S. and Ph.D. in finance from Indiana University.
5 | Invesco Structured Core Fund |
Your Fund’s Long-Term Performance
Results of a $10,000 Investment – Oldest Share Classes since Inception
Fund and index data from 3/31/06
![(PERFORMANCE CHART)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464211.gif)
Past performance cannot guarantee comparable future results.
The data shown in the chart include reinvested distributions, applicable sales charges and Fund expenses including management fees. Results for Class B shares are calculated as if a hypothetical shareholder had liquidated his entire investment in the Fund at the close of the reporting period and paid the contingent deferred sales charges, if applicable. Index results include reinvested dividends, but they do not reflect sales
charges. Performance of the peer group, if applicable, reflects fund expenses and management fees; performance of a market index does not. Performance shown in the chart and table(s) does not reflect deduction of taxes a shareholder would pay on Fund distributions or sale of Fund shares.
This chart, which is a logarithmic chart, presents the fluctuations in the value of the Fund and its indexes. We believe that a logarithmic chart is more effective than other types of charts in illustrating
changes in value during the early years shown in the chart. The vertical axis, the one that indicates the dollar value of an investment, is constructed with each segment representing a percent change in the value of the investment. In this chart, each segment represents a doubling, or 100% change, in the value of the investment. In other words, the space between $5,000 and $10,000 is the same size as the space between $10,000 and $20,000.
6 | Invesco Structured Core Fund |
Average Annual Total Returns
As of 8/31/11, including maximum applicable sales charges
Class A Shares | ||||||
Inception (3/31/06) | -1.77 | % | ||||
5 | Years | -2.28 | ||||
1 | Year | 11.44 | ||||
Class B Shares | ||||||
Inception (3/31/06) | -1.59 | % | ||||
5 | Years | -2.19 | ||||
1 | Year | 12.15 | ||||
Class C Shares | ||||||
Inception (3/31/06) | -1.47 | % | ||||
5 | Years | -1.91 | ||||
1 | Year | 15.99 | ||||
Class R Shares | ||||||
Inception (3/31/06) | -0.96 | % | ||||
5 | Years | -1.39 | ||||
1 | Year | 17.68 | ||||
Class Y Shares | ||||||
Inception | -0.57 | % | ||||
5 | Years | -0.99 | ||||
1 | Year | 18.24 | ||||
Investor Class Shares | ||||||
Inception | -0.72 | % | ||||
5 | Years | -1.15 | ||||
1 | Year | 17.76 | ||||
Institutional Class Shares | ||||||
Inception (3/31/06) | -0.47 | % | ||||
5 | Years | -0.90 | ||||
1 | Year | 18.24 |
Class Y shares incepted on October 3, 2008. Performance shown prior to that date is that of Class A shares and includes the 12b-1 fees applicable to Class A shares. Class A share performance reflects any applicable fee waivers or expense reimbursements.
Investor Class shares incepted on April 25, 2008. Performance shown prior to that date is that of Class A shares and includes the 12b-1 fees applicable to Class A shares. Class A share performance reflects any applicable fee waivers or expense reimbursements.
Average Annual Total Returns
As of 6/30/11, the most recent calendar quarter-end, including maximum applicable sales charges
Class A Shares | ||||||
Inception (3/31/06) | -0.22 | % | ||||
5 | Years | 0.00 | ||||
1 | Year | 21.86 | ||||
Class B Shares | ||||||
Inception (3/31/06) | 0.00 | % | ||||
5 | Years | 0.13 | ||||
1 | Year | 23.00 | ||||
Class C Shares | ||||||
Inception (3/31/06) | 0.11 | % | ||||
5 | Years | 0.39 | ||||
1 | Year | 26.89 | ||||
Class R Shares | ||||||
Inception (3/31/06) | 0.63 | % | ||||
5 | Years | 0.93 | ||||
1 | Year | 28.55 | ||||
Class Y Shares | ||||||
Inception | 1.02 | % | ||||
5 | Years | 1.32 | ||||
1 | Year | 29.28 | ||||
Investor Class Shares | ||||||
Inception | 0.89 | % | ||||
5 | Years | 1.18 | ||||
1 | Year | 28.93 | ||||
Institutional Class Shares | ||||||
Inception (3/31/06) | 1.13 | % | ||||
5 | Years | 1.41 | ||||
1 | Year | 29.08 |
The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Please visit invesco.com/performance for the most recent month-end performance. Performance figures reflect reinvested distributions, changes in net asset value and the effect of the maximum sales charge unless otherwise stated. Investment return and principal value will fluctuate so that you may have a gain or loss when you sell shares.
The net annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Class A, Class B, Class C, Class R, Class Y, Investor Class and Institutional Class shares was 1.00%, 1.75%, 1.75%, 1.25%, 0.75%, 1.00%, and 0.75%, respectively.1 The total annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Class A, Class B, Class C, Class R, Class Y, Investor Class and Institutional Class shares was 1.31%, 2.06%, 2.06%, 1.56%, 1.06%, 1.31% and 0.91%, respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.
Class A share performance reflects the maximum 5.50% sales charge, and Class B and Class C share performance reflects the applicable contingent deferred sales charge (CDSC) for the period involved. The CDSC on Class B shares declines from 5% beginning at the time of purchase to 0% at the beginning of the seventh year. The CDSC on Class C shares is 1% for the first year after purchase. Class R, Class Y, Investor Class and Institutional Class shares do not have a front-end sales charge or a CDSC; therefore, performance is at net asset value.
The performance of the Fund’s share classes will differ primarily due to different sales charge structures and class expenses.
Had the adviser not waived fees and/or reimbursed expenses, performance would have been lower.
1 | Total annual Fund operating expenses after any contractual fee waivers and/or expense reimbursements by the adviser in effect through at least December 31, 2011. See current prospectus for more information. |
continued from page 8
n | The returns shown in management’s discussion of Fund performance are based on net asset values calculated for shareholder transactions. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for |
financial reporting purposes, and as such, the net asset values for shareholder transactions and the returns based on those net asset values may differ from the net asset values and returns reported in the Financial Highlights. |
n | Industry classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. |
7 | Invesco Structured Core Fund |
Invesco Structured Core Fund’s investment objective is long-term growth of capital.
n | Unless otherwise stated, information presented in this report is as of August 31, 2011, and is based on total net assets. | |
n | Unless otherwise noted, all data provided by Invesco. | |
n | To access your Fund’s reports/prospectus, visit invesco.com/fundreports. |
About share classes
n | Class B shares may not be purchased or acquired by exchange from share classes other than Class B shares. Please see the prospectus for more information. | |
n | Class R shares are available only to certain retirement plans. Please see the prospectus for more information. | |
n | Class Y shares are available to only certain investors. Please see the prospectus for more information. | |
n | All Investor Class shares are closed to new investors. Contact your financial adviser about purchasing our other share classes. | |
n | Institutional Class shares are offered exclusively to institutional investors, including defined contribution plans that meet certain criteria. Please see the prospectus for more information. |
Principal risks of investing in the Fund
n | Active trading risk. The Fund engages in frequent trading of portfolio securities. Active trading results in added expenses and may result in a lower return and increased tax liability. | |
n | Derivatives risk. Derivatives may be more difficult to purchase, sell or value than other investments and may be subject to market, interest rate, credit, leverage, counterparty and management risks. A fund investing in a derivative could lose more than the cash amount invested or incur higher taxes. Over-the-counter derivatives are also subject to counterparty risk, which is the risk that the other party to the contract will not fulfill its contractual obligation to complete the transaction with the Fund. | |
n | Exchange-traded funds risk. An investment by the Fund in ETFs generally presents the same primary risks as an investment in a mutual fund. In addition, an ETF may be subject to the following: (1) a discount of the ETF’s shares to its net asset value; |
(2) failure to develop an active trading market for the ETF’s shares; (3) the listing exchange halting trading of the ETF’s shares; (4) failure of the ETF’s shares to track the referenced index; and (5) holding troubled securities in the referenced index. ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests. Further, certain of the ETFs in which the Fund may invest are leveraged. The more the Fund invests in such leveraged ETFs, the more this leverage will magnify any losses on those investments. | ||
n | Foreign securities risk. The Fund’s foreign investments may be affected by changes in a foreign country’s exchange rates; political and social instability; changes in economic or taxation policies; difficulties when enforcing obligations; decreased liquidity; and increased volatility. Foreign companies may be subject to less regulation resulting in less publicly available information about the companies. | |
n | 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. | |
n | Leverage risk. Leverage exists when the Fund purchases or sells an instrument or enters into a transaction without investing cash in an amount equal to the full economic exposure of the instrument or transaction and the Fund could lose more than it invested. Leverage created from borrowing or certain types of transactions or instruments, including derivatives, may impair the Fund’s liquidity, cause it to liquidate positions at an unfavorable time, increase volatility or otherwise not achieve its intended objective. |
n | Limited number of holdings risk. The Fund may invest a large percentage of its assets in a limited number of securities or other instruments, which could negatively affect the value of the Fund. | |
n | Management risk. The investment techniques and risk analysis used by the Fund’s portfolio managers may not produce the desired results. | |
n | Market risk. The prices of and the income generated by the Fund’s securities may decline in response to, among other things, investor sentiment; general economic and market conditions; regional or global instability; and currency and interest rate fluctuations. |
About indexes used in this report
n | The S&P 500® Index is an unmanaged index considered representative of the U.S. stock market. |
n | The Lipper Large-Cap Core Funds Index is an unmanaged index considered representative of large-cap core funds tracked by Lipper. | |
n | The Fund is not managed to track the performance of any particular index, including the index(es) defined here, and consequently, the performance of the Fund may deviate significantly from the performance of the index(es). | |
n | A direct investment cannot be made in an index. Unless otherwise indicated, index results include reinvested dividends, and they do not reflect sales charges. Performance of the peer group, if applicable, reflects fund expenses; performance of a market index does not. |
Other information
n | The Chartered Financial Analyst® (CFA®) designation is globally recognized and attests to a charterholder’s success in a rigorous and comprehensive study program in the field of investment management and research analysis. | |
continued on page 7 |
This report must be accompanied or preceded by a currently effective Fund prospectus, which contains more complete information, including sales charges and expenses. Investors should read it carefully before investing.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
Fund Nasdaq Symbols
Class A Shares | SCAUX | |
Class B Shares | SBCUX | |
Class C Shares | SCCUX | |
Class R Shares | SCRUX | |
Class Y Shares | SCAYX | |
Investor Class Shares | SCNUX | |
Institutional Class Shares | SCIUX |
8 | Invesco Structured Core Fund |
Schedule of Investments
August 31, 2011
Shares | Value | |||||||
Common Stocks & Other Equity Interests–98.37%(a) | ||||||||
Advertising–0.30% | ||||||||
Interpublic Group of Cos., Inc. (The) | 122,500 | $ | 1,057,175 | |||||
Aerospace & Defense–0.13% | ||||||||
Huntington Ingalls Industries Inc.(b) | 14,900 | 446,106 | ||||||
Aluminum–0.44% | ||||||||
Alcoa Inc. | 120,400 | 1,542,324 | ||||||
Apparel Retail–0.73% | ||||||||
Abercrombie & Fitch Co.–Class A | 3,900 | 248,079 | ||||||
Limited Brands, Inc. | 62,400 | 2,354,976 | ||||||
2,603,055 | ||||||||
Asset Management & Custody Banks–0.36% | ||||||||
State Street Corp. | 36,100 | 1,282,272 | ||||||
Auto Parts & Equipment–0.55% | ||||||||
Magna International Inc. (Canada) | 51,600 | 1,963,896 | ||||||
Biotechnology–2.36% | ||||||||
Amgen, Inc. | 151,000 | 8,366,155 | ||||||
Casinos & Gaming–2.15% | ||||||||
Las Vegas Sands Corp.(b) | 33,300 | 1,550,781 | ||||||
Wynn Resorts Ltd. | 39,150 | 6,057,288 | ||||||
7,608,069 | ||||||||
Communications Equipment–0.10% | ||||||||
Cisco Systems, Inc. | 21,900 | 343,392 | ||||||
Computer & Electronics Retail–0.39% | ||||||||
GameStop Corp.–Class A(b) | 58,200 | 1,392,726 | ||||||
Computer Hardware–7.01% | ||||||||
Apple Inc.(b) | 46,700 | 17,971,561 | ||||||
Dell Inc.(b) | 462,600 | 6,876,549 | ||||||
24,848,110 | ||||||||
Computer Storage & Peripherals–2.18% | ||||||||
Lexmark International, Inc.–Class A(b) | 130,500 | 4,170,780 | ||||||
SanDisk Corp.(b) | 96,600 | 3,540,390 | ||||||
7,711,170 | ||||||||
Construction & Engineering–1.41% | ||||||||
Fluor Corp. | 37,200 | 2,258,784 | ||||||
KBR, Inc. | 91,300 | 2,743,565 | ||||||
5,002,349 | ||||||||
Construction & Farm Machinery & Heavy Trucks–2.05% | ||||||||
Caterpillar Inc. | 79,900 | 7,270,900 | ||||||
Consumer Electronics–0.06% | ||||||||
Harman International Industries, Inc. | 5,400 | 195,426 | ||||||
Consumer Finance–3.67% | ||||||||
Capital One Financial Corp. | 137,600 | 6,336,480 | ||||||
Discover Financial Services | 264,600 | 6,657,336 | ||||||
12,993,816 | ||||||||
Department Stores–2.03% | ||||||||
Macy’s, Inc. | 277,100 | 7,190,745 | ||||||
Diversified Chemicals–1.15% | ||||||||
E. I. du Pont de Nemours and Co. | 84,700 | 4,088,469 | ||||||
Diversified Metals & Mining–2.05% | ||||||||
Freeport-McMoRan Copper & Gold Inc. | 154,000 | 7,259,560 | ||||||
Drug Retail–0.79% | ||||||||
Walgreen Co. | 79,400 | 2,795,674 | ||||||
Education Services–1.46% | ||||||||
Apollo Group, Inc.–Class A(b) | 110,400 | 5,169,480 | ||||||
Fertilizers & Agricultural Chemicals–0.99% | ||||||||
CF Industries Holdings, Inc. | 19,100 | 3,491,862 | ||||||
Footwear–0.90% | ||||||||
Crocs, Inc.(b) | 116,500 | 3,187,440 | ||||||
Gold–0.32% | ||||||||
Yamana Gold Inc. (Canada) | 71,700 | 1,133,577 | ||||||
Health Care Distributors–1.05% | ||||||||
Cardinal Health, Inc. | 62,100 | 2,639,250 | ||||||
McKesson Corp. | 13,600 | 1,087,048 | ||||||
3,726,298 | ||||||||
Health Care Equipment–0.11% | ||||||||
Hologic, Inc.(b) | 24,000 | 399,360 | ||||||
Home Entertainment Software–0.87% | ||||||||
Activision Blizzard, Inc. | 260,000 | 3,078,400 | ||||||
Household Products–0.17% | ||||||||
Procter & Gamble Co. (The) | 9,300 | 592,224 | ||||||
Hypermarkets & Super Centers–2.16% | ||||||||
Wal-Mart Stores, Inc. | 143,800 | 7,651,598 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
9 Invesco Structured Core Fund
Shares | Value | |||||||
Industrial Conglomerates–3.86% | ||||||||
3M Co. | 33,600 | $ | 2,788,128 | |||||
General Electric Co. | 667,500 | 10,886,925 | ||||||
13,675,053 | ||||||||
Integrated Oil & Gas–8.37% | ||||||||
Chevron Corp. | 46,500 | 4,599,315 | ||||||
ConocoPhillips | 115,400 | 7,855,278 | ||||||
Exxon Mobil Corp. | 232,400 | 17,206,896 | ||||||
29,661,489 | ||||||||
Integrated Telecommunication Services–6.06% | ||||||||
AT&T Inc. | 408,800 | 11,642,624 | ||||||
Verizon Communications, Inc. | 271,800 | 9,831,006 | ||||||
21,473,630 | ||||||||
Internet Software & Services–0.68% | ||||||||
IAC/InterActiveCorp(b) | 61,400 | 2,427,142 | ||||||
IT Consulting & Other Services–2.09% | ||||||||
International Business Machines Corp. | 43,050 | 7,400,725 | ||||||
Life & Health Insurance–0.05% | ||||||||
Lincoln National Corp. | 8,400 | 174,300 | ||||||
Managed Health Care–6.83% | ||||||||
Aetna, Inc. | 30,400 | 1,216,912 | ||||||
CIGNA Corp. | 13,100 | 612,294 | ||||||
Coventry Health Care, Inc.(b) | 9,300 | 305,784 | ||||||
Humana, Inc. | 96,900 | 7,523,316 | ||||||
UnitedHealth Group, Inc. | 180,100 | 8,558,352 | ||||||
WellPoint, Inc. | 94,600 | 5,988,180 | ||||||
24,204,838 | ||||||||
Multi-Line Insurance–0.34% | ||||||||
Assurant, Inc. | 34,300 | 1,206,331 | ||||||
Office REIT’s–0.12% | ||||||||
Boston Properties, Inc. | 4,100 | 427,589 | ||||||
Oil & Gas Equipment & Services–1.73% | ||||||||
National Oilwell Varco Inc. | 92,500 | 6,116,100 | ||||||
Oil & Gas Refining & Marketing–3.39% | ||||||||
Tesoro Corp.(b) | 262,300 | 6,310,938 | ||||||
Valero Energy Corp. | 250,600 | 5,693,632 | ||||||
12,004,570 | ||||||||
Other Diversified Financial Services–4.34% | ||||||||
Citigroup, Inc. | 252,100 | 7,827,705 | ||||||
JPMorgan Chase & Co. | 200,600 | 7,534,536 | ||||||
15,362,241 | ||||||||
Packaged Foods & Meats–0.83% | ||||||||
Green Mountain Coffee Roasters, Inc.(b) | 28,000 | 2,932,720 | ||||||
Paper Products–0.25% | ||||||||
International Paper Co. | 33,100 | 898,665 | ||||||
Pharmaceuticals–6.99% | ||||||||
Eli Lilly and Co. | 212,000 | 7,952,120 | ||||||
Forest Laboratories, Inc.(b) | 164,200 | 5,622,208 | ||||||
Johnson & Johnson | 9,600 | 631,680 | ||||||
Pfizer, Inc. | 557,100 | 10,573,758 | ||||||
24,779,766 | ||||||||
Property & Casualty Insurance–1.11% | ||||||||
Berkshire Hathaway Inc.–Class B(b) | 53,900 | 3,934,700 | ||||||
Publishing–0.85% | ||||||||
McGraw-Hill Cos., Inc. (The) | 71,100 | 2,994,021 | ||||||
Regional Banks–1.02% | ||||||||
KeyCorp | 545,600 | 3,622,784 | ||||||
Retail REIT’s–0.30% | ||||||||
Simon Property Group, Inc. | 9,100 | 1,069,250 | ||||||
Semiconductors–0.43% | ||||||||
Intel Corp. | 44,900 | 903,837 | ||||||
LSI Corp.(b) | 92,600 | 630,606 | ||||||
1,534,443 | ||||||||
Specialized Consumer Services–0.39% | ||||||||
H&R Block, Inc. | 92,500 | 1,398,600 | ||||||
Specialized Finance–1.60% | ||||||||
Moody’s Corp. | 184,000 | 5,672,720 | ||||||
Specialty Stores–0.09% | ||||||||
PetSmart, Inc. | 7,500 | 316,350 | ||||||
Steel–0.32% | ||||||||
Nucor Corp. | 31,000 | 1,118,480 | ||||||
Systems Software–4.31% | ||||||||
Microsoft Corp. | 360,400 | 9,586,640 | ||||||
Symantec Corp.(b) | 330,500 | 5,668,075 | ||||||
15,254,715 | ||||||||
Tobacco–2.78% | ||||||||
Lorillard, Inc. | 3,700 | 412,254 | ||||||
Philip Morris International, Inc. | 136,400 | 9,455,248 | ||||||
9,867,502 | ||||||||
Wireless Telecommunication Services–1.30% | ||||||||
Sprint Nextel Corp.(b) | 1,229,100 | 4,621,416 | ||||||
Total Common Stocks & Other Equity Interests (Cost $335,296,191) | 348,541,768 | |||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
10 Invesco Structured Core Fund
Principal | ||||||||
Amount | Value | |||||||
U.S. Treasury Securities–0.32% | ||||||||
U.S. Treasury Bills–0.32% | ||||||||
0.05%, 09/15/11 (Cost $1,139,981)(c)(d) | $ | 1,140,000 | $ | 1,139,981 | ||||
Money Market Funds–1.36% | ||||||||
Liquid Assets Portfolio–Institutional Class(e) | 2,415,310 | 2,415,310 | ||||||
Premier Portfolio–Institutional Class(e) | 2,415,309 | 2,415,309 | ||||||
Total Money Market Funds (Cost $4,830,619) | 4,830,619 | |||||||
TOTAL INVESTMENTS–100.05% (Cost $341,266,791) | 354,512,368 | |||||||
OTHER ASSETS LESS LIABILITIES–(0.05)% | (177,156 | ) | ||||||
NET ASSETS–100.00% | $ | 354,335,212 | ||||||
Investment Abbreviations:
REIT | – Real Estate Investment Trust |
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. | |
(b) | Non-income producing security. | |
(c) | Security traded on a discount basis. The interest rate shown represents the discount rate at the time of purchase by the Fund. | |
(d) | All or a portion of the value was pledged as collateral to cover margin requirements for open futures contracts. See Note 1I and Note 4. | |
(e) | The money market fund and the Fund are affiliated by having the same investment adviser. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
11 Invesco Structured Core Fund
Statement of Assets and Liabilities
August 31, 2011
Assets: | ||||
Investments, at value (Cost $336,436,172) | $ | 349,681,749 | ||
Investments in affiliated money market funds, at value and cost | 4,830,619 | |||
Total investments, at value (Cost $341,266,791) | 354,512,368 | |||
Receivable for: | ||||
Investments sold | 3,958 | |||
Variation margin | 64,863 | |||
Fund shares sold | 130,222 | |||
Dividends | 890,442 | |||
Investment for trustee deferred compensation and retirement plans | 121,495 | |||
Other assets | 26,124 | |||
Total assets | 355,749,472 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares reacquired | 593,887 | |||
Accrued fees to affiliates | 353,012 | |||
Accrued other operating expenses | 252,817 | |||
Trustee deferred compensation and retirement plans | 214,544 | |||
Total liabilities | 1,414,260 | |||
Net assets applicable to shares outstanding | $ | 354,335,212 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 487,585,233 | ||
Undistributed net investment income | 1,223,460 | |||
Undistributed net realized gain (loss) | (148,000,394 | ) | ||
Unrealized appreciation | 13,526,913 | |||
$ | 354,335,212 | |||
Net Assets: | ||||
Class A | $ | 204,311,185 | ||
Class B | $ | 20,750,491 | ||
Class C | $ | 48,592,433 | ||
Class R | $ | 1,300,217 | ||
Class Y | $ | 3,845,782 | ||
Investor Class | $ | 63,890,288 | ||
Institutional Class | $ | 11,644,816 | ||
Shares outstanding, $0.01 par value per share, with an unlimited number of shares authorized: | ||||
Class A | 27,834,027 | |||
Class B | 2,857,323 | |||
Class C | 6,704,641 | |||
Class R | 177,974 | |||
Class Y | 521,959 | |||
Investor Class | 8,677,983 | |||
Institutional Class | 1,580,373 | |||
Class A: | ||||
Net asset value per share | $ | 7.34 | ||
Maximum offering price per share (Net asset value of $7.34 divided by 94.50%) | $ | 7.77 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 7.26 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 7.25 | ||
Class R: | ||||
Net asset value and offering price per share | $ | 7.31 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 7.37 | ||
Investor Class: | ||||
Net asset value and offering price per share | $ | 7.36 | ||
Institutional Class: | ||||
Net asset value and offering price per share | $ | 7.37 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
12 Invesco Structured Core Fund
Statement of Operations
For the year ended August 31, 2011
Investment income: | ||||
Dividends (net of foreign withholding taxes of $5,248) | $ | 3,309,017 | ||
Dividends from affiliated money market funds | 2,746 | |||
Total investment income | 3,311,763 | |||
Expenses: | ||||
Advisory fees | 1,047,810 | |||
Administrative services fees | 50,000 | |||
Custodian fees | 10,496 | |||
Distribution fees: | ||||
Class A | 159,996 | |||
Class B | 66,543 | |||
Class C | 151,882 | |||
Class R | 7,114 | |||
Investor Class | 182,905 | |||
Transfer agent fees — A, B, C, R, Y and Investor | 359,179 | |||
Transfer agent fees — Institutional | 3,656 | |||
Trustees’ and officers’ fees and benefits | 16,542 | |||
Other | 175,311 | |||
Total expenses | 2,231,434 | |||
Less: Fees waived, expenses reimbursed and expense offset arrangement(s) | (358,957 | ) | ||
Net expenses | 1,872,477 | |||
Net investment income | 1,439,286 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain (loss) from: | ||||
Investment securities | 18,993,555 | |||
Futures contracts | (1,042,791 | ) | ||
17,950,764 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | (32,239,029 | ) | ||
Futures contracts | 354,928 | |||
(31,884,101 | ) | |||
Net realized and unrealized gain (loss) | (13,933,337 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | (12,494,051 | ) | |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
13 Invesco Structured Core Fund
Statement of Changes in Net Assets
For the years ended August 31, 2011 and 2010
2011 | 2010 | |||||||
Operations: | ||||||||
Net investment income | $ | 1,439,286 | $ | 1,058,281 | ||||
Net realized gain | 17,950,764 | 3,490,772 | ||||||
Change in net unrealized appreciation (depreciation) | (31,884,101 | ) | (4,027,846 | ) | ||||
Net increase (decrease) in net assets resulting from operations | (12,494,051 | ) | 521,207 | |||||
Distributions to shareholders from net investment income: | ||||||||
Class A | (18,026 | ) | (34,312 | ) | ||||
Class B | (754 | ) | (1,066 | ) | ||||
Class C | (862 | ) | (1,841 | ) | ||||
Class R | (14,776 | ) | (11,562 | ) | ||||
Class Y | (2,233 | ) | (4,053 | ) | ||||
Investor Class | (849,485 | ) | (1,552,566 | ) | ||||
Institutional Class | (175,166 | ) | (446,319 | ) | ||||
Total distributions from net investment income | (1,061,302 | ) | (2,051,719 | ) | ||||
Share transactions–net: | ||||||||
Class A | 223,179,943 | (342,045 | ) | |||||
Class B | 22,788,387 | (35,338 | ) | |||||
Class C | 53,420,675 | (31,677 | ) | |||||
Class R | (255,424 | ) | 1,396,013 | |||||
Class Y | 4,036,558 | (67,812 | ) | |||||
Investor Class | (17,699,092 | ) | (17,874,581 | ) | ||||
Institutional Class | (2,143,210 | ) | (10,123,792 | ) | ||||
Net increase (decrease) in net assets resulting from share transactions | 283,327,837 | (27,079,232 | ) | |||||
Net increase (decrease) in net assets | 269,772,484 | (28,609,744 | ) | |||||
Net assets: | ||||||||
Beginning of year | 84,562,728 | 113,172,472 | ||||||
End of year (includes undistributed net investment income of $1,223,460 and $1,010,448, respectively) | $ | 354,335,212 | $ | 84,562,728 | ||||
Notes to Financial Statements
August 31, 2011
NOTE 1—Significant Accounting Policies
Invesco Structured Core Fund (the “Fund”), is a series portfolio of AIM Counselor Series Trust (Invesco Counselor Series Trust (the “Trust”). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end series management investment company consisting of twelve separate portfolios, each authorized to issue an unlimited number of shares of beneficial interest. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class.
The Fund’s investment objective is long-term growth of capital.
The Fund currently consists of seven different classes of shares: Class A, Class B, Class C, Class R, Class Y, Investor Class and Institutional Class. Investor Class shares of the Fund are offered only to certain grandfathered investors. Class A shares are sold with a front-end sales charge unless certain waiver criteria are met and under certain circumstances load waived shares may be subject to contingent deferred sales charges (“CDSC”). Class C shares are sold with a CDSC. Class R, Class Y, Investor Class and Institutional Class shares are sold at net asset value. Effective November 30, 2010, new or additional investments in Class B shares are no longer permitted. Existing shareholders of Class B shares may continue to reinvest dividends and capital gains distributions in Class B shares until they convert. Also, shareholders in Class B shares will be able to exchange those shares for Class B shares of other Invesco Funds offering such
14 Invesco Structured Core Fund
shares until they convert. Generally, Class B shares will automatically convert to Class A shares on or about the month-end which is at least eight years after the date of purchase. Redemption of Class B shares prior to conversion date will be subject to a CDSC.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. | |
A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”). | ||
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded. | ||
Debt obligations (including convertible bonds) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations, including commercial paper, having 60 days or less to maturity are recorded at amortized cost which approximates value. Debt securities are subject to interest rate and credit risks. In addition, all debt securities involve some risk of default with respect to interest and/or principal payments. | ||
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trade is not the current value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economical upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards. | ||
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including Corporate Loans. | ||
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value. | ||
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments. | ||
B. | Securities Transactions and Investment Income — Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. Bond premiums and discounts are amortized and/or accreted for financial reporting purposes. | |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held. | ||
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund’s net asset value and, accordingly, they reduce the Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser. | ||
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class. |
15 Invesco Structured Core Fund
C. | Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. | |
D. | Distributions — Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to treat a portion of the proceeds from redemptions as distributions for federal income tax purposes. | |
E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. | |
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period. | ||
F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund are charged to the operations of such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses attributable to the Institutional Class are charged to such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses relating to all other classes are allocated among those classes based on relative net assets. All other expenses are allocated among the classes based on relative net assets. | |
G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. | |
H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. | |
I. | Futures Contracts — The Fund may enter into futures contracts to manage exposure to interest rate, equity and market price movements and/or currency risks. A futures contract is an agreement between two parties to purchase or sell a specified underlying security, currency or commodity (or delivery of a cash settlement price, in the case of an index future) for a fixed price at a future date. The Fund currently invests only in exchange-traded futures and they are standardized as to maturity date and underlying financial instrument. Initial margin deposits required upon entering into futures contracts are satisfied by the segregation of specific securities or cash as collateral at the futures commission merchant (broker). During the period the futures contracts are open, changes in the value of the contracts are recognized as unrealized gains or losses by recalculating the value of the contracts on a daily basis. Subsequent or variation margin payments are received or made depending upon whether unrealized gains or losses are incurred. These amounts are reflected as receivables or payables on the Statement of Assets and Liabilities. When the contracts are closed or expire, the Fund recognizes a realized gain or loss equal to the difference between the proceeds from, or cost of, the closing transaction and the Fund’s basis in the contract. The net realized gain (loss) and the change in unrealized gain (loss) on futures contracts held during the period is included on the Statement of Operations. The primary risks associated with futures contracts are market risk and the absence of a liquid secondary market. If the Fund were unable to liquidate a futures contract and/or enter into an offsetting closing transaction, the Fund would continue to be subject to market risk with respect to the value of the contracts and continue to be required to maintain the margin deposits on the futures contracts. Futures contracts have minimal counterparty risk since the exchange’s clearinghouse, as counterparty to all exchange-traded futures, guarantees the futures against default. Risks may exceed amounts recognized in the Statement of Assets and Liabilities. | |
J. | Collateral — To the extent the Fund has pledged or segregated a security as collateral and that security is subsequently sold, it is the Fund’s practice to replace such collateral no later than the next business day. |
16 Invesco Structured Core Fund
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser based on the annual rate of the Fund’s average daily net assets as follows:
Average Daily Net Assets | Rate | |||
First $250 million | 0 | .60% | ||
Next $250 million | 0 | .575% | ||
Next $500 million | 0 | .55% | ||
Next $1.5 billion | 0 | .525% | ||
Next $2.5 billion | 0 | .50% | ||
Next $2.5 billion | 0 | .475% | ||
Next $2.5 billion | 0 | .45% | ||
Over $10 billion | 0 | .425% | ||
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide discretionary investment management services to the Fund based on the percentage of assets allocated to such Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2012, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver (excluding certain items discussed below) of Class A, Class B, Class C, Class R, Class Y, Investor Class and Institutional Class shares to 1.00%, 1.75%, 1.75%, 1.25%, 0.75%, 1.00% and 0.75% of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual operating expenses after fee waiver to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless the Board of Trustees and Invesco mutually agree to amend or continue the fee waiver agreement, it will terminate on June 30, 2012.
Further, the Adviser has contractually agreed, through at least June 30, 2012, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the year ended August 31, 2011, the Adviser waived advisory fees $4,272 and reimbursed class level expenses of $138,498, $14,400, $32,868, $3,079, $2,848, $158,328 and $3,656 of Class A, Class B, Class C, Class R, Class Y, Investor Class and Institutional Class shares, respectively.
At the request of the Trustees of the Trust, Invesco Ltd. agreed to reimburse expenses incurred by the Fund in connection with market timing matters in the Invesco Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement are included in the Statement of Operations. For the year ended August 31, 2011, Invesco Ltd. reimbursed expenses of the Fund in the amount of $205.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco for certain administrative costs incurred in providing accounting services to the Fund. For the year ended August 31, 2011, expenses incurred under the agreement are shown in the Statement of Operations as administrative services fees.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (“IIS”) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. IIS may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. All fees payable by IIS to intermediaries that provide omnibus account services or sub-accounting are charged back to the Fund, subject to certain limitations approved by the Trust’s Board of Trustees. For the year ended August 31, 2011, expenses incurred under the agreement are shown in the Statement of Operations as transfer agent fees.
The Trust has entered into master distribution agreements with Invesco Distributors, Inc. (“IDI”) to serve as the distributor for the Class A, Class B, Class C, Class R, Class Y, Investor Class and Institutional Class shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund’s Class A, Class B, Class C, Class R and Investor Class shares (collectively the “Plans”). The Fund, pursuant to the Plans, pays IDI compensation at the annual rate of 0.25% of the Fund’s average daily net assets of Class A shares, 1.00% of the average daily net assets of Class B and Class C shares, 0.50% of the average daily net assets of Class R shares and 0.25% of the average daily net assets of Investor Class shares. Of the Plan payments, up to 0.25% of the average daily net assets of each class of shares may be paid to furnish continuing personal shareholder services to customers who purchase and own shares of such classes. Any amounts not paid as a service fee under the Plans would constitute an asset-based sales charge. Rules of the Financial Industry Regulatory Authority (“FINRA”) impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. For the year ended August 31, 2011, expenses incurred under the Plans are shown in the Statement of Operations as distribution fees.
Front-end sales commissions and CDSC (collectively the “sales charges”) are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the year ended August 31, 2011, IDI advised the Fund that IDI retained $2,663 in front-end sales commissions from the sale of Class A shares and $0, $21,791 and $505 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of the Adviser, Invesco Ltd., IIS and/or IDI.
17 Invesco Structured Core Fund
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3) generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
Level 1 — | Prices are determined using quoted prices in an active market for identical assets. | |
Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. | |
Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of August 31, 2011. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
During the year ended August 31, 2011, there were no significant transfers between investment levels.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 353,372,387 | $ | — | $ | — | $ | 353,372,387 | ||||||||
U.S. Treasury Securities | — | 1,139,981 | — | 1,139,981 | ||||||||||||
$ | 353,372,387 | $ | 1,139,981 | $ | — | $ | 354,512,368 | |||||||||
Futures* | 281,336 | — | — | 281,336 | ||||||||||||
Total Investments | $ | 353,653,723 | $ | 1,139,981 | $ | — | $ | 354,793,704 | ||||||||
* | Unrealized appreciation (depreciation). |
NOTE 4—Derivative Investments
The Fund has implemented the required disclosures about derivative instruments and hedging activities in accordance with GAAP. This disclosure is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position and financial performance. The enhanced disclosure has no impact on the results of operations reported in the financial statements.
Value of Derivative Instruments at Period-End
The table below summarizes the value of the Fund’s derivative instruments, detailed by primary risk exposure, held as of August 31, 2011:
Unrealized Appreciation | ||||||||
(Depreciation) | ||||||||
Risk Exposure/Derivative Type | Assets | Liabilities | ||||||
Market risk | ||||||||
Futures contracts(a) | $ | 281,336 | $ | — | ||||
(a) | Includes cumulative appreciation (depreciation) of futures contracts. Only current day’s variation margin receivable is reported within the Statement of Assets and Liabilities. |
Effect of Derivative Instruments for the year ended August 31, 2011
The table below summarizes the gains (losses) on derivative instruments, detailed by primary risk exposure, recognized in earnings during the period:
Location of Gain (Loss) on Statement of Operations | ||||
Futures* | ||||
Realized Gain (Loss) | ||||
Market risk | $ | (1,042,791 | ) | |
Change in Unrealized Appreciation | ||||
Market risk | $ | 354,928 | ||
Total | $ | (687,863 | ) | |
* | The average value of futures outstanding during the period was $4,288,866. |
18 Invesco Structured Core Fund
Open Futures Contracts | ||||||||||||||||
Number of | Expiration | Notional | Unrealized | |||||||||||||
Contract | Contracts | Month | Value | Appreciation | ||||||||||||
Long Contracts | ||||||||||||||||
E-Mini S&P 500 Index | 92 | September-2011 | $ | 5,601,420 | $ | 281,336 | ||||||||||
NOTE 5—Expense Offset Arrangement(s)
The expense offset arrangements are comprised of (i) transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions, (ii) custodian credits which result from periodic overnight cash balances at the custodian and (iii) a one time custodian fee credit used to offset custodian fees. For the year ended August 31, 2011, the Fund received credits from these arrangements, which resulted in the reduction of the Fund’s total expenses of $803.
NOTE 6—Trustees’ and Officers’ Fees and Benefits
“Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and “Trustees’ and Officers’ Fees and Benefits” also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. “Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
During the year ended August 31, 2011, the Fund paid legal fees of $1,931 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A partner of that firm is a Trustee of the Trust.
NOTE 7—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with The State Street Bank and Trust Company, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 8—Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Years Ended August 31, 2011 and 2010:
2011 | 2010 | |||||||
Ordinary income | $ | 1,061,302 | $ | 2,051,719 | ||||
Long-term capital gain | — | — | ||||||
Total distributions | $ | 1,061,302 | $ | 2,051,719 | ||||
Tax Components of Net Assets at Period-End:
2011 | ||||
Undistributed ordinary income | $ | 1,424,622 | ||
Net unrealized appreciation — investments | 11,339,191 | |||
Temporary book/tax differences | (201,162 | ) | ||
Capital loss carryforward | (145,812,672 | ) | ||
Shares of beneficial interest | 487,585,233 | |||
Total net assets | $ | 354,335,212 | ||
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund’s net unrealized appreciation (depreciation) difference is attributable primarily to wash sales.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund’s temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to utilize capital loss carryforward in the future may be limited under the Internal
19 Invesco Structured Core Fund
Revenue Code and related regulations based on the results of future transactions. Under these limitation rules, the Fund is limited to utilizing $39,181,418 of capital loss carryforward in the fiscal year ending August 31, 2012.
The Fund utilized $15,015,880 of capital loss carryforward in the current period to offset net realized capital gain for federal income tax purposes. The Fund has a capital loss carryforward as of August 31, 2011 which expires as follows:
Capital Loss | ||||
Expiration | Carryforward* | |||
August 31, 2015 | $ | 27,608,981 | ||
August 31, 2016 | 54,204,215 | |||
August 31, 2018 | 63,999,476 | |||
Total capital loss carryforward | $ | 145,812,672 | ||
* | Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. To the extent that unrealized gains as of May 23, 2011, the date of reorganization of Invesco Select Equity Fund and Invesco Van Kampen Equity Premium Income Fund into the Fund and realized on securities held in each fund at such date of reorganization, the capital loss carryforward may be further limited for up to five years from the date of the reorganization. |
NOTE 9—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended August 31, 2011 was $257,035,478 and $151,862,435, respectively. Cost of investments on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed Federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investment Securities on a Tax Basis | ||||
Aggregate unrealized appreciation of investment securities | $ | 28,673,238 | ||
Aggregate unrealized (depreciation) of investment securities | (17,334,047 | ) | ||
Net unrealized appreciation of investment securities | $ | 11,339,191 | ||
Cost of investments for tax purposes is $343,173,177. |
NOTE 10—Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of Real Estate Investment Trust distributions, on August 31, 2011, undistributed net investment income was decreased by $1,915 and undistributed net realized gain (loss) was increased by $1,915. Further, as a result of tax deferrals acquired in the reorganization of Invesco Select Equity Fund and Invesco Van Kampen Equity Premium Income Fund into the Fund, undistributed net investment income was decreased by $163,057, undistributed net realized gain (loss) was decreased by $130,619,902 and shares of beneficial interest increased by $130,782,959. These reclassifications had no effect on the net assets of the Fund.
20 Invesco Structured Core Fund
NOTE 11—Share Information
Summary of Share Activity | ||||||||||||||||
Year ended | Year ended | |||||||||||||||
August 31, 2011(a) | August 31, 2010 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Class A | 444,064 | $ | 3,252,631 | 128,789 | $ | 869,022 | ||||||||||
Class B | 30,958 | 318,539 | 5,802 | 38,360 | ||||||||||||
Class C | 60,904 | 612,804 | 19,734 | 129,647 | ||||||||||||
Class R | 28,885 | 217,255 | 208,043 | 1,443,352 | ||||||||||||
Class Y | 28,172 | 202,660 | 1,829 | 12,203 | ||||||||||||
Investor Class | 1,130,397 | 8,652,358 | 1,072,097 | 7,343,739 | ||||||||||||
Institutional Class | 110,714 | 848,843 | 176,429 | 1,207,236 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Class A | 2,411 | 17,863 | 4,968 | 33,784 | ||||||||||||
Class B | 3 | 17 | 157 | 1,066 | ||||||||||||
Class C | 107 | 789 | 262 | 1,773 | ||||||||||||
Class R | 1,985 | 14,673 | 1,703 | 11,562 | ||||||||||||
Class Y | 280 | 2,075 | 594 | 4,053 | ||||||||||||
Investor Class | 111,078 | 825,308 | 221,069 | 1,509,898 | ||||||||||||
Institutional Class | 23,584 | 174,990 | 65,443 | 446,320 | ||||||||||||
Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||
Class A | 151,051 | 1,168,291 | 2,729 | 18,856 | ||||||||||||
Class B | (152,536 | ) | (1,168,291 | ) | (2,755 | ) | (18,856 | ) | ||||||||
Issued in connection with acquisitions(b): | ||||||||||||||||
Class A | 30,466,369 | 244,337,285 | — | — | ||||||||||||
Class B | 3,267,037 | 25,973,165 | — | — | ||||||||||||
Class C | 7,619,899 | 60,448,451 | — | — | ||||||||||||
Class Y | 603,577 | 4,854,243 | — | — | ||||||||||||
Reacquired: | ||||||||||||||||
Class A | (3,430,939 | ) | (25,596,127 | ) | (185,339 | ) | (1,263,707 | ) | ||||||||
Class B | (316,001 | ) | (2,335,043 | ) | (8,460 | ) | (55,908 | ) | ||||||||
Class C | (1,011,485 | ) | (7,641,369 | ) | (24,579 | ) | (163,097 | ) | ||||||||
Class R | (65,749 | ) | (487,352 | ) | (8,840 | ) | (58,901 | ) | ||||||||
Class Y | (132,590 | ) | (1,022,420 | ) | (12,379 | ) | (84,068 | ) | ||||||||
Investor Class | (3,589,166 | ) | (27,176,758 | ) | (3,918,195 | ) | (26,728,218 | ) | ||||||||
Institutional Class | (419,448 | ) | (3,167,043 | ) | (1,779,103 | ) | (11,777,348 | ) | ||||||||
Net increase (decrease) in share activity | 34,963,561 | $ | 283,327,837 | (4,030,002 | ) | $ | (27,079,232 | ) | ||||||||
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 19% of the outstanding shares of the Fund. IDI has an agreement with these entities to sell Fund shares. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. In addition, less than 1% of the outstanding shares of the Fund are owned by affiliated mutual funs. Affiliated mutual funds are mutual funds that are advised by Invesco. | |
(b) | As of the opening of business on May 23, 2011, the Fund acquired all of the net assets of Invesco Select Equity Fund and Invesco Van Kampen Equity Premium Income Fund pursuant to a plan of reorganization approved by the Trustees of the Fund on November 10, 2010 and by the shareholders of Invesco Select Equity Fund and Invesco Van Kampen Equity Premium Income Fund on April 14, 2011. The acquisition was accomplished by a tax-free exchange of 41,956,881 shares of the Fund for 11,395,760 shares outstanding of Invesco Select Equity Fund and 14,365,444 shares outstanding of Invesco Van Kampen Equity Premium Income Fund as of the close of business on May 20, 2011. Class A, Class B, Class C and Class Y shares of Invesco Select Equity Fund and Class A, Class B, Class C and Class Y shares of Invesco Van Kampen Equity Premium Income Fund were exchanged for Class A, Class B, Class C and Class Y shares of the Fund, respectively, based on the relative net asset value of Invesco Select Equity Fund and Invesco Van Kampen Equity Premium Income Fund to the net asset value of the Fund on the close of business, May 20, 2011. Invesco Select Equity Fund’s net assets at that date of $213,098,975, including $34,790,682 of unrealized appreciation and Invesco Van Kampen Equity Premium Income Fund’s net assets at that date of $122,514,170, including $9,911,355 of unrealized appreciation were combined with those of the Fund. The net assets of the Fund immediately before the acquisition were $90,413,859. The net assets of the Fund immediately following the acquisition were $426,027,003. |
21 Invesco Structured Core Fund
NOTE 12—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Ratio of | Ratio of | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
expenses | expenses | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net gains | to average | to average net | Ratio of net | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset | Net | (losses) on | Dividends | Distributions | net assets | assets without | investment | |||||||||||||||||||||||||||||||||||||||||||||||||
value, | investment | securities (both | Total from | from net | from net | Net asset | Net assets, | with fee waivers | fee waivers | income (loss) | ||||||||||||||||||||||||||||||||||||||||||||||
beginning | income | realized and | investment | investment | realized | Total | value, end | Total | end of period | and/or expenses | and/or expenses | to average | Portfolio | |||||||||||||||||||||||||||||||||||||||||||
of period | (loss) | unrealized) | operations | income | gains | Distributions | of period | Return(b) | (000s omitted) | absorbed | absorbed | net assets | turnover(c) | |||||||||||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | $ | 6.29 | $ | 0.07 | (a) | $ | 1.06 | $ | 1.13 | $ | (0.08 | ) | $ | — | $ | (0.08 | ) | $ | 7.34 | 18.00 | % | $ | 204,311 | 1.00 | %(d) | 1.22 | %(d) | 0.90 | %(d) | 125 | % | |||||||||||||||||||||||||
Year ended 08/31/10 | 6.47 | 0.06 | (a) | (0.12 | ) | (0.06 | ) | (0.12 | ) | — | (0.12 | ) | 6.29 | (1.07 | ) | 1,265 | 1.00 | 1.31 | 0.93 | 71 | ||||||||||||||||||||||||||||||||||||
Year ended 08/31/09 | 9.89 | 0.11 | (a) | (2.16 | ) | (2.05 | ) | (0.07 | ) | (1.30 | ) | (1.37 | ) | 6.47 | (18.66 | ) | 1,618 | 0.66 | 1.29 | 1.85 | 77 | |||||||||||||||||||||||||||||||||||
Year ended 08/31/08 | 11.19 | 0.14 | (a) | (1.37 | ) | (1.23 | ) | (0.02 | ) | (0.05 | ) | (0.07 | ) | 9.89 | (11.03 | ) | 951 | 0.75 | 1.93 | 1.34 | 118 | |||||||||||||||||||||||||||||||||||
Year ended 08/31/07 | 10.19 | 0.08 | (a) | 1.10 | 1.18 | (0.18 | ) | — | (0.18 | ) | 11.19 | 11.60 | 1,532 | 1.02 | 6.88 | 0.67 | 79 | |||||||||||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 6.22 | 0.01 | (a) | 1.06 | 1.07 | (0.03 | ) | — | (0.03 | ) | 7.26 | 17.15 | 20,750 | 1.75 | (d) | 1.97 | (d) | 0.15 | (d) | 125 | ||||||||||||||||||||||||||||||||||||
Year ended 08/31/10 | 6.37 | 0.01 | (a) | (0.13 | ) | (0.12 | ) | (0.03 | ) | — | (0.03 | ) | 6.22 | (1.85 | ) | 173 | 1.75 | 2.06 | 0.18 | 71 | ||||||||||||||||||||||||||||||||||||
Year ended 08/31/09 | 9.79 | 0.06 | (a) | (2.13 | ) | (2.07 | ) | (0.05 | ) | (1.30 | ) | (1.35 | ) | 6.37 | (19.10 | ) | 211 | 1.41 | 2.04 | 1.10 | 77 | |||||||||||||||||||||||||||||||||||
Year ended 08/31/08 | 11.14 | 0.06 | (a) | (1.36 | ) | (1.30 | ) | — | (0.05 | ) | (0.05 | ) | 9.79 | (11.71 | ) | 165 | 1.50 | 2.68 | 0.59 | 118 | ||||||||||||||||||||||||||||||||||||
Year ended 08/31/07 | 10.16 | (0.01 | )(a) | 1.10 | 1.09 | (0.11 | ) | — | (0.11 | ) | 11.14 | 10.74 | 847 | 1.77 | 7.63 | (0.08 | ) | 79 | ||||||||||||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 6.22 | 0.01 | (a) | 1.05 | 1.06 | (0.03 | ) | — | (0.03 | ) | 7.25 | 16.99 | 48,592 | 1.75 | (d) | 1.97 | (d) | 0.15 | (d) | 125 | ||||||||||||||||||||||||||||||||||||
Year ended 08/31/10 | 6.37 | 0.01 | (a) | (0.13 | ) | (0.12 | ) | (0.03 | ) | — | (0.03 | ) | 6.22 | (1.85 | ) | 219 | 1.75 | 2.06 | 0.18 | 71 | ||||||||||||||||||||||||||||||||||||
Year ended 08/31/09 | 9.79 | 0.06 | (a) | (2.13 | ) | (2.07 | ) | (0.05 | ) | (1.30 | ) | (1.35 | ) | 6.37 | (19.10 | ) | 254 | 1.41 | 2.04 | 1.10 | 77 | |||||||||||||||||||||||||||||||||||
Year ended 08/31/08 | 11.14 | 0.06 | (a) | (1.36 | ) | (1.30 | ) | — | (0.05 | ) | (0.05 | ) | 9.79 | (11.71 | ) | 249 | 1.50 | 2.68 | 0.59 | 118 | ||||||||||||||||||||||||||||||||||||
Year ended 08/31/07 | 10.16 | (0.01 | )(a) | 1.10 | 1.09 | (0.11 | ) | — | (0.11 | ) | 11.14 | 10.74 | 1,043 | 1.77 | 7.63 | (0.08 | ) | 79 | ||||||||||||||||||||||||||||||||||||||
Class R | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 6.27 | 0.05 | (a) | 1.06 | 1.11 | (0.07 | ) | — | (0.07 | ) | 7.31 | 17.68 | 1,300 | 1.25 | (d) | 1.47 | (d) | 0.65 | (d) | 125 | ||||||||||||||||||||||||||||||||||||
Year ended 08/31/10 | 6.45 | 0.05 | (a) | (0.12 | ) | (0.07 | ) | (0.11 | ) | — | (0.11 | ) | 6.27 | (1.30 | ) | 1,335 | 1.25 | 1.56 | 0.68 | 71 | ||||||||||||||||||||||||||||||||||||
Year ended 08/31/09 | 9.86 | 0.10 | (a) | (2.15 | ) | (2.05 | ) | (0.06 | ) | (1.30 | ) | (1.36 | ) | 6.45 | (18.70 | ) | 77 | 0.91 | 1.54 | 1.60 | 77 | |||||||||||||||||||||||||||||||||||
Year ended 08/31/08 | 11.17 | 0.11 | (a) | (1.37 | ) | (1.26 | ) | — | (0.05 | ) | (0.05 | ) | 9.86 | (11.32 | ) | 53 | 1.00 | 2.18 | 1.09 | 118 | ||||||||||||||||||||||||||||||||||||
Year ended 08/31/07 | 10.18 | 0.05 | (a) | 1.10 | 1.15 | (0.16 | ) | — | (0.16 | ) | 11.17 | 11.33 | 684 | 1.27 | 7.13 | 0.42 | 79 | |||||||||||||||||||||||||||||||||||||||
Class Y | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 6.32 | 0.09 | (a) | 1.06 | 1.15 | (0.10 | ) | — | (0.10 | ) | 7.37 | 18.24 | 3,846 | 0.75 | (d) | 0.97 | (d) | 1.15 | (d) | 125 | ||||||||||||||||||||||||||||||||||||
Year ended 08/31/10 | 6.50 | 0.08 | (a) | (0.13 | ) | (0.05 | ) | (0.13 | ) | — | (0.13 | ) | 6.32 | (0.85 | ) | 142 | 0.75 | 1.06 | 1.18 | 71 | ||||||||||||||||||||||||||||||||||||
Year ended 08/31/09(e) | 8.29 | 0.12 | (a) | (0.54 | ) | (0.42 | ) | (0.07 | ) | (1.30 | ) | (1.37 | ) | 6.50 | (2.50 | ) | 211 | 0.43 | (f) | 1.07 | (f) | 2.08 | (f) | 77 | ||||||||||||||||||||||||||||||||
Investor Class | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 6.32 | 0.07 | (a) | 1.05 | 1.12 | (0.08 | ) | — | (0.08 | ) | 7.36 | 17.76 | 63,890 | 1.00 | (d) | 1.22 | (d) | 0.90 | (d) | 125 | ||||||||||||||||||||||||||||||||||||
Year ended 08/31/10 | 6.50 | 0.06 | (a) | (0.12 | ) | (0.06 | ) | (0.12 | ) | — | (0.12 | ) | 6.32 | (1.07 | ) | 69,635 | 1.00 | 1.31 | 0.93 | 71 | ||||||||||||||||||||||||||||||||||||
Year ended 08/31/09 | 9.90 | 0.12 | (a) | (2.15 | ) | (2.03 | ) | (0.07 | ) | (1.30 | ) | (1.37 | ) | 6.50 | (18.43 | ) | 88,674 | 0.66 | 1.29 | 1.85 | 77 | |||||||||||||||||||||||||||||||||||
Year ended 08/31/08(e) | 10.73 | 0.05 | (0.88 | ) | (0.83 | ) | — | — | — | 9.90 | (7.73 | ) | 136,838 | 0.60 | (f) | 1.10 | (f) | 1.49 | (f) | 118 | ||||||||||||||||||||||||||||||||||||
Institutional Class | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 6.32 | 0.09 | (a) | 1.06 | 1.15 | (0.10 | ) | — | (0.10 | ) | 7.37 | 18.24 | 11,645 | 0.74 | (d) | 0.77 | (d) | 1.18 | (d) | 125 | ||||||||||||||||||||||||||||||||||||
Year ended 08/31/10 | 6.50 | 0.08 | (a) | (0.12 | ) | (0.04 | ) | (0.14 | ) | — | (0.14 | ) | 6.32 | (0.83 | ) | 11,793 | 0.75 | 0.91 | 1.18 | 71 | ||||||||||||||||||||||||||||||||||||
Year ended 08/31/09 | 9.91 | 0.13 | (a) | (2.16 | ) | (2.03 | ) | (0.08 | ) | (1.30 | ) | (1.38 | ) | 6.50 | (18.32 | ) | 22,128 | 0.41 | 0.89 | 2.10 | 77 | |||||||||||||||||||||||||||||||||||
Year ended 08/31/08 | 11.21 | 0.16 | (a) | (1.36 | ) | (1.20 | ) | (0.05 | ) | (0.05 | ) | (0.10 | ) | 9.91 | (10.79 | ) | 29,374 | 0.50 | 1.57 | 1.59 | 118 | |||||||||||||||||||||||||||||||||||
Year ended 08/31/07 | 10.20 | 0.10 | (a) | 1.10 | 1.20 | (0.19 | ) | — | (0.19 | ) | 11.21 | 11.85 | 942 | 0.77 | 6.55 | 0.92 | 79 | |||||||||||||||||||||||||||||||||||||||
(a) | Calculated using average shares outstanding. | |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges and is not annualized for periods less than one year, if applicable. | |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. For the period ended August 31, 2011, the portfolio turnover calculation excludes the value of securities purchased of $285,320,621 and sold of $155,521,831 in the effort to realign the Fund’s portfolio holdings after the reorganization of Invesco Select Equity Fund and Invesco Van Kampen Equity Premium Income Fund into the Fund. | |
(d) | Ratios are annualized and based on average daily net assets (000’s) of $63,998, $6,654, $15,188, $1,423, $1,316, $73,162 and $12,894 for Class A, Class B, Class C, Class R, Class Y, Investor Class and Institutional Class shares, respectively. | |
(e) | Commencement date of October 3, 2008 and April 25, 2008 for Class Y and Investor Class shares, respectively. | |
(f) | Annualized. |
22 Invesco Structured Core Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Counselor Series Trust (Invesco Counselor Series Trust)
and Shareholders of Invesco Structured Core Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Invesco Structured Core Fund (one of the funds constituting AIM Counselor Series Trust (Invesco Counselor Series Trust), hereafter referred to as the “Fund”) at August 31, 2011, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at August 31, 2011 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
October 21, 2011
Houston, Texas
23 Invesco Structured Core Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments or contingent deferred sales charges on redemptions, and redemption fees, if any; and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period March 1, 2011 through August 31, 2011.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the hypothetical information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
HYPOTHETICAL | ||||||||||||||||||||||||||||||
(5% annual return before | ||||||||||||||||||||||||||||||
ACTUAL | expenses) | |||||||||||||||||||||||||||||
Beginning | Ending | Expenses | Ending | Expenses | Annualized | |||||||||||||||||||||||||
Account Value | Account Value | Paid During | Account Value | Paid During | Expense | |||||||||||||||||||||||||
Class | (03/01/11) | (08/31/11)1 | Period2 | (08/31/11) | Period2 | Ratio | ||||||||||||||||||||||||
A | $ | 1,000.00 | $ | 927.90 | $ | 4.81 | $ | 1,020.21 | $ | 5.04 | 0.99 | % | ||||||||||||||||||
B | 1,000.00 | 926.00 | 8.45 | 1,016.43 | 8.84 | 1.74 | ||||||||||||||||||||||||
C | 1,000.00 | 925.90 | 8.45 | 1,016.43 | 8.84 | 1.74 | ||||||||||||||||||||||||
R | 1,000.00 | 927.70 | 6.02 | 1,018.95 | 6.31 | 1.24 | ||||||||||||||||||||||||
Y | 1,000.00 | 930.60 | 3.60 | 1,021.48 | 3.77 | 0.74 | ||||||||||||||||||||||||
Investor | 1,000.00 | 928.10 | 4.81 | 1,020.21 | 5.04 | 0.99 | ||||||||||||||||||||||||
Institutional | 1,000.00 | 929.40 | 3.60 | 1,021.48 | 3.77 | 0.74 | ||||||||||||||||||||||||
1 | The actual ending account value is based on the actual total return of the Fund for the period March 1, 2011 through August 31, 2011, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund’s expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half year. |
24 Invesco Structured Core Fund
Approval of Investment Advisory and Sub-Advisory Contracts |
The Board of Trustees (the Board) of AIM Counselor Series Trust (Invesco Counselor Series Trust) is required under the Investment Company Act of 1940, as amended, to approve annually the renewal of the Invesco Structured Core Fund (the Fund) investment advisory agreement with Invesco Advisers, Inc. (Invesco Advisers) and the Master Intergroup Sub-Advisory Contract for Mutual Funds (the sub-advisory contracts) with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers). During contract renewal meetings held on June 14-15, 2011, the Board as a whole, and the disinterested or “independent” Trustees, who comprise 80% of the Board, voting separately, approved the continuance of the Fund’s investment advisory agreement and the sub-advisory contracts for another year, effective July 1, 2011. In doing so, the Board considered the process that it follows in reviewing and approving the Fund’s investment advisory agreement and sub-advisory contracts and the information that it is provided. The Board determined that the Fund’s investment advisory agreement and the sub-advisory contracts are in the best interests of the Fund and its shareholders and the compensation to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is responsible for overseeing the management of a number of the series portfolios of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies and limitations and investment risks of these funds. The Sub-Committees meet regularly and at designated contract renewal meetings each year to conduct a review of the performance, fees, expenses and other matters related to their assigned Invesco Funds. Each Sub-Committee recommends to the Investments Committee, which in turn recommends to the full Board, whether to approve the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Trustees receive comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and an independent company, Lipper, Inc. (Lipper). The Trustees also receive an independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. The independent Trustees are assisted in their annual evaluation of the Fund’s investment advisory agreement by the Senior Officer and by independent legal counsel. The independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in private sessions with the Senior Officer and counsel.
In evaluating the fairness and reasonableness of the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Trustees also considered information provided in connection with fund acquisitions approved by the Trustees to rationalize the Invesco Funds product range following the acquisition of the retail mutual fund business of Morgan Stanley (the Morgan Stanley Transaction). The Trustees recognized that the advisory fees for the Invesco Funds include advisory fees that are the result of years of review and negotiation between the Trustees and Invesco Advisers as well as advisory fees inherited from Morgan Stanley and Van Kampen funds acquired in the Morgan Stanley Transaction. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these same arrangements throughout the year and in prior years. One Trustee may have weighed a particular piece of information differently than another Trustee.
The discussion below serves as the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 15, 2011, and may not reflect consideration of factors that became known to the Board after that date, including, for example, changes to the Fund’s performance, advisory fees, expense limitations and/or fee waivers.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers, with whom the Board met during the year. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s consideration of Invesco Advisers’ performance and investment process oversight, independent credit analysis and investment risk management.
In determining whether to continue the Fund’s investment advisory agreement, the Board considered the prior relationship between Invesco Advisers and the Fund, as well as the Board’s knowledge of Invesco Advisers’ operations, and concluded that it is beneficial to maintain the current relationship, in part, because of such knowledge. The Board also considered services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution and legal and compliance. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and the advisory services are provided in accordance with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services provided by the Affiliated Sub-Advisers under the sub-advisory contracts and the credentials and experience of the officers and employees of the Affiliated Sub-Advisers who provide these services. The Board noted that the Affiliated Sub-Advisers have offices and personnel that are located in financial centers around the world. As a result, the Affiliated Sub-Advisers can provide research and investment analysis on the markets and economies of various countries in which the Fund invests and make recommendations on securities of companies located in such countries. The Board concluded that the sub-advisory contracts benefit the Fund and its shareholders by permitting Invesco Advisers to use the additional resources and talents of the Affiliated Sub-Advisers in managing the Fund. The Board concluded that the nature, extent and quality of the services provided by the Affiliated Sub-Advisers are appropriate and satisfactory and in accordance with the terms of the Fund’s sub-advisory contracts.
25 Invesco Structured Core Fund
B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
The Board noted that the Fund recently began operations and that only four calendar years of comparative performance data was available. The Board compared the Fund’s performance during the past one and three calendar years to the performance of funds in the Lipper performance universe and against the Lipper Large-Cap Core Funds Index. The Board noted that performance of Class A shares of the Fund was in the fifth quintile of the performance universe for the one and three year periods (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board noted that performance of Class A shares of the Fund was below the performance of the Index for the one and three year periods. Invesco Advisers advised the Board that the Fund was managed consistently with its mandate and that quantitative processes, such as those followed by the Fund, are typically challenged at market inflection points. Although the independent written evaluation of the Fund’s Senior Officer only considered Fund performance through the most recent calendar year, the Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
C. | Advisory and Sub-Advisory Fees and Fee Waivers |
The Board compared the Fund’s contractual advisory fee rate to the contractual advisory fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the contractual advisory fee rate for Class A shares of the Fund was below the median contractual advisory fee rate of funds in the expense group. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using audited financial data from the most recent annual report of each fund in the expense group that was publicly available as of the end of the past calendar year and including only one fund per investment adviser. The Board noted that comparative data is as of varying dates, which may affect the comparability of data during times of market volatility.
The Board noted that Invesco Advisers and Affiliated Sub-Advisers advise another fund with comparable investment strategies in a foreign jurisdiction; however, the Board did not consider comparisons of fees charged to that fund to be apt, as those fees may include fees for more than investment management services.
Other than the fund described above, the Board noted that Invesco Advisers and the Affiliated Sub-Advisers do not manage other mutual funds or client accounts in a manner substantially similar to the management of the Fund.
The Board noted that Invesco Advisers has contractually agreed to continue to waive fees and/or limit expenses of the Fund through at least June 30, 2012 in an amount necessary to limit total annual operating expenses to a specified percentage of average daily net assets for each class of the Fund. The Board considered the effect this fee waiver would have on the Fund’s total estimated expenses.
The Board also considered the services provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the allocation of fees between Invesco Advisers and the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board noted that Invesco Advisers provides services to sub-advised Invesco Funds, including oversight of the Affiliated Sub-Advisers as well as the additional services described above other than day-to-day portfolio management. The Board also noted that the sub-advisory fees have no direct effect on the Fund or its shareholders, as they are paid by Invesco Advisers to the Affiliated Sub-Advisers.
Based upon the information and considerations described above, the Board concluded that the Fund’s advisory and sub-advisory fees are fair and reasonable.
D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule. The Board also noted that the 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 Invesco Advisers.
E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the profitability of Invesco Advisers and its affiliates in providing these services. The Board reviewed with Invesco Advisers the methodology used to prepare the profitability information. The Board considered the profitability of Invesco Advisers in connection with managing the Fund and the Invesco Funds. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its subsidiaries provide to the Fund and the Invesco Funds. The Board concluded that the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund is not excessive given the nature, quality and extent of the services provided to the Invesco Funds. The Board considered whether Invesco Advisers and each Affiliated Sub-Adviser are financially sound and have the resources necessary to perform their obligations under the investment advisory agreement and sub-advisory contracts. The Board concluded that Invesco Advisers and each Affiliated Sub-Adviser have the financial resources necessary to fulfill these obligations.
F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund, including the fees received for their provision of administrative, transfer agency and distribution services to the Fund. The Board considered the performance of Invesco Advisers 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 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 Fund; that Invesco Advisers 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; and 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.
The Board considered the benefits realized by Invesco Advisers and the Affiliated Sub-Advisers as a result of portfolio brokerage transactions executed through “soft dollar” arrangements. The Board noted that soft dollar arrangements shift the payment obligation for research and execution services from Invesco Advisers and the Affiliated Sub-Advisers to the Invesco Funds and therefore may reduce Invesco Advisers’ and the Affiliated Sub-Advisers’ expenses. The Board concluded that the soft dollar arrangements are appropriate. The Board also concluded that, based on their review and representations made by the Chief Compliance Officer of the Invesco Funds, these arrangements are consistent with regulatory requirements.
The Board considered that the Fund’s uninvested cash and cash collateral from any securities lending arrangements may be invested in money market funds advised by Invesco Advisers pursuant to procedures approved by the Board. The Board noted that Invesco Advisers receives advisory fees from these affiliated money market funds attributable to such investments, although Invesco Advisers has contractually agreed to waive through varying periods the advisory fees payable by the Invesco Funds. The waiver is in an amount equal to 100% of the net advisory fee Invesco Advisers receives from the affiliated money market funds with respect to the Fund’s investment in the affiliated money market funds of uninvested cash, but not cash collateral. The Board concluded that the Fund’s investment of uninvested cash and cash collateral from any securities lending arrangements in the affiliated money market funds is in the best interests of the Fund and its shareholders.
26 Invesco Structured Core Fund
Tax Information
Form 1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific state’s requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended August 31, 2011:
Federal and State Income Tax | ||||
Qualified Dividend Income* | 100% | |||
Corporate Dividends Received Deduction* | 100% |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Fund’s fiscal year. |
27 Invesco Structured Core Fund
Trustees and Officers
The address of each trustee and officer is AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”), 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Number of Funds | ||||||||
in Fund Complex | ||||||||
Name, Year of Birth and | Trustee and/ | Principal Occupation(s) | Overseen by | Other Directorship(s) | ||||
Position(s) Held with the Trust | or Officer Since | During Past 5 Years | Trustee | Held by Trustee | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 — 1960 Trustee | 2007 | 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 | 143 | 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. Taylor2 — 1954 Trustee, President and Principal Executive Officer | 2006 | 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 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 Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust); Trustee and Executive Vice President, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s 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 Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Tax-Free Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. | 143 | None | ||||||
Wayne W. Whalen3 — 1939 Trustee | 2010 | Of Counsel, and prior to 2010, partner in the law firm of Skadden, Arps, Slate, Meagher & Flom LLP, legal counsel to funds in the Fund Complex | 161 | Director of the Abraham Lincoln Presidential Library Foundation | ||||
Independent Trustees | ||||||||
Bruce L. Crockett — 1944 Trustee and Chair | 2003 | Chairman, Crockett Technology Associates (technology consulting company) Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer COMSAT Corporation; and Chairman, Board of Governors of INTELSAT (international communications company) | 143 | ACE Limited (insurance company); and Investment Company Institute | ||||
1 | Mr. Flanagan is considered an interested person of the Trust because he is an officer of the adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the adviser to the Trust. |
2 | Mr. Taylor is considered an interested person of the Trust because he is an officer and a director of the adviser to, and a director of the principal underwriter of, the Trust. |
3 | Mr. Whalen has been deemed to be an interested person of the Trust because of his prior service as counsel to the predecessor funds of certain Invesco open-end funds and his affiliation with the law firm that served as counsel to such predecessor funds and continues to serve as counsel to the Invesco Van Kampen closed-end funds. |
T-1 Invesco Structured Core Fund
Trustees and Officers—(continued)
The address of each trustee and officer is AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”), 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Number of Funds | ||||||||
in Fund Complex | ||||||||
Name, Year of Birth and | Trustee and/ | Principal Occupation(s) | Overseen by | Other Directorship(s) | ||||
Position(s) Held with the Trust | or Officer Since | During Past 5 Years | Trustee | Held by Trustee | ||||
Independent Trustees | ||||||||
David C. Arch — 1945 Trustee | 2010 | Chairman and Chief Executive Officer of Blistex Inc., a consumer health care products manufacturer. | 161 | 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 | ||||
Bob R. Baker — 1936 Trustee | 1983 | Retired | 143 | None | ||||
Formerly: President and Chief Executive Officer, AMC Cancer Research Center; and Chairman and Chief Executive Officer, First Columbia Financial Corporation | ||||||||
Frank S. Bayley — 1939 Trustee | 2003 | Retired Formerly: Director, Badgley Funds, Inc. (registered investment company) (2 portfolios) and Partner, law firm of Baker & McKenzie | 143 | Director and Chairman, C.D. Stimson Company (a real estate investment company) | ||||
James T. Bunch — 1942 Trustee | 2000 | 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 | 143 | Vice Chairman, Board of Governors, Western Golf Association/Evans Scholars Foundation and Director, Denver Film Society | ||||
Rodney Dammeyer — 1940 Trustee | 2010 | President 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. | 161 | 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 | 2003 | 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) | 161 | Board of Nature’s 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 | 2003 | 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) | 143 | Administaff | ||||
Formerly: Chief Executive Officer, Texana Timber LP (sustainable forestry company) and member of the U.S. House of Representatives | ||||||||
Carl Frischling — 1937 Trustee | 2003 | Partner, law firm of Kramer Levin Naftalis and Frankel LLP | 143 | Director, Reich & Tang Funds (6 portfolios) | ||||
Prema Mathai-Davis — 1950 Trustee | 2003 | Retired | 143 | None | ||||
Formerly: Chief Executive Officer, YWCA of the U.S.A. | ||||||||
Larry Soll — 1942 Trustee | 1997 | Retired | 143 | None | ||||
Formerly, Chairman, Chief Executive Officer and President, Synergen Corp. (a biotechnology company) | ||||||||
T-2 Invesco Structured Core Fund
Trustees and Officers—(continued)
The address of each trustee and officer is AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”), 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Number of Funds | ||||||||
in Fund Complex | ||||||||
Name, Year of Birth and | Trustee and/ | Principal Occupation(s) | Overseen by | Other Directorship(s) | ||||
Position(s) Held with the Trust | or Officer Since | During Past 5 Years | Trustee | Held by Trustee | ||||
Independent Trustees | ||||||||
Hugo F. Sonnenschein — 1940 Trustee | 2010 | President Emeritus and Honorary Trustee 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. | 161 | 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 | 2005 | Retired Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios) and Partner, Deloitte & Touche | 143 | None | ||||
Other Officers | ||||||||
Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer of Invesco Funds | N/A | N/A | ||||
John M. Zerr — 1962 Senior Vice President, Chief Legal Officer and Secretary | 2006 | 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 | N/A | N/A | ||||
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) | ||||||||
Lisa O. Brinkley — 1959 Vice President | 2004 | Global Compliance Director, Invesco Ltd.; Chief Compliance Officer, Invesco Investment Services, Inc.(formerly known as Invesco Aim Investment Services, Inc.); and Vice President, The Invesco Funds Formerly: Chief Compliance Officer, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) and Van Kampen Investor Services Inc.; Senior Vice President, Invesco Management Group, Inc.; Senior Vice President and Chief Compliance Officer, Invesco Advisers, Inc. and The Invesco Funds; Vice President and Chief Compliance Officer, Invesco Aim Capital Management, Inc. and Invesco Distributors, Inc.; Vice President, Invesco Investment Services, Inc. and Fund Management Company | N/A | N/A | ||||
Sheri Morris — 1964 Vice President, Treasurer and Principal Financial Officer | 2003 | 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) | N/A | N/A | ||||
Formerly: 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, 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. | ||||||||
T-3 Invesco Structured Core Fund
Trustees and Officers—(continued)
The address of each trustee and officer is AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”), 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Number of Funds | ||||||||
in Fund Complex | ||||||||
Name, Year of Birth and | Trustee and/ | Principal Occupation(s) | Overseen by | Other Directorship(s) | ||||
Position(s) Held with the Trust | or Officer Since | During Past 5 Years | Trustee | Held by Trustee | ||||
Other Officers | ||||||||
Karen Dunn Kelley — 1960 Vice President | 2003 | Head of Invesco’s 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 Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust); and President and Principal Executive Officer, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust only). | N/A | N/A | ||||
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 Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Tax-Free Investments Trust only) | ||||||||
Lance A. Rejsek — 1967 Anti-Money Laundering Compliance Officer | 2005 | 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.), The Invesco Funds, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management) and Van Kampen Funds Inc. | N/A | N/A | ||||
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Investor Services Inc., Fund Management Company, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc. | ||||||||
Todd L. Spillane — 1958 Chief Compliance Officer | 2006 | 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, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, INVESCO Private Capital Investments, Inc. (holding company) and Invesco Private Capital, Inc. (registered investment adviser); Vice President, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.), Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.). Formerly: 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 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 | N/A | N/A | ||||
The Statement of Additional Information of the Trust includes additional information about the Fund’s Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Fund’s prospectus for information on the Fund’s sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 2500 Houston, TX 77046-1173 | Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 | Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 2500 Houston, TX 77046-1173 | Auditors PricewaterhouseCoopers LLP 1201 Louisiana Street, Suite 2900 Houston, TX 77002-5678 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2600 One Commerce Square Philadelphia, PA 19103 | Counsel to the Independent Trustees Kramer, Levin, Naftalis & Frankel LLP 1177 Avenue of the Americas New York, NY 10036-2714 | Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 2500 Houston, TX 77046-1173 | Custodian State Street Bank and Trust Company 225 Franklin Boston, MA 02110-2801 |
T-4 Invesco Structured Core Fund
![(EDELIVER GRAPHIC)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464212.gif)
Invesco mailing information
Send general correspondence to Invesco Investment Services, Inc., P.O. Box 219078, Kansas City, MO 64121-9078.
Invesco privacy policy
You share personal and financial information with us that is necessary for your transactions and your account records. We take very seriously the obligation to keep that information confidential and private.
Invesco collects nonpublic personal information about you from account applications or other forms you complete and from your transactions with us or our affiliates. We do not disclose information about you or our former customers to service providers or other third parties except to the extent necessary to service your account and in other limited circumstances as permitted by law. For example, we use this information to facilitate the delivery of transaction confirmations, financial reports, prospectuses and tax forms.
Even within Invesco, only people involved in the servicing of your accounts and compliance monitoring have access to your information. To ensure the highest level of confidentiality and security, Invesco maintains physical, electronic and procedural safeguards that meet or exceed federal standards. Special measures, such as data encryption and authentication, apply to your communications with us on our website. More detail is available to you at invesco.com/privacy.
Important notice regarding delivery of security holder documents
To reduce Fund expenses, only one copy of most shareholder documents may be mailed to shareholders with multiple accounts at the same address (Householding). Mailing of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact Invesco Investment Services, Inc. at 800 959 4246 or contact your financial institution. We will begin sending you individual copies for each account within 30 days after receiving your request.
Fund holdings and proxy voting information
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is available at invesco.com/completeqtrholdings. Shareholders can also look up the Fund’s Forms N-Q on the SEC website at sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-09913 and 333-36074.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov.
Information regarding how the Fund voted proxies related to its
portfolio securities during the 12 months ended June 30, 2011, is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov.
![(INVESCO LOGO)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464213.gif)
Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the U.S. distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
SCOR-AR-1 | Invesco Distributors, Inc. |
![]() |
Annual Report to Shareholders | August 31, 2011 |
Invesco Van Kampen American
Franchise Fund
Franchise Fund
Nasdaq:
A: VAFAX § B: VAFBX § C: VAFCX § R: VAFRX • Y: VAFIX § Institutional: VAFNX
A: VAFAX § B: VAFBX § C: VAFCX § R: VAFRX • Y: VAFIX § Institutional: VAFNX
2 | Letters to Shareholders | |
4 | Performance Summary | |
4 | Management Discussion | |
6 | Long-Term Fund Performance | |
8 | Supplemental Information | |
9 | Schedule of Investments | |
11 | Financial Statements | |
13 | Notes to Financial Statements | |
20 | Financial Highlights | |
21 | Auditor’s Report | |
22 | Fund Expenses | |
23 | Approval of Investment Advisory and Sub-Advisory Agreements | |
T-1 | Trustees and Officers |
Letters to Shareholders
![(PHOTO OF PHILIP TAYLOR)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464302.jpg)
Philip Taylor
Dear Shareholders:
Enclosed is important information about your Fund and its performance. I encourage you to read this report to learn more about your Fund’s short- and long-term performance and its holdings as of the close of the reporting period. This report also includes useful information about your Fund’s management team and a discussion of how your Fund was managed during the reporting period.
Data indicated that economic growth in the U.S. and most of Europe was anemic during the reporting period. In the U.S., unemployment remained high, and the housing market remained weak. Concerns about European sovereign debt persisted. Nonetheless, equity markets rose in late 2010 and early 2011 as investors anticipated better news ahead. But contentious negotiations to raise the U.S. government’s debt ceiling heightened investor unease, and following the first-ever downgrade of U.S. creditworthiness in August, global stock markets declined as many investors sought safer havens.
Where you can get current information about your Fund
In light of economic uncertainty and market volatility, I suggest you check the timely market updates and commentary from many of our fund managers and other investment professionals at invesco.com/us. On our website, you also can obtain information about your account at any hour of the day or night. I invite you to visit and explore the tools and information we offer at invesco.com/us.
Our commitment to investment excellence
As we’ve seen over the last several years, market conditions can change — often suddenly and dramatically. That’s one reason financial advisers typically advise their clients to be well diversified and to maintain a long-term investment focus. While diversification can’t guarantee a profit or protect against loss, it can cushion the impact of dramatic market moves. Maintaining a long-term investment focus for your long-term goals — financing your retirement or your children’s education, for example — may help you avoid making rash investment decisions based on short-term market swings.
Invesco’s investment professionals apply these same principles to the funds they manage.
Invesco offers a broad array of traditional mutual funds, as well as other investment products, including single-country, sector, regional and global investments spanning equity, fixed income and alternative asset classes. Across our product line, investment excellence is our ultimate goal. Each of our funds is managed by specialized teams of investment professionals, and as a company, we maintain a single focus — investment management — that allows our fund managers to concentrate on doing what they do best: managing your money.
Our funds are managed strictly according to their stated investment objectives and strategies, with robust risk oversight using consistent, repeatable investment processes that don’t change in response to short-term market events. This disciplined approach can’t guarantee a profit; no investment can do that, since all involve some measure of risk. But it can ensure that your money is managed the way we said it would be, and that it’s managed with a long-term focus.
Our adherence to stated investment objectives and strategies allows your financial adviser to build a diversified portfolio that meets your individual risk tolerance and financial goals. It also means that when your goals change, your financial adviser will be able to find an Invesco fund that’s appropriate for your needs.
Questions?
If you have questions about your account, please contact one of our client service representatives at 800 959 4246. If you have a general Invesco-related question or comment for me, I invite you to email me directly at phil@invesco.com.
All of us at Invesco look forward to serving your investment management needs for many years to come. Thank you for investing with us.
Sincerely,
![-s- PHILIP TAYLOR](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464303.gif)
Philip Taylor
Senior Managing Director, Invesco Ltd.
Senior Managing Director, Invesco Ltd.
2 | Invesco Van Kampen American Franchise Fund |
![(PHOTO OF BRUCE CROCKETT)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464304.jpg)
Bruce Crockett
Dear Fellow Shareholders:
Although the world’s economies are gradually recovering from the financial crisis, it has not been a smooth path. Unrest in the Middle East, persistently weak job and housing markets in the U.S. and continued government balance sheet repair in Europe are contributing to a slow, labored march toward global recovery.
In this environment, investors face risks that could make it more difficult to achieve their long-term financial goals — a secure retirement, home ownership, a child’s college education. Although the markets are complex and dynamic, there are ways to simplify the process and potentially increase your odds of achieving your goals. The best approach is to create a solid financial plan that helps you save and invest in ways that anticipate your needs over the long term.
Your financial adviser can help you define your financial plan, develop an appropriate investment strategy and put you in a better position to achieve your financial goals over the long term. This can take some of the guesswork out of the process and help you make thoughtful investments. Your financial adviser also can help you better understand your tolerance for risk, so that your investment approach lets you sleep at night while getting you closer to your goals. Lastly, your financial adviser can develop an asset allocation strategy that seeks to balance your investment approach, providing some protection against a decline in the markets while allowing you to participate in rising markets. Invesco calls this type of approach “intentional investing.” It means thinking carefully, planning thoughtfully and acting deliberately.
While no investment can guarantee favorable returns, your Board remains committed to managing costs and enhancing the performance of Invesco’s funds as part of our Investor First orientation. We continue to oversee the funds with the same strong sense of responsibility for your money and your continued trust that we’ve always maintained.
Thanks to the approval of our fund shareholders, Invesco has made great progress in realigning our U.S. mutual fund product line following our acquisition of Morgan Stanley’s retail asset management business, including Van Kampen Investments. When completed, the realignment will reduce overlap in the product lineup, enhance efficiency across our product line and build a solid foundation for further growth to meet client and shareholder needs. I would like to thank those of you who voted your proxy, and I hope our shareholders haven’t been too inconvenienced by the process.
As always, please contact me at bruce@brucecrockett.com with any questions or concerns you may have. On behalf of your Board, we look forward to continuing to represent your interests and serving your needs.
Sincerely,
![-s- BRUCE L. CROCKETT](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464305.gif)
Bruce L. Crockett
Independent Chair
Invesco Funds Board of Trustees
Independent Chair
Invesco Funds Board of Trustees
3 | Invesco Van Kampen American Franchise Fund |
Management’s Discussion of Fund Performance
Performance summary
For the fiscal year ended August 31, 2011, Invesco Van Kampen American Franchise Fund had positive double-digit returns but underperformed its benchmark, the Russell 1000 Growth Index. Underperformance was driven primarily by stock selection in several sectors.
Your Fund’s long-term performance appears later in this report.
Fund vs. Indexes
Total returns, 8/31/10 to 8/31/11, at net asset value (NAV). Performance shown does not include applicable contingent deferred sales charges (CDSC) or front-end sales charges, which would have reduced performance.
Class A Shares | 19.71 | % | ||
Class B Shares | 18.88 | |||
Class C Shares | 19.03 | |||
Class R Shares | 19.40 | |||
Class Y Shares | 19.84 | |||
Institutional Class Shares | 20.12 | |||
S&P500 Index▼ (Broad Market Index) | 18.48 | |||
Russell 1000 Growth Index▼ (Style-Specific Index) | 23.96 | |||
Lipper Large-Cap Growth Funds Index▼ (Peer Group Index) | 21.22 | |||
▼Lipper Inc. |
The Fund recently adopted a three-tier benchmark structure to compare its performance to broad market, style-specific and peer group market measures. |
How we invest
We believe a growth investment strategy is an essential component of a diversified portfolio.
Our investment process emphasizes rigorous bottom-up analysis of individual companies. We seek to invest in companies with strong or improving fundamentals, attractive valuation relative to growth prospects and earnings expectations that appear fair to conservative.
To narrow our investment universe, we use a holistic approach that emphasizes fundamental research and, to a lesser extent, includes quantitative analysis. At the end of this distillation process, we have a set of stocks to analyze in greater depth.
Our fundamental analysis focuses on
identifying companies with strong drivers of growth. We conduct rigorous bottom-up analysis in order to develop higher conviction in each company’s growth prospects, and in so doing, construct a comprehensive framework through detailed discussions with company management teams, competitors, distributors, suppliers, Wall Street analysts and customers. We also use a variety of valuation techniques based on the company in question, the industry in which the company operates, the stage of the business cycle, and other factors that best reflect a company’s value.
Risk management plays an important role in portfolio construction as we attempt to maximize the relationship between risk and return. We seek to accomplish this goal by investing in companies with attractive fundamental
prospects for growth, and we divide the portfolio between stable growth stocks and catalyst-driven stocks.
We consider selling a stock for any of the following reasons:
n | The price target set at purchase has been reached. | |
n | There is deterioration in fundamentals. | |
n | The catalysts for growth are no longer present or are reflected in the stock price. | |
n | We find a more attractive investment opportunity. |
Market conditions and your Fund
Equity markets were highly volatile during the fiscal year as investors weighed the competing issues of improved corporate profits, soft macro-economic data and debt issues in Europe and the U.S. Corporate earnings were largely positive but often overshadowed by concerns about high unemployment, lack of consumer confidence, the growing debt contagion in Europe and the possibility of a U.S. credit rating downgrade. With a general rising trend through July, the major equity indexes sold off precipitously in August as the U.S. received the first-ever downgrade to its credit rating from Standard & Poor’s, while the sovereign debt crisis unfolded in the eurozone, prompting fears of a “double-dip” recession.
Uncertainty created by the U.S. credit downgrade combined with a lack of consumer confidence and weak employment added to concerns that the recovery was slowing to a subnormal growth rate. Even with the abrupt sell-off in August, the major equity indexes garnered positive returns for the fiscal year, and all 10 sectors of the Russell 1000 Growth Index posted double-digit gains. Energy led all sectors, followed by
Portfolio Composition
By sector
Information Technology | 31.2 | % | ||
Consumer Discretionary | 16.3 | |||
Health Care | 12.3 | |||
Industrials | 11.7 | |||
Energy | 9.6 | |||
Consumer Staples | 6.2 | |||
Materials | 5.3 | |||
Telecommunication Services | 2.4 | |||
Financials | 0.9 | |||
Money Market Funds | ||||
Plus Other Assets Less Liabilities | 4.1 |
Total Net Assets | $5.9 billion | |
Total Number of Holdings* | 73 |
Top 10 Equity Holdings*
1. | Apple Inc. | 8.8 | % | |||||
2. | Rovi Corp. | 3.7 | ||||||
3. | Google Inc. | 3.0 | ||||||
4. | Baidu, Inc. | 2.9 | ||||||
5. | DIRECTV | 2.9 | ||||||
6. | Precision Castparts Corp. | 2.9 | ||||||
7. | UnitedHealth Group, Inc. | 2.6 | ||||||
8. | Amazon.com, Inc. | 2.5 | ||||||
9. | The Procter & Gamble Co. | 2.2 | ||||||
10. | National Oilwell Varco Inc. | 1.9 |
The Fund’s holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
*Excluding money market fund holdings.
4 | Invesco Van Kampen American Franchise Fund |
consumer discretionary and utilities, while the telecommunication services sector had the lowest return.
The Fund also had double-digit absolute returns but underperformed the Russell 1000 Growth Index during the reporting period. The Fund underperformed the index by the widest margins in the health care, financials and industrials sectors. An underweight position in the consumer staples sector also detracted from performance as many investors rotated into the more defensive sector given the volatile market conditions.
The Fund underperformed the Russell 1000 Growth Index most significantly in the health care sector due to stock selection. Key detractors from performance included biotechnology companies Dendreon and Illumina, pharmacy benefit manager Express Scripts and biotechnical instrument producer Agilent Technologies. We sold the Fund’s position in Dendreon due to deteriorating fundamentals.
Underperformance in the financials sector was also driven primarily by stock selection. Holdings that detracted from Fund performance included JP Morgan Chase, investment manager Franklin Resources and diversified financial services company American Express. We sold our position in American Express during the reporting period.
Underperformance in the industrials sector was also mainly attributable to stock selection. The largest single detractor from the Fund’s performance was construction and engineering services firm Foster Wheeler AG. The Fund did not own Caterpillar, which was a strong performer in the benchmark during the fiscal period, further contributing to relative underperformance during the fiscal year.
Some of the Fund’s underperformance was offset by outperformance in other sectors, including materials, consumer discretionary and information technology (IT). The Fund outperformed by the widest margin in the materials sector, driven by stock selection. In this sector, holdings that contributed to performance included agriculture products maker
Monsanto and fertilizer companies Mosaic and Potash. We sold our position in Potash during the reporting period.
In the consumer discretionary sector, the leading contributors were retailer Limited Brands and casino operator Las Vegas Sands. We sold our position in Limited Brands during the reporting period. In the IT sector, Chinese internet search engine provider Baidu was a strong contributor to Fund performance, and the Fund’s largest holding, Apple, was also the leading contributor to performance during the period. Apple continued to benefit from strong growth in revenue and earnings, driven by the success of its iPad product in the expanding tablet market, as well as new distributors and solid demand for the iPhone.
As we’ve discussed, the stock market experienced volatile performance during the reporting period. We caution investors against making investment decisions based on short-term performance, and as always, we recommend that you consult a financial adviser to discuss your individual financial program. Thank you for your commitment to Invesco Van Kampen American Franchise Fund.
The views and opinions expressed in management’s discussion of Fund performance are those of Invesco Advisers, Inc. These views and opinions are subject to change at any time based on factors such as market and economic conditions. These views and opinions may not be relied upon as investment advice or recommendations, or as an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but Invesco Advisers, Inc. makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
See important Fund and, if applicable, index disclosures later in this report.
![(PHOTO OF ERIK VOSS)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464306.jpg)
Erik Voss
Chartered Financial Analyst, portfolio manager, is lead manager of Invesco Van Kampen American Franchise Fund. He joined Invesco in 2010. Mr. Voss earned a B.S. in mathematics and an M.S. in finance from the University of Wisconsin.
![(PHOTO OF IDO COHEN)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464307.jpg)
Ido Cohen
Portfolio manager, is manager of Invesco Van Kampen American Franchise Fund. He joined Invesco in 2010. Mr. Cohen is a cum laude graduate of The Wharton School of the University of Pennsylvania with a B.S. in economics.
5 | Invesco Van Kampen American Franchise Fund |
Your Fund’s Long-Term Performance
Results of a $10,000 Investment – Oldest Share Classes since Inception
Fund data from 6/23/05, index data from 6/30/05
![(PERFORMANCE CHART)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464308.gif)
Past performance cannot guarantee comparable future results.
As noted earlier in this report, during the reporting period, the Fund has adopted a three-tier benchmark structure to compare its performance to broad market, style-specific and peer group market measures. These additional benchmarks will now be included in the chart above.
The data shown in the chart include reinvested distributions, applicable sales charges and Fund expenses including management fees. Results for Class B shares are calculated as if a hypothetical shareholder had liquidated his entire
investment in the Fund at the close of the reporting period and paid the contingent deferred sales charges, if applicable. Index results include reinvested dividends, but they do not reflect sales charges. Performance of the peer group, if applicable, reflects fund expenses and management fees; performance of a market index does not. Performance shown in the chart and table(s) does not reflect deduction of taxes a shareholder would pay on Fund distributions or sale of Fund shares.
This chart, which is a logarithmic chart, presents the fluctuations in the value of the Fund and its indexes. We believe that
a logarithmic chart is more effective than other types of charts in illustrating changes in value during the early years shown in the chart. The vertical axis, the one that indicates the dollar value of an investment, is constructed with each segment representing a percent change in the value of the investment. In this chart, each segment represents a doubling, or 100% change, in the value of the investment. In other words, the space between $5,000 and $10,000 is the same size as the space between $10,000 and $20,000.
continued from page 8
n | The Fund is not managed to track the performance of any particular index, including the index(es) defined here, and consequently, the performance of the Fund may deviate significantly from the performance of the index(es). |
n | A direct investment cannot be made in an index. Unless otherwise indicated, index results include reinvested dividends, and they do not reflect sales charges. Performance of the peer group, if applicable, reflects fund expenses; performance of a market index does not. |
Other information
n | The Chartered Financial Analyst® (CFA®) designation is globally recognized and attests to a charter-holder’s success in a rigorous and comprehensive study program in the field of investment management and research analysis. |
n | The returns shown in management’s discussion of Fund performance are based on net asset values calculated for shareholder transactions. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for |
financial reporting purposes, and as such, the net asset values for shareholder transactions and the returns based on those net asset values may differ from the net asset values and returns reported in the Financial Highlights. | ||
n | Industry classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. |
6 | Invesco Van Kampen American Franchise Fund |
Average Annual Total Returns | ||||
As of 8/31/11, including maximum applicable sales charges | ||||
Class A Shares | ||||
Inception (6/23/05) | 3.75 | % | ||
5 Years | 1.83 | |||
1 Year | 13.13 | |||
Class B Shares | ||||
Inception (6/23/05) | 3.91 | % | ||
5 Years | 1.86 | |||
1 Year | 13.88 | |||
Class C Shares | ||||
Inception (6/23/05) | 3.96 | % | ||
5 Years | 2.29 | |||
1 Year | 18.03 | |||
Class R Shares | ||||
Inception | 4.44 | % | ||
5 Years | 2.72 | |||
1 Year | 19.40 | |||
Class Y Shares | ||||
Inception (6/23/05) | 4.93 | % | ||
5 Years | 3.21 | |||
1 Year | 19.84 | |||
Institutional Class Shares | ||||
Inception | 4.76 | % | ||
5 Years | 3.05 | |||
1 Year | 20.12 |
Effective June 1, 2010, Class A, Class B, Class C and Class I shares of the predecessor fund, Van Kampen American Franchise Fund, advised by Van Kampen Asset Management were reorganized into Class A, Class B, Class C and Class Y shares, respectively, of Invesco Van Kampen American Franchise Fund. Returns shown above for Class A, Class B, Class C and Class Y shares are blended returns of the predecessor fund and Invesco Van Kampen American Franchise Fund. Share class returns will differ from the predecessor fund because of different expenses.
Class R shares incepted on May 23, 2011. Performance shown prior to that date is that of the predecessor fund’s Class A shares, restated to reflect the higher 12b-1 fees applicable to Class R shares. Class A share performance reflects any applicable fee waivers or expense reimbursements.
Average Annual Total Returns | ||||
As of 6/30/11, the most recent calendar quarter-end, including maximum applicable sales charges | ||||
Class A Shares | ||||
Inception (6/23/05) | 5.34 | % | ||
5 Years | 4.57 | |||
1 Year | 24.12 | |||
Class B Shares | ||||
Inception (6/23/05) | 5.51 | % | ||
5 Years | 4.60 | |||
1 Year | 25.27 | |||
Class C Shares | ||||
Inception (6/23/05) | 5.57 | % | ||
5 Years | 5.00 | |||
1 Year | 29.63 | |||
Class R Shares | ||||
Inception | 6.05 | % | ||
5 Years | 5.48 | |||
1 Year | 31.02 | |||
Class Y Shares | ||||
Inception (6/23/05) | 6.56 | % | ||
5 Years | 5.97 | |||
1 Year | 31.49 | |||
Institutional Class Shares | ||||
Inception | 6.37 | % | ||
5 Years | 5.80 | |||
1 Year | 31.73 |
Institutional Class shares incepted on December 22, 2010. Performance shown prior to that date is that of the predecessor fund’s Class A shares and includes the 12b-1 fees applicable to Class A shares. Class A share performance reflects any applicable fee waivers or expense reimbursements.
The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Please visit invesco.com/performance for the most recent month-end performance. Performance figures reflect reinvested distributions, changes in net asset value and the effect of the maximum sales charge unless otherwise stated. Investment return and principal value will fluctuate so that you may have a gain or loss when you sell shares.
The net annual Fund operating expense ratio set forth in the most
recent Fund prospectus as of the date of this report for Class A, Class B, Class C, Class R, Class Y and Institutional Class shares was 1.05%, 1.22%, 1.79%, 1.30%, 0.80% and 0.71%, respectively.1 The total annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Class A, Class B, Class C, Class R, Class Y and Institutional Class shares was 1.24%, 1.58%, 1.98%, 1.49%, 0.99% and 0.71%, respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.
Class A share performance reflects the maximum 5.50% sales charge, and Class B and Class C share performance reflects the applicable contingent deferred sales charge (CDSC) for the period involved. For shares purchased prior to June 1, 2010, the CDSC on Class B shares declines from 5% at the time of purchase to 0% at the beginning of the sixth year. For shares purchased on or after June 1, 2010, the CDSC on Class B shares declines from 5% at the time of purchase to 0% at the beginning of the seventh year. The CDSC on Class C shares is 1% for the first year after purchase. Class R, Class Y and Institutional Class shares do not have a front-end sales charge or a CDSC; therefore, performance is at net asset value.
The performance of the Fund’s share classes will differ primarily due to different sales charge structures and class expenses.
Had the adviser not waived fees and/or reimbursed expenses on Class B shares, performance would have been lower.
1 | Total annual Fund operating expenses after any contractual fee waivers and/or expense reimbursements by the adviser (all shares classes) and contractual fee waivers by the distributor (Class B shares only) in effect through at least June 30, 2013. See current prospectus for more information. |
7 | Invesco Van Kampen American Franchise Fund |
Invesco Van Kampen American Franchise Fund’s investment objective is to seek long-term capital appreciation.
n | Unless otherwise stated, information presented in this report is as of August 31, 2011, and is based on total net assets. | |
n | Unless otherwise noted, all data provided by Invesco. | |
n | To access your Fund’s reports/prospectus, visit invesco.com/fundreports. |
About share classes
n | Class B shares may not be purchased or acquired by exchange from share classes other than Class B shares. Please see the prospectus for more information. | |
n | Class R shares are available only to certain retirement plans. Please see the prospectus for more information. | |
n | Class Y shares are available to only certain investors. Please see the prospectus for more information. | |
n | Institutional Class shares are offered exclusively to institutional investors, including defined contribution plans that meet certain criteria. Please see the prospectus for more information. |
Principal risks of investing in the Fund
n | Active trading risk. The Fund may engage in frequent trading of portfolio securities. Active trading results in added expenses and may result in a lower return and increased tax liability. | |
n | Market risk. Market risk is the possibility that the market values of securities owned by the Fund will decline. Investments in common stocks and other equity securities generally are affected by changes in the stock markets which fluctuate substantially over time, sometimes suddenly and sharply. The value of a convertible security tends to decline as interest rates rise and, because of the conversion feature, tends to vary with fluctuations in the market value of the underlying equity security. | |
n | Foreign risks. The risks of investing in securities of foreign issuers can include fluctuations in foreign currencies, foreign currency exchange controls, political and economic instability, differences in financial reporting, differences in securities regulation and trading, and foreign taxation issues. | |
n | Medium and large-sized companies. The securities of medium-sized |
companies may be subject to more abrupt or erratic market movements than securities of larger-sized companies or the market averages in general. In addition, such companies typically are subject to a greater degree of change in earnings and business prospects than are larger companies. Thus, to the extent the Fund invests in medium-sized companies, the Fund may be subject to greater investment risk than that assumed through investment in the equity securities of larger-sized companies. | ||
n | Risks of using derivative instruments. Risks of derivatives include the possible imperfect correlation between the value of the instruments and the underlying assets; risks of default by the other party to the transaction; risks that the transaction may result in losses that partially or completely offset gains in portfolio positions; and risks that the transactions may not be liquid. | |
n | 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. | |
n | Swaps risk. 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. Swaps are subject to credit risk and counterparty risk. | |
n | Options risk. A decision as to whether, when and how to use options involves the exercise of skill and judgment and even a well conceived option transaction may be unsuccessful because of market behavior or unexpected events. The prices of options can be highly volatile and the use of options can lower total returns. |
n | Exchange-traded funds (ETFs) risk. An investment by the Fund in ETFs generally presents the same primary risks as an investment in a mutual fund. In addition, ETFs may be subject to the following: (1) a discount of the ETF’s shares to its net asset value; (2) failure to develop an active trading market for the ETF’s shares; (3) the listing exchange halting trading of the ETF’s shares; (4) failure of the ETF’s shares to track the referenced index; and (5) holding troubled securities in the referenced index. ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests. Further, certain of the ETFs in which each Fund may invest are leveraged. The more a Fund invests in such leveraged ETFs, the more this leverage will magnify any losses on those investments. | |
n | Management risk. As with any managed fund, the Adviser may not be successful in selecting the best-performing securities or investment techniques, and the Fund’s performance may lag behind that of similar funds. |
About indexes used in this report
n | The S&P 500® Index is an unmanaged index considered representative of the U.S. stock market. | |
n | The Russell 1000® Growth Index is an unmanaged index considered representative of large-cap growth stocks. The Russell 1000 Growth Index is a trademark/service mark of the Frank Russell Co. Russell® is a trademark of the Frank Russell Co. | |
n | The Lipper Large-Cap Growth Funds Index is an unmanaged index considered representative of large-cap growth funds tracked by Lipper. |
continued on page 6
This report must be accompanied or preceded by a currently effective Fund prospectus, which contains more complete information, including sales charges and expenses. Investors should read it carefully before investing.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
Fund Nasdaq Symbols
Class A Shares | VAFAX | |
Class B Shares | VAFBX | |
Class C Shares | VAFCX | |
Class R Shares | VAFRX | |
Class Y Shares | VAFIX | |
Institutional Class Shares | VAFNX |
8 | Invesco Van Kampen American Franchise Fund |
Schedule of Investments(a)
August 31, 2011
Shares | Value | |||||||
Common Stocks & Other Equity Interests–95.95% | ||||||||
Advertising–0.00% | ||||||||
Interpublic Group of Cos., Inc. (The) | 8,513 | $ | 73,467 | |||||
Aerospace & Defense–2.88% | ||||||||
Precision Castparts Corp. | 1,032,288 | 169,140,389 | ||||||
Apparel, Accessories & Luxury Goods–1.39% | ||||||||
Coach, Inc. | 705,522 | 39,664,447 | ||||||
Prada S.p.A. (Italy)(b) | 4,525,100 | 23,712,923 | ||||||
Prada S.p.A. (Italy)(b)(c) | 3,450,100 | 18,079,591 | ||||||
81,456,961 | ||||||||
Application Software–1.42% | ||||||||
Citrix Systems, Inc.(b) | 736,909 | 44,531,411 | ||||||
Salesforce.com, Inc.(b) | 299,399 | 38,547,621 | ||||||
83,079,032 | ||||||||
Asset Management & Custody Banks–0.25% | ||||||||
Franklin Resources, Inc. | 124,561 | 14,937,355 | ||||||
Auto Parts & Equipment–0.87% | ||||||||
BorgWarner, Inc.(b) | 710,910 | 50,751,865 | ||||||
Automotive Retail–0.49% | ||||||||
AutoZone, Inc.(b) | 94,064 | 28,877,648 | ||||||
Biotechnology–1.37% | ||||||||
Gilead Sciences, Inc.(b) | 2,017,267 | 80,458,694 | ||||||
Cable & Satellite–4.44% | ||||||||
Comcast Corp.–Class A | 4,173,328 | 89,768,285 | ||||||
DIRECTV–Class A(b) | 3,887,984 | 170,954,657 | ||||||
260,722,942 | ||||||||
Casinos & Gaming–1.43% | ||||||||
Las Vegas Sands Corp.(b) | 1,804,004 | 84,012,466 | ||||||
Communications Equipment–1.64% | ||||||||
F5 Networks, Inc.(b) | 192,758 | 15,732,908 | ||||||
QUALCOMM, Inc. | 1,559,481 | 80,250,892 | ||||||
95,983,800 | ||||||||
Computer Hardware–8.85% | ||||||||
Apple Inc.(b) | 1,348,587 | 518,976,735 | ||||||
Computer Storage & Peripherals–1.24% | ||||||||
EMC Corp.(b) | 2,554,975 | 57,716,885 | ||||||
SanDisk Corp.(b) | 411,138 | 15,068,208 | ||||||
72,785,093 | ||||||||
Construction & Engineering–1.45% | ||||||||
Foster Wheeler AG (Switzerland)(b) | 3,469,463 | 85,175,317 | ||||||
Construction & Farm Machinery & Heavy Trucks–0.89% | ||||||||
Cummins Inc. | 560,973 | 52,125,611 | ||||||
Data Processing & Outsourced Services–2.43% | ||||||||
MasterCard, Inc.–Class A | 151,355 | 49,903,257 | ||||||
Visa Inc.–Class A | 1,054,978 | 92,711,467 | ||||||
142,614,724 | ||||||||
Department Stores–0.94% | ||||||||
Kohl’s Corp. | 1,194,691 | 55,361,981 | ||||||
Diversified Metals & Mining–1.03% | ||||||||
Molycorp, Inc.(b) | 1,069,333 | 60,438,701 | ||||||
Drug Retail–1.33% | ||||||||
CVS Caremark Corp. | 2,176,923 | 78,173,305 | ||||||
Fertilizers & Agricultural Chemicals–3.13% | ||||||||
CF Industries Holdings, Inc. | 229,953 | 42,040,008 | ||||||
Monsanto Co. | 1,224,446 | 84,401,063 | ||||||
Mosaic Co. (The) | 800,388 | 56,931,598 | ||||||
183,372,669 | ||||||||
Food Retail–0.99% | ||||||||
Kroger Co. (The) | 2,466,720 | 58,115,923 | ||||||
General Merchandise Stores–0.42% | ||||||||
Dollar Tree, Inc.(b) | 341,356 | 24,379,646 | ||||||
Gold–1.16% | ||||||||
Goldcorp, Inc. (Canada) | 1,306,709 | 67,844,331 | ||||||
Health Care Equipment–0.81% | ||||||||
Baxter International Inc. | 846,531 | 47,388,805 | ||||||
Health Care Services–2.29% | ||||||||
Express Scripts, Inc.(b) | 1,248,954 | 58,625,901 | ||||||
Medco Health Solutions, Inc.(b) | 1,400,362 | 75,815,598 | ||||||
134,441,499 | ||||||||
Health Care Technology–0.90% | ||||||||
Allscripts Healthcare Solutions, Inc.(b) | 2,931,517 | 52,635,388 | ||||||
Heavy Electrical Equipment–1.38% | ||||||||
ABB Ltd.–ADR (Switzerland)(b) | 3,803,766 | 80,906,103 | ||||||
Hotels, Resorts & Cruise Lines–0.48% | ||||||||
Starwood Hotels & Resorts Worldwide, Inc. | 625,853 | 27,888,010 | ||||||
Household Products–2.19% | ||||||||
Procter & Gamble Co. (The) | 2,014,709 | 128,296,669 | ||||||
Industrial Conglomerates–1.58% | ||||||||
Danaher Corp. | 2,021,497 | 92,604,778 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
9 Invesco Van Kampen American Franchise Fund
Shares | Value | |||||||
Industrial Machinery–1.33% | ||||||||
Ingersoll-Rand PLC (Ireland) | 2,327,997 | $ | 78,011,179 | |||||
Integrated Oil & Gas–0.24% | ||||||||
Occidental Petroleum Corp. | 164,570 | 14,274,802 | ||||||
Internet Retail–4.24% | ||||||||
Amazon.com, Inc.(b) | 676,624 | 145,670,381 | ||||||
Netflix Inc.(b) | 243,468 | 57,217,414 | ||||||
Priceline.com Inc.(b) | 85,834 | 46,115,175 | ||||||
249,002,970 | ||||||||
Internet Software & Services–5.90% | ||||||||
Baidu, Inc.–ADR (China)(b) | 1,184,904 | 172,735,305 | ||||||
Google Inc.–Class A(b) | 320,263 | 173,249,473 | ||||||
345,984,778 | ||||||||
IT Consulting & Other Services–2.70% | ||||||||
Accenture PLC–Class A | 1,314,793 | 70,459,757 | ||||||
Cognizant Technology Solutions Corp.–Class A(b) | 1,388,884 | 88,124,690 | ||||||
158,584,447 | ||||||||
Life Sciences Tools & Services–3.13% | ||||||||
Agilent Technologies, Inc.(b) | 2,244,169 | 82,742,511 | ||||||
Illumina, Inc.(b) | 1,243,369 | 64,779,525 | ||||||
Waters Corp.(b) | 448,097 | 35,789,507 | ||||||
183,311,543 | ||||||||
Managed Health Care–2.56% | ||||||||
UnitedHealth Group, Inc. | 3,162,975 | 150,304,572 | ||||||
Oil & Gas Drilling–1.41% | ||||||||
Ensco PLC–ADR (United Kingdom) | 1,716,023 | 82,815,270 | ||||||
Oil & Gas Equipment & Services–6.28% | ||||||||
Cameron International Corp.(b) | 1,793,156 | 93,172,386 | ||||||
Halliburton Co. | 1,928,650 | 85,574,201 | ||||||
National Oilwell Varco Inc. | 1,688,535 | 111,645,934 | ||||||
Weatherford International Ltd. (Switzerland)(b) | 4,552,024 | 77,976,171 | ||||||
368,368,692 | ||||||||
Oil & Gas Exploration & Production–1.66% | ||||||||
Anadarko Petroleum Corp. | 633,932 | 46,752,485 | ||||||
EOG Resources, Inc. | 549,310 | 50,860,613 | ||||||
97,613,098 | ||||||||
Other Diversified Financial Services–0.70% | ||||||||
JPMorgan Chase & Co. | 1,089,185 | 40,909,789 | ||||||
Packaged Foods & Meats–1.06% | ||||||||
Mead Johnson Nutrition Co. | 871,809 | 62,116,391 | ||||||
Pharmaceuticals–1.22% | ||||||||
Allergan, Inc. | 874,317 | 71,527,874 | ||||||
Railroads–1.36% | ||||||||
Union Pacific Corp. | 868,328 | 80,033,792 | ||||||
Restaurants–1.56% | ||||||||
Starbucks Corp. | 2,372,826 | 91,638,540 | ||||||
Semiconductors–2.49% | ||||||||
Atmel Corp.(b) | 6,368,188 | 58,014,193 | ||||||
Broadcom Corp.–Class A(b) | 1,215,948 | 43,348,546 | ||||||
Xilinx, Inc. | 1,443,138 | 44,939,317 | ||||||
146,302,056 | ||||||||
Soft Drinks–0.64% | ||||||||
Hansen Natural Corp.(b) | 436,324 | 37,227,164 | ||||||
Systems Software–4.50% | ||||||||
Check Point Software Technologies Ltd. (Israel)(b) | 814,209 | 44,325,538 | ||||||
Rovi Corp.(b) | 4,496,391 | 219,828,556 | ||||||
264,154,094 | ||||||||
Trucking–0.87% | ||||||||
J.B. Hunt Transport Services, Inc. | 1,268,347 | 50,974,866 | ||||||
Wireless Telecommunication Services–2.43% | ||||||||
America Movil SAB de C.V., Series L–ADR (Mexico) | 1,724,420 | 44,076,175 | ||||||
American Tower Corp.–Class A(b) | 1,829,548 | 98,539,455 | ||||||
142,615,630 | ||||||||
Total Common Stocks & Other Equity Interests (Cost $4,940,217,325) | 5,628,791,454 | |||||||
Money Market Funds–3.62% | ||||||||
Liquid Assets Portfolio–Institutional Class(d) | 106,236,678 | 106,236,678 | ||||||
Premier Portfolio–Institutional Class(d) | 106,236,678 | 106,236,678 | ||||||
Total Money Market Funds (Cost $212,473,356) | 212,473,356 | |||||||
TOTAL INVESTMENTS–99.57% (Cost $5,152,690,681) | 5,841,264,810 | |||||||
OTHER ASSETS LESS LIABILITIES–0.43% | 25,311,057 | |||||||
NET ASSETS–100.00% | $ | 5,866,575,867 | ||||||
Investment Abbreviations:
ADR | – American Depositary Receipt |
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. | |
(b) | Non-income producing security. | |
(c) | Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended. The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The value of this security at August 31, 2011 represented 0.31% of the Fund’s Net Assets. | |
(d) | The money market fund and the Fund are affiliated by having the same investment adviser. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
10 Invesco Van Kampen American Franchise Fund
Statement of Assets and Liabilities
August 31, 2011
Assets: | ||||
Investments, at value (Cost $4,940,217,325) | $ | 5,628,791,454 | ||
Investments in affiliated money market funds, at value and cost | 212,473,356 | |||
Total investments, at value (Cost $5,152,690,681) | 5,841,264,810 | |||
Receivable for: | ||||
Investments sold | 69,930,233 | |||
Fund shares sold | 2,658,300 | |||
Dividends | 1,830,259 | |||
Fund expenses absorbed | 128,880 | |||
Investment for trustee deferred compensation and retirement plans | 177,879 | |||
Other assets | 47,543 | |||
Total assets | 5,916,037,904 | |||
Liabilities: | ||||
Payable for: | ||||
Investments purchased | 38,777,393 | |||
Fund shares reacquired | 4,404,917 | |||
Accrued fees to affiliates | 3,966,093 | |||
Accrued other operating expenses | 1,811,852 | |||
Trustee deferred compensation and retirement plans | 501,782 | |||
Total liabilities | 49,462,037 | |||
Net assets applicable to shares outstanding | $ | 5,866,575,867 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 5,694,511,898 | ||
Undistributed net investment income (loss) | (486,292 | ) | ||
Undistributed net realized gain (loss) | (516,057,157 | ) | ||
Unrealized appreciation | 688,607,418 | |||
$ | 5,866,575,867 | |||
Net assets: | ||||
Class A | $ | 4,894,162,947 | ||
Class B | $ | 373,156,612 | ||
Class C | $ | 266,990,495 | ||
Class R | $ | 17,698,174 | ||
Class Y | $ | 117,470,592 | ||
Institutional Class | $ | 197,097,047 | ||
Shares outstanding, $0.01 par value per share, with an unlimited number of shares authorized: | ||||
Class A | 417,696,749 | |||
Class B | 32,544,994 | |||
Class C | 23,202,144 | |||
Class R | 1,511,814 | |||
Class Y | 9,974,293 | |||
Institutional Class | 16,779,882 | |||
Class A: | ||||
Net asset value per share | $ | 11.72 | ||
Maximum offering price per share (Net asset value of $11.72 ¸ 94.50%) | $ | 12.40 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 11.47 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 11.51 | ||
Class R: | ||||
Net asset value and offering price per share | $ | 11.71 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 11.78 | ||
Institutional Class: | ||||
Net asset value and offering price per share | $ | 11.75 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
11 Invesco Van Kampen American Franchise Fund
Statement of Operations
For the year ended August 31, 2011
Investment income: | ||||
Dividends (net of foreign withholding taxes of $46,090) | $ | 12,340,923 | ||
Dividends from affiliated money market funds (includes securities lending income of $1,391) | 43,460 | |||
Total investment income | 12,384,383 | |||
Expenses: | ||||
Advisory fees | 12,028,491 | |||
Administrative services fees | 443,000 | |||
Custodian fees | 103,292 | |||
Distribution fees: | ||||
Class A | 4,020,465 | |||
Class B | 992,873 | |||
Class C | 808,144 | |||
Class R | 25,544 | |||
Transfer agent fees — A,B,C and Y | 4,749,109 | |||
Transfer agent fees — Institutional | 9,667 | |||
Trustees’ and officers’ fees and benefits | 40,763 | |||
Other | 411,769 | |||
Total expenses | 23,633,117 | |||
Less: Fees waived, expenses reimbursed and expense offset arrangement(s) | (2,388,827 | ) | ||
Net expenses | 21,244,290 | |||
Net investment income (loss) | (8,859,907 | ) | ||
Realized and unrealized gain (loss) from: | ||||
Net realized gain (loss) from: | ||||
Investment securities (includes net gains from securities sold to affiliates of $18,905,797) | 121,389,093 | |||
Foreign currencies | (3,129 | ) | ||
121,385,964 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | (601,643,292 | ) | ||
Foreign currencies | (1,093 | ) | ||
(601,644,385 | ) | |||
Net realized and unrealized gain (loss) | (480,258,421 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | (489,118,328 | ) | |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
12 Invesco Van Kampen American Franchise Fund
Statement of Changes in Net Assets
For the years ended August 31, 2011 and 2010.
August 31, | August 31, | |||||||
2011 | 2010 | |||||||
Operations: | ||||||||
Net investment income (loss) | $ | (8,859,907 | ) | $ | (76,085 | ) | ||
Net realized gain | 121,385,964 | 45,695,543 | ||||||
Change in net unrealized appreciation (depreciation) | (601,644,385 | ) | (15,933,096 | ) | ||||
Net increase (decrease) in net assets resulting from operations | (489,118,328 | ) | 29,686,362 | |||||
Distributions to shareholders from net investment income: | ||||||||
Class A | — | (2,517,727 | ) | |||||
Class B | — | (162,720 | ) | |||||
Class C | — | (152,378 | ) | |||||
Class Y | — | (39,480 | ) | |||||
Total distributions from net investment income | — | (2,872,305 | ) | |||||
Share transactions–net: | ||||||||
Class A | 5,136,608,852 | (52,924,797 | ) | |||||
Class B | 381,002,155 | (3,593,784 | ) | |||||
Class C | 261,483,995 | (4,023,023 | ) | |||||
Class R | 19,367,257 | — | ||||||
Class Y | 124,644,695 | 995,024 | ||||||
Institutional Class | 215,213,465 | — | ||||||
Net increase (decrease) in net assets resulting from share transactions | 6,138,320,419 | (59,546,580 | ) | |||||
Net increase (decrease) in net assets | 5,649,202,091 | (32,732,523 | ) | |||||
Net assets: | ||||||||
Beginning of year | 217,373,776 | 250,106,299 | ||||||
End of year (includes undistributed net investment income (loss) of $(486,292) and $(165,074), respectively) | $ | 5,866,575,867 | $ | 217,373,776 | ||||
Notes to Financial Statements
August 31, 2011
NOTE 1—Significant Accounting Policies
Invesco Van Kampen American Franchise Fund (the “Fund”), is a series portfolio of AIM Counselor Series Trust (Invesco Counselor Series Trust), (the “Trust”). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end series management investment company consisting of twelve separate portfolios, each authorized to issue an unlimited number of shares of beneficial interest. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class.
The Fund’s investment objective is to seek long-term capital appreciation.
The Fund currently consists of six different classes of shares: Class A, Class B, Class C, Class R, Class Y and Institutional Class. Class A shares are sold with a front-end sales charge unless certain waiver criteria are met and under certain circumstances load waived shares may be subject to contingent deferred sales charges (“CDSC”). Class C shares are sold with a CDSC. Class R, Class Y and Institutional Class shares are sold at net asset value. Effective November 30, 2010, new or additional investments in Class B shares are no longer permitted. Existing shareholders of Class B shares may continue to reinvest dividends and capital gains distributions in Class B shares until they convert. Also, shareholders in Class B shares will be able to exchange those shares for Class B shares of other Invesco Funds offering such shares until they convert. Generally, Class B shares will automatically convert to Class A shares on or about the month-end which is at least eight years after the date of purchase. Redemption of Class B shares prior to conversion date will be subject to a CDSC.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. | |
A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the |
13 Invesco Van Kampen American Franchise Fund
security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”). | ||
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded. | ||
Debt obligations (including convertible bonds) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations, including commercial paper, having 60 days or less to maturity are recorded at amortized cost which approximates value. Debt securities are subject to interest rate and credit risks. In addition, all debt securities involve some risk of default with respect to interest and/or principal payments. | ||
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trade is not the current value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economical upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards. | ||
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including Corporate Loans. | ||
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value. | ||
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments. | ||
B. | Securities Transactions and Investment Income — Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. | |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held. | ||
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund’s net asset value and, accordingly, they reduce the Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser. | ||
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class. | ||
C. | Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
14 Invesco Van Kampen American Franchise Fund
D. | Distributions — Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to treat a portion of the proceeds from redemptions as distributions for federal income tax purposes. | |
E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. | |
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period. | ||
F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund are charged to the operations of such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses attributable to the Institutional Class are charged to such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses relating to all other classes are allocated among those classes based on relative net assets. All other expenses are allocated among the classes based on relative net assets. Prior to the Reorganization, incremental transfer agency fees which are unique to each class of shares of the Acquired Fund were charged to the operations of such class. | |
G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. | |
H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. | |
I. | Foreign Currency Translations — Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. | |
The Fund may invest in foreign securities which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. |
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser based on the annual rate of the Fund’s average daily net assets as follows:
Average Daily Net Assets | Rate | |||
First $250 million | 0 | .695% | ||
Next $250 million | 0 | .67% | ||
Next $500 million | 0 | .645% | ||
Next $550 million | 0 | .62% | ||
Next $3.45 billion | 0 | .60% | ||
Next $250 million | 0 | .595% | ||
Next $2.25 billion | 0 | .57% | ||
Next $2.5 billion | 0 | .545% | ||
Next $10 billion | 0 | .52% | ||
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Sub-Adviser(s).
15 Invesco Van Kampen American Franchise Fund
Effective May 23, 2011, the Adviser has contractually agreed, through at least June 30, 2013, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Class A, Class B, Class C, Class R, Class Y and Institutional Class shares to 1.05%, 1.22%, 1.80%, 1.30%, 0.80% and 0.80%, respectively, of average daily net assets. Prior to May 23, 2011, the Adviser had contractually agreed to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Class A, Class B, Class C, and Class Y shares to 1.35%, 2.10%, 2.10%, and 1.10%, respectively, of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless the Board of Trustees and Invesco mutually agree to amend or continue the fee waiver agreement, it will terminate on June 30, 2013.
Further, the Adviser has contractually agreed, through at least June 30, 2012, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the year ended August 31, 2011, the Adviser waived advisory fees of $43,931 and reimbursed class level expenses of $1,679,217, $141,151, $106,996, $6,030 and $43,557 of Class A, Class B, Class C, Class R and Class Y shares, respectively.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco for certain administrative costs incurred in providing accounting services to the Fund. For the year ended August 31, 2011, expenses incurred under the agreement are shown in the Statement of Operations as administrative services fees.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (“IIS”) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. IIS may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. All fees payable by IIS to intermediaries that provide omnibus account services or sub-accounting are charged back to the Fund, subject to certain limitations approved by the Trust’s Board of Trustees. For the year ended August 31, 2011, expenses incurred under the agreement are shown in the Statement of Operations as transfer agent fees.
Shares of the Fund are distributed by Invesco Distributors, Inc. (“IDI”). The Fund has adopted a distribution plan pursuant to Rule 12b-1 under the 1940 Act, and a service plan (collectively, the “Plans”) for Class A shares, Class B shares, Class C shares and Class R shares to compensate IDI for the sale, distribution, shareholder servicing and maintenance of shareholder accounts for these shares. Under the Plans, the Fund will incur annual fees of up to 0.25% of Class A average daily net assets, up to 1.00% each of Class B and Class C average daily net assets and up to 0.50% of Class R average daily net assets.
With respect to Class B and Class C shares, the Fund is authorized to reimburse in future years any distribution related expenses that exceed the maximum annual reimbursement rate for such class, so long as such reimbursement does not cause the Fund to exceed the Class B and Class C maximum annual reimbursement rate, respectively. With respect to Class A shares, distribution related expenses that exceed the maximum annual reimbursement rate for such class are not carried forward to future years and the Fund will not reimburse IDI for any such expenses.
Effective May 23, 2011, IDI has contractually agreed to limit Rule 12b-1 plan fees on Class B shares to 0.42% of average net assets through at least June 30, 2013.
For the year ended August 31, 2011, 12b-1 fees before fee waivers incurred under the Plan are detailed in the Statement of Operations as distribution fees. For the year ended August 31, 2011, 12b-1 fees incurred for Class B shares were $631,292 after fee waivers of $361,581.
Front-end sales commissions and CDSC (collectively the “sales charges”) are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the year ended August 31, 2011, IDI advised the Fund that IDI retained $202,185 in front-end sales commissions from the sale of Class A shares and $659, $173,993 and $12,870 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of the Adviser, Invesco Ltd., IIS and/or IDI.
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3) generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
Level 1 — | Prices are determined using quoted prices in an active market for identical assets. | |
Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. | |
Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of August 31, 2011. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
16 Invesco Van Kampen American Franchise Fund
During the year ended August 31, 2011, there were no significant transfers between investment levels.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 5,841,264,810 | $ | — | $ | — | $ | 5,841,264,810 | ||||||||
NOTE 4—Trustees’ and Officers’ Fees and Benefits
“Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and “Trustees’ and Officers’ Fees and Benefits” also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. “Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
During the year ended August 31, 2011, the Fund paid legal fees of $3,289 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A partner of that firm is a Trustee of the Trust.
NOTE 5—Security Transactions with Affiliated Funds
The Fund is permitted to purchase or sell securities from or to certain other Invesco Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment adviser (or affiliated investment advisers), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, for the year ended August 31, 2011, the Fund engaged in securities purchases of $88,475,587 and securities sales of $67,496,088, which resulted in net realized gains of $18,905,797.
NOTE 6—Expense Offset Arrangement(s)
The expense offset arrangement is comprised of transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions. For the year ended August 31, 2011, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $6,364.
NOTE 7—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 8—Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Years Ended August 31, 2011 and 2010:
2011 | 2010 | |||||||
Ordinary income | $ | — | $ | 2,872,305 | ||||
Long-term capital gain | — | — | ||||||
Total distributions | $ | — | $ | 2,872,305 | ||||
Tax Components of Net Assets at Period-End:
2011 | ||||
Undistributed long-term gain | $ | 59,743,192 | ||
Net unrealized appreciation — investments | 659,737,714 | |||
Net unrealized appreciation — other investments | 33,289 | |||
Temporary book/tax differences | (469,018 | ) | ||
Post-October deferrals | (17,274 | ) | ||
Capital loss carryforward | (546,963,934 | ) | ||
Shares of beneficial interest | 5,694,511,898 | |||
Total net assets | $ | 5,866,575,867 | ||
17 Invesco Van Kampen American Franchise Fund
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund’s net unrealized appreciation (depreciation) difference is attributable primarily to wash sales.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund’s temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund utilized $77,197,203 of capital loss carryforward in the current period to offset net realized capital gain for federal income tax purposes. The Fund has a capital loss carryforward as of August 31, 2011 which expires as follows:
Capital Loss | ||||
Expiration | Carryforward* | |||
August 31, 2016 | $ | 436,460,438 | ||
August 31, 2018 | 110,503,496 | |||
Total capital loss carryforward | $ | 546,963,934 | ||
* | Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. |
To the extent that unrealized gains as of May 23, 2011, the date of reorganization of Invesco Large Cap Growth Fund, Invesco Van Kampen Capital Growth Fund and Invesco Van Kampen Enterprise Fund into the Fund and realized on securities held in each fund at such date of reorganization, the capital loss carryforward may be further limited for up to five years from the date of the reorganization.
NOTE 9—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended August 31, 2011 was $2,844,440,613 and $1,197,132,648, respectively. Cost of investments on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed Federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investment Securities on a Tax Basis | ||||
Aggregate unrealized appreciation of investment securities | $ | 878,256,413 | ||
Aggregate unrealized (depreciation) of investment securities | (218,518,699 | ) | ||
Net unrealized appreciation of investment securities | $ | 659,737,714 | ||
Cost of investments for tax purposes is $5,181,527,096. | ||||
NOTE 10—Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of foreign currency transactions, merger expenses and net operating losses, on August 31, 2011, undistributed net investment income (loss) was increased by $9,003,234, undistributed net realized gain (loss) was decreased by $11,837,676, and shares of beneficial interest increased by $2,834,442.
Further, as a result of tax deferrals acquired in the reorganization of Invesco Large Cap Growth Fund, Invesco Van Kampen Capital Growth Fund and Invesco Van Kampen Enterprise Fund into the Fund, undistributed net investment income (loss) was decreased by $464,545, undistributed net realized gain (loss) was decreased by $562,579,394 and shares of beneficial interest increased by $563,043,939. These reclassifications had no effect on the net assets of the Fund.
18 Invesco Van Kampen American Franchise Fund
NOTE 11—Share Information
Summary of Share Activity | ||||||||||||||||
Year ended August 31, | ||||||||||||||||
2011(a) | 2010 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Class A | 15,799,630 | $ | 194,566,281 | 2,227,115 | $ | 22,019,702 | ||||||||||
Class B | 715,055 | 8,527,696 | 278,730 | 2,757,084 | ||||||||||||
Class C | 2,491,661 | 30,223,787 | 251,034 | 2,484,206 | ||||||||||||
Class R | 128,847 | 1,596,002 | — | — | ||||||||||||
Class Y | 4,844,371 | 60,928,311 | 316,694 | 3,116,556 | ||||||||||||
Institutional Class | 1,771,287 | 22,307,656 | — | — | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Class A | — | — | 254,295 | 2,479,382 | ||||||||||||
Class B | — | — | 16,396 | 158,221 | ||||||||||||
Class C | — | — | 14,122 | 136,561 | ||||||||||||
Class Y | — | — | 1,781 | 17,399 | ||||||||||||
Issued in connection with acquisitions:(b) | ||||||||||||||||
Class A | 407,652,673 | 5,222,483,910 | — | — | ||||||||||||
Class B | 34,111,525 | 427,773,604 | — | — | ||||||||||||
Class C | 20,203,402 | 254,475,232 | — | — | ||||||||||||
Class R | 1,514,559 | 19,398,869 | — | — | ||||||||||||
Class Y | 7,427,093 | 95,663,760 | — | — | ||||||||||||
Institutional Class | 16,008,613 | 205,368,045 | — | — | ||||||||||||
Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||
Class A | 2,508,702 | 30,977,368 | 45,762 | 461,494 | ||||||||||||
Class B | (2,563,046 | ) | (30,977,368 | ) | (46,387 | ) | (461,494 | ) | ||||||||
Reacquired: | ||||||||||||||||
Class A | (25,492,374 | ) | (311,418,707 | ) | (7,851,906 | ) | (77,885,375 | ) | ||||||||
Class B | (2,034,031 | ) | (24,321,777 | ) | (614,432 | ) | (6,047,595 | ) | ||||||||
Class C | (1,944,263 | ) | (23,215,024 | ) | (674,167 | ) | (6,643,790 | ) | ||||||||
Class R | (131,592 | ) | (1,627,614 | ) | — | — | ||||||||||
Class Y | (2,560,884 | ) | (31,947,376 | ) | (217,671 | ) | (2,138,931 | ) | ||||||||
Institutional Class | (1,000,018 | ) | (12,462,236 | ) | — | — | ||||||||||
Net increase (decrease) in share activity | 479,451,210 | $ | 6,138,320,419 | (5,998,634 | ) | $ | (59,546,580 | ) | ||||||||
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 25% of the outstanding shares of the Fund. IDI has an agreement with these entities to sell Fund shares. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. | |
(b) | As of the open of business on May 23, 2011, the Fund acquired all the net assets of Invesco Large Cap Growth Fund, Invesco Van Kampen Capital Growth Fund and Invesco Van Kampen Enterprise Fund pursuant to a plan of reorganization approved by the Trustees of the Fund on November 10, 2010 and by the shareholders of Invesco Large Cap Growth Fund, Invesco Van Kampen Capital Growth Fund and Invesco Van Kampen Enterprise Fund on April 14, 2011. The acquisition was accomplished by a taxable exchange of 486,917,865 shares of the Fund for 106,999,397, 277,821,622 and 50,537,139 shares outstanding of Invesco Large Cap Growth Fund, Invesco Van Kampen Capital Growth Fund and Invesco Van Kampen Enterprise Fund, respectively, as of the close of business on May 20, 2011. Each class of Invesco Large Cap Growth Fund, Invesco Van Kampen Capital Growth Fund and Invesco Van Kampen Enterprise Fund was exchanged for the like class of shares of the Fund based on the relative net asset value of Invesco Large Cap Growth Fund, Invesco Van Kampen Capital Growth Fund and Invesco Van Kampen Enterprise Fund to the net asset value of the Fund on the close of business, May 20, 2011. Invesco Large Cap Growth Fund, Invesco Van Kampen Capital Growth Fund and Invesco Van Kampen Enterprise Fund net assets at that date of $1,350,805,388, $3,945,324,161 and $929,033,871, respectively, including $1,276,200,577 of unrealized appreciation, was combined with those of the Fund. The net assets of the Fund immediately before the acquisition were $392,208,046. The net assets of the Fund immediately following the acquisition were $6,617,371,465. |
19 Invesco Van Kampen American Franchise Fund
NOTE 12—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Ratio of | Ratio of | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net gains | expenses | expenses | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
(losses) | to average | to average net | Ratio of net | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset | Net | on securities | Dividends | Distributions | net assets | assets without | investment | |||||||||||||||||||||||||||||||||||||||||||||||||
value, | investment | (both | Total from | from net | from net | Net asset | Net assets, | with fee waivers | fee waivers | income (loss) | ||||||||||||||||||||||||||||||||||||||||||||||
beginning | income | realized and | investment | investment | realized | Total | value, end | Total | end of period | and/or expenses | and/or expenses | to average | Portfolio | |||||||||||||||||||||||||||||||||||||||||||
of period | (loss)(a) | unrealized) | operations | income | gains | Distributions | of period | Return | (000s omitted) | absorbed | absorbed | net assets | turnover(b) | |||||||||||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | $ | 9.79 | $ | (0.05 | ) | $ | 1.98 | $ | 1.93 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 11.72 | 19.71 | %(c) | $ | 4,894,163 | 1.06 | %(d) | 1.17 | %(d) | (0.43 | )%(d) | 179 | % | |||||||||||||||||||||||||||
Year ended 08/31/10 | 8.87 | 0.01 | 1.03 | 1.04 | (0.12 | ) | 0.00 | (0.12 | ) | 9.79 | 11.75 | (c) | 168,731 | 1.30 | 1.30 | 0.11 | 101 | |||||||||||||||||||||||||||||||||||||||
Year ended 08/31/09 | 10.23 | 0.13 | (1.33 | ) | (1.20 | ) | (0.16 | ) | 0.00 | (0.16 | ) | 8.87 | (11.40 | )(e) | 200,127 | 1.35 | 1.41 | 1.60 | 105 | |||||||||||||||||||||||||||||||||||||
Year ended 08/31/08 | 12.19 | 0.13 | (1.20 | ) | (1.07 | ) | (0.31 | ) | (0.58 | ) | (0.89 | ) | 10.23 | (9.31 | )(e) | 241,026 | 1.24 | 1.24 | 1.22 | 18 | ||||||||||||||||||||||||||||||||||||
Year ended 08/31/07 | 11.41 | 0.36 | 0.52 | 0.88 | (0.10 | ) | 0.00 | (0.10 | ) | 12.19 | 7.75 | (e) | 394,013 | 1.19 | 1.19 | 2.93 | 39 | |||||||||||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 9.64 | (0.08 | ) | 1.91 | 1.83 | 0.00 | 0.00 | 0.00 | 11.47 | 18.98 | (c)(f) | 373,157 | 1.28 | (d)(f) | 1.65 | (d)(f) | (0.64 | )(d)(f) | 179 | |||||||||||||||||||||||||||||||||||||
Year ended 08/31/10 | 8.75 | (0.06 | ) | 1.01 | 0.95 | (0.06 | ) | 0.00 | (0.06 | ) | 9.64 | 10.89 | (c) | 22,332 | 2.05 | 2.05 | (0.64 | ) | 101 | |||||||||||||||||||||||||||||||||||||
Year ended 08/31/09 | 10.08 | 0.07 | (1.31 | ) | (1.24 | ) | (0.09 | ) | 0.00 | (0.09 | ) | 8.75 | (12.09 | )(g) | 23,466 | 2.10 | 2.16 | 0.86 | 105 | |||||||||||||||||||||||||||||||||||||
Year ended 08/31/08 | 12.03 | 0.05 | (1.18 | ) | (1.13 | ) | (0.24 | ) | (0.58 | ) | (0.82 | ) | 10.08 | (9.98 | )(g) | 28,330 | 2.00 | 2.00 | 0.45 | 18 | ||||||||||||||||||||||||||||||||||||
Year ended 08/31/07 | 11.30 | 0.26 | 0.53 | 0.79 | (0.06 | ) | 0.00 | (0.06 | ) | 12.03 | 7.01 | (g) | 38,428 | 1.95 | 1.95 | 2.15 | 39 | |||||||||||||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 9.68 | (0.11 | ) | 1.94 | 1.83 | 0.00 | 0.00 | 0.00 | 11.51 | 18.90 | (c)(h) | 266,990 | 1.60 | (d)(h) | 1.71 | (d)(h) | (0.97 | )(d)(h) | 179 | |||||||||||||||||||||||||||||||||||||
Year ended 08/31/10 | 8.76 | (0.05 | ) | 1.03 | 0.98 | (0.06 | ) | 0.00 | (0.06 | ) | 9.68 | 11.14 | (c)(h) | 23,718 | 1.93 | (h) | 1.93 | (h) | (0.52 | )(h) | 101 | |||||||||||||||||||||||||||||||||||
Year ended 08/31/09 | 10.10 | 0.06 | (1.30 | ) | (1.24 | ) | (0.10 | ) | 0.00 | (0.10 | ) | 8.76 | (12.11 | )(i) | 25,063 | 2.16 | 2.22 | 0.78 | 105 | |||||||||||||||||||||||||||||||||||||
Year ended 08/31/08 | 12.02 | 0.06 | (1.18 | ) | (1.12 | ) | (0.22 | ) | (0.58 | ) | (0.80 | ) | 10.10 | (9.89 | )(i)(j) | 26,600 | 1.92 | (j) | 1.92 | (j) | 0.55 | (j) | 18 | |||||||||||||||||||||||||||||||||
Year ended 08/31/07 | 11.30 | 0.26 | 0.53 | 0.79 | (0.07 | ) | 0.00 | (0.07 | ) | 12.02 | 6.99 | (i) | 46,382 | 1.95 | 1.95 | 2.15 | 39 | |||||||||||||||||||||||||||||||||||||||
Class R | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11(k) | 12.81 | (0.02 | ) | (1.08 | ) | (1.10 | ) | 0.00 | 0.00 | 0.00 | 11.71 | (8.59 | )(c) | 17,698 | 1.30 | (d)(l) | 1.42 | (d)(l) | (0.66 | )(d)(l) | 179 | |||||||||||||||||||||||||||||||||||
Class Y | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 9.83 | (0.02 | ) | 1.97 | 1.95 | 0.00 | 0.00 | 0.00 | 11.78 | 19.84 | (c) | 117,471 | 0.81 | (d) | 0.92 | (d) | (0.18 | )(d) | 179 | |||||||||||||||||||||||||||||||||||||
Year ended 08/31/10 | 8.91 | 0.04 | 1.02 | 1.06 | (0.14 | ) | 0.00 | (0.14 | ) | 9.83 | 11.95 | (c) | 2,592 | 1.05 | 1.05 | 0.35 | 101 | |||||||||||||||||||||||||||||||||||||||
Year ended 08/31/09 | 10.27 | 0.14 | (1.31 | ) | (1.17 | ) | (0.19 | ) | 0.00 | (0.19 | ) | 8.91 | (11.07 | )(m) | 1,451 | 1.10 | 1.18 | 1.77 | 105 | |||||||||||||||||||||||||||||||||||||
Year ended 08/31/08 | 12.23 | 0.18 | (1.22 | ) | (1.04 | ) | (0.34 | ) | (0.58 | ) | (0.92 | ) | 10.27 | (9.05 | )(m) | 108 | 1.00 | 1.00 | 1.65 | 18 | ||||||||||||||||||||||||||||||||||||
Year ended 08/31/07 | 11.44 | 0.42 | 0.48 | 0.90 | (0.11 | ) | 0.00 | (0.11 | ) | 12.23 | 7.93 | (m) | 1,635 | 0.93 | 0.93 | 3.42 | 39 | |||||||||||||||||||||||||||||||||||||||
Institutional Class | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11(k) | 12.07 | (0.00 | ) | (0.32 | ) | (0.32 | ) | 0.00 | 0.00 | 0.00 | 11.75 | (2.65 | )(c) | 197,097 | 0.66 | (d)(l) | 0.66 | (d)(l) | (0.03 | )(d)(l) | 179 | |||||||||||||||||||||||||||||||||||
(a) | Calculated using average shares outstanding. | |
(b) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. For the year ending August 31, 2011, the portfolio turnover calculation excludes the value of securities purchased of $4,947,460,310 and sold of $2,251,028,915 in the effort to realign the Fund’s portfolio holdings after the reorganization of Invesco Large Cap Growth Fund, Invesco Van Kampen Capital Growth Fund and Invesco Van Kampen Enterprise Fund into the Fund. | |
(c) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges and is not annualized for periods less than one year. | |
(d) | Ratios are based on average daily net assets (000’s omitted) of $1,608,186, $135,181, $102,470, $5,109, $41,714 and $55,810 for Class A, Class B, Class C, Class R, Class Y and Institutional Class shares, respectively. | |
(e) | Assumes reinvestment of all distributions for the period and does not include payment of the maximum sales charge of 5.75% or contingent deferred sales charge (CDSC). On purchases of $1 million or more, a CDSC of 1% may be imposed on certain redemptions made within eighteen months of purchase. If the sales charges were included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to 0.25% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. | |
(f) | The total return, ratio of expenses to average net assets and ratio of net investment income (loss) to average net assets reflect actual 12b-1 fees of 0.47%. | |
(g) | Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 5%, charged on certain redemptions made within one year of purchase and declining to 0% after the fifth year. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to 1% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. | |
(h) | The total return, ratio of expenses to average net assets and ratio of net investment income (loss) to average net assets reflect actual 12b-1 fees of 0.79% and 0.88% for the period ended August 31, 2011 and 2010, respectively. | |
(i) | Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 1%, charged on certain redemptions made within one year of purchase. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to 1% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. | |
(j) | The total return, ratio of expenses to average net assets and ratio of net investment income (loss) to average net assets reflect actual 12b-1 fees of less than 1%. | |
(k) | Commencement date of May 23, 2011 for Class R and December 22, 2010 for Institutional Class. | |
(l) | Annualized. | |
(m) | Assumes reinvestment of all distributions for the period. These returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption on Fund shares. |
20 Invesco Van Kampen American Franchise Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Counselor Series Trust (Invesco Counselor Series Trust)
and Shareholders of Invesco Van Kampen American Franchise Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Invesco Van Kampen American Franchise Fund (one of the funds constituting AIM Counselor Series Trust (Invesco Counselor Series Trust), hereafter referred to as the “Fund”) at August 31, 2011, the results of its operations for the year then ended, the changes in its net assets and the financial highlights for each of the two years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at August 31, 2011 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. The financial highlights of the Fund for the periods ended August 31, 2009 and prior were audited by other independent auditors whose report dated October 26, 2009 expressed an unqualified opinion on those financial statements.
PRICEWATERHOUSECOOPERS LLP
October 21, 2011
Houston, Texas
21 Invesco Van Kampen American Franchise Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments or contingent deferred sales charges on redemptions, and redemption fees, if any; and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. With the exception of the actual ending account value and expenses of the Class R shares, the example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period May 23, 2011, through August 31, 2011. The actual ending account value and expenses of the Class R shares in the example below are based on an investment of $1,000 invested as of close of business May 20, 2011 (commencement date) and held through August 31, 2011.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period (as of close of business May 20, 2011 through August 31, 2011 for the Class R shares). Because the actual ending account value and expense information in the example is not based upon a six month period for the Class R shares, the ending account value and expense information may not provide a meaningful comparison to mutual funds that provide such information for a full six month period.
Hypothetical expenses for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the hypothetical information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
HYPOTHETICAL | ||||||||||||||||||||||||||||||
ACTUAL | (5% annual return before expenses) | |||||||||||||||||||||||||||||
Beginning | Ending | Expenses | Ending | Expenses | Annualized | |||||||||||||||||||||||||
Account Value | Account Value | Paid During | Account Value | Paid During | Expense | |||||||||||||||||||||||||
Class | (03/01/11) | (08/31/11)1 | Period2,4 | (08/31/11) | Period2,5 | Ratio3 | ||||||||||||||||||||||||
A | $ | 1,000.00 | $ | 916.30 | $ | 5.12 | $ | 1,019.86 | $ | 5.40 | 1.06 | % | ||||||||||||||||||
B | 1,000.00 | 913.10 | 5.83 | 1,019.11 | 6.16 | 1.21 | ||||||||||||||||||||||||
C | 1,000.00 | 912.80 | 7.71 | 1,017.14 | 8.13 | 1.60 | ||||||||||||||||||||||||
R | 1,000.00 | 914.10 | 6.27 | 1,018.65 | 6.61 | 1.30 | ||||||||||||||||||||||||
Y | 1,000.00 | 916.00 | 3.91 | 1,021.12 | 4.13 | 0.81 | ||||||||||||||||||||||||
Institutional | 1,000.00 | 917.30 | 3.19 | 1,021.88 | 3.36 | 0.66 | ||||||||||||||||||||||||
1 | The actual ending account value is based on the actual total return of the Fund for the period March 1, 2011 through August 31, 2011 (as of close of business May 23, 2011 through August 31, 2011 for Class R shares), after actual expenses and will differ from the hypothetical ending account value which is based on the Fund’s expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half year. Class R shares actual expenses are equal to the annualized expense ratio indicated above multiplied by the average account value over the period, multiplied by 101 (as of close of business May 23, 2011 through August 31, 2011)/365. Because Class R shares have not been in existence for a full six month period and, because the actual ending account value and expense information in the expense example covers a short time period, return and expense data may not be indicative of return and expense data for longer time periods. |
3 | Effective May 23, 2011, the Fund’s adviser has contractually agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit Total Annual Fund Operating Expense of Class A, Class B, Class C, Class R, Class Y and Institutional Class shares to 1.05%, 1.22%, 1.80%, 1.30%, 0.80% and 0.80% of average daily net assets, respectively. The annualized expense ratios restated as if these agreements had been in effect throughout the entire most recent fiscal half year are 1.05%, 1.21%, 1.59%, 1.30%, 0.80% and 0.68% for Class A, Class B, Class C, Class R, Class Y and Institutional Class shares, respectively. |
4 | The actual expenses paid restated as if the changes discussed above had been in effect throughout the entire most recent fiscal half year are $5.07, $5.83, $7.67, $6.27, $3.86 and $3.29 for Class A, Class B, Class C, Class R, Class Y and Institutional Class shares, respectively. |
5 | The hypothetical expenses paid restated as if the changes discussed above had been in effect throughout the entire most recent fiscal half year are $5.35, $6.16, $8.08, $6.61, $4.08 and $3.47 for Class A, Class B, Class C, Class R, Class Y and Institutional Class shares, respectively. |
22 Invesco Van Kampen American Franchise Fund
Approval of Investment Advisory and Sub-Advisory Contracts
The Board of Trustees (the Board) of AIM Counselor Series Trust (Invesco Counselor Series Trust) is required under the Investment Company Act of 1940, as amended, to approve annually the renewal of the Invesco Van Kampen American Franchise Fund (the Fund) investment advisory agreement with Invesco Advisers, Inc. (Invesco Advisers) and the Master Intergroup Sub-Advisory Contract for Mutual Funds (the sub-advisory contracts) with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers). During contract renewal meetings held on June 14-15, 2011, the Board as a whole, and the disinterested or “independent” Trustees, who comprise 80% of the Board, voting separately, approved the continuance of the Fund’s investment advisory agreement and the sub-advisory contracts for another year, effective July 1, 2011. In doing so, the Board considered the process that it follows in reviewing and approving the Fund’s investment advisory agreement and sub-advisory contracts and the information that it is provided. The Board determined that the Fund’s investment advisory agreement and the sub-advisory contracts are in the best interests of the Fund and its shareholders and the compensation to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is responsible for overseeing the management of a number of the series portfolios of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies and limitations and investment risks of these funds. The Sub-Committees meet regularly and at designated contract renewal meetings each year to conduct a review of the performance, fees, expenses and other matters related to their assigned Invesco Funds. Each Sub-Committee recommends to the Investments Committee, which in turn recommends to the full Board, whether to approve the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Trustees receive comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and an independent company, Lipper, Inc. (Lipper). The Trustees also receive an independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. The independent Trustees are assisted in their annual evaluation of the Fund’s investment advisory agreement by the Senior Officer and by independent legal counsel. The independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in private sessions with the Senior Officer and counsel.
In evaluating the fairness and reasonableness of the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Trustees also considered information provided in connection with fund acquisitions approved by the Trustees to rationalize the Invesco Funds product range following the acquisition of the retail mutual fund business of Morgan Stanley (the Morgan Stanley Transaction). The Trustees recognized that the advisory fees for the Invesco Funds include advisory fees that are the result of years of review and negotiation between the Trustees and Invesco Advisers as well as advisory fees inherited from Morgan Stanley and Van Kampen funds acquired in the Morgan Stanley Transaction. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these same arrangements throughout the year and in prior years. One Trustee may have weighed a particular piece of information differently than another Trustee.
The discussion below serves as the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 15, 2011, and may not reflect consideration of factors that became known to the Board after that date, including, for example, changes to the Fund’s performance, advisory fees, expense limitations and/or fee waivers.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers, with whom the Board met during the year. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s consideration of Invesco Advisers’ performance and investment process oversight, independent credit analysis and investment risk management.
In determining whether to continue the Fund’s investment advisory agreement, the Board considered the prior relationship between Invesco Advisers and the Fund, as well as the Board’s knowledge of Invesco Advisers’ operations, and concluded that it is beneficial to maintain the current relationship, in part, because of such knowledge. The Board also considered services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution and legal and compliance. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and the advisory services are provided in accordance with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services provided by the Affiliated Sub-Advisers under the sub-advisory contracts and the credentials and experience of the officers and employees of the Affiliated Sub-Advisers who provide these services. The Board noted that the Affiliated Sub-Advisers have offices and personnel that are located in financial centers around the world. As a result, the Affiliated Sub-Advisers can provide research and investment analysis on the markets and economies of various countries in which the Fund invests and make recommendations on securities of companies located in such countries. The Board concluded that the sub-advisory contracts benefit the Fund and its shareholders by permitting Invesco Advisers to use the resources and talents of the Affiliated Sub-Advisers in managing the Fund. The Board concluded that the nature, extent and quality of the services provided by the Affiliated Sub-Advisers are appropriate and satisfactory and in accordance with the terms of the Fund’s sub-advisory contracts.
23 Invesco Van Kampen American Franchise Fund
B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
The Board compared the Fund’s performance during the past one, three and five calendar years to the performance of funds in the Lipper performance universe and against the Lipper Large-Cap Growth Funds Index. The Board noted that performance of Class A shares of the Fund was in the first quintile of the performance universe for the one, 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 performance of Class A shares of the Fund was above the performance of the Index for the one, three and five year periods. Although the independent written evaluation of the Fund’s Senior Officer only considered Fund performance through the most recent calendar year, the Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
C. | Advisory and Sub-Advisory Fees and Fee Waivers |
The Board compared the Fund’s contractual advisory fee rate to the contractual advisory fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the contractual advisory fee rate for Class A shares of the Fund was below the median contractual advisory fee rate of funds in the expense group. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using audited financial data from the most recent annual report of each fund in the expense group that was publicly available as of the end of the past calendar year and including only one fund per investment adviser. The Board noted that comparative data is as of varying dates, which may affect the comparability of data during times of market volatility.
The Board also compared the Fund’s effective fee rate (the advisory fee after advisory fee waivers and before expense limitations/waivers) to the advisory fee rates of other mutual funds advised by Invesco Advisers and its affiliates with investment strategies comparable to those of the Fund. The Board noted that the Fund’s rate was below the rate of the other mutual fund advised by Invesco Advisers with comparable investment strategies. The Board also noted that Invesco Advisers sub-advises two other mutual funds with investment strategies comparable to those of the Fund and that the sub-advisory rate was below the effective fee fate of the Fund.
Other than the mutual funds described above, the Board noted that Invesco Advisers and the Affiliated Sub-Advisers do not manage other mutual funds or client accounts in a manner substantially similar to the management of the Fund.
The Board noted that Invesco Advisers has contractually agreed to waive fees and/or limit expenses of the Fund through at least June 30, 2013 in an amount necessary to limit total annual operating expenses to a specified percentage of average daily net assets for each class of the Fund. The Board also considered the effect this fee waiver would have on the Fund’s total estimated expenses.
The Board also considered the services provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the allocation of fees between Invesco Advisers and the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board noted that Invesco Advisers provides services to sub-advised Invesco Funds, including oversight of the Affiliated Sub-Advisers as well as the additional services described above other than day-to-day portfolio management. The Board also noted that the sub-advisory fees have no direct effect on the Fund or its shareholders, as they are paid by Invesco Advisers to the Affiliated Sub-Advisers.
Based upon the information and considerations described above, the Board concluded that the Fund’s advisory and sub-advisory fees are fair and reasonable.
D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule. The Board also noted that the 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 Invesco Advisers.
E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the profitability of Invesco Advisers and its affiliates in providing these services. The Board reviewed with Invesco Advisers the methodology used to prepare the profitability information. The Board considered the profitability of Invesco Advisers in connection with managing the Fund and the Invesco Funds. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its subsidiaries provide to the Fund and the Invesco Funds.
The Board concluded that the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund is not excessive given the nature, quality and extent of the services provided to the Invesco Funds. The Board considered whether Invesco Advisers and each Affiliated Sub-Adviser are financially sound and have the resources necessary to perform their obligations under the investment advisory agreement and sub-advisory contracts. The Board concluded that Invesco Advisers and each Affiliated Sub-Adviser have the financial resources necessary to fulfill these obligations.
F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund, including the fees received for their provision of administrative, transfer agency and distribution services to the Fund. The Board considered the performance of Invesco Advisers 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 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 Fund; that Invesco Advisers 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; and 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.
The Board considered the benefits realized by Invesco Advisers and the Affiliated Sub-Advisers as a result of portfolio brokerage transactions executed through “soft dollar” arrangements. The Board noted that soft dollar arrangements shift the payment obligation for research and execution services from Invesco Advisers and the Affiliated Sub-Advisers to the Invesco Funds and therefore may reduce Invesco Advisers’ and the Affiliated Sub-Advisers’ expenses. The Board concluded that the soft dollar arrangements are appropriate. The Board also concluded that, based on their review and representations made by the Chief Compliance Officer of the Invesco Funds, these arrangements are consistent with regulatory requirements.
The Board considered that the Fund’s uninvested cash and cash collateral from any securities lending arrangements may be invested in money market funds advised by Invesco Advisers pursuant to procedures approved by the Board. The Board noted that Invesco Advisers receives advisory fees from these affiliated money market funds attributable to such investments, although Invesco Advisers has contractually agreed to waive through varying periods the advisory fees payable by the Invesco Funds. The waiver is in an amount equal to 100% of the net advisory fee Invesco Advisers receives from the affiliated money market funds with respect to the Fund’s investment in the affiliated money market funds of uninvested cash, but not cash collateral. The Board concluded that the Fund’s investment of uninvested cash and cash collateral from any securities lending arrangements in the affiliated money market funds is in the best interests of the Fund and its shareholders.
24 Invesco Van Kampen American Franchise Fund
Trustees and Officers
The address of each trustee and officer is AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”), 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Number of Funds | ||||||||
in Fund Complex | ||||||||
Name, Year of Birth and | Trustee and/ | Principal Occupation(s) | Overseen by | Other Directorship(s) | ||||
Position(s) Held with the Trust | or Officer Since | During Past 5 Years | Trustee | Held by Trustee | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 — 1960 Trustee | 2007 | 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 | 143 | 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. Taylor2 — 1954 Trustee, President and Principal Executive Officer | 2006 | 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 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 Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust); Trustee and Executive Vice President, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s 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 Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Tax-Free Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. | 143 | None | ||||||
Wayne W. Whalen3 — 1939 Trustee | 2010 | Of Counsel, and prior to 2010, partner in the law firm of Skadden, Arps, Slate, Meagher & Flom LLP, legal counsel to funds in the Fund Complex | 161 | Director of the Abraham Lincoln Presidential Library Foundation | ||||
Independent Trustees | ||||||||
Bruce L. Crockett — 1944 Trustee and Chair | 2003 | Chairman, Crockett Technology Associates (technology consulting company) Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer COMSAT Corporation; and Chairman, Board of Governors of INTELSAT (international communications company) | 143 | ACE Limited (insurance company); and Investment Company Institute | ||||
1 | Mr. Flanagan is considered an interested person of the Trust because he is an officer of the adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the adviser to the Trust. |
2 | Mr. Taylor is considered an interested person of the Trust because he is an officer and a director of the adviser to, and a director of the principal underwriter of, the Trust. |
3 | Mr. Whalen has been deemed to be an interested person of the Trust because of his prior service as counsel to the predecessor funds of certain Invesco open-end funds and his affiliation with the law firm that served as counsel to such predecessor funds and continues to serve as counsel to the Invesco Van Kampen closed-end funds. |
T-1 Invesco Van Kampen American Franchise Fund
Trustees and Officers—(continued)
The address of each trustee and officer is AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”), 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Number of Funds | ||||||||
in Fund Complex | ||||||||
Name, Year of Birth and | Trustee and/ | Principal Occupation(s) | Overseen by | Other Directorship(s) | ||||
Position(s) Held with the Trust | or Officer Since | During Past 5 Years | Trustee | Held by Trustee | ||||
Independent Trustees | ||||||||
David C. Arch — 1945 Trustee | 2010 | Chairman and Chief Executive Officer of Blistex Inc., a consumer health care products manufacturer. | 161 | 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 | ||||
Bob R. Baker — 1936 Trustee | 1983 | Retired | 143 | None | ||||
Formerly: President and Chief Executive Officer, AMC Cancer Research Center; and Chairman and Chief Executive Officer, First Columbia Financial Corporation | ||||||||
Frank S. Bayley — 1939 Trustee | 2003 | Retired Formerly: Director, Badgley Funds, Inc. (registered investment company) (2 portfolios) and Partner, law firm of Baker & McKenzie | 143 | Director and Chairman, C.D. Stimson Company (a real estate investment company) | ||||
James T. Bunch — 1942 Trustee | 2000 | 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 | 143 | Vice Chairman, Board of Governors, Western Golf Association/Evans Scholars Foundation and Director, Denver Film Society | ||||
Rodney Dammeyer — 1940 Trustee | 2010 | President 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. | 161 | 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 | 2003 | 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) | 161 | Board of Nature’s 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 | 2003 | 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) | 143 | Administaff | ||||
Formerly: Chief Executive Officer, Texana Timber LP (sustainable forestry company) and member of the U.S. House of Representatives | ||||||||
Carl Frischling — 1937 Trustee | 2003 | Partner, law firm of Kramer Levin Naftalis and Frankel LLP | 143 | Director, Reich & Tang Funds (6 portfolios) | ||||
Prema Mathai-Davis — 1950 Trustee | 2003 | Retired | 143 | None | ||||
Formerly: Chief Executive Officer, YWCA of the U.S.A. | ||||||||
Larry Soll — 1942 Trustee | 1997 | Retired | 143 | None | ||||
Formerly, Chairman, Chief Executive Officer and President, Synergen Corp. (a biotechnology company) | ||||||||
T-2 Invesco Van Kampen American Franchise Fund
Trustees and Officers—(continued)
The address of each trustee and officer is AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”), 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Number of Funds | ||||||||
in Fund Complex | ||||||||
Name, Year of Birth and | Trustee and/ | Principal Occupation(s) | Overseen by | Other Directorship(s) | ||||
Position(s) Held with the Trust | or Officer Since | During Past 5 Years | Trustee | Held by Trustee | ||||
Independent Trustees | ||||||||
Hugo F. Sonnenschein — 1940 Trustee | 2010 | President Emeritus and Honorary Trustee 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. | 161 | 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 | 2005 | Retired Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios) and Partner, Deloitte & Touche | 143 | None | ||||
Other Officers | ||||||||
Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer of Invesco Funds | N/A | N/A | ||||
John M. Zerr — 1962 Senior Vice President, Chief Legal Officer and Secretary | 2006 | 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 | N/A | N/A | ||||
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) | ||||||||
Lisa O. Brinkley — 1959 Vice President | 2004 | Global Compliance Director, Invesco Ltd.; Chief Compliance Officer, Invesco Investment Services, Inc.(formerly known as Invesco Aim Investment Services, Inc.); and Vice President, The Invesco Funds Formerly: Chief Compliance Officer, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) and Van Kampen Investor Services Inc.; Senior Vice President, Invesco Management Group, Inc.; Senior Vice President and Chief Compliance Officer, Invesco Advisers, Inc. and The Invesco Funds; Vice President and Chief Compliance Officer, Invesco Aim Capital Management, Inc. and Invesco Distributors, Inc.; Vice President, Invesco Investment Services, Inc. and Fund Management Company | N/A | N/A | ||||
Sheri Morris — 1964 Vice President, Treasurer and Principal Financial Officer | 2003 | 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) | N/A | N/A | ||||
Formerly: 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, 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. | ||||||||
T-3 Invesco Van Kampen American Franchise Fund
Trustees and Officers—(continued)
The address of each trustee and officer is AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”), 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Number of Funds | ||||||||
in Fund Complex | ||||||||
Name, Year of Birth and | Trustee and/ | Principal Occupation(s) | Overseen by | Other Directorship(s) | ||||
Position(s) Held with the Trust | or Officer Since | During Past 5 Years | Trustee | Held by Trustee | ||||
Other Officers | ||||||||
Karen Dunn Kelley — 1960 Vice President | 2003 | Head of Invesco’s 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 Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust); and President and Principal Executive Officer, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust only). | N/A | N/A | ||||
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 Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Tax-Free Investments Trust only) | ||||||||
Lance A. Rejsek — 1967 Anti-Money Laundering Compliance Officer | 2005 | 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.), The Invesco Funds, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management) and Van Kampen Funds Inc. | N/A | N/A | ||||
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Investor Services Inc., Fund Management Company, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc. | ||||||||
Todd L. Spillane — 1958 Chief Compliance Officer | 2006 | 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, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, INVESCO Private Capital Investments, Inc. (holding company) and Invesco Private Capital, Inc. (registered investment adviser); Vice President, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.), Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.). Formerly: 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 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 | N/A | N/A | ||||
The Statement of Additional Information of the Trust includes additional information about the Fund’s Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Fund’s prospectus for information on the Fund’s sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 2500 Houston, TX 77046-1173 | Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 | Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 2500 Houston, TX 77046-1173 | Auditors PricewaterhouseCoopers LLP 1201 Louisiana Street, Suite 2900 Houston, TX 77002-5678 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2600 One Commerce Square Philadelphia, PA 19103 | Counsel to the Independent Trustees Kramer, Levin, Naftalis & Frankel LLP 1177 Avenue of the Americas New York, NY 10036-2714 | Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 2500 Houston, TX 77046-1173 | Custodian State Street Bank and Trust Company 225 Franklin Boston, MA 02110-2801 |
T-4 Invesco Van Kampen American Franchise Fund
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Invesco mailing information
Send general correspondence to Invesco Investment Services, Inc., P.O. Box 219078, Kansas City, MO 64121-9078.
Invesco privacy policy
You share personal and financial information with us that is necessary for your transactions and your account records. We take very seriously the obligation to keep that information confidential and private.
Invesco collects nonpublic personal information about you from account applications or other forms you complete and from your transactions with us or our affiliates. We do not disclose information about you or our former customers to service providers or other third parties except to the extent necessary to service your account and in other limited circumstances as permitted by law. For example, we use this information to facilitate the delivery of transaction confirmations, financial reports, prospectuses and tax forms.
Even within Invesco, only people involved in the servicing of your accounts and compliance monitoring have access to your information. To ensure the highest level of confidentiality and security, Invesco maintains physical, electronic and procedural safeguards that meet or exceed federal standards. Special measures, such as data encryption and authentication, apply to your communications with us on our website. More detail is available to you at invesco.com/privacy.
Important notice regarding delivery of security holder documents
To reduce Fund expenses, only one copy of most shareholder documents may be mailed to shareholders with multiple accounts at the same address (Householding). Mailing of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact Invesco Investment Services, Inc. at 800 959 4246 or contact your financial institution. We will begin sending you individual copies for each account within 30 days after receiving your request.
Fund holdings and proxy voting information
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is available at invesco.com/completeqtrholdings. Shareholders can also look up the Fund’s Forms N-Q on the SEC website at sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-09913 and 333-36074.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov.
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Information regarding how the Fund voted proxies related to its portfolio securities during the 12 months ended June 30, 2011, is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov.
Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the U.S. distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
VK-AMFR-AR-1 | Invesco Distributors, Inc. |
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Annual Report to Shareholders | August 31, 2011 |
Invesco Van Kampen Equity and Income Fund
Nasdaq:
A: ACEIX n B: ACEQX n C: ACERX n R: ACESX n Y: ACETX n Institutional: ACEKX
A: ACEIX n B: ACEQX n C: ACERX n R: ACESX n Y: ACETX n Institutional: ACEKX
2 | Letters to Shareholders | |
4 | Performance Summary | |
4 | Management Discussion | |
6 | Long-Term Fund Performance | |
8 | Supplemental Information | |
9 | Schedule of Investments | |
20 | Financial Statements | |
22 | Notes to Financial Statements | |
32 | Financial Highlights | |
33 | Auditor’s Report | |
34 | Fund Expenses | |
35 | Approval of Investment Advisory and Sub-Advisory Agreements | |
37 | Tax Information | |
T-1 | Trustees and Officers |
Letter to Shareholders
![(PHOTO OF TAYOR)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464402.jpg)
Philip Taylor
Dear Shareholders:
Enclosed is important information about your Fund and its performance. I encourage you to read this report to learn more about your Fund’s short- and long-term performance and its holdings as of the close of the reporting period. This report also includes useful information about your Fund’s management team and a discussion of how your Fund was managed during the reporting period.
Data indicated that economic growth in the U.S. and most of Europe was anemic during the reporting period. In the U.S., unemployment remained high, and the housing market remained weak. Concerns about European sovereign debt persisted. Nonetheless, equity markets rose in late 2010 and early 2011 as investors anticipated better news ahead. But contentious negotiations to raise the U.S. government’s debt ceiling heightened investor unease, and following the first-ever downgrade of U.S. creditworthiness in August, global stock markets declined as many investors sought safer havens.
Where you can get current information about your Fund
In light of economic uncertainty and market volatility, I suggest you check the timely market updates and commentary from many of our fund managers and other investment professionals at invesco.com/us. On our website, you also can obtain information about your account at any hour of the day or night. I invite you to visit and explore the tools and information we offer at invesco.com/us.
Our commitment to investment excellence
As we’ve seen over the last several years, market conditions can change — often suddenly and dramatically. That’s one reason financial advisers typically advise their clients to be well diversified and to maintain a long-term investment focus. While diversification can’t guarantee a profit or protect against loss, it can cushion the impact of dramatic market moves. Maintaining a long-term investment focus for your long-term goals — financing your retirement or your children’s education, for example — may help you avoid making rash investment decisions based on short-term market swings.
Invesco’s investment professionals apply these same principles to the funds they manage.
Invesco offers a broad array of traditional mutual funds, as well as other investment products, including single-country, sector, regional and global investments spanning equity, fixed income and alternative asset classes. Across our product line, investment excellence is our ultimate goal. Each of our funds is managed by specialized teams of investment professionals, and as a company, we maintain a single focus — investment management — that allows our fund managers to concentrate on doing what they do best: managing your money.
Our funds are managed strictly according to their stated investment objectives and strategies, with robust risk oversight using consistent, repeatable investment processes that don’t change in response to short-term market events. This disciplined approach can’t guarantee a profit; no investment can do that, since all involve some measure of risk. But it can ensure that your money is managed the way we said it would be, and that it’s managed with a long-term focus.
Our adherence to stated investment objectives and strategies allows your financial adviser to build a diversified portfolio that meets your individual risk tolerance and financial goals. It also means that when your goals change, your financial adviser will be able to find an Invesco fund that’s appropriate for your needs.
Questions?
If you have questions about your account, please contact one of our client service representatives at 800 959 4246. If you have a general Invesco-related question or comment for me, I invite you to email me directly at phil@invesco.com.
All of us at Invesco look forward to serving your investment management needs for many years to come. Thank you for investing with us.
Sincerely,
![GRAPHIC](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464403.gif)
Philip Taylor
Senior Managing Director, Invesco Ltd.
Senior Managing Director, Invesco Ltd.
2 | Invesco Van Kampen Equity and Income Fund |
![(PHOT OF BRUCE CROCKETT)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464404.jpg)
Bruce Crockett
Dear Fellow Shareholders:
Although the world’s economies are gradually recovering from the financial crisis, it has not been a smooth path. Unrest in the Middle East, persistently weak job and housing markets in the U.S. and continued government balance sheet repair in Europe are contributing to a slow, labored march toward global recovery.
In this environment, investors face risks that could make it more difficult to achieve their long-term financial goals — a secure retirement, home ownership, a child’s college education. Although the markets are complex and dynamic, there are ways to simplify the process and potentially increase your odds of achieving your goals. The best approach is to create a solid financial plan that helps you save and invest in ways that anticipate your needs over the long term.
Your financial adviser can help you define your financial plan, develop an appropriate investment strategy and put you in a better position to achieve your financial goals over the long term. This can take some of the guesswork out of the process and help you make thoughtful investments. Your financial adviser also can help you better understand your tolerance for risk, so that your investment approach lets you sleep at night while getting you closer to your goals. Lastly, your financial adviser can develop an asset allocation strategy that seeks to balance your investment approach, providing some protection against a decline in the markets while allowing you to participate in rising markets. Invesco calls this type of approach “intentional investing.” It means thinking carefully, planning thoughtfully and acting deliberately.
While no investment can guarantee favorable returns, your Board remains committed to managing costs and enhancing the performance of Invesco’s funds as part of our Investor First orientation. We continue to oversee the funds with the same strong sense of responsibility for your money and your continued trust that we’ve always maintained.
Thanks to the approval of our fund shareholders, Invesco has made great progress in realigning our U.S. mutual fund product line following our acquisition of Morgan Stanley’s retail asset management business, including Van Kampen Investments. When completed, the realignment will reduce overlap in the product lineup, enhance efficiency across our product line and build a solid foundation for further growth to meet client and shareholder needs. I would like to thank those of you who voted your proxy, and I hope our shareholders haven’t been too inconvenienced by the process.
As always, please contact me at bruce@brucecrockett.com with any questions or concerns you may have. On behalf of your Board, we look forward to continuing to represent your interests and serving your needs.
Sincerely,
![-s- BRUCE L. CROCKETT](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464405.gif)
Bruce L. Crockett
Independent Chair
Invesco Funds Board of Trustees
Independent Chair
Invesco Funds Board of Trustees
3 | Invesco Van Kampen Equity and Income Fund |
Management’s Discussion of Fund Performance
Performance summary
For the 12 months ended August 31, 2011, Invesco Van Kampen Equity and Income Fund underperformed the Russell 1000 Value Index, the Fund’s broad market benchmark. As the Fund uses a bottom-up stock selection approach, stock selection in various sectors was the primary reason the Fund underperformed its benchmark.
Your Fund’s long-term performance appears later in this report.
Fund vs. Indexes
Total returns, 8/31/10 to 8/31/11, at net asset value (NAV). Performance shown does not include applicable contingent deferred sales charges (CDSC) or front-end sales charges, which would have reduced performance.
Class A Shares | 10.78 | % | ||||||
Class B Shares | 10.69 | |||||||
Class C Shares | 9.95 | |||||||
Class R Shares | 10.45 | |||||||
Class Y Shares | 11.04 | |||||||
Institutional Class Shares | 11.16 | |||||||
Russell 1000 Value Index▼ (Broad Market Index) | 14.37 | |||||||
Barclays Capital U.S. Government/Credit Index▼ (Style-Specific Index) | 4.34 | |||||||
▼ Lipper Inc. |
How we invest
We call our investment philosophy value with a catalyst. We believe that undervalued companies which are experiencing positive changes (i.e., “catalysts”) have the potential to generate long-term stock price growth for shareholders. We generally seek to identify companies that are out of favor with investors, under earning relative to their potential and attractively valued. For these companies, we attempt to identify catalysts that may improve the financial results and/or correct the under valuation. Examples of catalysts typically include improved operational efficiency, changing industry dynamics and/or a change in management.
We initially identify potential investments through a series of quantitative screens including, but not limited to, return on capital and enterprise value to sales metrics. We then conduct fundamental research on the most attractive opportunities. The research process includes a thorough review of a company’s
financial statements, an evaluation of its competitive position and stability, and meetings with its executives. During the research process, we also value the company under various scenarios to determine if the investment is an attractive opportunity relative to its risks. This is also where we typically identify the positive catalyst, a pre-requisite for potential investment. Finally, we generally set a price target for a stock based on normalized earnings and historical valuation multiples.
In short, our objective is to exploit negative sentiment toward a company’s stock by analyzing the company’s operations in the context of a cyclical environment and identifying one or more catalysts that may improve the company’s financial performance. Improved financial performance, in turn, has the potential to drive the company’s stock price higher.
We typically sell an investment when it reaches our estimate of fair value or when we identify a more attractive investment opportunity.
Market conditions and your Fund
Equity markets were highly volatile during the fiscal year as investors weighed the competing issues of improved corporate profits, soft macro-economic data and debt issues in Europe and in the U.S. Corporate earnings were largely positive, but often overshadowed by concerns about high unemployment, a lack of consumer confidence, the growing debt contagion in Europe and the possibility of a downgrade of the U.S. credit rating. After a general rising trend through July 2011, the major equity indexes sold off precipitously in August as the U.S. received the first-ever downgrade to its credit rating from Standard & Poor’s, while the sovereign debt crisis unfolded in the Eurozone, prompting concerns of a “double-dip” recession. Even with the abrupt sell-off in August, major equity indexes recorded positive returns for the fiscal year, and all 10 sectors in the S&P 500 Index posted gains. Sector returns were mixed, as the energy sector returned the highest, followed by consumer discretionary and health care, with financials returning the lowest, with only slightly positive results.
An underweight position in the financials sector was the largest relative contributor to Fund performance versus the Russell 1000 Value Index, its broad market benchmark, as financial stocks performed poorly toward the end of the reporting period. In general, we focused on what we believed were lower risk financial companies with stronger balance sheets and less credit risk given the systemic risk in most financial stocks.
Stock selection in and an overweight allocation to the consumer discretionary sector also contributed to relative performance of the Fund, as media stocks, like Viacom performed well in this sector due to an increase in advertisement revenue over the reporting period.
Strong stock selection in the materials sector was another driver of relative performance versus the benchmark, as holdings such as Dow Chemical performed extremely well. Though it was a long-term holding for the Fund, we sold our position in Dow Chemical during the reporting period, staying true to our value approach of selling an investment when it reaches our estimate of fair value in order to find more favorable investment opportunities that we consider undervalued.
Portfolio Composition
By security type
Common Stocks & Other Equity Interests | 63.3 | % | ||||||
Bonds & Notes | 22.6 | |||||||
U.S. Treasury Securities | 7.6 | |||||||
Preferred Stocks | 1.8 | |||||||
U.S. Government Sponsored | ||||||||
Agency Securities | 1.2 | |||||||
Municipal Obligations | 0.1 | |||||||
Asset-Backed Securities | 0.1 | |||||||
Money Market Funds | ||||||||
Plus Other Assets Less Liabilities | 3.3 |
Total Net Assets | $10.9 billion | |
Total Number of Holdings* | 401 |
Top 10 Equity Holdings*
1. | JP Morgan Chase & Co. | 3.0 | % | |||||
2. | General Electric Co. | 2.6 | ||||||
3. | Marsh & McLennan Cos., Inc. | 2.1 | ||||||
4. | Anadarko Petroleum Corp. | 1.7 | ||||||
5. | UnitedHealth Group. Inc. | 1.7 | ||||||
6. | Pfizer, Inc. | 1.7 | ||||||
7. | Viacom, Inc.-Class B | 1.6 | ||||||
8. | eBay, Inc. | 1.6 | ||||||
9. | American Electric Power Co., Inc. | 1.6 | ||||||
10. | Proctor & Gamble Co. (The) | 1.5 |
The Fund’s holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
*Excluding cash equivalent holdings.
4 | AIM High Income Municipal Fund |
Stock selection in the information technology (IT) sector was the largest relative detractor from Fund performance during the reporting period. The portfolio was overweight in the sector versus the Russell 1000 Value Index and was adversely affected by exposure to stocks in the hardware and equipment industry. Notably affecting the Fund performance was Hewlett Packard, as the stock sold off significantly on the announcement the company was selling its PC business to purchase an enterprise software company. Cisco Systems also was a large detractor in the IT sector; however, the Fund sold this position during the early part of 2011.
Stock selection in industrials also dampened relative performance versus the Russell 1000 Value Index. Notably, in the transportation industry, lack of exposure to railroad stocks that performed well during the period detracted from relative performance.
Finally, stock selection in the utilities sector also detracted from relative performance. Lack of exposure to multi-utilities stocks was one of the largest detractors in this sector.
Currency forward contracts were used during the reporting period for the sole purpose of hedging currency exposure of U.S. dollar-denominated American Depositary Receipts (ADRs) in the Fund. An ADR is a negotiable security that represents the underlying securities of a non-U.S. company that trades in the U.S. financial markets, priced in U.S. dollars. The use of currency forward contracts had a slight positive effect on both absolute and relative Fund performance versus the Russell 1000 Value Index for the reporting period.
The bond portion of the portfolio underperformed the Barclays Capital U.S. Government/Credit Index due largely to duration and yield curve positioning.
Our short duration positioning, particularly our lack of exposure to the five-year segment of the yield curve, detracted from our relative performance as interest rates fell across the broader two- to 10-year section of the curve over the reporting period. Sector selection was a negligible detractor, as the detrimental effects from being underweight in energy, overweight in basic industrials and capital goods and overweight in consumer cyclicals offset the benefits of being underweight in U.S. Treasuries and overweight in cash for the reporting period.
Security selection also had a very small negative overall effect on performance. Poor security selection in financials (notably banking), utilities and government-related credits adversely affected Fund returns.
The Fund also used active duration and yield curve positioning for risk management and generating outperformance versus its benchmark. U.S. Treasury futures were the main tool used in managing duration. The use of U.S. Treasury futures for both duration and yield curve positioning had a slightly negative effect on absolute and relative performance for the reporting period.
Equity markets experienced an increase in volatility during the fiscal year, ending with a sharp sell-off in August of 2011. We believe that market volatility and the market correction that began in the third quarter of 2011, created opportunities to invest in companies with attractive valuations and strong fundamentals. We believe that ultimately those valuations and fundamentals may be reflected in those companies’ stock prices.
As always, we would like to caution investors against making investment decisions based on short-term performance. We recommend that you consult a financial adviser to discuss your individual financial program.
Thank you for your investment in Invesco Van Kampen Equity and Income Fund and for sharing our long-term investment horizon.
The views and opinions expressed in management’s discussion of Fund performance are those of Invesco Advisers, Inc. These views and opinions are subject to change at any time based on factors such as market and economic conditions. These views and opinions may not be relied upon as investment advice or recommendations, or as an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but Invesco Advisers, Inc. makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
See important Fund and, if applicable, index disclosures later in this report.
![(T BASTIAN PHOTO)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464411.jpg)
Thomas Bastian
Chartered Financial Analyst, portfolio manager, is lead manager of Invesco Van Kampen Equity and Income Fund. He joined Invesco in 2010. Mr. Bastian earned a B.A. in accounting from St. John’s University and an M.B.A. in finance from the University of Michigan. He is a member of the CFA Institute and the Houston Society of Financial Analysts.
![(C BURGE PHOTO)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464406.jpg)
Chuck Burge
Portfolio manager, is manager of Invesco Van Kampen Equity and Income Fund. He joined Invesco in 2002. Mr. Burge earned a B.S. in economics from Texas A&M University and an M.B.A. in finance from Rice University.
![(M LASKIN PHOTO)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464407.jpg)
Mark Laskin
Chartered Financial Analyst, portfolio manager, is manager of Invesco Van Kampen Equity and Income Fund. He joined Invesco in 2010. Mr. Laskin earned a B.A. in history from Swarthmore College and an M.B.A. and M.A. from the Wharton School and Lauder Institute, respectively, of the University of Pennsylvania.
![(M J MALY PHOTO)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464408.jpg)
Mary Jayne Maly
Chartered Financial Analyst, portfolio manager, is manager of Invesco Van Kampen Equity and Income Fund. She joined Invesco in 2010. Ms. Maly earned a B.A. from the University of Pittsburgh and an M.B.A. from the American Graduate School of International Management. She is a member of the Houston Society of Financial Analysts.
![(S MARCHELI PHOTO)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464409.jpg)
Sergio Marcheli
Portfolio manager, is manager of Invesco Van Kampen Equity and Income Fund. He joined Invesco in 2010. Mr. Marcheli earned a B.B.A. from the University of Houston and an M.B.A. from the University of St. Thomas.
![(J ROEDER PHOTO)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464410.jpg)
James Roeder
Chartered Financial Analyst, portfolio manager, is manager of Invesco Van Kampen Equity and Income Fund. He joined Invesco in 2010. Mr. Roeder earned a B.S. in accounting from Clemson University and an M.B.A. in economics and finance from the University of Chicago Graduate School of Business. He is a member of the CFA Institute and the Houston Society of Financial Analysts.
5 | Invesco Van Kampen Equity and Income Fund |
Your Fund’s Long-Term Performance
Results of a $10,000 Investment — Oldest Share Class
Fund and index data from 8/31/01
![(PERFORMANCE CHART)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464412.gif)
Past performance cannot guarantee comparable future results.
The data shown in the chart include reinvested distributions, applicable sales charges and Fund expenses including management fees. Index results include reinvested dividends, but they do not reflect sales charges. Performance of the peer group, if applicable, reflects fund expenses and management fees; performance of a market index does not. Performance shown in the chart and
table(s) does not reflect deduction of taxes a shareholder would pay on Fund distributions or sale of Fund shares.
This chart, which is a logarithmic chart, presents the fluctuations in the value of the Fund and its indexes. We believe that a logarithmic chart is more effective than other types of charts in illustrating changes in value during the early years shown in the chart. The vertical axis, the one that indicates the dollar value of an investment, is constructed with each
segment representing a percent change in the value of the investment. In this chart, each segment represents a doubling, or 100% change, in the value of the investment. In other words, the space between $5,000 and $10,000 is the same size as the space between $10,000 and $20,000.
6 | Invesco Van Kampen Equity and Income Fund |
Average Annual Total Returns | ||||
As of 8/31/11, including maximum applicable sales charges | ||||
Class A Shares | ||||
Inception (8/3/60) | 10.03 | % | ||
10 Years | 4.06 | |||
5 Years | 0.94 | |||
1 Year | 4.99 | |||
Class B Shares | ||||
Inception (5/1/92) | 9.01 | % | ||
10 Years | 4.19 | |||
5 Years | 1.57 | |||
1 Year | 5.69 | |||
Class C Shares | ||||
Inception (7/6/93) | 8.24 | % | ||
10 Years | 3.88 | |||
5 Years | 1.34 | |||
1 Year | 8.94 | |||
Class R Shares | ||||
Inception (10/1/02) | 6.47 | % | ||
5 Years | 1.83 | |||
1 Year | 10.45 | |||
Class Y Shares | ||||
Inception (12/22/04) | 3.83 | % | ||
5 Years | 2.35 | |||
1 Year | 11.04 | |||
Institutional Class Shares | ||||
10 Years | 4.71 | % | ||
5 Years | 2.20 | |||
1 Year | 11.16 | |||
Effective June 1, 2010, Class A, Class B, Class C, Class I and Class R shares of the predecessor fund, Van Kampen Equity and Income Fund, advised by Van Kampen Asset Management were reorganized into Class A, Class B, Class C, Class Y and Class R shares, respectively, of Invesco Van Kampen Equity and Income Fund. Returns shown above for Class A, Class B, Class C, Class R and Class Y shares are blended returns of the predecessor fund and Invesco Van Kampen Equity and Income Fund. Share class returns will differ from the predecessor fund because of different expenses.
Average Annual Total Returns | ||||
As of 6/30/11, the most recent calendar quarter-end, including maximum applicable sales charges | ||||
Class A Shares | ||||
Inception (8/3/60) | 10.24 | % | ||
10 Years | 4.77 | |||
5 Years | 3.16 | |||
1 Year | 15.97 | |||
Class B Shares | ||||
Inception (5/1/92) | 9.55 | % | ||
10 Years | 4.88 | |||
5 Years | 3.77 | |||
1 Year | 17.59 | |||
Class C Shares | ||||
Inception (7/6/93) | 8.81 | % | ||
10 Years | 4.60 | |||
5 Years | 3.56 | |||
1 Year | 20.84 | |||
Class R Shares | ||||
Inception (10/1/02) | 7.57 | % | ||
5 Years | 4.08 | |||
1 Year | 22.49 | |||
Class Y Shares | ||||
Inception (12/22/04) | 5.20 | % | ||
5 Years | 4.59 | |||
1 Year | 23.05 | |||
Institutional Class Shares | ||||
10 Years | 5.41 | % | ||
5 Years | 4.42 | |||
1 Year | 23.18 | |||
Institutional Class shares incepted on June 1, 2010. Performance shown prior to that date is that of the predecessor fund’s Class A shares and includes the 12b-1 fees applicable to Class A shares. Class A share performance reflects any applicable fee waivers or expense reimbursements.
The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Please visit invesco.com/performance for the most recent month-end performance. Performance figures reflect reinvested
distributions, changes in net asset value and the effect of the maximum sales charge unless otherwise stated. Investment return and principal value will fluctuate so that you may have a gain or loss when you sell shares.
The total annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Class A, Class B, Class C, Class R, Class Y and Institutional Class shares was 0.78%, 0.91%, 1.52%, 1.03%, 0.53% and 0.45%, respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.
Class A share performance reflects the maximum 5.50% sales charge, and Class B and Class C share performance reflects the applicable contingent deferred sales charge (CDSC) for the period involved. For shares purchased prior to June 1, 2010, the CDSC on Class B shares declines from 5% at the time of purchase to 0% at the beginning of the sixth year. For shares purchased on or after June 1, 2010, the CDSC on Class B shares declines from 5% at the time of purchase to 0% at the beginning of the seventh year. The CDSC on Class C shares is 1% for the first year after purchase. Class R, Class Y and Institutional Class shares do not have a front-end sales charge or a CDSC; therefore, performance is at net asset value.
The performance of the Fund’s share classes will differ primarily due to different sales charge structures and class expenses.
continued from page 8
Other information
n | The Chartered Financial Analyst® (CFA®) designation is globally recognized and attests to a charterholder’s success in a rigorous and comprehensive study program in the field of investment management and research analysis. |
n | The returns shown in management’s discussion of Fund performance are |
based on net asset values calculated for shareholder transactions. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes, and as such, the net asset values for shareholder transactions and the returns based on those net asset values may differ from |
the net asset values and returns reported in the Financial Highlights. | ||
n | Industry classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. |
7 | Invesco Van Kampen Equity and Income Fund |
Invesco Van Kampen Equity and Income Fund’s investment objective is to seek the highest possible income consistent with safety of principal. Long-term growth of capital is an important secondary investment objective.
n | Unless otherwise stated, information presented in this report is as of August 31, 2011, and is based on total net assets. | |
n | Unless otherwise noted, all data provided by Invesco. | |
n | To access your Fund’s reports/prospectus, visit invesco.com/fundreports. |
About share classes
n | Class B shares may not be purchased or acquired by exchange from share classes other than Class B shares. Please see the prospectus for more information. | |
n | Class R shares are available only to certain retirement plans. Please see the prospectus for more information. | |
n | Class Y shares are available to only certain investors. Please see the prospectus for more information. | |
n | Institutional Class shares are offered exclusively to institutional investors, including defined contribution plans that meet certain criteria. Please see the prospectus for more information. |
Principal risks of investing in the Fund
n | Market risk. Market risk is the possibility that the market values of securities owned by the Fund will decline. Market risk may affect a single issuer, industry, sector of the economy or the market as a whole. The securities of small- and medium-sized companies are subject to more abrupt or erratic market movements and may have lower trading volumes or more erratic trading than securities of larger companies or the market averages in general. Investments in debt securities generally are affected by changes in interest rates and the creditworthiness of the issuer. The prices of such securities tend to fall as interest rates rise, and such declines tend to be greater among securities with longer maturities. The value of a convertible security tends to decline as interest rates rise and, because of the conversion feature, tends to vary with fluctuations in the market value of the underlying equity security. | |
n | Income risk. The ability of the Fund’s equity securities to generate income generally depends on the earnings and the continuing declaration of dividends by the issuers of such securities. The interest income on debt securities generally is affected by prevailing interest rates, which can vary widely over the short- and long-term. If dividends are reduced or discontinued |
or interest rates drop, distributions to shareholders from the Fund may drop as well. | ||
n | Call risk. If interest rates fall, it is possible that issuers of callable securities held by the Fund will call or prepay their securities before their maturity dates. In this event, the proceeds from the called securities would most likely be reinvested by the Fund in securities bearing the new, lower interest rates, resulting in a possible decline in the Fund’s income and distributions to shareholders and termination of any conversion option on convertible securities. | |
n | Credit risk. Credit risk refers to an issuer’s ability to make timely payments of interest and principal. Because the Fund generally invests only in investment grade-quality debt securities, it is subject to a lower level of credit risk than a fund investing in lower-quality securities. | |
n | Foreign risks. The risks of investing in securities of foreign issuers can include fluctuations in foreign currencies, foreign currency exchange controls, political and economic instability, differences in financial reporting, differences in securities regulation and trading, and foreign taxation issues. The Fund may also invest in issuers in developing or emerging market countries, which are subject to greater risks than investments in securities of issuers in developed countries. | |
n | Risks of investing in REITs. Investing in REITs makes the Fund more susceptible to risks associated with the ownership of real estate and with the real estate industry in general and may involve duplication of management fees and certain other expenses. In addition, REITs depend upon specialized management skills, may less diversified, may have lower trading volume, and may be subject to more abrupt or erratic price movements than the overall securities markets. | |
n | Value investing. The Fund emphasizes a value style of investing. The Fund’s investment style presents the risk that the valuations may never improve or |
that the returns on value securities may be less than the returns on other styles of investing or the overall stock market. Different types of stocks tend to shift in and out of favor depending on market and economic conditions. Thus, the value of the Fund’s investments will vary and at times may be lower or higher than that of other types of investments. | ||
n | Risks of derivatives. Risks of derivatives include the possible imperfect correlation between the value of the instruments and the underlying assets; risks of default by the other party to certain transactions; risks that the transactions may result in losses that partially or completely offset gains in portfolio positions; and risks that the transactions may not be liquid. |
About indexes used in this report
n | The Russell 1000® Value Index is an unmanaged index considered representative of large-cap value stocks. The Russell 1000 Value Index is a trademark/service mark of the Frank Russell Co. Russell® is a trademark of the Frank Russell Co. | |
n | The Barclays Capital U.S. Government/Credit Index includes treasuries and agencies that represent the government portion of the index, and includes publicly issued U.S. corporate and foreign debentures and secured notes that meet specified maturity, liquidity, and quality requirements to represent the credit interests. | |
n | The Fund is not managed to track the performance of any particular index, including the index(es) defined here, and consequently, the performance of the Fund may deviate significantly from the performance of the index(es). | |
n | A direct investment cannot be made in an index. Unless otherwise indicated, index results include reinvested dividends, and they do not reflect sales charges. Performance of the peer group, if applicable, reflects fund expenses; performance of a market index does not. |
continued on page 7
This report must be accompanied or preceded by a currently effective Fund prospectus, which contains more complete information, including sales charges and expenses. Investors should read it carefully before investing.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
Fund Nasdaq Symbols
Class A Shares | ACEIX | |
Class B Shares | ACEQX | |
Class C Shares | ACERX | |
Class R Shares | ACESX | |
Class Y Shares | ACETX | |
Institutional Class Shares | ACEKX |
8 | Invesco Van Kampen Equity and Income Fund |
Schedule of Investments
August 31, 2011
Shares | Value | |||||||
Common Stocks & Other Equity Interests–63.26%(a) | ||||||||
Agricultural Products–0.50% | ||||||||
Archer-Daniels-Midland Co. | 1,919,203 | $ | 54,658,901 | |||||
Air Freight & Logistics–0.32% | ||||||||
FedEx Corp. | 436,649 | 34,373,009 | ||||||
Asset Management & Custody Banks–0.98% | ||||||||
Northern Trust Corp. | 1,354,580 | 52,056,509 | ||||||
State Street Corp. | 1,551,573 | 55,111,873 | ||||||
107,168,382 | ||||||||
Cable & Satellite–2.28% | ||||||||
Comcast Corp.–Class A | 6,515,026 | 140,138,209 | ||||||
Time Warner Cable, Inc. | 1,647,954 | 107,940,987 | ||||||
248,079,196 | ||||||||
Computer Hardware–1.48% | ||||||||
Dell, Inc.(b) | 4,782,488 | 71,091,684 | ||||||
Hewlett-Packard Co. | 3,448,736 | 89,770,598 | ||||||
160,862,282 | ||||||||
Consumer Electronics–0.56% | ||||||||
Sony Corp.–ADR (Japan) | 2,776,656 | 60,947,599 | ||||||
Data Processing & Outsourced Services–0.59% | ||||||||
Western Union Co. | 3,896,435 | 64,369,106 | ||||||
Diversified Banks–1.02% | ||||||||
U.S. Bancorp | 1,978,947 | 45,931,360 | ||||||
Wells Fargo & Co. | 2,507,873 | 65,455,485 | ||||||
111,386,845 | ||||||||
Diversified Chemicals–0.63% | ||||||||
PPG Industries, Inc. | 898,256 | 68,797,427 | ||||||
Diversified Support Services–0.46% | ||||||||
Cintas Corp. | 1,552,694 | 49,655,154 | ||||||
Drug Retail–0.69% | ||||||||
Walgreen Co. | 2,137,214 | 75,251,305 | ||||||
Electric Utilities–3.06% | ||||||||
American Electric Power Co., Inc. | 4,516,416 | 174,469,150 | ||||||
Edison International | 1,366,125 | 50,806,189 | ||||||
Entergy Corp. | 662,685 | 43,213,689 | ||||||
FirstEnergy Corp. | 1,458,903 | 64,556,457 | ||||||
333,045,485 | ||||||||
Food Distributors–0.86% | ||||||||
Sysco Corp. | 3,369,034 | 94,097,120 | ||||||
Health Care Distributors–0.55% | ||||||||
Cardinal Health, Inc. | 1,412,278 | 60,021,815 | ||||||
Health Care Equipment–0.70% | ||||||||
Medtronic, Inc. | 2,162,756 | 75,847,853 | ||||||
Health Care Facilities–0.31% | ||||||||
HCA Holdings, Inc.(b) | 1,667,788 | 33,405,794 | ||||||
Home Improvement Retail–0.98% | ||||||||
Home Depot, Inc. (The) | 3,200,088 | 106,818,937 | ||||||
Household Products–1.89% | ||||||||
Energizer Holdings, Inc.(b) | 503,728 | 38,021,389 | ||||||
Procter & Gamble Co. (The) | 2,630,832 | 167,531,382 | ||||||
205,552,771 | ||||||||
Human Resource & Employment Services–0.49% | ||||||||
Manpower, Inc. | 521,856 | 21,020,360 | ||||||
Robert Half International, Inc. | 1,351,470 | 32,327,162 | ||||||
53,347,522 | ||||||||
Industrial Conglomerates–3.56% | ||||||||
General Electric Co. | 17,587,921 | 286,858,991 | ||||||
Tyco International Ltd. | 2,444,739 | 101,652,248 | ||||||
388,511,239 | ||||||||
Industrial Machinery–0.80% | ||||||||
Ingersoll-Rand PLC (Ireland) | 2,611,284 | 87,504,127 | ||||||
Insurance Brokers–2.13% | ||||||||
Marsh & McLennan Cos., Inc. | 7,824,062 | 232,531,123 | ||||||
Integrated Oil & Gas–4.25% | ||||||||
ConocoPhillips | 547,273 | 37,252,873 | ||||||
Exxon Mobil Corp. | 1,167,041 | 86,407,716 | ||||||
Hess Corp. | 1,788,447 | 106,126,445 | ||||||
Occidental Petroleum Corp. | 804,166 | 69,753,359 | ||||||
Royal Dutch Shell PLC–ADR (United Kingdom) | 2,445,750 | 163,987,537 | ||||||
463,527,930 | ||||||||
Integrated Telecommunication Services–0.81% | ||||||||
Verizon Communications, Inc. | 2,454,388 | 88,775,214 | ||||||
Internet Software & Services–2.28% | ||||||||
eBay, Inc.(b) | 5,661,206 | 174,761,429 | ||||||
Yahoo! Inc.(b) | 5,417,696 | 73,707,754 | ||||||
248,469,183 | ||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
9 Invesco Van Kampen Equity and Income Fund
Shares | Value | |||||||
Investment Banking & Brokerage–1.43% | ||||||||
Charles Schwab Corp. (The) | 6,742,760 | $ | 83,138,231 | |||||
Morgan Stanley | 4,172,007 | 73,010,122 | ||||||
156,148,353 | ||||||||
IT Consulting & Other Services–0.65% | ||||||||
Amdocs Ltd.(b) | 2,579,665 | 70,863,398 | ||||||
Life & Health Insurance–0.35% | ||||||||
Principal Financial Group, Inc. | 1,514,035 | 38,395,928 | ||||||
Managed Health Care–1.90% | ||||||||
CIGNA Corp. | 462,376 | 21,611,454 | ||||||
UnitedHealth Group, Inc. | 3,893,128 | 185,001,443 | ||||||
206,612,897 | ||||||||
Movies & Entertainment–2.71% | ||||||||
Time Warner, Inc. | 3,750,677 | 118,746,434 | ||||||
Viacom, Inc.–Class B | 3,656,836 | 176,405,769 | ||||||
295,152,203 | ||||||||
Office Services & Supplies–0.46% | ||||||||
Avery Dennison Corp. | 1,728,346 | 50,312,152 | ||||||
Oil & Gas Equipment & Services–1.66% | ||||||||
Baker Hughes, Inc. | 855,288 | 52,266,650 | ||||||
Cameron International Corp.(b) | 666,745 | 34,644,070 | ||||||
Schlumberger Ltd. | 1,208,495 | 94,407,629 | ||||||
181,318,349 | ||||||||
Oil & Gas Exploration & Production–2.42% | ||||||||
Anadarko Petroleum Corp. | 2,575,276 | 189,926,605 | ||||||
Devon Energy Corp. | 1,091,468 | 74,034,275 | ||||||
263,960,880 | ||||||||
Oil & Gas Storage & Transportation–0.36% | ||||||||
Williams Cos., Inc. (The) | 1,435,855 | 38,753,727 | ||||||
Other Diversified Financial Services–4.58% | ||||||||
Bank of America Corp. | 7,231,082 | 59,077,940 | ||||||
Citigroup, Inc. | 3,502,518 | 108,753,184 | ||||||
JPMorgan Chase & Co. | 8,825,848 | 331,498,851 | ||||||
499,329,975 | ||||||||
Packaged Foods & Meats–2.00% | ||||||||
Kraft Foods, Inc.–Class A | 3,222,935 | 112,867,184 | ||||||
Unilever N.V.–New York Shares (Netherlands) | 3,099,661 | 105,388,474 | ||||||
218,255,658 | ||||||||
Personal Products–1.07% | ||||||||
Avon Products, Inc. | 5,164,378 | 116,508,368 | ||||||
Pharmaceuticals–4.47% | ||||||||
Abbott Laboratories | 1,111,120 | 58,344,911 | ||||||
Bristol-Myers Squibb Co. | 4,537,587 | 134,993,213 | ||||||
Eli Lilly and Co. | 379,998 | 14,253,725 | ||||||
Merck & Co., Inc. | 2,933,301 | 97,150,929 | ||||||
Pfizer, Inc. | 9,637,870 | 182,926,773 | ||||||
487,669,551 | ||||||||
Property & Casualty Insurance–0.54% | ||||||||
Chubb Corp. (The) | 942,679 | 58,342,403 | ||||||
Regional Banks–2.19% | ||||||||
BB&T Corp. | 2,300,157 | 51,270,500 | ||||||
Fifth Third Bancorp | 3,310,354 | 35,155,960 | ||||||
PNC Financial Services Group, Inc. | 2,372,831 | 118,973,746 | ||||||
Regions Financial Corp. | 7,258,695 | 32,954,475 | ||||||
238,354,681 | ||||||||
Semiconductor Equipment–0.28% | ||||||||
Applied Materials, Inc. | 2,737,932 | 30,993,390 | ||||||
Semiconductors–0.54% | ||||||||
Intel Corp. | 2,845,627 | 57,282,472 | ||||||
STMicroelectronics N.V.–New York Shares (Switzerland) | 153,425 | 1,021,810 | ||||||
58,304,282 | ||||||||
Soft Drinks–0.79% | ||||||||
Coca-Cola Co. (The) | 1,227,338 | 86,465,962 | ||||||
Systems Software–1.48% | ||||||||
Microsoft Corp. | 6,058,755 | 161,162,883 | ||||||
Wireless Telecommunication Services–1.20% | ||||||||
Vodafone Group PLC–ADR (United Kingdom) | 4,962,883 | 130,722,338 | ||||||
Total Common Stocks & Other Equity Interests (Cost $6,932,996,054) | 6,894,632,697 | |||||||
Principal | ||||||||
Amount | Value | |||||||
Bonds & Notes–22.59% | ||||||||
Advertising–0.54% | ||||||||
Interpublic Group of Cos., Inc. (The), | ||||||||
Sr. Unsec. Conv. Global Putable Notes, 4.25%, 03/15/12 | $ | 37,739,000 | $ | 38,729,649 | ||||
4.75%, 03/15/13 | 14,400,000 | 16,002,000 | ||||||
WPP Finance (United Kingdom), Sr. Unsec. Gtd. Global Notes, 8.00%, 09/15/14 | 3,225,000 | 3,762,584 | ||||||
58,494,233 | ||||||||
Aerospace & Defense–0.03% | ||||||||
Raytheon Co., Sr. Unsec. Notes, 1.63%, 10/15/15 | 2,910,000 | 2,924,876 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
10 Invesco Van Kampen Equity and Income Fund
Principal | ||||||||
Amount | Value | |||||||
Agricultural Products–0.06% | ||||||||
Corn Products International, Inc., Sr. Unsec. Notes, | ||||||||
4.63%, 11/01/20 | $ | 1,875,000 | $ | 1,968,885 | ||||
6.63%, 04/15/37 | 3,940,000 | 4,424,533 | ||||||
6,393,418 | ||||||||
Airlines–0.07% | ||||||||
Continental Airlines, Inc.–Series 2010-1, Class A, Sec. Pass Through Ctfs., 4.75%, 01/12/21 | 4,845,000 | 4,572,469 | ||||||
Delta Air Lines, Inc., Series 2001-1, Class A-2, Sr. Sec. Pass Through Ctfs., 7.11%, 09/18/11 | 300,000 | 300,060 | ||||||
Series 2010-1, Class A, Sec. Pass Through Ctfs., 6.20%, 07/02/18 | 3,112,777 | 3,184,759 | ||||||
8,057,288 | ||||||||
Alternative Carriers–0.13% | ||||||||
TW Telecom, Inc., Sr. Unsec. Conv. Putable Deb., 2.38%, 04/01/13 | 11,720,000 | 13,990,750 | ||||||
Application Software–0.20% | ||||||||
Cadence Design Systems, Inc.–Series B, Sr. Unsec. Conv. Global Notes, 1.50%, 12/15/13 | 22,000,000 | 21,257,500 | ||||||
Asset Management & Custody Banks–0.38% | ||||||||
Affiliated Managers Group, Inc., Sr. Unsec. Conv. Putable Notes, 3.95%, 08/15/13 | 39,246,000 | 41,846,047 | ||||||
Automobile Manufacturers–0.00% | ||||||||
Daimler Finance North America LLC, Unsec. Gtd. Unsub. Global Notes, 7.30%, 01/15/12 | 85,000 | 86,975 | ||||||
Automotive Retail–0.20% | ||||||||
Advance Auto Parts, Inc., Sr. Unsec. Gtd. Notes, 5.75%, 05/01/20 | 9,195,000 | 10,230,918 | ||||||
AutoZone, Inc., Sr. Unsec. Global Notes, 6.50%, 01/15/14 | 5,400,000 | 6,048,161 | ||||||
Sr. Unsec. Notes, 5.88%, 10/15/12 | 1,040,000 | 1,095,491 | ||||||
O’Reilly Automotive, Inc., Sr. Unsec. Gtd. Notes, 4.88%, 01/14/21 | 3,855,000 | 4,132,050 | ||||||
21,506,620 | ||||||||
Biotechnology–1.27% | ||||||||
Amylin Pharmaceuticals, Inc., Sr. Unsec. Conv. Global Notes, 3.00%, 06/15/14 | 13,963,000 | 12,723,784 | ||||||
Dendreon Corp., Sr. Unsec. Conv. Notes, 2.88%, 01/15/16 | 50,896,000 | 38,935,440 | ||||||
Gilead Sciences, Inc., Sr. Conv. Notes, 1.63%, 05/01/16 | 75,120,000 | 86,763,600 | ||||||
138,422,824 | ||||||||
Brewers–0.14% | ||||||||
Anheuser-Busch InBev Worldwide, Inc., | ||||||||
Sr. Unsec. Gtd. Global Notes, | ||||||||
3.63%, 04/15/15 | 6,145,000 | 6,644,158 | ||||||
5.38%, 01/15/20 | 950,000 | 1,113,695 | ||||||
FBG Financial Ltd. (Australia), Sr. Unsec. Gtd. Notes, 5.13%, 06/15/15(c) | 6,965,000 | 7,705,809 | ||||||
15,463,662 | ||||||||
Broadcasting–0.07% | ||||||||
COX Communications, Inc., Deb., 7.25%, 11/15/15 | 5,000,000 | 5,978,772 | ||||||
Sr. Unsec. Global Notes, 5.45%, 12/15/14 | 400,000 | 446,632 | ||||||
Sr. Unsec. Notes, 8.38%, 03/01/39(c) | 655,000 | 880,849 | ||||||
7,306,253 | ||||||||
Cable & Satellite–0.43% | ||||||||
Comcast Corp., | ||||||||
Sr. Unsec. Gtd. Global Notes, 5.70%, 05/15/18 | 4,735,000 | 5,482,531 | ||||||
Sr. Unsec. Gtd. Notes, 6.45%, 03/15/37 | 2,000,000 | 2,224,983 | ||||||
DIRECTV Holdings LLC, Sr. Unsec. Gtd. Global Notes, 7.63%, 05/15/16 | 14,640,000 | 15,747,150 | ||||||
NBC Universal Media LLC, Sr. Unsec. Global Notes, | ||||||||
2.10%, 04/01/14 | 3,425,000 | 3,484,013 | ||||||
5.15%, 04/30/20 | 3,320,000 | 3,679,546 | ||||||
5.95%, 04/01/41 | 3,365,000 | 3,617,327 | ||||||
Time Warner Cable, Inc., Sr. Unsec. Gtd. Global Notes, 8.75%, 02/14/19 | 3,935,000 | 5,115,113 | ||||||
Sr. Unsec. Gtd. Notes, 5.88%, 11/15/40 | 7,235,000 | 7,534,177 | ||||||
46,884,840 | ||||||||
Casinos & Gaming–1.06% | ||||||||
International Game Technology, Sr. Unsec. Conv. Notes, 3.25%, 05/01/14 | 46,844,000 | 54,924,590 | ||||||
MGM Resorts International, Sr. Unsec. Gtd. Conv. Notes, 4.25%, 04/15/15 | 63,088,000 | 60,801,060 | ||||||
115,725,650 | ||||||||
Communications Equipment–1.02% | ||||||||
Alcatel-Lucent USA, Inc.–Series B, Sr. Unsec. Gtd. Conv. Putable Notes, 2.88%, 06/15/13 | 76,524,000 | 73,176,075 | ||||||
Ciena Corp., Sr. Unsec. Conv. Notes, 4.00%, 03/15/15(c) | 3,355,000 | 3,279,512 | ||||||
JDS Uniphase Corp., Sr. Unsec. Conv. Putable Notes, 1.00%, 05/15/13(c) | 34,000,000 | 33,362,500 | ||||||
Juniper Networks, Inc., Sr. Unsec. Notes, 4.60%, 03/15/21 | 1,730,000 | 1,820,168 | ||||||
111,638,255 | ||||||||
Computer & Electronics Retail–0.05% | ||||||||
Best Buy Co., Inc., Sr. Unsec. Notes, 5.50%, 03/15/21 | 6,025,000 | 5,812,482 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
11 Invesco Van Kampen Equity and Income Fund
Principal | ||||||||
Amount | Value | |||||||
Computer Storage & Peripherals–0.83% | ||||||||
SanDisk Corp., Sr. Unsec. Conv. Notes, 1.00%, 05/15/13 | $ | 94,995,000 | $ | 90,482,737 | ||||
Construction Materials–0.57% | ||||||||
Cemex S.A.B. de C.V. (Mexico), Unsec. Sub. Conv. Notes, | ||||||||
3.75%, 03/15/18(c) | 25,350,000 | 17,745,000 | ||||||
4.88%, 03/15/15 | 60,100,000 | 44,849,625 | ||||||
62,594,625 | ||||||||
Consumer Finance–0.08% | ||||||||
American Express Credit Corp.–Series C, Sr. Unsec. Medium-Term Global Notes, 7.30%, 08/20/13 | 7,230,000 | 7,956,347 | ||||||
Capital One Financial Corp., Sr. Unsec. Notes, 6.75%, 09/15/17 | 220,000 | 250,905 | ||||||
8,207,252 | ||||||||
Department Stores–0.05% | ||||||||
Macy’s Retail Holdings, Inc., Sr. Unsec. Gtd. Notes, 5.35%, 03/15/12 | 4,792,000 | 4,887,840 | ||||||
Diversified Banks–1.82% | ||||||||
Abbey National Treasury Services PLC (United Kingdom), | ||||||||
Sr. Gtd. Global Notes, 2.88%, 04/25/14 | 2,560,000 | 2,453,810 | ||||||
Sr. Unsec. Gtd. Global Notes, 4.00%, 04/27/16 | 2,930,000 | 2,807,903 | ||||||
Sr. Unsec. Gtd. Notes, 3.88%, 11/10/14(c) | 4,750,000 | 4,633,725 | ||||||
Ally Financial, Inc., Gtd. Notes, 2.20%, 12/19/12 | 11,750,000 | 12,035,878 | ||||||
Bank of Nova Scotia (Canada), Sr. Unsec. Global Notes, 2.38%, 12/17/13 | 6,110,000 | 6,294,822 | ||||||
Barclays Bank PLC (United Kingdom), Sr. Unsec. Global Notes, | ||||||||
5.13%, 01/08/20 | 1,140,000 | 1,151,976 | ||||||
6.75%, 05/22/19 | 8,500,000 | 9,425,565 | ||||||
Unsec. Sub. Global Notes, 5.14%, 10/14/20 | 5,015,000 | 4,613,962 | ||||||
Commonwealth Bank of Australia (Australia), Sr. Unsec. Notes, 5.00%, 10/15/19(c) | 6,235,000 | 6,653,675 | ||||||
Credit Suisse AG (Switzerland), Sub. Global Notes, 5.40%, 01/14/20 | 1,820,000 | 1,829,848 | ||||||
Unsec. Sub. Global Notes, 6.00%, 02/15/18 | 1,677,000 | 1,771,564 | ||||||
Danske Bank A/S (Denmark), Sr. Unsec. Notes, 3.88%, 04/14/16(c) | 9,435,000 | 9,090,527 | ||||||
Groupe BPCE S.A. (France), Sr. Unsec. Notes, 2.38%, 10/04/13(c) | 7,025,000 | 6,849,864 | ||||||
HBOS PLC (United Kingdom)–Series G, Unsec. Sub. Medium-Term Notes, 6.75%, 05/21/18(c) | 8,535,000 | 8,021,506 | ||||||
HSBC Bank PLC (United Kingdom), Sr. Notes, 4.13%, 08/12/20(c) | 8,540,000 | 8,447,493 | ||||||
HSBC Finance Corp., Sr. Unsec. Global Notes, 7.00%, 05/15/12 | 6,600,000 | 6,833,997 | ||||||
Sr. Unsec. Sub. Notes, 6.68%, 01/15/21(c) | 828,000 | 814,778 | ||||||
ING Bank N.V. (Netherlands), Sr. Notes, 2.00%, 10/18/13(c) | 4,500,000 | 4,441,653 | ||||||
Korea Development Bank (South Korea), Sr. Unsec. Gtd. Global Notes, 4.38%, 08/10/15 | 3,460,000 | 3,638,210 | ||||||
Lloyds TSB Bank PLC (United Kingdom), Sr. Unsec. Gtd. Global Notes, 4.88%, 01/21/16 | 9,750,000 | 9,791,252 | ||||||
Sr. Unsec. Gtd. Medium-Term Notes, 5.80%, 01/13/20(c) | 1,360,000 | 1,353,975 | ||||||
National Australia Bank Ltd. (Australia), Sr. Unsec. Bonds, 3.75%, 03/02/15(c) | 3,390,000 | 3,556,735 | ||||||
Nordea Bank A.B. (Sweden), Sr. Notes, 4.88%, 01/27/20(c) | 4,495,000 | 4,898,881 | ||||||
Series 2, Sr. Unsec. Notes, 3.70%, 11/13/14(c) | 880,000 | 918,006 | ||||||
Rabobank Nederland N.V. (Netherlands), Sr. Unsec. Medium-Term Notes, 4.75%, 01/15/20(c) | 9,100,000 | 10,039,997 | ||||||
Royal Bank of Scotland PLC (The) (United Kingdom), Sr. Unsec. Gtd. Floating Rate Medium-Term Notes, 0.40%, 10/28/11(c) | 900,000 | 899,799 | ||||||
Sr. Unsec. Gtd. Global Notes, 4.88%, 03/16/15 | 8,215,000 | 8,269,767 | ||||||
Santander U.S. Debt S.A. Unipersonal (Spain), Sr. Unsec. Gtd. Notes, 3.72%, 01/20/15(c) | 3,200,000 | 2,947,333 | ||||||
Societe Generale (France), Sr. Unsec. Notes, 2.50%, 01/15/14(c) | 11,940,000 | 11,307,380 | ||||||
Standard Chartered Bank (United Kingdom), Unsec. Sub. Notes, 6.40%, 09/26/17(c) | 2,310,000 | 2,564,004 | ||||||
Standard Chartered PLC (United Kingdom), | ||||||||
Sr. Unsec. Notes, | ||||||||
3.85%, 04/27/15(c) | 4,190,000 | 4,323,534 | ||||||
5.50%, 11/18/14(c) | 1,140,000 | 1,243,869 | ||||||
U.S. Bancorp., Sr. Unsec. Notes, 2.00%, 06/14/13 | 8,165,000 | 8,350,157 | ||||||
U.S. Bank N.A., Sub. Variable Rate Notes, 3.78%, 04/29/20 | 8,200,000 | 8,634,420 | ||||||
Wells Fargo & Co., Sr. Unsec. Global Notes, 3.63%, 04/15/15 | 750,000 | 791,107 | ||||||
Sr. Unsec. Notes, 5.63%, 12/11/17 | 8,095,000 | 9,261,314 | ||||||
Westpac Banking Corp. (Australia), Sr. Unsec. Global Notes, 2.10%, 08/02/13 | 7,235,000 | 7,335,085 | ||||||
198,297,371 | ||||||||
Diversified Capital Markets–0.10% | ||||||||
Credit Suisse New York (Switzerland), Sr. Unsec. Medium-Term Global Notes, 5.30%, 08/13/19 | 3,630,000 | 3,737,172 | ||||||
UBS AG (Switzerland), Sr. Unsec. Global Deposit Notes, 3.88%, 01/15/15 | 1,435,000 | 1,480,962 | ||||||
Sr. Unsec. Medium-Tem Loan Global Notes, 5.88%, 12/20/17 | 5,200,000 | 5,501,706 | ||||||
Sr. Unsec. Medium-Term Global Notes, 5.75%, 04/25/18 | 520,000 | 550,267 | ||||||
11,270,107 | ||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
12 Invesco Van Kampen Equity and Income Fund
Principal | ||||||||
Amount | Value | |||||||
Diversified Metals & Mining–0.19% | ||||||||
Anglo American Capital PLC (United Kingdom), Sr. Unsec. Gtd. Notes, 9.38%, 04/08/19(c) | $ | 3,185,000 | $ | 4,275,391 | ||||
Freeport-McMoRan Copper & Gold, Inc., Sr. Unsec. Notes, 8.38%, 04/01/17 | 5,865,000 | 6,330,534 | ||||||
Rio Tinto Finance USA Ltd. (Australia), Sr. Unsec. Gtd. Global Notes, 9.00%, 05/01/19 | 5,240,000 | 7,251,873 | ||||||
Southern Copper Corp., Sr. Unsec. Global Notes, | ||||||||
5.38%, 04/16/20 | 1,170,000 | 1,240,487 | ||||||
6.75%, 04/16/40 | 1,695,000 | 1,729,081 | ||||||
20,827,366 | ||||||||
Diversified Real Estate Activities–0.01% | ||||||||
Brookfield Asset Management, Inc. (Canada), | ||||||||
Sr. Unsec. Notes, 7.13%, 06/15/12 | 1,410,000 | 1,475,833 | ||||||
Diversified REIT’s–0.17% | ||||||||
Dexus Diversified Trust/Dexus Office Trust (Australia), Sr. Unsec. Gtd. Notes, 5.60%, 03/15/21(c) | 16,355,000 | 17,963,685 | ||||||
Qatari Diar Finance QSC (Qatar), Unsec. Gtd. Unsub. Notes, 5.00%, 07/21/20(c) | 440,000 | 480,313 | ||||||
18,443,998 | ||||||||
Diversified Support Services–0.06% | ||||||||
Cintas Corp. No. 2, Sr. Unsec. Gtd. Notes, 2.85%, 06/01/16 | 6,305,000 | 6,565,472 | ||||||
Drug Retail–0.08% | ||||||||
CVS Caremark Corp., Sec. Global Pass-Through Ctfs., 6.04%, 12/10/28 | 7,609,666 | 8,358,682 | ||||||
Electric Utilities–0.12% | ||||||||
Electricite de France S.A. (France), Sr. Unsec. Notes, 4.60%, 01/27/20(c) | 2,150,000 | 2,292,813 | ||||||
Enel Finance International N.V. (Luxembourg), Sr. Unsec. Gtd. Notes, | ||||||||
3.88%, 10/07/14(c) | 600,000 | 604,534 | ||||||
5.13%, 10/07/19(c) | 6,755,000 | 6,784,195 | ||||||
Iberdola Finance Ireland Ltd. (Ireland), Unsec. Gtd. Unsub. Notes, 3.80%, 09/11/14(c) | 2,175,000 | 2,192,808 | ||||||
Ohio Power Co.–Series M, Sr. Unsec. Notes, 5.38%, 10/01/21 | 1,050,000 | 1,216,440 | ||||||
PPL Electric Utilities Corp., Sec. First Mortgage Bonds, 6.25%, 05/15/39 | 355,000 | 446,669 | ||||||
13,537,459 | ||||||||
Electronic Components–0.02% | ||||||||
Corning, Inc., Sr. Unsec. Notes, | ||||||||
6.63%, 05/15/19 | 730,000 | 891,899 | ||||||
7.25%, 08/15/36 | 1,185,000 | 1,432,172 | ||||||
2,324,071 | ||||||||
Environmental & Facilities Services–0.06% | ||||||||
Waste Management, Inc., Sr. Unsec. Gtd. Notes, 5.00%, 03/15/14 | 6,205,000 | 6,785,451 | ||||||
Food Retail–0.12% | ||||||||
Delhaize Group S.A. (Belgium), Sr. Unsec. Gtd. Bonds, 5.88%, 02/01/14 | 3,850,000 | 4,244,661 | ||||||
Kroger Co., Sr. Unsec. Gtd. Global Notes, 6.90%, 04/15/38 | 1,000,000 | 1,253,590 | ||||||
Safeway, Inc., Sr. Unsec. Global Notes, 3.95%, 08/15/20 | 7,250,000 | 7,264,613 | ||||||
12,762,864 | ||||||||
General Merchandise Stores–0.06% | ||||||||
Family Dollar Stores, Inc., Sr. Unsec. Notes, 5.00%, 02/01/21 | 6,310,000 | 6,256,756 | ||||||
Gold–0.16% | ||||||||
Barrick Gold Corp. (Canada), Sr. Unsec. Notes, 2.90%, 05/30/16(c) | 6,045,000 | 6,297,086 | ||||||
Gold Fields Orogen Holding BVI Ltd. (South Africa), Sr. Unsec. Gtd. Notes, 4.88%, 10/07/20(c) | 12,145,000 | 11,380,604 | ||||||
17,677,690 | ||||||||
Health Care Equipment–0.51% | ||||||||
CareFusion Corp., Sr. Unsec. Global Notes, 4.13%, 08/01/12 | 4,770,000 | 4,887,806 | ||||||
NuVasive, Inc., Sr. Unsec. Conv. Notes, 2.75%, 07/01/17 | 13,684,000 | 12,862,960 | ||||||
Teleflex, Inc., Sr. Unsec. Sub. Conv. Notes, 3.88%, 08/01/17 | 33,647,000 | 37,726,699 | ||||||
55,477,465 | ||||||||
Health Care Facilities–0.43% | ||||||||
Lifepoint Hospitals, Inc., Sr. Unsec. Sub. Conv. Notes, 3.50%, 05/15/14 | 46,059,000 | 46,807,459 | ||||||
Health Care Services–0.52% | ||||||||
Express Scripts, Inc., | ||||||||
Sr. Unsec. Gtd. Global Notes, | ||||||||
5.25%, 06/15/12 | 14,295,000 | 14,771,032 | ||||||
6.25%, 06/15/14 | 1,300,000 | 1,449,479 | ||||||
Sr. Unsec. Gtd. Notes, 3.13%, 05/15/16 | 3,800,000 | 3,904,203 | ||||||
Medco Health Solutions, Inc., Sr. Unsec. Notes, 2.75%, 09/15/15 | 3,535,000 | 3,614,300 | ||||||
Omnicare, Inc., Sr. Conv. Sub. Notes, 3.75%, 12/15/25 | 14,335,000 | 17,990,425 | ||||||
Series OCR, Sr. Unsec. Gtd. Conv. Putable Deb., 3.25%, 12/15/15 | 16,126,000 | 14,634,345 | ||||||
56,363,784 | ||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
13 Invesco Van Kampen Equity and Income Fund
Principal | ||||||||
Amount | Value | |||||||
Hotels, Resorts & Cruise Lines–0.42% | ||||||||
Gaylord Entertainment Co., Sr. Gtd. Conv. Notes, 3.75%, 10/01/14(c) | $ | 31,562,000 | $ | 35,743,965 | ||||
Hyatt Hotels Corp., Sr. Unsec. Notes, 5.75%, 08/15/15(c) | 1,400,000 | 1,508,386 | ||||||
Wyndham Worldwide Corp., Sr. Unsec. Notes, | ||||||||
5.63%, 03/01/21 | 8,170,000 | 8,282,338 | ||||||
7.38%, 03/01/20 | 430,000 | 478,644 | ||||||
46,013,333 | ||||||||
Housewares & Specialties–0.08% | ||||||||
Tupperware Brands Corp., Sr. Unsec. Gtd. Notes, 4.75%, 06/01/21(c) | 8,615,000 | 8,873,442 | ||||||
Hypermarkets & Super Centers–0.01% | ||||||||
Wal-Mart Stores, Inc., Sr. Unsec. Global Notes, 6.50%, 08/15/37 | 730,000 | 914,164 | ||||||
Independent Power Producers & Energy Traders–0.01% | ||||||||
Indianapolis Power & Light Co., Sr. Sec. Notes, 6.30%, 07/01/13(c) | 1,330,000 | 1,442,575 | ||||||
Industrial Conglomerates–0.59% | ||||||||
General Electric Capital Corp., Series G, Sr. Gtd. Medium-Term Global Notes, 2.63%, 12/28/12 | 48,180,000 | 49,629,119 | ||||||
Sr. Unsec. Medium-Term Notes, 6.00%, 08/07/19 | 8,500,000 | 9,564,192 | ||||||
General Electric Co., Sr. Unsec. Global Notes, 5.25%, 12/06/17 | 4,445,000 | 4,995,529 | ||||||
Koninklije Philips Electronics N.V. (Netherlands), Sr. Unsec. Global Notes, 5.75%, 03/11/18 | 115,000 | 132,995 | ||||||
64,321,835 | ||||||||
Industrial Machinery–0.13% | ||||||||
Pentair, Inc., Sr. Unsec. Gtd. Notes, 5.00%, 05/15/21 | 13,490,000 | 14,135,226 | ||||||
Integrated Oil & Gas–0.05% | ||||||||
Hess Corp., Sr. Unsec. Global Notes, 5.60%, 02/15/41 | 3,325,000 | 3,464,288 | ||||||
Shell International Finance B.V. (Netherlands), Sr. Unsec. Gtd. Global Notes, 3.10%, 06/28/15 | 1,965,000 | 2,090,478 | ||||||
5,554,766 | ||||||||
Integrated Telecommunication Services–0.32% | ||||||||
AT&T Corp., Sr. Unsec. Gtd. Global Notes, 8.00%, 11/15/31 | 63,000 | 85,591 | ||||||
AT&T, Inc., Sr. Unsec. Global Notes, | ||||||||
2.50%, 08/15/15 | 450,000 | 461,341 | ||||||
5.35%, 09/01/40 | 2,077,000 | 2,143,366 | ||||||
6.15%, 09/15/34 | 3,675,000 | 3,918,784 | ||||||
Deutsche Telekom International Finance B.V. (Netherlands), Sr. Unsec. Gtd. Global Bonds, 8.75%, 06/15/30 | 2,545,000 | 3,452,462 | ||||||
Telecom Italia Capital S.A. (Luxembourg), Sr. Unsec. Gtd. Global Notes, | ||||||||
7.00%, 06/04/18 | 6,255,000 | 6,431,073 | ||||||
7.18%, 06/18/19 | 3,360,000 | 3,501,735 | ||||||
Verizon Communications, Inc., Sr. Unsec. Global Notes, | ||||||||
3.00%, 04/01/16 | 3,575,000 | 3,723,815 | ||||||
6.35%, 04/01/19 | 4,090,000 | 4,980,051 | ||||||
8.95%, 03/01/39 | 3,500,000 | 5,266,333 | ||||||
Windstream Georgia Communications Corp., Sr. Unsec. Notes, 6.50%, 11/15/13 | 1,007,000 | 1,030,484 | ||||||
34,995,035 | ||||||||
Internet Retail–0.07% | ||||||||
Expedia, Inc., Sr. Unsec. Gtd. Global Notes, 5.95%, 08/15/20 | 7,765,000 | 7,888,429 | ||||||
Investment Banking & Brokerage–1.60% | ||||||||
Charles Schwab Corp. (The), Sr. Unsec. Notes, 4.45%, 07/22/20 | 7,880,000 | 8,284,454 | ||||||
Goldman Sachs Group, Inc. (The), Sr. Unsec. Conv. Medium-Term Notes, 1.00%, 03/15/17(c) | 61,461,000 | 56,199,938 | ||||||
Sr. Unsec. Global Notes, 6.15%, 04/01/18 | 15,845,000 | 16,975,865 | ||||||
Sr. Unsec. Medium-Term Global Notes, 3.70%, 08/01/15 | 1,350,000 | 1,365,533 | ||||||
Unsec. Unsub. Global Notes, 6.75%, 10/01/37 | 4,585,000 | 4,351,236 | ||||||
Jefferies Group, Inc., Sr. Unsec. Conv. Putable Notes, 3.88%, 11/01/17 | 32,936,500 | 31,454,358 | ||||||
Sr. Unsec. Notes, 6.88%, 04/15/21 | 6,130,000 | 6,744,123 | ||||||
Macquarie Group Ltd. (Australia), Sr. Unsec. Notes, 6.00%, 01/14/20(c) | 950,000 | 955,071 | ||||||
MF Global Holdings Ltd., Sr. Unsec. Conv. Notes, 1.88%, 02/01/16 | 8,726,000 | 7,471,638 | ||||||
Sr. Unsec. Conv. Putable Notes, 9.00%, 07/01/13 | 8,515,000 | 9,228,131 | ||||||
Morgan Stanley, Sr. Unsec. Global Notes, | ||||||||
3.80%, 04/29/16 | 5,560,000 | 5,469,534 | ||||||
4.00%, 07/24/15 | 12,875,000 | 12,837,436 | ||||||
Sr. Unsec. Notes, | ||||||||
3.45%, 11/02/15 | 9,855,000 | 9,508,985 | ||||||
5.75%, 01/25/21 | 3,135,000 | 3,225,447 | ||||||
174,071,749 | ||||||||
IT Consulting & Other Services–0.00% | ||||||||
International Business Machines Corp., Sr. Unsec. Global Notes, 7.63%, 10/15/18 | 100,000 | 131,796 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
14 Invesco Van Kampen Equity and Income Fund
Principal | ||||||||
Amount | Value | |||||||
Life & Health Insurance–0.26% | ||||||||
Aegon N.V. (Netherlands), Sr. Unsec. Global Bonds, 4.63%, 12/01/15 | $ | 3,100,000 | $ | 3,251,410 | ||||
MetLife, Inc., Sr. Unsec. Global Notes, 4.75%, 02/08/21 | 3,565,000 | 3,739,535 | ||||||
Series A, Sr. Unsec. Notes, 6.82%, 08/15/18 | 3,070,000 | 3,593,349 | ||||||
Nationwide Financial Services, Sr. Unsec. Notes, 6.25%, 11/15/11 | 3,155,000 | 3,182,512 | ||||||
Pacific LifeCorp., Sr. Notes, 6.00%, 02/10/20(c) | 3,425,000 | 3,738,843 | ||||||
Prudential Financial, Inc., Sr. Unsec. Medium-Term Notes, | ||||||||
3.88%, 01/14/15 | 950,000 | 974,285 | ||||||
4.75%, 09/17/15 | 5,030,000 | 5,348,977 | ||||||
6.63%, 12/01/37 | 3,475,000 | 3,816,476 | ||||||
Series D, Sr. Unsec. Medium-Term Notes, 7.38%, 06/15/19 | 1,020,000 | 1,215,660 | ||||||
28,861,047 | ||||||||
Life Sciences Tools & Services–0.79% | ||||||||
Illumina, Inc., Sr. Unsec. Conv. Notes, 0.25%, 03/15/16(c) | 42,059,000 | 39,850,902 | ||||||
Life Technologies Corp., Sr. Unsec. Conv. Putable Notes, 1.50%, 02/15/12 | 45,000,000 | 46,181,250 | ||||||
86,032,152 | ||||||||
Managed Health Care–0.15% | ||||||||
Aetna, Inc., Sr. Unsec. Global Notes, 3.95%, 09/01/20 | 9,990,000 | 10,267,135 | ||||||
WellPoint, Inc., Sr. Unsec. Notes, 4.35%, 08/15/20 | 6,110,000 | 6,445,822 | ||||||
16,712,957 | ||||||||
Mortgage Backed Securities–0.01% | ||||||||
U.S. Bank N.A., Sr. Unsec. Medium-Term Notes, 5.92%, 05/25/12 | 1,128,372 | 1,170,891 | ||||||
Movies & Entertainment–0.37% | ||||||||
Liberty Media LLC, Sr. Unsec. Conv. Putable Notes, 3.13%, 03/30/13 | 33,234,000 | 37,014,368 | ||||||
Time Warner, Inc., Sr. Unsec. Gtd. Notes, 5.88%, 11/15/16 | 2,655,000 | 3,105,829 | ||||||
40,120,197 | ||||||||
Multi-Line Insurance–0.05% | ||||||||
CNA Financial Corp., Sr. Unsec. Global Bonds, 5.88%, 08/15/20 | 4,915,000 | 5,141,959 | ||||||
Liberty Mutual Group, Inc., Sr. Unsec. Notes, 5.75%, 03/15/14(c) | 730,000 | 769,116 | ||||||
5,911,075 | ||||||||
Multi-Utilities–0.02% | ||||||||
Nisource Finance Corp., Sr. Unsec. Gtd. Bonds, 6.80%, 01/15/19 | 2,085,000 | 2,523,337 | ||||||
Office Electronics–0.01% | ||||||||
Xerox Corp., Sr. Unsec. Notes, 4.25%, 02/15/15 | 820,000 | 874,870 | ||||||
Office REIT’s–0.05% | ||||||||
Digital Realty Trust LP, Sr. Unsec. Gtd. Global Notes, 4.50%, 07/15/15 | 5,210,000 | 5,415,509 | ||||||
Oil & Gas Equipment & Services–0.23% | ||||||||
Helix Energy Solutions Group, Inc., Sr. Unsec. Conv. Putable Notes, 3.25%, 12/15/12 | 25,155,000 | 25,092,112 | ||||||
Oil & Gas Exploration & Production–0.07% | ||||||||
Petrobras International Finance Co. (Cayman Islands), Sr. Unsec. Gtd. Global Notes, 6.88%, 01/20/40 | 260,000 | 290,928 | ||||||
Petroleos Mexicanos (Mexico), Sr. Unsec. Gtd. Global Notes, 5.50%, 01/21/21 | 6,200,000 | 6,753,796 | ||||||
XTO Energy, Inc., Sr. Unsec. Notes, 5.75%, 12/15/13 | 310,000 | 345,769 | ||||||
7,390,493 | ||||||||
Oil & Gas Storage & Transportation–0.16% | ||||||||
Enterprise Products Operating LLC, | ||||||||
Sr. Unsec. Gtd. Global Notes, 5.25%, 01/31/20 | 2,380,000 | 2,594,953 | ||||||
Sr. Unsec. Gtd. Notes, 6.45%, 09/01/40 | 555,000 | 610,640 | ||||||
Series N, Sr. Unsec. Gtd. Notes, 6.50%, 01/31/19 | 4,420,000 | 5,173,782 | ||||||
Spectra Energy Capital LLC, Sr. Unsec. Gtd. Notes, 5.65%, 03/01/20 | 1,100,000 | 1,241,832 | ||||||
7.50%, 09/15/38 | 2,245,000 | 2,888,112 | ||||||
Texas Eastern Transmission LP, Sr. Unsec. Notes, 7.00%, 07/15/32 | 3,835,000 | 4,805,950 | ||||||
17,315,269 | ||||||||
Other Diversified Financial Services–1.62% | ||||||||
Bank of America Corp., Sr. Unsec. Global Notes, 5.75%, 12/01/17 | 2,825,000 | 2,928,994 | ||||||
Sr. Unsec. Medium-Term Notes, 7.38%, 05/15/14 | 315,000 | 345,160 | ||||||
Series L, Sr. Unsec. Medium-Term Global Notes, 5.65%, 05/01/18 | 16,030,000 | 16,479,127 | ||||||
Bear Stearns Cos., LLC (The), Sr. Unsec. Global Notes, 7.25%, 02/01/18 | 8,140,000 | 9,611,260 | ||||||
Citibank N.A., Sr. Unsec. Gtd. Notes, 1.75%, 12/28/12 | 18,400,000 | 18,747,927 | ||||||
Citigroup Funding, Inc., Unsec. Gtd. Unsub. Global Notes, 2.25%, 12/10/12 | 70,500,000 | 72,200,120 | ||||||
Citigroup, Inc., Sr. Unsec. Global Notes, | ||||||||
6.01%, 01/15/15 | 1,615,000 | 1,733,441 | ||||||
6.13%, 11/21/17 | 11,440,000 | 12,562,954 | ||||||
8.50%, 05/22/19 | 4,200,000 | 5,166,854 | ||||||
Sr. Unsec. Notes, 4.75%, 05/19/15 | 1,000,000 | 1,042,983 | ||||||
ERAC USA Finance LLC, Sr. Unsec. Gtd. Notes, 2.75%, 07/01/13(c) | 5,060,000 | 5,172,089 | ||||||
Unsec. Gtd. Notes, 5.80%, 10/15/12(c) | 1,715,000 | 1,803,724 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
15 Invesco Van Kampen Equity and Income Fund
Principal | ||||||||
Amount | Value | |||||||
Other Diversified Financial Services–(continued) | ||||||||
General Electric Capital Corp., Sr. Unsec. Global Notes, 5.90%, 05/13/14 | $ | 1,465,000 | $ | 1,629,159 | ||||
JPMorgan Chase & Co., Sr. Unsec. Global Notes, | ||||||||
4.40%, 07/22/20 | 5,700,000 | 5,833,291 | ||||||
4.75%, 05/01/13 | 1,280,000 | 1,356,119 | ||||||
Sr. Unsec. Notes, 6.00%, 01/15/18 | 7,395,000 | 8,320,039 | ||||||
Unsec. Sub. Global Notes, 5.13%, 09/15/14 | 1,530,000 | 1,642,411 | ||||||
Merrill Lynch & Co., Inc., Sr. Unsec. Medium-Term Notes, 6.88%, 04/25/18 | 9,445,000 | 10,004,390 | ||||||
Twin Reefs Pass-Through Trust, Sec. Notes, 0.00%, 12/10/34(c)(d) | 1,610,000 | — | ||||||
176,580,042 | ||||||||
Packaged Foods & Meats–0.18% | ||||||||
Grupo Bimbo S.A.B. de C.V. (Mexico), Sr. Unsec. Gtd. Notes, 4.88%, 06/30/20(c) | 5,095,000 | 5,282,219 | ||||||
Kraft Foods, Inc., Sr. Unsec. Global Notes, | ||||||||
5.38%, 02/10/20 | 2,205,000 | 2,508,816 | ||||||
5.63%, 11/01/11 | 80,000 | 80,637 | ||||||
6.88%, 02/01/38 | 842,000 | 1,006,467 | ||||||
7.00%, 08/11/37 | 7,160,000 | 8,625,413 | ||||||
Sr. Unsec. Notes, 6.88%, 01/26/39 | 2,125,000 | 2,556,951 | ||||||
20,060,503 | ||||||||
Paper Packaging–0.01% | ||||||||
Bemis Co., Inc., Sr. Unsec. Notes, 5.65%, 08/01/14 | 800,000 | 877,855 | ||||||
Pharmaceuticals–0.56% | ||||||||
Endo Pharmaceuticals Holdings, Inc., Sr. Unsec. Sub. Conv. Notes, 1.75%, 04/15/15 | 28,137,000 | 34,538,167 | ||||||
Salix Pharmaceuticals Ltd., Sr. Unsec. Conv. Notes, 2.75%, 05/15/15 | 25,391,000 | 26,152,730 | ||||||
60,690,897 | ||||||||
Property & Casualty Insurance–0.03% | ||||||||
CNA Financial Corp., Sr. Unsec. Notes, 7.35%, 11/15/19 | 425,000 | 483,131 | ||||||
Travelers Cos., Inc. (The), Sr. Unsec. Notes, 5.35%, 11/01/40 | 3,235,000 | 3,218,166 | ||||||
3,701,297 | ||||||||
Railroads–0.03% | ||||||||
CSX Corp., Sr. Unsec. Global Notes, 6.15%, 05/01/37 | 1,750,000 | 2,009,072 | ||||||
Sr. Unsec. Notes, 5.50%, 04/15/41 | 1,660,000 | 1,750,909 | ||||||
3,759,981 | ||||||||
Regional Banks–0.26% | ||||||||
Key Bank NA, Sr. Unsec. Gtd. Global Notes, 3.20%, 06/15/12 | 7,500,000 | 7,675,589 | ||||||
Nationwide Building Society (United Kingdom), Sr. Unsec. Notes, 6.25%, 02/25/20(c) | 8,845,000 | 9,168,919 | ||||||
PNC Funding Corp., Sr. Unsec. Gtd. Global Notes, | ||||||||
3.63%, 02/08/15 | 890,000 | 940,044 | ||||||
5.13%, 02/08/20 | 5,305,000 | 5,862,331 | ||||||
Sr. Unsec. Gtd. Notes, 6.70%, 06/10/19 | 3,635,000 | 4,377,859 | ||||||
28,024,742 | ||||||||
Restaurants–0.06% | ||||||||
Yum! Brands, Inc., | ||||||||
Sr. Unsec. Global Bonds, 6.25%, 03/15/18 | 1,175,000 | 1,397,392 | ||||||
Sr. Unsec. Notes, 5.30%, 09/15/19 | 4,295,000 | 4,802,406 | ||||||
6,199,798 | ||||||||
Retail REIT’s–0.06% | ||||||||
WEA Finance LLC, Sr. Gtd. Notes, 7.13%, 04/15/18(c) | 5,290,000 | 6,082,681 | ||||||
Semiconductor Equipment–0.04% | ||||||||
Novellus Systems, Inc., Sr. Unsec. Conv. Notes, 2.63%, 05/15/41(c) | 5,032,000 | 4,396,710 | ||||||
Semiconductors–1.01% | ||||||||
Linear Technology Corp., Sr. Unsec. Conv. Putable Notes, 3.00%, 05/01/14(c) | 36,420,000 | 37,284,975 | ||||||
Micron Technology, Inc., Sr. Unsec. Conv. Notes, 1.88%, 06/01/14 | 51,757,000 | 49,427,935 | ||||||
Xilinx, Inc., Jr. Unsec. Conv. Sub. Notes, 3.13%, 03/15/37(c) | 20,622,000 | 22,890,420 | ||||||
109,603,330 | ||||||||
Sovereign Debt–0.27% | ||||||||
Brazilian Government International Bond (Brazil), Sr. Unsec. Global Bonds, 6.00%, 01/17/17 | 16,505,000 | 19,393,540 | ||||||
Peruvian Government International Bond (Peru), Sr. Unsec. Global Notes, 7.13%, 03/30/19 | 1,650,000 | 2,076,938 | ||||||
Republic of Italy (Italy), Sr. Unsec. Global Notes, 6.88%, 09/27/23 | 6,380,000 | 6,792,133 | ||||||
Russian Foreign Bond (Russia), Sr. Unsec. Euro Bonds, 3.63%, 04/29/15(c) | 800,000 | 820,800 | ||||||
29,083,411 | ||||||||
Specialized Finance–0.00% | ||||||||
National Rural Utilities Cooperative Finance Corp., Sr. Sec. Collateral Trust Notes, 2.63%, 09/16/12 | 440,000 | 449,551 | ||||||
Specialized REIT’s–0.06% | ||||||||
Senior Housing Properties Trust, Sr. Unsec. Notes, 4.30%, 01/15/16 | 6,620,000 | 6,599,313 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
16 Invesco Van Kampen Equity and Income Fund
Principal | ||||||||
Amount | Value | |||||||
Steel–0.28% | ||||||||
ArcelorMittal (Luxembourg), Sr. Unsec. Global Bonds, 9.85%, 06/01/19 | $ | 7,005,000 | $ | 8,590,844 | ||||
Sr. Unsec. Global Notes, | ||||||||
3.75%, 08/05/15 | 8,775,000 | 8,658,193 | ||||||
5.50%, 03/01/21 | 1,325,000 | 1,299,888 | ||||||
6.13%, 06/01/18 | 390,000 | 412,352 | ||||||
6.75%, 03/01/41 | 1,325,000 | 1,271,576 | ||||||
7.00%, 10/15/39 | 910,000 | 879,995 | ||||||
Vale Overseas Ltd. (Brazil), Sr. Unsec. Gtd. Global Notes, | ||||||||
4.63%, 09/15/20 | 320,000 | 329,958 | ||||||
5.63%, 09/15/19 | 3,655,000 | 4,003,894 | ||||||
6.88%, 11/10/39 | 4,075,000 | 4,624,797 | ||||||
30,071,497 | ||||||||
Systems Software–0.26% | ||||||||
Symantec Corp.–Class B, Sr. Unsec. Conv. Global Notes, 1.00%, 06/15/13 | 24,728,000 | 28,684,480 | ||||||
Technology Distributors–0.01% | ||||||||
Avnet, Inc., Sr. Unsec. Notes, 5.88%, 06/15/20 | 950,000 | 1,017,289 | ||||||
Thrifts & Mortgage Finance–0.10% | ||||||||
MGIC Investment Corp., Sr. Unsec. Conv. Notes, 5.00%, 05/01/17 | 16,283,000 | 10,624,658 | ||||||
Tobacco–0.01% | ||||||||
Altria Group, Inc., Sr. Unsec. Gtd. Global Notes, 4.13%, 09/11/15 | 715,000 | 767,140 | ||||||
Trading Companies & Distributors–0.00% | ||||||||
GATX Corp., Sr. Unsec. Notes, 4.75%, 10/01/12 | 450,000 | 467,964 | ||||||
Trucking–0.04% | ||||||||
Ryder System, Inc., Sr. Unsec. Medium-Term Notes, 3.15%, 03/02/15 | 4,030,000 | 4,189,628 | ||||||
Wireless Telecommunication Services–0.64% | ||||||||
America Movil Sab De CV, Global Unsec. Gtd. Notes, 2.38%, 09/08/16 | 4,450,000 | 4,421,743 | ||||||
American Tower Corp., Sr. Unsec. Global Notes, 4.63%, 04/01/15 | 2,425,000 | 2,623,932 | ||||||
Sr. Unsec. Notes, 4.50%, 01/15/18 | 4,620,000 | 4,741,147 | ||||||
Clearwire Communications LLC/Clearwire Finance, Inc., Sr. Unsec. Gtd. Conv. Putable Notes, 8.25%, 12/01/17(c) | 10,651,000 | 7,535,583 | ||||||
Crown Castle Towers LLC, Sr. Sec. Gtd. Notes, 3.21%, 08/15/15(c) | 5,095,000 | 5,247,850 | ||||||
SBA Communications Corp., Sr. Unsec. Conv. Notes, 1.88%, 05/01/13 | 40,663,000 | 44,830,957 | ||||||
69,401,212 | ||||||||
Total Bonds & Notes (Cost $2,394,854,934) | 2,462,312,193 | |||||||
U.S. Treasury Securities–7.55% | ||||||||
U.S. Treasury Notes–6.39% | ||||||||
0.88%, 02/29/12 | 1,500,000 | 1,508,965 | ||||||
0.75%, 05/31/12 | 17,760,000 | 17,843,944 | ||||||
1.75%, 08/15/12 | 4,080,000 | 4,142,634 | ||||||
4.38%, 08/15/12 | 500,000 | 520,254 | ||||||
1.38%, 09/15/12 | 21,200,000 | 21,469,969 | ||||||
1.50%, 12/31/13 | 28,000,000 | 28,826,875 | ||||||
1.75%, 03/31/14 | 12,000,000 | 12,461,250 | ||||||
2.63%, 07/31/14 | 95,125,000 | 101,501,348 | ||||||
2.38%, 10/31/14 | 231,415,000 | 245,950,755 | ||||||
2.13%, 11/30/14 | 77,385,000 | 81,689,541 | ||||||
2.25%, 01/31/15 | 19,650,000 | 20,853,562 | ||||||
2.50%, 03/31/15 | 495,000 | 530,655 | ||||||
2.13%, 05/31/15 | 4,445,000 | 4,708,922 | ||||||
2.00%, 04/30/16 | 17,445,000 | 18,385,394 | ||||||
1.75%, 05/31/16 | 950,000 | 989,484 | ||||||
3.75%, 11/15/18 | 34,750,000 | 39,984,219 | ||||||
3.63%, 08/15/19 | 58,350,000 | 66,519,000 | ||||||
3.38%, 11/15/19 | 20,000,000 | 22,390,625 | ||||||
2.63%, 11/15/20 | 6,500,000 | 6,794,531 | ||||||
697,071,927 | ||||||||
U.S. Treasury Bonds–1.12% | ||||||||
8.00%, 11/15/21 | 3,557,000 | 5,442,210 | ||||||
6.88%, 08/15/25 | 20,000 | 29,525 | ||||||
6.13%, 11/15/27 | 19,110,000 | 26,876,424 | ||||||
5.38%, 02/15/31 | 5,205,000 | 6,866,534 | ||||||
3.50%, 02/15/39 | 31,890,000 | 31,481,409 | ||||||
4.25%, 05/15/39 | 9,900,000 | 11,125,125 | ||||||
4.50%, 08/15/39 | 1,060,000 | 1,239,372 | ||||||
4.38%, 11/15/39 | 13,200,000 | 15,122,250 | ||||||
4.63%, 02/15/40 | 18,150,000 | 21,638,203 | ||||||
4.38%, 05/15/40 | 1,280,000 | 1,466,000 | ||||||
4.25%, 11/15/40 | 500,000 | 560,859 | ||||||
121,847,911 | ||||||||
U.S. Treasury Bills–0.04% | ||||||||
0.10%, 11/17/11(f) | 3,920,000 | 3,919,955 | ||||||
Total U.S. Treasury Securities (Cost $770,817,632) | 822,839,793 | |||||||
Shares | Value | |||||||
Preferred Stocks–1.83% | ||||||||
Health Care Facilities–0.25% | ||||||||
HealthSouth Corp., Series A, Conv. Pfd. | 27,000 | $ | 27,546,750 | |||||
Health Care Services–0.14% | ||||||||
Omnicare Capital Trust II, Series B, Conv. Pfd. | 356,855 | 15,441,116 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
17 Invesco Van Kampen Equity and Income Fund
Shares | Value | |||||||
Multi-Utilities–0.41% | ||||||||
CenterPoint Energy, Inc., Conv. Pfd. | 1,300,669 | $ | 44,710,497 | |||||
Oil & Gas Storage & Transportation–0.36% | ||||||||
El Paso Energy Capital Trust I, Conv. Pfd | 875,900 | 38,837,406 | ||||||
Regional Banks–0.40% | ||||||||
KeyCorp, Series A, Conv. Pfd. | 427,098 | 43,944,113 | ||||||
Research & Consulting Services–0.06% | ||||||||
Nielsen Holdings N.V., (Netherlands) Conv. Pfd. | 106,910 | 6,260,917 | ||||||
Trucking–0.21% | ||||||||
2010 Swift Mandatory Common Exchange Security Trust, Conv. Pfd.(c) | 2,398,700 | 22,895,591 | ||||||
Total Preferred Stocks (Cost $188,512,415) | 199,636,390 | |||||||
Principal | ||||||||
Amount | Value | |||||||
U.S. Government Sponsored Agency Securities–1.19% | ||||||||
Federal Home Loan Mortgage Corp. (FHLMC)–0.70% | ||||||||
Federal Home Loan Mortgage Corp., | ||||||||
Sr. Unsec. Global Bonds, 6.75%, 03/15/31 | $ | 7,000,000 | $ | 9,972,949 | ||||
Sr. Unsec. Global Notes, 3.00%, 07/28/14 | 23,700,000 | 25,456,802 | ||||||
Unsec. Global Notes, 4.88%, 06/13/18 | 33,680,000 | 40,238,533 | ||||||
75,668,284 | ||||||||
Federal National Mortgage Association (FNMA)–0.49% | ||||||||
Federal National Mortgage Association, | ||||||||
Sr. Unsec. Global Bonds, 6.63%, 11/15/30 | 6,315,000 | 8,874,480 | ||||||
Sr. Unsec. Global Notes, | ||||||||
2.88%, 12/11/13 | 600,000 | 634,028 | ||||||
4.38%, 10/15/15 | 38,850,000 | 44,313,488 | ||||||
53,821,996 | ||||||||
Total U.S. Government Sponsored Agency Securities (Cost $121,786,937) | 129,490,280 | |||||||
Municipal Obligations–0.13% | ||||||||
California (State of); Series 2009, Unlimited Tax GO Bonds, 5.95%, 04/01/16 | 2,390,000 | 2,727,110 | ||||||
Georgia (State of) Municipal Electric Authority (Plant Vogtle Units 3 & 4 Project J); Series 2010 A, Taxable Build America RB, 6.64%, 04/01/57 | 2,600,000 | 2,652,416 | ||||||
Georgia (State of) Municipal Electric Authority; Series 2010, Build America RB, 6.66%, 04/01/57 | 4,980,000 | 5,017,549 | ||||||
Texas (State of) Transportation Commission; Series 2010 B, Taxable First Tier Build America RB, 5.03%, 04/01/26 | 3,450,000 | 4,030,738 | ||||||
Total Municipal Obligations (Cost $13,492,622) | 14,427,813 | |||||||
Asset-Backed Securities–0.06% | ||||||||
ARI Fleet Lease Trust–Series 2010 A, Floating Rate Pass Through Ctfs., 1.66%, 08/15/18(c) | 1,570,272 | 1,579,761 | ||||||
GE Dealer Floorplan Master Note Trust–Series 2009 2A, Floating Rate Pass Through Ctfs., 1.76%, 10/20/14(c) | 5,200,000 | 5,261,554 | ||||||
Nomura Asset Acceptance Corp.–Series 2005 AR1, Floating Rate Pass Through Ctfs., 0.50%, 02/25/35 | 20,560 | 17,987 | ||||||
Specialty Underwriting & Residential Finance–Series 2003 BC3, Floating Rate Pass Through Ctfs., 0.92%, 08/25/34 | 8,370 | 6,795 | ||||||
Total Asset-Backed Securities (Cost $6,799,202) | 6,866,097 | |||||||
U.S. Government Sponsored Mortgage-Backed Securities–0.00% | ||||||||
Federal Home Loan Mortgage Corp. (FHLMC)–0.00% | ||||||||
Federal Home Loan Mortgage Corp., Pass Through Ctfs., | ||||||||
6.50%, 05/01/29 | 4 | 5 | ||||||
5.50%, 02/01/37 | 587 | 642 | ||||||
647 | ||||||||
Federal National Mortgage Association (FNMA)–0.00% | ||||||||
Federal National Mortgage Association, Pass Through Ctfs., | ||||||||
7.00%, 03/01/12 to 07/01/32 | 128,156 | 146,509 | ||||||
5.50%, 03/01/21 | 422 | 458 | ||||||
8.00%, 08/01/21 | 8,941 | 10,318 | ||||||
157,285 | ||||||||
Government National Mortgage Association (GNMA)–0.00% | ||||||||
Government National Mortgage Association, Pass Through Ctfs., | ||||||||
8.00%, 04/15/26 to 01/20/31 | 55,274 | 63,882 | ||||||
7.50%, 12/20/30 | 3,666 | 4,302 | ||||||
68,184 | ||||||||
Total U.S. Government Sponsored Mortgage-Backed Securities (Cost $204,207) | 226,116 | |||||||
Shares | Value | |||||||
Money Market Funds–3.36% | ||||||||
Liquid Assets Portfolio–Institutional Class(e) | 183,137,308 | $ | 183,137,308 | |||||
Premier Portfolio–Institutional Class(e) | 183,137,308 | 183,137,308 | ||||||
Total Money Market Funds (Cost $366,274,616) | 366,274,616 | |||||||
TOTAL INVESTMENTS–99.97% (Cost $10,795,738,619) | 10,896,705,995 | |||||||
OTHER ASSETS LESS LIABILITIES–0.03% | 3,619,100 | |||||||
NET ASSETS–100.00% | $ | 10,900,325,095 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
18 Invesco Van Kampen Equity and Income Fund
Investment Abbreviations:
ADR | – American Depositary Receipt | |
Conv. | – Convertible | |
Ctfs. | – Certificates | |
Deb. | – Debentures | |
FHLMC | – Federal Home Loan Mortgage Corp. | |
FNMA | – Federal National Mortgage Association | |
GNMA | – Government National Mortgage Association | |
GO | – General Obligation | |
Gtd. | – Guaranteed | |
Jr. | – Junior | |
Pfd. | – Preferred | |
RB | – Revenue Bonds | |
REIT | – Real Estate Investment Trust | |
Sec. | – Secured | |
Sr. | – Senior | |
Sub. | – Subordinated | |
Unsec. | – Unsecured | |
Unsub. | – Unsubordinated |
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. | |
(b) | Non-income producing security. | |
(c) | Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended. The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The aggregate value of these securities at August 31, 2011 was $492,756,947, which represented 4.52% of the Fund’s Net Assets. | |
(d) | Defaulted security. Currently, the issuer is partially or fully in default with respect to interest payments. The value of this security at August 31, 2011 represented 0.00% of the Fund’s Net Assets. | |
(e) | The money market fund and the Fund are affiliated by having the same investment adviser. | |
(f) | All or a portion of this security has been physically segregated in connection with open futures contracts. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
19 Invesco Van Kampen Equity and Income Fund
Statement of Assets and Liabilities
August 31, 2011
Assets: | ||||
Investments, at value (Cost $10,429,464,003) | $ | 10,530,431,379 | ||
Investments in affiliated money market funds, at value and cost | 366,274,616 | |||
Total investments, at value (Cost $10,795,738,619) | 10,896,705,995 | |||
Cash | 907,025 | |||
Foreign currencies, at value (Cost $261,244) | 263,457 | |||
Receivable for: | ||||
Investments sold | 12,331,220 | |||
Variation margin | 780,751 | |||
Fund shares sold | 38,389,079 | |||
Dividends and interest | 49,205,413 | |||
Fund expenses absorbed | 540,111 | |||
Foreign currency contracts outstanding | 94,445 | |||
Investment for trustee deferred compensation and retirement plans | 244,372 | |||
Other assets | 342,220 | |||
Total assets | 10,999,804,088 | |||
Liabilities: | ||||
Payable for: | ||||
Investments purchased | 28,160,532 | |||
Fund shares reacquired | 59,057,461 | |||
Accrued fees to affiliates | 9,882,058 | |||
Accrued other operating expenses | 1,800,410 | |||
Trustee deferred compensation and retirement plans | 578,532 | |||
Total liabilities | 99,478,993 | |||
Net assets applicable to shares outstanding | $ | 10,900,325,095 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 11,038,910,564 | ||
Undistributed net investment income | 37,039,105 | |||
Undistributed net realized gain (loss) | (268,708,387 | ) | ||
Unrealized appreciation | 93,083,813 | |||
$ | 10,900,325,095 | |||
Net Assets: | ||||
Class A | $ | 7,908,622,694 | ||
Class B | $ | 1,014,527,016 | ||
Class C | $ | 1,216,935,641 | ||
Class R | $ | 182,134,655 | ||
Class Y | $ | 422,009,444 | ||
Institutional Class | $ | 156,095,645 | ||
Shares outstanding, $0.01 par value per share, with an unlimited number of shares authorized: | ||||
Class A | 965,263,347 | |||
Class B | 126,168,707 | |||
Class C | 150,793,307 | |||
Class R | 22,138,227 | |||
Class Y | 51,480,183 | |||
Institutional Class | 19,033,088 | |||
Class A: | ||||
Net asset value per share | $ | 8.19 | ||
Maximum offering price per share (Net asset value of $8.19 divided by 94.50%) | $ | 8.67 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 8.04 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 8.07 | ||
Class R: | ||||
Net asset value and offering price per share | $ | 8.23 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 8.20 | ||
Institutional Class: | ||||
Net asset value and offering price per share | $ | 8.20 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
20 Invesco Van Kampen Equity and Income Fund
Statement of Operations
For the year ended August 31, 2011
Investment income: | ||||
Dividends (net of foreign withholding taxes of $1,848,528) | $ | 175,645,544 | ||
Dividends from affiliated money market funds | 336,195 | |||
Interest | 121,786,484 | |||
Total investment income | 297,768,223 | |||
Expenses: | ||||
Advisory fees | 41,159,457 | |||
Administrative services fees | 849,581 | |||
Custodian fees | 182,943 | |||
Distribution fees: | ||||
Class A | 20,724,169 | |||
Class B | 5,306,488 | |||
Class C | 12,685,821 | |||
Class R | 969,683 | |||
Transfer agent fees — A, B, C, R and Y | 21,996,177 | |||
Transfer agent fees — Institutional | 12,146 | |||
Trustees’ and officers’ fees and benefits | 334,446 | |||
Other | 1,126,973 | |||
Total expenses | 105,347,884 | |||
Less: Fees waived and expense offset arrangement(s) | (2,266,561 | ) | ||
Net expenses | 103,081,323 | |||
Net investment income | 194,686,900 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain (loss) from: | ||||
Investment securities (includes net gains from securities sold to affiliates of $1,407,981) | 727,733,389 | |||
Foreign currencies | 31,535 | |||
Foreign currency contracts | (4,825,178 | ) | ||
Futures contracts | (12,644,342 | ) | ||
710,295,404 | ||||
Change in net unrealized appreciation of: | ||||
Investment securities | 221,474,212 | |||
Foreign currencies | 2,213 | |||
Foreign currency contracts | 64,565 | |||
Futures contracts | 126,955 | |||
221,667,945 | ||||
Net realized and unrealized gain | 931,963,349 | |||
Net increase in net assets resulting from operations | $ | 1,126,650,249 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
21 Invesco Van Kampen Equity and Income Fund
Statement of Changes in Net Assets
For the year ended August 31, 2011, the period January 1, 2010 to August 31, 2010 and the year ended December 31, 2009
Eight months | ||||||||||||
Year ended | ended | Year ended | ||||||||||
August 31, | August 31, | December 31, | ||||||||||
2011 | 2010 | 2009 | ||||||||||
Operations: | ||||||||||||
Net investment income | $ | 194,686,900 | $ | 140,787,760 | $ | 233,664,480 | ||||||
Net realized gain | 710,295,404 | 411,639,873 | 124,608,587 | |||||||||
Change in net unrealized appreciation (depreciation) | 221,667,945 | (804,353,206 | ) | 1,979,469,250 | ||||||||
Net increase (decrease) in net assets resulting from operations | 1,126,650,249 | (251,925,573 | ) | 2,337,742,317 | ||||||||
Distributions to shareholders from net investment income: | ||||||||||||
Class A | (150,003,794 | ) | (78,392,006 | ) | (169,870,784 | ) | ||||||
Class B | (22,043,921 | ) | (13,309,304 | ) | (34,279,040 | ) | ||||||
Class C | (14,081,775 | ) | (7,935,103 | ) | (18,888,668 | ) | ||||||
Class R | (3,025,566 | ) | (1,478,570 | ) | (2,837,918 | ) | ||||||
Class Y | (9,905,470 | ) | (5,662,982 | ) | (10,397,866 | ) | ||||||
Institutional Class | (1,974,595 | ) | (53 | ) | — | |||||||
Total distributions from net investment income | (201,035,121 | ) | (106,778,018 | ) | (236,274,276 | ) | ||||||
Share transactions–net: | ||||||||||||
Class A | (294,013,394 | ) | (579,858,731 | ) | (1,280,688,241 | ) | ||||||
Class B | (393,976,120 | ) | (274,161,326 | ) | (384,284,389 | ) | ||||||
Class C | (98,154,582 | ) | (122,001,532 | ) | (204,593,156 | ) | ||||||
Class R | (4,687,717 | ) | 8,276,003 | (7,250,141 | ) | |||||||
Class Y | (22,575,978 | ) | (100,424,326 | ) | 85,666,136 | |||||||
Institutional Class | 87,888,812 | 62,012,587 | — | |||||||||
Net increase (decrease) in net assets resulting from share transactions | (725,518,979 | ) | (1,006,157,325 | ) | (1,791,149,791 | ) | ||||||
Net increase (decrease) in net assets | 200,096,149 | (1,364,860,916 | ) | 310,318,250 | ||||||||
Net assets: | ||||||||||||
Beginning of year | 10,700,228,946 | 12,065,089,862 | 11,754,771,612 | |||||||||
End of year (includes undistributed net investment income (loss) of $37,039,105, $38,387,747 and $(347,446), respectively) | $ | 10,900,325,095 | $ | 10,700,228,946 | $ | 12,065,089,862 | ||||||
Notes to Financial Statements
August 31, 2011
NOTE 1—Significant Accounting Policies
Invesco Van Kampen Equity and Income Fund (the “Fund”), is a series portfolio of AIM Counselor Series Trust (Invesco Counselor Series Trust), (the “Trust”). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end series management investment company consisting of twelve separate portfolios, each authorized to issue an unlimited number of shares of beneficial interest. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class.
On August 31, 2010, the Fund’s fiscal year-end changed from December 31 to August 31.
Prior to June 1, 2010, the Fund operated as Van Kampen Equity and Income Fund (the “Acquired Fund”). The Acquired Fund was reorganized on June 1, 2010 (The “Reorganization Date”) through the transfer of all its assets and liabilities to the Fund (the “Reorganization”).
Upon closing of the Reorganization, holders of the Acquired Fund’s Class A, Class B, Class C, Class R and Class I shares received Class A, Class B, Class C, Class R and Class Y shares, respectively of the Fund.
Information for the Acquired Fund’s — Class I shares prior to the Reorganization is included with Class Y shares of the Fund throughout this report.
The Fund’s investment objective is to seek the highest possible income consistent with safety of principal. Long-term growth of capital is an important secondary investment objective.
22 Invesco Van Kampen Equity and Income Fund
The Fund currently consists of six different classes of shares: Class A, Class B, Class C, Class R, Class Y and Institutional Class. Class A shares are sold with a front-end sales charge unless certain waiver criteria are met and under certain circumstances load waived shares may be subject to contingent deferred sales charges (“CDSC”). Class C shares are sold with a CDSC. Class R, Class Y and Institutional Class shares are sold at net asset value. Effective November 30, 2010, new or additional investments in Class B shares are no longer permitted. Existing shareholders of Class B shares may continue to reinvest dividends and capital gains distributions in Class B shares until they convert. Also, shareholders in Class B shares will be able to exchange those shares for Class B shares of other Invesco Funds offering such shares until they convert. Generally, Class B shares will automatically convert to Class A shares on or about the month-end which is at least eight years after the date of purchase. Redemption of Class B shares prior to conversion date will be subject to a CDSC.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. | |
Debt obligations (including convertible bonds) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations, including commercial paper, having 60 days or less to maturity are recorded at amortized cost which approximates value. Debt securities are subject to interest rate and credit risks. In addition, all debt securities involve some risk of default with respect to interest and/or principal payments. | ||
A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”). | ||
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded. | ||
Swap agreements are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service are valued based on a model which may include end of day net present values, spreads, ratings, industry, and company performance. | ||
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trade is not the current value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economical upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards. | ||
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including Corporate Loans. | ||
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value. | ||
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments. | ||
B. | Securities Transactions and Investment Income — Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded on the accrual basis from settlement date. Paydown gains and losses on mortgage and asset-backed securities are recorded as adjustments to interest income. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. Bond premiums and discounts are amortized and/or accreted for financial reporting purposes. | |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held. | ||
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from |
23 Invesco Van Kampen Equity and Income Fund
investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund’s net asset value and, accordingly, they reduce the Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser. | ||
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class. | ||
C. | Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. | |
D. | Distributions — Distributions from income are declared and paid quarterly and are recorded on ex-dividend date. Distributions from net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to treat a portion of the proceeds from redemptions as distributions for federal income tax purposes. | |
E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. | |
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period. | ||
F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund are charged to the operations of such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses attributable to the Institutional Class are charged to such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses relating to all other classes are allocated among those classes based on relative net assets. All other expenses are allocated among the classes based on relative net assets. | |
G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. | |
H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. | |
I. | Securities Purchased on a When-Issued and Delayed Delivery Basis — The Fund may purchase and sell interests in Corporate Loans and Corporate Debt Securities and other portfolio securities on a when-issued and delayed delivery basis, with payment and delivery scheduled for a future date. No income accrues to the Fund on such interests or securities in connection with such transactions prior to the date the Fund actually takes delivery of such interests or securities. These transactions are subject to market fluctuations and are subject to the risk that the value at delivery may be more or less than the trade date purchase price. Although the Fund will generally purchase these securities with the intention of acquiring such securities, they may sell such securities prior to the settlement date. | |
J. | Dollar Roll and Forward Commitment Transactions — The Fund may engage in dollar roll and forward commitment transactions with respect to mortgage-backed securities issued by GNMA, FNMA and FHLMC. These transactions are often conducted on a to be announced (“TBA”) basis. In a TBA mortgage-backed transaction, the seller does not specify the particular securities to be delivered. Rather, a Fund agrees to accept any security that meets specified terms, such as an agreed upon issuer, coupon rate and terms of the underlying mortgages. TBA mortgage-backed transactions generally settle once a month on a specific date. | |
In a dollar roll transaction, the Fund sells a mortgage-backed security held in the Fund to a financial institution such as a bank or broker-dealer, and simultaneously agrees to purchase a substantially similar security (same type, coupon and maturity) from the institution at an agreed upon price and future date. The mortgage-backed securities to be purchased will bear the same coupon as those sold, but generally will be collateralized by different pools of mortgages with different prepayment histories. Based on the typical structure of dollar roll transactions by the Fund, the dollar roll transactions are accounted for as financing transactions in which the Fund receives compensation as either a “fee” or a “drop”. “Fee” income which is agreed upon amongst the parties at the commencement of the dollar roll and the “drop” which is the difference between the selling price and the repurchase price of the mortgage-backed securities are amortized to income. During the period between the sale and purchase settlement dates, the Fund will not be entitled to receive interest and principal payments on securities purchased and not yet settled. Proceeds of the sale may be invested in short-term instruments, and the income from these investments, together with any additional fee income received on the sale, could generate income for the Fund exceeding the yield on the security sold. Dollar roll transactions are considered borrowings under the 1940 Act. |
24 Invesco Van Kampen Equity and Income Fund
Forward commitment transactions involve commitments by the Fund to acquire or sell TBA mortgage-backed securities from/to a financial institution, such as a bank or broker-dealer at a specified future date and amount. The TBA mortgage-backed security is marked to market until settlement and the unrealized appreciation or depreciation is recorded in the Statement of Operations. | ||
At the time the Fund enters into the dollar roll or forward commitment transaction, mortgage-backed securities or other liquid assets held by the Fund having a dollar value equal to the purchase price or in an amount sufficient to honor the forward commitment will be segregated. | ||
Dollar roll transactions involve the risk that the market value of the securities retained by the Fund may decline below the price of the securities that the Fund has sold but is obligated to purchase under the agreement. In the event that the buyer of securities in a dollar roll transaction files for bankruptcy or becomes insolvent, the Fund’s use of the proceeds from the sale of the securities may be restricted pending a determination by the other party, or its trustee or receiver, whether to enforce the Fund’s obligation to purchase the securities. The return earned by the Fund with the proceeds of the dollar roll transaction may not exceed the return on the securities sold. | ||
Forward commitment transactions involve the risk that a counter-party to the transaction may fail to complete the transaction. If this occurs, the Fund may lose the opportunity to purchase or sell the security at the agreed upon price. Settlement dates of forward commitment transactions may be a month or more after entering into these transactions and as a result the market values of the securities may vary from the purchase or sale prices. Therefore, forward commitment transactions may increase the Fund’s overall interest rate exposure. | ||
K. | Futures Contracts — The Fund may enter into futures contracts to manage exposure to interest rate, equity and market price movements and/or currency risks. A futures contract is an agreement between two parties to purchase or sell a specified underlying security, currency or commodity (or delivery of a cash settlement price, in the case of an index future) for a fixed price at a future date. The Fund currently invests only in exchange-traded futures and they are standardized as to maturity date and underlying financial instrument. Initial margin deposits required upon entering into futures contracts are satisfied by the segregation of specific securities or cash as collateral at the futures commission merchant (broker). During the period the futures contracts are open, changes in the value of the contracts are recognized as unrealized gains or losses by recalculating the value of the contracts on a daily basis. Subsequent or variation margin payments are received or made depending upon whether unrealized gains or losses are incurred. These amounts are reflected as receivables or payables on the Statement of Assets and Liabilities. When the contracts are closed or expire, the Fund recognizes a realized gain or loss equal to the difference between the proceeds from, or cost of, the closing transaction and the Fund’s basis in the contract. The net realized gain (loss) and the change in unrealized gain (loss) on futures contracts held during the period is included on the Statement of Operations. The primary risks associated with futures contracts are market risk and the absence of a liquid secondary market. If the Fund were unable to liquidate a futures contract and/or enter into an offsetting closing transaction, the Fund would continue to be subject to market risk with respect to the value of the contracts and continue to be required to maintain the margin deposits on the futures contracts. Futures contracts have minimal counterparty risk since the exchange’s clearinghouse, as counterparty to all exchange-traded futures, guarantees the futures against default. Risks may exceed amounts recognized in the Statement of Assets and Liabilities. | |
L. | Call Options Written — The Fund may write call options. A call option gives the purchaser of such option the right to buy, and the writer (the Fund) the obligation to sell, the underlying security at the stated exercise price during the option period. Written call options are recorded as a liability in the Statement of Assets and Liabilities. The amount of the liability is subsequently valued to reflect the current market value of the option written. If a written call option expires on the stipulated expiration date, or if the Fund enters into a closing purchase transaction, the Fund realizes a gain (or a loss if the closing purchase transaction exceeds the premium received when the option was written) without regard to any unrealized gain or loss on the underlying security, and the liability related to such option is extinguished. If a written option is exercised, the Fund realizes a gain or a loss from the sale of the underlying security and the proceeds of the sale are increased by the premium originally received. Realized gains and losses on these contracts are included in the Statement of Operations. A risk in writing a covered call option is that the Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised. | |
M. | Foreign Currency Translations — Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. | |
The Fund may invest in foreign securities which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. | ||
N. | Collateral — To the extent the Fund has pledged or segregated a security as collateral and that security is subsequently sold, it is the Fund’s practice to replace such collateral no later than the next business day. |
25 Invesco Van Kampen Equity and Income Fund
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser based on the annual rate of the Fund’s average daily net assets as follows:
Average Daily Net Assets | Rate | |||
First $150 million | 0 | .50% | ||
Next $100 million | 0 | .45% | ||
Next $100 million | 0 | .40% | ||
Over $350 million | 0 | .35% | ||
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2012, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver (excluding certain items discussed below) of Class A, Class B, Class C, Class R, Class Y and Institutional Class shares to 0.82%, 0.95% (net of 12b-1 fee waivers), 1.57%, 1.07%, 0.57% and 0.57%, respectively, of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual operating expenses after fee waiver to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless the Board of Trustees and Invesco mutually agree to amend or continue the fee waiver agreement, it will terminate on June 30, 2012. The Adviser did not waive fees and/or reimburse expenses during the period under this limitation.
Further, the Adviser has contractually agreed, through at least June 30, 2012, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the year ended August 31, 2011, the Adviser waived advisory fees of $479,572.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco for certain administrative costs incurred in providing accounting services to the Fund. For the year ended August 31, 2011, expenses incurred under the agreement are shown in the Statement of Operations as administrative services fees.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (“IIS”) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. IIS may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. All fees payable by IIS to intermediaries that provide omnibus account services or sub-accounting are charged back to the Fund, subject to certain limitations approved by the Trust’s Board of Trustees. For the year ended August 31, 2011, expenses incurred under the agreement are shown in the Statement of Operations as transfer agent fees.
Shares of the Fund are distributed by Invesco Distributors, Inc. (“IDI”). The Fund has adopted a distribution plan pursuant to Rule 12b-1 under the 1940 Act, and a service plan (collectively, the “Plans”) for Class A shares, Class B shares, Class C shares and Class R shares to compensate IDI for the sale, distribution, shareholder servicing and maintenance of shareholder accounts for these shares. Under the Plans, the Fund will incur annual fees of up to 0.25% of Class A average daily net assets, up to 1.00% each of Class B and Class C average daily net assets and up to 0.50% of Class R average daily net assets.
With respect to Class B and Class C shares, the Fund is authorized to reimburse in future years any distribution related expenses that exceed the maximum annual reimbursement rate for such class, so long as such reimbursement does not cause the Fund to exceed the Class B and Class C maximum annual reimbursement rate, respectively. With respect to Class A shares, distribution related expenses that exceed the maximum annual reimbursement rate for such class are not carried forward to future years and the Fund will not reimburse IDI for any such expenses.
Effective May 23, 2011, IDI has contractually agreed to limit Rule 12b-1 plan fees on Class B shares to 0.38% of average net assets through at least June 30, 2012.
For the year ended August 31, 2011, 12b-1 fees before fee waivers incurred under the Plan are detailed in the Statement of Operations as distribution fees. For the year ended August 31, 2011, 12b-1 fees incurred for Class B Shares were $3,534,787 after fee waivers of $1,771,701.
Front-end sales commissions and CDSC (collectively the “sales charges”) are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the year ended August 31, 2011, IDI advised the Fund that IDI retained $1,489,033 in front-end sales commissions from the sale of Class A shares and $14,965, $1,338,320 and $39,343 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of the Adviser, Invesco Ltd., IIS and/or IDI.
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs
26 Invesco Van Kampen Equity and Income Fund
(Level 3) generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
Level 1 — | Prices are determined using quoted prices in an active market for identical assets. | |
Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. | |
Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of August 31, 2011. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
During the year ended August 31, 2011, there were no significant transfers between investment levels.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 7,359,129,948 | $ | 101,413,755 | $ | — | $ | 7,460,543,703 | ||||||||
U.S. Treasury Securities | — | 822,839,793 | — | 822,839,793 | ||||||||||||
U.S. Government Sponsored Securities | — | 129,716,396 | — | 129,716,396 | ||||||||||||
Corporate Debt Securities | — | 2,433,228,782 | — | 2,433,228,782 | ||||||||||||
Asset Backed Securities | — | 6,866,097 | — | 6,866,097 | ||||||||||||
Municipal Obligations | — | 14,427,813 | — | 14,427,813 | ||||||||||||
Foreign Government Debt Securities | — | 29,083,411 | — | 29,083,411 | ||||||||||||
$ | 7,359,129,948 | $ | 3,537,576,047 | $ | — | $ | 10,896,705,995 | |||||||||
Futures Contracts* | (7,980,221 | ) | — | — | (7,980,221 | ) | ||||||||||
Foreign Currency Contracts* | — | 94,445 | — | 94,445 | ||||||||||||
Total Investments | $ | 7,351,149,727 | $ | 3,537,670,492 | $ | — | $ | 10,888,820,219 | ||||||||
* | Unrealized appreciation (depreciation) |
NOTE 4—Derivative Investments
Open Futures Contracts | ||||||||||||||||
Unrealized | ||||||||||||||||
Number of | Month/ | Appreciation | ||||||||||||||
Contract | Contracts | Commitment | Value | (Depreciation) | ||||||||||||
U.S. Treasury 2 Year Notes | 1,025 | December 2011/Long | $ | 226,012,500 | $ | 29,879 | ||||||||||
U.S. Treasury 5 Year Notes | 1,334 | December 2011/Short | 163,477,531 | (367,567 | ) | |||||||||||
U.S. Treasury 10 Year Notes | 913 | September 2011/Short | 118,718,531 | (7,541,300 | ) | |||||||||||
U.S. Long Bonds | 215 | December 2011/Short | 29,246,719 | (101,233 | ) | |||||||||||
Total | $ | 537,455,281 | $ | (7,980,221 | ) | |||||||||||
Open Foreign Currency Contracts | ||||||||||||||||||||||
Settlement | Contract to | Notional | Unrealized | |||||||||||||||||||
Date | Counterparty | Deliver | Receive | Value | Appreciation | |||||||||||||||||
9/15/2011 | Bank of New York | GBP | 12,279,762 | USD | 19,954,859 | $ | (19,936,433 | ) | $ | 18,426 | ||||||||||||
9/15/2011 | Bank of New York | JPY | 1,628,145,775 | USD | 21,322,810 | (21,265,328 | ) | 57,482 | ||||||||||||||
9/15/2011 | BNPX NA | GBP | 24,734,829 | USD | 40,231,570 | (40,157,477 | ) | 74,093 | ||||||||||||||
9/15/2011 | Morgan Stanley | EUR | 13,761,081 | USD | 19,784,374 | (19,770,503 | ) | 13,871 | ||||||||||||||
9/15/2011 | Morgan Stanley | JPY | 1,643,211,642 | USD | 21,523,783 | (21,462,104 | ) | 61,679 | ||||||||||||||
9/15/2011 | State Street | GBP | 12,728,906 | USD | 20,671,998 | (20,665,627 | ) | 6,371 | ||||||||||||||
$ | (143,257,472 | ) | $ | 231,922 | ||||||||||||||||||
27 Invesco Van Kampen Equity and Income Fund
Unrealized | ||||||||||||||||||||||
Settlement | Contract to | Notional | Appreciation | |||||||||||||||||||
Date | Counterparty | Deliver | Receive | Value | (Depreciation) | |||||||||||||||||
9/15/2011 | Bank of New York | EUR | 25,689,934 | USD | 36,886,122 | $ | (36,908,652 | ) | $ | (22,530 | ) | |||||||||||
9/15/2011 | Bank of New York | GBP | 13,334,378 | USD | 21,578,490 | (21,648,622 | ) | (70,132 | ) | |||||||||||||
9/15/2011 | BNPX NA | EUR | 41,196,870 | USD | 59,175,596 | (59,187,420 | ) | (11,824 | ) | |||||||||||||
9/15/2011 | State Street | EUR | 41,919,544 | USD | 60,192,692 | (60,225,683 | ) | (32,991 | ) | |||||||||||||
$ | (177,970,377 | ) | $ | (137,477 | ) | |||||||||||||||||
Total open foreign currency contracts | $ | (321,227,849 | ) | $ | 94,445 | |||||||||||||||||
Currency Abbreviations: | ||
EUR | – Euro | |
GBP | – British Pound Sterling | |
JPY | – Japanese Yen | |
USD | – U.S. Dollar |
The Fund has implemented the required disclosures about derivative instruments and hedging activities in accordance with GAAP. This disclosure is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position and financial performance. The enhanced disclosure has no impact on the results of operations reported in the financial statements.
Value of Derivative Instruments at Period-End
The table below summarizes the value of the Fund’s derivative instruments, detailed by primary risk exposure, held as of August 31, 2011:
Value | ||||||||||||
Risk Exposure/ Derivative Type | Assets | Liabilities | ||||||||||
Currency risk | ||||||||||||
Foreign currency contracts | $ | 231,922 | $ | (137,477 | ) | |||||||
Interest rate risk | ||||||||||||
Futures contracts(a) | $ | 29,879 | $ | (8,010,100 | ) | |||||||
(a) | Includes cumulative appreciation (depreciation) of futures contracts. Only current day’s variation margin receivable (payable) is reported within the Statement of Assets & Liabilities. |
Effect of Derivative Instruments for the year ended August 31, 2011
The table below summarizes the gains (losses) on derivative instruments, detailed by primary risk exposure, recognized in earnings during the period:
Location of Gain (Loss) on | ||||||||
Statement of Operations | ||||||||
Futures | Foreign Currency | |||||||
Contracts* | Contracts* | |||||||
Realized Gain (Loss) | ||||||||
Currency risk | $ | — | $ | (4,825,178 | ) | |||
Interest rate risk | (12,644,342 | ) | — | |||||
Change in Unrealized Appreciation (Depreciation) | ||||||||
Currency risk | — | 64,565 | ||||||
Interest rate risk | 126,955 | — | ||||||
Total | $ | (12,517,387 | ) | $ | (4,760,613 | ) | ||
* | The average notional value of futures contracts and foreign currency contracts outstanding during the period was $634,018,882 and $305,561,011, respectively. |
NOTE 5—Security Transactions with Affiliated Funds
The Fund is permitted to purchase or sell securities from or to certain other Invesco Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment adviser (or affiliated investment advisers), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, for the year ended August 31, 2011, the Fund engaged in securities purchases of $17,211,952 and securities sales of $3,426,385, which resulted in net realized gains of $1,407,981.
28 Invesco Van Kampen Equity and Income Fund
NOTE 6—Expense Offset Arrangement(s)
The expense offset arrangement is comprised of transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions. For the year ended August 31, 2011, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $15,288.
NOTE 7—Trustees’ and Officers’ Fees and Benefits
“Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and “Trustees’ and Officers’ Fees and Benefits” also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. “Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
During the year ended August 31, 2011, the Fund paid legal fees of $23,995 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A partner of that firm is a Trustee of the Trust.
NOTE 8—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with SSB, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 9—Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Year Ended August 31, 2011, the Eight Months Ended August 31, 2010 and the Year Ended December 31, 2009:
August 31, 2011 | August 31, 2010 | December 31, 2009 | ||||||||||
Ordinary income | $ | 201,035,121 | $ | 106,778,018 | $ | 236,274,276 | ||||||
Long-term capital gain | -0- | -0- | -0- | |||||||||
Total distributions | $ | 201,035,121 | $ | 106,778,018 | $ | 236,274,276 | ||||||
Tax Components of Net Assets at Period-End:
August 31, 2011 | ||||
Undistributed ordinary income | $ | 52,681,858 | ||
Net unrealized appreciation — investments | 63,895,899 | |||
Net unrealized appreciation — other | 2,213 | |||
Temporary book/tax differences | (520,657 | ) | ||
Capital loss carryforward | (254,644,782 | ) | ||
Shares of beneficial interest | 11,038,910,564 | |||
Total net assets | $ | 10,900,325,095 | ||
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund’s net unrealized appreciation (depreciation) difference is attributable primarily to wash sales.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund’s temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions. Under these limitation rules, the Fund is limited to utilizing $127,304,507 of capital loss carryforward in the fiscal year ending August 31, 2012.
29 Invesco Van Kampen Equity and Income Fund
The Fund utilized $717,433,345 of capital loss carryforward in the current period to offset net realized capital gain for federal income tax purposes. The Fund has a capital loss carryforward as of August 31, 2011 which expires as follows:
Capital Loss | ||||
Expiration | Carryforward* | |||
August 31, 2015 | $ | 40,242,087 | ||
August 31, 2016 | 111,861,101 | |||
August 31, 2017 | 102,541,594 | |||
Total capital loss carryforward | $ | 254,644,782 | ||
* | Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. |
NOTE 10—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended August 31, 2011 was $2,396,552,955 and $3,865,329,362, respectively. During the same period, purchases and sales of U.S. Treasury obligations were $960,094 and $10,000,000. Cost of investments on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed Federal income tax reporting period end.
Unrealized Appreciation (Depreciation) of Investment Securities on a Tax Basis | ||||
Aggregate unrealized appreciation of investment securities | $ | 736,734,372 | ||
Aggregate unrealized (depreciation) of investment securities | (672,838,473 | ) | ||
Net unrealized appreciation of investment securities | $ | 63,895,899 | ||
Cost of investments for tax purposes is $10,832,810,096. |
NOTE 11—Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of foreign currency transactions and net operating losses, on August 31, 2011, undistributed net investment income was increased by $4,999,579, undistributed net realized gain (loss) was decreased by $191,924,309 and shares of beneficial interest increased by $186,924,730. This reclassification had no effect on the net assets of the Fund.
30 Invesco Van Kampen Equity and Income Fund
NOTE 12—Share Information
Summary of Share Activity | ||||||||||||||||||||||||
Year ended | Eight months ended | Year ended | ||||||||||||||||||||||
August 31, 2011(a) | August 31, 2010 | December 31, 2009 | ||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||
Sold: | ||||||||||||||||||||||||
Class A | 127,971,222 | (b) | $ | 1,100,290,001 | (b) | 98,417,827 | (b) | $ | 775,393,804 | (b) | 152,455,661 | $ | 1,019,540,444 | |||||||||||
Class B | 4,314,780 | 35,442,243 | 9,862,974 | 76,560,048 | 17,040,669 | 112,317,617 | ||||||||||||||||||
Class C | 8,570,105 | 73,027,813 | 8,006,841 | 62,607,051 | 14,723,990 | 97,030,036 | ||||||||||||||||||
Class R | 6,592,227 | 57,106,122 | 5,995,073 | 47,243,796 | 7,528,313 | 50,828,631 | ||||||||||||||||||
Class Y | 21,595,593 | 186,789,017 | 13,491,946 | 104,059,515 | 27,440,102 | 185,400,799 | ||||||||||||||||||
Institutional Class | 12,398,629 | 103,169,510 | 8,655,060 | 63,701,549 | — | — | ||||||||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||||||||||
Class A | 16,308,100 | 136,884,446 | 9,608,352 | 74,626,926 | 24,446,316 | 161,015,444 | ||||||||||||||||||
Class B | 2,490,833 | 20,476,183 | 1,636,496 | 12,524,790 | 4,987,667 | 32,122,352 | ||||||||||||||||||
Class C | 1,497,465 | 12,382,375 | 870,817 | 6,684,401 | 2,469,812 | 15,782,993 | ||||||||||||||||||
Class R | 358,603 | 3,023,225 | 160,236 | 1,249,945 | 346,588 | 2,295,727 | ||||||||||||||||||
Class Y | 1,136,447 | 9,551,241 | 459,192 | 3,551,289 | 864,221 | 5,807,903 | ||||||||||||||||||
Institutional Class | 233,353 | 1,974,351 | 7 | 53 | — | — | ||||||||||||||||||
Issued in connection with acquisitions:(c) | ||||||||||||||||||||||||
Class A | 65,351,925 | 588,917,667 | — | — | — | — | ||||||||||||||||||
Class B | 6,813,818 | 60,220,062 | — | — | — | — | ||||||||||||||||||
Class C | 12,039,953 | 106,937,496 | — | — | — | — | ||||||||||||||||||
Class R | 809,078 | 7,322,872 | — | — | — | — | ||||||||||||||||||
Class Y | 268,205 | 2,415,975 | — | — | — | — | ||||||||||||||||||
Institutional Class | 25,520 | 230,109 | — | — | — | — | ||||||||||||||||||
Reacquired: | ||||||||||||||||||||||||
Class A | (247,798,564 | ) | (2,120,105,508 | ) | (182,005,149 | ) | (1,429,879,461 | ) | (373,158,614 | ) | (2,461,244,129 | ) | ||||||||||||
Class B | (60,512,482 | )(b) | (510,114,608 | )(b) | (46,975,980 | )(b) | (363,246,164 | )(b) | (81,100,246 | ) | (528,724,358 | ) | ||||||||||||
Class C | (34,522,121 | ) | (290,502,266 | ) | (24,667,895 | ) | (191,292,984 | ) | (48,861,338 | ) | (317,406,185 | ) | ||||||||||||
Class R | (8,375,268 | ) | (72,139,936 | ) | (5,083,175 | ) | (40,217,738 | ) | (9,103,508 | ) | (60,374,499 | ) | ||||||||||||
Class Y | (26,462,868 | ) | (221,332,211 | ) | (27,008,434 | ) | (208,035,130 | ) | (15,826,484 | ) | (105,542,566 | ) | ||||||||||||
Institutional Class | (2,060,952 | ) | (17,485,158 | ) | (218,529 | ) | (1,689,015 | ) | — | — | ||||||||||||||
Net increase (decrease) in share activity | (90,956,399 | ) | $ | (725,518,979 | ) | (128,794,341 | ) | $ | (1,006,157,325 | ) | (275,746,851 | ) | $ | (1,791,149,791 | ) | |||||||||
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 28% of the outstanding shares of the Fund. IDI has an agreement with these entities to sell Fund shares. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. | |
(b) | Includes automatic conversion of 30,510,407 Class B shares into 29,939,971 Class A shares at a value of $258,765,594 and 13,997,523 Class B shares into 13,730,129 Class A shares at a value of $107,228,226 for the year ended August 31, 2011 and the eight months ended August 31, 2010, respectively. | |
(c) | As of the open of business day on May 23, 2011, the Fund acquired all the net assets of Invesco Balanced Fund and Invesco Basic Balanced Fund pursuant to a plan of reorganization approved by the Trustees of the Fund on November 10, 2010 and by the shareholders of Invesco Balanced Fund and Invesco Basic Balanced Fund on April 14, 2011. The acquisition was accomplished by a tax-free exchange of 85,308,499 shares of the Fund for 11,505,036 and 53,265,217 shares outstanding of Invesco Balanced Fund and Invesco Basic Balanced Fund, respectively as of the close of business on May 20, 2011. Each class of Invesco Balanced Fund and Invesco Basic Balanced Fund was exchanged for the like class of shares of the Fund based on the relative net asset value of Invesco Balanced Fund and Invesco Basic Balanced Fund to the net asset value of the Fund on the close of business, May 20, 2011. Invesco Balanced Fund and Invesco Basic Balanced Fund’s net assets at that date of $155,118,564 and $610,925,617, respectively, including $7,987,998 and $82,271,409 of unrealized appreciation, respectively, was combined with those of the Fund. The net assets of the Fund immediately before the acquisition were $11,740,080,547. The net assets of the Fund immediately following the acquisition were $12,506,124,728. |
31 Invesco Van Kampen Equity and Income Fund
NOTE 13—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Ratio of | Ratio of | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net gains | expenses | expenses | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
(losses) on | to average | to average net | Ratio of net | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset | securities | Dividends | Distributions | net assets | assets without | investment | ||||||||||||||||||||||||||||||||||||||||||||||||||
value, | Net | (both | Total from | from net | from net | Net asset | Net assets, | with fee waivers | fee waivers | income to | ||||||||||||||||||||||||||||||||||||||||||||||
beginning | investment | realized and | investment | investment | realized | Total | value, end | Total | end of period | and/or expenses | and/or expenses | average | Portfolio | |||||||||||||||||||||||||||||||||||||||||||
of period | income(a) | unrealized) | operations | income | gains | Distributions | of period | return | (000s omitted) | absorbed | absorbed | net assets | turnover(b) | |||||||||||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | $ | 7.53 | $ | 0.15 | $ | 0.66 | $ | 0.81 | $ | (0.15 | ) | $ | — | $ | (0.15 | ) | $ | 8.19 | 10.78 | %(c) | $ | 7,908,623 | 0.81 | %(d) | 0.81 | %(d) | 1.74 | %(d) | 22 | % | ||||||||||||||||||||||||||
Eight months ended 08/31/10 | 7.79 | 0.10 | (0.28 | ) | (0.18 | ) | (0.08 | ) | — | (0.08 | ) | 7.53 | (2.40 | )(c) | 7,560,462 | 0.78 | 0.78 | 1.89 | 24 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/09 | 6.45 | 0.15 | 1.34 | 1.49 | (0.15 | ) | — | (0.15 | ) | 7.79 | 23.51 | (e) | 8,395,716 | 0.82 | 0.82 | 2.15 | 78 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/08 | 8.84 | 0.20 | (2.36 | ) | (2.16 | ) | (0.22 | ) | (0.01 | ) | (0.23 | ) | 6.45 | (24.78 | )(e) | 8,214,093 | 0.79 | 0.79 | 2.59 | 56 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/07 | 9.12 | 0.22 | 0.08 | 0.30 | (0.22 | ) | (0.36 | ) | (0.58 | ) | 8.84 | 3.26 | (e) | 13,332,525 | 0.76 | 0.76 | 2.32 | 35 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/06 | 8.68 | 0.20 | 0.86 | 1.06 | (0.20 | ) | (0.42 | ) | (0.62 | ) | 9.12 | 12.53 | (e) | 12,604,874 | 0.78 | 0.78 | 2.29 | 39 | ||||||||||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 7.39 | 0.14 | 0.65 | 0.79 | (0.14 | ) | — | (0.14 | ) | 8.04 | 10.69 | (c)(f) | 1,014,527 | 0.84 | (d)(f) | 0.98 | (d)(f) | 1.71 | (d)(f) | 22 | ||||||||||||||||||||||||||||||||||||
Eight months ended 08/31/10 | 7.64 | 0.09 | (0.27 | ) | (0.18 | ) | (0.07 | ) | — | (0.07 | ) | 7.39 | (2.40 | )(c)(f) | 1,278,734 | 0.91 | (f) | 0.91 | (f) | 1.76 | (f) | 24 | ||||||||||||||||||||||||||||||||||
Year ended 12/31/09 | 6.33 | 0.14 | 1.32 | 1.46 | (0.15 | ) | — | (0.15 | ) | 7.64 | 23.48 | (g)(h) | 1,594,135 | 0.82 | (h) | 0.82 | (h) | 2.16 | (h) | 78 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/08 | 8.68 | 0.20 | (2.32 | ) | (2.12 | ) | (0.22 | ) | (0.01 | ) | (0.23 | ) | 6.33 | (24.78 | )(g)(h) | 1,693,758 | 0.79 | (h) | 0.79 | (h) | 2.59 | (h) | 56 | |||||||||||||||||||||||||||||||||
Year ended 12/31/07 | 8.97 | 0.17 | 0.08 | 0.25 | (0.18 | ) | (0.36 | ) | (0.54 | ) | 8.68 | 2.71 | (g)(h) | 2,978,302 | 1.25 | (h) | 1.25 | (h) | 1.83 | (h) | 35 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/06 | 8.55 | 0.13 | 0.84 | 0.97 | (0.13 | ) | (0.42 | ) | (0.55 | ) | 8.97 | 11.66 | (g) | 3,270,381 | 1.53 | 1.53 | 1.54 | 39 | ||||||||||||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 7.42 | 0.09 | 0.65 | 0.74 | (0.09 | ) | — | (0.09 | ) | 8.07 | 9.95 | (c)(i) | 1,216,936 | 1.54 | (d)(i) | 1.54 | (d)(i) | 1.01 | (d)(i) | 22 | ||||||||||||||||||||||||||||||||||||
Eight months ended 08/31/10 | 7.68 | 0.06 | (0.27 | ) | (0.21 | ) | (0.05 | ) | — | (0.05 | ) | 7.42 | (2.81 | )(c)(i) | 1,211,089 | 1.52 | (i) | 1.52 | (i) | 1.15 | (i) | 24 | ||||||||||||||||||||||||||||||||||
Year ended 12/31/09 | 6.36 | 0.09 | 1.33 | 1.42 | (0.10 | ) | — | (0.10 | ) | 7.68 | 22.63 | (j)(h) | 1,375,516 | 1.56 | (h) | 1.56 | (h) | 1.40 | (h) | 78 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/08 | 8.72 | 0.14 | (2.32 | ) | (2.18 | ) | (0.17 | ) | (0.01 | ) | (0.18 | ) | 6.36 | (25.33 | )(j)(h) | 1,340,367 | 1.50 | (h) | 1.50 | (h) | 1.88 | (h) | 56 | |||||||||||||||||||||||||||||||||
Year ended 12/31/07 | 9.01 | 0.14 | 0.08 | 0.22 | (0.15 | ) | (0.36 | ) | (0.51 | ) | 8.72 | 2.41 | (j) | 2,334,402 | 1.51 | 1.51 | 1.57 | 35 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/06 | 8.58 | 0.14 | 0.84 | 0.98 | (0.13 | ) | (0.42 | ) | (0.55 | ) | 9.01 | 11.73 | (j) | 2,267,416 | 1.53 | 1.53 | 1.54 | 39 | ||||||||||||||||||||||||||||||||||||||
Class R | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 7.57 | 0.13 | 0.66 | 0.79 | (0.13 | ) | — | (0.13 | ) | 8.23 | 10.45 | (c) | 182,135 | 1.06 | (d) | 1.06 | (d) | 1.49 | (d) | 22 | ||||||||||||||||||||||||||||||||||||
Eight months ended 08/31/10 | 7.83 | 0.09 | (0.28 | ) | (0.19 | ) | (0.07 | ) | — | (0.07 | ) | 7.57 | (2.51 | )(c) | 172,143 | 1.03 | 1.03 | 1.64 | 24 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/09 | 6.48 | 0.13 | 1.35 | 1.48 | (0.13 | ) | — | (0.13 | ) | 7.83 | 23.25 | (k) | 169,713 | 1.07 | 1.07 | 1.88 | 78 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/08 | 8.87 | 0.18 | (2.36 | ) | (2.18 | ) | (0.20 | ) | (0.01 | ) | (0.21 | ) | 6.48 | (24.89 | )(k) | 148,399 | 1.04 | 1.04 | 2.35 | 56 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/07 | 9.16 | 0.19 | 0.08 | 0.27 | (0.20 | ) | (0.36 | ) | (0.56 | ) | 8.87 | 2.87 | (k) | 192,906 | 1.01 | 1.01 | 2.07 | 35 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/06 | 8.72 | 0.18 | 0.86 | 1.04 | (0.18 | ) | (0.42 | ) | (0.60 | ) | 9.16 | 12.20 | (k) | 151,755 | 1.03 | 1.03 | 2.04 | 39 | ||||||||||||||||||||||||||||||||||||||
Class Y(m) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 7.54 | 0.17 | 0.67 | 0.84 | (0.18 | ) | — | (0.18 | ) | 8.20 | 11.04 | (c) | 422,009 | 0.56 | (d) | 0.56 | (d) | 1.99 | (d) | 22 | ||||||||||||||||||||||||||||||||||||
Eight months ended 08/31/10 | 7.79 | 0.11 | (0.28 | ) | (0.17 | ) | (0.08 | ) | — | (0.08 | ) | 7.54 | (2.15 | )(c) | 414,203 | 0.53 | 0.53 | 2.15 | 24 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/09 | 6.45 | 0.16 | 1.35 | 1.51 | (0.17 | ) | — | (0.17 | ) | 7.79 | 23.82 | (l) | 530,010 | 0.57 | 0.57 | 2.34 | 78 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/08 | 8.84 | 0.22 | (2.36 | ) | (2.14 | ) | (0.24 | ) | (0.01 | ) | (0.25 | ) | 6.45 | (24.60 | )(l) | 358,154 | 0.54 | 0.54 | 2.85 | 56 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/07 | 9.12 | 0.24 | 0.08 | 0.32 | (0.24 | ) | (0.36 | ) | (0.60 | ) | 8.84 | 3.52 | (l) | 392,848 | 0.51 | 0.51 | 2.57 | 35 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/06 | 8.69 | 0.23 | 0.84 | 1.07 | (0.22 | ) | (0.42 | ) | (0.64 | ) | 9.12 | 12.68 | (l) | 154,666 | 0.53 | 0.53 | 2.53 | 39 | ||||||||||||||||||||||||||||||||||||||
Institutional Class | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 7.54 | 0.19 | 0.65 | 0.84 | (0.18 | ) | — | (0.18 | ) | 8.20 | 11.16 | (c) | 156,096 | 0.39 | (d) | 0.39 | (d) | 2.16 | (d) | 22 | ||||||||||||||||||||||||||||||||||||
Eight months ended 08/31/10(n) | 7.59 | 0.03 | (0.04 | ) | (0.01 | ) | (0.04 | ) | — | (0.04 | ) | 7.54 | (0.13 | )(c) | 63,598 | 0.45 | (o) | 0.45 | (o) | 1.79 | (o) | 24 | ||||||||||||||||||||||||||||||||||
(a) | Calculated using average shares outstanding. | |
(b) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. For the period ending August 31, 2011 the portfolio turnover calculation excludes the value of securities purchased of $602,192,170 and sold of $70,835,642 in the effort to realign the Fund’s portfolio holdings after the reorganization of Invesco Balanced Fund and Invesco Basic Balanced Fund into the Fund. | |
(c) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges and is not annualized for periods less than one year, if applicable. | |
(d) | Ratios are based on average daily net assets (000’s omitted) of $8,298,870, $1,269,907, $1,304,599, $193,954, $490,248 and $95,125 for Class A, Class B, Class C, Class R, Class Y and Institutional Class shares, respectively. | |
(e) | Assumes reinvestment of all distributions for the period and does not include payment of the maximum sales charge of 5.75% or contingent deferred sales charge (CDSC). On purchases of $1 million or more, a CDSC of 1% may be imposed on certain redemptions made within eighteen months of purchase. If the sales charges were included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to 0.25% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. | |
(f) | The total return, ratio of expenses to average net assets and ratio of net investment income to average net assets reflect actual 12b-1 fees of 0.28% and 0.38% for the year ended August 31, 2011 and the eight months ended August 31, 2010, respectively. | |
(g) | Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 5%, charged on certain redemptions made within one year of purchase and declining to 0% after the fifth year. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to 1% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. | |
(h) | The total return, ratio of expenses to average net assets and ratio of net investment income to average net assets reflect actual 12b-1 fees of less than 1%. | |
(i) | The rotal return, ratio of expenses to average net assets and ratio of net investment income to average net assets reflect actual 12b-1 fees of 0.97% and 0.99% for the year ended August 31, 2011 and the eight months ended August 31, 2010, respectively. | |
(j) | Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 1%, charged on certain redemptions made within one year of purchase. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to 1% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. | |
(k) | Assumes reinvestment of all distributions for the period. These returns include combined Rule 12b-1 fees and service fees of up to 0.50% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. | |
(l) | Assumes reinvestment of all distributions for the period. These returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. | |
(m) | On June 1, 2010, the Fund’s former Class I Shares were reorganized into Class Y Shares. | |
(n) | Commencement date of June 1, 2010. | |
(o) | Ratios are annualized. |
32 Invesco Van Kampen Equity and Income Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Counselor Series Trust (Invesco Counselor Series Trust)
and Shareholders of Invesco Van Kampen Equity and Income Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Invesco Van Kampen Equity and Income Fund (one of the funds constituting AIM Counselor Series Trust (Invesco Counselor Series Trust), hereafter referred to as the “Fund”) at August 31, 2011, the results of its operations for the year then ended, the changes in its net assets and the financial highlights for the year then ended and the eight month period ended August 31, 2010, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at August 31, 2011 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. The statement of changes in net assets and the financial highlights of the Fund for the periods ended December 31, 2009 and prior were audited by other independent auditors whose report dated February 19, 2010 expressed an unqualified opinion on those financial statements.
PRICEWATERHOUSECOOPERS LLP
October 26, 2011
Houston, Texas
33 Invesco Van Kampen Equity and Income Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments or contingent deferred sales charges on redemptions, and redemption fees, if any; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period March 1, 2011, through August 31, 2011.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the hypothetical information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
HYPOTHETICAL | ||||||||||||||||||||||||||||||
(5% annual return before | ||||||||||||||||||||||||||||||
ACTUAL | expenses) | |||||||||||||||||||||||||||||
Beginning | Ending | Expenses | Ending | Expenses | Annualized | |||||||||||||||||||||||||
Account Value | Account Value | Paid During | Account Value | Paid During | Expense | |||||||||||||||||||||||||
Class | (03/01/11) | (08/31/11)1 | Period2 | (08/31/11) | Period2 | Ratio | ||||||||||||||||||||||||
A | $ | 1,000.00 | $ | 913.00 | $ | 4.00 | $ | 1,021.02 | $ | 4.23 | 0.83 | % | ||||||||||||||||||
B | 1,000.00 | 914.20 | 3.91 | 1,021.12 | 4.13 | 0.81 | ||||||||||||||||||||||||
C | 1,000.00 | 910.40 | 7.42 | 1,017.44 | 7.83 | 1.54 | ||||||||||||||||||||||||
R | 1,000.00 | 913.30 | 5.21 | 1,019.76 | 5.50 | 1.08 | ||||||||||||||||||||||||
Y | 1,000.00 | 915.30 | 2.80 | 1,022.28 | 2.96 | 0.58 | ||||||||||||||||||||||||
Institutional | 1,000.00 | 915.30 | 1.79 | 1,023.34 | 1.89 | 0.37 | ||||||||||||||||||||||||
1 | The actual ending account value is based on the actual total return of the Fund for the period March 1, 2011 through August 31, 2011, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund’s expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half year. |
34 Invesco Van Kampen Equity and Income Fund
Approval of Investment Advisory and Sub-Advisory Contracts
The Board of Trustees (the Board) of AIM Counselor Series Trust (Invesco Counselor Series Trust) is required under the Investment Company Act of 1940, as amended, to approve annually the renewal of the Invesco Van Kampen Equity and Income Fund (the Fund) investment advisory agreement with Invesco Advisers, Inc. (Invesco Advisers) and the Master Intergroup Sub-Advisory Contract for Mutual Funds (the sub-advisory contracts) with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers). During contract renewal meetings held on June 14-15, 2011, the Board as a whole, and the disinterested or “independent” Trustees, who comprise 80% of the Board, voting separately, approved the continuance of the Fund’s investment advisory agreement and the sub-advisory contracts for another year, effective July 1, 2011. In doing so, the Board considered the process that it follows in reviewing and approving the Fund’s investment advisory agreement and sub-advisory contracts and the information that it is provided. The Board determined that the Fund’s investment advisory agreement and the sub-advisory contracts are in the best interests of the Fund and its shareholders and the compensation to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is responsible for overseeing the management of a number of the series portfolios of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies and limitations and investment risks of these funds. The Sub-Committees meet regularly and at designated contract renewal meetings each year to conduct a review of the performance, fees, expenses and other matters related to their assigned Invesco Funds. Each Sub-Committee recommends to the Investments Committee, which in turn recommends to the full Board, whether to approve the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Trustees receive comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and an independent company, Lipper, Inc. (Lipper). The Trustees also receive an independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. The independent Trustees are assisted in their annual evaluation of the Fund’s investment advisory agreement by the Senior Officer and by independent legal counsel. The independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in private sessions with the Senior Officer and counsel.
In evaluating the fairness and reasonableness of the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Trustees also considered information provided in connection with fund acquisitions approved by the Trustees to rationalize the Invesco Funds product range following the acquisition of the retail mutual fund business of Morgan Stanley (the Morgan Stanley Transaction). The Trustees recognized that the advisory fees for the Invesco Funds include advisory fees that are the result of years of review and negotiation between the Trustees and Invesco Advisers as well as advisory fees inherited from Morgan Stanley and Van Kampen funds acquired in the Morgan Stanley Transaction. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these same arrangements throughout the year and in prior years. One Trustee may have weighed a particular piece of information differently than another Trustee.
The discussion below serves as the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 15, 2011, and may not reflect consideration of factors that became known to the Board after that date, including, for example, changes to the Fund’s performance, advisory fees, expense limitations and/or fee waivers.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers, with whom the Board met during the year. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s consideration of Invesco Advisers’ performance and investment process oversight, independent credit analysis and investment risk management.
In determining whether to continue the Fund’s investment advisory agreement, the Board considered the prior relationship between Invesco Advisers and the Fund, as well as the Board’s knowledge of Invesco Advisers’ operations, and concluded that it is beneficial to maintain the current relationship, in part, because of such knowledge. The Board also considered services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution and legal and compliance. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and the advisory services are provided in accordance with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services provided by the Affiliated Sub-Advisers under the sub-advisory contracts and the credentials and experience of the officers and employees of the Affiliated Sub-Advisers who provide these services. The Board noted that the Affiliated Sub-Advisers have offices and personnel that are located in financial centers around the world. As a result, the Affiliated Sub-Advisers can provide research and investment analysis on the markets and economies of various countries in which the Fund invests and make recommendations on securities of companies located in such countries.]The Board concluded that the sub-advisory contracts benefit the Fund and its shareholders by permitting Invesco Advisers to use the resources and talents of the Affiliated Sub-Advisers in managing the Fund. The Board concluded that the nature, extent and quality of the services provided by the Affiliated Sub-Advisers are appropriate and satisfactory and in accordance with the terms of the Fund’s sub-advisory contracts.
35 Invesco Van Kampen Equity and Income Fund
B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
The Board compared the Fund’s performance during the past one, three and five calendar years to the performance of funds in the Lipper performance universe and against the Lipper Mixed-Asset Target Allocation Growth Funds Index. The Board noted that performance of Class A shares of the Fund was in the third quintile of the performance universe for the one year period, the first quintile for the three year period and the second quintile for the five year period (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board noted that performance of Class A shares of the Fund was below the performance of the Index for the one and five year periods and above the performance of the Index for the three year period. Although the independent written evaluation of the Fund’s Senior Officer only considered Fund performance through the most recent calendar year, the Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
C. | Advisory and Sub-Advisory Fees and Fee Waivers |
The Board compared the Fund’s contractual advisory fee rate to the contractual advisory fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the contractual advisory fee rate for Class A shares of the Fund was below the median contractual advisory fee rate of funds in the expense group. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using audited financial data from the most recent annual report of each fund in the expense group that was publicly available as of the end of the past calendar year and including only one fund per investment adviser. The Board noted that comparative data is as of varying dates, which may affect the comparability of data during times of market volatility.
The Board also compared the Fund’s effective fee rate (the advisory fee after advisory fee waivers and before expense limitations/waivers) to the advisory fee rates of other mutual funds advised by Invesco Advisers and its affiliates with investment strategies comparable to those of the Fund. The Board noted that the Fund’s rate was below the rate of one mutual fund advised by Invesco Advisers and below the total account level fee of two mutual funds subadvised by Invesco Advisers with comparable strategies.
Other than the mutual funds described above, the Board noted that Invesco Advisers and the Affiliated Sub-Advisers do not manage other mutual funds or client accounts in a manner substantially similar to the management of the Fund.
The Board noted that Invesco Advisers has contractually agreed to waive fees and/or limit expenses of the Fund through at least June 30, 2012 in an amount necessary to limit total annual operating expenses to a specified percentage of average daily net assets for each class of the Fund. The Board noted that at the current expense ratio for the Fund, this expense waiver does not have any impact.
The Board also considered the services provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the allocation of fees between Invesco Advisers and the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board noted that Invesco Advisers provides services to sub-advised Invesco Funds, including oversight of the Affiliated Sub-Advisers as well as the additional services described above other than day-to-day portfolio management. The Board also noted that the sub-advisory fees have no direct effect on the Fund or its shareholders, as they are paid by Invesco Advisers to the Affiliated Sub-Advisers.
Based upon the information and considerations described above, the Board concluded that the Fund’s advisory and sub-advisory fees are fair and reasonable.
D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule. The Board also noted that the 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 Invesco Advisers.
E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the profitability of Invesco Advisers and its affiliates in providing these services. The Board reviewed with Invesco Advisers the methodology used to prepare the profitability information. The Board considered the profitability of Invesco Advisers in connection with managing the Fund and the Invesco Funds. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its subsidiaries provide to the Fund and the Invesco Funds. The Board concluded that the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund is not excessive given the nature, quality and extent of the services provided to the Invesco Funds. The Board considered whether Invesco Advisers and each Affiliated Sub-Adviser are financially sound and have the resources necessary to perform their obligations under the investment advisory agreement and sub-advisory contracts. The Board concluded that Invesco Advisers and each Affiliated Sub-Adviser have the financial resources necessary to fulfill these obligations.
F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund, including the fees received for their provision of administrative, transfer agency and distribution services to the Fund. The Board considered the performance of Invesco Advisers 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 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 Fund; that Invesco Advisers 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; and 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.
The Board considered the benefits realized by Invesco Advisers and the Affiliated Sub-Advisers as a result of portfolio brokerage transactions executed through “soft dollar” arrangements. The Board noted that soft dollar arrangements shift the payment obligation for research and execution services from Invesco Advisers and the Affiliated Sub-Advisers to the Invesco Funds and therefore may reduce Invesco Advisers’ and the Affiliated Sub-Advisers’ expenses. The Board concluded that the soft dollar arrangements are appropriate. The Board also concluded that, based on their review and representations made by the Chief Compliance Officer of the Invesco Funds, these arrangements are consistent with regulatory requirements.
The Board considered that the Fund’s uninvested cash and cash collateral from any securities lending arrangements may be invested in money market funds advised by Invesco Advisers pursuant to procedures approved by the Board. The Board noted that Invesco Advisers receives advisory fees from these affiliated money market funds attributable to such investments, although Invesco Advisers has contractually agreed to waive through varying periods the advisory fees payable by the Invesco Funds. The waiver is in an amount equal to 100% of the net advisory fee Invesco Advisers receives from the affiliated money market funds with respect to the Fund’s investment in the affiliated money market funds of uninvested cash, but not cash collateral. The Board concluded that the Fund’s investment of uninvested cash and cash collateral from any securities lending arrangements in the affiliated money market funds is in the best interests of the Fund and its shareholders.
36 Invesco Van Kampen Equity and Income Fund
Tax Information
Form 1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific state’s requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended August 31, 2011:
Federal and State Income Tax | ||||
Qualified Dividend Income* | 79.59% | |||
Corporate Dividends Received Deduction* | 65.67% | |||
U.S. Treasury Obligations* | 7.00% |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Fund’s fiscal year. |
37 Invesco Van Kampen Equity and Income Fund
Trustees and Officers
The address of each trustee and officer is AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”), 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Number of Funds | ||||||||
in Fund Complex | ||||||||
Name, Year of Birth and | Trustee and/ | Principal Occupation(s) | Overseen by | Other Directorship(s) | ||||
Position(s) Held with the Trust | or Officer Since | During Past 5 Years | Trustee | Held by Trustee | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 — 1960 Trustee | 2007 | 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 | 143 | 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. Taylor2 — 1954 Trustee, President and Principal Executive Officer | 2006 | 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 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 Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust); Trustee and Executive Vice President, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s 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 Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Tax-Free Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. | 143 | None | ||||||
Wayne W. Whalen3 — 1939 Trustee | 2010 | Of Counsel, and prior to 2010, partner in the law firm of Skadden, Arps, Slate, Meagher & Flom LLP, legal counsel to funds in the Fund Complex | 161 | Director of the Abraham Lincoln Presidential Library Foundation | ||||
Independent Trustees | �� | |||||||
Bruce L. Crockett — 1944 Trustee and Chair | 2003 | Chairman, Crockett Technology Associates (technology consulting company) Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer COMSAT Corporation; and Chairman, Board of Governors of INTELSAT (international communications company) | 143 | ACE Limited (insurance company); and Investment Company Institute | ||||
1 | Mr. Flanagan is considered an interested person of the Trust because he is an officer of the adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the adviser to the Trust. |
2 | Mr. Taylor is considered an interested person of the Trust because he is an officer and a director of the adviser to, and a director of the principal underwriter of, the Trust. |
3 | Mr. Whalen has been deemed to be an interested person of the Trust because of his prior service as counsel to the predecessor funds of certain Invesco open-end funds and his affiliation with the law firm that served as counsel to such predecessor funds and continues to serve as counsel to the Invesco Van Kampen closed-end funds. |
T-1 Invesco Van Kampen Equity and Income Fund
Trustees and Officers—(continued)
The address of each trustee and officer is AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”), 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Number of Funds | ||||||||
in Fund Complex | ||||||||
Name, Year of Birth and | Trustee and/ | Principal Occupation(s) | Overseen by | Other Directorship(s) | ||||
Position(s) Held with the Trust | or Officer Since | During Past 5 Years | Trustee | Held by Trustee | ||||
Independent Trustees | ||||||||
David C. Arch — 1945 Trustee | 2010 | Chairman and Chief Executive Officer of Blistex Inc., a consumer health care products manufacturer. | 161 | 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 | ||||
Bob R. Baker — 1936 Trustee | 1983 | Retired | 143 | None | ||||
Formerly: President and Chief Executive Officer, AMC Cancer Research Center; and Chairman and Chief Executive Officer, First Columbia Financial Corporation | ||||||||
Frank S. Bayley — 1939 Trustee | 2003 | Retired Formerly: Director, Badgley Funds, Inc. (registered investment company) (2 portfolios) and Partner, law firm of Baker & McKenzie | 143 | Director and Chairman, C.D. Stimson Company (a real estate investment company) | ||||
James T. Bunch — 1942 Trustee | 2000 | 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 | 143 | Vice Chairman, Board of Governors, Western Golf Association/Evans Scholars Foundation and Director, Denver Film Society | ||||
Rodney Dammeyer — 1940 Trustee | 2010 | President 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. | 161 | 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 | 2003 | 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) | 161 | Board of Nature’s 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 | 2003 | 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) | 143 | Administaff | ||||
Formerly: Chief Executive Officer, Texana Timber LP (sustainable forestry company) and member of the U.S. House of Representatives | ||||||||
Carl Frischling — 1937 Trustee | 2003 | Partner, law firm of Kramer Levin Naftalis and Frankel LLP | 143 | Director, Reich & Tang Funds (6 portfolios) | ||||
Prema Mathai-Davis — 1950 Trustee | 2003 | Retired | 143 | None | ||||
Formerly: Chief Executive Officer, YWCA of the U.S.A. | ||||||||
Larry Soll — 1942 Trustee | 1997 | Retired | 143 | None | ||||
Formerly, Chairman, Chief Executive Officer and President, Synergen Corp. (a biotechnology company) | ||||||||
T-2 Invesco Van Kampen Equity and Income Fund
Trustees and Officers—(continued)
The address of each trustee and officer is AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”), 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Number of Funds | ||||||||
in Fund Complex | ||||||||
Name, Year of Birth and | Trustee and/ | Principal Occupation(s) | Overseen by | Other Directorship(s) | ||||
Position(s) Held with the Trust | or Officer Since | During Past 5 Years | Trustee | Held by Trustee | ||||
Independent Trustees | ||||||||
Hugo F. Sonnenschein — 1940 Trustee | 2010 | President Emeritus and Honorary Trustee 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. | 161 | 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 | 2005 | Retired Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios) and Partner, Deloitte & Touche | 143 | None | ||||
Other Officers | ||||||||
Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer of Invesco Funds | N/A | N/A | ||||
John M. Zerr — 1962 Senior Vice President, Chief Legal Officer and Secretary | 2006 | 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 | N/A | N/A | ||||
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) | ||||||||
Lisa O. Brinkley — 1959 Vice President | 2004 | Global Compliance Director, Invesco Ltd.; Chief Compliance Officer, Invesco Investment Services, Inc.(formerly known as Invesco Aim Investment Services, Inc.); and Vice President, The Invesco Funds Formerly: Chief Compliance Officer, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) and Van Kampen Investor Services Inc.; Senior Vice President, Invesco Management Group, Inc.; Senior Vice President and Chief Compliance Officer, Invesco Advisers, Inc. and The Invesco Funds; Vice President and Chief Compliance Officer, Invesco Aim Capital Management, Inc. and Invesco Distributors, Inc.; Vice President, Invesco Investment Services, Inc. and Fund Management Company | N/A | N/A | ||||
Sheri Morris — 1964 Vice President, Treasurer and Principal Financial Officer | 2003 | 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) | N/A | N/A | ||||
Formerly: 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, 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. | ||||||||
T-3 Invesco Van Kampen Equity and Income Fund
Trustees and Officers—(continued)
The address of each trustee and officer is AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”), 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Number of Funds | ||||||||
in Fund Complex | ||||||||
Name, Year of Birth and | Trustee and/ | Principal Occupation(s) | Overseen by | Other Directorship(s) | ||||
Position(s) Held with the Trust | or Officer Since | During Past 5 Years | Trustee | Held by Trustee | ||||
Other Officers | ||||||||
Karen Dunn Kelley — 1960 Vice President | 2003 | Head of Invesco’s 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 Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust); and President and Principal Executive Officer, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust only). | N/A | N/A | ||||
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 Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Tax-Free Investments Trust only) | ||||||||
Lance A. Rejsek — 1967 Anti-Money Laundering Compliance Officer | 2005 | 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.), The Invesco Funds, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management) and Van Kampen Funds Inc. | N/A | N/A | ||||
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Investor Services Inc., Fund Management Company, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc. | ||||||||
Todd L. Spillane — 1958 Chief Compliance Officer | 2006 | 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, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, INVESCO Private Capital Investments, Inc. (holding company) and Invesco Private Capital, Inc. (registered investment adviser); Vice President, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.), Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.). Formerly: 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 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 | N/A | N/A | ||||
The Statement of Additional Information of the Trust includes additional information about the Fund’s Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Fund’s prospectus for information on the Fund’s sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 2500 Houston, TX 77046-1173 | Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 | Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 2500 Houston, TX 77046-1173 | Auditors PricewaterhouseCoopers LLP 1201 Louisiana Street, Suite 2900 Houston, TX 77002-5678 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2600 One Commerce Square Philadelphia, PA 19103 | Counsel to the Independent Trustees Kramer, Levin, Naftalis & Frankel LLP 1177 Avenue of the Americas New York, NY 10036-2714 | Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 2500 Houston, TX 77046-1173 | Custodian State Street Bank and Trust Company 225 Franklin Boston, MA 02110-2801 |
T-4 Invesco Van Kampen Equity and Income Fund
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Invesco mailing information
Send general correspondence to Invesco Investment Services, Inc., P.O. Box 219078, Kansas City, MO 64121-9078.
Invesco privacy policy
You share personal and financial information with us that is necessary for your transactions and your account records. We take very seriously the obligation to keep that information confidential and private.
Invesco collects nonpublic personal information about you from account applications or other forms you complete and from your transactions with us or our affiliates. We do not disclose information about you or our former customers to service providers or other third parties except to the extent necessary to service your account and in other limited circumstances as permitted by law. For example, we use this information to facilitate the delivery of transaction confirmations, financial reports, prospectuses and tax forms.
Even within Invesco, only people involved in the servicing of your accounts and compliance monitoring have access to your information. To ensure the highest level of confidentiality and security, Invesco maintains physical, electronic and procedural safeguards that meet or exceed federal standards. Special measures, such as data encryption and authentication, apply to your communications with us on our website. More detail is available to you at invesco.com/privacy.
Important notice regarding delivery of security holder documents
To reduce Fund expenses, only one copy of most shareholder documents may be mailed to shareholders with multiple accounts at the same address (Householding). Mailing of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact Invesco Investment Services, Inc. at 800 959 4246 or contact your financial institution. We will begin sending you individual copies for each account within 30 days after receiving your request.
Fund holdings and proxy voting information
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is available at invesco.com/completeqtrholdings. Shareholders can also look up the Fund’s Forms N-Q on the SEC website at sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-09913 and 333-36074.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov.
Information regarding how the Fund voted proxies related to its portfolio securities during the 12 months ended June 30, 2011, is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov.
Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the U.S. distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
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VK-EQI-AR-1 | Invesco Distributors, Inc. |
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Annual Report to Shareholders | August 31, 2011 |
Invesco Van Kampen Growth and Income Fund
Nasdaq:
A: ACGIX • B: ACGJX • C: ACGKX • R: ACGLX • Y: ACGMX • Institutional: ACGQX
A: ACGIX • B: ACGJX • C: ACGKX • R: ACGLX • Y: ACGMX • Institutional: ACGQX
2 | Letters to Shareholders | |
4 | Performance Summary | |
4 | Management Discussion | |
6 | Long-Term Fund Performance | |
8 | Supplemental Information | |
9 | Schedule of Investments | |
12 | Financial Statements | |
14 | Notes to Financial Statements | |
22 | Financial Highlights | |
24 | Auditor’s Report | |
25 | Fund Expenses | |
26 | Approval of Investment Advisory and Sub-Advisory Agreements | |
28 | Tax Information | |
T-1 | Trustees and Officers |
Letters to Shareholders
![(PHOTO OF PHILIP TAYLOR)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8466302.gif)
Philip Taylor
Dear Shareholders:
Enclosed is important information about your Fund and its performance. I encourage you to read this report to learn more about your Fund’s short- and long-term performance and its holdings as of the close of the reporting period. This report also includes useful information about your Fund’s management team and a discussion of how your Fund was managed during the reporting period.
Data indicated that economic growth in the U.S. and most of Europe was anemic during the reporting period. In the U.S., unemployment remained high, and the housing market remained weak. Concerns about European sovereign debt persisted. Nonetheless, equity markets rose in late 2010 and early 2011 as investors anticipated better news ahead. But contentious negotiations to raise the U.S. government’s debt ceiling heightened investor unease, and following the first-ever downgrade of U.S. creditworthiness in August, global stock markets declined as many investors sought safer havens.
Where you can get current information about your Fund
In light of economic uncertainty and market volatility, I suggest you check the timely market updates and commentary from many of our fund managers and other investment professionals at invesco.com/us. On our website, you also can obtain information about your account at any hour of the day or night. I invite you to visit and explore the tools and information we offer at invesco.com/us.
Our commitment to investment excellence
As we’ve seen over the last several years, market conditions can change – often suddenly and dramatically. That’s one reason financial advisers typically advise their clients to be well diversified and to maintain a long-term investment focus. While diversification can’t guarantee a profit or protect against loss, it can cushion the impact of dramatic market moves. Maintaining a long-term investment focus for your long-term goals – financing your retirement or your children’s education, for example – may help you avoid making rash investment decisions based on short-term market swings.
Invesco’s investment professionals apply these same principles to the funds they manage.
Invesco offers a broad array of traditional mutual funds, as well as other investment products, including single-country, sector, regional and global investments spanning equity, fixed income and alternative asset classes. Across our product line, investment excellence is our ultimate goal. Each of our funds is managed by specialized teams of investment professionals, and as a company, we maintain a single focus – investment management – that allows our fund managers to concentrate on doing what they do best: managing your money.
Our funds are managed strictly according to their stated investment objectives and strategies, with robust risk oversight using consistent, repeatable investment processes that don’t change in response to short-term market events. This disciplined approach can’t guarantee a profit; no investment can do that, since all involve some measure of risk. But it can ensure that your money is managed the way we said it would be, and that it’s managed with a long-term focus.
Our adherence to stated investment objectives and strategies allows your financial adviser to build a diversified portfolio that meets your individual risk tolerance and financial goals. It also means that when your goals change, your financial adviser will be able to find an Invesco fund that’s appropriate for your needs.
Questions?
If you have questions about your account, please contact one of our client service representatives at 800 959 4246. If you have a general Invesco-related question or comment for me, I invite you to email me directly at phil@invesco.com.
All of us at Invesco look forward to serving your investment management needs for many years to come. Thank you for investing with us.
Sincerely,
![-s- Philip Taylor](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8466303.gif)
Philip Taylor
Senior Managing Director, Invesco Ltd.
Senior Managing Director, Invesco Ltd.
2 Invesco Van Kampen Growth and Income Fund
![(PHOTO OF BRUCE CROCKETT)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8466304.gif)
Bruce Crockett
Dear Fellow Shareholders:
Although the world’s economies are gradually recovering from the financial crisis, it has not been a smooth path. Unrest in the Middle East, persistently weak job and housing markets in the U.S. and continued government balance sheet repair in Europe are contributing to a slow, labored march toward global recovery.
In this environment, investors face risks that could make it more difficult to achieve their long-term financial goals – a secure retirement, home ownership, a child’s college education. Although the markets are complex and dynamic, there are ways to simplify the process and potentially increase your odds of achieving your goals. The best approach is to create a solid financial plan that helps you save and invest in ways that anticipate your needs over the long term.
Your financial adviser can help you define your financial plan, develop an appropriate investment strategy and put you in a better position to achieve your financial goals over the long term. This can take some of the guesswork out of the process and help you make thoughtful investments. Your financial adviser also can help you better understand your tolerance for risk, so that your investment approach lets you sleep at night while getting you closer to your goals. Lastly, your financial adviser can develop an asset allocation strategy that seeks to balance your investment approach, providing some protection against a decline in the markets while allowing you to participate in rising markets. Invesco calls this type of approach “intentional investing.” It means thinking carefully, planning thoughtfully and acting deliberately.
While no investment can guarantee favorable returns, your Board remains committed to managing costs and enhancing the performance of Invesco’s funds as part of our Investor First orientation. We continue to oversee the funds with the same strong sense of responsibility for your money and your continued trust that we’ve always maintained.
Thanks to the approval of our fund shareholders, Invesco has made great progress in realigning our U.S. mutual fund product line following our acquisition of Morgan Stanley’s retail asset management business, including Van Kampen Investments. When completed, the realignment will reduce overlap in the product lineup, enhance efficiency across our product line and build a solid foundation for further growth to meet client and shareholder needs. I would like to thank those of you who voted your proxy, and I hope our shareholders haven’t been too inconvenienced by the process.
As always, please contact me at bruce@brucecrockett.com with any questions or concerns you may have. On behalf of your Board, we look forward to continuing to represent your interests and serving your needs.
Sincerely,
![-s- Bruce L. Crockett](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8466305.gif)
Bruce L. Crockett
Independent Chair
Invesco Funds Board of Trustees
Independent Chair
Invesco Funds Board of Trustees
3 Invesco Van Kampen Growth and Income Fund
Management’s Discussion of Fund Performance
Performance summary
For the 12 months ended August 31, 2011, Invesco Van Kampen Growth and Income Fund underperformed the Russell 1000 Value Index, the Fund’s benchmark. As the Fund uses a bottom-up stock selection approach, stock selection in various sectors was the primary reason the Fund underperformed its benchmark.
Your Fund’s long-term performance appears later in this report.
Fund vs. Indexes
Total returns, 8/31/10 to 8/31/11, at net asset value (NAV). Performance shown does not include applicable contingent deferred sales charges (CDSC) or front-end sales charges, which would have reduced performance.
Class A Shares | 13.37 | % | ||
Class B Shares | 13.36 | |||
Class C Shares | 12.52 | |||
Class R Shares | 13.08 | |||
Class Y Shares | 13.64 | |||
Institutional Class Shares | 13.87 | |||
S&P 500 Index▼(Broad Market Index) | 18.48 | |||
Russell 1000 Value Index▼(Style-Specific Index) | 14.37 | |||
Lipper Large-Cap Value Funds Index▼(Peer Group Index) | 13.81 | |||
▼ | Lipper Inc. |
How we invest
We call our investment philosophy value with a catalyst. We believe that undervalued companies which are experiencing positive changes (i.e., “catalysts”) have the potential to generate long-term stock price growth for shareholders. We generally seek to identify companies that are out of favor with investors, under earning relative to their potential and attractively valued. For these companies, we attempt to identify catalysts that may improve the financial results and/or correct the under valuation. Examples of catalysts typically include improved operational efficiency, changing industry dynamics and/or a change in management.
We initially identify potential investments through a series of quantitative screens including, but not limited to, return on capital and enterprise value to sales metrics. We then conduct
fundamental research on the most attractive opportunities. The research process includes a thorough review of a company’s financial statements, an evaluation of its competitive position and stability, and meetings with its executives. During the research process, we also value the company under various scenarios to determine if the investment is an attractive opportunity relative to its risks. This is also where we typically identify the positive catalyst, a pre-requisite for potential investment. Finally, we generally set a price target for a stock based on normalized earnings and historical valuation multiples.
In short, our objective is to exploit negative sentiment toward a company’s stock by analyzing the company’s operations in the context of a cyclical environment and identifying one or more catalysts that may improve the company’s financial performance. Improved
financial performance, in turn, has the potential to drive the company’s stock price higher.
We typically sell an investment when it reaches our estimate of fair value or when we identify a more attractive investment opportunity.
Market conditions and your Fund
Equity markets were highly volatile during the fiscal year as investors weighed the competing issues of improved corporate profits, soft macroeconomic data and debt issues in Europe. In the U.S., corporate earnings were largely positive, but often overshadowed by concerns about high unemployment, a lack of consumer confidence, the growing debt contagion in Europe and the possibility of a downgrade of the U.S. credit rating.
After a general rising trend through July 2011, the major equity indexes sold off precipitously in August as the U.S. received the first-ever downgrade to its credit rating from Standard & Poor’s. At the same time, the sovereign debt crisis unfolded in the eurozone, prompting concerns of a “double-dip” recession. Even with the abrupt sell-off in August, the major equity indexes recorded positive returns for the fiscal year, and all 10 sectors of the S&P 500 Index posted gains. Sector returns were mixed, as the energy sector posted the highest returns, followed by consumer discretionary and health care, with financials returning the lowest, with only slightly positive results.
An underweight position in the financials sector was the largest relative contributor to Fund performance versus the Russell 1000 Value Index, its style-specific benchmark, as financial stocks performed poorly toward the end of the reporting period. In general, we focused on what we believed were lower risk
Portfolio Composition
By sector
Financials | 19.7 | % | ||
Energy | 12.9 | |||
Health Care | 11.9 | |||
Consumer Staples | 11.8 | |||
Information Technology | 10.9 | |||
Consumer Discretionary | 9.7 | |||
Industrials | 9.0 | |||
Utilities | 4.6 | |||
Telecommunication Services | 3.0 | |||
Materials | 0.9 | |||
Money Market Funds Plus | ||||
Other Assets Less Liabilities | 5.6 | |||
Top 10 Equity Holdings*
1. | JPMorgan Chase & Co. | 4.5 | % | |||||
2. | General Electric Co. | 4.0 | ||||||
3. | Marsh & McLennan Cos, Inc. | 3.1 | ||||||
4. | UnitedHealth Group, Inc. | 2.6 | ||||||
5. | Anadarko Petroleum Corp. | 2.6 | ||||||
6. | Pfizer, Inc. | 2.5 | ||||||
7. | Viacom, Inc.-Class B | 2.4 | ||||||
8. | eBay, Inc. | 2.4 | ||||||
9. | American Electric Power Co., Inc. | 2.4 | ||||||
10. | Proctor & Gamble Co. (The) | 2.3 |
Top Five Industries
1. | Other Diversified Financial Services | 6.84 | % | |||||
2. | Pharmaceuticals | 6.71 | ||||||
3. | Integrated Oil & Gas | 6.30 | ||||||
4. | Industrial Conglomerates | 5.36 | ||||||
5. | Electric Utilities | 4.56 |
Total Net Assets | $6.6 billion | |||
Total Number of Holdings* | 78 |
The Fund’s holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
*Excluding money market fund holdings.
4 Invesco Van Kampen Growth and Income Fund
financial companies with stronger balance sheets and less credit risk given the systemic risk in most financial stocks.
Stock selection within and an overweight allocation to consumer discretionary stocks also contributed to relative performance of the Fund, as media stocks, like Viacom, performed well in this sector due to an increase in advertisement revenue over the reporting period.
Strong stock selection in the materials sector was another driver of relative performance versus the benchmark, as holdings such as Dow Chemical performed extremely well. Though it was a long-term holding for the Fund, we sold our position in Dow Chemical during the reporting period, staying true to our value approach of selling an investment when it reaches our estimate of fair value in order to find more favorable investment opportunities that we consider undervalued.
The information technology (IT) sector was the largest relative detractor from Fund performance during the reporting period due to stock selection. The portfolio was overweight in the IT sector versus the Russell 1000 Value Index and was adversely affected by its exposure to stocks in the hardware and equipment industry. Notably detracting from Fund returns was Hewlett Packard, as the stock sold off significantly on the announcement the company was selling its PC business to purchase an enterprise software company. Cisco Systems was also a large detractor in the IT sector; however, the Fund sold this position during the early part of 2011.
Stock selection in the industrials sector also dampened relative performance versus the Russell 1000 Value Index. Notably, in the transportation industry, lack of exposure to railroad stocks that performed well during the reporting period detracted from relative performance.
Finally, stock selection and an underweight position in the utilities sector also detracted from relative performance. Lack of exposure to multi-utilities stocks was one of the largest detractors from performance in this sector.
Currency forward contracts were used during the reporting period for the sole purpose of hedging currency exposure of the U.S. dollar-denominated American Depositary Receipts (ADRs) in the Fund. An ADR is a negotiable security that represents the underlying securities of a non-U.S. company that trades in the U.S. financial markets, priced in U.S. dollars. The use of currency forward contracts had a slight positive effect on both
absolute and relative Fund performance versus the Russell 1000 Value Index for the reporting period.
Equity markets experienced an increase in volatility during the reporting period, ending with a sharp sell-off in August of 2011. We believe that market volatility and the market correction that began in the third quarter of 2011 created opportunities to invest in companies with attractive valuations and strong fundamentals. We believe that ultimately those valuations and fundamentals may be reflected in those companies’ stock prices.
As always, we would like to caution investors against making investment decisions based on short-term performance. We recommend that you consult a financial adviser to discuss your individual financial program.
Thank you for your investment in Invesco Van Kampen Growth and Income Fund and for sharing our long-term investment horizon.
The views and opinions expressed in management’s discussion of Fund performance are those of Invesco Advisers, Inc. These views and opinions are subject to change at any time based on factors such as market and economic conditions. These views and opinions may not be relied upon as investment advice or recommendations, or as an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but Invesco Advisers, Inc. makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
See important Fund and, if applicable, index disclosures later in this report.
![(PHOTO OF THOMAS BASTIAN)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8466306.gif)
Thomas Bastian
Chartered Financial Analyst, portfolio manager, is lead manager of Invesco Van Kampen Growth and Income Fund. Mr. Bastian joined Invesco in 2010. He earned a B.A. in accounting from St. John’s University and an M.B.A. in finance from the University of Michigan.
Chartered Financial Analyst, portfolio manager, is lead manager of Invesco Van Kampen Growth and Income Fund. Mr. Bastian joined Invesco in 2010. He earned a B.A. in accounting from St. John’s University and an M.B.A. in finance from the University of Michigan.
![(PHOTO OF MARK LASKIN)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8466307.gif)
Mark Laskin
Chartered Financial Analyst, portfolio manager, is manager of Invesco Van Kampen Growth and Income Fund. Mr. Laskin joined Invesco in 2010. He earned a B.A. in history from Swarthmore College and an M.B.A. and M.A. from the Wharton School and Lauder Institute, respectively, of the University of Pennsylvania.
Chartered Financial Analyst, portfolio manager, is manager of Invesco Van Kampen Growth and Income Fund. Mr. Laskin joined Invesco in 2010. He earned a B.A. in history from Swarthmore College and an M.B.A. and M.A. from the Wharton School and Lauder Institute, respectively, of the University of Pennsylvania.
![(PHOTO OF MARY JAYNE MALY)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8466308.gif)
Mary Jayne Maly
Chartered Financial Analyst, portfolio manager, is manager of Invesco Van Kampen Growth and Income Fund. Ms. Maly joined Invesco in 2010. She earned a B.A. from the University of Pittsburgh and an M.B.A. from the American Graduate School of International Management.
Chartered Financial Analyst, portfolio manager, is manager of Invesco Van Kampen Growth and Income Fund. Ms. Maly joined Invesco in 2010. She earned a B.A. from the University of Pittsburgh and an M.B.A. from the American Graduate School of International Management.
![(PHOTO OF SERGIO MARCHELI)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8466309.gif)
Sergio Marcheli
Portfolio manager, is manager of Invesco Van Kampen Growth and Income Fund. Mr. Marcheli joined Invesco in 2010. He earned a B.B.A. from the University of Houston and an M.B.A. from the University of St. Thomas.
Portfolio manager, is manager of Invesco Van Kampen Growth and Income Fund. Mr. Marcheli joined Invesco in 2010. He earned a B.B.A. from the University of Houston and an M.B.A. from the University of St. Thomas.
![(PHOTO OF JAMES ROEDER)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8466310.gif)
James Roeder
Chartered Financial Analyst, Certified Public Accountant, portfolio manager, is manager of Invesco Van Kampen Growth and Income Fund. Mr. Roeder joined Invesco in 2010. He earned a B.S. in accounting from Clemson University and an M.B.A. in economics and finance from the University of Chicago Graduate School of Business.
Chartered Financial Analyst, Certified Public Accountant, portfolio manager, is manager of Invesco Van Kampen Growth and Income Fund. Mr. Roeder joined Invesco in 2010. He earned a B.S. in accounting from Clemson University and an M.B.A. in economics and finance from the University of Chicago Graduate School of Business.
5 Invesco Van Kampen Growth and Income Fund
Your Fund’s Long-Term Performance
![(PERFORMANCE GRAPH)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8466311.gif)
Past performance cannot guarantee comparable future results.
The data shown in the chart include reinvested distributions, applicable sales charges and Fund expenses including management fees. Index results include reinvested dividends, but they do not reflect sales charges. Performance of the peer group, if applicable, reflects fund expenses and management fees; performance of a market index does not.
Performance shown in the chart and table(s) does not reflect deduction of taxes a shareholder would pay on Fund distributions or sale of Fund shares.
This chart, which is a logarithmic chart, presents the fluctuations in the value of the Fund and its indexes. We believe that a logarithmic chart is more effective than other types of charts in illustrating changes in value during the early years shown in the chart. The vertical axis, the
one that indicates the dollar value of an investment, is constructed with each segment representing a percent change in the value of the investment. In this chart, each segment represents a doubling, or 100% change, in the value of the investment. In other words, the space between $5,000 and $10,000 is the same size as the space between $10,000 and $20,000.
6 Invesco Van Kampen Growth and Income Fund
Average Annual Total Returns
As of 8/31/11, including maximum applicable sales charges
Class A Shares | ||||||||
Inception (8/1/46) | 9.11 | % | ||||||
10 | Years | 3.12 | ||||||
5 | Years | -1.11 | ||||||
1 | Year | 7.17 | ||||||
Class B Shares | ||||||||
Inception (8/2/93) | 8.37 | % | ||||||
10 | Years | 3.36 | ||||||
5 | Years | -0.36 | ||||||
1 | Year | 8.36 | ||||||
Class C Shares | ||||||||
Inception (8/2/93) | 7.93 | % | ||||||
10 | Years | 2.95 | ||||||
5 | Years | -0.72 | ||||||
1 | Year | 11.52 | ||||||
Class R Shares | ||||||||
Inception (10/1/02) | 6.43 | % | ||||||
5 | Years | -0.24 | ||||||
1 | Year | 13.08 | ||||||
Class Y Shares | ||||||||
Inception (10/19/04) | 4.14 | % | ||||||
5 | Years | 0.27 | ||||||
1 | Year | 13.64 | ||||||
Institutional Class Shares | ||||||||
10 | Years | 3.76 | % | |||||
5 | Years | 0.13 | ||||||
1 | Year | 13.87 |
Effective June 1, 2010, Class A, Class B, Class C, Class R and Class I shares of the predecessor fund, Van Kampen Growth and Income Fund, advised by Van Kampen Asset Management were reorganized into Class A, Class B, Class C, Class R and Class Y shares, respectively, of Invesco Van Kampen Growth and Income Fund. Returns shown above for Class A, Class B, Class C, Class R and Class Y shares are blended returns of the predecessor fund and Invesco Van Kampen Growth and Income Fund. Share class returns
Average Annual Total Returns
As of 6/30/11, the most recent calendar quarter-end, including maximum applicable sales charges
Class A Shares | ||||||||
Inception (8/1/46) | 9.31 | % | ||||||
10 | Years | 3.90 | ||||||
5 | Years | 1.64 | ||||||
1 | Year | 21.23 | ||||||
Class B Shares | ||||||||
Inception (8/2/93) | 9.08 | % | ||||||
10 | Years | 4.12 | ||||||
5 | Years | 2.38 | ||||||
1 | Year | 23.28 | ||||||
Class C Shares | ||||||||
Inception (8/2/93) | 8.65 | % | ||||||
10 | Years | 3.72 | ||||||
5 | Years | 2.03 | ||||||
1 | Year | 26.32 | ||||||
Class R Shares | ||||||||
Inception (10/1/02) | 7.84 | % | ||||||
5 | Years | 2.52 | ||||||
1 | Year | 27.98 | ||||||
Class Y Shares | ||||||||
Inception (10/19/04) | 5.87 | % | ||||||
5 | Years | 3.04 | ||||||
1 | Year | 28.63 | ||||||
Institutional Class Shares | ||||||||
10 | Years | 4.54 | % | |||||
5 | Years | 2.88 | ||||||
1 | Year | 28.88 |
will differ from the predecessor fund because of different expenses.
Institutional Class shares incepted on June 1, 2010. Performance shown prior to that date is that of the predecessor fund’s Class A shares and includes the 12b-1 fees applicable to Class A shares. Class A share performance reflects any applicable fee waivers or expense reimbursements.
The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may
be lower or higher. Please visit invesco.com/performance for the most recent month-end performance. Performance figures reflect reinvested distributions, changes in net asset value and the effect of the maximum sales charge unless otherwise stated. Investment return and principal value will fluctuate so that you may have a gain or loss when you sell shares.
The total annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Class A, Class B, Class C, Class R, Class Y and Institutional Class shares was 0.75%, 0.90%, 1.50%, 1.00%, 0.50% and 0.45%, respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.
Class A share performance reflects the maximum 5.50% sales charge, and Class B and Class C share performance reflects the applicable contingent deferred sales charge (CDSC) for the period involved. For shares purchased prior to June 1, 2010, the CDSC on Class B shares declines from 5% at the time of purchase to 0% at the beginning of the sixth year. For shares purchased on or after June 1, 2010, the CDSC on Class B shares declines from 5% at the time of purchase to 0% at the beginning of the seventh year. The CDSC on Class C shares is 1% for the first year after purchase. Class R, Class Y and Institutional Class shares do not have a front-end sales charge or a CDSC; therefore, performance is at net asset value.
The performance of the Fund’s share classes will differ primarily due to different sales charge structures and class expenses.
continued from page 8
sive study program in the field of investment management and research analysis. | ||
n | CPA® and Certified Public Accountant® are trademarks owned by the American Institute of Certified Public Accountants. | |
n | The returns shown in management’s discussion of Fund performance are based on net asset values calculated |
for shareholder transactions. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes, and as such, the net asset values for shareholder transactions and the returns based on those net asset values may differ from the net asset |
values and returns reported in the Financial Highlights. | ||
n | Industry classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. |
7 Invesco Van Kampen Growth and Income Fund
Invesco Van Kampen Growth and Income Fund’s investment objective is to seek income and long-term
growth of capital.
growth of capital.
n | Unless otherwise stated, information presented in this report is as of August 31, 2011, and is based on total net assets. | |
n | Unless otherwise noted, all data provided by Invesco. | |
n | To access your Fund’s reports/prospectus, visit invesco.com/fundreports. |
About share classes
n | Class B shares may not be purchased or acquired by exchange from share classes other than Class B shares. Please see the prospectus for more information. | |
n | Class R shares are available only to certain retirement plans. Please see the prospectus for more information. | |
n | Class Y shares are available to only certain investors. Please see the prospectus for more information. | |
n | Institutional Class shares are offered exclusively to institutional investors, including defined contribution plans that meet certain criteria. Please see the prospectus for more information. in |
Principal risks of investing in the Fund
n | Market risk. Market risk is the possibility that the market values of securities owned by the Fund will decline. Market risk may affect a single issuer, industry, sector of the economy or the market as a whole. Investments in equity securities generally are affected by changes in the stock markets which fluctuate substantially over time, sometimes suddenly and sharply. Small or medium-sized companies are often subject to more abrupt or erratic market movements than securities of larger, more established companies or the market averages in general. The ability of the Fund’s portfolio holdings to generate income is dependent on the earnings and the continuing declaration of dividends by the issuers of such securities. The values of income-producing equity securities may or may not fluctuate in tandem with overall changes in the stock markets. The Fund’s investments in other fixed income or debt securities generally are affected by changes in interest rates and the creditworthiness of the issuer. The market prices of such securities tend to fall as interest rates rise, and such declines may be greater |
among securities with longer maturities. The values of convertible securities tend to decline as interest rates rise and, because of the conversion feature, tend to vary with fluctuations in the market value of the underlying equity security. | ||
n | Foreign risks. The risks of investing in securities of foreign issuers, including emerging markets issuers, can include fluctuations in foreign currencies, foreign currency exchange controls, political and economic instability, differences in financial reporting, differences in securities regulation and trading, and foreign taxation issues. | |
n | 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. | |
n | Options risk. A decision as to whether, when and how to use options involves the exercise of skill and judgment and even a well conceived option transaction may be unsuccessful because of market behavior or unexpected events. The prices of options can be highly volatile and the use of options can lower total returns. | |
n | Risks of investing in REITs. Investing in REITs makes the Fund more susceptible to risks associated with the ownership of real estate and with the real estate industry in general and may involve duplication of management fees and certain other expenses. In addition, REITs depend upon specialized management skills, may not be diversified, may have less trading volume, and may be subject to more abrupt or erratic price movements than the overall securities markets. | |
n | Risks of derivatives. Risks of derivatives include the possible imperfect correlation between the value of the instruments and the underlying assets; risks of default by the other party to certain transactions; risks that the transactions may result in losses that partially |
or completely offset gains in portfolio positions; and risks that the transactions may not be liquid. | ||
n | Value investing style. The Fund emphasizes a value style of investing, which focuses on undervalued companies with characteristics for improved valuations. This style of investing is subject to the risk that the valuations never improve or that the returns on value equity securities are less than returns on other styles of investing or the overall stock market. Value stocks also may decline in price, even though in theory they are already underpriced. |
About indexes used in this report
n | The S&P 500® Index is an unmanaged index considered representative of the U.S. stock market. | |
n | The Russell 1000 Value Index® is an unmanaged index considered representative of large-cap value stocks. The Russell 1000 Value Index is a trademark/service mark of the Frank Russell Co. Russell® is a trademark of the Frank Russell Co. | |
n | The Lipper Large-Cap Value Funds Index is an unmanaged index considered representative of large-cap value funds tracked by Lipper. | |
n | The Fund is not managed to track the performance of any particular index, including the index(es) defined here, and consequently, the performance of the Fund may deviate significantly from the performance of the index(es). | |
n | A direct investment cannot be made in an index. Unless otherwise indicated, index results include reinvested dividends, and they do not reflect sales charges. Performance of the peer group, if applicable, reflects fund expenses; performance of a market index does not. |
Other information
n | The Chartered Financial Analyst® (CFA®) designation is globally recognized and attests to a charterholder’s success in a rigorous and comprehen- |
continued on page 7
This report must be accompanied or preceded by a currently effective Fund prospectus, which contains more complete information, including sales charges and expenses. Investors should read it carefully before investing.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
Fund Nasdaq Symbols
Class A Shares | ACGIX | |||
Class B Shares | ACGJX | |||
Class C Shares | ACGKX | |||
Class R Shares | ACGLX | |||
Class Y Shares | ACGMX | |||
Institutional Class Shares | ACGQX |
8 Invesco Van Kampen Growth and Income Fund
Schedule of Investments
August 31, 2011
Shares | Value | |||||||
Common Stocks & Other Equity Interests–94.37%(a) | ||||||||
Advertising–0.00% | ||||||||
Interpublic Group of Cos., Inc. (The) | 31,918 | $ | 275,452 | |||||
Agricultural Products–0.77% | ||||||||
Archer-Daniels-Midland Co. | 1,766,859 | 50,320,144 | ||||||
Air Freight & Logistics–0.48% | ||||||||
FedEx Corp. | 397,143 | 31,263,097 | ||||||
Asset Management & Custody Banks–1.48% | ||||||||
Northern Trust Corp. | 1,227,686 | 47,179,973 | ||||||
State Street Corp. | 1,420,900 | 50,470,368 | ||||||
97,650,341 | ||||||||
Cable & Satellite–3.35% | ||||||||
Comcast Corp.–Class A | 5,764,155 | 123,986,974 | ||||||
Time Warner Cable, Inc. | 1,471,327 | 96,371,918 | ||||||
220,358,892 | ||||||||
Computer Hardware–2.22% | ||||||||
Dell, Inc.(b) | 4,407,404 | 65,516,060 | ||||||
Hewlett-Packard Co. | 3,092,769 | 80,504,777 | ||||||
146,020,837 | ||||||||
Consumer Electronics–0.85% | ||||||||
Sony Corp.–ADR (Japan) | 2,542,789 | 55,814,218 | ||||||
Data Processing & Outsourced Services–0.90% | ||||||||
Western Union Co. | 3,584,883 | 59,222,267 | ||||||
Diversified Banks–1.50% | ||||||||
U.S. Bancorp | 1,781,134 | 41,340,120 | ||||||
Wells Fargo & Co. | 2,201,095 | 57,448,580 | ||||||
98,788,700 | ||||||||
Diversified Chemicals–0.92% | ||||||||
PPG Industries, Inc. | 788,267 | 60,373,369 | ||||||
Diversified Support Services–0.67% | ||||||||
Cintas Corp. | 1,373,706 | 43,931,118 | ||||||
Drug Retail–1.03% | ||||||||
Walgreen Co. | 1,929,437 | 67,935,477 | ||||||
Electric Utilities–4.56% | ||||||||
American Electric Power Co., Inc. | 4,020,880 | 155,326,595 | ||||||
Edison International | 1,216,617 | 45,245,986 | ||||||
Entergy Corp. | 613,940 | 40,035,027 | ||||||
FirstEnergy Corp. | 1,351,104 | 59,786,352 | ||||||
300,393,960 | ||||||||
Food Distributors–1.31% | ||||||||
Sysco Corp. | 3,082,301 | 86,088,667 | ||||||
Health Care Distributors–0.81% | ||||||||
Cardinal Health, Inc. | 1,258,990 | 53,507,075 | ||||||
Health Care Equipment–1.04% | ||||||||
Medtronic, Inc. | 1,949,853 | 68,381,345 | ||||||
Health Care Facilities–0.46% | ||||||||
HCA Holdings, Inc.(b) | 1,505,963 | 30,164,439 | ||||||
Home Improvement Retail–1.44% | ||||||||
Home Depot, Inc. (The) | 2,830,060 | 94,467,403 | ||||||
Household Products–2.83% | ||||||||
Energizer Holdings, Inc.(b) | 460,856 | 34,785,411 | ||||||
Procter & Gamble Co. (The) | 2,379,604 | 151,533,183 | ||||||
186,318,594 | ||||||||
Human Resource & Employment Services–0.73% | ||||||||
Manpower, Inc. | 479,636 | 19,319,738 | ||||||
Robert Half International, Inc. | 1,195,665 | 28,600,307 | ||||||
47,920,045 | ||||||||
Industrial Conglomerates–5.36% | ||||||||
General Electric Co. | 16,003,028 | 261,009,387 | ||||||
Tyco International Ltd. | 2,208,366 | 91,823,858 | ||||||
352,833,245 | ||||||||
Industrial Machinery–1.21% | ||||||||
Ingersoll-Rand PLC (Ireland) | 2,375,974 | 79,618,889 | ||||||
Insurance Brokers–3.16% | ||||||||
Marsh & McLennan Cos., Inc. | 6,992,997 | 207,831,871 | ||||||
Integrated Oil & Gas–6.30% | ||||||||
ConocoPhillips | 492,391 | 33,517,055 | ||||||
Exxon Mobil Corp. | 1,040,339 | 77,026,700 | ||||||
Hess Corp. | 1,632,558 | 96,875,992 | ||||||
Occidental Petroleum Corp. | 729,384 | 63,266,768 | ||||||
Royal Dutch Shell PLC–ADR (United Kingdom) | 2,150,646 | 144,200,814 | ||||||
414,887,329 | ||||||||
Integrated Telecommunication Services–1.21% | ||||||||
Verizon Communications, Inc. | 2,203,440 | 79,698,425 | ||||||
Internet Software & Services–3.37% | ||||||||
eBay, Inc.(b) | 5,062,255 | 156,271,812 | ||||||
Yahoo! Inc.(b) | 4,835,982 | 65,793,535 | ||||||
222,065,347 | ||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
9 Invesco Van Kampen Growth and Income Fund
Shares | Value | |||||||
Investment Banking & Brokerage–2.16% | ||||||||
Charles Schwab Corp. (The) | 6,078,197 | $ | 74,944,169 | |||||
Morgan Stanley | 3,820,643 | 66,861,252 | ||||||
141,805,421 | ||||||||
IT Consulting & Other Services–0.95% | ||||||||
Amdocs Ltd.(b) | 2,283,747 | 62,734,530 | ||||||
Life & Health Insurance–0.53% | ||||||||
Principal Financial Group, Inc. | 1,386,524 | 35,162,249 | ||||||
Managed Health Care–2.91% | ||||||||
CIGNA Corp. | 424,605 | 19,846,038 | ||||||
UnitedHealth Group, Inc. | 3,605,199 | 171,319,056 | ||||||
191,165,094 | ||||||||
Movies & Entertainment–4.02% | ||||||||
Time Warner, Inc. | 3,346,593 | 105,953,134 | ||||||
Viacom, Inc.–Class B | 3,283,357 | 158,389,142 | ||||||
264,342,276 | ||||||||
Office Services & Supplies–0.56% | ||||||||
Avery Dennison Corp. | 1,268,320 | 36,920,795 | ||||||
Oil & Gas Equipment & Services–2.50% | ||||||||
Baker Hughes, Inc. | 780,272 | 47,682,422 | ||||||
Cameron International Corp.(b) | 595,872 | 30,961,509 | ||||||
Schlumberger Ltd. | 1,099,941 | 85,927,391 | ||||||
164,571,322 | ||||||||
Oil & Gas Exploration & Production–3.59% | ||||||||
Anadarko Petroleum Corp. | 2,309,610 | 170,333,738 | ||||||
Devon Energy Corp. | 972,321 | 65,952,533 | ||||||
236,286,271 | ||||||||
Oil & Gas Storage & Transportation–0.52% | ||||||||
Williams Cos., Inc. (The) | 1,278,633 | 34,510,305 | ||||||
Other Diversified Financial Services–6.84% | ||||||||
Bank of America Corp. | 6,622,084 | 54,102,426 | ||||||
Citigroup, Inc. | 3,207,537 | 99,594,018 | ||||||
JPMorgan Chase & Co. | 7,894,425 | 296,514,603 | ||||||
450,211,047 | ||||||||
Packaged Foods & Meats–3.02% | ||||||||
Kraft Foods, Inc.–Class A | 2,907,829 | 101,832,172 | ||||||
Unilever N.V.–New York Shares (Netherlands) | 2,856,510 | 97,121,340 | ||||||
198,953,512 | ||||||||
Personal Products–1.61% | ||||||||
Avon Products, Inc. | 4,699,003 | 106,009,508 | ||||||
Pharmaceuticals–6.71% | ||||||||
Abbott Laboratories | 989,004 | 51,932,600 | ||||||
Bristol-Myers Squibb Co. | 4,185,816 | 124,528,026 | ||||||
Eli Lilly and Co. | 348,956 | 13,089,340 | ||||||
Merck & Co., Inc. | 2,639,815 | 87,430,673 | ||||||
Pfizer, Inc. | 8,665,327 | 164,467,906 | ||||||
441,448,545 | ||||||||
Property & Casualty Insurance–0.81% | ||||||||
Chubb Corp. (The) | 862,431 | 53,375,855 | ||||||
Regional Banks–3.26% | ||||||||
BB&T Corp. | 2,064,692 | 46,021,985 | ||||||
Fifth Third Bancorp | 2,925,153 | 31,065,125 | ||||||
PNC Financial Services Group, Inc. | 2,143,832 | 107,491,736 | ||||||
Regions Financial Corp. | 6,647,371 | 30,179,064 | ||||||
214,757,910 | ||||||||
Semiconductor Equipment–0.43% | ||||||||
Applied Materials, Inc. | 2,522,753 | 28,557,564 | ||||||
Semiconductors–0.79% | ||||||||
Intel Corp. | 2,545,318 | 51,237,252 | ||||||
STMicroelectronics N.V.–New York Shares (Netherlands) | 141,452 | 942,070 | ||||||
52,179,322 | ||||||||
Soft Drinks–1.19% | ||||||||
Coca-Cola Co. (The) | 1,107,283 | 78,008,087 | ||||||
Systems Software–2.21% | ||||||||
Microsoft Corp. | 5,458,547 | 145,197,350 | ||||||
Wireless Telecommunication Services–1.80% | ||||||||
Vodafone Group PLC–ADR (United Kingdom) | 4,490,306 | 118,274,660 | ||||||
Total Common Stocks & Other Equity Interests (Cost $6,140,209,362) | 6,210,602,169 | |||||||
Money Market Funds–5.68% | ||||||||
Liquid Assets Portfolio–Institutional Class(c) | 186,930,047 | 186,930,047 | ||||||
Premier Portfolio–Institutional Class(c) | 186,930,046 | 186,930,046 | ||||||
Total Money Market Funds (Cost $373,860,093) | 373,860,093 | |||||||
TOTAL INVESTMENTS–100.05% (Cost $6,514,069,455) | 6,584,462,262 | |||||||
OTHER ASSETS LESS LIABILITIES–(0.05)% | (3,430,165 | ) | ||||||
NET ASSETS–100.00% | $ | 6,581,032,097 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
10 Invesco Van Kampen Growth and Income Fund
Investment Abbreviation:
ADR | – American Depositary Receipt |
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. | |
(b) | Non-income producing security. | |
(c) | The money market fund and the Fund are affiliated by having the same investment adviser. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
11 Invesco Van Kampen Growth and Income Fund
Statement of Assets and Liabilities
August 31, 2011
Assets: | ||||
Investments, at value (Cost $6,140,209,362) | $ | 6,210,602,169 | ||
Investments in affiliated money market funds, at value and cost | 373,860,093 | |||
Total investments, at value (Cost $6,514,069,455) | 6,584,462,262 | |||
Receivable for: | ||||
Investments sold | 8,389,220 | |||
Fund shares sold | 5,445,934 | |||
Dividends | 15,622,878 | |||
Foreign currency contracts outstanding | 218,846 | |||
Investment for trustee deferred compensation and retirement plans | 13,759 | |||
Other assets | 59,119 | |||
Total assets | 6,614,212,018 | |||
Liabilities: | ||||
Payable for: | ||||
Investments purchased | 7,407,333 | |||
Fund shares reacquired | 20,039,142 | |||
Accrued fees to affiliates | 4,995,327 | |||
Accrued other operating expenses | 544,625 | |||
Foreign currency contracts outstanding | 106,597 | |||
Trustee deferred compensation and retirement plans | 86,897 | |||
Total liabilities | 33,179,921 | |||
Net assets applicable to shares outstanding | $ | 6,581,032,097 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 6,858,017,906 | ||
Undistributed net investment income | 20,820,280 | |||
Undistributed net realized gain (loss) | (368,311,145 | ) | ||
Unrealized appreciation | 70,505,056 | |||
$ | 6,581,032,097 | |||
Net Assets: | ||||
Class A | $ | 4,149,537,155 | ||
Class B | $ | 173,129,147 | ||
Class C | $ | 258,606,266 | ||
Class R | $ | 147,453,360 | ||
Class Y | $ | 1,544,968,267 | ||
Institutional Class | $ | 307,337,902 | ||
Shares outstanding, $0.01 par value per share, with an unlimited number of shares authorized: | ||||
Class A | 230,373,400 | |||
Class B | 9,680,634 | |||
Class C | 14,493,275 | |||
Class R | 8,183,777 | |||
Class Y | 85,706,502 | |||
Institutional Class | 17,027,156 | |||
Class A: | ||||
Net asset value per share | $ | 18.01 | ||
Maximum offering price per share | ||||
(Net asset value of $18.01 divided by 94.50%) | $ | 19.06 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 17.88 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 17.84 | ||
Class R: | ||||
Net asset value and offering price per share | $ | 18.02 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 18.03 | ||
Institutional Class: | ||||
Net asset value and offering price per share | $ | 18.05 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
12 Invesco Van Kampen Growth and Income Fund
Statement of Operations
For the year ended August 31, 2011
Investment income: | ||||
Dividends (net of foreign withholding taxes of $1,667,492) | $ | 145,931,550 | ||
Dividends from affiliated money market funds | 334,800 | |||
Total investment income | 146,266,350 | |||
Expenses: | ||||
Advisory fees | 25,136,962 | |||
Administrative services fees | 712,245 | |||
Custodian fees | 174,196 | |||
Distribution fees: | ||||
Class A | 11,577,995 | |||
Class B | 578,542 | |||
Class C | 2,912,311 | |||
Class R | 757,392 | |||
Transfer agent fees — A, B, C, R and Y | 14,780,687 | |||
Transfer agent fees — Institutional | 37,962 | |||
Trustees’ and officers’ fees and benefits | 202,748 | |||
Other | 387,723 | |||
Total expenses | 57,258,763 | |||
Less: Fees waived and expense offset arrangement(s) | (469,507 | ) | ||
Net expenses | 56,789,256 | |||
Net investment income | 89,477,094 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain (loss) from: | ||||
Investment securities (includes net gains from securities sold to affiliates of $1,254,912) | 395,088,343 | |||
Foreign currency contracts | (4,543,402 | ) | ||
390,544,941 | ||||
Change in net unrealized appreciation of: | ||||
Investment securities | 328,889,078 | |||
Foreign currency contracts | 112,249 | |||
329,001,327 | ||||
Net realized and unrealized gain | 719,546,268 | |||
Net increase in net assets resulting from operations | $ | 809,023,362 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
13 Invesco Van Kampen Growth and Income Fund
Statement of Changes in Net Assets
For the year ended August 31, 2011, nine months ended August 31, 2010 and the year ended November 30, 2009
For the | For the nine | For the | ||||||||||
year ended | months ended | year ended | ||||||||||
August 31, | August 31, | November 30, | ||||||||||
2011 | 2010 | 2009 | ||||||||||
Operations: | ||||||||||||
Net investment income | $ | 89,477,094 | $ | 66,058,781 | $ | 87,509,634 | ||||||
Net realized gain (loss) | 390,544,941 | 227,794,122 | (393,154,825 | ) | ||||||||
Change in net unrealized appreciation (depreciation) | 329,001,327 | (655,291,184 | ) | 1,496,446,937 | ||||||||
Net increase (decrease) in net assets resulting from operations | 809,023,362 | (361,438,281 | ) | 1,190,801,746 | ||||||||
Distributions to shareholders from net investment income: | ||||||||||||
Class A | (49,752,247 | ) | (46,288,757 | ) | (70,464,829 | ) | ||||||
Class B | (2,289,778 | ) | (2,797,501 | ) | (5,807,436 | ) | ||||||
Class C | (994,066 | ) | (1,469,851 | ) | (3,052,534 | ) | ||||||
Class R | (1,231,024 | ) | (966,152 | ) | (1,240,399 | ) | ||||||
Class Y | (20,659,588 | ) | (14,834,399 | ) | (16,453,885 | ) | ||||||
Institutional Class | (2,010,774 | ) | (7,403 | ) | — | |||||||
Total distributions from net investment income | (76,937,477 | ) | (66,364,063 | ) | (97,019,083 | ) | ||||||
Share transactions–net: | ||||||||||||
Class A | (497,901,045 | ) | (79,552,064 | ) | (678,175,907 | ) | ||||||
Class B | (91,521,932 | ) | (73,657,762 | ) | (106,688,362 | ) | ||||||
Class C | (44,889,378 | ) | (28,153,841 | ) | (45,428,209 | ) | ||||||
Class R | 11,454,379 | 23,921,215 | 8,022,019 | |||||||||
Class Y | 198,824,176 | 200,227,325 | 59,355,169 | |||||||||
Institutional Class | 279,255,628 | 42,659,039 | — | |||||||||
Net increase (decrease) in net assets resulting from share transactions | (144,778,172 | ) | 85,443,912 | (762,915,290 | ) | |||||||
Net increase (decrease) in net assets | 587,307,713 | (342,358,432 | ) | 330,867,373 | ||||||||
Net assets: | ||||||||||||
Beginning of period | 5,993,724,384 | 6,336,082,816 | 6,005,215,443 | |||||||||
End of period (includes undistributed net investment income of $20,820,280, $8,255,246 and $8,560,528, respectively) | $ | 6,581,032,097 | $ | 5,993,724,384 | $ | 6,336,082,816 | ||||||
Notes to Financial Statements
August 31, 2011
NOTE 1—Significant Accounting Policies
Invesco Van Kampen Growth and Income Fund (the “Fund”), is a series portfolio of AIM Counselor Series Trust (Invesco Counselor Series Trust (the “Trust”). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end series management investment company consisting of twelve separate portfolios, each authorized to issue an unlimited number of shares of beneficial interest. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class.
The Fund’s investment objective is income and long-term growth of capital.
The Fund currently consists of six different classes of shares: Class A, Class B, Class C, Class R, Class Y and Institutional Class. Class A shares are sold with a front-end sales charge unless certain waiver criteria are met and under certain circumstances load waived shares may be subject to contingent deferred sales charges (“CDSC”). Class C shares are sold with a CDSC. Class R, Class Y and Institutional Class shares are sold at net asset value. Effective November 30, 2010, new or additional investments in Class B shares are no longer permitted. Existing shareholders of Class B shares may continue to reinvest dividends and capital gains distributions in Class B shares until they convert. Also, shareholders in Class B shares will be able to exchange those shares for Class B shares of other
14 Invesco Van Kampen Growth and Income Fund
Invesco Funds offering such shares until they convert. Generally, Class B shares will automatically convert to Class A shares on or about the month-end which is at least eight years after the date of purchase. Redemption of Class B shares prior to conversion date will be subject to a CDSC.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. | |
A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”). | ||
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded. | ||
Debt obligations (including convertible bonds) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations, including commercial paper, having 60 days or less to maturity are recorded at amortized cost which approximates value. Debt securities are subject to interest rate and credit risks. In addition, all debt securities involve some risk of default with respect to interest and/or principal payments. | ||
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trade is not the current value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economical upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards. | ||
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including Corporate Loans. | ||
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value. | ||
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments. | ||
B. | Securities Transactions and Investment Income — Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. | |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held. | ||
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund’s net asset value and, accordingly, they reduce the Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser. | ||
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class. | ||
C. | Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the |
15 Invesco Van Kampen Growth and Income Fund
laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. | ||
D. | Distributions — Distributions from income are declared and paid quarterly and are recorded on ex-dividend date. Distributions from net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to treat a portion of the proceeds from redemptions as distributions for federal income tax purposes. | |
E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. | |
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period. | ||
F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund are charged to the operations of such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses attributable to the Institutional Class are charged to such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses relating to all other classes are allocated among those classes based on relative net assets. All other expenses are allocated among the classes based on relative net assets. | |
G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. | |
H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. | |
I. | Foreign Currency Translations — Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. | |
The Fund may invest in foreign securities which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. | ||
J. | Foreign Currency Contracts — The Fund may enter into foreign currency contracts to manage or minimize currency or exchange rate risk. The Fund may also enter into foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to “lock in” the U.S. dollar price of that security. A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The use of foreign currency contracts does not eliminate fluctuations in the price of the underlying securities the Fund owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statement of Operations. The primary risks associated with foreign currency contracts include failure of the counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities. |
16 Invesco Van Kampen Growth and Income Fund
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser based on the annual rate of the Fund’s average daily net assets as follows:
Average Daily Net Assets | Rate | |||
First $150 million | 0 | .50% | ||
Next $100 million | 0 | .45% | ||
Next $100 million | 0 | .40% | ||
Over $350 million | 0 | .35% | ||
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (formerly Invesco Trimark Ltd.) (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide discretionary investment management services to the Fund based on the percentage of assets allocated to such Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2012, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Class A, Class B, Class C, Class R, Class Y and Institutional Class shares to 0.88%, 1.63%, 1.63%, 1.13%, 0.63% and 0.63% of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless the Board of Trustees and Invesco mutually agree to amend or continue the fee waiver agreement, it will terminate on June 30, 2012. The Adviser did not waive fees and/or reimburse expenses during the period under this limitation.
Further, the Adviser has contractually agreed, through at least June 30, 2012, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the year ended August 31, 2011, the Adviser waived advisory fees of $462,153.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco for certain administrative costs incurred in providing accounting services to the Fund. For the year ended August 31, 2011, expenses incurred under the agreement are shown in the Statement of Operations as administrative services fees.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (“IIS”) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. IIS may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. All fees payable by IIS to intermediaries that provide omnibus account services or sub-accounting are charged back to the Fund, subject to certain limitations approved by the Trust’s Board of Trustees. For the year ended August 31, 2011, expenses incurred under the agreement are shown in the Statement of Operations as transfer agent fees.
Shares of the Fund are distributed by Invesco Distributors, Inc. (“IDI”). The Fund has adopted a distribution plan pursuant to Rule 12b-1 under the 1940 Act, and a service plan (collectively, the “Plans”) for Class A shares, Class B shares, Class C shares and Class R shares to compensate IDI for the sale, distribution, shareholder servicing and maintenance of shareholder accounts for these shares. Under the Plans, the Fund will incur annual fees of up to 0.25% of Class A average daily net assets, up to 1.00% each of Class B and Class C average daily net assets and up to 0.50% of Class R average daily net assets.
With respect to Class B and Class C shares, the Fund is authorized to reimburse in future years any distribution related expenses that exceed the maximum annual reimbursement rate for such class, so long as such reimbursement does not cause the Fund to exceed the Class B and Class C maximum annual reimbursement rate, respectively. With respect to Class A shares, distribution related expenses that exceed the maximum annual reimbursement rate for such class are not carried forward to future years and the Fund will not reimburse IDI for any such expenses.
For the year ended August 31, 2011, expenses incurred under these agreements are shown in the Statement of Operations as distribution fees.
Front-end sales commissions and CDSC (collectively the “sales charges”) are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. For the year ended August 31, 2011, IDI advised the Fund that IDI retained $363,411 in front-end sales commissions from the sale of Class A shares and $448, $210,511 and $15,857 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of the Adviser, Invesco Ltd., IIS and/or IDI.
17 Invesco Van Kampen Growth and Income Fund
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3) generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
Level 1 — | Prices are determined using quoted prices in an active market for identical assets. | |
Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. | |
Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of August 31, 2011. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
During the year ended August 31, 2011, there were no significant transfers between investment levels.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 6,584,462,262 | $ | — | $ | — | $ | 6,584,462,262 | ||||||||
Foreign Currency Contracts* | — | 112,249 | — | 112,249 | ||||||||||||
Total Investments | $ | 6,584,462,262 | $ | 112,249 | $ | — | $ | 6,584,574,511 | ||||||||
* | Unrealized appreciation (depreciation). |
NOTE 4—Derivative Investments
The Fund has implemented the required disclosures about derivative instruments and hedging activities in accordance with GAAP. This disclosure is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position and financial performance. The enhanced disclosure has no impact on the results of operations reported in the financial statements.
Value of Derivative Instruments at Period-End
The table below summarizes the value of the Fund’s derivative instruments, detailed by primary risk exposure, held as of August 31, 2011:
Value | ||||||||
Risk Exposure/Derivative Type | Assets | Liabilities | ||||||
Currency risk/foreign currency contracts | $ | 218,846 | $ | (106,597 | ) | |||
Effect of Derivative Instruments for the year ended August 31, 2011
The table below summarizes the gains (losses) on derivative instruments, detailed by primary risk exposure, recognized in earnings during the period:
Location of Gain (Loss) on | ||||
Statement of Operations | ||||
Foreign Currency | ||||
Contracts* | ||||
Realized Gain (Loss) | ||||
Currency risk | $ | (4,543,402 | ) | |
Change in Unrealized Appreciation | ||||
Currency risk | 112,249 | |||
Total | $ | (4,431,153 | ) | |
* | The average notional value of foreign currency contracts outstanding during the period was $(96,830,806). |
18 Invesco Van Kampen Growth and Income Fund
Open Foreign Currency Contracts | ||||||||||||||||||||||
Settlement | Contract to | Notional | Unrealized | |||||||||||||||||||
Date | Counterparty | Deliver | Receive | Value | Appreciation | |||||||||||||||||
9/15/2011 | Bank of New York | GBP | 11,568,518 | USD | 18,799,074 | $ | (18,781,715 | ) | $ | 17,359 | ||||||||||||
9/15/2011 | Bank of New York | JPY | 1,533,863,815 | USD | 20,088,058 | (20,033,904 | ) | 54,154 | ||||||||||||||
9/15/2011 | BNPX NA | GBP | 23,302,187 | USD | 37,901,358 | (37,831,556 | ) | 69,802 | ||||||||||||||
9/15/2011 | Morgan Stanley | EUR | 13,315,654 | USD | 19,143,982 | (19,130,560 | ) | 13,422 | ||||||||||||||
9/15/2011 | Morgan Stanley | JPY | 1,548,057,254 | USD | 20,277,393 | (20,219,286 | ) | 58,107 | ||||||||||||||
9/15/2011 | State Street | GBP | 11,991,648 | USD | 19,474,676 | (19,468,674 | ) | 6,002 | ||||||||||||||
$ | (135,465,695 | ) | $ | 218,846 | ||||||||||||||||||
Unrealized | ||||||||||||||||||||||||
Settlement | Contract to | Notional | Appreciation | |||||||||||||||||||||
Date | Counterparty | Deliver | Receive | Value | (Depreciation) | |||||||||||||||||||
9/15/2011 | Bank of New York | EUR | 24,858,387 | USD | 35,692,169 | $ | (35,713,970 | ) | $ | (21,801 | ) | |||||||||||||
9/15/2011 | Bank of New York | GBP | 7,877,470 | USD | 12,747,793 | (12,789,225 | ) | (41,432 | ) | |||||||||||||||
9/15/2011 | BNPX NA | EUR | 39,863,385 | USD | 57,260,165 | (57,271,606 | ) | (11,441 | ) | |||||||||||||||
9/15/2011 | State Street | EUR | 40,562,667 | USD | 58,244,338 | (58,276,261 | ) | (31,923 | ) | |||||||||||||||
$ | (164,051,062 | ) | $ | (106,597 | ) | |||||||||||||||||||
Total open foreign currency contracts | $ | (299,516,757 | ) | $ | 112,249 | |||||||||||||||||||
Currency Abbreviations: | ||
EUR | – Euro | |
GBP | – British Pound Sterling | |
JPY | – Japanese Yen | |
USD | – U.S. Dollar |
NOTE 5—Security Transactions with Affiliated Funds
The Fund is permitted to purchase or sell securities from or to certain other Invesco Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment adviser (or affiliated investment advisers), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, for the year ended August 31, 2011, the Fund engaged in securities purchases of $14,303,385 and securities sales of $2,711,217, which resulted in net realized gains of $1,254,912.
NOTE 6—Expense Offset Arrangement(s)
The expense offset arrangement is comprised of transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions. For the year ended August 31, 2011, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $7,354.
NOTE 7—Trustees’ and Officers’ Fees and Benefits
“Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and “Trustees’ and Officers’ Fees and Benefits” also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. “Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
During the year ended August 31, 2011, the Fund paid legal fees of $14,982 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A partner of that firm is a Trustee of the Trust.
NOTE 8—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with The State Street Bank and Trust Company, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
19 Invesco Van Kampen Growth and Income Fund
NOTE 9—Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Year Ended August 31, 2011 and the nine months ended August 31, 2010:
2011 | 2010 | |||||||
Ordinary income | $ | 76,937,477 | $ | 66,364,063 | ||||
Tax Components of Net Assets at Period-End:
2011 | ||||
Undistributed ordinary income | $ | 20,905,812 | ||
Net unrealized appreciation — investments | 59,269,930 | |||
Temporary book/tax differences | (85,533 | ) | ||
Capital loss carryforward | (357,076,018 | ) | ||
Shares of beneficial interest | 6,858,017,906 | |||
Total net assets | $ | 6,581,032,097 | ||
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund’s net unrealized appreciation (depreciation) difference is attributable primarily to wash sales.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions. Under these limitation rules, the Fund is limited to utilizing $349,943,905 of capital loss carryforward in the fiscal year ending August 31, 2012.
The Fund utilized $389,710,055 of capital loss carryforward in the current period to offset net realized capital gain for federal income tax purposes. The Fund has a capital loss carryforward as of August 31, 2011 which expires as follows:
Capital Loss | ||||
Expiration | Carryforward* | |||
August 31, 2016 | $ | 12,303,518 | ||
August 31, 2017 | 344,772,500 | |||
Total capital loss carryforward | $ | 357,076,018 | ||
* | Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. To the extent that unrealized gains as of May 23, 2011, the date of reorganization of Invesco Fundamental Value Fund and Invesco Large Cap Relative Value Fund into the Fund and realized on securities held in each fund at such date of reorganization, the capital loss carryforward may be further limited for up to five years from the date of the reorganizations. |
NOTE 10—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended August 31, 2011 was $1,516,650,748 and $1,900,122,966, respectively. Cost of investments on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed Federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investment Securities on a Tax Basis | ||||
Aggregate unrealized appreciation of investment securities | $ | 525,980,551 | ||
Aggregate unrealized (depreciation) of investment securities | (466,710,621 | ) | ||
Net unrealized appreciation of investment securities | $ | 59,269,930 | ||
Cost of investments for tax purposes is $6,525,192,332. |
NOTE 11—Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of foreign currency transactions, merger expenses and net operating losses, on August 31, 2011, undistributed net investment income was increased by $25,417, undistributed net realized gain (loss) was decreased by $14,743,462 and shares of beneficial interest was increased by $14,718,045.
20 Invesco Van Kampen Growth and Income Fund
NOTE 12—Share Information
Summary of Share Activity | ||||||||||||||||||||||||
Year ended | Nine months ended | Year ended | ||||||||||||||||||||||
August 31, 2011(a) | August 31, 2010 | November 30, 2009 | ||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||
Sold: | ||||||||||||||||||||||||
Class A | 40,168,664 | (b) | $ | 769,987,884 | (b) | 40,694,820 | (c) | $ | 707,176,618 | (c) | 57,927,682 | $ | 807,430,785 | |||||||||||
Class B | 438,546 | 8,100,844 | 934,228 | 16,167,953 | 2,148,011 | 29,667,060 | ||||||||||||||||||
Class C | 1,063,972 | 20,372,767 | 1,252,711 | 21,780,200 | 2,037,857 | 28,300,443 | ||||||||||||||||||
Class R | 2,659,405 | 51,394,097 | 2,423,181 | 42,296,238 | 2,343,353 | 33,092,151 | ||||||||||||||||||
Class Y | 35,839,552 | 683,384,836 | 29,182,798 | 503,102,992 | 27,202,880 | 396,177,523 | ||||||||||||||||||
Institutional Class | 17,685,144 | 338,759,065 | 2,638,781 | 43,251,096 | — | — | ||||||||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||||||||||
Class A | 2,499,969 | 46,491,378 | 2,544,181 | 43,649,414 | 4,949,122 | 66,221,754 | ||||||||||||||||||
Class B | 115,560 | 2,128,328 | 154,168 | 2,633,398 | 411,733 | 5,438,004 | ||||||||||||||||||
Class C | 48,175 | 883,466 | 69,351 | 1,190,861 | 192,064 | 2,487,495 | ||||||||||||||||||
Class R | 65,955 | 1,229,378 | 50,681 | 870,627 | 82,308 | 1,099,777 | ||||||||||||||||||
Class Y | 1,043,596 | 19,488,200 | 714,655 | 12,230,024 | 956,393 | 12,847,279 | ||||||||||||||||||
Institutional Class | 105,285 | 2,010,645 | 3 | 38 | — | — | ||||||||||||||||||
Issued in connection with acquisitions:(d) | ||||||||||||||||||||||||
Class A | 2,699,773 | 54,844,342 | — | — | — | — | ||||||||||||||||||
Class B | 1,176,109 | 23,721,474 | — | — | — | — | ||||||||||||||||||
Class C | 191,857 | 3,863,281 | — | — | — | — | ||||||||||||||||||
Class Y | 3,646,445 | 74,111,693 | — | — | — | — | ||||||||||||||||||
Reacquired: | ||||||||||||||||||||||||
Class A | (71,652,843 | ) | (1,369,224,649 | ) | (48,110,313 | ) | (830,378,096 | ) | (119,809,171 | ) | (1,551,828,446 | ) | ||||||||||||
Class B | (6,560,544 | )(b) | (125,472,578 | )(b) | (5,374,410 | )(c) | (92,459,113 | )(c) | (10,314,145 | ) | (141,793,426 | ) | ||||||||||||
Class C | (3,720,137 | ) | (70,008,892 | ) | (2,985,220 | ) | (51,124,902 | ) | (5,586,391 | ) | (76,216,147 | ) | ||||||||||||
Class R | (2,146,765 | ) | (41,169,096 | ) | (1,113,115 | ) | (19,245,650 | ) | (1,842,190 | ) | (26,169,909 | ) | ||||||||||||
Class Y | (29,884,311 | ) | (578,160,553 | ) | (18,516,612 | ) | (315,105,691 | ) | (25,304,022 | ) | (349,669,633 | ) | ||||||||||||
Institutional Class | (3,366,863 | ) | (61,514,082 | ) | (35,194 | ) | (592,095 | ) | — | — | ||||||||||||||
Net increase (decrease) in share activity | (7,883,456 | ) | $ | (144,778,172 | ) | 4,524,694 | $ | 85,443,912 | (64,604,516 | ) | $ | (762,915,290 | ) | |||||||||||
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 22% of the outstanding shares of the Fund. IDI has an agreement with these entities to sell Fund shares. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. In addition, 1% of the outstanding shares of the Fund are owned by affiliated mutual funds. Affiliated mutual funds are mutual funds that are advised by Invesco. | |
(b) | Includes automatic conversion of 3,952,448 Class B shares into 3,922,878 Class A shares at a value of $76,286,897. | |
(c) | Includes automatic conversion of 1,668,282 Class B shares into 1,654,934 Class A shares at a value of $28,323,179. | |
(d) | As of the opening of business on May 23, 2011, the Fund acquired all of the net assets of Invesco Fundamental Value Fund and Invesco Large Cap Relative Value Fund pursuant to a plan of reorganization approved by the Trustees of the Fund on November 10, 2010 and by the shareholders of Invesco Fundamental Value Fund and Invesco Large Cap Relative Value Fund on April 14, 2011. The acquisitions were accomplished by a tax-free exchange of 7,714,184 shares of the Fund for 3,780,748 shares outstanding of Invesco Fundamdental Value Fund and 10,106,294 shares outstanding of Invesco Large Cap Relative Value Fund as of the close of business on May 20, 2011. Invesco Fundamental Value Fund’s net assets at that date of $42,883,547 including $7,514,659 of unrealized appreciation and Invesco Large Cap Relative Value Fund’s net assets at that date of $113,657,243 including $3,426,387 of unrealized appreciation, were combined with those of the Fund. The net assets of the Fund immediately before the acquisition were $7,418,140,055. The net assets of the Fund immediately following the acquisition were $7,574,680,845. |
21 Invesco Van Kampen Growth and Income Fund
NOTE 13—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Ratio of | Ratio of | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
expenses | expenses | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net gains | to average | to average net | Ratio of net | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset | (losses) on | Dividends | Distributions | net assets | assets without | investment | ||||||||||||||||||||||||||||||||||||||||||||||||||
value, | Net | securities (both | Total from | from net | from net | Net asset | Net assets, | with fee waivers | fee waivers | income | ||||||||||||||||||||||||||||||||||||||||||||||
beginning | investment | realized and | investment | investment | realized | Total | value, end | Total | end of period | and/or expenses | and/or expenses | to average | Portfolio | |||||||||||||||||||||||||||||||||||||||||||
of period | income(a) | unrealized) | operations | income | gains | Distributions | of period | Return | (000s omitted) | absorbed | absorbed | net assets | turnover(b) | |||||||||||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | $ | 16.06 | $ | 0.24 | $ | 1.91 | $ | 2.15 | $ | (0.20 | ) | $ | — | $ | (0.20 | ) | $ | 18.01 | 13.37 | %(c) | $ | 4,149,537 | 0.83 | %(d) | 0.84 | %(d) | 1.23 | %(d) | 23 | % | ||||||||||||||||||||||||||
Nine months ended 08/31/10 | 17.19 | 0.18 | (1.13 | ) | (0.95 | ) | (0.18 | ) | — | (0.18 | ) | 16.06 | (5.60 | )(c) | 4,122,779 | 0.74 | (n) | 0.74 | (n) | 1.36 | (n) | 23 | ||||||||||||||||||||||||||||||||||
Year ended 11/30/09 | 13.87 | 0.23 | 3.34 | 3.57 | (0.25 | ) | — | (0.25 | ) | 17.19 | 26.24 | (e) | 4,496,159 | 0.88 | 0.88 | 1.58 | 51 | |||||||||||||||||||||||||||||||||||||||
Year ended 11/30/08 | 22.72 | 0.33 | (7.86 | ) | (7.53 | ) | (0.37 | ) | (0.95 | ) | (1.32 | ) | 13.87 | (35.05 | )(e) | 4,416,052 | 0.79 | 0.79 | 1.78 | 42 | ||||||||||||||||||||||||||||||||||||
Year ended 11/30/07 | 22.62 | 0.36 | 1.21 | 1.57 | (0.39 | ) | (1.08 | ) | (1.47 | ) | 22.72 | 7.26 | (e) | 7,793,361 | 0.77 | 0.77 | 1.58 | 26 | ||||||||||||||||||||||||||||||||||||||
Year ended 11/30/06 | 21.72 | 0.35 | 2.43 | 2.78 | (0.31 | ) | (1.57 | ) | (1.88 | ) | 22.62 | 13.76 | (e) | 7,711,863 | 0.79 | 0.79 | 1.66 | 30 | ||||||||||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 15.93 | 0.23 | 1.90 | 2.13 | (0.18 | ) | — | (0.18 | ) | 17.88 | 13.36 | (c)(f) | 173,129 | 0.83 | (d)(f) | 0.84 | (d)(f) | 1.23 | (d)(f) | 23 | ||||||||||||||||||||||||||||||||||||
Nine months ended 08/31/10 | 17.05 | 0.16 | (1.12 | ) | (0.96 | ) | (0.16 | ) | — | (0.16 | ) | 15.93 | (5.69 | )(c)(f) | 231,193 | 0.89 | (f)(n) | 0.89 | (f)(n) | 1.21 | (f)(n) | 23 | ||||||||||||||||||||||||||||||||||
Year ended 11/30/09 | 13.76 | 0.22 | 3.32 | 3.54 | (0.25 | ) | — | (0.25 | ) | 17.05 | 26.32 | (g)(h) | 320,577 | 0.89 | (h) | 0.89 | (h) | 1.59 | (h) | 51 | ||||||||||||||||||||||||||||||||||||
Year ended 11/30/08 | 22.57 | 0.32 | (7.81 | ) | (7.49 | ) | (0.37 | ) | (0.95 | ) | (1.32 | ) | 13.76 | (35.09 | )(g)(h) | 365,277 | 0.84 | (h) | 0.84 | (h) | 1.72 | (h) | 42 | |||||||||||||||||||||||||||||||||
Year ended 11/30/07 | 22.47 | 0.34 | 1.20 | 1.54 | (0.36 | ) | (1.08 | ) | (1.44 | ) | 22.57 | 7.18 | (g)(h) | 777,590 | �� | 0.85 | (h) | 0.85 | (h) | 1.50 | (h) | 26 | ||||||||||||||||||||||||||||||||||
Year ended 11/30/06 | 21.52 | 0.34 | 2.41 | 2.75 | (0.23 | ) | (1.57 | ) | (1.80 | ) | 22.47 | 13.70 | (g)(h) | 869,869 | 0.84 | (h) | 0.84 | (h) | 1.60 | (h) | 30 | |||||||||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 15.91 | 0.09 | 1.90 | 1.99 | (0.06 | ) | — | (0.06 | ) | 17.84 | 12.52 | (c)(m) | 258,606 | 1.57 | (d)(m) | 1.58 | (d)(m) | 0.49 | (d)(m) | 23 | ||||||||||||||||||||||||||||||||||||
Nine months ended 08/31/10 | 17.03 | 0.08 | (1.12 | ) | (1.04 | ) | (0.08 | ) | — | (0.08 | ) | 15.91 | (6.13 | )(c) | 269,051 | 1.49 | (n) | 1.49 | (n) | 0.61 | (n) | 23 | ||||||||||||||||||||||||||||||||||
Year ended 11/30/09 | 13.74 | 0.12 | 3.32 | 3.44 | (0.15 | ) | — | (0.15 | ) | 17.03 | 25.36 | (h)(i) | 316,283 | 1.62 | (h) | 1.62 | (h) | 0.84 | (h) | 51 | ||||||||||||||||||||||||||||||||||||
Year ended 11/30/08 | 22.53 | 0.20 | (7.81 | ) | (7.61 | ) | (0.23 | ) | (0.95 | ) | (1.18 | ) | 13.74 | (35.54 | )(h)(i) | 301,306 | 1.51 | (h) | 1.51 | (h) | 1.06 | (h) | 42 | |||||||||||||||||||||||||||||||||
Year ended 11/30/07 | 22.43 | 0.20 | 1.21 | 1.41 | (0.23 | ) | (1.08 | ) | (1.31 | ) | 22.53 | 6.53 | (h)(i) | 591,037 | 1.48 | (h) | 1.48 | (h) | 0.87 | (h) | 26 | |||||||||||||||||||||||||||||||||||
Year ended 11/30/06 | 21.56 | 0.19 | 2.41 | 2.60 | (0.16 | ) | (1.57 | ) | (1.73 | ) | 22.43 | 12.88 | (i) | 620,565 | 1.54 | 1.54 | 0.91 | 30 | ||||||||||||||||||||||||||||||||||||||
Class R | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 16.07 | 0.19 | 1.92 | 2.11 | (0.16 | ) | — | (0.16 | ) | 18.02 | 13.08 | (c) | 147,453 | 1.08 | (d) | 1.09 | (d) | 0.98 | (d) | 23 | ||||||||||||||||||||||||||||||||||||
Nine months ended 08/31/10 | 17.19 | 0.14 | (1.11 | ) | (0.97 | ) | (0.15 | ) | — | (0.15 | ) | 16.07 | (5.72 | )(c) | 122,188 | 0.99 | (n) | 0.99 | (n) | 1.11 | (n) | 23 | ||||||||||||||||||||||||||||||||||
Year ended 11/30/09 | 13.87 | 0.18 | 3.35 | 3.53 | (0.21 | ) | — | (0.21 | ) | 17.19 | 26.00 | (j) | 107,371 | 1.13 | 1.13 | 1.29 | 51 | |||||||||||||||||||||||||||||||||||||||
Year ended 11/30/08 | 22.73 | 0.29 | (7.88 | ) | (7.59 | ) | (0.32 | ) | (0.95 | ) | (1.27 | ) | 13.87 | (35.25 | )(j) | 78,522 | 1.04 | 1.04 | 1.53 | 42 | ||||||||||||||||||||||||||||||||||||
Year ended 11/30/07 | 22.62 | 0.30 | 1.22 | 1.52 | (0.33 | ) | (1.08 | ) | (1.41 | ) | 22.73 | 7.03 | (j) | 140,227 | 1.02 | 1.02 | 1.33 | 26 | ||||||||||||||||||||||||||||||||||||||
Year ended 11/30/06 | 21.72 | 0.31 | 2.42 | 2.73 | (0.26 | ) | (1.57 | ) | (1.83 | ) | 22.62 | 13.48 | (j) | 128,511 | 1.04 | 1.04 | 1.46 | 30 | ||||||||||||||||||||||||||||||||||||||
Class Y | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 16.08 | 0.28 | 1.92 | 2.20 | (0.25 | ) | — | (0.25 | ) | 18.03 | 13.64 | (c) | 1,544,968 | 0.58 | (d) | 0.59 | (d) | 1.48 | (d) | 23 | ||||||||||||||||||||||||||||||||||||
Nine months ended 08/31/10 | 17.21 | 0.21 | (1.13 | ) | (0.92 | ) | (0.21 | ) | — | (0.21 | ) | 16.08 | (5.41 | )(c) | 1,206,652 | 0.49 | (n) | 0.49 | (n) | 1.61 | (n) | 23 | ||||||||||||||||||||||||||||||||||
Year ended 11/30/09 | 13.88 | 0.26 | 3.35 | 3.61 | (0.28 | ) | — | (0.28 | ) | 17.21 | 26.60 | (k) | 1,095,692 | 0.63 | 0.63 | 1.81 | 51 | |||||||||||||||||||||||||||||||||||||||
Year ended 11/30/08 | 22.74 | 0.38 | (7.87 | ) | (7.49 | ) | (0.42 | ) | (0.95 | ) | (1.37 | ) | 13.88 | (34.90 | )(k) | 844,058 | 0.54 | 0.54 | 2.04 | 42 | ||||||||||||||||||||||||||||||||||||
Year ended 11/30/07 | 22.63 | 0.41 | 1.23 | 1.64 | (0.45 | ) | (1.08 | ) | (1.53 | ) | 22.74 | 7.57 | (k) | 1,185,286 | 0.52 | 0.52 | 1.83 | 26 | ||||||||||||||||||||||||||||||||||||||
Year ended 11/30/06 | 21.73 | 0.41 | 2.43 | 2.84 | (0.37 | ) | (1.57 | ) | (1.94 | ) | 22.63 | 13.98 | (k) | 881,182 | 0.54 | 0.54 | 1.92 | 30 | ||||||||||||||||||||||||||||||||||||||
Institutional Class | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 16.08 | 0.32 | 1.92 | 2.24 | (0.27 | ) | — | (0.27 | ) | 18.05 | 13.87 | (c) | 307,338 | 0.39 | (d) | 0.40 | (d) | 1.67 | (d) | 23 | ||||||||||||||||||||||||||||||||||||
Nine months ended 08/31/10(l) | 16.48 | 0.05 | (0.39 | ) | (0.34 | ) | (0.06 | ) | — | (0.06 | ) | 16.08 | (2.05 | )(c) | 41,861 | 0.45 | (n) | 0.45 | (n) | 1.31 | (n) | 23 | ||||||||||||||||||||||||||||||||||
(a) | Calculated using average shares outstanding. | |
(b) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. For the year ended August 31, 2011, the portfolio calculation excludes the value of securities purchased of $138,016,999 and sold of $13,000,923 in the effort to realign the Fund’s portfolio holdings after the reorganization of Invesco Fundamental Value Fund and Invesco Large Cap Relative Value Fund into the Fund. | |
(c) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges and is not annualized for periods less than one year. | |
(d) | Ratios are based on average daily net assets (000’s omitted) of $4,636,574, $230,898, $294,554, $151,485, $1,602,529 and $158,806, for Class A, Class B, Class C, Class R, Class Y and Institutional Class, respectively. | |
(e) | Assumes reinvestment of all distributions for the period and does not include payment of the maximum sales charge of 5.75% or contingent deferred sales charge (CDSC). On purchases of $1 million or more, a CDSC of 1% may be imposed on certain redemptions made within eighteen months of purchase. If the sales charges were included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to 0.25% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of the Fund shares. | |
(f) | The total return, ratio of expenses to average net assets and ratio of net investment income to average net assets reflect actual 12b-1 fees of 0.25% and 0.40% for the year ended August 31, 2011 and nine months ended August 31, 2010. | |
(g) | Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 5%, charged on certain redemptions made within one year of purchase and declining to 0% after the fifth year. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to 1% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. | |
(h) | The total return, ratio of expenses to average net assets and ratio of net investment income to average net assets reflect actual 12b-1 fees of less than 1%. |
22 Invesco Van Kampen Growth and Income Fund
(i) | Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 1%, charged on certain redemptions made within one year of purchase. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to 1% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. | |
(j) | Assumes reinvestment of all distributions for the period. These returns include combined Rule 12b-1 fees and service fees of up to 0.50% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. | |
(k) | Assumes reinvestment of all distributions for the period. These returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. | |
(l) | Commencement date of June 1, 2010. | |
(m) | The total return, ratio of expenses to average net assets and ratio of net investment income to average net assets reflect actual 12b-1 fees of 0.99% for the year ended August 31, 2011. | |
(n) | Ratios are annualized. |
23 Invesco Van Kampen Growth and Income Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Counselor Series Trust (Invesco Counselor Series Trust)
and Shareholders of Invesco Van Kampen Growth and Income Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Invesco Van Kampen Growth and Income Fund (one of the funds constituting AIM Counselor Series Trust (Invesco Counselor Series Trust), hereafter referred to as the “Fund”) at August 31, 2011, the results of its operations for the year then ended, the changes in its net assets and the financial highlights for the year then ended and the nine month period ended August 31, 2010, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at August 31, 2011 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. The statement of changes in net assets and the financial highlights of the Fund for the periods ended November 30, 2009 and prior were audited by other independent auditors whose report dated January 22, 2010 expressed an unqualified opinion on those financial statements.
PRICEWATERHOUSECOOPERS LLP
October 21, 2011
Houston, Texas
24 Invesco Van Kampen Growth and Income Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments or contingent deferred sales charges on redemptions, and redemption fees, if any; and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period March 1, 2011 through August 31, 2011.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the hypothetical information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
HYPOTHETICAL | ||||||||||||||||||||||||||||||
ACTUAL | (5% annual return before expenses) | |||||||||||||||||||||||||||||
Beginning | Ending | Expenses | Ending | Expenses | Annualized | |||||||||||||||||||||||||
Account Value | Account Value | Paid During | Account Value | Paid During | Expense | |||||||||||||||||||||||||
Class | (03/01/11) | (08/31/11)1 | Period2 | (08/31/11) | Period2 | Ratio | ||||||||||||||||||||||||
A | $ | 1,000.00 | $ | 883.40 | $ | 3.94 | $ | 1,021.02 | $ | 4.23 | 0.83 | % | ||||||||||||||||||
B | 1,000.00 | 883.70 | 3.80 | 1,021.17 | 4.08 | 0.80 | ||||||||||||||||||||||||
C | 1,000.00 | 879.90 | 7.39 | 1,017.34 | 7.93 | 1.56 | ||||||||||||||||||||||||
R | 1,000.00 | 882.30 | 5.12 | 1,019.76 | 5.50 | 1.08 | ||||||||||||||||||||||||
Y | 1,000.00 | 884.70 | 2.76 | 1,022.28 | 2.96 | 0.58 | ||||||||||||||||||||||||
Institutional | 1,000.00 | 885.60 | 1.90 | 1,023.19 | 2.04 | 0.40 | ||||||||||||||||||||||||
1 | The actual ending account value is based on the actual total return of the Fund for the period March 1, 2011 through August 31, 2011, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund’s expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half year. |
25 Invesco Van Kampen Growth and Income Fund
Approval of Investment Advisory and Sub-Advisory Contracts |
The Board of Trustees (the Board) of AIM Counselor Series Trust (Invesco Counselor Series Trust) is required under the Investment Company Act of 1940, as amended, to approve annually the renewal of the Invesco Van Kampen Growth and Income Fund (the Fund) investment advisory agreement with Invesco Advisers, Inc. (Invesco Advisers) and the Master Intergroup Sub-Advisory Contract for Mutual Funds (the sub-advisory contracts) with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers). During contract renewal meetings held on June 14-15, 2011, the Board as a whole, and the disinterested or “independent” Trustees, who comprise 80% of the Board, voting separately, approved the continuance of the Fund’s investment advisory agreement and the sub-advisory contracts for another year, effective July 1, 2011. In doing so, the Board considered the process that it follows in reviewing and approving the Fund’s investment advisory agreement and sub-advisory contracts and the information that it is provided. The Board determined that the Fund’s investment advisory agreement and the sub-advisory contracts are in the best interests of the Fund and its shareholders and the compensation to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is responsible for overseeing the management of a number of the series portfolios of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies and limitations and investment risks of these funds. The Sub-Committees meet regularly and at designated contract renewal meetings each year to conduct a review of the performance, fees, expenses and other matters related to their assigned Invesco Funds. Each Sub-Committee recommends to the Investments Committee, which in turn recommends to the full Board, whether to approve the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Trustees receive comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and an independent company, Lipper, Inc. (Lipper). The Trustees also receive an independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. The independent Trustees are assisted in their annual evaluation of the Fund’s investment advisory agreement by the Senior Officer and by independent legal counsel. The independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in private sessions with the Senior Officer and counsel.
In evaluating the fairness and reasonableness of the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Trustees also considered information provided in connection with fund acquisitions approved by the Trustees to rationalize the Invesco Funds product range following the acquisition of the retail mutual fund business of Morgan Stanley (the Morgan Stanley Transaction). The Trustees recognized that the advisory fees for the Invesco Funds include advisory fees that are the result of years of review and negotiation between the Trustees and Invesco Advisers as well as advisory fees inherited from Morgan Stanley and Van Kampen funds acquired in the Morgan Stanley Transaction. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these same arrangements throughout the year and in prior years. One Trustee may have weighed a particular piece of information differently than another Trustee.
The discussion below serves as the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 15, 2011, and may not reflect consideration of factors that became known to the Board after that date, including, for example, changes to the Fund’s performance, advisory fees, expense limitations and/or fee waivers.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers, with whom the Board met during the year. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s consideration of Invesco Advisers’ performance and investment process oversight, independent credit analysis and investment risk management.
In determining whether to continue the Fund’s investment advisory agreement, the Board considered the prior relationship between Invesco Advisers and the Fund, as well as the Board’s knowledge of Invesco Advisers’ operations, and concluded that it is beneficial to maintain the current relationship, in part, because of such knowledge. The Board also considered services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution and legal and compliance. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and the advisory services are provided in accordance with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services provided by the Affiliated Sub-Advisers under the sub-advisory contracts and the credentials and experience of the officers and employees of the Affiliated Sub-Advisers who provide these services. The Board noted that the Affiliated Sub-Advisers have offices and personnel that are located in financial centers around the world. As a result, the Affiliated Sub-Advisers can provide research and investment analysis on the markets and economies of various countries in which the Fund invests and make recommendations on securities of companies located in such countries. The Board concluded that the sub-advisory contracts benefit the Fund and its shareholders by permitting Invesco Advisers to use the resources and talents of the Affiliated Sub-Advisers in managing the Fund. The Board concluded that the nature, extent and quality of the services provided by the Affiliated Sub-Advisers are appropriate and satisfactory and in accordance with the terms of the Fund’s sub-advisory contracts.
26 Invesco Van Kampen Growth and Income Fund
B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
The Board compared the Fund’s performance during the past one, three and five calendar years to the performance of funds in the Lipper performance universe and against the Lipper Large Cap Value Funds Index. The Board noted that performance of Class A shares of the Fund was in the third quintile of the performance universe for the one year period and the first 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 performance of Class A shares of the Fund was below the performance of the Index for the one year period and above the performance of the Index for the three and five year periods. Although the independent written evaluation of the Fund’s Senior Officer only considered Fund performance through the most recent calendar year, the Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
C. | Advisory and Sub-Advisory Fees and Fee Waivers |
The Board compared the Fund’s contractual advisory fee rate to the contractual advisory fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the contractual advisory fee rate for Class A shares of the Fund was below the median contractual advisory fee rate of funds in the expense group. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using audited financial data from the most recent annual report of each fund in the expense group that was publicly available as of the end of the past calendar year and including only one fund per investment adviser. The Board noted that comparative data is as of varying dates, which may affect the comparability of data during times of market volatility.
The Board also compared the Fund’s effective fee rate (the advisory fee after advisory fee waivers and before expense limitations/waivers) to the advisory fee rates of other mutual funds advised by Invesco Advisers and its affiliates with investment strategies comparable to those of the Fund. The Board noted that the Fund’s rate was below the rate of one mutual fund advised by Invesco Advisers and below the total account level fee of two mutual funds sub-advised by Invesco Advisers with comparable investment strategies..
Other than the mutual funds described above, the Board noted that Invesco Advisers and the Affiliated Sub-Advisers do not manage other mutual funds or client accounts in a manner substantially similar to the management of the Fund.
The Board noted that Invesco Advisers has contractually agreed to waive fees and/or limit expenses of the Fund through at least June 30, 2012 in an amount necessary to limit total annual operating expenses to a specified percentage of average daily net assets for each class of the Fund. The Board noted that at the current expense ratio for the Fund, this expense waiver does not have any impact.
The Board also considered the services provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the allocation of fees between Invesco Advisers and the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board noted that Invesco Advisers provides services to sub-advised Invesco Funds, including oversight of the Affiliated Sub-Advisers as well as the additional services described above other than day-to-day portfolio management. The Board also noted that the sub-advisory fees have no direct effect on the Fund or its shareholders, as they are paid by Invesco Advisers to the Affiliated Sub-Advisers.
Based upon the information and considerations described above, the Board concluded that the Fund’s advisory and sub-advisory fees are fair and reasonable.
D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule. The Board also noted that the 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 Invesco Advisers.
E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the profitability of Invesco Advisers and its affiliates in providing these services. The Board reviewed with Invesco Advisers the methodology used to prepare the profitability information. The Board considered the profitability of Invesco Advisers in connection with managing the Fund and the Invesco Funds. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its subsidiaries provide to the Fund and the Invesco Funds. The Board concluded that the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund is not excessive given the nature, quality and extent of the services provided to the Invesco Funds. The Board considered whether Invesco Advisers and each Affiliated Sub-Adviser are financially sound and have the resources necessary to perform their obligations under the investment advisory agreement and sub-advisory contracts. The Board concluded that Invesco Advisers and each Affiliated Sub-Adviser have the financial resources necessary to fulfill these obligations.
F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund, including the fees received for their provision of administrative, transfer agency and distribution services to the Fund. The Board considered the performance of Invesco Advisers 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 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 Fund; that Invesco Advisers 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; and 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.
The Board considered the benefits realized by Invesco Advisers and the Affiliated Sub-Advisers as a result of portfolio brokerage transactions executed through “soft dollar” arrangements. The Board noted that soft dollar arrangements shift the payment obligation for research and execution services from Invesco Advisers and the Affiliated Sub-Advisers to the Invesco Funds and therefore may reduce Invesco Advisers’ and the Affiliated Sub-Advisers’ expenses. The Board concluded that the soft dollar arrangements are appropriate. The Board also concluded that, based on their review and representations made by the Chief Compliance Officer of the Invesco Funds, these arrangements are consistent with regulatory requirements.
The Board considered that the Fund’s uninvested cash and cash collateral from any securities lending arrangements may be invested in money market funds advised by Invesco Advisers pursuant to procedures approved by the Board. The Board noted that Invesco Advisers receives advisory fees from these affiliated money market funds attributable to such investments, although Invesco Advisers has contractually agreed to waive through varying periods the advisory fees payable by the Invesco Funds. The waiver is in an amount equal to 100% of the net advisory fee Invesco Advisers receives from the affiliated money market funds with respect to the Fund’s investment in the affiliated money market funds of uninvested cash, but not cash collateral. The Board concluded that the Fund’s investment of uninvested cash and cash collateral from any securities lending arrangements in the affiliated money market funds is in the best interests of the Fund and its shareholders.
27 Invesco Van Kampen Growth and Income Fund
Tax Information
Form 1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific state’s requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended August 31, 2011:
Federal and State Income Tax | ||||
Qualified Dividend Income* | 100% | |||
Corporate Dividends Received Deduction* | 100% |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Fund’s fiscal year. |
28 Invesco Van Kampen Growth and Income Fund
Trustees and Officers
The address of each trustee and officer is AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”), 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Number of Funds | ||||||||
in Fund Complex | ||||||||
Name, Year of Birth and | Trustee and/ | Principal Occupation(s) | Overseen by | Other Directorship(s) | ||||
Position(s) Held with the Trust | or Officer Since | During Past 5 Years | Trustee | Held by Trustee | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 — 1960 Trustee | 2007 | 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 | 143 | 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. Taylor2 — 1954 Trustee, President and Principal Executive Officer | 2006 | 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 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 Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust); Trustee and Executive Vice President, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s 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 Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Tax-Free Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. | 143 | None | ||||||
Wayne W. Whalen3 — 1939 Trustee | 2010 | Of Counsel, and prior to 2010, partner in the law firm of Skadden, Arps, Slate, Meagher & Flom LLP, legal counsel to funds in the Fund Complex | 161 | Director of the Abraham Lincoln Presidential Library Foundation | ||||
Independent Trustees | ||||||||
Bruce L. Crockett — 1944 Trustee and Chair | 2003 | Chairman, Crockett Technology Associates (technology consulting company) Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer COMSAT Corporation; and Chairman, Board of Governors of INTELSAT (international communications company) | 143 | ACE Limited (insurance company); and Investment Company Institute | ||||
1 | Mr. Flanagan is considered an interested person of the Trust because he is an officer of the adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the adviser to the Trust. |
2 | Mr. Taylor is considered an interested person of the Trust because he is an officer and a director of the adviser to, and a director of the principal underwriter of, the Trust. |
3 | Mr. Whalen has been deemed to be an interested person of the Trust because of his prior service as counsel to the predecessor funds of certain Invesco open-end funds and his affiliation with the law firm that served as counsel to such predecessor funds and continues to serve as counsel to the Invesco Van Kampen closed-end funds. |
T-1 Invesco Van Kampen Growth and Income Fund
Trustees and Officers—(continued)
The address of each trustee and officer is AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”), 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Number of Funds | ||||||||
in Fund Complex | ||||||||
Name, Year of Birth and | Trustee and/ | Principal Occupation(s) | Overseen by | Other Directorship(s) | ||||
Position(s) Held with the Trust | or Officer Since | During Past 5 Years | Trustee | Held by Trustee | ||||
Independent Trustees | ||||||||
David C. Arch — 1945 Trustee | 2010 | Chairman and Chief Executive Officer of Blistex Inc., a consumer health care products manufacturer. | 161 | 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 | ||||
Bob R. Baker — 1936 Trustee | 1983 | Retired | 143 | None | ||||
Formerly: President and Chief Executive Officer, AMC Cancer Research Center; and Chairman and Chief Executive Officer, First Columbia Financial Corporation | ||||||||
Frank S. Bayley — 1939 Trustee | 2003 | Retired Formerly: Director, Badgley Funds, Inc. (registered investment company) (2 portfolios) and Partner, law firm of Baker & McKenzie | 143 | Director and Chairman, C.D. Stimson Company (a real estate investment company) | ||||
James T. Bunch — 1942 Trustee | 2000 | 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 | 143 | Vice Chairman, Board of Governors, Western Golf Association/Evans Scholars Foundation and Director, Denver Film Society | ||||
Rodney Dammeyer — 1940 Trustee | 2010 | President 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. | 161 | 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 | 2003 | 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) | 161 | Board of Nature’s 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 | 2003 | 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) | 143 | Administaff | ||||
Formerly: Chief Executive Officer, Texana Timber LP (sustainable forestry company) and member of the U.S. House of Representatives | ||||||||
Carl Frischling — 1937 Trustee | 2003 | Partner, law firm of Kramer Levin Naftalis and Frankel LLP | 143 | Director, Reich & Tang Funds (6 portfolios) | ||||
Prema Mathai-Davis — 1950 Trustee | 2003 | Retired | 143 | None | ||||
Formerly: Chief Executive Officer, YWCA of the U.S.A. | ||||||||
Larry Soll — 1942 Trustee | 1997 | Retired | 143 | None | ||||
Formerly, Chairman, Chief Executive Officer and President, Synergen Corp. (a biotechnology company) | ||||||||
T-2 Invesco Van Kampen Growth and Income Fund
Trustees and Officers—(continued)
The address of each trustee and officer is AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”), 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Number of Funds | ||||||||
in Fund Complex | ||||||||
Name, Year of Birth and | Trustee and/ | Principal Occupation(s) | Overseen by | Other Directorship(s) | ||||
Position(s) Held with the Trust | or Officer Since | During Past 5 Years | Trustee | Held by Trustee | ||||
Independent Trustees | ||||||||
Hugo F. Sonnenschein — 1940 Trustee | 2010 | President Emeritus and Honorary Trustee 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. | 161 | 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 | 2005 | Retired Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios) and Partner, Deloitte & Touche | 143 | None | ||||
Other Officers | ||||||||
Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer of Invesco Funds | N/A | N/A | ||||
John M. Zerr — 1962 Senior Vice President, Chief Legal Officer and Secretary | 2006 | 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 | N/A | N/A | ||||
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) | ||||||||
Lisa O. Brinkley — 1959 Vice President | 2004 | Global Compliance Director, Invesco Ltd.; Chief Compliance Officer, Invesco Investment Services, Inc.(formerly known as Invesco Aim Investment Services, Inc.); and Vice President, The Invesco Funds Formerly: Chief Compliance Officer, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) and Van Kampen Investor Services Inc.; Senior Vice President, Invesco Management Group, Inc.; Senior Vice President and Chief Compliance Officer, Invesco Advisers, Inc. and The Invesco Funds; Vice President and Chief Compliance Officer, Invesco Aim Capital Management, Inc. and Invesco Distributors, Inc.; Vice President, Invesco Investment Services, Inc. and Fund Management Company | N/A | N/A | ||||
Sheri Morris — 1964 Vice President, Treasurer and Principal Financial Officer | 2003 | 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) | N/A | N/A | ||||
Formerly: 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, 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. | ||||||||
T-3 Invesco Van Kampen Growth and Income Fund
Trustees and Officers—(continued)
The address of each trustee and officer is AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”), 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Number of Funds | ||||||||
in Fund Complex | ||||||||
Name, Year of Birth and | Trustee and/ | Principal Occupation(s) | Overseen by | Other Directorship(s) | ||||
Position(s) Held with the Trust | or Officer Since | During Past 5 Years | Trustee | Held by Trustee | ||||
Other Officers | ||||||||
Karen Dunn Kelley — 1960 Vice President | 2003 | Head of Invesco’s 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 Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust); and President and Principal Executive Officer, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust only). | N/A | N/A | ||||
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 Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Tax-Free Investments Trust only) | ||||||||
Lance A. Rejsek — 1967 Anti-Money Laundering Compliance Officer | 2005 | 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.), The Invesco Funds, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management) and Van Kampen Funds Inc. | N/A | N/A | ||||
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Investor Services Inc., Fund Management Company, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc. | ||||||||
Todd L. Spillane — 1958 Chief Compliance Officer | 2006 | 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, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, INVESCO Private Capital Investments, Inc. (holding company) and Invesco Private Capital, Inc. (registered investment adviser); Vice President, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.), Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.). Formerly: 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 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 | N/A | N/A | ||||
The Statement of Additional Information of the Trust includes additional information about the Fund’s Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Fund’s prospectus for information on the Fund’s sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 2500 Houston, TX 77046-1173 | Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 | Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 2500 Houston, TX 77046-1173 | Auditors PricewaterhouseCoopers LLP 1201 Louisiana Street, Suite 2900 Houston, TX 77002-5678 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2600 One Commerce Square Philadelphia, PA 19103 | Counsel to the Independent Trustees Kramer, Levin, Naftalis & Frankel LLP 1177 Avenue of the Americas New York, NY 10036-2714 | Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 2500 Houston, TX 77046-1173 | Custodian State Street Bank and Trust Company 225 Franklin Boston, MA 02110-2801 |
T-4 Invesco Van Kampen Growth and Income Fund
![(IMAGE)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8466312.gif)
Invesco mailing information
Send general correspondence to Invesco Investment Services, Inc., P.O. Box 219078, Kansas City, MO 64121-9078.
Invesco privacy policy
You share personal and financial information with us that is necessary for your transactions and your account records. We take very seriously the obligation to keep that information confidential and private.
Invesco collects nonpublic personal information about you from account applications or other forms you complete and from your transactions with us or our affiliates. We do not disclose information about you or our former customers to service providers or other third parties except to the extent necessary to service your account and in other limited circumstances as permitted by law. For example, we use this information to facilitate the delivery of transaction confirmations, financial reports, prospectuses and tax forms.
Even within Invesco, only people involved in the servicing of your accounts and compliance monitoring have access to your information. To ensure the highest level of confidentiality and security, Invesco maintains physical, electronic and procedural safeguards that meet or exceed federal standards. Special measures, such as data encryption and authentication, apply to your communications with us on our website. More detail is available to you at invesco.com/privacy.
Important notice regarding delivery of security holder documents
To reduce Fund expenses, only one copy of most shareholder documents may be mailed to shareholders with multiple accounts at the same address (Householding). Mailing of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact Invesco Investment Services, Inc. at 800 959 4246 or contact your financial institution. We will begin sending you individual copies for each account within 30 days after receiving your request.
Fund holdings and proxy voting information
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is available at invesco.com/completeqtrholdings. Shareholders can also look up the Fund’s Forms N-Q on the SEC website at sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-09913 and 333-36074.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov.
![(INVESCO LOGO)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8466313.gif)
Information regarding how the Fund voted proxies related to its portfolio securities during the 12 months ended June 30, 2011, is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov.
Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the U.S. distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
VK-GRI-AR-1 | Invesco Distributors, Inc. |
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Annual Report to Shareholders | August 31, 2011 |
Invesco Van Kampen Pennsylvania Tax Free Income Fund
Nasdaq:
A: VKMPX n B: VKPAX n C: VKPCX n Y: VKPYX
A: VKMPX n B: VKPAX n C: VKPCX n Y: VKPYX
2 | Letters to Shareholders | |
4 | Performance Summary | |
4 | Management Discussion | |
6 | Long-Term Fund Performance | |
8 | Supplemental Information | |
9 | Schedule of Investments | |
14 | Financial Statements | |
16 | Notes to Financial Statements | |
23 | Financial Highlights | |
24 | Auditor's Report | |
25 | Fund Expenses | |
26 | Approval of Investment Advisory and Sub-Advisory Agreements | |
28 | Tax Information | |
T-1 | Trustees and Officers |
Letters to Shareholders
![(PHOTO OF PHILIP TAYLOR)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8466402.jpg)
Philip Taylor
Dear Shareholders:
Enclosed is important information about your Fund and its performance. I encourage you to read this report to learn more about your Fund’s short- and long-term performance and its holdings as of the close of the reporting period. This report also includes useful information about your Fund’s management team and a discussion of how your Fund was managed during the reporting period.
Data indicated that economic growth in the U.S. and most of Europe was anemic during the reporting period. In the U.S., unemployment remained high, and the housing market remained weak. Concerns about European sovereign debt persisted. Nonetheless, equity markets rose in late 2010 and early 2011 as investors anticipated better news ahead. But contentious negotiations to raise the U.S. government’s debt ceiling heightened investor unease, and following the first-ever downgrade of U.S. creditworthiness in August, global stock markets declined as many investors sought safer havens.
Where you can get current information about your Fund
In light of economic uncertainty and market volatility, I suggest you check the timely market updates and commentary from many of our fund managers and other investment professionals at invesco.com/us. On our website, you also can obtain information about your account at any hour of the day or night. I invite you to visit and explore the tools and information we offer at invesco.com/us.
Our commitment to investment excellence
As we’ve seen over the last several years, market conditions can change – often suddenly and dramatically. That’s one reason financial advisers typically advise their clients to be well diversified and to maintain a long-term investment focus. While diversification can’t guarantee a profit or protect against loss, it can cushion the impact of dramatic market moves. Maintaining a long-term investment focus for your long-term goals – financing your retirement or your children’s education, for example – may help you avoid making rash investment decisions based on short-term market swings.
Invesco’s investment professionals apply these same principles to the funds they manage.
Invesco offers a broad array of traditional mutual funds, as well as other investment products, including single-country, sector, regional and global investments spanning equity, fixed income and alternative asset classes. Across our product line, investment excellence is our ultimate goal. Each of our funds is managed by specialized teams of investment professionals, and as a company, we maintain a single focus – investment management – that allows our fund managers to concentrate on doing what they do best: managing your money.
Our funds are managed strictly according to their stated investment objectives and strategies, with robust risk oversight using consistent, repeatable investment processes that don’t change in response to short-term market events. This disciplined approach can’t guarantee a profit; no investment can do that, since all involve some measure of risk. But it can ensure that your money is managed the way we said it would be, and that it’s managed with a long-term focus.
Our adherence to stated investment objectives and strategies allows your financial adviser to build a diversified portfolio that meets your individual risk tolerance and financial goals. It also means that when your goals change, your financial adviser will be able to find an Invesco fund that’s appropriate for your needs.
Questions?
If you have questions about your account, please contact one of our client service representatives at 800 959 4246. If you have a general Invesco-related question or comment for me, I invite you to email me directly at phil@invesco.com.
All of us at Invesco look forward to serving your investment management needs for many years to come. Thank you for investing with us.
Sincerely,
![-s- Philip Taylor](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8466403.gif)
Philip Taylor
Senior Managing Director, Invesco Ltd.
Senior Managing Director, Invesco Ltd.
2 Invesco Van Kampen Pennsylvania Tax Free Income Fund
![(PHOTO OF BRUCE CROCKETT)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8466404.jpg)
Bruce Crockett
Dear Fellow Shareholders:
Although the world’s economies are gradually recovering from the financial crisis, it has not been a smooth path. Unrest in the Middle East, persistently weak job and housing markets in the U.S. and continued government balance sheet repair in Europe are contributing to a slow, labored march toward global recovery.
In this environment, investors face risks that could make it more difficult to achieve their long-term financial goals – a secure retirement, home ownership, a child’s college education. Although the markets are complex and dynamic, there are ways to simplify the process and potentially increase your odds of achieving your goals. The best approach is to create a solid financial plan that helps you save and invest in ways that anticipate your needs over the long term.
Your financial adviser can help you define your financial plan, develop an appropriate investment strategy and put you in a better position to achieve your financial goals over the long term. This can take some of the guesswork out of the process and help you make thoughtful investments. Your financial adviser also can help you better understand your tolerance for risk, so that your investment approach lets you sleep at night while getting you closer to your goals. Lastly, your financial adviser can develop an asset allocation strategy that seeks to balance your investment approach, providing some protection against a decline in the markets while allowing you to participate in rising markets. Invesco calls this type of approach “intentional investing.” It means thinking carefully, planning thoughtfully and acting deliberately.
While no investment can guarantee favorable returns, your Board remains committed to managing costs and enhancing the performance of Invesco’s funds as part of our Investor First orientation. We continue to oversee the funds with the same strong sense of responsibility for your money and your continued trust that we’ve always maintained.
Thanks to the approval of our fund shareholders, Invesco has made great progress in realigning our U.S. mutual fund product line following our acquisition of Morgan Stanley’s retail asset management business, including Van Kampen Investments. When completed, the realignment will reduce overlap in the product lineup, enhance efficiency across our product line and build a solid foundation for further growth to meet client and shareholder needs. I would like to thank those of you who voted your proxy, and I hope our shareholders haven’t been too inconvenienced by the process.
As always, please contact me at bruce@brucecrockett.com with any questions or concerns you may have. On behalf of your Board, we look forward to continuing to represent your interests and serving your needs.
Sincerely,
![-s- Bruce L. Crockett](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8466405.gif)
Bruce L. Crockett
Independent Chair
Independent Chair
Invesco Funds Board of Trustees
3 Invesco Van Kampen Pennsylvania Tax Free Income Fund
Management’s Discussion of Fund Performance
Performance summary
All share classes of Invesco Van Kampen Pennsylvania Tax Free Income Fund at net asset value (NAV) posted positive returns for the 12-month reporting period ended August 31, 2011. The Fund at NAV underperformed its broad market benchmark, the Barclays Capital Municipal Bond Index, and its style-specific benchmark, the Barclays Capital Pennsylvania Municipal Index. The Fund’s significant underweight exposures in the state and local general obligation sectors were the main detractors from relative performance versus the Barclays Capital Pennsylvania Municipal Index for the reporting period.
Your Fund’s long-term performance appears later in this report.
Fund vs. Indexes
Total returns, 8/31/10 to 8/31/11, at net asset value (NAV). Performance shown does not include applicable contingent deferred sales charges (CDSC) or front-end sales charges, which would have reduced performance.
Class A Shares | 1.58 | % | ||
Class B Shares | 1.68 | |||
Class C Shares | 0.89 | |||
Class Y Shares | 1.84 | |||
Barclays Capital Municipal Bond Index▼ (Broad Market Index) | 2.66 | |||
Barclays Capital Pennsylvania Municipal Index■ (Style-Specific Index) | 2.65 | |||
▼Lipper Inc.; ■ Barclays Capital via FactSet Research Systems Inc. |
How we invest
Our investment objective is to provide only Pennsylvania investors with a high level of current income exempt from federal and Pennsylvania state income taxes and, where possible under local law, local income and personal property taxes, through investments primarily in a varied portfolio of medium- and lower grade municipal securities.
Though we seek to invest primarily in medium- and lower grade securities, at times the conditions in Pennsylvania municipal markets may be such that the Fund may invest in higher grade securities. These investments may lessen the decline in the NAV of the Fund but also may affect the amount of current income since yields
on higher grade securities are usually lower than yields on medium- or lower grade securities. As a result, we will not necessarily invest in the highest yielding Pennsylvania municipal securities permitted by our investment policies depending on market conditions or if we determine that market risks or credit risks associated with such investments would subject the Fund’s portfolio to undue risk.
The Fund’s investment in medium- and lower grade securities involves special risks as compared to investment in higher grade securities. Lower grade securities are commonly referred to as junk bonds and involve greater risks than investments in higher grade securities. We generally do not purchase securities that are in default
Portfolio Composition
By credit sector, based on total investments
Revenue Bonds | 89.3 | % | ||
General Obligation Bonds | 10.4 | |||
Pre-refunded Bonds | 0.3 |
Total Net Assets | $143.3 million | |||
Total Number of Holdings | 121 |
The Fund’s holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
Top 10 Fixed Income Issuers
1. | Philadelphia (City of) | |||||||
Municipal Authority | 5.6 | % | ||||||
2. | Philadelphia (City of) | |||||||
Industrial Development Authority | 4.8 | |||||||
3. | Philadelphia (City of) | 4.5 | ||||||
4. | Pennsylvania (State of) | |||||||
Turnpike Commission | 4.1 | |||||||
5. | Delaware (County of) | |||||||
Valley Regional Airport Authority | 3.5 | |||||||
6. | Pennsylvania (State of) Higher | |||||||
Educational Facilities Authority | 3.4 | |||||||
7. | Susquehanna Area Regional | |||||||
Airport Authority | 3.2 | |||||||
8. | Pennsylvania (State of) Economic | |||||||
Development Financing Authority | 3.0 | |||||||
9. | Montgomery (County of) Industrial | |||||||
Development Authority | 2.9 | |||||||
10. | Delaware (County of) Industrial | |||||||
Development Authority | 2.8 |
or rated in categories lower than B- by Standard and Poor’s or B3 by Moody’s Investors Service, Inc. or unrated securities of comparable quality.1 Under normal market conditions, the Fund may invest up to 20% of its total assets in municipal securities that are subject to the federal alternative minimum tax.
We actively manage the Fund’s portfolio and adjust the average maturity of portfolio investments based on expectations about the direction of interest rates and other economic factors. We select securities that we believe offer higher yields with reasonable credit risk considered in relation to the investment policies of the Fund. In selecting securities for investment, we use our research capabilities to assess potential investments and consider a number of factors, including general market and economic conditions and credit, interest rate and prepayment risks.
Portfolio securities are typically sold when our assessment of any of these factors materially changes.
Market conditions and your Fund
Market conditions during the 12-month period covered by this report were plagued by the continuation of a lacklus-ter recovery, with most major central banks keeping interest rates at low levels. The European Central Bank was the only major central bank to raise rates in an attempt to mitigate commodity-based increases in inflation. Investor skepticism of global governments’ abilities to retire huge amounts of debt without affecting economic growth rates caused sovereign debt distress (particularly for Greece and other southern eurozone countries) and remained a focal point of investor concern. Prices of oil and commodities soared as political unrest plagued the Middle East/North Africa region. Meanwhile in Japan, natural disasters disrupted supply chains globally.
In the U.S., economic recovery remained modest, as weak labor market conditions and elevated unemployment rates continued to weigh on the U.S. economy. Real gross domestic product (GDP), the broadest measure of overall U.S. economic activity, increased at an annual rate of 1.3% in the second quarter of 2011.2 In the first quarter, real GDP increased 0.4%.2 To promote spending, the U.S. Federal Reserve (the Fed) implemented a second round of quantitative easing (QE2) from November 2010 to June 2011. This was augmented by a fiscal stimulus package agreed on
4 Invesco Van Kampen Pennsylvania Tax Free Income Fund
between the Obama administration and Congress in December. However, continued concerns over the federal government’s balance sheet led most rating agencies to revise their U.S. debt outlooks to negative, and Standard & Poor’s to lower its rating on long-term U.S. debt. The Fed announced its intention to keep the federal funds target rate unchanged in a range of zero to 0.25%.3 At the August 2011 Federal Open Market Committee meeting, the Fed indicated that rates would likely be kept low for a long period of time, stating, “The Committee currently anticipates that economic conditions – including low rates of resource utilization and a subdued outlook for inflation over the medium run – are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.“3
Historically, the state of Pennsylvania has a record of good financial management and budgetary balances over the years with a well-controlled debt position. With the slowdown in the economy, the state continued to face challenges due to its below average income and a continuing loss of manufacturing jobs. The state’s 2011–2012 budget outlined intended cuts in spending by 4.1% from 2008–2009 levels. We continue to monitor the state’s economic health and look for opportunities in more stable sectors within the state.
During the 12-month period covered by this report, municipal bond mutual funds experienced mostly outflows. Market volatility was heightened across the municipal asset class as U.S. Treasury yields increased, and the market was flooded with new issuance during the last two months of 2010 in anticipation of the end of the Build America Bonds program. Supply/demand dynamics turned positive in 2011 as the increased yields attracted crossover buyers while supply levels remained low at about 50% of 2010’s levels, causing upward pressure on prices and a gradual drop in yields.4 Also during the period, concerns over the dire default predictions at the end of 2010 became subdued as state tax collections increased for the sixth consecutive quarter.5
During the reporting period, lower rated tax-exempt bonds experienced greater price increases relative to their higher rated counterparts. Strong security selection among unrated bonds was a main contributor to Fund performance for the period. An overweight exposure to – and favorable security selection in – lower-rated bonds also contributed to returns.
In terms of yield curve positioning, longer dated debt holdings hindered performance relative to the Barclays Capital Pennsylvania Municipal Index. The Fund benefited from its duration positioning at the short end of the curve, given the lower sensitivity to interest rate movements. Some of our yield curve and duration positioning was obtained through the use of inverse floating rate securities, which are instruments that have an inverse relationship to a referenced interest rate. Inverse floating rate securities can be a more efficient means of managing duration, yield curve exposure and credit exposure, and potentially can enhance yields.
At a sector level, securities in the dedicated tax sector were the main contributors to Fund performance. Security selection in the water/sewer sector was also a positive contributor. The Fund’s significant underweight allocation to the state and local general obligation sectors was the primary detractor from Fund performance for the reporting period.
Thank you for investing in Invesco Van Kampen Pennsylvania Tax Free Income Fund and for sharing our long-term investment horizon.
1 | A credit rating is an assessment provided by a nationally recognized statistical rating organization (NRSRO) of the creditworthiness of an issuer with respect to debt obligations, including specific securities, money market instruments or other debts. Ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest); ratings are subject to change without notice. For more information on rating methodologies, please visit the following NRSRO websites: standardandpoors.com and select “Understanding Ratings” under Rating Resources on the homepage; moodys.com and select “Rating Methodologies” under Research and Ratings on the homepage. | |
2 | Bureau of Economic Analysis | |
3 | U.S. Federal Reserve | |
4 | Securities Industry and Financial Markets Association | |
5 | Nelson A. Rockefeller Institute of Government |
The views and opinions expressed in management’s discussion of Fund performance are those of Invesco Advisers, Inc. These views and opinions are subject to change at any time based on factors such as market and economic conditions. These views and opinions may not be relied upon as investment advice or recommendations, or as an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but Invesco Advisers, Inc. makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
See important Fund and, if applicable, index disclosures later in this report.
![(PHOTO OF THOMAS BYRON)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8466406.jpg)
Thomas Byron
Portfolio manager, is manager of Invesco Van Kampen Pennsylvania Tax Free Income Fund. Mr. Byron joined Invesco in 2010. He earned a B.S. in finance from Marquette University and an M.B.A. in finance from DePaul University.
![(PHOTO OF ROBERT STRYKER)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8466407.jpg)
Robert Stryker
Chartered Financial Analyst, portfolio manager, is manager of Invesco Van Kampen Pennsylvania Tax Free Income Fund. Mr. Stryker joined Invesco in 2010. He earned a B.S. in finance from the University of Illinois, Chicago.
![(PHOTO OF STEPHEN TURMAN)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8466408.jpg)
Stephen Turman
Chartered Financial Analyst, portfolio manager, is manager of Invesco Van Kampen Pennsylvania Tax Free Income Fund. Mr. Turman joined Invesco in 1985. He earned a B.B.A. in finance from the University of Texas at Arlington.
![(PHOTO OF JULIUS WILLIAMS)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8466409.jpg)
Julius Williams
Portfolio manager, is manager of Invesco Van Kampen Pennsylvania Tax Free Income Fund. Mr. Williams joined Invesco in 2010. He earned a B.A. in economics and sociology and a Master of Education degree in educational psychology from the University of Virginia.
![(PHOTO OF ROBERT WIMMEL)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8466410.jpg)
Robert Wimmel
Portfolio manager, is manager of Invesco Van Kampen Pennsylvania Tax Free Income Fund. Mr. Wimmel joined Invesco in 2010. He earned a B.A. in anthropology from the University of Cincinnati and an M.A. in economics from the University of Illinois, Chicago.
Portfolio manager, is manager of Invesco Van Kampen Pennsylvania Tax Free Income Fund. Mr. Wimmel joined Invesco in 2010. He earned a B.A. in anthropology from the University of Cincinnati and an M.A. in economics from the University of Illinois, Chicago.
5 Invesco Van Kampen Pennsylvania Tax Free Income Fund
Your Fund’s Long-Term Performance
Results of a $10,000 Investment – Oldest Share Class since Inception
Index data from 4/30/87, Fund data from 5/1/87
![(PERFORMANCE GRAPH)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8466411.gif)
Past performance cannot guarantee comparable future results.
The data shown in the chart include reinvested distributions, applicable sales charges and Fund expenses including management fees. Index results include reinvested dividends, but they do not reflect sales charges. Performance of the peer group, if applicable, reflects fund expenses and management fees; performance of a market index does
not. Performance shown in the chart above and before tax table(s) does not reflect deduction of taxes a shareholder would pay on Fund distributions or sale of Fund shares.
This chart, which is a logarithmic chart, presents the fluctuations in the value of the Fund and its indexes. We believe that a logarithmic chart is more effective than other types of charts in illustrating changes in value during the early years
shown in the chart. The vertical axis, the one that indicates the dollar value of an investment, is constructed with each segment representing a percent change in the value of the investment. In this chart, each segment represents a doubling, or 100% change, in the value of the investment. In other words, the space between $5,000 and $10,000 is the same size as the space between $10,000 and $20,000, and so on.
continued from page 8
Other information
n | The Chartered Financial Analyst® (CFA®) designation is globally recognized and attests to a charterholder’s success in a rigorous and comprehensive study program in the field of investment management and research analysis. |
n | The returns shown in management’s discussion of Fund performance are based on net asset values calculated for shareholder transactions. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes, and as |
such, the net asset values for shareholder transactions and the returns based on those net asset values may differ from the net asset values and returns reported in the Financial Highlights. |
6 Invesco Van Kampen Pennsylvania Tax Free Income Fund
Average Annual Total Returns
As of 8/31/11, including maximum applicable sales charges
After Taxes | ||||||||||||||||
After Taxes | on Distributions | |||||||||||||||
Before | on | and Sale of | ||||||||||||||
Taxes | Distributions | Fund Shares | ||||||||||||||
Class A Shares | ||||||||||||||||
Inception (5/1/87) | 5.77 | % | 5.75 | % | 5.77 | % | ||||||||||
10 | Years | 3.11 | 3.09 | 3.26 | ||||||||||||
5 | Years | 1.87 | 1.85 | 2.21 | ||||||||||||
1 | Year | -3.23 | -3.23 | -0.69 | ||||||||||||
Class B Shares | ||||||||||||||||
Inception (5/3/93) | 4.08 | % | 4.06 | % | 4.13 | % | ||||||||||
10 | Years | 3.06 | 3.04 | 3.16 | ||||||||||||
5 | Years | 2.13 | 2.11 | 2.38 | ||||||||||||
1 | Year | -3.21 | -3.21 | -0.73 | ||||||||||||
Class C Shares | ||||||||||||||||
Inception (8/13/93) | 3.51 | % | 3.50 | % | 3.58 | % | ||||||||||
10 | Years | 2.88 | 2.85 | 2.97 | ||||||||||||
5 | Years | 2.11 | 2.09 | 2.32 | ||||||||||||
1 | Year | -0.08 | -0.08 | 1.16 | ||||||||||||
Class Y Shares | ||||||||||||||||
10 | Years | 3.65 | % | 3.63 | % | 3.75 | % | |||||||||
5 | Years | 2.95 | 2.92 | 3.15 | ||||||||||||
1 | Year | 1.84 | 1.84 | 2.76 |
Average Annual Total Returns
As of 6/30/11, the most recent calendar quarter-end, including maximum applicable sales charges
After Taxes | ||||||||||||||||
After Taxes | on Distributions | |||||||||||||||
Before | on | and Sale of | ||||||||||||||
Taxes | Distributions | Fund Shares | ||||||||||||||
Class A Shares | ||||||||||||||||
Inception (5/1/87) | 5.71 | % | 5.69 | % | 5.71 | % | ||||||||||
10 | Years | 3.17 | 3.15 | 3.33 | ||||||||||||
5 | Years | 1.87 | 1.85 | 2.22 | ||||||||||||
1 | Year | -2.43 | -2.43 | -0.11 | ||||||||||||
Class B Shares | ||||||||||||||||
Inception (5/3/93) | 3.98 | % | 3.96 | % | 4.05 | % | ||||||||||
10 | Years | 3.09 | 3.07 | 3.20 | ||||||||||||
5 | Years | 2.09 | 2.07 | 2.35 | ||||||||||||
1 | Year | -2.46 | -2.46 | -0.20 | ||||||||||||
Class C Shares | ||||||||||||||||
Inception (8/13/93) | 3.41 | % | 3.40 | % | 3.49 | % | ||||||||||
10 | Years | 2.93 | 2.91 | 3.04 | ||||||||||||
5 | Years | 2.11 | 2.08 | 2.33 | ||||||||||||
1 | Year | 0.74 | 0.74 | 1.75 | ||||||||||||
Class Y Shares | ||||||||||||||||
10 | Years | 3.71 | % | 3.69 | % | 3.81 | % | |||||||||
5 | Years | 2.93 | 2.91 | 3.15 | ||||||||||||
1 | Year | 2.74 | 2.74 | 3.41 |
Effective June 1, 2010, Class A, Class B and Class C shares of the predecessor fund, Van Kampen Pennsylvania Tax Free Income Fund, advised by Van Kampen Asset Management were reorganized into Class A, Class B and Class C shares, respectively, of Invesco Van Kampen Pennsylvania Tax Free Income Fund. Returns shown above for Class A, Class B and Class C shares are blended returns of the predecessor fund and Invesco Van Kampen Pennsylvania Tax Free Income Fund. Share class returns will differ from the predecessor fund because of different expenses.
Class Y shares incepted on June 1, 2010. Performance shown prior to that date is that of the predecessor fund’s Class A shares and includes the 12b-1 fees applicable to Class A shares. Class A share performance reflects any applicable fee waivers or expense reimbursements.
The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Please visit
invesco.com/performance for the most recent month-end performance. Performance figures reflect reinvested distributions, changes in net asset value and the effect of the maximum sales charge unless otherwise stated. Investment return and principal value will fluctuate so that you may have a gain or loss when you sell shares.
The total annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Class A, Class B, Class C and Class Y shares was 1.08%, 1.57%, 1.83% and 0.83%, respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.
Class A share performance reflects the maximum 4.75% sales charge, and Class B and Class C share performance reflects the applicable contingent deferred sales charge (CDSC) for the period involved. For shares purchased prior to June 1, 2010, the CDSC on Class B shares declines from 4% at the
time of purchase to 0% at the beginning of the seventh year. For shares purchased on or after June 1, 2010, the CDSC on Class B shares declines from 5% at the time of purchase to 0% at the beginning of the seventh year. The CDSC on Class C shares is 1% for the first year after purchase. Class Y shares do not have a front-end sales charge or a CDSC; therefore, performance is at net asset value.
The performance of the Fund’s share classes will differ primarily due to different sales charge structures and class expenses.
After-tax returns are calculated using the historical highest individual federal marginal income tax rate. They do not reflect the effect of state and local taxes. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their shares in tax-deferred accounts such as 401(k)s or IRAs. The Fund’s past performance, before and after taxes, is not necessarily an indication of how the Fund will perform in the future.
7 Invesco Van Kampen Pennsylvania Tax Free Income Fund
Invesco Van Kampen Pennsylvania Tax Free Income Fund’s investment objective is to provide only Pennsylvania investors with a high level of current income exempt from federal and Pennsylvania state income taxes and, where possible under local law, local income and personal property taxes, through investment primarily in a varied portfolio of medium- and lower-grade municipal securities.
n | Unless otherwise stated, information presented in this report is as of August 31, 2011, and is based on total net assets. | |
n | Unless otherwise noted, all data provided by Invesco. | |
n | To access your Fund’s reports/prospectus, visit invesco.com/fundreports. |
About share classes
n | Class B shares may not be purchased or acquired by exchange from share classes other than Class B shares. Please see the prospectus for more information. | |
n | Class Y shares are available to only certain investors. Please see the prospectus for more information. |
Principal risks of investing in the Fund
n | Active trading risk. The Fund may engage in frequent trading of portfolio securities. Active trading results in added expenses and may result in a lower return and increased tax liability. | |
n | Market risk. Market risk is the possibility that the market values of securities owned by the Fund will decline. Investments in debt securities generally are affected by changes in interest rates and the creditworthiness of the issuer. The prices of debt securities tend to fall as interest rates rise, and such declines tend to be greater among debt securities with longer maturities. As interest rates change, zero coupon bonds or pay-in-kind securities often fluctuate more in price than traditional debt securities. | |
n | Credit risk. Credit risk refers to an issuer’s ability to make timely payments of interest and principal. The credit quality of noninvestment-grade securities is considered speculative by recognized rating agencies with respect to the issuer’s continuing ability to pay interest and principal. Lower-grade securities (also sometimes known as junk bonds) may have less liquidity and a higher incident of default than higher-grade securities. The Fund may incur higher expenses to protect the Fund’s interest in such securities. The credit risks and market prices of medium- and lower-grade securities, especially those with longer maturities or those that do not make regular interest payment, generally are more |
sensitive to negative issuer developments or adverse economic conditions and may be more volatile than are higher-grade securities. | ||
n | 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 drop, your income from the Fund may drop as well. To the extent that the Adviser invests in higher-grade securities at times, the amount of current income from such securities may be lower than the income from medium- and lower-grade securities. | |
n | Call risk. If interest rates fall, it is possible that issuers of debt 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 Fund’s income and distributions to shareholders. | |
n | Municipal securities risk. Under normal market conditions, the Fund invests primarily in municipal securities. The yields of municipal securities may move differently and adversely compared to the yields of the overall debt securities markets. The Fund may invest up to 20% of its total assets in municipal securities subject to the federal alternative minimum tax. There could be changes in applicable tax laws or tax treatments that adversely affect the current federal or state tax status of municipal securities. | |
n | State-specific risks. The Fund is more susceptible to political, economic, regulatory or other factors affecting issuers of Pennsylvania municipal securities than a fund that does not limit its investments to such issuers. | |
n | Risks of using derivative Instruments. Risks of derivatives include imperfect correlation between the value of the instruments and the underlying assets; risks of default by the other party to |
certain transactions; risks that the transactions may result in losses that partially or completely offset gains in portfolio positions; and risks that the transactions may not be liquid. | ||
n | Small- and mid-capitalization risk. Stocks of small and mid sized companies tend to be more vulnerable to adverse developments in the above factors and may have little or no operating history or track record of success, and limited product lines, markets, management and financial resources. The securities of small and mid sized companies may be more volatile due to less market interest and less publicly available information about the issuer. They also may be illiquid or restricted as to resale, or may trade less frequently and in smaller volumes, all of which may cause difficulty when establishing or closing a position at a desirable price. | |
n | Alternative minimum tax. The Fund may invest up to 20% of its total assets in securities subject to the federal alternative minimum tax. |
About indexes used in this report
n | The Barclays Capital Municipal Bond Index is an unmanaged index considered representative of the tax-exempt bond market. | |
n | The Barclays Capital Pennsylvania Municipal Index is an index of Pennsylvania investment grade municipal bonds. | |
n | The Fund is not managed to track the performance of any particular index, including the index(es) defined here, and consequently, the performance of the Fund may deviate significantly from the performance of the index(es). | |
n | A direct investment cannot be made in an index. Unless otherwise indicated, index results include reinvested dividends, and they do not reflect sales charges. Performance of the peer group, if applicable, reflects fund expenses; performance of a market index does not. |
continued on page 6
This report must be accompanied or preceded by a currently effective Fund prospectus, which contains more complete information, including sales charges and expenses. Investors should read it carefully before investing.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
Fund Nasdaq Symbols
Class A Shares | VKMPX | |||
Class B Shares | VKPAX | |||
Class C Shares | VKPCX | |||
Class Y Shares | VKPYX |
8 Invesco Van Kampen Pennsylvania Tax Free Income Fund
Schedule of Investments
August 31, 2011
Principal | ||||||||||||||||
Interest | Maturity | Amount | ||||||||||||||
Rate | Date | (000) | Value | |||||||||||||
Municipal Obligations–101.12% | ||||||||||||||||
Pennsylvania–91.66% | ||||||||||||||||
Allegheny (County of) Higher Education Building Authority (Duquesne University); | ||||||||||||||||
Series 1998, Ref. University RB (INS–AMBAC)(a) | 5.50 | % | 03/01/20 | $ | 1,750 | $ | 1,935,185 | |||||||||
Series 2011 A, University RB | 5.50 | % | 03/01/31 | 550 | 582,538 | |||||||||||
Allegheny (County of) Higher Education Building Authority (Robert Morris University); Series 2008 A, University RB | 6.00 | % | 10/15/38 | 1,000 | 998,590 | |||||||||||
Allegheny (County of) Hospital Development Authority (Ohio Valley General Hospital); Series 2005 A, RB | 5.00 | % | 04/01/25 | 1,600 | 1,375,168 | |||||||||||
Allegheny (County of) Hospital Development Authority (University of Pittsburgh Medical); Series 2009, RB | 5.63 | % | 08/15/39 | 1,250 | 1,294,100 | |||||||||||
Allegheny (County of) Industrial Development Authority (AFCO Cargo PIT, LLC); Series 1999, Cargo Facilities Lease RB(b) | 6.63 | % | 09/01/24 | 935 | 806,540 | |||||||||||
Allegheny (County of) Industrial Development Authority (Residential, Inc.); Series 2006, Lease RB | 5.10 | % | 09/01/26 | 980 | 907,264 | |||||||||||
Allegheny (County of) Redevelopment Authority (Pittsburgh Mills); Series 2004, Tax Allocation RB | 5.60 | % | 07/01/23 | 1,220 | 1,144,555 | |||||||||||
Allegheny (County of) Residential Finance Authority; Series 2006 TT, Single Family Mortgage RB (CEP–GNMA)(b) | 5.00 | % | 05/01/35 | 1,110 | 1,115,650 | |||||||||||
Allegheny (County of); Series 2008 C 61, Unlimited Tax GO Bonds (INS–AGC)(a) | 5.00 | % | 12/01/33 | 1,000 | 1,044,850 | |||||||||||
Allegheny Valley Joint School District; Series 2004 A, Unlimited Tax GO Bonds (INS–NATL)(a) | 5.00 | % | 11/01/28 | 1,500 | 1,547,955 | |||||||||||
Beaver (County of) Pennsylvania; Series 2009, Unlimited Tax GO Bonds (INS–AGM)(a) | 5.55 | % | 11/15/31 | 1,390 | 1,496,905 | |||||||||||
Berks (County of) Industrial Development Authority (One Douglassville); Series 2007 A, Ref. First Mortgage RB(b) | 6.13 | % | 11/01/34 | 480 | 396,581 | |||||||||||
Berks (County of) Municipal Authority (Albright College); Series 2004, College RB | 5.50 | % | 10/01/18 | 1,895 | 1,882,853 | |||||||||||
Bethlehem Area School District; Series 2010, Unlimited Tax GO Bonds (INS–AGM)(a) | 5.25 | % | 01/15/26 | 1,000 | 1,080,380 | |||||||||||
Bucks (County of) Industrial Development Authority (Ann’s Choice, Inc. Facility); | ||||||||||||||||
Series 2005 A, Retirement Community RB | 6.13 | % | 01/01/25 | 1,500 | 1,430,910 | |||||||||||
Series 2005 A, Retirement Community RB | 5.90 | % | 01/01/27 | 1,000 | 915,010 | |||||||||||
Bucks (County of) Industrial Development Authority (Lutheran Community Telford Center); Series 2007, RB | 5.75 | % | 01/01/37 | 2,000 | 1,582,760 | |||||||||||
Central Bradford Progress Authority (Guthrie Healthcare System); Series 2011, RB | 5.38 | % | 12/01/41 | 700 | 711,802 | |||||||||||
Centre (County of) Hospital Authority (Mt. Nittany Medical Center); Series 2009, Hospital RB (INS–AGC)(a) | 6.13 | % | 11/15/39 | 1,000 | 1,035,420 | |||||||||||
Chartiers Valley Industrial & Commercial Development Authority (Asbury Health Center); | ||||||||||||||||
Series 2006, Ref. First Mortgage RB | 5.25 | % | 12/01/15 | 500 | 494,715 | |||||||||||
Series 2006, Ref. First Mortgage RB | 5.75 | % | 12/01/22 | 900 | 856,602 | |||||||||||
Cumberland (County of) Municipal Authority (Asbury Pennsylvania Obligated Group); Series 2010, RB | 6.00 | % | 01/01/40 | 800 | 707,232 | |||||||||||
Cumberland (County of) Municipal Authority (Diakon Lutheran Ministries); Series 2007, RB | 5.00 | % | 01/01/36 | 1,000 | 886,790 | |||||||||||
Cumberland (County of) Municipal Authority (Dickinson College); Series 2009, RB | 5.00 | % | 11/01/39 | 750 | 772,500 | |||||||||||
Cumberland (County of) Municipal Authority (Messiah Village); Series 2008 A, RB | 5.63 | % | 07/01/28 | 1,000 | 932,440 | |||||||||||
Dauphin (County of) General Authority (Pinnacle Health System); Series 2009 A, Health System RB | 6.00 | % | 06/01/36 | 2,215 | 2,262,888 | |||||||||||
Dauphin (County of) General Authority (Riverfront Office); Series 1998, Office & Package RB | 6.00 | % | 01/01/25 | 1,155 | 909,701 | |||||||||||
Delaware (County of) Authority (Cabrini College); Series 1999, Unrefunded Balance College RB (INS–RADIAN)(a) | 5.75 | % | 07/01/23 | 220 | 220,051 | |||||||||||
Delaware (County of) Authority (Neumann College); Series 2008, College RB | 6.25 | % | 10/01/38 | 500 | 512,595 | |||||||||||
Delaware (County of) Industrial Development Authority (Aqua Pennsylvania, Inc.); Series 2005 A, Water Facilities RB (INS–NATL)(a)(b) | 5.00 | % | 11/01/38 | 1,500 | 1,508,010 | |||||||||||
Delaware (County of) Industrial Development Authority (Philadelphia Suburban Water); Series 2001, Water Facilities RB (INS–AMBAC)(a)(b) | 5.35 | % | 10/01/31 | 2,500 | 2,518,575 | |||||||||||
Delaware (County of) River Port Authority; Series 2010 D, RB | 5.00 | % | 01/01/40 | 1,000 | 1,027,020 | |||||||||||
Delaware (County of) Valley Regional Financial Authority; | ||||||||||||||||
Series 2002, Local Government RB | 5.75 | % | 07/01/17 | 3,535 | 4,028,168 | |||||||||||
Series 2002, Local Government RB | 5.75 | % | 07/01/32 | 1,000 | 1,015,750 | |||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
9 Invesco Van Kampen Pennsylvania Tax Free Income Fund
Principal | ||||||||||||||||
Interest | Maturity | Amount | ||||||||||||||
Rate | Date | (000) | Value | |||||||||||||
Pennsylvania–(continued) | ||||||||||||||||
Erie Higher Education Building Authority (Mercyhurst College); | ||||||||||||||||
Series 2004 B, Ref. College RB | 5.00 | % | 03/15/23 | $ | 1,000 | $ | 1,021,470 | |||||||||
Series 2008, College RB | 5.50 | % | 03/15/38 | 500 | 500,565 | |||||||||||
Franklin (County of) Industrial Development Authority (Chambersburg Hospital); Series 2010, RB | 5.38 | % | 07/01/42 | 1,000 | 996,190 | |||||||||||
Geisinger Authority; Series 2011 A1, Health System RB | 5.13 | % | 06/01/41 | 500 | 514,065 | |||||||||||
Greensburg Salem School District; Series 2002, Ref. Unlimited Tax GO Bonds (INS–NATL)(a) | 5.38 | % | 09/15/17 | 1,415 | 1,484,293 | |||||||||||
Lancaster (County of) Hospital Authority (Brethren Village); Series 2008 A, RB | 6.50 | % | 07/01/40 | 750 | 742,208 | |||||||||||
Lancaster (County of) Hospital Authority (St. Anne’s Home); Series 1999, Health Center RB | 6.60 | % | 04/01/24 | 1,000 | 970,720 | |||||||||||
Lehigh (County of) General Purpose Authority (KidsPeace Obligated Group); Series 1998, RB | 6.00 | % | 11/01/23 | 1,760 | 1,058,130 | |||||||||||
Lehigh (County of) General Purpose Authority (St. Luke’s Bethlehem); Series 2003, Hospital RB(c)(d) | 5.25 | % | 08/15/13 | 980 | 1,072,992 | |||||||||||
Lehigh (County of) Industrial Development Authority (Lifepath, Inc.); Series 1998, Health Facility RB | 6.30 | % | 06/01/28 | 1,085 | 829,895 | |||||||||||
Lycoming (County of) Authority (Pennsylvania College of Technology); Series 2011, RB | 5.00 | % | 07/01/30 | 750 | 767,805 | |||||||||||
Lycoming (County of) Authority (Susquehanna Health System); Series 2009 A, Heath System RB | 5.75 | % | 07/01/39 | 1,250 | 1,206,212 | |||||||||||
Mercer (County of) Pennsylvania; Series 2001, Unlimited Tax GO Bonds (INS–NATL)(a) | 5.50 | % | 10/01/17 | 1,095 | 1,099,654 | |||||||||||
Monroe (County of) Hospital Authority (Pocono Medical Center); | ||||||||||||||||
Series 2003, Hospital RB(c)(d) | 6.00 | % | 01/01/14 | 1,000 | 1,129,300 | |||||||||||
Series 2007, Hospital RB | 5.13 | % | 01/01/37 | 1,500 | 1,411,785 | |||||||||||
Montgomery (County of) Higher Education & Health Authority (Abington Memorial Hospital); Series 2002 A, Hospital RB | 5.13 | % | 06/01/32 | 2,100 | 2,103,822 | |||||||||||
Montgomery (County of) Higher Education & Health Authority (Holy Redeemer Health); Series 1997 A, Health Care RB (INS–AMBAC)(a) | 5.25 | % | 10/01/17 | 1,000 | 1,000,520 | |||||||||||
Montgomery (County of) Industrial Development Authority (Acts Retirement-Life Community); Series 2009 A 1, Retirement Community RB | 6.25 | % | 11/15/29 | 1,000 | 1,040,190 | |||||||||||
Montgomery (County of) Industrial Development Authority (Philadelphia Presbytery Homes, Inc.); Series 2010, RB | 6.63 | % | 12/01/30 | 1,500 | 1,558,020 | |||||||||||
Montgomery (County of) Industrial Development Authority (Whitemarsh Community); Series 2008, Mortgage RB | 7.00 | % | 02/01/36 | 500 | 456,085 | |||||||||||
Montgomery (County of) Industrial Development Authority (Whitemarsh Continuing Care); | ||||||||||||||||
Series 2005, Mortgage RB | 6.13 | % | 02/01/28 | 1,100 | 957,528 | |||||||||||
Series 2005, Mortgage RB | 6.25 | % | 02/01/35 | 250 | 209,513 | |||||||||||
Mt. Lebanon Hospital Authority (St. Clair Memorial Hospital); Series 2002 A, RB | 5.63 | % | 07/01/32 | 2,000 | 2,006,520 | |||||||||||
Northampton (County of) General Purpose Authority (Lehigh University); Series 2009, Higher Education RB | 5.50 | % | 11/15/33 | 1,000 | 1,094,260 | |||||||||||
Northampton (County of) General Purpose Authority (St. Luke’s Hospital); | ||||||||||||||||
Series 2008 A, Hospital RB | 5.50 | % | 08/15/35 | 1,000 | 958,900 | |||||||||||
Series 2010 C, Hospital RB(c)(e) | 4.50 | % | 08/15/16 | 1,000 | 1,074,450 | |||||||||||
Pennsylvania (State of) Economic Development Financing Authority (Allegheny Energy Supply Co.); Series 2009, Exempt Facilities RB | 7.00 | % | 07/15/39 | 1,830 | 1,963,352 | |||||||||||
Pennsylvania (State of) Economic Development Financing Authority (Philadelphia Biosolids Facility); Series 2009, Sewage Sludge Disposal RB | 6.25 | % | 01/01/32 | 1,000 | 1,050,870 | |||||||||||
Pennsylvania (State of) Economic Development Financing Authority (Waste Management, Inc.); Series 2005 A, Solid Waste Disposal RB(b) | 5.10 | % | 10/01/27 | 1,300 | 1,300,611 | |||||||||||
Pennsylvania (State of) Higher Educational Facilities Authority (Edinboro University Foundation); Series 2010, RB | 6.00 | % | 07/01/43 | 500 | 494,350 | |||||||||||
Pennsylvania (State of) Higher Educational Facilities Authority (La Salle University); Series 2003, RB | 5.50 | % | 05/01/34 | 1,500 | 1,507,215 | |||||||||||
Pennsylvania (State of) Higher Educational Facilities Authority (St. Joseph’s University); Series 2010 A, RB | 5.00 | % | 11/01/40 | 500 | 503,805 | |||||||||||
Pennsylvania (State of) Higher Educational Facilities Authority (Thomas Jefferson University); | ||||||||||||||||
Series 2002, RB | 5.50 | % | 01/01/19 | 355 | 368,987 | |||||||||||
Series 2002, RB | 5.38 | % | 01/01/25 | 645 | 658,680 | |||||||||||
Pennsylvania (State of) Higher Educational Facilities Authority (Trustees University of Pennsylvania); Series 2005 C, RB(f) | 5.00 | % | 07/15/38 | 4,700 | 4,860,881 | |||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
10 Invesco Van Kampen Pennsylvania Tax Free Income Fund
Principal | ||||||||||||||||
Interest | Maturity | Amount | ||||||||||||||
Rate | Date | (000) | Value | |||||||||||||
Pennsylvania–(continued) | ||||||||||||||||
Pennsylvania (State of) Turnpike Commission; | ||||||||||||||||
Series 2008 B 1, Sub. Turnpike RB | 5.50 | % | 06/01/33 | $ | 1,000 | $ | 1,048,390 | |||||||||
Series 2009 C, Sub. Turnpike Conv. CAB RB (INS–AGM)(a)(g) | 6.25 | % | 06/01/33 | 2,000 | 1,626,040 | |||||||||||
Series 2009 E, Sub. Turnpike Conv. CAB RB(g) | 6.38 | % | 12/01/38 | 1,435 | 1,057,093 | |||||||||||
Series 2010 A 1, Motor License Fund Special Turnpike RB | 5.00 | % | 12/01/38 | 500 | 517,595 | |||||||||||
Series 2010 A 2, Motor License Special Turnpike Conv. CAB RB(g) | 5.50 | % | 12/01/34 | 1,000 | 793,810 | |||||||||||
Series 2010 B 2, Turnpike Conv. CAB RB(g) | 5.00 | % | 12/01/30 | 625 | 492,019 | |||||||||||
Series 2010 B 2, Turnpike Conv. CAB RB(g) | 5.13 | % | 12/01/35 | 500 | 375,910 | |||||||||||
Philadelphia (City of) Hospitals & Higher Education Facilities Authority (Chester Jefferson Health System); Series 2010 B, RB | 5.00 | % | 05/15/40 | 1,500 | 1,512,540 | |||||||||||
Philadelphia (City of) Industrial Development Authority (Independence Charter School); Series 2007 A, RB | 5.50 | % | 09/15/37 | 1,235 | 1,033,695 | |||||||||||
Philadelphia (City of) Industrial Development Authority (MaST Charter School); Series 2010, RB | 6.00 | % | 08/01/35 | 700 | 722,624 | |||||||||||
Philadelphia (City of) Industrial Development Authority (Please Touch Museum); | ||||||||||||||||
Series 2006, RB | 5.25 | % | 09/01/31 | 2,750 | 2,330,212 | |||||||||||
Series 2006, RB | 5.25 | % | 09/01/36 | 375 | 303,671 | |||||||||||
Philadelphia (City of) Industrial Development Authority; Series 1990, Commercial Development Remarketing RB(b) | 7.75 | % | 12/01/17 | 2,505 | 2,507,079 | |||||||||||
Philadelphia (City of) Municipal Authority (Municipal Services Building Lease); | ||||||||||||||||
Series 1990, CAB RB (INS–AGM)(a)(h) | 0.00 | % | 03/15/12 | 3,775 | 3,759,409 | |||||||||||
Series 1990, CAB RB (INS–AGM)(a)(h) | 0.00 | % | 03/15/13 | 4,400 | 4,298,404 | |||||||||||
Philadelphia (City of); | ||||||||||||||||
Series 2005 A, Airport RB (INS–NATL)(a)(b) | 5.00 | % | 06/15/25 | 1,000 | 1,009,540 | |||||||||||
Series 2009 A, Ref. Unlimited Tax GO Bonds (INS–AGC)(a) | 5.50 | % | 08/01/24 | 2,000 | 2,180,540 | |||||||||||
Series 2010 9th, Gas Works RB | 5.25 | % | 08/01/40 | 1,500 | 1,507,350 | |||||||||||
Series 2010 C, Water & Wastewater RB (INS–AGM)(a) | 5.00 | % | 08/01/35 | 1,250 | 1,299,637 | |||||||||||
Series 2011, Unlimited Tax GO Bonds | 6.00 | % | 08/01/36 | 500 | 536,335 | |||||||||||
Philadelphia School District; Series 2008 E, Limited Tax GO Bonds (INS–BHAC)(a) | 5.13 | % | 09/01/23 | 1,500 | 1,649,400 | |||||||||||
Pittsburgh (City of) & Allegheny (County of) Sports & Exhibition Authority (Regional Asset District); Series 2010, Ref. Sales Tax RB (INS–AGM)(a) | 5.00 | % | 02/01/31 | 1,000 | 1,043,450 | |||||||||||
Radnor Township School District; Series 2005 B, Unlimited Tax GO Bonds (INS–AGM)(a) | 5.00 | % | 02/15/35 | 1,000 | 1,032,350 | |||||||||||
State Public School Building Authority (Harrisburg School District); Series 2009 A, School RB (INS–AGC)(a) | 5.00 | % | 11/15/33 | 1,000 | 1,047,310 | |||||||||||
Susquehanna Area Regional Airport Authority; | ||||||||||||||||
Series 2003 A, Airport System RB (INS–AMBAC)(a)(b) | 5.50 | % | 01/01/19 | 2,500 | 2,509,025 | |||||||||||
Series 2003 D, Sub. Airport System RB | 5.38 | % | 01/01/18 | 2,350 | 2,156,618 | |||||||||||
Union (County of) Hospital Authority (Evangelical Community); Series 2011, Ref. Hospital RB | 7.00 | % | 08/01/41 | 1,000 | 1,035,320 | |||||||||||
Upper St. Clair Township School District; Series 2002, Unlimited Tax GO Bonds(c)(d) | 5.38 | % | 07/15/12 | 1,200 | 1,253,964 | |||||||||||
Washington (County of) Industrial Development Authority (Washington Jefferson College); Series 2010, RB | 5.25 | % | 11/01/30 | 500 | 527,185 | |||||||||||
Washington (County of) Pennsylvania; | ||||||||||||||||
Series 2002 A, Unlimited Tax GO Bonds(c)(d) | 5.13 | % | 09/01/12 | 350 | 367,168 | |||||||||||
Series 2002 A, Unlimited Tax GO Bonds (INS–AMBAC)(a) | 5.13 | % | 09/01/27 | 650 | 656,624 | |||||||||||
Washington (County of) Redevelopment Authority (Victory Centre Tanger Outlet Development); Series 2006 A, Tax Allocation RB(c)(e) | 5.45 | % | 07/01/17 | 1,460 | 1,280,157 | |||||||||||
West Shore Area Authority (Holy Spirit Hospital); Series 2001, RB | 6.25 | % | 01/01/32 | 2,045 | 2,046,861 | |||||||||||
Westmoreland (County of) Industrial Development Authority (Redstone Presbyterian Senior Care Obligated Group); | ||||||||||||||||
Series 2005 A, RB | 5.75 | % | 01/01/26 | 2,500 | 2,243,800 | |||||||||||
Series 2005 A, RB | 5.88 | % | 01/01/32 | 900 | 780,903 | |||||||||||
Wilkes Barre Finance Authority (University of Scranton); Series 2010, RB | 5.00 | % | 11/01/40 | 850 | 859,605 | |||||||||||
131,313,529 | ||||||||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
11 Invesco Van Kampen Pennsylvania Tax Free Income Fund
Principal | ||||||||||||||||
Interest | Maturity | Amount | ||||||||||||||
Rate | Date | (000) | Value | |||||||||||||
Puerto Rico–5.82% | ||||||||||||||||
Puerto Rico (Commonwealth of) Aqueduct & Sewer Authority; Series 2008 A, Sr. Lien RB | 6.00 | % | 07/01/38 | $ | 1,000 | $ | 1,003,790 | |||||||||
Puerto Rico (Commonwealth of) Electric Power Authority; | ||||||||||||||||
Series 2008 WW, Power RB | 5.50 | % | 07/01/21 | 1,000 | 1,084,500 | |||||||||||
Series 2008 WW, Power RB | 5.25 | % | 07/01/33 | 1,500 | 1,477,845 | |||||||||||
Series 2010 XX, Power RB | 5.75 | % | 07/01/36 | 1,000 | 1,024,600 | |||||||||||
Puerto Rico (Commonwealth of) Infrastructure Financing Authority; Series 2005 C, Ref. Special Tax RB (INS–AMBAC)(a) | 5.50 | % | 07/01/27 | 600 | 627,474 | |||||||||||
Puerto Rico Sales Tax Financing Corp.; | ||||||||||||||||
First Sub-Series 2010 A, RB | 5.38 | % | 08/01/39 | 470 | 474,094 | |||||||||||
Series 2010, First Subseries Sales Tax Conv. CAB RB(g) | 6.25 | % | 08/01/33 | 1,065 | 744,477 | |||||||||||
Series 2010 A, Sales Tax CAB RB(h) | 0.00 | % | 08/01/34 | 3,500 | 822,535 | |||||||||||
Series 2010 A, Sales Tax CAB RB(h) | 0.00 | % | 08/01/35 | 5,000 | 1,085,350 | |||||||||||
8,344,665 | ||||||||||||||||
Virgin Islands–1.84% | ||||||||||||||||
Virgin Islands (Government of) Public Finance Authority (Matching Fund Loan Note–Diageo); Series 2009 A, Sub. RB | 6.63 | % | 10/01/29 | 750 | 791,760 | |||||||||||
Virgin Islands (Government of) Public Finance Authority (Virgin Islands Matching Fund Loan Note); Series 2010 A, Sr. Lien RB | 5.00 | % | 10/01/29 | 500 | 485,780 | |||||||||||
Virgin Islands (Government of) Water & Power Authority; Series 2007 A, Electric System RB | 5.00 | % | 07/01/25 | 1,335 | 1,351,407 | |||||||||||
2,628,947 | ||||||||||||||||
Guam–1.80% | ||||||||||||||||
Guam (Territory of) (Section 30); Series 2009 A, Limited Obligation RB | 5.75 | % | 12/01/34 | 1,250 | 1,260,075 | |||||||||||
Guam (Territory of) Government Waterworks Authority; Series 2010, Water & Wastewater System RB | 5.63 | % | 07/01/40 | 1,000 | 922,480 | |||||||||||
Guam (Territory of) Power Authority; Series 2010 A, RB | 5.50 | % | 10/01/40 | 410 | 390,747 | |||||||||||
2,573,302 | ||||||||||||||||
TOTAL INVESTMENTS(i)–101.12% (Cost $144,333,572) | 144,860,443 | |||||||||||||||
FLOATING RATE NOTE OBLIGATION(j)–(2.19)% | ||||||||||||||||
Note with an interest rate of 0.21% at 08/31/11 and contractual maturity of collateral of 07/15/38 (See Note 1L) | (3,135,000 | ) | ||||||||||||||
OTHER ASSETS LESS LIABILITIES–1.07% | 1,529,385 | |||||||||||||||
NET ASSETS–100.00% | $ | 143,254,828 | ||||||||||||||
Investment Abbreviations:
AGC | – Assured Guaranty Corp. | |
AGM | – Assured Guaranty Municipal Corp. | |
AMBAC | – American Municipal Bond Assurance Corp. | |
BHAC | – Berkshire Hathaway Assurance Corp. | |
CAB | – Capital Appreciation Bonds | |
CEP | – Credit Enhanced Provider | |
Conv. | – Convertible | |
GNMA | – Government National Mortgage Association | |
GO | – General Obligation | |
INS | – Insurer | |
NATL | – National Public Finance Guarantee Corp. | |
RADIAN | – Radian Asset Assurance, Inc. | |
RB | – Revenue Bonds | |
Ref | – Refunding | |
Sr. | – Senior | |
Sub. | – Subordinated |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
12 Invesco Van Kampen Pennsylvania Tax Free Income Fund
Notes to Schedule of Investments:
(a) | Principal and/or interest payments are secured by the bond insurance company listed. | |
(b) | Security subject to the alternative minimum tax. | |
(c) | Security has an irrevocable call by the issuer or mandatory put by the holder. Maturity date reflects such call or put. | |
(d) | Advance refunded; secured by an escrow fund of U.S. Government obligations on other highly rated collateral. | |
(e) | Interest or dividend rate is redetermined periodically. Rate shown is the rate in effect on August 31, 2011. | |
(f) | Underlying security related to Special Purpose Trusts entered into by the Fund. See Note 1L | |
(g) | Step coupon bond. The interest rate represents the coupon rate at which the bond will accrue at a specified future date. | |
(h) | Zero coupon bond issued at a discount. | |
(i) | This table provides a listing of those entities that have either issued, guaranteed, backed or otherwise enhanced the credit quality of more than 5% of the securities held in the portfolio. In instances where the entity has guaranteed, backed or otherwise enhanced the credit quality of a security, it is not primarily responsible for the issuer’s obligations but may be called upon to satisfy the issuer’s obligations. |
Entities | Percentage | |||
Assured Guaranty Municipal Corp. | 10.79 | % | ||
American Municipal Bond Assurance Corp. | 6.38 | |||
(j) | Floating rate note obligation related to a security held. The interest rate shown reflects the rate in effect at August 31, 2011. At August 31, 2011, the Fund’s investment with a value of $4,860,881 is held by the Dealer Trusts and serves as collateral for the $3,135,000 in the floating rate note obligation outstanding at that date. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
13 Invesco Van Kampen Pennsylvania Tax Free Income Fund
Statement of Assets and Liabilities
August 31, 2011
Assets: | ||||
Investments, at value (Cost $144,333,572) | $ | 144,860,443 | ||
Cash | 759,463 | |||
Receivable for: | ||||
Investments sold | 45,000 | |||
Fund shares sold | 55,228 | |||
Interest | 1,762,033 | |||
Investment for trustee deferred compensation and retirement plans | 3,359 | |||
Other assets | 568 | |||
Total assets | 147,486,094 | |||
Liabilities: | ||||
Floating rate note obligations | 3,135,000 | |||
Payable for: | ||||
Investments purchased | 694,246 | |||
Fund shares reacquired | 68,260 | |||
Dividends | 199,958 | |||
Accrued fees to affiliates | 62,344 | |||
Accrued other operating expenses | 66,475 | |||
Trustee deferred compensation and retirement plans | 4,983 | |||
Total liabilities | 4,231,266 | |||
Net assets applicable to shares outstanding | $ | 143,254,828 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 149,703,315 | ||
Undistributed net investment income | 305,487 | |||
Undistributed net realized gain (loss) | (7,280,845 | ) | ||
Unrealized appreciation | 526,871 | |||
$ | 143,254,828 | |||
Net Assets: | ||||
Class A | $ | 130,344,093 | ||
Class B | $ | 3,061,517 | ||
Class C | $ | 9,669,880 | ||
Class Y | $ | 179,338 | ||
Shares outstanding, $0.01 par value per share, with an unlimited number of shares authorized: | ||||
Class A | 8,222,469 | |||
Class B | 193,052 | |||
Class C | 609,078 | |||
Class Y | 11,310 | |||
Class A: | ||||
Net asset value per share | $ | 15.85 | ||
Maximum offering price per share | ||||
(Net asset value of $15.85 divided by 95.25%) | $ | 16.64 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 15.86 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 15.88 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 15.86 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
14 Invesco Van Kampen Pennsylvania Tax Free Income Fund
Statement of Operations
For the year ended August 31, 2011
Investment income: | ||||
Interest | $ | 8,034,813 | ||
Expenses: | ||||
Advisory fees | 879,274 | |||
Administrative services fees | 50,000 | |||
Custodian fees | 7,652 | |||
Distribution fees: | ||||
Class A | 330,875 | |||
Class B | 9,225 | |||
Class C | 101,437 | |||
Interest, facilities and maintenance fees | 28,456 | |||
Transfer agent fees | 84,723 | |||
Trustees’ and officers’ fees and benefits | 19,070 | |||
Other | 54,355 | |||
Total expenses | 1,565,067 | |||
Less: Expense offset arrangement(s) | (171 | ) | ||
Net expenses | 1,564,896 | |||
Net investment income | 6,469,917 | |||
Net realized gain (loss) from investment securities | (204,374 | ) | ||
Change in net unrealized appreciation (depreciation) of investment securities | (4,601,295 | ) | ||
Net realized and unrealized gain (loss) | (4,805,669 | ) | ||
Net increase in net assets resulting from operations | $ | 1,664,248 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
15 Invesco Van Kampen Pennsylvania Tax Free Income Fund
Statement of Changes in Net Assets
For the year ended August 31, 2011, the period October 1, 2009 through August 31, 2010 and the year ended September 30, 2009
Year ended | Eleven months ended | Year ended | ||||||||||
August 31, | August 31, | September 30, | ||||||||||
2011 | 2010 | 2009 | ||||||||||
Operations: | ||||||||||||
Net investment income | $ | 6,469,917 | $ | 6,308,398 | $ | 6,953,806 | ||||||
Net realized gain (loss) | (204,374 | ) | 911,918 | (1,875,518 | ) | |||||||
Change in net unrealized appreciation (depreciation) | (4,601,295 | ) | 2,799,644 | 12,908,584 | ||||||||
Net increase in net assets resulting from operations | 1,664,248 | 10,019,960 | 17,986,872 | |||||||||
Distributions to shareholders from net investment income: | ||||||||||||
Class A | (5,718,833 | ) | (5,990,320 | ) | (6,597,361 | ) | ||||||
Class B | (145,393 | ) | (198,854 | ) | (267,886 | ) | ||||||
Class C | (361,071 | ) | (325,653 | ) | (216,276 | ) | ||||||
Class Y | (7,449 | ) | (1,373 | ) | — | |||||||
Total distributions from net investment income | (6,232,746 | ) | (6,516,200 | ) | (7,081,523 | ) | ||||||
Share transactions–net: | ||||||||||||
Class A | (6,996,668 | ) | (2,903,142 | ) | (6,276,311 | ) | ||||||
Class B | (1,483,029 | ) | (773,253 | ) | (1,180,437 | ) | ||||||
Class C | (1,051,715 | ) | 4,017,339 | 1,739,449 | ||||||||
Class Y | 16,165 | 163,817 | — | |||||||||
Net increase (decrease) in net assets resulting from share transactions | (9,515,247 | ) | 504,761 | (5,717,299 | ) | |||||||
Net increase (decrease) in net assets | (14,083,745 | ) | 4,008,521 | 5,188,050 | ||||||||
Net assets: | ||||||||||||
Beginning of year | 157,338,573 | 153,330,052 | 148,142,002 | |||||||||
End of year (includes undistributed net investment income of $305,487, $76,017 and $275,568, respectively) | $ | 143,254,828 | $ | 157,338,573 | $ | 153,330,052 | ||||||
Notes to Financial Statements
August 31, 2011
NOTE 1—Significant Accounting Policies
Invesco Van Kampen Pennsylvania Tax Free Income Fund (the “Fund”), is a series portfolio of AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end series management investment company consisting of twelve separate portfolios, each authorized to issue an unlimited number of shares of beneficial interest. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class.
The Fund’s investment objective is to provide only Pennsylvania investors with a high level of current income exempt from federal and Pennsylvania state income taxes and, where possible under local law, local income and personal property taxes, through investment primarily in a varied portfolio of medium- and lower-grade municipal securities.
The Fund currently consists of four different classes of shares: Class A, Class B, Class C and Class Y. Class A shares are sold with a front-end sales charge unless certain waiver criteria are met and under certain circumstances load waived shares may be subject to contingent deferred sales charges (“CDSC”). Class C shares are sold with a CDSC. Class Y shares are sold at net asset value. Effective November 30, 2010, new or additional investments in Class B shares are no longer permitted. Existing shareholders of Class B shares may continue to reinvest dividends and capital gains distributions in Class B shares until they convert. Also, shareholders in Class B shares will be able to exchange those shares for Class B shares of other Invesco Funds offering such shares until they convert. Generally, Class B shares will automatically convert to Class A shares on or about the month-end which is at least eight years after the date of purchase. Redemption of Class B shares prior to conversion date will be subject to a CDSC.
16 Invesco Van Kampen Pennsylvania Tax Free Income Fund
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. | |
Securities are fair valued using an evaluated quote provided by an independent pricing service approved by the Board of Trustees. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices and may reflect appropriate factors such as institution-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, individual trading characteristics and other market data. Short-term obligations, including commercial paper, having 60 days or less to maturity are recorded at amortized cost which approximates value. Securities with a demand feature exercisable within one to seven days are valued at par. Debt securities are subject to interest rate and credit risks. In addition, all debt securities involve some risk of default with respect to interest and principal payments. | ||
Securities for which market quotations either are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. Some of the factors which may be considered in determining fair value are fundamental analytical data relating to the investment; the nature and duration of any restrictions on transferability or disposition; trading in similar securities by the same issuer or comparable companies; relevant political, economic or issuer specific news; and other relevant factors under the circumstances. | ||
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments. | ||
B. | Securities Transactions and Investment Income — Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. Bond premiums and discounts are amortized and/or accreted for financial reporting purposes. | |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held. | ||
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund’s net asset value and, accordingly, they reduce the Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser. | ||
The Fund allocates realized and unrealized capital gains and losses to a class based on the relative net assets of each class. The Fund allocates income to a class based on the relative value of the settled shares of each class. | ||
C. | Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. | |
D. | Distributions — Distributions from income are declared daily and paid monthly. Distributions from net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to treat a portion of the proceeds from redemptions as distributions for federal income tax purposes. | |
E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable and tax-exempt earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. | |
In addition, the Fund intends to invest in such municipal securities to allow it to qualify to pay shareholders “exempt-interest dividends”, as defined in the Internal Revenue Code. | ||
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period. | ||
F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. | |
G. | Interest, Facilities and Maintenance Fees — Interest, Facilities and Maintenance Fees include interest and related borrowing costs such as commitment fees and other expenses associated with lines of credit and interest and administrative expenses related to establishing and maintaining floating rate note obligations, if any. | |
H. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to |
17 Invesco Van Kampen Pennsylvania Tax Free Income Fund
taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. | ||
I. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. | |
J. | Other Risks — The value of, payment of interest on, repayment of principal for and the ability to sell a municipal security may be affected by constitutional amendments, legislative enactments, executive orders, administrative regulations, voter initiatives and the economics of the regions in which the issuers are located. | |
Since, many municipal securities are issued to finance similar projects, especially those relating to education, health care, transportation and utilities, conditions in those sectors can affect the overall municipal securities market and a Fund’s investments in municipal securities. | ||
There is some risk that a portion or all of the interest received from certain tax-free municipal securities could become taxable as a result of determinations by the Internal Revenue Service. | ||
K. | Securities Purchased on a When-Issued and Delayed Delivery Basis — The Fund may purchase and sell interests in portfolio securities on a when-issued and delayed delivery basis, with payment and delivery scheduled for a future date. No income accrues to the Fund on such interests or securities in connection with such transactions prior to the date the Fund actually takes delivery of such interests or securities. These transactions are subject to market fluctuations and are subject to the risk that the value at delivery may be more or less than the trade date purchase price. Although the Fund will generally purchase these securities with the intention of acquiring such securities, they may sell such securities prior to the settlement date. | |
L. | Floating Rate Note Obligations — The Fund invests in inverse floating rate securities, such as Residual Interest Bonds (“RIBs”) or Tender Option Bonds (“TOBs”) for investment purposes and to enhance the yield of the Fund. Inverse floating rate investments 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. Such transactions may be purchased in the secondary market without first owning the underlying bond or by the sale of fixed rate bonds by the Fund to special purpose trusts established by a broker dealer (“Dealer Trusts”) in exchange for cash and residual interests in the Dealer Trusts’ assets and cash flows, which are in the form of inverse floating rate securities. The Dealer Trusts finance the purchases of the fixed rate bonds by issuing floating rate notes to third parties and allowing the Fund to retain residual interest in the bonds. The floating rate notes issued by the Dealer Trusts have interest rates that reset weekly and the floating rate note holders have the option to tender their notes to the Dealer Trusts for redemption at par at each reset date. The residual interests held by the Fund (inverse floating rate investments) include the right of the Fund (1) to cause the holders of the floating rate notes to tender their notes at par at the next interest rate reset date, and (2) to transfer the municipal bond from the Dealer Trusts to the Fund, thereby collapsing the Dealer Trusts. | |
TOBs are presently classified as private placement securities. Private placement securities are subject to restrictions on resale because they have not been registered under the Securities Act of 1933, as amended or are otherwise not readily marketable. As a result of the absence of a public trading market for these securities, they may be less liquid than publicly traded securities. Although these securities may be resold in privately negotiated transactions, the prices realized from these sales could be less than those originally paid by the Fund or less than what may be considered the fair value of such securities. | ||
The Fund accounts for the transfer of bonds to the Dealer Trusts as secured borrowings, with the securities transferred remaining in the Fund’s investment assets, and the related floating rate notes reflected as Fund liabilities under the caption Floating rate note obligations on the Statement of Assets and Liabilities. The Fund records the interest income from the fixed rate bonds under the caption Interest and records the expenses related to floating rate obligations and any administrative expenses of the Dealer Trusts as a component of Interest, facilities and maintenance fees on the Statement of Operations. | ||
The Fund generally invests in inverse floating rate securities that include embedded leverage, thus exposing the Fund to greater risks and increased costs. The primary risks associated with inverse floating rate securities are varying degrees of liquidity and the changes in the value of such securities in response to changes in market rates of interest to a greater extent than the value of an equal principal amount of a fixed rate security having similar credit quality, redemption provisions and maturity which may cause the Fund’s net asset value to be more volatile than if it had not invested in inverse floating rate securities. In certain instances, the short-term floating rate interests created by the 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 RIBs or TOBs created by the contribution of long-term fixed income bonds by the Fund, the Fund will 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. |
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser based on the annual rate of the Fund’s average daily net assets as follows:
Average Daily Net Assets | Rate | |||
First $500 million | 0 | .60% | ||
Over $500 million | 0 | .50% | ||
18 Invesco Van Kampen Pennsylvania Tax Free Income Fund
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide discretionary investment management services to the Fund based on the percentage of assets allocated to such Sub-Adviser(s).
The Adviser has contractually agreed, through June 30, 2012, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Class A, Class B, Class C and Class Y shares to 1.13%, 1.88%, 1.88% and 0.88% of average daily net assets, respectively. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the net annual operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest, facilities and maintenance fees; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless the Board of Trustees and Invesco mutually agree to amend or continue the fee waiver agreement, it will terminate on June 30, 2012. The Adviser did not waive fees and/or reimburse expenses during the period under this limitation.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco for certain administrative costs incurred in providing accounting services to the Fund. For the year ended August 31, 2011, expenses incurred under the agreement are shown in the Statement of Operations as administrative services fees.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (“IIS”) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. IIS may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. All fees payable by IIS to intermediaries that provide omnibus account services or sub-accounting are charged back to the Fund, subject to certain limitations approved by the Trust’s Board of Trustees. For the year ended August 31, 2011, the expenses incurred under the agreement are shown in the Statement of Operations as transfer agent fees.
Shares of the Fund are distributed by Invesco Distributors, Inc. (“IDI”). The Fund has adopted a distribution plan pursuant to Rule 12b-1 under the 1940 Act, and a service plan (collectively, the “Plans”) for Class A shares, Class B shares and Class C shares to compensate IDI for the sale, distribution, shareholder servicing and maintenance of shareholder accounts for these shares. Under the Plans, the Fund will incur annual fees of up to 0.25% of Class A average daily net assets and up to 1.00% each of Class B and Class C average daily net assets.
With respect to Class B and Class C shares, the Fund is authorized to reimburse in future years any distribution related expenses that exceed the maximum annual reimbursement rate for such class, so long as such reimbursement does not cause the Fund to exceed the Class B and Class C maximum annual reimbursement rate, respectively. With respect to Class A shares, distribution related expenses that exceed the maximum annual reimbursement rate for such class are not carried forward to future years and the Fund will not reimburse IDI for any such expenses.
For the year ended August 31, 2011, expenses incurred under these agreements are shown in the Statement of Operations as distribution fees.
Front-end sales commissions and CDSC (collectively the “sales charges”) are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the year ended August 31, 2011, IDI advised the Fund that IDI retained $8,802 in front-end sales commissions from the sale of Class A shares and $311, $5,469 and $2,569 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of the Adviser, Invesco Ltd., IIS and/or IDI.
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3) generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
Level 1 — | Prices are determined using quoted prices in an active market for identical assets. | |
Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. | |
Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of August 31, 2011. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
During the year ended August 31, 2011, there were no significant transfers between investment levels.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Municipal Obligations | $ | — | $ | 144,860,443 | $ | — | $ | 144,860,443 | ||||||||
19 Invesco Van Kampen Pennsylvania Tax Free Income Fund
NOTE 4—Expense Offset Arrangement(s)
The expense offset arrangement is comprised of transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions. For the year ended August 31, 2011, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $171.
NOTE 5—Trustees’ and Officers’ Fees and Benefits
“Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and “Trustees’ and Officers’ Fees and Benefits” also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. “Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
During the year ended August 31, 2011, the Fund paid legal fees of $1,985 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A partner of that firm is a Trustee of the Trust.
NOTE 6—Cash Balances and Borrowings
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with The State Street Bank and Trust Company (“SSB”), the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
Inverse floating rate obligations resulting from the transfer of bonds to Dealer Trusts are accounted for as secured borrowings. The average floating rate notes outstanding and average annual interest and fees related to inverse floating rate note obligations during the year ended August 31, 2011 were $3,135,000 and 0.91%, respectively.
NOTE 7—Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Year Ended August 31, 2011, the Period October 1, 2009 to August 31, 2010 and the Year Ended September 30, 2009:
August 31, | August 31, | September 30, | ||||||||||
2011 | 2010 | 2009 | ||||||||||
Ordinary income | $ | 1,272 | $ | 1,034 | $ | 2,133 | ||||||
Tax-exempt income | 6,231,474 | 6,515,166 | 7,080,623 | |||||||||
Total distributions | $ | 6,232,746 | $ | 6,516,200 | $ | 7,082,756 | ||||||
Tax Components of Net Assets at Period-End:
August 31, | ||||
2011 | ||||
Undistributed ordinary income | $ | 139,342 | ||
Net unrealized appreciation — investments | 652,287 | |||
Temporary book/tax differences | (4,651 | ) | ||
Post-October deferrals | (206,216 | ) | ||
Capital loss carryforward | (7,029,249 | ) | ||
Shares of beneficial interest | 149,703,315 | |||
Total net assets | $ | 143,254,828 | ||
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund’s net unrealized appreciation (depreciation) difference is attributable primarily to wash sales.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund’s temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
20 Invesco Van Kampen Pennsylvania Tax Free Income Fund
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund utilized $105,896 of capital loss carryforward in the current period to offset net realized capital gain for federal income tax purposes. The Fund has a capital loss carryforward as of August 31, 2011 which expires as follows:
Capital Loss | ||||
Expiration | Carryforward* | |||
August 31, 2016 | $ | 7,726 | ||
August 31, 2017 | 5,935,990 | |||
August 31, 2018 | 1,085,533 | |||
Total capital loss carryforward | $ | 7,029,249 | ||
* | Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. |
NOTE 8—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended August 31, 2011 was $19,243,369 and $27,555,518, respectively. Cost of investments on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed Federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investment Securities on a Tax Basis | ||||
Aggregate unrealized appreciation of investment securities | $ | 4,803,465 | ||
Aggregate unrealized (depreciation) of investment securities | (4,151,178 | ) | ||
Net unrealized appreciation of investment securities | $ | 652,287 | ||
Cost of investments for tax purposes is $144,208,156. |
NOTE 9—Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of bond premium amortizations, on August 31, 2011, undistributed net investment income was decreased by $7,701, undistributed net realized gain (loss) was increased by $6,732 and shares of beneficial interest increased by $969. This reclassification had no effect on the net assets of the Fund.
21 Invesco Van Kampen Pennsylvania Tax Free Income Fund
NOTE 10—Share Information
Summary of Share Activity | ||||||||||||||||||||||||
Year ended | Eleven months ended | Year ended | ||||||||||||||||||||||
August 31, 2011(a) | August 31, 2010 | September 30, 2009 | ||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||
Sold: | ||||||||||||||||||||||||
Class A | 328,452 | $ | 5,195,467 | 420,596 | $ | 6,629,232 | 624,550 | $ | 9,069,094 | |||||||||||||||
Class B | 7,253 | 112,271 | 42,501 | 666,876 | 63,620 | 900,403 | ||||||||||||||||||
Class C | 85,450 | 1,346,149 | 275,203 | 4,345,188 | 163,118 | 2,375,341 | ||||||||||||||||||
Class Y | 3,213 | 49,072 | 10,234 | 163,408 | — | — | ||||||||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||||||||||
Class A | 226,447 | 3,533,901 | 293,314 | 4,635,383 | 349,405 | 5,048,650 | ||||||||||||||||||
Class B | 5,309 | 82,803 | 10,806 | 170,137 | 15,260 | 219,136 | ||||||||||||||||||
Class C | 15,348 | 240,054 | 15,684 | 248,771 | 10,533 | 153,108 | ||||||||||||||||||
Class Y | 106 | 1,660 | 25 | 409 | — | — | ||||||||||||||||||
Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||||||||||
Class A | 61,948 | 965,762 | 41,896 | 663,119 | — | — | ||||||||||||||||||
Class B | (62,106 | ) | (965,762 | ) | (42,014 | ) | (663,119 | ) | — | — | ||||||||||||||
Reacquired: | ||||||||||||||||||||||||
Class A | (1,074,556 | ) | (16,691,798 | ) | (938,577 | ) | (14,830,876 | ) | (1,424,586 | ) | (20,394,055 | ) | ||||||||||||
Class B | (45,831 | ) | (712,341 | ) | (60,330 | ) | (947,147 | ) | (159,949 | ) | (2,299,976 | ) | ||||||||||||
Class C | (171,056 | ) | (2,637,918 | ) | (36,252 | ) | (576,620 | ) | (56,561 | ) | (789,000 | ) | ||||||||||||
Class Y | (2,268 | ) | (34,567 | ) | — | — | — | — | ||||||||||||||||
Net increase (decrease) in share activity | (622,291 | ) | $ | (9,515,247 | ) | 33,086 | $ | 504,761 | (414,610 | ) | $ | (5,717,299 | ) | |||||||||||
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 34% of the outstanding shares of the Fund. IDI has an agreement with these entities to sell Fund shares. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
22 Invesco Van Kampen Pennsylvania Tax Free Income Fund
NOTE 11—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Supplemental | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratio of | ratio of | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
expenses | expenses to | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
to average | average net | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net gains | net assets | assets | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
(losses) on | with fee | (excluding | Ratio of net | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset | securities | Dividends | Distributions | waivers | interest, | investment | ||||||||||||||||||||||||||||||||||||||||||||||||||
value, | Net | (both | Total from | from net | from net | Net asset | Net assets, | and/or | facilities and | income | ||||||||||||||||||||||||||||||||||||||||||||||
beginning | investment | realized and | investment | investment | realized | Total | value, end | Total | end of period | expenses | maintenance | to average | Portfolio | |||||||||||||||||||||||||||||||||||||||||||
of period | income(a) | unrealized) | operations | income | gains | distributions | of period | return | (000s omitted) | absorbed | fees)(b) | net assets | turnover(c) | |||||||||||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | $ | 16.29 | $ | 0.70 | $ | (0.47 | ) | $ | 0.23 | $ | (0.67 | ) | $ | 0.00 | $ | (0.67 | ) | $ | 15.85 | 1.58 | %(d) | $ | 130,344 | 1.02 | %(e) | 1.00 | %(e) | 4.47 | %(e) | 13 | ||||||||||||||||||||||||||
Period ended 08/31/10 | 15.93 | 0.66 | 0.38 | 1.04 | (0.68 | ) | 0.00 | (0.68 | ) | 16.29 | 6.74 | (d) | 141,406 | 1.14 | (f) | 1.10 | (f) | 4.54 | (f) | 15 | ||||||||||||||||||||||||||||||||||||
Year ended 09/30/09 | 14.76 | 0.73 | 1.18 | 1.91 | (0.74 | ) | 0.00 | (0.74 | ) | 15.93 | 13.60 | (g) | 141,191 | 1.21 | 1.13 | 5.05 | 17 | |||||||||||||||||||||||||||||||||||||||
Year ended 09/30/08 | 16.84 | 0.72 | (2.03 | ) | (1.31 | ) | (0.73 | ) | (0.04 | ) | (0.77 | ) | 14.76 | (8.02 | )(g) | 137,435 | 1.32 | 1.06 | 4.43 | 25 | ||||||||||||||||||||||||||||||||||||
Year ended 09/30/07 | 17.43 | 0.70 | (0.53 | ) | 0.17 | (0.68 | ) | (0.08 | ) | (0.76 | ) | 16.84 | 0.95 | (g) | 160,539 | 1.44 | 1.08 | 4.08 | 25 | |||||||||||||||||||||||||||||||||||||
Year ended 09/30/06 | 17.44 | 0.69 | 0.04 | 0.73 | (0.68 | ) | (0.06 | ) | (0.74 | ) | 17.43 | 4.39 | (g) | 170,102 | 1.06 | 1.06 | 4.02 | 28 | ||||||||||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 16.23 | 0.70 | (0.45 | ) | 0.25 | (0.62 | ) | 0.00 | (0.62 | ) | 15.86 | 1.68 | (d)(h) | 3,062 | 1.02 | (e)(h) | 1.00 | %(e)(h) | 4.47 | (e)(h) | 13 | |||||||||||||||||||||||||||||||||||
Period ended 08/31/10 | 15.89 | 0.59 | 0.38 | 0.97 | (0.63 | ) | 0.00 | (0.63 | ) | 16.23 | 6.27 | (d)(h) | 4,682 | 1.64 | (f)(h) | 1.60 | (f)(h) | 4.05 | (f)(h) | 15 | ||||||||||||||||||||||||||||||||||||
Year ended 09/30/09 | 14.72 | 0.68 | 1.18 | 1.86 | (0.69 | ) | 0.00 | (0.69 | ) | 15.89 | 13.21 | (i)(j) | 5,364 | 1.57 | (j) | 1.49 | (j) | 4.70 | (j) | 17 | ||||||||||||||||||||||||||||||||||||
Year ended 09/30/08 | 16.78 | 0.63 | (2.01 | ) | (1.38 | ) | (0.64 | ) | (0.04 | ) | (0.68 | ) | 14.72 | (8.46 | )(i)(j) | 6,161 | 1.81 | (j) | 1.55 | (j) | 3.94 | (j) | 25 | |||||||||||||||||||||||||||||||||
Year ended 09/30/07 | 17.38 | 0.57 | (0.54 | ) | 0.03 | (0.55 | ) | (0.08 | ) | (0.63 | ) | 16.78 | 0.20 | (i) | 8,919 | 2.19 | 1.83 | 3.32 | 25 | |||||||||||||||||||||||||||||||||||||
Year ended 09/30/06 | 17.38 | 0.57 | 0.05 | 0.62 | (0.56 | ) | (0.06 | ) | (0.62 | ) | 17.38 | 3.63 | (i) | 12,180 | 1.81 | 1.81 | 3.26 | 28 | ||||||||||||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 16.31 | 0.58 | (0.45 | ) | 0.13 | (0.56 | ) | 0.00 | (0.56 | ) | 15.88 | 0.89 | (d) | 9,670 | 1.77 | (e) | 1.75 | (e) | 3.72 | (e) | 13 | |||||||||||||||||||||||||||||||||||
Period ended 08/31/10 | 15.95 | 0.55 | 0.38 | 0.93 | (0.57 | ) | 0.00 | (0.57 | ) | 16.31 | 6.01 | (d) | 11,083 | 1.89 | (f) | 1.85 | (f) | 3.79 | (f) | 15 | ||||||||||||||||||||||||||||||||||||
Year ended 09/30/09 | 14.78 | 0.62 | 1.18 | 1.80 | (0.63 | ) | 0.00 | (0.63 | ) | 15.95 | 12.74 | (k) | 6,776 | 1.96 | 1.89 | 4.28 | 17 | |||||||||||||||||||||||||||||||||||||||
Year ended 09/30/08 | 16.86 | 0.59 | (2.02 | ) | (1.43 | ) | (0.61 | ) | (0.04 | ) | (0.65 | ) | 14.78 | (8.71 | )(k) | 4,546 | 2.07 | 1.81 | 3.68 | 25 | ||||||||||||||||||||||||||||||||||||
Year ended 09/30/07 | 17.45 | 0.58 | (0.54 | ) | 0.04 | (0.55 | ) | (0.08 | ) | (0.63 | ) | 16.86 | 0.19 | (k) | 4,793 | 2.19 | 1.83 | 3.33 | 25 | |||||||||||||||||||||||||||||||||||||
Year ended 09/30/06 | 17.45 | 0.57 | 0.05 | 0.62 | (0.56 | ) | (0.06 | ) | (0.62 | ) | 17.45 | 3.68 | (j)(k) | 5,185 | 1.80 | (j) | 1.80 | (j) | 3.27 | (j) | 28 | |||||||||||||||||||||||||||||||||||
Class Y | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 16.30 | 0.74 | (0.47 | ) | 0.27 | (0.71 | ) | 0.00 | (0.71 | ) | 15.86 | 1.84 | (d) | 179 | 0.77 | (e) | 0.75 | (e) | 4.72 | (e) | 13 | |||||||||||||||||||||||||||||||||||
Period ended 08/31/10(l) | 15.94 | 0.19 | 0.36 | 0.55 | (0.19 | ) | 0.00 | (0.19 | ) | 16.30 | 3.49 | (d) | 167 | 0.85 | (f) | 0.81 | (f) | 4.75 | (f) | 15 | ||||||||||||||||||||||||||||||||||||
(a) | Calculated using average shares outstanding. | |
(b) | For the years ended September 30, 2009 and prior, ratio does not exclude facilities and maintenance fees. | |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. | |
(d) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges and is not annualized for periods less than one year, if applicable. | |
(e) | Ratios are annualized and based on average daily net assets (000’s omitted) of $132,562, $3,679, $10,141, and $163 for Class A, Class B, Class C, and Class Y shares, respectively. | |
(f) | Annualized. | |
(g) | Assumes reinvestment of all distributions for the period and does not include payment of the maximum sales charge of 4.75% or contingent deferred sales charge (CDSC). On purchases of $1 million or more, a CDSC of 1% may be imposed on certain redemptions made within eighteen months of purchase. If the sales charges were included, total returns would be lower. These returns include combined Rule��12b-1 fees and service fees of up to 0.25% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. | |
(h) | The total return, ratio of expenses to average net assets and ratio of net investment income (loss) to average net assets reflect actual 12b-1 fees of 0.25% and 0.74% for the year ended August 31, 2011 and the period ended August 31, 2010, respectively. | |
(i) | Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 5%, charged on certain redemptions made within one year of purchase and declining to 0% after the fifth year. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to 1% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. | |
(j) | The total return, ratio of expenses to average net assets and ratio of net investment income (loss) to average net assets reflect actual 12b-1 fees of less than 1%. | |
(k) | Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 1%, charged on certain redemptions made within one year of purchase. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to 1% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. | |
(l) | Commencement date of June 1, 2010. |
23 Invesco Van Kampen Pennsylvania Tax Free Income Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Counselor Series Trust (Invesco Counselor Series Trust)
and Shareholders of Invesco Van Kampen Pennsylvania Tax Free Income Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Invesco Van Kampen Pennsylvania Tax Free Income Fund (one of the funds constituting AIM Counselor Series Trust (Invesco Counselor Series Trust), hereafter referred to as the “Fund”) at August 31, 2011, the results of its operations for the year then ended, the changes in its net assets and the financial highlights for the year then ended and the eleven month period ended August 31, 2010, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at August 31, 2011 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. The statement of changes in net assets and the financial highlights of the Fund for the periods ended September 30, 2009 and prior were audited by other independent auditors whose report dated November 20, 2009 expressed an unqualified opinion on those financial statements.
PRICEWATERHOUSECOOPERS LLP
October 21, 2011
Houston, Texas
24 Invesco Van Kampen Pennsylvania Tax Free Income Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments or contingent deferred sales charges on redemptions, and redemption fees, if any; and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period March 1, 2011 through August 31, 2011.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the hypothetical information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
HYPOTHETICAL | ||||||||||||||||||||||||||||||
ACTUAL | (5% annual return before expenses) | |||||||||||||||||||||||||||||
Beginning | Ending | Expenses | Ending | Expenses | Annualized | |||||||||||||||||||||||||
Account Value | Account Value | Paid During | Account Value | Paid During | Expense | |||||||||||||||||||||||||
Class | (03/01/11) | (08/31/11)1 | Period2 | (08/31/11) | Period2 | Ratio | ||||||||||||||||||||||||
A | $ | 1,000.00 | $ | 1,057.90 | $ | 5.24 | $ | 1,020.11 | $ | 5.14 | 1.01 | % | ||||||||||||||||||
B | 1,000.00 | 1,062.20 | 5.04 | 1,020.32 | 4.94 | 0.97 | ||||||||||||||||||||||||
C | 1,000.00 | 1,054.70 | 9.11 | 1,016.33 | 8.94 | 1.76 | ||||||||||||||||||||||||
Y | 1,000.00 | 1,059.90 | 3.95 | 1,021.37 | 3.87 | 0.76 | ||||||||||||||||||||||||
1 | The actual ending account value is based on the actual total return of the Fund for the period March 1, 2011 through August 31, 2011, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund’s expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half year. |
25 Invesco Van Kampen Pennsylvania Tax Free Income Fund
Approval of Investment Advisory and Sub-Advisory Contracts
The Board of Trustees (the Board) of AIM Counselor Series Trust (Invesco Counselor Series Trust) is required under the Investment Company Act of 1940, as amended, to approve annually the renewal of the Invesco Van Kampen Pennsylvania Tax Free Income Fund (the Fund) investment advisory agreement with Invesco Advisers, Inc. (Invesco Advisers) and the Master Intergroup Sub-Advisory Contract for Mutual Funds (the sub-advisory contracts) with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers). During contract renewal meetings held on June 14-15, 2011, the Board as a whole, and the disinterested or “independent” Trustees, who comprise 80% of the Board, voting separately, approved the continuance of the Fund’s investment advisory agreement and the sub-advisory contracts for another year, effective July 1, 2011. In doing so, the Board considered the process that it follows in reviewing and approving the Fund’s investment advisory agreement and sub-advisory contracts and the information that it is provided. The Board determined that the Fund’s investment advisory agreement and the sub-advisory contracts are in the best interests of the Fund and its shareholders and the compensation to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is responsible for overseeing the management of a number of the series portfolios of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies and limitations and investment risks of these funds. The Sub-Committees meet regularly and at designated contract renewal meetings each year to conduct a review of the performance, fees, expenses and other matters related to their assigned Invesco Funds. Each Sub-Committee recommends to the Investments Committee, which in turn recommends to the full Board, whether to approve the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Trustees receive comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and an independent company, Lipper, Inc. (Lipper). The Trustees also receive an independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. The independent Trustees are assisted in their annual evaluation of the Fund’s investment advisory agreement by the Senior Officer and by independent legal counsel. The independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in private sessions with the Senior Officer and counsel.
In evaluating the fairness and reasonableness of the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Trustees also considered information provided in connection with fund acquisitions approved by the Trustees to rationalize the Invesco Funds product range following the acquisition of the retail mutual fund business of Morgan Stanley (the Morgan Stanley Transaction). The Trustees recognized that the advisory fees for the Invesco Funds include advisory fees that are the result of years of review and negotiation between the Trustees and Invesco Advisers as well as advisory fees inherited from Morgan Stanley and Van Kampen funds acquired in the Morgan Stanley Transaction. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these same arrangements throughout the year and in prior years. One Trustee may have weighed a particular piece of information differently than another Trustee.
The discussion below serves as the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 15, 2011, and may not reflect consideration of factors that became known to the Board after that date, including, for example, changes to the Fund’s performance, advisory fees, expense limitations and/or fee waivers.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers, with whom the Board met during the year. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s consideration of Invesco Advisers’ performance and investment process oversight, independent credit analysis and investment risk management.
In determining whether to continue the Fund’s investment advisory agreement, the Board considered the prior relationship between Invesco Advisers and the Fund, as well as the Board’s knowledge of Invesco Advisers’ operations, and concluded that it is beneficial to maintain the current relationship, in part, because of such knowledge. The Board also considered services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution and legal and compliance. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and the advisory services are provided in accordance with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services provided by the Affiliated Sub-Advisers under the sub-advisory contracts and the credentials and experience of the officers and employees of the Affiliated Sub-Advisers who provide these services. The Board concluded that the sub-advisory contracts benefit the Fund and its shareholders by permitting Invesco Advisers to use the resources and talents of the Affiliated Sub-Advisers in managing the Fund. The Board concluded that the nature, extent and quality of the services provided by the Affiliated Sub-Advisers are appropriate and satisfactory and in accordance with the terms of the Fund’s sub-advisory contracts.
B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
26 Invesco Van Kampen Pennsylvania Tax Free Income Fund
The Board compared the Fund’s performance during the past one, three and five calendar years to the performance of funds in the Lipper performance universe and against the Lipper Pennsylvania Municipal Debt Funds Index. The Board noted that performance of Class A shares of the Fund was in the first quintile of the performance universe for the one year period, the third quintile for the three year period and the fifth quintile for the five year period (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board noted that performance of Class A shares of the Fund was above the performance of the Index for the one year period, at the same level for the three year period and below the Index for the five year period. Although the independent written evaluation of the Fund’s Senior Officer only considered Fund performance through the most recent calendar year, the Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
C. | Advisory and Sub-Advisory Fees and Fee Waivers |
The Board compared the Fund’s contractual advisory fee rate to the contractual advisory fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the contractual advisory fee rate for Class A shares of the Fund was above the median contractual advisory fee rate of funds in the expense group. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using audited financial data from the most recent annual report of each fund in the expense group that was publicly available as of the end of the past calendar year and including only one fund per investment adviser. The Board noted that comparative data is as of varying dates, which may affect the comparability of data during times of market volatility.
The Board noted that Invesco Advisers and the Affiliated Sub-Advisers do not manage other mutual funds or client accounts in a manner substantially similar to the management of the Fund.
The Board noted that Invesco Advisers has contractually agreed to waive fees and/or limit expenses of the Fund through at least June 30, 2012 in an amount necessary to limit total annual operating expenses to a specified percentage of average daily net assets for each class of the Fund. The Board noted that at the current expense ratio for the Fund, this expense waiver does not have any impact.
The Board also considered the services provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the allocation of fees between Invesco Advisers and the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board noted that Invesco Advisers provides services to sub-advised Invesco Funds, including oversight of the Affiliated Sub-Advisers as well as the additional services described above other than day-to-day portfolio management. The Board also noted that the sub-advisory fees have no direct effect on the Fund or its shareholders, as they are paid by Invesco Advisers to the Affiliated Sub-Advisers.
Based upon the information and considerations described above, the Board concluded that the Fund’s advisory and sub-advisory fees are fair and reasonable.
D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule. The Board also noted that the 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 Invesco Advisers.
E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the profitability of Invesco Advisers and its affiliates in providing these services. The Board reviewed with Invesco Advisers the methodology used to prepare the profitability information. The Board considered the profitability of Invesco Advisers in connection with managing the Fund and the Invesco Funds. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its subsidiaries provide to the Fund and the Invesco Funds. The Board concluded that the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund is not excessive given the nature, quality and extent of the services provided to the Invesco Funds. The Board considered whether Invesco Advisers and each Affiliated Sub-Adviser are financially sound and have the resources necessary to perform their obligations under the investment advisory agreement and sub-advisory contracts. The Board concluded that Invesco Advisers and each Affiliated Sub-Adviser have the financial resources necessary to fulfill these obligations.
F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund, including the fees received for their provision of administrative, transfer agency and distribution services to the Fund. The Board considered the performance of Invesco Advisers 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 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 Fund; that Invesco Advisers 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; and 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.
The Board considered the benefits realized by Invesco Advisers and the Affiliated Sub-Advisers as a result of portfolio brokerage transactions executed through “soft dollar” arrangements. The Board noted that soft dollar arrangements shift the payment obligation for research and execution services from Invesco Advisers and the Affiliated Sub-Advisers to the Invesco Funds and therefore may reduce Invesco Advisers’ and the Affiliated Sub-Advisers’ expenses. The Board concluded that the soft dollar arrangements are appropriate. The Board also concluded that, based on their review and representations made by the Chief Compliance Officer of the Invesco Funds, these arrangements are consistent with regulatory requirements.
The Board considered that the Fund’s uninvested cash and cash collateral from any securities lending arrangements may be invested in money market funds advised by Invesco Advisers pursuant to procedures approved by the Board. The Board noted that Invesco Advisers receives advisory fees from these affiliated money market funds attributable to such investments, although Invesco Advisers has contractually agreed to waive through varying periods the advisory fees payable by the Invesco Funds. The waiver is in an amount equal to 100% of the net advisory fee Invesco Advisers receives from the affiliated money market funds with respect to the Fund’s investment in the affiliated money market funds of uninvested cash, but not cash collateral. The Board concluded that the Fund’s investment of uninvested cash and cash collateral from any securities lending arrangements in the affiliated money market funds is in the best interests of the Fund and its shareholders.
27 Invesco Van Kampen Pennsylvania Tax Free Income Fund
Tax Information
Form 1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific state’s requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended August 31, 2011:
Federal and State Income Tax | ||||
Qualified Dividend Income* | 0% | |||
Corporate Dividends Received Deduction* | 0% | |||
Tax-Exempt Interest Dividends* | 99.98% |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Fund’s fiscal year. |
28 Invesco Van Kampen Pennsylvania Tax Free Income Fund
Trustees and Officers
The address of each trustee and officer is AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”), 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Number of Funds | ||||||||
in Fund Complex | ||||||||
Name, Year of Birth and | Trustee and/ | Principal Occupation(s) | Overseen by | Other Directorship(s) | ||||
Position(s) Held with the Trust | or Officer Since | During Past 5 Years | Trustee | Held by Trustee | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 — 1960 Trustee | 2007 | 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 | 143 | 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. Taylor2 — 1954 Trustee, President and Principal Executive Officer | 2006 | 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 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 Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust); Trustee and Executive Vice President, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s 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 Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Tax-Free Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. | 143 | None | ||||||
Wayne W. Whalen3 — 1939 Trustee | 2010 | Of Counsel, and prior to 2010, partner in the law firm of Skadden, Arps, Slate, Meagher & Flom LLP, legal counsel to funds in the Fund Complex | 161 | Director of the Abraham Lincoln Presidential Library Foundation | ||||
Independent Trustees | ||||||||
Bruce L. Crockett — 1944 Trustee and Chair | 2003 | Chairman, Crockett Technology Associates (technology consulting company) Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer COMSAT Corporation; and Chairman, Board of Governors of INTELSAT (international communications company) | 143 | ACE Limited (insurance company); and Investment Company Institute | ||||
1 | Mr. Flanagan is considered an interested person of the Trust because he is an officer of the adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the adviser to the Trust. |
2 | Mr. Taylor is considered an interested person of the Trust because he is an officer and a director of the adviser to, and a director of the principal underwriter of, the Trust. |
3 | Mr. Whalen has been deemed to be an interested person of the Trust because of his prior service as counsel to the predecessor funds of certain Invesco open-end funds and his affiliation with the law firm that served as counsel to such predecessor funds and continues to serve as counsel to the Invesco Van Kampen closed-end funds. |
T-1 Invesco Van Kampen Pennsylvania Tax Free Income Fund
Trustees and Officers—(continued)
The address of each trustee and officer is AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”), 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Number of Funds | ||||||||
in Fund Complex | ||||||||
Name, Year of Birth and | Trustee and/ | Principal Occupation(s) | Overseen by | Other Directorship(s) | ||||
Position(s) Held with the Trust | or Officer Since | During Past 5 Years | Trustee | Held by Trustee | ||||
Independent Trustees | ||||||||
David C. Arch — 1945 Trustee | 2010 | Chairman and Chief Executive Officer of Blistex Inc., a consumer health care products manufacturer. | 161 | 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 | ||||
Bob R. Baker — 1936 Trustee | 1983 | Retired | 143 | None | ||||
Formerly: President and Chief Executive Officer, AMC Cancer Research Center; and Chairman and Chief Executive Officer, First Columbia Financial Corporation | ||||||||
Frank S. Bayley — 1939 Trustee | 2003 | Retired Formerly: Director, Badgley Funds, Inc. (registered investment company) (2 portfolios) and Partner, law firm of Baker & McKenzie | 143 | Director and Chairman, C.D. Stimson Company (a real estate investment company) | ||||
James T. Bunch — 1942 Trustee | 2000 | 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 | 143 | Vice Chairman, Board of Governors, Western Golf Association/Evans Scholars Foundation and Director, Denver Film Society | ||||
Rodney Dammeyer — 1940 Trustee | 2010 | President 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. | 161 | 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 | 2003 | 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) | 161 | Board of Nature’s 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 | 2003 | 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) | 143 | Administaff | ||||
Formerly: Chief Executive Officer, Texana Timber LP (sustainable forestry company) and member of the U.S. House of Representatives | ||||||||
Carl Frischling — 1937 Trustee | 2003 | Partner, law firm of Kramer Levin Naftalis and Frankel LLP | 143 | Director, Reich & Tang Funds (6 portfolios) | ||||
Prema Mathai-Davis — 1950 Trustee | 2003 | Retired | 143 | None | ||||
Formerly: Chief Executive Officer, YWCA of the U.S.A. | ||||||||
Larry Soll — 1942 Trustee | 1997 | Retired | 143 | None | ||||
Formerly, Chairman, Chief Executive Officer and President, Synergen Corp. (a biotechnology company) | ||||||||
T-2 Invesco Van Kampen Pennsylvania Tax Free Income Fund
Trustees and Officers—(continued)
The address of each trustee and officer is AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”), 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Number of Funds | ||||||||
in Fund Complex | ||||||||
Name, Year of Birth and | Trustee and/ | Principal Occupation(s) | Overseen by | Other Directorship(s) | ||||
Position(s) Held with the Trust | or Officer Since | During Past 5 Years | Trustee | Held by Trustee | ||||
Independent Trustees | ||||||||
Hugo F. Sonnenschein — 1940 Trustee | 2010 | President Emeritus and Honorary Trustee 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. | 161 | 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 | 2005 | Retired Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios) and Partner, Deloitte & Touche | 143 | None | ||||
Other Officers | ||||||||
Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer of Invesco Funds | N/A | N/A | ||||
John M. Zerr — 1962 Senior Vice President, Chief Legal Officer and Secretary | 2006 | 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 | N/A | N/A | ||||
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) | ||||||||
Lisa O. Brinkley — 1959 Vice President | 2004 | Global Compliance Director, Invesco Ltd.; Chief Compliance Officer, Invesco Investment Services, Inc.(formerly known as Invesco Aim Investment Services, Inc.); and Vice President, The Invesco Funds Formerly: Chief Compliance Officer, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) and Van Kampen Investor Services Inc.; Senior Vice President, Invesco Management Group, Inc.; Senior Vice President and Chief Compliance Officer, Invesco Advisers, Inc. and The Invesco Funds; Vice President and Chief Compliance Officer, Invesco Aim Capital Management, Inc. and Invesco Distributors, Inc.; Vice President, Invesco Investment Services, Inc. and Fund Management Company | N/A | N/A | ||||
Sheri Morris — 1964 Vice President, Treasurer and Principal Financial Officer | 2003 | 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) | N/A | N/A | ||||
Formerly: 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, 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. | ||||||||
T-3 Invesco Van Kampen Pennsylvania Tax Free Income Fund
Trustees and Officers—(continued)
The address of each trustee and officer is AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”), 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Number of Funds | ||||||||
in Fund Complex | ||||||||
Name, Year of Birth and | Trustee and/ | Principal Occupation(s) | Overseen by | Other Directorship(s) | ||||
Position(s) Held with the Trust | or Officer Since | During Past 5 Years | Trustee | Held by Trustee | ||||
Other Officers | ||||||||
Karen Dunn Kelley — 1960 Vice President | 2003 | Head of Invesco’s 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 Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust); and President and Principal Executive Officer, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust only). | N/A | N/A | ||||
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 Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Tax-Free Investments Trust only) | ||||||||
Lance A. Rejsek — 1967 Anti-Money Laundering Compliance Officer | 2005 | 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.), The Invesco Funds, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management) and Van Kampen Funds Inc. | N/A | N/A | ||||
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Investor Services Inc., Fund Management Company, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc. | ||||||||
Todd L. Spillane — 1958 Chief Compliance Officer | 2006 | 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, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, INVESCO Private Capital Investments, Inc. (holding company) and Invesco Private Capital, Inc. (registered investment adviser); Vice President, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.), Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.). Formerly: 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 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 | N/A | N/A | ||||
The Statement of Additional Information of the Trust includes additional information about the Fund’s Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Fund’s prospectus for information on the Fund’s sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 2500 Houston, TX 77046-1173 | Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 | Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 2500 Houston, TX 77046-1173 | Auditors PricewaterhouseCoopers LLP 1201 Louisiana Street, Suite 2900 Houston, TX 77002-5678 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2600 One Commerce Square Philadelphia, PA 19103 | Counsel to the Independent Trustees Kramer, Levin, Naftalis & Frankel LLP 1177 Avenue of the Americas New York, NY 10036-2714 | Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 2500 Houston, TX 77046-1173 | Custodian State Street Bank and Trust Company 225 Franklin Boston, MA 02110-2801 |
T-4 Invesco Van Kampen Pennsylvania Tax Free Income Fund
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Invesco mailing information
Send general correspondence to Invesco Investment Services, Inc., P.O. Box 219078, Kansas City, MO 64121-9078.
Invesco privacy policy
You share personal and financial information with us that is necessary for your transactions and your account records. We take very seriously the obligation to keep that information confidential and private.
Invesco collects nonpublic personal information about you from account applications or other forms you complete and from your transactions with us or our affiliates. We do not disclose information about you or our former customers to service providers or other third parties except to the extent necessary to service your account and in other limited circumstances as permitted by law. For example, we use this information to facilitate the delivery of transaction confirmations, financial reports, prospectuses and tax forms.
Even within Invesco, only people involved in the servicing of your accounts and compliance monitoring have access to your information. To ensure the highest level of confidentiality and security, Invesco maintains physical, electronic and procedural safeguards that meet or exceed federal standards. Special measures, such as data encryption and authentication, apply to your communications with us on our website. More detail is available to you at invesco.com/privacy.
Important notice regarding delivery of security holder documents
To reduce Fund expenses, only one copy of most shareholder documents may be mailed to shareholders with multiple accounts at the same address (Householding). Mailing of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact Invesco Investment Services, Inc. at 800 959 4246 or contact your financial institution. We will begin sending you individual copies for each account within 30 days after receiving your request.
Fund holdings and proxy voting information
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is available at invesco.com/completeqtrholdings. Shareholders can also look up the Fund’s Forms N-Q on the SEC website at sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-09913 and 333-36074.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov.
Information regarding how the Fund voted proxies related to its portfolio securities during the 12 months ended June 30, 2011, is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov.
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Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the U.S. distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
VK-PTFI-AR-1 | Invesco Distributors, Inc. |
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Annual Report to Shareholders August 31, 2011
Invesco Van Kampen Small Cap Growth Fund
Nasdaq:
A: VASCX n B: VBSCX n C: VCSCX n Y: VISCX
A: VASCX n B: VBSCX n C: VCSCX n Y: VISCX
2 | Letters to Shareholders | |
4 | Performance Summary | |
4 | Management Discussion | |
6 | Long-Term Fund Performance | |
8 | Supplemental Information | |
9 | Schedule of Investments | |
13 | Financial Statements | |
15 | Notes to Financial Statements | |
21 | Financial Highlights | |
22 | Auditor's Report | |
23 | Fund Expenses | |
24 | Approval of Investment Advisory and Sub-Advisory Agreements | |
T-1 | Trustees and Officers |
Letters to Shareholders
![(PHOTO OF PHILIP TAYLOR)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8466502.jpg)
Philip Taylor
Dear Shareholders:
Enclosed is important information about your Fund and its performance. I encourage you to read this report to learn more about your Fund’s short- and long-term performance and its holdings as of the close of the reporting period. This report also includes useful information about your Fund’s management team and a discussion of how your Fund was managed during the reporting period.
Data indicated that economic growth in the U.S. and most of Europe was anemic during the reporting period. In the U.S., unemployment remained high, and the housing market remained weak. Concerns about European sovereign debt persisted. Nonetheless, equity markets rose in late 2010 and early 2011 as investors anticipated better news ahead. But contentious negotiations to raise the U.S. government’s debt ceiling heightened investor unease, and following the first-ever downgrade of U.S. creditworthiness in August, global stock markets declined as many investors sought safer havens.
Where you can get current information about your Fund
In light of economic uncertainty and market volatility, I suggest you check the timely market updates and commentary from many of our fund managers and other investment professionals at invesco.com/us. On our website, you also can obtain information about your account at any hour of the day or night. I invite you to visit and explore the tools and information we offer at invesco.com/us.
Our commitment to investment excellence
As we’ve seen over the last several years, market conditions can change – often suddenly and dramatically. That’s one reason financial advisers typically advise their clients to be well diversified and to maintain a long-term investment focus. While diversification can’t guarantee a profit or protect against loss, it can cushion the impact of dramatic market moves. Maintaining a long-term investment focus for your long-term goals – financing your retirement or your children’s education, for example – may help you avoid making rash investment decisions based on short-term market swings.
Invesco’s investment professionals apply these same principles to the funds they manage.
Invesco offers a broad array of traditional mutual funds, as well as other investment products, including single-country, sector, regional and global investments spanning equity, fixed income and alternative asset classes. Across our product line, investment excellence is our ultimate goal. Each of our funds is managed by specialized teams of investment professionals, and as a company, we maintain a single focus – investment management – that allows our fund managers to concentrate on doing what they do best: managing your money.
Our funds are managed strictly according to their stated investment objectives and strategies, with robust risk oversight using consistent, repeatable investment processes that don’t change in response to short-term market events. This disciplined approach can’t guarantee a profit; no investment can do that, since all involve some measure of risk. But it can ensure that your money is managed the way we said it would be, and that it’s managed with a long-term focus.
Our adherence to stated investment objectives and strategies allows your financial adviser to build a diversified portfolio that meets your individual risk tolerance and financial goals. It also means that when your goals change, your financial adviser will be able to find an Invesco fund that’s appropriate for your needs.
Questions?
If you have questions about your account, please contact one of our client service representatives at 800 959 4246. If you have a general Invesco-related question or comment for me, I invite you to email me directly at phil@invesco.com.
All of us at Invesco look forward to serving your investment management needs for many years to come. Thank you for investing with us.
Sincerely,
![-s- Philip Taylor](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8466503.gif)
Philip Taylor
Senior Managing Director, Invesco Ltd.
Senior Managing Director, Invesco Ltd.
2 Invesco Van Kampen Small Cap Growth Fund
![(PHOTO OF BRUCE CROCKETT)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8466504.jpg)
Bruce Crockett
Dear Fellow Shareholders:
Although the world’s economies are gradually recovering from the financial crisis, it has not been a smooth path. Unrest in the Middle East, persistently weak job and housing markets in the U.S. and continued government balance sheet repair in Europe are contributing to a slow, labored march toward global recovery.
In this environment, investors face risks that could make it more difficult to achieve their long-term financial goals – a secure retirement, home ownership, a child’s college education. Although the markets are complex and dynamic, there are ways to simplify the process and potentially increase your odds of achieving your goals. The best approach is to create a solid financial plan that helps you save and invest in ways that anticipate your needs over the long term.
Your financial adviser can help you define your financial plan, develop an appropriate investment strategy and put you in a better position to achieve your financial goals over the long term. This can take some of the guesswork out of the process and help you make thoughtful investments. Your financial adviser also can help you better understand your tolerance for risk, so that your investment approach lets you sleep at night while getting you closer to your goals. Lastly, your financial adviser can develop an asset allocation strategy that seeks to balance your investment approach, providing some protection against a decline in the markets while allowing you to participate in rising markets. Invesco calls this type of approach “intentional investing.” It means thinking carefully, planning thoughtfully and acting deliberately.
While no investment can guarantee favorable returns, your Board remains committed to managing costs and enhancing the performance of Invesco’s funds as part of our Investor First orientation. We continue to oversee the funds with the same strong sense of responsibility for your money and your continued trust that we’ve always maintained.
Thanks to the approval of our fund shareholders, Invesco has made great progress in realigning our U.S. mutual fund product line following our acquisition of Morgan Stanley’s retail asset management business, including Van Kampen Investments. When completed, the realignment will reduce overlap in the product lineup, enhance efficiency across our product line and build a solid foundation for further growth to meet client and shareholder needs. I would like to thank those of you who voted your proxy, and I hope our shareholders haven’t been too inconvenienced by the process.
As always, please contact me at bruce@brucecrockett.com with any questions or concerns you may have. On behalf of your Board, we look forward to continuing to represent your interests and serving your needs.
Sincerely,
![-s- Bruce L. Crockett](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8466505.gif)
Bruce L. Crockett
Independent Chair
Invesco Funds Board of Trustees
Independent Chair
Invesco Funds Board of Trustees
3 Invesco Van Kampen Small Cap Growth Fund
Management’s Discussion of Fund Performance
Performance summary
For the 12 months ended August 31, 2011, Invesco Van Kampen Small Cap Growth Fund had positive returns but underperformed the Fund’s style-specific benchmark, the Russell 2000 Growth Index. Underperformance was driven primarily by stock selection in several sectors, including information technology (IT), health care and industrials.
Your Fund’s long-term performance appears later in this report.
Fund vs. Indexes
Total returns, 8/31/10 to 8/31/11, at net asset value (NAV). Performance shown does not include applicable contingent deferred sales charges (CDSC) or front-end sales charges, which would have reduced performance.
Class A Shares | 20.82 | % | ||
Class B Shares | 20.90 | |||
Class C Shares | 20.00 | |||
Class Y Shares | 21.27 | |||
S&P 500 Index▼ (Broad Market Index) | 18.48 | |||
Russell 2000 Growth Index▼ (Style-Specific Index) | 27.54 | |||
Lipper Small-Cap Growth Funds Index▼ (Peer Group Index) | 24.66 | |||
▼ | Lipper Inc. |
The Fund recently adopted a three-tier benchmark structure to compare its performance to broad market, style-specific and peer group market measures.
How we invest
We believe a growth investment strategy is an essential component of a diversified portfolio.
Our investment process seeks to identify small-cap companies with growth rates that are higher and/or more sustainable than what is implied by current valuations and market expectations.
We begin with a quantitative model that ranks all stock candidates based on a set of variables we believe are leading indicators of change and are common in those companies that have the potential for sustainable growth, competitive advantage and ability to execute. This proprietary model provides an objective approach to identifying new investment opportunities. The highest ranked stocks become the primary focus of our research efforts.
Our stock selection process includes the development and analysis of a fully integrated financial model, which allows our team members to build a more complete understanding of the financial health of each investment candidate. The second step in our security research involves due diligence of the company, which includes in-depth discussions with members of company management teams. We also leverage Porter’s Five Forces Analysis, a theoretical tool that carefully examines a company by five dimensions (supplier power, threat of substitutes, barriers to entry, buying power and degree of rivalry). This tool is used to further measure and define the sustainability of a company’s earnings growth and whether there is upside to expectations already embedded in the security.
Risk management plays an important role in portfolio construction, as our target portfolio attempts to maximize the relationship between risk and return.
We consider selling a stock for any of the following reasons:
n | Investment thesis plays out or is no longer valid. | |
n | Fundamentals deteriorate. | |
n | Macroeconomic conditions change. | |
n | Risk/reward ratio becomes unfavorable or a higher conviction investment idea arises with better risk/reward ratio. |
Market conditions and your Fund
Equity markets were highly volatile during the fiscal year as investors weighed the competing issues of improved corporate profits, soft macroeconomic data and debt issues in Europe and in the U.S. Corporate earnings were largely positive, but often overshadowed by concerns about high unemployment, a lack of consumer confidence, the growing debt contagion in Europe and the possibility of a downgrade of the U.S. credit rating. After a general rising trend through July 2011, major equity indexes sold off precipitously in August as the U.S. received the first-ever downgrade to its credit rating from Standard & Poor’s, while the sovereign debt crisis unfolded in the eurozone, prompting concerns of a “double-dip” recession.
Uncertainty created by the U.S. credit downgrade, combined with lack of consumer confidence and weak employment, added to concerns that the economic recovery was slowing to a subnormal growth rate. Even with the abrupt sell-off in August, major equity indexes recorded positive returns for the fiscal year, and all 10 sectors of the Russell 2000 Growth Index posted double-digit gains. Russell 2000 Growth
Portfolio Composition
By sector
Information Technology | 20.4 | % | ||
Health Care | 19.0 | |||
Consumer Discretionary | 17.2 | |||
Industrials | 16.7 | |||
Energy | 6.9 | |||
Materials | 4.7 | |||
Financials | 3.9 | |||
Consumer Staples | 2.3 | |||
Telecommunication Services | 0.8 | |||
Utilities | 0.8 | |||
Money Market Funds Plus Other Assets Less Liabilities | 7.3 |
Top 10 Equity Holdings*
1. | Cinemark Holdings, Inc. | 1.2 | ||||||
2. | Health Management Associates, Inc.- Class A | 1.1 | ||||||
3. | CLARCOR, Inc. | 1.1 | ||||||
4. | Complete Production Services, Inc. | 1.1 | ||||||
5. | WESCO International, Inc. | 1.0 | ||||||
6. | Rockwood Holdings, Inc. | 1.0 | ||||||
7. | Deckers Outdoor Corp. | 1.0 | ||||||
8. | Salix Pharmaceuticals Ltd. | 1.0 | ||||||
9. | Packaging Corp. of America | 1.0 | ||||||
10. | ProAssurance | 1.0 |
Top Five Industries*
1. | Health Care Equipment | 6.1 | % | |||||
2. | Application Software | 5.0 | ||||||
3. | Health Care Services | 3.7 | ||||||
4. | Semiconductors | 3.5 | ||||||
5. | Systems Software | 3.1 |
Total Net Assets | $1.1 billion | |||
Total Number of Holdings* | 139 |
The Fund’s holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
*Excluding money market fund holdings.
4 Invesco Van Kampen Small Cap Growth Fund
Index sector returns were mixed, as the energy sector had the highest return followed by telecommunication services and consumer staples, while the utilities sector had the lowest return.
While the Fund had positive absolute returns during the reporting period, it underperformed versus the Russell 2000 Growth Index. This underperformance was driven primarily by stock selection in several sectors, including IT, health care and industrials.
The Fund underperformed the Russell 2000 Growth Index most significantly in the IT sector, driven by stock selection and an underweight position. This sector saw significant merger and acquisition speculation and activity during the reporting period. Some of the Fund’s underperformance was a result of not owning several holdings that had strong performance in this environment but did not meet the team’s strict investment and valuation criteria. Examples of holdings that detracted from performance included network products maker Netgear, network testing services provider Ixia Communications and organic light emitting diode technology products maker Universal Display. Universal Display was no longer held at the end of the reporting period.
Underperformance in the health care sector was driven primarily by stock selection. Similar to the IT sector, some of this underperformance was a result of not owning several holdings that performed well but did not meet the team’s strict investment criteria. Additionally, several holdings detracted from performance, including pharmaceutical products maker Auxilium Pharmaceuticals and medical products maker Masimo. While the Fund continued to own Masimo, Auxilium Pharmaceuticals was sold due to deteriorating fundamentals.
The Fund also underperformed in the industrials sector, largely due to stock selection. Three holdings that were among the leading detractors from performance included automotive systems maker Meritol, Inc., commercial and construction equipment renter United Rentals and industrial services outsourcer TMS International.
Some of the Fund’s underperformance was offset by outperformance in other sectors, including consumer discretionary, energy and consumer staples. The Fund outperformed by the widest margin in the consumer discretionary sector, driven by stock selection. In this
sector, examples of holdings that contributed to performance included shoe retailer Foot Locker and farm and ranch retailer Tractor Supply. The Fund’s position in Foot Locker was sold during the period.
In the energy sector, contributors to outperformance included offshore driller Atwood Oceanics, oil services provider Oil States International and exploration and production holding Whiting Petroleum. The Fund’s position in Whiting Petroleum was sold during the reporting period. In the consumer staples sector, holdings that contributed to outperformance included snack foods maker Diamond Foods International and beauty products maker Elizabeth Arden.
As we’ve discussed, the stock market experienced volatile performance during the reporting period. We would like to caution investors against making investment decisions based on short-term performance. As always, we recommend that you consult a financial adviser to discuss your individual financial program.
We thank you for your commitment to Invesco Van Kampen Small Cap Growth Fund.
The views and opinions expressed in management’s discussion of Fund performance are those of Invesco Advisers, Inc. These views and opinions are subject to change at any time based on factors such as market and economic conditions. These views and opinions may not be relied upon as investment advice or recommendations, or as an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but Invesco Advisers, Inc. makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
See important Fund and, if applicable, index disclosures later in this report.
![(PHOTO OF MATTHEW HART)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8466506.jpg)
Matthew Hart
Chartered Financial Analyst, portfolio manager, is lead manager of Invesco Van Kampen Small Cap Growth Fund. He joined Invesco in 2010. Mr. Hart earned a B.B.A. from Southern Methodist University.
![(PHOTO OF JUSTIN SPEER)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8466506.jpg)
Justin Speer
Portfolio manager, is manager of Invesco Van Kampen Small Cap Growth Fund. He joined Invesco in 2010. Mr. Speer earned a B.S. in finance and accounting from Texas Christian University.
5 Invesco Van Kampen Small Cap Growth Fund
Your Fund’s Long-Term Performance
Results of a $10,000 Investment – Oldest Share Classes since Inception
Fund data from 11/27/00, index data from 11/30/00
![(PERFORMANCE GRAPH)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8466508.gif)
As noted earlier in this report, during the reporting period, the Fund has adopted a three-tier benchmark structure to compare its performance to broad market, style-specific and peer group market measures. These additional benchmarks will now be included in the chart above.
Past performance cannot guarantee comparable future results.
The data shown in the chart include reinvested distributions, applicable sales charges and Fund expenses including management fees. Results for Class B shares are calculated as if a hypothetical shareholder had liquidated his entire investment in the Fund at the close of the reporting period and paid the contingent deferred sales charges, if applicable. Index results include reinvested dividends, but they do not reflect sales charges. Performance of the peer group, if applicable, reflects fund expenses and management fees; performance of a market index does not. Performance shown in the chart and table(s) does not reflect deduction of taxes a shareholder would pay on Fund distributions or sale of Fund shares.
This chart, which is a logarithmic chart, presents the fluctuations in the value of the Fund and its indexes. We believe that a logarithmic chart is more effective than other types of charts in illustrating changes in value during the early years shown in the chart. The vertical axis, the one that indicates the dollar value of an investment, is constructed with each segment representing a percent change in the value of the investment. In this chart, each segment represents a doubling, or 100% change, in the value of the investment. In other words, the space between $4,000 and $8,000 is the same size as the space between $8,000 and $16,000, and so on.
6 Invesco Van Kampen Small Cap Growth Fund
Average Annual Total Returns
As of 8/31/11, including maximum applicable
sales charges
sales charges
Class A Shares | ||||
Inception (11/27/00) | 0.55 | % | ||
10 Years | 4.58 | |||
5 Years | 1.92 | |||
1 Year | 14.16 | |||
Class B Shares | ||||
Inception (11/27/00) | 0.54 | % | ||
10 Years | 4.59 | |||
5 Years | 2.31 | |||
1 Year | 15.90 | |||
Class C Shares | ||||
Inception (11/27/00) | 0.33 | % | ||
10 Years | 4.41 | |||
5 Years | 2.32 | |||
1 Year | 19.00 | |||
Class Y Shares | ||||
Inception (2/2/06) | 2.36 | % | ||
5 Years | 3.37 | |||
1 Year | 21.27 |
Average Annual Total Returns
As of 6/30/11, the most recent calendar quarter-end, including maximum applicable sales charges
Class A Shares | ||||
Inception (11/27/00) | 2.02 | % | ||
10 Years | 4.59 | |||
5 Years | 4.36 | |||
1 Year | 32.12 | |||
Class B Shares | ||||
Inception (11/27/00) | 2.00 | % | ||
10 Years | 4.60 | |||
5 Years | 4.74 | |||
1 Year | 34.64 | |||
Class C Shares | ||||
Inception (11/27/00) | 1.81 | % | ||
10 Years | 4.43 | |||
5 Years | 4.76 | |||
1 Year | 37.80 | |||
Class Y Shares | ||||
Inception (2/2/06) | 5.35 | % | ||
5 Years | 5.82 | |||
1 Year | 40.07 |
Effective June 1, 2010, Class A, Class B, Class C and Class I shares of the predecessor fund, Van Kampen Small Cap Growth Fund, advised by Van Kampen Asset Management were reorganized into Class A, Class B, Class C and Class Y shares, respectively, of Invesco Van Kampen Small Cap Growth Fund. Returns shown above for Class A, Class B, Class C and Class Y shares are blended returns of the predecessor fund and Invesco Van Kampen Small Cap Growth Fund. Share class returns will differ from the predecessor fund because of different expenses.
The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Please visit invesco.com/performance for the most recent month-end performance. Performance figures reflect reinvested distributions, changes in net asset value and the effect of the maximum sales charge unless otherwise stated. Investment return and principal value will fluctuate so that you may have a gain or loss when you sell shares.
The net annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Class A, Class B,
Class C and Class Y shares was 1.38%, 1.66%, 2.13% and 1.13%, respectively.1 The total annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Class A, Class B, Class C and Class Y shares was 1.39%, 1.67%, 2.14% and 1.14%, respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.
Class A share performance reflects the maximum 5.50% sales charge, and Class B and Class C share performance reflects the applicable contingent deferred sales charge (CDSC) for the period involved. For shares purchased prior to June 1, 2010, the CDSC on Class B shares declines from 5% at the time of purchase to 0% at the beginning of the sixth year. For shares purchased on or after June 1, 2010, the CDSC on Class B shares declines from 5% at the time of purchase to 0% at the beginning of the seventh year. The CDSC on Class C shares is 1% for the first year after purchase. Class Y shares do not have a front-end sales charge or a CDSC; therefore, performance is at net asset value.
The performance of the Fund’s share classes will differ primarily due to different sales charge structures and class expenses.
A redemption fee of 2% will be imposed on certain redemptions or exchanges out of the Fund within 31 days of purchase. Exceptions to the redemption fee are listed in the Fund’s prospectus.
1 | Total annual Fund operating expenses after any contractual fee waivers and/or expense reimbursements by the adviser in effect through at least June 30, 2012. See current prospectus for more information. |
7 Invesco Van Kampen Small Cap Growth Fund
Invesco Van Kampen Small Cap Growth Fund’s investment objective is to seek capital appreciation.
n | Unless otherwise stated, information presented in this report is as of August 31, 2011, and is based on total net assets. | |
n | Unless otherwise noted, all data provided by Invesco. | |
n | To access your Fund’s reports/prospectus, visit invesco.com/fundreports. |
About share classes
n | Class B shares may not be purchased or acquired by exchange from share classes other than Class B shares. Please see the prospectus for more information. | |
n | Class Y shares are available to only certain investors. Please see the prospectus for more information. |
Principal risks of investing in the Fund
n | Market risk. Market risk is the possibility that the market values of securities owned by the Fund will decline. Investments in common stocks and other equity securities generally are affected by changes in the stock markets, which fluctuate substantially over time, sometimes suddenly and sharply. | |
n | Risks of small capitalization companies. | |
Small capitalization companies often have less predictable earnings, more limited product lines, markets, distribution channels or financial resources and the management of such companies may be dependent upon one or few key people. The market movements of equity securities of small capitalization companies may be more abrupt and volatile than the market movements of equity securities of larger, more established companies or the stock market in general and are generally less liquid than the equity securities of larger companies. | ||
n | Growth investing risk. Investments in growth-oriented equity securities may have above-average volatility of price movement. The returns on growth securities may or may not move in tandem with the returns on other styles of investing or the overall stock markets. | |
n | Foreign risks. The risks of investing in securities of foreign issuers, including emerging market issuers, can include fluctuations in foreign currencies, foreign currency exchange controls, political and economic instability, differences in securities regulation and trading, and foreign taxation issues. |
n | Risks of investing in REITs. Investing in REITs makes the Fund more susceptible to risks associated with the ownership of real estate and with the real estate industry in general and may involve duplication of management fees and other expenses. REITs may be less diversified than other pools of securities, may have lower trading volumes and may be subject to more abrupt or erratic price movements than the overall securities markets. | |
n | Risks of derivatives. Risks of derivatives include the possible imperfect correlation between the value of the instruments and the underlying assets; risks of default by the other party to the transaction; risks that the transactions may result in losses that partially or completely offset gains in portfolio positions; and risks that the instruments may not be liquid. | |
n | Active trading risk. The Fund may engage in frequent trading of portfolio securities. Active trading results in added expenses and may result in a lower return and increased tax liability. |
About indexes used in this report
n | The S&P 500® Index is an unmanaged index considered representative of the U.S. stock market. | |
n | The Russell 2000® Growth Index is an unmanaged index considered representative of small-cap growth stocks. The Russell 2000 Growth Index is a trademark/service mark of the Frank Russell Co. Russell® is a trademark of the Frank Russell Co. | |
n | The Lipper Small-Cap Growth Funds Index is an unmanaged index considered representative of small-cap growth funds tracked by Lipper. | |
n | The Fund is not managed to track the performance of any particular index, including the index(es) defined here, and consequently, the performance of the Fund may deviate significantly from the performance of the index(es). |
n | A direct investment cannot be made in an index. Unless otherwise indicated, index results include reinvested dividends, and they do not reflect sales charges. Performance of the peer group, if applicable, reflects fund expenses; performance of a market index does not. |
Other information
n | The Chartered Financial Analyst® (CFA®) designation is globally recognized and attests to a charterholder’s success in a rigorous and comprehensive study program in the field of investment management and research analysis. | |
n | The returns shown in management’s discussion of Fund performance are based on net asset values calculated for shareholder transactions. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes, and as such, the net asset values for shareholder transactions and the returns based on those net asset values may differ from the net asset values and returns reported in the Financial Highlights. | |
n | Industry classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. |
This report must be accompanied or preceded by a currently effective Fund prospectus, which contains more complete information, including sales charges and expenses. Investors should read it carefully before investing.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
Fund Nasdaq Symbols
Class A Shares | VASCX | |
Class B Shares | VBSCX | |
Class C Shares | VCSCX | |
Class Y Shares | VISCX |
8 Invesco Van Kampen Small Cap Growth Fund
Schedule of Investments
August 31, 2011
Shares | Value | |||||||
Common Stocks & Other Equity Interests–92.67%(a) | ||||||||
Advertising–0.40% | ||||||||
National CineMedia, Inc. | 317,171 | $ | 4,494,313 | |||||
Aerospace & Defense–1.30% | ||||||||
Esterline Technologies Corp.(b) | 122,737 | 9,240,869 | ||||||
TransDigm Group, Inc.(b) | 58,866 | 5,407,431 | ||||||
14,648,300 | ||||||||
Air Freight & Logistics–0.61% | ||||||||
UTI Worldwide, Inc. | 504,839 | 6,838,044 | ||||||
Alternative Carriers–0.77% | ||||||||
AboveNet, Inc. | 140,457 | 8,635,296 | ||||||
Apparel Retail–2.44% | ||||||||
DSW Inc.–Class A | 189,188 | 8,780,215 | ||||||
Express, Inc. | 388,472 | 7,415,931 | ||||||
Francesca’s Holdings Corp.(b)(c) | 196,339 | 4,502,053 | ||||||
Genesco Inc.(b) | 125,920 | 6,676,278 | ||||||
27,374,477 | ||||||||
Apparel, Accessories & Luxury Goods–1.10% | ||||||||
Maidenform Brands, Inc.(b) | 234,003 | 5,948,357 | ||||||
Under Armour, Inc.–Class A(b)(c) | 89,977 | 6,375,770 | ||||||
12,324,127 | ||||||||
Application Software–4.96% | ||||||||
Bottomline Technologies, Inc.(b) | 275,258 | 6,322,676 | ||||||
BroadSoft Inc.(b)(c) | 309,842 | 9,372,720 | ||||||
Cadence Design Systems, Inc.(b) | 616,224 | 5,693,910 | ||||||
Compuware Corp.(b) | 1,146,745 | 9,701,463 | ||||||
Parametric Technology Corp.(b) | 470,249 | 8,464,482 | ||||||
SolarWinds, Inc.(b) | 360,775 | 8,936,397 | ||||||
SS&C Techonologies Holdings, Inc.(b) | 265,576 | 4,379,348 | ||||||
TIBCO Software Inc.(b) | 123,197 | 2,757,149 | ||||||
55,628,145 | ||||||||
Asset Management & Custody Banks–0.74% | ||||||||
Affiliated Managers Group, Inc.(b) | 94,828 | 8,265,209 | ||||||
Auto Parts & Equipment–1.34% | ||||||||
Modine Manufacturing Co.(b) | 611,323 | 7,042,441 | ||||||
TRW Automotive Holdings Corp.(b) | 190,964 | 7,961,289 | ||||||
15,003,730 | ||||||||
Automotive Retail–0.52% | ||||||||
Asbury Automotive Group Inc.(b)(c) | 310,348 | 5,837,646 | ||||||
Biotechnology–2.94% | ||||||||
Amarin Corp. PLC–ADR (United Kingdom)(b) | 356,929 | 4,108,253 | ||||||
BioMarin Pharmaceutical Inc.(b) | 303,403 | 8,976,178 | ||||||
Cubist Pharmaceuticals Inc.(b) | 166,014 | 5,759,026 | ||||||
Incyte Corp.(b)(c) | 516,029 | 8,292,586 | ||||||
United Therapeutics Corp.(b) | 136,811 | 5,903,394 | ||||||
33,039,437 | ||||||||
Building Products–0.76% | ||||||||
Owens Corning Inc(b) | 292,955 | 8,513,272 | ||||||
Communications Equipment–2.19% | ||||||||
IXIA(b) | 498,480 | 4,281,943 | ||||||
Netgear, Inc.(b) | 323,291 | 8,990,723 | ||||||
Polycom, Inc.(b) | 327,218 | 7,787,788 | ||||||
ShoreTel, Inc.(b) | 506,372 | 3,534,477 | ||||||
24,594,931 | ||||||||
Construction & Engineering–0.76% | ||||||||
MasTec Inc.(b)(c) | 385,643 | 8,561,275 | ||||||
Construction & Farm Machinery & Heavy Trucks–1.36% | ||||||||
AGCO Corp.(b) | 205,814 | 8,817,072 | ||||||
Meritor, Inc.(b) | 759,959 | 6,421,653 | ||||||
15,238,725 | ||||||||
Data Processing & Outsourced Services–2.33% | ||||||||
Cardtronics, Inc.(b) | 379,730 | 9,402,115 | ||||||
VeriFone Systems, Inc.(b) | 278,276 | 9,800,881 | ||||||
Wright Express Corp.(b) | 166,111 | 6,999,917 | ||||||
26,202,913 | ||||||||
Diversified Chemicals–0.64% | ||||||||
Solutia Inc.(b) | 415,995 | 7,229,993 | ||||||
Diversified Support Services–0.36% | ||||||||
TMS International Corp.–Class A(b) | 548,219 | 4,040,374 | ||||||
Electric Utilities–0.81% | ||||||||
ITC Holdings Corp. | 119,681 | 9,055,064 | ||||||
Electrical Components & Equipment–1.76% | ||||||||
EnerSys(b) | 203,299 | 4,568,129 | ||||||
GrafTech International Ltd.(b) | 375,563 | 5,896,339 | ||||||
Regal-Beloit Corp. | 158,924 | 9,343,142 | ||||||
19,807,610 | ||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
9 Invesco Van Kampen Small Cap Growth Fund
Shares | Value | |||||||
Electronic Equipment & Instruments–1.01% | ||||||||
Cognex Corp. | 173,817 | $ | 5,562,144 | |||||
Coherent, Inc.(b) | 129,956 | 5,745,355 | ||||||
11,307,499 | ||||||||
Environmental & Facilities Services–1.57% | ||||||||
Progressive Waste Solutions Ltd. (Canada)(c) | 419,314 | 9,375,861 | ||||||
Waste Connections, Inc.(c) | 237,092 | 8,201,012 | ||||||
17,576,873 | ||||||||
Fertilizers & Agricultural Chemicals–0.86% | ||||||||
Intrepid Potash, Inc.(b)(c) | 282,109 | 9,653,770 | ||||||
Footwear–1.96% | ||||||||
Crocs, Inc.(b) | 210,075 | 5,747,652 | ||||||
Deckers Outdoor Corp.(b)(c) | 120,091 | 10,683,295 | ||||||
Steven Madden Ltd.(b) | 155,254 | 5,607,775 | ||||||
22,038,722 | ||||||||
Health Care Distributors–0.80% | ||||||||
PSS World Medical, Inc.(b)(c) | 383,023 | 9,031,682 | ||||||
Health Care Equipment–6.06% | ||||||||
Arthrocare Corp.(b) | 224,763 | 7,289,064 | ||||||
HeartWare International Inc.(b)(c) | 88,089 | 5,532,870 | ||||||
Hill-Rom Holdings, Inc. | 265,565 | 8,046,620 | ||||||
Insulet Corp.(b) | 325,724 | 5,693,656 | ||||||
Masimo Corp. | 308,897 | 7,620,489 | ||||||
NuVasive, Inc.(b)(c) | 333,519 | 8,081,165 | ||||||
Sirona Dental Systems, Inc.(b) | 181,356 | 8,462,071 | ||||||
Thoratec Corp.(b) | 263,398 | 9,024,015 | ||||||
Volcano Corp.(b)(c) | 277,447 | 8,309,538 | ||||||
68,059,488 | ||||||||
Health Care Facilities–1.02% | ||||||||
Health Management Associates Inc.–Class A(b) | 1,390,499 | 11,429,902 | ||||||
Health Care Services–3.67% | ||||||||
Catalyst Health Solutions, Inc.(b) | 166,992 | 8,970,810 | ||||||
ExamWorks Group, Inc.(b)(c) | 390,059 | 5,862,587 | ||||||
HMS Holdings Corp.(b) | 371,760 | 9,751,265 | ||||||
Mednax, Inc.(b) | 125,603 | 8,203,132 | ||||||
Team Health Holdings, Inc.(b)(c) | 450,942 | 8,428,106 | ||||||
41,215,900 | ||||||||
Health Care Supplies–1.37% | ||||||||
Align Technology, Inc.(b) | 511,121 | 9,762,411 | ||||||
Meridian Bioscience, Inc. | 302,711 | 5,600,154 | ||||||
15,362,565 | ||||||||
Health Care Technology–0.79% | ||||||||
Allscripts Healthcare Solutions, Inc.(b) | 491,758 | 8,829,515 | ||||||
Home Furnishings–0.81% | ||||||||
Leggett & Platt, Inc. | 410,310 | 9,104,779 | ||||||
Homebuilding–0.37% | ||||||||
Pulte Group Inc.(b) | 859,983 | 4,127,918 | ||||||
Housewares & Specialties–1.57% | ||||||||
Jarden Corp.(c) | 307,971 | 8,943,478 | ||||||
Tupperware Brands Corp. | 130,629 | 8,686,828 | ||||||
17,630,306 | ||||||||
Industrial Machinery–2.55% | ||||||||
Actuant Corp.–Class A | 416,043 | 8,354,143 | ||||||
CLARCOR Inc. | 241,507 | 11,239,736 | ||||||
Robbins & Myers, Inc. | 187,613 | 9,014,805 | ||||||
28,608,684 | ||||||||
Internet Retail–0.52% | ||||||||
Shutterfly, Inc.(b)(c) | 108,850 | 5,840,891 | ||||||
Internet Software & Services–2.81% | ||||||||
comScore Inc.(b) | 362,047 | 5,774,650 | ||||||
Digital River, Inc.(b)(c) | 250,038 | 5,030,764 | ||||||
j2 Global Communications, Inc. | 43,301 | 1,383,467 | ||||||
Open Text Corp. (Canada)(b) | 126,339 | 7,454,001 | ||||||
ValueClick, Inc.(b) | 569,412 | 8,712,004 | ||||||
Velti PLC (Ireland)(b)(c) | 98,353 | 930,419 | ||||||
Vocus, Inc.(b) | 102,737 | 2,211,928 | ||||||
31,497,233 | ||||||||
Investment Banking & Brokerage–0.76% | ||||||||
Stifel Financial Corp.(b) | 282,886 | 8,509,211 | ||||||
Leisure Products–0.80% | ||||||||
Polaris Industries Inc. | 81,805 | 8,987,915 | ||||||
Managed Health Care–0.67% | ||||||||
Health Net Inc.(b) | 303,955 | 7,504,649 | ||||||
Marine–0.76% | ||||||||
Kirby Corp.(b) | 154,198 | 8,487,058 | ||||||
Metal & Glass Containers–0.75% | ||||||||
Greif Inc.–Class A | 150,687 | 8,417,376 | ||||||
Movies & Entertainment–1.08% | ||||||||
Cinemark Holdings, Inc. | 579,043 | 12,130,951 | ||||||
Office Services & Supplies–1.24% | ||||||||
Interface, Inc.–Class A | 403,949 | 6,091,551 | ||||||
Steelcase Inc.–Class A | 944,375 | 7,819,425 | ||||||
13,910,976 | ||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
10 Invesco Van Kampen Small Cap Growth Fund
Shares | Value | |||||||
Oil & Gas Drilling–0.81% | ||||||||
Atwood Oceanics, Inc.(b) | 215,637 | $ | 9,076,161 | |||||
Oil & Gas Equipment & Services–2.49% | ||||||||
Complete Production Services, Inc.(b) | 380,012 | 11,043,149 | ||||||
Oil States International, Inc.(b) | 126,433 | 8,354,692 | ||||||
Superior Energy Services, Inc.(b) | 243,844 | 8,612,570 | ||||||
28,010,411 | ||||||||
Oil & Gas Exploration & Production–2.69% | ||||||||
Gulfport Energy Corp.(b) | 304,944 | 8,812,882 | ||||||
Oasis Petroleum Inc.(b) | 213,737 | 5,685,404 | ||||||
PetroQuest Energy, Inc.(b)(c) | 988,903 | 7,515,663 | ||||||
Rosetta Resources, Inc.(b) | 179,139 | 8,231,437 | ||||||
30,245,386 | ||||||||
Oil & Gas Refining & Marketing–0.85% | ||||||||
CVR Energy, Inc.(b) | 334,169 | 9,513,791 | ||||||
Packaged Foods & Meats–1.51% | ||||||||
B&G Foods Inc. | 469,921 | 8,557,261 | ||||||
Diamond Foods, Inc.(c) | 106,746 | 8,417,990 | ||||||
16,975,251 | ||||||||
Paper Packaging–0.89% | ||||||||
Packaging Corp. of America | 396,026 | 10,039,259 | ||||||
Personal Products–0.82% | ||||||||
Elizabeth Arden, Inc.(b) | 287,269 | 9,255,807 | ||||||
Pharmaceuticals–1.72% | ||||||||
Medicis Pharmaceutical Corp.–Class A | 229,695 | 8,935,135 | ||||||
Salix Pharmaceuticals, Ltd.(b) | 339,844 | 10,348,250 | ||||||
19,283,385 | ||||||||
Property & Casualty Insurance–0.89% | ||||||||
ProAssurance Corp.(b) | 136,984 | 9,939,559 | ||||||
Regional Banks–0.64% | ||||||||
SVB Financial Group(b) | 154,856 | 7,135,765 | ||||||
Research & Consulting Services–0.77% | ||||||||
Acacia Research(b) | 198,684 | 8,682,491 | ||||||
Restaurants–1.63% | ||||||||
BJ’s Restaurants Inc.(b) | 126,992 | 5,863,220 | ||||||
Bravo Brio Restaurant Group Inc.(b) | 185,153 | 3,841,925 | ||||||
Buffalo Wild Wings Inc.(b) | 139,527 | 8,599,049 | ||||||
18,304,194 | ||||||||
Semiconductor Equipment–1.37% | ||||||||
Cymer, Inc.(b) | 173,521 | 7,020,659 | ||||||
Teradyne, Inc.(b)(c) | 695,488 | 8,415,405 | ||||||
15,436,064 | ||||||||
Semiconductors–3.47% | ||||||||
Cavium Inc.(b) | 248,077 | 7,985,599 | ||||||
Cypress Semiconductor Corp.(b) | 321,978 | 5,100,131 | ||||||
Microsemi Corp.(b) | 505,652 | 7,852,776 | ||||||
Netlogic Microsystems Inc.(b) | 203,789 | 6,117,746 | ||||||
Semtech Corp.(b) | 327,173 | 6,978,600 | ||||||
Volterra Semiconductor Corp.(b) | 244,518 | 4,951,489 | ||||||
38,986,341 | ||||||||
Specialty Chemicals–1.57% | ||||||||
Cytec Industries Inc.(c) | 152,187 | 6,909,290 | ||||||
Rockwood Holdings Inc.(b) | 210,055 | 10,712,805 | ||||||
17,622,095 | ||||||||
Specialty Stores–2.21% | ||||||||
Signet Jewelers Ltd. (Bermuda)(b) | 207,103 | 8,064,591 | ||||||
Tractor Supply Co. | 135,832 | 8,336,010 | ||||||
Vitamin Shoppe, Inc.(b) | 188,708 | 8,359,764 | ||||||
24,760,365 | ||||||||
Systems Software–3.14% | ||||||||
Ariba Inc.(b) | 217,520 | 5,901,318 | ||||||
CommVault Systems, Inc.(b) | 185,707 | 6,297,324 | ||||||
Fortinet Inc.(b) | 321,828 | 6,156,570 | ||||||
MICROS Systems, Inc.(b) | 194,526 | 9,271,109 | ||||||
Rovi Corp.(b) | 154,865 | 7,571,350 | ||||||
35,197,671 | ||||||||
Tires & Rubber–0.40% | ||||||||
Cooper Tire & Rubber Co. | 371,492 | 4,506,198 | ||||||
Trading Companies & Distributors–1.59% | ||||||||
United Rentals, Inc.(b) | 422,564 | 7,048,367 | ||||||
WESCO International, Inc.(b) | 251,043 | 10,817,443 | ||||||
17,865,810 | ||||||||
Trucking–1.32% | ||||||||
Landstar System, Inc. | 209,363 | 8,477,108 | ||||||
Werner Enterprises, Inc. | 272,819 | 6,351,226 | ||||||
14,828,334 | ||||||||
Total Common Stocks & Other Equity Interests (Cost $973,795,106) | 1,040,261,082 | |||||||
Money Market Funds–8.22% | ||||||||
Liquid Assets Portfolio–Institutional Class(d) | 46,098,464 | 46,098,464 | ||||||
Premier Portfolio–Institutional Class(d) | 46,098,465 | 46,098,465 | ||||||
Total Money Market Funds (Cost $92,196,929) | 92,196,929 | |||||||
TOTAL INVESTMENTS (excluding investments purchased with cash collateral from securities on loan)–100.88% (Cost $1,065,992,035) | 1,132,458,011 | |||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
11 Invesco Van Kampen Small Cap Growth Fund
Shares | Value | |||||||
Investment Purchased with Cash Collateral from Securities on Loan | ||||||||
Money Market Funds–8.87% | ||||||||
Liquid Assets Portfolio–Institutional Class (Cost $99,628,449)(d)(e) | 99,628,449 | $ | 99,628,449 | |||||
TOTAL INVESTMENTS–109.76% (Cost $1,165,620,484) | 1,232,086,460 | |||||||
OTHER ASSETS LESS LIABILITIES–(9.76)% | (109,509,375 | ) | ||||||
NET ASSETS–100.00% | $ | 1,122,577,085 | ||||||
Investment Abbreviation:
ADR | – American Depositary Receipts |
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. | |
(b) | Non-income producing security. | |
(c) | All or a portion of this security was out on loan at August 31, 2011. | |
(d) | The money market fund and the Fund are affiliated by having the same investment adviser. | |
(e) | The security has been segregated to satisfy the commitment to return the cash collateral received in securities lending transactions upon the borrower’s return of the securities loaned. See Note 1J. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
12 Invesco Van Kampen Small Cap Growth Fund
Statement of Assets and Liabilities
August 31, 2011
Assets: | ||||
Investments, at value (Cost $973,795,106)* | $ | 1,040,261,082 | ||
Investments in affiliated money market funds, at value and cost | 191,825,378 | |||
Total investments, at value (Cost $1,165,620,484) | 1,232,086,460 | |||
Cash | 66,667 | |||
Receivable for: | ||||
Investments sold | 8,966,038 | |||
Fund shares sold | 2,284,152 | |||
Dividends | 293,081 | |||
Fund expenses absorbed | 409,509 | |||
Investment for trustee deferred compensation and retirement plans | 5,246 | |||
Other assets | 12,546 | |||
Total assets | 1,244,123,699 | |||
Liabilities: | ||||
Payable for: | ||||
Investments purchased | 18,436,988 | |||
Fund shares reacquired | 1,803,189 | |||
Collateral upon return of securities loaned | 99,628,449 | |||
Accrued fees to affiliates | 1,529,609 | |||
Accrued other operating expenses | 131,357 | |||
Trustee deferred compensation and retirement plans | 17,022 | |||
Total liabilities | 121,546,614 | |||
Net assets applicable to shares outstanding | $ | 1,122,577,085 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 950,060,079 | ||
Undistributed net investment income (loss) | (16,503 | ) | ||
Undistributed net realized gain | 106,067,533 | |||
Unrealized appreciation | 66,465,976 | |||
$ | 1,122,577,085 | |||
Net Assets: | ||||
Class A | $ | 820,988,328 | ||
Class B | $ | 16,910,115 | ||
Class C | $ | 51,211,829 | ||
Class Y | $ | 233,466,813 | ||
Shares outstanding, $0.01 par value per share, with an unlimited number of shares authorized: | ||||
Class A | 77,749,197 | |||
Class B | 1,709,495 | |||
Class C | 5,265,916 | |||
Class Y | 21,781,817 | |||
Class A: | ||||
Net asset value per share | $ | 10.56 | ||
Maximum offering price per share (Net asset value of $10.56 divided by 94.50%) | $ | 11.17 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 9.89 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 9.73 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 10.72 | ||
* | At August 31, 2011, securities with an aggregate value of $97,884,378 were on loan to brokers. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
13 Invesco Van Kampen Small Cap Growth Fund
Statement of Operations
For the year ended August 31, 2011
Investment income: | ||||
Dividends (net of foreign withholding taxes of $31,691) | $ | 4,300,794 | ||
Dividends from affiliated money market funds (includes securities lending income of $218,190) | 310,964 | |||
Total investment income | 4,611,758 | |||
Expenses: | ||||
Advisory fees | 9,528,179 | |||
Administrative services fees | 318,426 | |||
Custodian fees | 47,506 | |||
Distribution fees: | ||||
Class A | 2,234,625 | |||
Class B | 57,483 | |||
Class C | 566,902 | |||
Transfer agent fees | 4,519,506 | |||
Trustees’ and officers’ fees and benefits | 47,195 | |||
Other | 247,088 | |||
Total expenses | 17,566,910 | |||
Less: Fees waived and expense offset arrangement(s) | (536,486 | ) | ||
Net expenses | 17,030,424 | |||
Net investment income (loss) | (12,418,666 | ) | ||
Net realized gain from investment securities (includes net gains from securities sold to affiliates of $206,431) | 156,490,689 | |||
Change in net unrealized appreciation of investment securities | 61,326,821 | |||
Net realized and unrealized gain | 217,817,510 | |||
Net increase in net assets resulting from operations | $ | 205,398,844 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
14 Invesco Van Kampen Small Cap Growth Fund
Statement of Changes in Net Assets
For the year ended August 31, 2011, the five months ended August 31, 2010 and the year ended
March 31, 2010
For the five | ||||||||||||
For the year | months | For the year | ||||||||||
ended | ended | ended | ||||||||||
August 31, | August 31, | March 31, | ||||||||||
2011 | 2010 | 2010 | ||||||||||
Operations: | ||||||||||||
Net investment income (loss) | $ | (12,418,666 | ) | $ | (4,614,297 | ) | $ | (8,825,452 | ) | |||
Net realized gain | 156,490,689 | 69,715,541 | 92,171,919 | |||||||||
Change in net unrealized appreciation (depreciation) | 61,326,821 | (165,915,054 | ) | 192,170,825 | ||||||||
Net increase (decrease) in net assets resulting from operations | 205,398,844 | (100,813,810 | ) | 275,517,292 | ||||||||
Share transactions–net: | ||||||||||||
Class A | (15,344,006 | ) | 13,649,587 | 153,506,328 | ||||||||
Class B | (6,818,997 | ) | (1,894,281 | ) | (6,353,547 | ) | ||||||
Class C | (13,825,956 | ) | (3,031,745 | ) | 6,844,322 | |||||||
Class Y | (10,814,267 | ) | (46,191,056 | ) | 117,434,920 | |||||||
Net increase (decrease) in net assets resulting from share transactions | (46,803,226 | ) | (37,467,495 | ) | 271,432,023 | |||||||
Net increase (decrease) in net assets | 158,595,618 | (138,281,305 | ) | 546,949,315 | ||||||||
Net assets: | ||||||||||||
Beginning of year | 963,981,467 | 1,102,262,772 | 555,313,457 | |||||||||
End of period (includes undistributed net investment income (loss) of $(16,503), $0, and $(231,253), respectively) | $ | 1,122,577,085 | $ | 963,981,467 | $ | 1,102,262,772 | ||||||
Notes to Financial Statements
August 31, 2011
NOTE 1—Significant Accounting Policies
Invesco Van Kampen Small Cap Growth Fund (the “Fund”), is a series portfolio of AIM Counselor Series Trust (Invesco Counselor Series Trust (the “Trust”). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end series management investment company consisting of twelve separate portfolios, each authorized to issue an unlimited number of shares of beneficial interest. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class.
The Fund’s investment objective is capital appreciation.
The Fund currently consists of four different classes of shares: Class A, Class B, Class C and Class Y. Class A shares are sold with a front-end sales charge unless certain waiver criteria are met and under certain circumstances load waived shares may be subject to contingent deferred sales charges (“CDSC”). Class C shares are sold with a CDSC. Class Y shares are sold at net asset value. Effective November 30, 2010, new or additional investments in Class B shares are no longer permitted. Existing shareholders of Class B shares may continue to reinvest dividends and capital gains distributions in Class B shares until they convert. Also, shareholders in Class B shares will be able to exchange those shares for Class B shares of other Invesco Funds offering such shares until they convert. Generally, Class B shares will automatically convert to Class A shares on or about the month-end which is at least eight years after the date of purchase. Redemption of Class B shares prior to conversion date will be subject to a CDSC.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. | |
A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”). | ||
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded. |
15 Invesco Van Kampen Small Cap Growth Fund
Debt obligations (including convertible bonds) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations, including commercial paper, having 60 days or less to maturity are recorded at amortized cost which approximates value. Debt securities are subject to interest rate and credit risks. In addition, all debt securities involve some risk of default with respect to interest and/or principal payments. | ||
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trade is not the current value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economical upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards. | ||
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including Corporate Loans. | ||
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value. | ||
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments. | ||
B. | Securities Transactions and Investment Income — Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. | |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held. | ||
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund’s net asset value and, accordingly, they reduce the Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser. | ||
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class. | ||
C. | Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. | |
D. | Distributions — Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to treat a portion of the proceeds from redemptions as distributions for federal income tax purposes. | |
E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. | |
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period. | ||
F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. Prior to the Reorganization, incremental transfer agency fees which are unique to each class of shares of the Acquired Fund were charged to the operations of such class. |
16 Invesco Van Kampen Small Cap Growth Fund
G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. | |
H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. | |
I. | Redemption Fees — The Fund has a 2% redemption fee that is to be retained by the Fund to offset transaction costs and other expenses associated with short-term redemptions and exchanges. The fee, subject to certain exceptions, is imposed on certain redemptions or exchanges of shares within 31 days of purchase. The redemption fee is recorded as an increase in shareholder capital and is allocated among the share classes based on the relative net assets of each class. Effective January 1, 2012, the Fund will eliminate the 2% redemption fee, if applicable, assessed on shares of the Fund redeemed or exchanged within 31 days of purchase. | |
J. | Securities Lending — The Fund may lend portfolio securities having a market value up to one-third of the Fund’s total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily by the securities lending provider. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its sponsored agencies. Cash collateral received in connection with these loans is invested in short-term money market instruments or affiliated money market funds and is shown as such on the Schedule of Investments. It is the Fund’s policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. Upon the failure of the borrower to return the securities, collateral may be liquidated and the securities may be purchased on the open market to replace the loaned securities. The Fund could experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to any loss on the collateral invested. Dividends received on cash collateral investments for securities lending transactions, which are net of compensation to counterparties, is included in Dividends from affiliates on the Statement of Operations. The aggregate value of securities out on loan is shown as a footnote on the Statement of Assets and Liabilities, if any. | |
K. | Foreign Currency Translations — Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. | |
The Fund may invest in foreign securities which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. |
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser based on the annual rate of the Fund’s average daily net assets as follows:
Average Daily Net Assets | Rate | |||
First $500 million | 0 | .80% | ||
Next $500 million | 0 | .75% | ||
Over $1.0 billion | 0 | .70% | ||
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide discretionary investment management services to the Fund based on the percentage of assets allocated to such Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2012, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Class A, Class B, Class C and Class Y shares to 1.38%, 2.13%, 2.13% and 1.13%, respectively, of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual operating expenses after fee waiver and/or
17 Invesco Van Kampen Small Cap Growth Fund
expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless the Board of Trustees and Invesco mutually agree to amend or continue the fee waiver agreement, it will terminate on June 30, 2012.
Further, the Adviser has contractually agreed, through at least June 30, 2012, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash (excluding investments of cash collateral from securities lending) in such affiliated money market funds.
For the year ended August 31, 2011, the Adviser waived advisory fees of $534,910.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco for certain administrative costs incurred in providing accounting services to the Fund. For the year ended August 31, 2011, expenses incurred under the agreement are shown in the Statement of Operations as administrative services fees.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (“IIS”) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. IIS may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. All fees payable by IIS to intermediaries that provide omnibus account services or sub-accounting are charged back to the Fund, subject to certain limitations approved by the Trust’s Board of Trustees. For the year ended August 31, 2011, the expenses incurred under the agreement are shown in the Statement of Operations as transfer agent fees.
Shares of the Fund are distributed by Invesco Distributors, Inc. (“IDI”). The Fund has adopted a distribution plan pursuant to Rule 12b-1 under the 1940 Act, and a service plan (collectively, the “Plans”) for Class A shares, Class B shares and Class C shares to compensate IDI for the sale, distribution, shareholder servicing and maintenance of shareholder accounts for these shares. Under the Plans, the Fund will incur annual fees of up to 0.25% of Class A average daily net assets and up to 1.00% each of Class B and Class C average daily net assets.
With respect to Class B and Class C shares, the Fund is authorized to reimburse in future years any distribution related expenses that exceed the maximum annual reimbursement rate for such class, so long as such reimbursement does not cause the Fund to exceed the Class B and Class C maximum annual reimbursement rate, respectively. With respect to Class A shares, distribution related expenses that exceed the maximum annual reimbursement rate for such class are not carried forward to future years and the Fund will not reimburse IDI for any such expenses.
For the year ended August 31, 2011, expenses incurred under these agreements are shown in the Statement of Operations as distribution fees.
Front-end sales commissions and CDSC (collectively the “sales charges”) are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the year ended August 31, 2011, IDI advised the Fund that IDI retained $52,910 in front-end sales commissions from the sale of Class A shares and $2,708, $32,826 and $4,562 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of the Adviser, Invesco Ltd., IIS and/or IDI.
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3) generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
Level 1 — | Prices are determined using quoted prices in an active market for identical assets. | |
Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. | |
Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of August 31, 2011. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
During the year ended August 31, 2011, there were no significant transfers between investment levels.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 1,232,086,460 | $ | — | $ | — | $ | 1,232,086,460 | ||||||||
NOTE 4—Security Transactions with Affiliated Funds
The Fund is permitted to purchase or sell securities from or to certain other Invesco Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment adviser (or affiliated investment advisers), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price.
18 Invesco Van Kampen Small Cap Growth Fund
Pursuant to these procedures, for the year ended August 31, 2011, the Fund engaged in securities purchases of $7,221,477 and securities sales of $1,662,353, which resulted in net realized gains of $206,431.
NOTE 5—Expense Offset Arrangement(s)
The expense offset arrangement is comprised of transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions. For the year ended August 31, 2011, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $1,576.
NOTE 6—Trustees’ and Officers’ Fees and Benefits
“Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and “Trustees’ and Officers’ Fees and Benefits” also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. “Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
During the year ended August 31, 2011, the Fund paid legal fees of $4,001 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A partner of that firm is a Trustee of the Trust.
NOTE 7—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with The State Street Bank and Trust Company, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 8—Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Year ended August 31, 2011:
There were no ordinary income or long term capital gains distributions paid during the year ended August 31, 2011.
Tax Components of Net Assets at Period-End:
2011 | ||||
Undistributed ordinary income | $ | 38,167,167 | ||
Undistributed long-term gain | 72,465,497 | |||
Net unrealized appreciation — investments | 61,900,844 | |||
Temporary book/tax differences | (16,502 | ) | ||
Shares of beneficial interest | 950,060,079 | |||
Total net assets | $ | 1,122,577,085 | ||
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund’s net unrealized appreciation (depreciation) difference is attributable primarily to wash sales.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund’s temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
19 Invesco Van Kampen Small Cap Growth Fund
The Fund utilized $36,401,316 of capital loss carryforward in the current period to offset net realized capital gain for federal income tax purposes.
NOTE 9— Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended August 31, 2011 was $1,334,547,978 and $1,420,463,512, respectively. Cost of investments on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed Federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investment Securities on a Tax Basis | ||||
Aggregate unrealized appreciation of investment securities | $ | 146,858,746 | ||
Aggregate unrealized (depreciation) of investment securities | (84,957,902 | ) | ||
Net unrealized appreciation of investment securities | $ | 61,900,844 | ||
Cost of investments for tax purposes is $1,170,185,616. |
NOTE 10—Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of net operating losses, on August 31, 2011, undistributed net investment income (loss) was increased by $12,402,163, undistributed net realized gain was decreased by $12,402,163 and shares of beneficial interest decreased by $0. This reclassification had no effect on the net assets of the Fund.
NOTE 11—Share Information
Summary of Share Activity | ||||||||||||||||||||||||
Year ended | Five months ended | Year ended | ||||||||||||||||||||||
August 31, 2011(a) | August 31, 2010 | March 31, 2010 | ||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||
Sold: | ||||||||||||||||||||||||
Class A | 27,616,067(b | ) | $ | 308,811,543(b | ) | 12,491,916(b | ) | $ | 117,534,320(b | ) | 46,177,393 | $ | 374,644,838 | |||||||||||
Class B | 121,453 | 1,227,517 | 160,701 | 1,436,516 | 600,025 | 4,541,319 | ||||||||||||||||||
Class C | 732,345 | 7,621,915 | 417,676 | 3,715,035 | 2,604,739 | 19,506,872 | ||||||||||||||||||
Class Y | 9,655,115 | 109,865,214 | 2,430,630 | 23,295,049 | 21,184,423 | 175,208,673 | ||||||||||||||||||
Reacquired:(c) | ||||||||||||||||||||||||
Class A | (29,021,472 | ) | (324,155,549 | ) | (11,170,029 | ) | (103,884,733 | ) | (26,403,632 | ) | (221,138,510 | ) | ||||||||||||
Class B | (763,950 | )(b) | (8,046,514 | )(b) | (375,529 | )(b) | (3,330,797 | )(b) | (1,417,790 | ) | (10,894,866 | ) | ||||||||||||
Class C | (2,092,933 | ) | (21,447,871 | ) | (775,941 | ) | (6,746,780 | ) | (1,630,764 | ) | (12,662,550 | ) | ||||||||||||
Class Y | (10,441,601 | ) | (120,679,481 | ) | (7,352,354 | ) | (69,486,105 | ) | (6,790,411 | ) | (57,773,753 | ) | ||||||||||||
Net increase (decrease) in share activity | (4,194,976 | ) | $ | (46,803,226 | ) | (4,172,930 | ) | $ | (37,467,495 | ) | 34,323,983 | $ | 271,432,023 | |||||||||||
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 33% of the outstanding shares of the Fund. IDI has an agreement with these entities to sell Fund shares. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. | |
(b) | Includes automatic conversion of 299,369 Class B shares into 280,405 Class A shares at a value of $3,196,083 for the year ended August 31, 2011 and automatic conversion of 225,007 Class B shares into 210,988 Class A shares at a value of $1,929,978 for the period ended August 31, 2010. | |
(c) | Net of redemption fees of $34,933 and $7,585 allocated among the classes based on relative net assets of each class for the year ended August 31, 2011 and the five months ended August 31, 2010, respectively. |
20 Invesco Van Kampen Small Cap Growth Fund
NOTE 12—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Ratio of net | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratio of | Ratio of | investment | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net gains | expenses | expenses | income (loss) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(losses) on | to average | to average net | Ratio of net | to average net | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset | Net | securities | Dividends | Distributions | net assets | assets without | investment | assets without | ||||||||||||||||||||||||||||||||||||||||||||||||||||
value, | investment | (both | Total from | from net | from net | Net asset | Net assets, | with fee waivers | fee waivers | income(loss) | fee waivers | |||||||||||||||||||||||||||||||||||||||||||||||||
beginning | income | realized and | investment | investment | realized | Total | value, end | Total | end of period | and/or expenses | and/or expenses | to average | and/or expenses | Portfolio | ||||||||||||||||||||||||||||||||||||||||||||||
of period | (loss)(a) | unrealized) | operations | income | gains | Distributions | of period(f) | return | (000s omitted) | absorbed | absorbed | net assets | absorbed | turnover(d) | ||||||||||||||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | $ | 8.74 | $ | (0.11 | ) | $ | 1.93 | $ | 1.82 | $ | — | $ | — | $ | — | $ | 10.56 | 20.82 | %(b) | $ | 820,988 | 1.38 | %(c) | 1.42 | %(c) | (1.01 | )%(c) | (1.05 | )%(c) | 114 | % | |||||||||||||||||||||||||||||
Five months ended 08/31/10 | 9.62 | (0.04 | ) | (0.84 | ) | (0.88 | ) | — | — | — | 8.74 | (9.15 | )(b) | 691,456 | 1.34 | (m) | 1.34 | (m) | (1.04 | )(m) | (1.04 | )(m) | 63 | |||||||||||||||||||||||||||||||||||||
Year ended 03/31/10 | 6.93 | (0.09 | ) | 2.78 | 2.69 | — | — | — | 9.62 | 38.82 | (e) | 748,998 | 1.39 | 1.39 | (1.04 | ) | (1.04 | ) | 234 | |||||||||||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 10.15 | (0.09 | ) | (3.13 | ) | (3.22 | ) | — | — | — | 6.93 | (31.72 | )(e) | 402,611 | 1.40 | 1.40 | (1.00 | ) | (1.00 | ) | 219 | |||||||||||||||||||||||||||||||||||||||
Year ended 03/31/08 | 10.70 | (0.10 | ) | 0.29 | 0.19 | — | (0.74 | ) | (0.74 | ) | 10.15 | 0.79 | (e) | 317,560 | 1.38 | 1.38 | (0.92 | ) | (0.92 | ) | 194 | |||||||||||||||||||||||||||||||||||||||
Year ended 03/31/07 | 10.80 | (0.09 | ) | (0.01 | ) | (0.10 | ) | — | — | — | 10.70 | (0.83 | )(e) | 226,581 | 1.47 | 1.47 | (0.92 | ) | (0.92 | ) | 321 | |||||||||||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 8.18 | (0.11 | ) | 1.82 | 1.71 | — | — | — | 9.89 | 20.90 | (b)(h) | 16,910 | 1.40 | (c)(h) | 1.44 | (c)(h) | (1.03 | )(c)(h) | (1.07 | )(c)(h) | 114 | |||||||||||||||||||||||||||||||||||||||
Five months ended 08/31/10 | 9.03 | (0.05 | ) | (0.80 | ) | (0.85 | ) | — | — | — | 8.18 | (9.41 | )(b)(h) | 19,249 | 1.63 | (h)(m) | 1.63 | (h)(m) | (1.33 | )(h)(m) | (1.33 | )(h)(m) | 63 | |||||||||||||||||||||||||||||||||||||
Year ended 03/31/10 | 6.51 | (0.09 | ) | 2.61 | 2.52 | — | — | — | 9.03 | 38.71 | (g)(i) | 23,169 | 1.53 | (i) | 1.53 | (i) | (1.19 | )(i) | (1.19 | )(i) | 234 | |||||||||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 9.59 | (0.14 | ) | (2.94 | ) | (3.08 | ) | — | — | — | 6.51 | (32.12 | )(g)(i) | 22,044 | 2.04 | (i) | 2.04 | (i) | (1.65 | )(i) | (1.65 | )(i) | 219 | |||||||||||||||||||||||||||||||||||||
Year ended 03/31/08 | 10.22 | (0.18 | ) | 0.29 | 0.11 | — | (0.74 | ) | (0.74 | ) | 9.59 | 0.03 | (g) | 42,722 | 2.14 | 2.14 | (1.68 | ) | (1.68 | ) | 194 | |||||||||||||||||||||||||||||||||||||||
Year ended 03/31/07 | 10.39 | (0.16 | ) | (0.01 | ) | (0.17 | ) | — | — | — | 10.22 | (1.64 | )(g) | 50,593 | 2.22 | 2.22 | (1.68 | ) | (1.68 | ) | 321 | |||||||||||||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 8.10 | (0.17 | ) | 1.80 | 1.63 | — | — | — | 9.73 | 20.12 | (b)(l) | 51,212 | 2.06 | (c)(l) | 2.10 | (c)(l) | (1.69 | )(c)(l) | (1.73 | )(c)(l) | 114 | |||||||||||||||||||||||||||||||||||||||
Five months ended 08/31/10 | 8.95 | (0.07 | ) | (0.78 | ) | (0.85 | ) | — | — | — | 8.10 | (9.50 | )(b) | 53,673 | 2.09 | (m) | 2.09 | (m) | (1.79 | )(m) | (1.79 | )(m) | 63 | |||||||||||||||||||||||||||||||||||||
Year ended 03/31/10 | 6.50 | (0.14 | ) | 2.59 | 2.45 | — | — | — | 8.95 | 37.69 | (j) | 62,523 | 2.14 | 2.14 | (1.79 | ) | (1.79 | ) | 234 | |||||||||||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 9.58 | (0.14 | ) | (2.94 | ) | (3.08 | ) | — | — | — | 6.50 | (32.15 | )(j) | 39,064 | 2.14 | 2.14 | (1.75 | ) | (1.75 | ) | 219 | |||||||||||||||||||||||||||||||||||||||
Year ended 03/31/08 | 10.21 | (0.18 | ) | 0.29 | 0.11 | — | (0.74 | ) | (0.74 | ) | 9.58 | 0.03 | (j) | 42,395 | 2.14 | 2.14 | (1.67 | ) | (1.67 | ) | 194 | |||||||||||||||||||||||||||||||||||||||
Year ended 03/31/07 | 10.38 | (0.16 | ) | (0.01 | ) | (0.17 | ) | — | — | — | 10.21 | (1.64 | )(j) | 31,672 | 2.22 | 2.22 | (1.68 | ) | (1.68 | ) | 321 | |||||||||||||||||||||||||||||||||||||||
Class Yˆ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 8.84 | (0.09 | ) | 1.97 | 1.88 | — | — | — | 10.72 | 21.27 | (b) | 233,467 | 1.13 | (c) | 1.17 | (c) | (0.76 | )(c) | (0.80 | )(c) | 114 | |||||||||||||||||||||||||||||||||||||||
Five months ended 08/31/10 | 9.73 | (0.03 | ) | (0.86 | ) | (0.89 | ) | — | — | — | 8.84 | (9.15 | )(b) | 199,603 | 1.09 | (m) | 1.09 | (m) | (0.80 | )(m) | (0.80 | )(m) | 63 | |||||||||||||||||||||||||||||||||||||
Year ended 03/31/10 | 6.99 | (0.06 | ) | 2.80 | 2.74 | — | — | — | 9.73 | 39.20 | (k) | 267,593 | 1.14 | 1.14 | (0.76 | ) | (0.76 | ) | 234 | |||||||||||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 10.20 | (0.07 | ) | (3.14 | ) | (3.21 | ) | — | — | — | 6.99 | (31.47 | )(k) | 91,594 | 1.15 | 1.15 | (0.75 | ) | (0.75 | ) | 219 | |||||||||||||||||||||||||||||||||||||||
Year ended 03/31/08 | 10.74 | (0.07 | ) | 0.27 | 0.20 | — | (0.74 | ) | (0.74 | ) | 10.20 | 0.88 | (k) | 81,038 | 1.14 | 1.14 | (0.63 | ) | (0.63 | ) | 194 | |||||||||||||||||||||||||||||||||||||||
Year ended 03/31/07 | 10.80 | (0.07 | ) | 0.01 | (0.06 | ) | — | — | — | 10.74 | (0.56 | )(k) | 15,477 | 1.22 | 1.22 | (0.67 | ) | (0.67 | ) | 321 | ||||||||||||||||||||||||||||||||||||||||
(a) | Calculated using average shares outstanding. | |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges and is not annualized for periods less than one year. | |
(c) | Ratios are annualized and based on average daily net assets (000’s omitted) of $894,031, $21,614, $61,228, and $277,153 for Class A, Class B, Class C, and Class Y Class shares, respectively. | |
(d) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. | |
(e) | Assumes reinvestment of all distributions for the period and does not include payment of the maximum sales charge of 5.75% or contingent deferred sales charge (CDSC). On purchases of $1 million or more, a CDSC of 1% may be imposed on certain redemptions made within eighteen months of purchase. If the sales charges were included, total returns would be lower. These returns include combined Rule 12b-1 and service fees of up to 0.25% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. | |
(f) | Includes redemption fees added to shares of beneficial interest which were less than $0.005 per share. | |
(g) | Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 5%, charged on certain redemptions made within one year of purchase and declining to 0% after the fifth year. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to 1% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. | |
(h) | The total return, ratio of expenses to average net assets and ratio of net investment income (loss) to average net assets reflect actual 12b-1 fees of 0.27% and 0.54% for the year ended August 31, 2011 and the five months ended August 31, 2010, respectively. | |
(i) | The total return, ratio of expenses to average net assets and ratio of net investment income (loss) to average net assets reflect actual 12b-1 fess of less than 1%. | |
(j) | Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 1%, charged on certain redemptions made within one year of purchase. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to 1% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. | |
(k) | Assumes reinvestment of all distributions for the period. These returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. | |
(l) | The total return, ratio of expenses to average net assets and ratio of net investment income (loss) to average net assets reflect actual 12b-1 fees of 0.93% for the year ended August 31, 2011. | |
(m) | Ratios are annualized. | |
ˆ | On June 1, 2010, the Fund’s former Class I shares were reorganized into Class Y Shares. |
21 Invesco Van Kampen Small Cap Growth Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Counselor Series Trust (Invesco Counselor Series Trust)
and Shareholders of Invesco Van Kampen Small Cap Growth Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Invesco Van Kampen Small Cap Growth Fund (one of the funds constituting AIM Counselor Series Trust (Invesco Counselor Series Trust), hereafter referred to as the “Fund”) at August 31, 2011, the results of its operations for the year then ended, the changes in its net assets and the financial highlights for the year then ended and the five month period ended August 31, 2010, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at August 31, 2011 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. The statement of changes in net assets and the financial highlights of the Fund for the periods ended March 31, 2010 and prior were audited by other independent auditors whose report dated May 18, 2010 expressed an unqualified opinion on those financial statements.
PRICEWATERHOUSECOOPERS LLP
October 21, 2011
Houston, Texas
22 Invesco Van Kampen Small Cap Growth Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments or contingent deferred sales charges on redemptions, and redemption fees, if any; and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period March 1, 2011 through August 31, 2011.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the hypothetical information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
HYPOTHETICAL | ||||||||||||||||||||||||||||||
(5% annual return before | ||||||||||||||||||||||||||||||
ACTUAL | expenses) | |||||||||||||||||||||||||||||
Beginning | Ending | Expenses | Ending | Expenses | Annualized | |||||||||||||||||||||||||
Account Value | Account Value | Paid During | Account Value | Paid During | Expense | |||||||||||||||||||||||||
Class | (03/01/11) | (08/31/11)1 | Period2 | (08/31/11) | Period2 | Ratio | ||||||||||||||||||||||||
A | $ | 1,000.00 | $ | 881.50 | $ | 6.64 | $ | 1,018.15 | $ | 7.12 | 1.40 | % | ||||||||||||||||||
B | 1,000.00 | 881.50 | 6.45 | 1,018.35 | 6.92 | 1.36 | ||||||||||||||||||||||||
C | 1,000.00 | 878.80 | 9.80 | 1,014.77 | 10.51 | 2.07 | ||||||||||||||||||||||||
Y | 1,000.00 | 883.00 | 5.46 | 1,019.41 | 5.85 | 1.15 | ||||||||||||||||||||||||
1 | The actual ending account value is based on the actual total return of the Fund for the period March 1, 2011 through August 31, 2011, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund’s expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half year. |
23 Invesco Van Kampen Small Cap Growth Fund
Approval of Investment Advisory and Sub-Advisory Contracts |
The Board of Trustees (the Board) of AIM Counselor Series Trust (Invesco Counselor Series Trust) is required under the Investment Company Act of 1940, as amended, to approve annually the renewal of the Invesco Van Kampen Small Cap Growth Fund (the Fund) investment advisory agreement with Invesco Advisers, Inc. (Invesco Advisers) and the Master Intergroup Sub-Advisory Contract for Mutual Funds (the sub-advisory contracts) with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers). During contract renewal meetings held on June 14-15, 2011, the Board as a whole, and the disinterested or “independent” Trustees, who comprise 80% of the Board, voting separately, approved the continuance of the Fund’s investment advisory agreement and the sub-advisory contracts for another year, effective July 1, 2011. In doing so, the Board considered the process that it follows in reviewing and approving the Fund’s investment advisory agreement and sub-advisory contracts and the information that it is provided. The Board determined that the Fund’s investment advisory agreement and the sub-advisory contracts are in the best interests of the Fund and its shareholders and the compensation to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is responsible for overseeing the management of a number of the series portfolios of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies and limitations and investment risks of these funds. The Sub-Committees meet regularly and at designated contract renewal meetings each year to conduct a review of the performance, fees, expenses and other matters related to their assigned Invesco Funds. Each Sub-Committee recommends to the Investments Committee, which in turn recommends to the full Board, whether to approve the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Trustees receive comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and an independent company, Lipper, Inc. (Lipper). The Trustees also receive an independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. The independent Trustees are assisted in their annual evaluation of the Fund’s investment advisory agreement by the Senior Officer and by independent legal counsel. The independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in private sessions with the Senior Officer and counsel.
In evaluating the fairness and reasonableness of the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Trustees also considered information provided in connection with fund acquisitions approved by the Trustees to rationalize the Invesco Funds product range following the acquisition of the retail mutual fund business of Morgan Stanley (the Morgan Stanley Transaction). The Trustees recognized that the advisory fees for the Invesco Funds include advisory fees that are the result of years of review and negotiation between the Trustees and Invesco Advisers as well as advisory fees inherited from Morgan Stanley and Van Kampen funds acquired in the Morgan Stanley Transaction. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these same arrangements throughout the year and in prior years. One Trustee may have weighed a particular piece of information differently than another Trustee.
The discussion below serves as the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 15, 2011, and may not reflect consideration of factors that became known to the Board after that date, including, for example, changes to the Fund’s performance, advisory fees, expense limitations and/or fee waivers.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers, with whom the Board met during the year. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s consideration of Invesco Advisers’ performance and investment process oversight, independent credit analysis and investment risk management.
In determining whether to continue the Fund’s investment advisory agreement, the Board considered the prior relationship between Invesco Advisers and the Fund, as well as the Board’s knowledge of Invesco Advisers’ operations, and concluded that it is beneficial to maintain the current relationship, in part, because of such knowledge. The Board also considered services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution and legal and compliance. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and the advisory services are provided in accordance with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services provided by the Affiliated Sub-Advisers under the sub-advisory contracts and the credentials and experience of the officers and employees of the Affiliated Sub-Advisers who provide these services. The Board noted that the Affiliated Sub-Advisers have offices and personnel that are located in financial centers around the world. As a result, the Affiliated Sub-Advisers can provide research and investment analysis on the markets and economies of various countries in which the Fund invests and make recommendations on securities of companies located in such countries. The Board concluded that the sub-advisory contracts benefit the Fund and its shareholders by permitting Invesco Advisers to use the resources and talents of the Affiliated Sub-Advisers in managing the Fund. The Board concluded that the nature, extent and quality of the services provided by the Affiliated Sub-Advisers are appropriate and satisfactory and in accordance with the terms of the Fund’s sub-advisory contracts.
24 Invesco Van Kampen Small Cap Growth Fund
B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
The Board compared the Fund’s performance during the past one, three and five calendar years to the performance of funds in the Lipper performance universe and against the Lipper Small-Cap Growth Funds Index. The Board noted that performance of Class A shares of the Fund was in the fourth quintile of the performance universe for the one and three year periods and the second quintile for the five year period (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board noted that performance of Class A shares of the Fund was below the performance of the Index for the one and three year periods and above the performance of the Index for the five year period. Invesco Advisers advised the Board that the Fund has shifted to a more balanced approach by including securities at both ends of the quality spectrum and that new team members were added to the investment management team in 2010. Although the independent written evaluation of the Fund’s Senior Officer only considered Fund performance through the most recent calendar year, the Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
C. | Advisory and Sub-Advisory Fees and Fee Waivers |
The Board compared the Fund’s contractual advisory fee rate to the contractual advisory fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the contractual advisory fee rate for Class A shares of the Fund was below the median contractual advisory fee rate of funds in the expense group. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using audited financial data from the most recent annual report of each fund in the expense group that was publicly available as of the end of the past calendar year and including only one fund per investment adviser. The Board noted that comparative data is as of varying dates, which may affect the comparability of data during times of market volatility.
The Board also compared the Fund’s effective fee rate (the advisory fee after any advisory fee waivers and before any expense limitations/waivers) to the advisory fee rates of other mutual funds advised by Invesco Advisers and its affiliates with investment strategies comparable to those of the Fund. The Board noted that the Fund’s effective fee rate was above the effective fee rate of one mutual fund advised by Invesco Advisers. The Board also noted that Invesco Advisers sub-advises seven mutual funds with investment strategies comparable to those of the Fund and that the sub-advisory fees are below the effective fee rate of the Fund.
Other than the mutual funds described above, the Board noted that Invesco Advisers and the Affiliated Sub-Advisers do not advise other client accounts with investment strategies comparable to those of the Fund.
The Board noted that Invesco Advisers has contractually agreed to waive fees and/or limit expenses of the Fund through at least June 30, 2012 in an amount necessary to limit total annual operating expenses to a specified percentage of average daily net assets for each class of the Fund. The Board noted that at the current expense ratio for the Fund, this expense waiver does not have any impact.
The Board also considered the services provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the allocation of fees between Invesco Advisers and the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board noted that Invesco Advisers provides services to sub-advised Invesco Funds, including oversight of the Affiliated Sub-Advisers as well as the additional services described above other than day-to-day portfolio management. The Board also noted that the sub-advisory fees have no direct effect on the Fund or its shareholders, as they are paid by Invesco Advisers to the Affiliated Sub-Advisers.
Based upon the information and considerations described above, the Board concluded that the Fund’s advisory and sub-advisory fees are fair and reasonable.
D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule. The Board also noted that the 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 Invesco Advisers.
E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the profitability of Invesco Advisers and its affiliates in providing these services. The Board reviewed with Invesco Advisers the methodology used to prepare the profitability information. The Board considered the profitability of Invesco Advisers in connection with managing the Fund and the Invesco Funds. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its subsidiaries provide to the Fund and the Invesco Funds. The Board concluded that the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund is not excessive given the nature, quality and extent of the services provided to the Invesco Funds. The Board considered whether Invesco Advisers and each Affiliated Sub-Adviser are financially sound and have the resources necessary to perform their obligations under the investment advisory agreement and sub-advisory contracts. The Board concluded that Invesco Advisers and each Affiliated Sub-Adviser have the financial resources necessary to fulfill these obligations.
F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund, including the fees received for their provision of administrative, transfer agency and distribution services to the Fund. The Board considered the performance of Invesco Advisers 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 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 Fund; that Invesco Advisers 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; and 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.
The Board considered the benefits realized by Invesco Advisers and the Affiliated Sub-Advisers as a result of portfolio brokerage transactions executed through “soft dollar” arrangements. The Board noted that soft dollar arrangements shift the payment obligation for research and execution services from Invesco Advisers and the Affiliated Sub-Advisers to the Invesco Funds and therefore may reduce Invesco Advisers’ and the Affiliated Sub-Advisers’ expenses. The Board concluded that the soft dollar arrangements are appropriate. The Board also concluded that, based on their review and representations made by the Chief Compliance Officer of the Invesco Funds, these arrangements are consistent with regulatory requirements.
The Board considered that the Fund’s uninvested cash and cash collateral from any securities lending arrangements may be invested in money market funds advised by Invesco Advisers pursuant to procedures approved by the Board. The Board noted that Invesco Advisers receives advisory fees from these affiliated money market funds attributable to such investments, although Invesco Advisers has contractually agreed to waive through varying periods the advisory fees payable by the Invesco Funds. The waiver is in an amount equal to 100% of the net advisory fee Invesco Advisers receives from the affiliated money market funds with respect to the Fund’s investment in the affiliated money market funds of uninvested cash, but not cash collateral. The Board concluded that the Fund’s investment of uninvested cash and cash collateral from any securities lending arrangements in the affiliated money market funds is in the best interests of the Fund and its shareholders.
25 Invesco Van Kampen Small Cap Growth Fund
Trustees and Officers
The address of each trustee and officer is AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”), 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Number of Funds | ||||||||
in Fund Complex | ||||||||
Name, Year of Birth and | Trustee and/ | Principal Occupation(s) | Overseen by | Other Directorship(s) | ||||
Position(s) Held with the Trust | or Officer Since | During Past 5 Years | Trustee | Held by Trustee | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 — 1960 Trustee | 2007 | 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 | 143 | 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. Taylor2 — 1954 Trustee, President and Principal Executive Officer | 2006 | 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 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 Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust); Trustee and Executive Vice President, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s 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 Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Tax-Free Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. | 143 | None | ||||||
Wayne W. Whalen3 — 1939 Trustee | 2010 | Of Counsel, and prior to 2010, partner in the law firm of Skadden, Arps, Slate, Meagher & Flom LLP, legal counsel to funds in the Fund Complex | 161 | Director of the Abraham Lincoln Presidential Library Foundation | ||||
Independent Trustees | ||||||||
Bruce L. Crockett — 1944 Trustee and Chair | 2003 | Chairman, Crockett Technology Associates (technology consulting company) Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer COMSAT Corporation; and Chairman, Board of Governors of INTELSAT (international communications company) | 143 | ACE Limited (insurance company); and Investment Company Institute | ||||
1 | Mr. Flanagan is considered an interested person of the Trust because he is an officer of the adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the adviser to the Trust. |
2 | Mr. Taylor is considered an interested person of the Trust because he is an officer and a director of the adviser to, and a director of the principal underwriter of, the Trust. |
3 | Mr. Whalen has been deemed to be an interested person of the Trust because of his prior service as counsel to the predecessor funds of certain Invesco open-end funds and his affiliation with the law firm that served as counsel to such predecessor funds and continues to serve as counsel to the Invesco Van Kampen closed-end funds. |
T-1 Invesco Van Kampen Small Cap Growth Fund
Trustees and Officers—(continued)
The address of each trustee and officer is AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”), 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Number of Funds | ||||||||
in Fund Complex | ||||||||
Name, Year of Birth and | Trustee and/ | Principal Occupation(s) | Overseen by | Other Directorship(s) | ||||
Position(s) Held with the Trust | or Officer Since | During Past 5 Years | Trustee | Held by Trustee | ||||
Independent Trustees | ||||||||
David C. Arch — 1945 Trustee | 2010 | Chairman and Chief Executive Officer of Blistex Inc., a consumer health care products manufacturer. | 161 | 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 | ||||
Bob R. Baker — 1936 Trustee | 1983 | Retired | 143 | None | ||||
Formerly: President and Chief Executive Officer, AMC Cancer Research Center; and Chairman and Chief Executive Officer, First Columbia Financial Corporation | ||||||||
Frank S. Bayley — 1939 Trustee | 2003 | Retired Formerly: Director, Badgley Funds, Inc. (registered investment company) (2 portfolios) and Partner, law firm of Baker & McKenzie | 143 | Director and Chairman, C.D. Stimson Company (a real estate investment company) | ||||
James T. Bunch — 1942 Trustee | 2000 | 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 | 143 | Vice Chairman, Board of Governors, Western Golf Association/Evans Scholars Foundation and Director, Denver Film Society | ||||
Rodney Dammeyer — 1940 Trustee | 2010 | President 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. | 161 | 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 | 2003 | 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) | 161 | Board of Nature’s 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 | 2003 | 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) | 143 | Administaff | ||||
Formerly: Chief Executive Officer, Texana Timber LP (sustainable forestry company) and member of the U.S. House of Representatives | ||||||||
Carl Frischling — 1937 Trustee | 2003 | Partner, law firm of Kramer Levin Naftalis and Frankel LLP | 143 | Director, Reich & Tang Funds (6 portfolios) | ||||
Prema Mathai-Davis — 1950 Trustee | 2003 | Retired | 143 | None | ||||
Formerly: Chief Executive Officer, YWCA of the U.S.A. | ||||||||
Larry Soll — 1942 Trustee | 1997 | Retired | 143 | None | ||||
Formerly, Chairman, Chief Executive Officer and President, Synergen Corp. (a biotechnology company) | ||||||||
T-2 Invesco Van Kampen Small Cap Growth Fund
Trustees and Officers—(continued)
The address of each trustee and officer is AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”), 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Number of Funds | ||||||||
in Fund Complex | ||||||||
Name, Year of Birth and | Trustee and/ | Principal Occupation(s) | Overseen by | Other Directorship(s) | ||||
Position(s) Held with the Trust | or Officer Since | During Past 5 Years | Trustee | Held by Trustee | ||||
Independent Trustees | ||||||||
Hugo F. Sonnenschein — 1940 Trustee | 2010 | President Emeritus and Honorary Trustee 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. | 161 | 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 | 2005 | Retired Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios) and Partner, Deloitte & Touche | 143 | None | ||||
Other Officers | ||||||||
Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer of Invesco Funds | N/A | N/A | ||||
John M. Zerr — 1962 Senior Vice President, Chief Legal Officer and Secretary | 2006 | 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 | N/A | N/A | ||||
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) | ||||||||
Lisa O. Brinkley — 1959 Vice President | 2004 | Global Compliance Director, Invesco Ltd.; Chief Compliance Officer, Invesco Investment Services, Inc.(formerly known as Invesco Aim Investment Services, Inc.); and Vice President, The Invesco Funds Formerly: Chief Compliance Officer, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) and Van Kampen Investor Services Inc.; Senior Vice President, Invesco Management Group, Inc.; Senior Vice President and Chief Compliance Officer, Invesco Advisers, Inc. and The Invesco Funds; Vice President and Chief Compliance Officer, Invesco Aim Capital Management, Inc. and Invesco Distributors, Inc.; Vice President, Invesco Investment Services, Inc. and Fund Management Company | N/A | N/A | ||||
Sheri Morris — 1964 Vice President, Treasurer and Principal Financial Officer | 2003 | 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) | N/A | N/A | ||||
Formerly: 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, 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. | ||||||||
T-3 Invesco Van Kampen Small Cap Growth Fund
Trustees and Officers—(continued)
The address of each trustee and officer is AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”), 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Number of Funds | ||||||||
in Fund Complex | ||||||||
Name, Year of Birth and | Trustee and/ | Principal Occupation(s) | Overseen by | Other Directorship(s) | ||||
Position(s) Held with the Trust | or Officer Since | During Past 5 Years | Trustee | Held by Trustee | ||||
Other Officers | ||||||||
Karen Dunn Kelley — 1960 Vice President | 2003 | Head of Invesco’s 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 Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust); and President and Principal Executive Officer, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust only). | N/A | N/A | ||||
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 Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Tax-Free Investments Trust only) | ||||||||
Lance A. Rejsek — 1967 Anti-Money Laundering Compliance Officer | 2005 | 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.), The Invesco Funds, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management) and Van Kampen Funds Inc. | N/A | N/A | ||||
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Investor Services Inc., Fund Management Company, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc. | ||||||||
Todd L. Spillane — 1958 Chief Compliance Officer | 2006 | 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, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, INVESCO Private Capital Investments, Inc. (holding company) and Invesco Private Capital, Inc. (registered investment adviser); Vice President, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.), Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.). Formerly: 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 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 | N/A | N/A | ||||
The Statement of Additional Information of the Trust includes additional information about the Fund’s Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Fund’s prospectus for information on the Fund’s sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 2500 Houston, TX 77046-1173 | Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 | Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 2500 Houston, TX 77046-1173 | Auditors PricewaterhouseCoopers LLP 1201 Louisiana Street, Suite 2900 Houston, TX 77002-5678 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2600 One Commerce Square Philadelphia, PA 19103 | Counsel to the Independent Trustees Kramer, Levin, Naftalis & Frankel LLP 1177 Avenue of the Americas New York, NY 10036-2714 | Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 2500 Houston, TX 77046-1173 | Custodian State Street Bank and Trust Company 225 Franklin Boston, MA 02110-2801 |
T-4 Invesco Van Kampen Small Cap Growth Fund
![(IMAGE)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8466509.gif)
Invesco mailing information
Send general correspondence to Invesco Investment Services, Inc., P.O. Box 219078, Kansas City, MO 64121-9078.
Invesco privacy policy
You share personal and financial information with us that is necessary for your transactions and your account records. We take very seriously the obligation to keep that information confidential and private.
Invesco collects nonpublic personal information about you from account applications or other forms you complete and from your transactions with us or our affiliates. We do not disclose information about you or our former customers to service providers or other third parties except to the extent necessary to service your account and in other limited circumstances as permitted by law. For example, we use this information to facilitate the delivery of transaction confirmations, financial reports, prospectuses and tax forms.
Even within Invesco, only people involved in the servicing of your accounts and compliance monitoring have access to your information. To ensure the highest level of confidentiality and security, Invesco maintains physical, electronic and procedural safeguards that meet or exceed federal standards. Special measures, such as data encryption and authentication, apply to your communications with us on our website. More detail is available to you at invesco.com/privacy.
Important notice regarding delivery of security holder documents
To reduce Fund expenses, only one copy of most shareholder documents may be mailed to shareholders with multiple accounts at the same address (Householding). Mailing of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact Invesco Investment Services, Inc. at 800 959 4246 or contact your financial institution. We will begin sending you individual copies for each account within 30 days after receiving your request.
Fund holdings and proxy voting information
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is available at invesco.com/completeqtrholdings. Shareholders can also look up the Fund’s Forms N-Q on the SEC website at sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-09913 and 333-36074.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov.
![(INVESCO LOGO)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8466510.gif)
Information regarding how the Fund voted proxies related to its portfolio securities during the 12 months ended June 30, 2011, is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov.
Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the U.S. distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
VK-SCG-AR-1 | Invesco Distributors, Inc. |
![]() |
Annual Report to Shareholders | August 31, 2011 |
Invesco California Tax-Free Income Fund
Nasdaq:
A: CLFAX § B: CLFBX § C: CLFCX § Y: CLFDX
A: CLFAX § B: CLFBX § C: CLFCX § Y: CLFDX
2 | Letters to Shareholders | |
4 | Performance Summary | |
4 | Management Discussion | |
6 | Long-Term Fund Performance | |
8 | Supplemental Information | |
9 | Schedule of Investments | |
17 | Financial Statements | |
19 | Notes to Financial Statements | |
25 | Financial Highlights | |
26 | Auditor’s Report | |
27 | Fund Expenses | |
28 | Approval of Investment Advisory and Sub-Advisory Agreements | |
30 | Tax Information | |
T-1 | Trustees and Officers |
Letters to Shareholders
![(PHOTO OF PHILIP TAYLOR)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8463502.jpg)
Philip Taylor
Dear Shareholders:
Enclosed is important information about your Fund and its performance. I encourage you to read this report to learn more about your Fund’s short- and long-term performance and its holdings as of the close of the reporting period. This report also includes useful information about your Fund’s management team and a discussion of how your Fund was managed during the reporting period.
Data indicated that economic growth in the U.S. and most of Europe was anemic during the reporting period. In the U.S., unemployment remained high, and the housing market remained weak. Concerns about European sovereign debt persisted. Nonetheless, equity markets rose in late 2010 and early 2011 as investors anticipated better news ahead. But contentious negotiations to raise the U.S. government’s debt ceiling heightened investor unease, and following the first-ever downgrade of U.S. creditworthiness in August, global stock markets declined as many investors sought safer havens.
Where you can get current information about your Fund
In light of economic uncertainty and market volatility, I suggest you check the timely market updates and commentary from many of our fund managers and other investment professionals at invesco.com/us. On our website, you also can obtain information about your account at any hour of the day or night. I invite you to visit and explore the tools and information we offer at invesco.com/us.
Our commitment to investment excellence
As we’ve seen over the last several years, market conditions can change — often suddenly and dramatically. That’s one reason financial advisers typically advise their clients to be well diversified and to maintain a long-term investment focus. While diversification can’t guarantee a profit or protect against loss, it can cushion the impact of dramatic market moves. Maintaining a long-term investment focus for your long-term goals — financing your retirement or your children’s education, for example — may help you avoid making rash investment decisions based on short-term market swings.
Invesco’s investment professionals apply these same principles to the funds they manage.
Invesco offers a broad array of traditional mutual funds, as well as other investment products, including single-country, sector, regional and global investments spanning equity, fixed income and alternative asset classes. Across our product line, investment excellence is our ultimate goal. Each of our funds is managed by specialized teams of investment professionals, and as a company, we maintain a single focus — investment management — that allows our fund managers to concentrate on doing what they do best: managing your money.
Our funds are managed strictly according to their stated investment objectives and strategies, with robust risk oversight using consistent, repeatable investment processes that don’t change in response to short-term market events. This disciplined approach can’t guarantee a profit; no investment can do that, since all involve some measure of risk. But it can ensure that your money is managed the way we said it would be, and that it’s managed with a long-term focus.
Our adherence to stated investment objectives and strategies allows your financial adviser to build a diversified portfolio that meets your individual risk tolerance and financial goals. It also means that when your goals change, your financial adviser will be able to find an Invesco fund that’s appropriate for your needs.
Questions?
If you have questions about your account, please contact one of our client service representatives at 800 959 4246. If you have a general Invesco-related question or comment for me, I invite you to email me directly at phil@invesco.com.
All of us at Invesco look forward to serving your investment management needs for many years to come. Thank you for investing with us.
Sincerely,
![-s- Philip Taylor](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8463503.gif)
Philip Taylor
Senior Managing Director, Invesco Ltd.
Senior Managing Director, Invesco Ltd.
2 | Invesco California Tax-Free Income Fund |
![(PHOTO OF BRUCE CROCKETT)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8463504.jpg)
Bruce Crockett
Dear Fellow Shareholders:
Although the world’s economies are gradually recovering from the financial crisis, it has not been a smooth path. Unrest in the Middle East, persistently weak job and housing markets in the U.S. and continued government balance sheet repair in Europe are contributing to a slow, labored march toward global recovery.
In this environment, investors face risks that could make it more difficult to achieve their long-term financial goals — a secure retirement, home ownership, a child’s college education. Although the markets are complex and dynamic, there are ways to simplify the process and potentially increase your odds of achieving your goals. The best approach is to create a solid financial plan that helps you save and invest in ways that anticipate your needs over the long term.
Your financial adviser can help you define your financial plan, develop an appropriate investment strategy and put you in a better position to achieve your financial goals over the long term. This can take some of the guesswork out of the process and help you make thoughtful investments. Your financial adviser also can help you better understand your tolerance for risk, so that your investment approach lets you sleep at night while getting you closer to your goals. Lastly, your financial adviser can develop an asset allocation strategy that seeks to balance your investment approach, providing some protection against a decline in the markets while allowing you to participate in rising markets. Invesco calls this type of approach “intentional investing.” It means thinking carefully, planning thoughtfully and acting deliberately.
While no investment can guarantee favorable returns, your Board remains committed to managing costs and enhancing the performance of Invesco’s funds as part of our Investor First orientation. We continue to oversee the funds with the same strong sense of responsibility for your money and your continued trust that we’ve always maintained.
Thanks to the approval of our fund shareholders, Invesco has made great progress in realigning our U.S. mutual fund product line following our acquisition of Morgan Stanley’s retail asset management business, including Van Kampen Investments. When completed, the realignment will reduce overlap in the product lineup, enhance efficiency across our product line and build a solid foundation for further growth to meet client and shareholder needs. I would like to thank those of you who voted your proxy, and I hope our shareholders haven’t been too inconvenienced by the process.
As always, please contact me at bruce@brucecrockett.com with any questions or concerns you may have. On behalf of your Board, we look forward to continuing to represent your interests and serving your needs.
Sincerely,
![-s- Bruce L. Crockett](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8463505.gif)
Bruce L. Crockett
Independent Chair
Invesco Funds Board of Trustees
Independent Chair
Invesco Funds Board of Trustees
3 | Invesco California Tax-Free Income Fund |
Management’s Discussion of Fund Performance
Performance summary
All share classes of Invesco California Tax-Free Income Fund at net asset value (NAV) posted positive returns during the 12-month reporting period ended August 31, 2011. The Fund at NAV underperformed its broad market and style-specific benchmark, the Barclays Capital California Municipal Index. The Fund’s significant underweight exposures in the state and local general obligation sectors were the main detractors from its relative performance versus the Barclays Capital California Municipal Index for the reporting period.
Your Fund’s long-term performance appears later in this report.
Fund vs. Indexes
Total returns, 8/31/10 to 8/31/11, at net asset value (NAV). Performance shown does not include applicable contingent deferred sales charges (CDSC) or front-end sales charges, which would have reduced performance.
Class A Shares | 1.22 | % | ||
Class B Shares | 1.25 | |||
Class C Shares | 0.74 | |||
Class Y Shares | 1.49 | |||
Barclays Capital California Municipal Index▼ (Broad Market/Style-Specific Index) | 2.62 | |||
Lipper California Municipal Debt Funds Index■ (Peer Group Index) | 1.49 | |||
▼Barclays Capital via FactSet Research Systems Inc.; ■Lipper Inc. |
How we invest
The Fund will normally invest at least 80% of its assets in securities that pay interest exempt from federal and California state income taxes. We generally invest the Fund’s assets in investment grade California municipal obligations. These municipal obligations will have the following ratings at the time of purchase:
n | Municipal bonds — within the four highest grades by Moody’s Investors Service, Inc. (Moody’s), Standard & Poor’s Ratings Group (S&P) or Fitch Ratings (Fitch) | |
n | Municipal notes — within the two highest grades or, if not rated, have outstanding bonds within the four highest grades by Moody’s, S&P or Fitch |
Portfolio Composition
By credit sector, based on total investments
Revenue Bonds | 69.8 | % | ||
General Obligation Bonds | 18.1 | |||
Pre-refunded Bonds | 1.0 | |||
Other | 11.1 |
Total Net Assets | $415.4 million | |
Total Number of Holdings* | 230 |
The Fund’s holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
*Excluding cash equivalent holdings.
n | Municipal commercial paper — within the highest grade by Moody’s, S&P or Fitch |
We may also invest in unrated securities, which we judge to be of comparable quality to the securities described above. Additionally, we may invest up to 5.0% of the Fund’s net assets in municipal obligations rated below investment grade (commonly known as junk bonds) or, if unrated, of comparable quality as we determine.
We buy and sell California municipal securities with a view toward seeking a high level of current income exempt from federal and California income taxes or other local income taxes. In selecting securities for purchase and sale, we use our research capabilities to identify and monitor investment opportunities. In
Top 10 Fixed Income Issuers*
1. | Long Beach (City of) Financing Authority | 5.8 | % | |||||
2. | Bay Area Toll Authority | 3.9 | ||||||
3. | California (State of) Health Facilities Financing Authority | 3.4 | ||||||
4. | California (State of) | 2.9 | ||||||
5. | California (State of) Educational Facilities Authority | 2.9 | ||||||
6. | Southern California Public Power Authority | 2.9 | ||||||
7. | California (State of) Statewide Communities Development Authority | 2.8 | ||||||
8. | Metropolitan Water District of Southern California | 2.7 | ||||||
9. | California (State of) Department of Water Resources | 2.6 | ||||||
10. | Los Angeles (City of) Department of Water & Power | 2.3 |
conducting research and analysis, we consider a number of factors, including general market and economic conditions and credit and interest rate risk.
Portfolio securities are typically sold when our assessments of any of these factors materially change. Measures of interest rate risk that we evaluate include duration, coupon, maturity and call protection. Measures of credit risk evaluated include individual issuer analysis, sector weightings, geographic distribution and quality spreads.
Market conditions and your Fund
Market conditions during the 12-month period covered by this report were plagued by the continuation of a lackluster recovery, with most major central banks keeping interest rates at low levels. The European Central Bank was the only major central bank to raise rates in an attempt to mitigate commodity-based increases in inflation. Investor skepticism of global governments’ abilities to retire huge amounts of debt without affecting economic growth rates caused sovereign debt distress (particularly for Greece and other southern eurozone countries) and remained a focal point of investor concern. Prices of oil and commodities soared as political unrest plagued the Middle East/North Africa region. Meanwhile in Japan, natural disasters disrupted supply chains globally.
In the U.S., economic recovery remained modest, as weak labor market conditions and elevated unemployment rates continued to weigh on the U.S. economy. Real gross domestic product (GDP), the broadest measure of overall U.S. economic activity, increased at an annual rate of 1.3% in the second quarter of 2011.1 In the first quarter, real GDP increased 0.4%.1 To promote spending, the U.S. Federal Reserve (the Fed) implemented a second round of quantitative easing (QE2) from November 2010 to June 2011. This was augmented by a fiscal stimulus package agreed on between the Obama administration and Congress in December. However, continued concerns over the federal government’s balance sheet led most rating agencies to revise their U.S. debt outlooks to negative, and Standard & Poor’s to lower its rating on long-term U.S. debt. The Fed announced its intention to keep the federal funds target rate unchanged in a range of zero to 0.25%.2 At the August 2011 Federal Open Market
4 | Invesco California Tax-Free Income Fund |
Committee meeting, the Fed indicated that rates would likely be kept low for a long period of time, stating, “The Committee currently anticipates that economic conditions — including low rates of resource utilization and a subdued outlook for inflation over the medium run — are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.”2
While many states are currently facing budgetary challenges, California has perhaps received more press than most. The state still benefits from its large and diverse economic base and above-average wealth levels. However, its significant exposure to the housing crisis, falling tax revenues and recent budgetary shortfalls continue to pose considerable challenges. Although the rating agencies have downgraded the state’s credit rating and the market has reacted accordingly, the negative impact was tempered somewhat by the issuance of taxable Build America Bonds (BABs) and the continued decrease in supply of tax-exempt debt.
During the 12-month period covered by this report, municipal bond mutual funds experienced mostly outflows. Market volatility was heightened across the municipal asset class as U.S. Treasury yields increased, and the market was flooded with new issuance during the last two months of 2010 in anticipation of the end of the BABs program. Supply/ demand dynamics turned positive in 2011 as the increased yields attracted crossover buyers while supply levels remained low at about 50% of 2010’s levels, causing upward pressure on prices and a gradual drop in yields.3 Also during the period, concerns over the dire default predictions at the end of 2010 became subdued as state tax collections increased for the sixth consecutive quarter.4
During the reporting period, lower rated tax-exempt bonds experienced greater price increases relative to their higher rated counterparts. Strong security selection among unrated bonds was a main contributor to Fund performance for the period. An overweight exposure to — and favorable security selection in — lower-rated bonds also contributed to returns.
In terms of yield curve positioning, security selection in the 15- to 20-year part of the curve and on the long end of the curve (20 and more years) contributed to Fund returns relative to the Barclays Capital California Municipal Index. Duration positioning detracted from the Fund’s performance as the short
end of the yield curve had lower sensitivity to interest rate movements and performed well over the reporting period. Some of our yield curve and duration positioning was obtained through the use of inverse floating rate securities, which are instruments that have an inverse relationship to a referenced interest rate. Inverse floating rate securities can be a more efficient means of managing duration, yield curve exposure and credit exposure, and potentially can enhance yields.
At a sector level, strong security selection in the dedicated tax sector was the main contributor to Fund performance. Overweight exposures to the water/sewer and hospital sectors also benefited performance. The Fund’s significant underweight allocation to the state and local general obligation sectors was the primary detractor from Fund performance for the reporting period.
Thank you for investing in Invesco California Tax-Free Income Fund and for sharing our long-term investment horizon.
1 Bureau of Economic Analysis
2 U.S. Federal Reserve
3 Securities Industry and Financial Markets Association
4 Nelson A. Rockefeller Institute of Government
2 U.S. Federal Reserve
3 Securities Industry and Financial Markets Association
4 Nelson A. Rockefeller Institute of Government
The views and opinions expressed in management’s discussion of Fund performance are those of Invesco Advisers, Inc. These views and opinions are subject to change at any time based on factors such as market and economic conditions. These views and opinions may not be relied upon as investment advice or recommendations, or as an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but Invesco Advisers, Inc. makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
See important Fund and, if applicable, index disclosures later in this report.
![(PHOTO OF THOMAS BYRON)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8463506.jpg)
Thomas Byron
Portfolio manager, is manager of Invesco California Tax-Free Income Fund. Mr. Byron joined Invesco in 2010. He earned a B.S. in finance from Marquette University and an M.B.A. in finance from DePaul University.
![(PHOTO OF ROBERT STRYKER)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8463507.jpg)
Robert Stryker
Chartered Financial Analyst, portfolio manager, is manager of Invesco California Tax-Free Income Fund. Mr. Stryker joined Invesco in 2010. He earned a B.S. in finance from the University of Illinois, Chicago.
![(PHOTO OF STEPHEN TURMAN)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8463508.jpg)
Stephen Turman
Chartered Financial Analyst, portfolio manager, is manager of Invesco California Tax-Free Income Fund. Mr. Turman joined Invesco in 1985. He earned a B.B.A. in finance from the University of Texas at Arlington.
![(PHOTO OF JULIUS WILLIAMS)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8463509.jpg)
Julius Williams
Portfolio manager, is manager of Invesco California Tax-Free Income Fund. Mr. Williams joined Invesco in 2010. He earned a B.A. in economics and sociology and a Master of Education degree in educational psychology from the University of Virginia.
![(PHOTO OF ROBERT WIMMEL)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8463510.jpg)
Robert Wimmel
Portfolio manager, is manager of Invesco California Tax-Free Income Fund. Mr. Wimmel joined Invesco in 2010. He earned a B.A. in anthropology from the University of Cincinnati and an M.A. in economics from the University of Illinois, Chicago.
5 | Invesco California Tax-Free Income Fund |
Results of a $10,000 Investment — Oldest Share Class
Fund and index data from 8/31/01
![(GRAPH)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8463511.gif)
1 Barclays Capital via FactSet Research Systems Inc.
2 Lipper Inc.
2 Lipper Inc.
Past performance cannot guarantee comparable future results.
The data shown in the chart include reinvested distributions, applicable sales charges and Fund expenses including management fees. Results for Class B shares are calculated as if a hypothetical shareholder had liquidated his entire investment in the Fund at the close of the reporting period and paid the contingent deferred sales charges, if applicable. Index results include reinvested dividends, but they do not reflect sales
charges. Performance of the peer group, if applicable, reflects fund expenses and management fees; performance of a market index does not. Performance shown in the chart above and before tax table(s) does not reflect deduction of taxes a shareholder would pay on Fund distributions or sale of Fund shares.
This chart, which is a logarithmic chart, presents the fluctuations in the value of the Fund and its indexes. We believe that a logarithmic chart is more effective than other types of charts in illustrating
changes in value during the early years shown in the chart. The vertical axis, the one that indicates the dollar value of an investment, is constructed with each segment representing a percent change in the value of the investment. In this chart, each segment represents a doubling, or 100% change, in the value of the investment. In other words, the space between $5,000 and $10,000 is the same size as the space between $10,000 and $20,000.
continued from page 8
n | The returns shown in management’s discussion of Fund performance are based on net asset values calculated for shareholder transactions. Generally accepted accounting principles require |
adjustments to be made to the net assets of the Fund at period end for financial reporting purposes, and as such, the net asset values for shareholder transactions and the returns
based on those net asset values may differ from the net asset values and returns reported in the Financial Highlights.
6 | Invesco California Tax-Free Income Fund |
Average Annual Total Returns
As of 8/31/11, including maximum applicable sales charges
After Taxes | ||||||||||||
After Taxes | on Distributions | |||||||||||
Before | on | and Sale of | ||||||||||
Taxes | Distributions | Fund Shares | ||||||||||
Class A Shares | ||||||||||||
Inception (7/28/97) | 3.87 | % | 3.77 | % | 3.91 | % | ||||||
10 Years | 3.34 | 3.25 | 3.44 | |||||||||
5 Years | 2.33 | 2.29 | 2.59 | |||||||||
1 Year | -3.62 | -3.62 | -0.85 | |||||||||
Class B Shares | ||||||||||||
Inception (7/11/84) | 6.27 | % | 6.15 | % | 6.16 | % | ||||||
10 Years | 3.85 | 3.76 | 3.90 | |||||||||
5 Years | 3.05 | 3.01 | 3.23 | |||||||||
1 Year | -3.58 | -3.58 | -0.75 | |||||||||
Class C Shares | ||||||||||||
Inception (7/28/97) | 3.73 | % | 3.63 | % | 3.73 | % | ||||||
10 Years | 3.29 | 3.20 | 3.34 | |||||||||
5 Years | 2.83 | 2.79 | 2.97 | |||||||||
1 Year | -0.23 | -0.23 | 1.26 | |||||||||
Class Y Shares | ||||||||||||
Inception (7/28/97) | 4.49 | % | 4.40 | % | 4.49 | % | ||||||
10 Years | 4.06 | 3.97 | 4.11 | |||||||||
5 Years | 3.61 | 3.57 | 3.74 | |||||||||
1 Year | 1.49 | 1.49 | 2.63 | |||||||||
Average Annual Total Returns
As of 6/30/11, the most recent calendar quarter-end, including maximum applicable sales charges
After Taxes | ||||||||||||
After Taxes | on Distributions | |||||||||||
Before | on | and Sale of | ||||||||||
Taxes | Distributions | Fund Shares | ||||||||||
Class A Shares | ||||||||||||
Inception (7/28/97) | 3.68 | % | 3.58 | % | 3.75 | % | ||||||
10 Years | 3.46 | 3.37 | 3.56 | |||||||||
5 Years | 2.22 | 2.18 | 2.51 | |||||||||
1 Year | -2.69 | -2.69 | -0.19 | |||||||||
Class B Shares | ||||||||||||
Inception (7/11/84) | 6.18 | % | 6.07 | % | 6.09 | % | ||||||
10 Years | 3.96 | 3.87 | 4.02 | |||||||||
5 Years | 2.93 | 2.90 | 3.15 | |||||||||
1 Year | -2.60 | -2.60 | -0.06 | |||||||||
Class C Shares | ||||||||||||
Inception (7/28/97) | 3.54 | % | 3.45 | % | 3.58 | % | ||||||
10 Years | 3.41 | 3.32 | 3.47 | |||||||||
5 Years | 2.70 | 2.67 | 2.87 | |||||||||
1 Year | 0.81 | 0.81 | 1.99 | |||||||||
Class Y Shares | ||||||||||||
Inception (7/28/97) | 4.31 | % | 4.21 | % | 4.34 | % | ||||||
10 Years | 4.19 | 4.10 | 4.25 | |||||||||
5 Years | 3.49 | 3.45 | 3.65 | |||||||||
1 Year | 2.54 | 2.54 | 3.38 | |||||||||
Effective June 1, 2010, Class A, Class B, Class C and Class I shares of the predecessor fund, Morgan Stanley California Tax-Free Income Fund, advised by Morgan Stanley Investment Advisors Inc. were reorganized into Class A, Class B, Class C and Class Y shares, respectively, of Invesco California Tax-Free Income Fund. Returns shown above for Class A, Class B, Class C and Class Y shares are blended returns of the predecessor fund and Invesco California Tax-Free Income Fund. Share class returns will differ from the predecessor fund because of different expenses.
The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Please visit invesco.com/performance for the most recent month-end performance. Performance figures reflect reinvested distributions, changes in net asset
value and the effect of the maximum sales charge unless otherwise stated. Investment return and principal value will fluctuate so that you may have a gain or loss when you sell shares.
The total annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Class A, Class B, Class C and Class Y shares was 0.88%, 0.88%, 1.38% and 0.63%, respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.
Class A share performance reflects the maximum 4.75% sales charge, and Class B and Class C share performance reflects the applicable contingent deferred sales charge (CDSC) for the period involved. The CDSC on Class B shares declines from 5% beginning at the time of purchase to 0% at the
beginning of the seventh year. The CDSC on Class C shares is 1% for the first year after purchase. Class Y shares do not have a front-end sales charge or a CDSC; therefore, performance is at net asset value.
The performance of the Fund’s share classes will differ primarily due to different sales charge structures and class expenses.
After-tax returns are calculated using the historical highest individual federal marginal income tax rate. They do not reflect the effect of state and local taxes. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their shares in tax-deferred accounts such as 401(k)s or IRAs. The Fund’s past performance, before and after taxes, is not necessarily an indication of how the Fund will perform in the future.
7 | Invesco California Tax-Free Income Fund |
n | Unless otherwise stated, information presented in this report is as of August 31, 2011, and is based on total net assets. | |
n | Unless otherwise noted, all data provided by Invesco. | |
n | To access your Fund’s reports/prospectus, visit invesco.com/fundreports. |
About share classes
n | Class B shares may not be purchased or acquired by exchange from share classes other than Class B shares. Please see the prospectus for more information. | |
n | Class Y shares are available to only certain investors. Please see the prospectus for more information. |
Principal risks of investing in the Fund
n | Credit risk. Credit risk refers to the possibility that the issuer of a security will be unable or unwilling to make interest payments and/or repay the principal on its debt. In the case of revenue bonds, notes or commercial paper, for example, the credit risk is the possibility that the user fees from a project or other specified revenue sources are insufficient to meet interest and/or principal payment obligations. 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. | |
n | Interest rate risk. Interest rate risk refers to fluctuations in the value of a fixed-income security resulting from changes in the general level of interest rates. When the general level of interest rates goes up, the prices of most fixed-income securities go down. When the general level of interest rates goes down, the prices of most fixed-income securities go up. Zero coupon securities are typically subject to greater price fluctuations than comparable securities that pay current interest. | |
n | Lease obligations. Leases and installment purchase or conditional sale contracts (which may provide for title to the leased asset to pass eventually to the issuer) have developed as a means for governmental issuers to |
acquire property and equipment without the necessity of complying with the constitutional and statutory requirements generally applicable for the issuance of debt. 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. | ||
n | 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. This could cause a decline in the Fund’s value. | |
n | Inverse floating rate municipal obligations. The inverse floating rate municipal obligations in which the 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 the Fund. The |
short-term floating rate interests have first priority on the cash flow from the bond held by the special purpose trust and the Fund is paid the residual cash flow from the bond held by the special purpose trust. | ||
n | Alternative minimum tax. The Fund may invest up to 20% of its total assets in securities subject to the federal alternative minimum tax. | |
n | State-specific risks. The Fund is more susceptible to political, economic, regulatory or other factors affecting issuers of California municipal securities than a fund that does not limit its investments to such issuers. |
About indexes used in this report
n | The Barclays Capital California Municipal Index is an index of California investment grade municipal bonds. | |
n | The Lipper California Municipal Debt Funds Index is an unmanaged index considered representative of California municipal debt funds tracked by Lipper. | |
n | The Fund is not managed to track the performance of any particular index, including the index(es) defined here, and consequently, the performance of the Fund may deviate significantly from the performance of the index(es). | |
n | A direct investment cannot be made in an index. Unless otherwise indicated, index results include reinvested dividends, and they do not reflect sales charges. Performance of the peer group, if applicable, reflects fund expenses; performance of a market index does not. |
Other information
n | The Chartered Financial Analyst® (CFA®) designation is globally recognized and attests to a charter-holder’s success in a rigorous and comprehensive study program in the field of investment management and research analysis. |
continued on page 6
This report must be accompanied or preceded by a currently effective Fund prospectus, which contains more complete information, including sales charges and expenses. Investors should read it carefully before investing.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
Fund Nasdaq Symbols | ||
Class A Shares | CLFAX | |
Class B Shares | CLFBX | |
Class C Shares | CLFCX | |
Class Y Shares | CLFDX |
8 | Invesco California Tax-Free Income Fund |
Schedule of Investments
August 31, 2011
Principal | ||||||||||||||||
Interest | Maturity | Amount | ||||||||||||||
Rate | Date | (000) | Value | |||||||||||||
Municipal Obligations–105.02% | ||||||||||||||||
California–101.22% | ||||||||||||||||
Adelanto (City of) Public Utility Authority (Utility System); Series 2009 A, Ref. RB | 6.75 | % | 07/01/39 | $ | 1,500 | $ | 1,555,125 | |||||||||
Alameda (County of) Joint Powers Authority (Juvenile Justice Refunding); | ||||||||||||||||
Series 2008 A, Lease RB (INS–AGM)(a) | 5.00 | % | 12/01/25 | 750 | 796,395 | |||||||||||
Series 2008 A, Lease RB (INS–AGM)(a) | 5.00 | % | 12/01/26 | 1,325 | 1,398,683 | |||||||||||
Alhambra (City of) (Atherton Baptist Homes); Series 2010 A, RB | 7.63 | % | 01/01/40 | 1,575 | 1,626,313 | |||||||||||
Alhambra Unified School District (Election of 1999); Series 1999 A, Unlimited Tax CAB GO Bonds (INS–AGM)(a)(b) | 0.00 | % | 09/01/20 | 1,925 | 1,274,254 | |||||||||||
Alvord Unified School District (Election of 2007); Series 2008 A, Unlimited Tax GO Bonds (INS–AGM)(a) | 5.00 | % | 08/01/28 | 1,590 | 1,666,097 | |||||||||||
Anaheim (City of) Public Financing Authority (Anaheim Public Improvements); Series 1997 C, Sub. Lease RB (INS–AGM)(a) | 6.00 | % | 09/01/16 | 4,000 | 4,525,360 | |||||||||||
Anaheim (City of) Public Financing Authority (Electric System Distribution Facilities); Series 2011 A, RB | 5.38 | % | 10/01/36 | 2,500 | 2,663,650 | |||||||||||
Antelope Valley Healthcare District; Series 1997 A, Ref. RB (INS–AGM)(a) | 5.20 | % | 01/01/20 | 4,000 | 4,004,160 | |||||||||||
Apple Valley (Town of) Public Financing Authority (Town Hall Annex); Series 2007 A, Lease RB (INS–AMBAC)(a) | 5.00 | % | 09/01/27 | 2,365 | 2,468,256 | |||||||||||
Arcadia Unified School District (Election of 2006); Series 2007 A, Unlimited Tax GO Bonds (INS–AGM)(a) | 5.00 | % | 08/01/37 | 1,500 | 1,533,105 | |||||||||||
Bakersfield (City of); Series 2007 A, Wastewater RB (INS–AGM)(a) | 5.00 | % | 09/15/32 | 2,215 | 2,277,086 | |||||||||||
Bay Area Governments Association (California Capital); Series 2001 A, Lease RB (INS–AMBAC)(a) | 5.25 | % | 07/01/17 | 1,430 | 1,485,884 | |||||||||||
Bay Area Governments Association; Series 2004 A, Lease RB (INS–SGI)(a) | 5.00 | % | 09/01/29 | 2,735 | 2,758,466 | |||||||||||
Bay Area Toll Authority (San Francisco Bay Area); | ||||||||||||||||
Series 2008 F-1, Toll Bridge RB(c) | 5.00 | % | 04/01/39 | 1,250 | 1,292,063 | |||||||||||
Series 2008 F-1, Toll Bridge RB | 5.00 | % | 04/01/39 | 2,500 | 2,584,125 | |||||||||||
Series 2009 F-1, Toll Bridge RB(c) | 5.25 | % | 04/01/26 | 4,685 | 5,228,460 | |||||||||||
Series 2009 F-1, Toll Bridge RB(c) | 5.25 | % | 04/01/29 | 5,205 | 5,646,280 | |||||||||||
Series 2009 F-1, Toll Bridge RB(c) | 5.13 | % | 04/01/39 | 1,500 | 1,569,225 | |||||||||||
Beverly Hills Unified School District (Election of 2008); | ||||||||||||||||
Series 2009, Unlimited Tax CAB GO Bonds(b) | 0.00 | % | 08/01/26 | 1,465 | 690,176 | |||||||||||
Series 2009, Unlimited Tax CAB GO Bonds(b) | 0.00 | % | 08/01/32 | 3,045 | 951,349 | |||||||||||
Bonita Unified School District (Election of 2004); Series 2004 A, Unlimited Tax GO Bonds (INS–NATL)(a) | 5.00 | % | 08/01/28 | 1,000 | 1,043,730 | |||||||||||
Brea Olinda Unified School District; Series 2002 A, Ref. COP (INS–AGM)(a) | 5.50 | % | 08/01/18 | 1,850 | 1,875,437 | |||||||||||
California (County of) Tobacco Securitization Agency (Los Angeles County Securitization Corp.); Series 2006 A, Tobacco Settlement Asset-Backed Conv. Turbo RB | 5.45 | % | 06/01/28 | 5,000 | 4,138,800 | |||||||||||
California (State of) Department of Water Resources (Central Valley); Series 2003 Y, Water System RB (INS–NATL)(a) | 5.00 | % | 12/01/25 | 10,000 | 10,592,200 | |||||||||||
California (State of) Educational Facilities Authority (California College of the Arts); Series 2005, RB | 5.00 | % | 06/01/35 | 2,000 | 1,631,000 | |||||||||||
California (State of) Educational Facilities Authority (Claremont McKenna College); Series 2007, RB(c) | 5.00 | % | 01/01/38 | 2,100 | 2,160,102 | |||||||||||
California (State of) Educational Facilities Authority (Pitzer College); | ||||||||||||||||
Series 2005 A, RB | 5.00 | % | 04/01/35 | 2,000 | 1,937,980 | |||||||||||
Series 2009, RB | 6.00 | % | 04/01/40 | 2,000 | 2,149,660 | |||||||||||
California (State of) Educational Facilities Authority (University of Southern California); Series 2009 B, RB(c) | 5.25 | % | 10/01/39 | 1,800 | 1,931,220 | |||||||||||
California (State of) Educational Facilities Authority (University of the Pacific); Series 2000, RB (INS–NATL)(a) | 5.88 | % | 11/01/20 | 2,040 | 2,047,099 | |||||||||||
California (State of) Health Facilities Financing Authoritiy (Stanford Hospital); Series 2008 A-2, Ref. RB | 5.25 | % | 11/15/40 | 2,000 | 2,036,220 | |||||||||||
California (State of) Health Facilities Financing Authority (Adventist Health System/West); Series 2009 A, RB | 5.75 | % | 09/01/39 | 500 | 514,515 | |||||||||||
California (State of) Health Facilities Financing Authority (Catholic Healthcare West); Series 2009 A, RB | 6.00 | % | 07/01/39 | 500 | 530,045 | |||||||||||
California (State of) Health Facilities Financing Authority (Children’s Hospital Los Angeles); Series 2010 A, RB (INS–AGM)(a) | 5.25 | % | 07/01/38 | 2,950 | 2,893,596 | |||||||||||
California (State of) Health Facilities Financing Authority (Kaiser Permanente); Series 2006 A, RB | 5.25 | % | 04/01/39 | 2,000 | 1,985,500 | |||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
9 Invesco California Tax-Free Income Fund
Principal | ||||||||||||||||
Interest | Maturity | Amount | ||||||||||||||
Rate | Date | (000) | Value | |||||||||||||
California–(continued) | ||||||||||||||||
California (State of) Health Facilities Financing Authority (Providence Health & Services); | ||||||||||||||||
Series 2008, RB(d)(e) | 6.50 | % | 10/01/18 | $ | 20 | $ | 26,396 | |||||||||
Series 2008, RB | 6.50 | % | 10/01/38 | 980 | 1,083,949 | |||||||||||
California (State of) Health Facilities Financing Authority (Scripps Health); Series 2010 A, RB | 5.00 | % | 11/15/36 | 4,000 | 4,007,720 | |||||||||||
California (State of) Health Facilities Financing Authority (Sutter Health); Series 2011 B, RB | 5.50 | % | 08/15/26 | 1,000 | 1,066,940 | |||||||||||
California (State of) Municipal Finance Authority (American Heritage Education Foundation); Series 2006 A, Education RB | 5.25 | % | 06/01/26 | 1,000 | 884,180 | |||||||||||
California (State of) Municipal Finance Authority (Community Hospitals of Central California Obligated Group); | ||||||||||||||||
Series 2007, COP | 5.00 | % | 02/01/20 | 2,055 | 2,066,529 | |||||||||||
Series 2007, COP | 5.25 | % | 02/01/37 | 500 | 437,860 | |||||||||||
California (State of) Municipal Finance Authority (Eisenhower Medical Center); | ||||||||||||||||
Series 2010 A, RB | 5.50 | % | 07/01/30 | 1,000 | 989,520 | |||||||||||
Series 2010 A, RB | 5.75 | % | 07/01/40 | 1,500 | 1,489,425 | |||||||||||
California (State of) Municipal Finance Authority (University of La Verne); Series 2010 A, RB | 6.13 | % | 06/01/30 | 1,000 | 1,028,160 | |||||||||||
California (State of) Pollution Control Financing Authority (Waste Management, Inc.); Series 2002 A, Ref. Solid Waste Disposal RB(f) | 5.00 | % | 01/01/22 | 2,000 | 2,035,260 | |||||||||||
California (State of) Statewide Communities Development Authority (Adventist Health System/West); Series 2005 A, Health Facility RB | 5.00 | % | 03/01/30 | 5,000 | 5,001,600 | |||||||||||
California (State of) Statewide Communities Development Authority (American Baptist Homes of the West); Series 2010, RB | 6.25 | % | 10/01/39 | 2,000 | 2,016,260 | |||||||||||
California (State of) Statewide Communities Development Authority (California Baptist University); Series 2007 A, RB | 5.40 | % | 11/01/27 | 1,785 | 1,609,981 | |||||||||||
California (State of) Statewide Communities Development Authority (Cedars Sinai Medical Center); Series 1992, Hospital Revenue COP | 6.50 | % | 08/01/12 | 295 | 305,039 | |||||||||||
California (State of) Statewide Communities Development Authority (Cottage Health System Obligated Group); Series 2010, RB | 5.25 | % | 11/01/30 | 1,675 | 1,706,607 | |||||||||||
California (State of) Statewide Communities Development Authority (Methodist Hospital); Series 2009, RB (INS–FHA)(a) | 6.75 | % | 02/01/38 | 500 | 564,615 | |||||||||||
California (State of) Statewide Communities Development Authority (Rady Children’s Hospital); Series 2008 B, VRD RB (LOC–Wells Fargo Bank, N.A.)(g)(h) | 0.06 | % | 08/15/47 | 5,100 | 5,100,000 | |||||||||||
California (State of) Statewide Communities Development Authority (Senior Living Southern California); Series 2009, RB | 7.25 | % | 11/15/41 | 500 | 537,290 | |||||||||||
California (State of); | ||||||||||||||||
Series 1992, Unlimited Tax GO Bonds (INS–FGIC)(a) | 6.25 | % | 09/01/12 | 310 | 316,606 | |||||||||||
Series 2009, Various Purpose Unlimited Tax GO Bonds | 5.75 | % | 04/01/31 | 5,000 | 5,436,050 | |||||||||||
Series 2009, Various Purpose Unlimited Tax GO Bonds | 6.00 | % | 11/01/35 | 1,750 | 1,937,075 | |||||||||||
Series 2009, Various Purpose Unlimited Tax GO Bonds | 6.00 | % | 04/01/38 | 1,250 | 1,364,675 | |||||||||||
Series 2010, Various Purpose Unlimited Tax GO Bonds | 5.25 | % | 11/01/40 | 3,000 | 3,051,090 | |||||||||||
California Infrastructure & Economic Development Bank (Broad Museum); Series 2011 A, RB | 5.00 | % | 06/01/21 | 3,000 | 3,613,020 | |||||||||||
California Infrastructure & Economic Development Bank (California Science Center Phase II); Series 2006 B, RB (INS–NATL)(a) | 5.00 | % | 05/01/31 | 2,000 | 1,896,700 | |||||||||||
California Infrastructure & Economic Development Bank (Pacific Gas & Electric Co.); Series 2009 B, Ref. VRD RB (LOC–Wells Fargo Bank, N.A.)(g)(h) | 0.08 | % | 11/01/26 | 2,600 | 2,600,000 | |||||||||||
California Special Districts Association Finance Corp. (Special Districts Finance Program); Series 1997 DD, COP (INS–AGM)(a) | 5.63 | % | 01/01/27 | 1,050 | 1,050,032 | |||||||||||
California State University; | ||||||||||||||||
Series 2008 A, Systemwide RB (INS–AGM)(a) | 5.00 | % | 11/01/39 | 3,150 | 3,198,856 | |||||||||||
Series 2009 A, Statewide RB (INS–AGC)(a) | 5.25 | % | 11/01/38 | 1,000 | 1,028,960 | |||||||||||
Castaic Lake Water Agency (Water System Improvement); Series 1994 A, Ref. COP (INS–NATL)(a) | 7.00 | % | 08/01/12 | 2,000 | 2,115,800 | |||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
10 Invesco California Tax-Free Income Fund
Principal | ||||||||||||||||
Interest | Maturity | Amount | ||||||||||||||
Rate | Date | (000) | Value | |||||||||||||
California–(continued) | ||||||||||||||||
Cerritos Community College District (Election of 2004); | ||||||||||||||||
Series 2004 A, Unlimited Tax GO Bonds (INS–NATL)(a) | 5.00 | % | 08/01/26 | $ | 100 | $ | 103,135 | |||||||||
Series 2004 A, Unlimited Tax GO Bonds (INS–NATL)(a) | 5.00 | % | 08/01/28 | 125 | 128,423 | |||||||||||
Chino Basin Regional Financing Authority (Inland Empire Utilities Agency); Series 2008 A, RB (INS–AMBAC)(a) | 5.00 | % | 11/01/33 | 725 | 735,121 | |||||||||||
Clovis Unified School District (Election of 2004); Series 2004 A, Unlimited Tax CAB GO Bonds (INS–NATL)(a)(b) | 0.00 | % | 08/01/29 | 735 | 255,736 | |||||||||||
Corona-Norco Unified School District (Election of 2006); | ||||||||||||||||
Series 2009 B, Unlimited Tax CAB GO Bonds (INS–AGC)(a)(b) | 0.00 | % | 08/01/24 | 1,000 | 496,610 | |||||||||||
Series 2009 B, Unlimited Tax CAB GO Bonds (INS–AGC)(a)(b) | 0.00 | % | 08/01/25 | 1,000 | 455,440 | |||||||||||
Series 2009 B, Unlimited Tax CAB GO Bonds (INS–AGC)(a)(b) | 0.00 | % | 08/01/26 | 1,525 | 646,188 | |||||||||||
Desert Community College District (Election of 2004); Series 2007 C, Unlimited Tax GO Bonds (INS–AGM)(a) | 5.00 | % | 08/01/37 | 2,500 | 2,547,950 | |||||||||||
Duarte (City of) (City of Hope National Medical Center); Series 1999 A, COP | 5.25 | % | 04/01/19 | 2,500 | 2,506,675 | |||||||||||
East Bay Municipal Utility District; Series 2010 A, Ref. Sub. Water System RB | 5.00 | % | 06/01/36 | 2,000 | 2,136,420 | |||||||||||
Eden (Township of) Healthcare District (Eden Hospital Health Services Corp.); Series 2010, COP | 6.13 | % | 06/01/34 | 1,000 | 988,400 | |||||||||||
El Dorado Irrigation District; Series 2009, COP (INS–AGC)(a) | 5.75 | % | 08/01/39 | 1,000 | 1,024,570 | |||||||||||
El Monte Union High School District (Election of 2008); Series 2009 A, Unlimited Tax GO Bonds (INS–AGC)(a) | 5.50 | % | 06/01/34 | 1,000 | 1,058,370 | |||||||||||
El Segundo Unified School District (Election of 2008); Series 2009 A, Unlimited Tax CAB GO Bonds(b) | 0.00 | % | 08/01/33 | 4,430 | 1,123,227 | |||||||||||
Fairfield (City of) Community Facilities District No. 3 (North Cordelia General Improvements); Series 2008, Special Tax RB | 6.00 | % | 09/01/32 | 1,200 | 1,237,284 | |||||||||||
Fontana (City of) Public Financing Authority (North Fontana Redevelopment); Series 2003 A, Tax Allocation RB (INS–AMBAC)(a) | 5.38 | % | 09/01/25 | 1,500 | 1,503,390 | |||||||||||
Fontana (City of) Redevelopment Agency (Downtown Redevelopment); Series 2000, Ref. Tax Allocation RB (INS–NATL)(a) | 5.00 | % | 09/01/21 | 1,480 | 1,441,402 | |||||||||||
Foothill/Eastern Transportation Corridor Agency; Series 1999, Ref. Toll Road RB (INS–NATL)(a) | 5.13 | % | 01/15/19 | 4,000 | 3,894,480 | |||||||||||
Fresno Unified School District; | ||||||||||||||||
Series 1999 C, Ref. Unlimited Tax GO Bonds (INS–NATL)(a) | 5.90 | % | 08/01/17 | 590 | 677,391 | |||||||||||
Series 1999 C, Ref. Unlimited Tax GO Bonds (INS–NATL)(a) | 5.90 | % | 08/01/18 | 630 | 725,073 | |||||||||||
Series 1999 C, Ref. Unlimited Tax GO Bonds (INS–NATL)(a) | 5.90 | % | 08/01/19 | 675 | 781,043 | |||||||||||
Series 1999 C, Ref. Unlimited Tax GO Bonds (INS–NATL)(a) | 5.90 | % | 08/01/20 | 720 | 835,258 | |||||||||||
Gilroy Unified School District (Election of 2008); | ||||||||||||||||
Series 2009 A, Unlimited Tax CAB GO Bonds (INS–AGC)(a)(b) | 0.00 | % | 08/01/29 | 5,350 | 1,791,661 | |||||||||||
Series 2009 A, Unlimited Tax CAB GO Bonds (INS–AGC)(a)(b) | 0.00 | % | 08/01/31 | 3,650 | 1,057,040 | |||||||||||
Glendora Public Finance Authority; Series 2003 A, Project No. One Tax Allocation RB (INS–NATL)(a) | 5.00 | % | 09/01/24 | 2,425 | 2,336,536 | |||||||||||
Grossmont Union High School District (Election of 2004); Series 2006, Unlimited Tax CAB GO Bonds (INS–NATL)(a)(b) | 0.00 | % | 08/01/24 | 6,750 | 3,310,267 | |||||||||||
Hanford Joint Union High School District (Election of 1998); Series 2004 C, Unlimited Tax GO Bonds (INS–NATL)(a) | 5.70 | % | 08/01/28 | 2,230 | 2,377,024 | |||||||||||
Hawaiian Gardens Redevelopment Agency; Series 2006 A, Project No. One Tax Allocation RB (INS–AMBAC)(a) | 5.00 | % | 12/01/25 | 2,275 | 2,048,819 | |||||||||||
Independent Cities Lease Finance Authority (San Juan Mobile Estates); Series 2006 A, Mobile Home Park RB | 5.13 | % | 05/15/41 | 2,000 | 1,649,020 | |||||||||||
Indio (City of) Redevelopment Agency (Indio Redevelopment Merged Project Area); | ||||||||||||||||
Series 2008 A, Sub. Tax Allocation RB | 5.25 | % | 08/15/27 | 780 | 687,562 | |||||||||||
Series 2008 A, Sub. Tax Allocation RB | 5.25 | % | 08/15/28 | 470 | 408,844 | |||||||||||
Series 2008 A, Sub. Tax Allocation RB | 5.63 | % | 08/15/35 | 250 | 222,500 | |||||||||||
Inglewood (City of) Redevelopment Agency (Merged Redevelopment); Series 1998 A, Ref. Tax Allocation RB (INS–AMBAC)(a) | 5.25 | % | 05/01/23 | 1,000 | 997,340 | |||||||||||
Irvine (City of) Public Facilities & Infrastructure Authority; Series 2002 B, Special Assessment RB (INS–AMBAC)(a) | 5.00 | % | 09/02/23 | 1,670 | 1,673,557 | |||||||||||
Irvine Unified School District (Community Facilities District No. 06-1- Portola Springs); Series 2010, Special Tax RB | 6.70 | % | 09/01/35 | 1,000 | 1,061,700 | |||||||||||
Kern (County of) (Capital Improvments); Series 2009 A, COP (INS–AGC)(a) | 5.75 | % | 08/01/35 | 1,000 | 1,058,330 | |||||||||||
Kern County Water Agency Improvement District No. 4; Series 2008 A, COP (INS–AGC)(a) | 5.00 | % | 05/01/28 | 1,700 | 1,775,752 | |||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
11 Invesco California Tax-Free Income Fund
Principal | ||||||||||||||||
Interest | Maturity | Amount | ||||||||||||||
Rate | Date | (000) | Value | |||||||||||||
California–(continued) | ||||||||||||||||
Lodi (City of); Series 2007 A, Wastewater System Revenue COP (INS–AGM)(a) | 5.00 | % | 10/01/37 | $ | 1,000 | $ | 1,016,470 | |||||||||
Long Beach (City of) Financing Authority; Series 1992, RB (INS–AMBAC)(a) | 6.00 | % | 11/01/17 | 20,000 | 21,478,200 | |||||||||||
Long Beach (City of); Series 2010 A, Sr. Airport RB | 5.00 | % | 06/01/40 | 2,500 | 2,432,900 | |||||||||||
Los Angeles (City of) (FHA Insured Mortgage Loans–Section 8 Assisted Project); Series 1997 A, Ref. Mortgage RB (INS–NATL)(a) | 6.10 | % | 07/01/25 | 525 | 525,662 | |||||||||||
Los Angeles (City of) Department of Airports (Los Angeles International Airport); | ||||||||||||||||
Series 2010 A, Sr. RB | 5.00 | % | 05/15/35 | 2,500 | 2,575,425 | |||||||||||
Series 2010 B, Sub. RB | 5.00 | % | 05/15/40 | 1,000 | 1,019,370 | |||||||||||
Los Angeles (City of) Department of Water & Power; | ||||||||||||||||
Series 2004 C, Water System RB (INS–NATL)(a) | 5.00 | % | 07/01/26 | 1,000 | 1,035,020 | |||||||||||
Series 2011 A, Power System RB | 5.00 | % | 07/01/22 | 1,800 | 2,132,316 | |||||||||||
Series 2011 A, Water System RB | 5.25 | % | 07/01/39 | 1,500 | 1,621,095 | |||||||||||
Subseries 2006 A-1, Water System RB (INS–AMBAC)(a) | 5.00 | % | 07/01/36 | 1,485 | 1,524,946 | |||||||||||
Subseries 2007 A-1, Power System RB (INS–AMBAC)(a) | 5.00 | % | 07/01/37 | 1,000 | 1,031,290 | |||||||||||
Subseries 2008 A-1, Power System RB | 5.25 | % | 07/01/38 | 2,000 | 2,115,600 | |||||||||||
Los Angeles (City of); Series 2003 B, Ref. Wastewater System RB (INS–AGM)(a) | 5.00 | % | 06/01/22 | 5,000 | 5,299,700 | |||||||||||
Los Angeles (County of) (Disney Parking Refunding Project); Series 1998, COP (INS–AMBAC)(a) | 4.75 | % | 03/01/23 | 1,000 | 901,080 | |||||||||||
Los Angeles (County of) Metropolitan Transportation Authority; Series 2005 A, Proposition A First Tier Sr. Sales Tax RB (INS–AMBAC)(a) | 5.00 | % | 07/01/35 | 1,000 | 1,028,890 | |||||||||||
Los Angeles Community College District (Election of 2003); Series 2008 F-1, Unlimited Tax GO Bonds(c) | 5.00 | % | 08/10/33 | 2,000 | 2,082,320 | |||||||||||
Los Angeles County Schools Regionalized Business Services Corp. (Los Angeles County Schools Pooled Financing Program); Series 1999 A, CAB COP (INS–AMBAC)(a)(b) | 0.00 | % | 08/01/24 | 1,265 | 519,181 | |||||||||||
Los Angeles Unified School District (Election of 2004); | ||||||||||||||||
Series 2007 H, Unlimited Tax GO Bonds (INS–AGM)(a) | 5.00 | % | 07/01/32 | 1,000 | 1,034,410 | |||||||||||
Series 2009 F-1, Unlimited Tax GO Bonds (INS–AGC)(a) | 5.00 | % | 01/01/34 | 3,000 | 3,082,950 | |||||||||||
Madera (County of) (Valley Children’s Hospital); Series 1995, COP (INS–NATL)(a) | 6.50 | % | 03/15/15 | 6,180 | 6,608,212 | |||||||||||
Menifee Union School District (Election of 2008); Series 2009 C, Unlimited Tax CAB GO Bonds (INS–AGC)(a)(b) | 0.00 | % | 08/01/35 | 940 | 203,341 | |||||||||||
Metropolitan Water District of Southern California; | ||||||||||||||||
Series 2005 A, Water Works RB (INS–AGM)(a) | 5.00 | % | 07/01/35 | 1,520 | 1,564,992 | |||||||||||
Series 2009 B, Ref. RB(c) | 5.00 | % | 07/01/27 | 8,585 | 9,512,953 | |||||||||||
Monrovia (City of) Financing Authority (Hillside Wilderness Preserve); Series 2002, Lease RB (INS–AMBAC)(a) | 5.00 | % | 12/01/20 | 1,105 | 1,144,670 | |||||||||||
Montclair (City of) Redevelopment Agency (Montclair Redevelopment Project No. V); Series 2001, Ref. Tax Allocation RB (INS–NATL)(a) | 5.00 | % | 10/01/20 | 1,840 | 1,788,517 | |||||||||||
Montebello Unified School District (Election of 2004); Series 2009 A-1, Unlimited Tax GO Bonds (INS–AGC)(a) | 5.25 | % | 08/01/34 | 1,000 | 1,036,300 | |||||||||||
Moorpark Unified School District (Election of 2008); Series 2009 A, Unlimited Tax CAB GO Bonds (INS–AGC)(a)(b) | 0.00 | % | 08/01/31 | 840 | 243,264 | |||||||||||
Morongo Band of Mission Indians (Enterprise Casino); Series 2008, Enterprise RB(i) | 6.50 | % | 03/01/28 | 1,000 | 940,830 | |||||||||||
Mountain View (City of) Shoreline Regional Park Community; Series 2001 A, Tax Allocation RB (INS–NATL)(a) | 5.25 | % | 08/01/16 | 1,570 | 1,581,037 | |||||||||||
National City (City of) Community Development Commission (National City Redevelopment); Series 2011, Tax Allocation RB | 7.00 | % | 08/01/32 | 1,500 | 1,571,955 | |||||||||||
Norco Financing Authority; Series 2009, Ref. Enterprise RB (INS–AGM)(a) | 5.63 | % | 10/01/34 | 1,000 | 1,056,410 | |||||||||||
Oakland (City of) Joint Powers Financing Authority (Oakland Administration Buildings); Series 2008 B, Ref. Lease RB (INS–AGC)(a) | 5.00 | % | 08/01/26 | 1,215 | 1,260,963 | |||||||||||
Oakland (Port of); | ||||||||||||||||
Series 2002 L, RB(d)(e)(f) | 5.00 | % | 11/01/12 | 110 | 115,793 | |||||||||||
Series 2002 L, RB (INS–NATL)(a)(f) | 5.00 | % | 11/01/21 | 890 | 900,280 | |||||||||||
Oceanside (City of); Series 2003 A, Ref. COP (INS–AMBAC)(a) | 5.20 | % | 04/01/23 | 1,300 | 1,317,381 | |||||||||||
Palm Springs (City of) Financing Authority (Convention Center); Series 2001A, Ref. Lease RB (INS–NATL)(a) | 5.25 | % | 11/01/19 | 1,340 | 1,356,750 | |||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
12 Invesco California Tax-Free Income Fund
Principal | ||||||||||||||||
Interest | Maturity | Amount | ||||||||||||||
Rate | Date | (000) | Value | |||||||||||||
California–(continued) | ||||||||||||||||
Palomar Pomerado Health Care District; Series 2009, COP | 6.75 | % | 11/01/39 | $ | 2,000 | $ | 2,040,180 | |||||||||
Panama-Buena Vista Union School District (School Construction); Series 2006, COP (INS–NATL)(a) | 5.00 | % | 09/01/30 | 1,045 | 1,053,266 | |||||||||||
Paramount Unified School District (Election of 2006); Series 2007, Unlimited Tax GO Bonds (INS–AGM)(a) | 5.25 | % | 08/01/30 | 1,600 | 1,673,920 | |||||||||||
Patterson Joint Unified School District (Election of 2008); | ||||||||||||||||
Series 2009 B, Unlimited Tax CAB GO Bonds (INS–AGM)(a)(b) | 0.00 | % | 08/01/44 | 6,250 | 697,250 | |||||||||||
Series 2009 B, Unlimited Tax CAB GO Bonds (INS–AGM)(a)(b) | 0.00 | % | 08/01/45 | 6,715 | 700,845 | |||||||||||
Series 2009 B, Unlimited Tax CAB GO Bonds (INS–AGM)(a)(b) | 0.00 | % | 08/01/46 | 7,050 | 687,023 | |||||||||||
Series 2009 B, Unlimited Tax CAB GO Bonds (INS–AGM)(a)(b) | 0.00 | % | 08/01/47 | 1,700 | 154,428 | |||||||||||
Pittsburg Unified School District (Election of 2006); Series 2009 B, Unlimited Tax GO Bonds (INS–AGM)(a) | 5.50 | % | 08/01/31 | 1,000 | 1,084,480 | |||||||||||
Pomona (City of) Public Financing Authority (Merged Redevelopment); | ||||||||||||||||
Series 2001 AD, Tax Allocation RB (INS–NATL)(a) | 5.00 | % | 02/01/15 | 2,020 | 2,022,262 | |||||||||||
Series 2001 AD, Tax Allocation RB (INS–NATL)(a) | 5.00 | % | 02/01/16 | 1,110 | 1,110,966 | |||||||||||
Series 2007 AW, Sub. RB | 5.13 | % | 02/01/33 | 1,000 | 851,380 | |||||||||||
Port Hueneme (City of) (Capital Improvement Program); Series 1992, Ref. COP (INS–NATL)(a) | 6.00 | % | 04/01/19 | 1,360 | 1,473,438 | |||||||||||
Poway Unified School District (Election of 2008–School Facilities Improvement District No. 2007-1); Series 2009 A, Unlimited Tax CAB GO Bonds(b) | 0.00 | % | 08/01/32 | 6,460 | 1,747,301 | |||||||||||
Rancho Cucamonga (City of) Redevelopment Agency (Rancho Redevelopment); Series 2001, Tax Allocation RB (INS–NATL)(a) | 5.38 | % | 09/01/25 | 3,000 | 2,943,630 | |||||||||||
Rancho Cucamonga (City of) Redevelopment Agency (Redevelopment Housing Set Aside) Series 2007 A, Tax Allocation RB (INS–NATL)(a) | 5.00 | % | 09/01/34 | 1,000 | 869,390 | |||||||||||
Rancho Mirage (City of) Joint Powers Financing Authority (Eisenhower Medical Center); Series 1997 B, COP (INS–NATL)(a) | 4.88 | % | 07/01/22 | 1,000 | 992,050 | |||||||||||
Redding (City of) Redevelopment Agency (Canby-Hilltop-Cypress Redevelopment); Series 2003 A, Tax Allocation RB (INS–NATL)(a) | 5.00 | % | 09/01/23 | 1,400 | 1,403,696 | |||||||||||
Regents of the University of California; | ||||||||||||||||
Series 2007 A, Medical Center Pooled RB (INS–BHAC)(a) | 4.50 | % | 05/15/47 | 2,555 | 2,440,868 | |||||||||||
Series 2009 E, Medical Center Pooled RB | 5.50 | % | 05/15/27 | 2,500 | 2,693,475 | |||||||||||
Series 2009 O, RB(c) | 5.75 | % | 05/15/23 | 705 | 855,785 | |||||||||||
Series 2009 O, RB(c) | 5.75 | % | 05/15/25 | 1,050 | 1,246,812 | |||||||||||
Series 2009 Q, General RB(c)(j) | 5.00 | % | 05/15/34 | 920 | 950,884 | |||||||||||
Riverside (City of); | ||||||||||||||||
Series 2008 D, Electric RB (INS–AGM)(a) | 5.00 | % | 10/01/28 | 500 | 526,305 | |||||||||||
Series 2008 B, Water RB (INS–AGM)(a) | 5.00 | % | 10/01/33 | 1,000 | 1,042,010 | |||||||||||
Series 2008 D, Electric RB (INS–AGM)(a) | 5.00 | % | 10/01/38 | 1,800 | 1,827,270 | |||||||||||
Riverside (County of) Transportation Commission; Series 2010 A, Limited Sales Tax RB | 5.00 | % | 06/01/32 | 1,500 | 1,557,495 | |||||||||||
Rohnert Park (City of) Community Development Commission (Rohnert Park Redevelopment); Series 2007 H, Housing Tax Allocation RB (INS–NATL)(a) | 4.38 | % | 08/01/30 | 3,375 | 2,806,380 | |||||||||||
Roseville Joint Union High School District (Election of 2004); | ||||||||||||||||
Series 2007 C, Unlimited Tax CAB GO Bonds (INS–AGM)(a)(b) | 0.00 | % | 08/01/24 | 2,515 | 1,208,684 | |||||||||||
Series 2007 C, Unlimited Tax CAB GO Bonds (INS–AGM)(a)(b) | 0.00 | % | 08/01/25 | 1,970 | 874,700 | |||||||||||
Series 2007 C, Unlimited Tax CAB GO Bonds (INS–AGM)(a)(b) | 0.00 | % | 08/01/26 | 1,350 | 555,296 | |||||||||||
Sacramento (County of) Sanitation Districts Financing Authority (Sacramento Regional County Sanitation District); | ||||||||||||||||
Series 2006, RB (INS–NATL)(a) | 5.00 | % | 12/01/29 | 2,000 | 2,103,740 | |||||||||||
Series 2008 A, Ref. VRD Sub. Lien RB (LOC–JPMorgan Chase Bank, N.A.)(g)(h) | 0.08 | % | 12/01/36 | 3,000 | 3,000,000 | |||||||||||
Series 2011 A, Ref. RB | 5.00 | % | 12/01/26 | 1,500 | 1,667,040 | |||||||||||
Sacramento (County of); | ||||||||||||||||
Series 2008 A, Sr. Airport System RB (INS–AGM)(a) | 5.00 | % | 07/01/32 | 1,000 | 1,019,350 | |||||||||||
Series 2008 A, Sr. Airport System RB (INS–AGM)(a) | 5.00 | % | 07/01/41 | 1,015 | 1,022,227 | |||||||||||
Series 2010, Sr. Airport System RB | 5.00 | % | 07/01/40 | 2,200 | 2,194,852 | |||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
13 Invesco California Tax-Free Income Fund
Principal | ||||||||||||||||
Interest | Maturity | Amount | ||||||||||||||
Rate | Date | (000) | Value | |||||||||||||
California–(continued) | ||||||||||||||||
San Buenaventura (City of) (Community Memorial Health System); Series 2011, RB | 7.50 | % | 12/01/41 | $ | 2,000 | $ | 1,985,460 | |||||||||
San Diego (City of) Public Facilities Financing Authority (Southcrest & Central Imperial Redevelopment); Series 2007 B, Pooled Financing Tax Allocation RB (INS–RADIAN)(a) | 5.25 | % | 10/01/27 | 2,535 | 2,382,748 | |||||||||||
San Diego (County of) (Burnham Institute for Medical Research); Series 2006, COP | 5.00 | % | 09/01/34 | 2,000 | 1,699,280 | |||||||||||
San Diego (County of) Regional Airport Authority; Series 2010 A, Sub. RB | 5.00 | % | 07/01/40 | 2,335 | 2,303,244 | |||||||||||
San Diego Community College District (Election of 2002); Series 2009, Unlimited Tax GO Bonds(c) | 5.25 | % | 08/01/33 | 1,500 | 1,611,885 | |||||||||||
San Diego Community College District (Election of 2006); Series 2011, Unlimited Tax GO Bonds | 5.00 | % | 08/01/31 | 2,500 | 2,684,900 | |||||||||||
San Francisco (City & County of) (Laguna Honda Hospital); Series 2005 I, Unlimited Tax GO Bonds (INS–AGM)(a) | 5.00 | % | 06/15/30 | 8,000 | 8,184,240 | |||||||||||
San Francisco (City & County of) Airports Commission; | ||||||||||||||||
Second Series 2011 G, International Airport RB | 5.25 | % | 05/01/28 | 2,000 | 2,152,960 | |||||||||||
Series 2009 E, International Airport RB | 6.00 | % | 05/01/39 | 1,000 | 1,097,300 | |||||||||||
San Francisco (City & County of) Public Utilities Commission (Water System Improvement Program); Subseries 2011 A, RB | 5.00 | % | 11/01/36 | 4,000 | 4,216,600 | |||||||||||
San Francisco (City & County of) Redevelopment Financing Authority (Mission Bay North Redevelopment); Series 2011 C, Tax Allocation RB | 6.75 | % | 08/01/41 | 1,000 | 1,060,230 | |||||||||||
San Francisco (City & County of) Redevelopment Financing Authority (Mission Bay South Redevelopment); Series 2011 D, Tax Allocation RB | 7.00 | % | 08/01/33 | 500 | 526,355 | |||||||||||
San Francisco (City &County of) Airports Commission; Series 2011 C, Ref. Second Series RB | 5.00 | % | 05/01/23 | 5,000 | 5,247,500 | |||||||||||
San Jose Evergreen Community College District (Election of 2004); Series 2008 B, Unlimited Tax GO Bonds (INS–AGM)(a)(b) | 0.00 | % | 09/01/31 | 3,110 | 915,304 | |||||||||||
San Leandro (City of) (Joint Project Area Financing); Series 2001, COP (INS–NATL)(a) | 5.10 | % | 12/01/26 | 1,000 | 1,005,990 | |||||||||||
San Luis Obispo (County of) Financing Authority (Lopez Dam Improvement); Series 2011 A, Ref. RB (INS–AGM)(a) | 5.00 | % | 08/01/30 | 1,500 | 1,547,895 | |||||||||||
Santa Clara (County of) Financing Authority (Multiple Facilities); Series 2008 L, Ref. Lease RB | 5.25 | % | 05/15/36 | 3,000 | 3,094,620 | |||||||||||
Santa Monica Community College District (Election of 2002); | ||||||||||||||||
Series 2007 A, Unlimited Tax CAB GO Bonds (INS–NATL)(a)(b) | 0.00 | % | 08/01/23 | 1,385 | 764,783 | |||||||||||
Series 2007 A, Unlimited Tax CAB GO Bonds (INS–NATL)(a)(b) | 0.00 | % | 08/01/24 | 1,385 | 710,851 | |||||||||||
Series 2007 A, Unlimited Tax CAB GO Bonds (INS–NATL)(a)(b) | 0.00 | % | 08/01/25 | 1,380 | 660,620 | |||||||||||
School Facilities Financing Authority (Grant Joint Union High School District); | ||||||||||||||||
Series 2008 A, CAB GO RB (INS–AGM)(a)(b) | 0.00 | % | 08/01/31 | 2,040 | 588,968 | |||||||||||
Series 2008 A, CAB GO RB (INS–AGM)(a)(b) | 0.00 | % | 08/01/32 | 6,395 | 1,722,365 | |||||||||||
Shafter (City of) Community Development Agency (Shafter Community Development Project Area No. 1); Series 2006, Ref. Tax Allocation RB (INS–AGM)(a) | 5.00 | % | 11/01/36 | 1,460 | 1,455,751 | |||||||||||
Sierra View Local Health Care District; Series 2007, RB | 5.25 | % | 07/01/32 | 500 | 483,370 | |||||||||||
Simi Valley Unified School District (Election of 2004); | ||||||||||||||||
Series 2007 C, Unlimited Tax CAB GO Bonds (INS–AGM)(a)(b) | 0.00 | % | 08/01/28 | 3,480 | 1,252,069 | |||||||||||
Series 2007 C, Unlimited Tax CAB GO Bonds (INS–AGM)(a)(b) | 0.00 | % | 08/01/30 | 2,765 | 851,205 | |||||||||||
South Gate (City of) Public Financing Authority (South Gate Redevelopment Project No. 1); Series 2002, Tax Allocation RB (INS–SGI)(a) | 5.75 | % | 09/01/22 | 1,000 | 1,007,100 | |||||||||||
Southern California Logistics Airport Authority (Southern California Logistics Airport); | ||||||||||||||||
Series 2007, Tax Allocation RB | 5.38 | % | 12/01/22 | 2,365 | 1,696,580 | |||||||||||
Series 2007, Tax Allocation RB | 6.10 | % | 12/01/37 | 1,250 | 743,238 | |||||||||||
Southern California Public Power Authority (Mead-Adelanto); Series 1994 A, RB (INS–AMBAC)(a)(k) | 8.75 | % | 07/01/15 | 3,500 | 4,302,970 | |||||||||||
Southern California Public Power Authority (Mead-Phoenix); Series 1994 A, RB (INS–AMBAC)(a)(k) | 8.75 | % | 07/01/15 | 2,500 | 3,074,950 | |||||||||||
Southern California Public Power Authority (Milford Wind Corridor Phase II); | ||||||||||||||||
Series 2011-1, RB | 5.25 | % | 07/01/29 | 2,100 | 2,296,371 | |||||||||||
Series 2011-1, RB | 5.25 | % | 07/01/31 | 2,100 | 2,266,341 | |||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
14 Invesco California Tax-Free Income Fund
Principal | ||||||||||||||||
Interest | Maturity | Amount | ||||||||||||||
Rate | Date | (000) | Value | |||||||||||||
California–(continued) | ||||||||||||||||
Southern California Tobacco Securitization Authority (San Diego County Tobacco Asset Securitization Corp.); | ||||||||||||||||
Series 2006 A-1, Sr. Tobacco Settlement Asset-Backed RB | 5.00 | % | 06/01/37 | $ | 3,000 | $ | 2,033,550 | |||||||||
Series 2006 A-1, Sr. Tobacco Settlement Asset-Backed RB | 5.13 | % | 06/01/46 | 2,000 | 1,272,300 | |||||||||||
Temecula (City of) Redevelopment Agency (Temecula Redevelopment Project No. 1); Series 2002, Tax Allocation RB (INS–NATL)(a) | 5.13 | % | 08/01/27 | 2,150 | 2,013,131 | |||||||||||
Torrance (City of) (Torrance Memorial Medical Center); Series 2010 A, RB | 5.00 | % | 09/01/40 | 1,000 | 947,320 | |||||||||||
Turlock (City of) Public Financing Authority; Series 2006, Tax Allocation RB (INS–AGM)(a) | 5.00 | % | 09/01/36 | 2,500 | 2,201,850 | |||||||||||
Tustin (City of) Public Financing Authority; Series 2011 A, Water RB | 5.00 | % | 04/01/41 | 1,000 | 1,031,850 | |||||||||||
Tustin Unified School District (Election of 2002–School Facilities Improvement District No. 2002-1); Series 2008 C, Unlimited Tax GO Bonds (INS–AGM)(a) | 5.00 | % | 06/01/28 | 1,750 | 1,853,057 | |||||||||||
Twin Rivers Unified School District (School Facility Bridge Funding Program); Series 2007, COP (INS–AGM)(a)(e)(l) | 3.50 | % | 05/31/13 | 1,000 | 1,000,810 | |||||||||||
Twin Rivers Unified School District; Series 2009, Unlimited Tax CAB GO BAN(b) | 0.00 | % | 04/01/14 | 1,700 | 1,597,575 | |||||||||||
Val Verde Unified School District; Series 2009 A, Ref. COP (INS–AGC)(a) | 5.13 | % | 03/01/36 | 1,475 | 1,486,874 | |||||||||||
Vernon (City of); Series 2009 A, Electric System RB | 5.13 | % | 08/01/21 | 2,000 | 2,108,100 | |||||||||||
Walnut Energy Center Authority; Series 2010 A, Ref. RB | 5.00 | % | 01/01/35 | 3,000 | 3,015,030 | |||||||||||
West Contra Costa Unified School District; Series 2005, Unlimited Tax CAB GO Bonds (INS–NATL)(a)(b) | 0.00 | % | 08/01/25 | 2,500 | 1,042,900 | |||||||||||
Western Riverside County Regional Wastewater Authority (Eastern Municipal Water District Improvement Districts General Obligation Bond Financing); Series 2009, Ref. RB (INS–AGC)(a) | 5.63 | % | 09/01/39 | 1,000 | 1,055,970 | |||||||||||
Yosemite Community College District (Election of 2004); | ||||||||||||||||
Series 2008 C, Unlimited Tax CAB GO Bonds (INS–AGM)(a)(b) | 0.00 | % | 08/01/24 | 4,685 | 2,266,041 | |||||||||||
Series 2008 C, Unlimited Tax CAB GO Bonds (INS–AGM)(a)(b) | 0.00 | % | 08/01/25 | 3,000 | 1,344,330 | |||||||||||
420,409,231 | ||||||||||||||||
Guam–0.41% | ||||||||||||||||
Guam (Territory of) (Section 30); | ||||||||||||||||
Series 2009 A, Limited Obligation RB | 5.38 | % | 12/01/24 | 1,000 | 1,021,150 | |||||||||||
Series 2009 A, Limited Obligation RB | 5.63 | % | 12/01/29 | 660 | 670,818 | |||||||||||
1,691,968 | ||||||||||||||||
Puerto Rico–2.58% | ||||||||||||||||
Puerto Rico Electric Power Authority; | ||||||||||||||||
Series 2007 TT, RB | 5.00 | % | 07/01/37 | 2,000 | 1,882,480 | |||||||||||
Series 2010 AAA, RB | 5.25 | % | 07/01/29 | 2,000 | 2,018,860 | |||||||||||
Puerto Rico Public Buildings Authority; | ||||||||||||||||
Series 2002 D, Gtd. CAB RB(b)(d)(e) | 0.00 | % | 07/01/17 | 3,680 | 4,179,928 | |||||||||||
Series 2002 D, Gtd. CAB RB (INS–AMBAC)(a)(b) | 0.00 | % | 07/01/31 | 1,320 | 1,187,419 | |||||||||||
Puerto Rico Sales Tax Financing Corp.; First Sub. Series 2010 C, RB | 5.00 | % | 08/01/35 | 1,500 | 1,466,175 | |||||||||||
10,734,862 | ||||||||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
15 Invesco California Tax-Free Income Fund
Principal | ||||||||||||||||
Interest | Maturity | Amount | ||||||||||||||
Rate | Date | (000) | Value | |||||||||||||
Puerto Rico–(continued) | ||||||||||||||||
Virgin Islands–0.81% | ||||||||||||||||
Virgin Islands Public Finance Authority (Virgin Islands Matching Fund Loan Note–Diageo); Series 2009 A, Sub. RB | 6.63 | % | 10/01/29 | $ | 1,675 | $ | 1,768,264 | |||||||||
Virgin Islands Public Finance Authority (Virgin Islands Matching Fund Loan Note); Series 2010 A, Sr. Lien Working Capital RB | 5.00 | % | 10/01/25 | 1,600 | 1,603,984 | |||||||||||
3,372,248 | ||||||||||||||||
TOTAL INVESTMENTS(m)–105.02% (Cost $426,145,121) | 436,208,309 | |||||||||||||||
FLOATING RATE NOTE OBLIGATIONS–(4.96)% | ||||||||||||||||
Notes with interest rates ranging from 0.18% to 0.27% at 08/31/11 and contractual maturities of collateral ranging from 05/15/23 to 10/01/39 (See Note 1J)(n) | (20,620,000 | ) | ||||||||||||||
OTHER ASSETS LESS LIABILITIES–(0.06)% | (231,282 | ) | ||||||||||||||
NET ASSETS–100.00% | $ | 415,357,027 | ||||||||||||||
Investment Abbreviations:
AGC | – Assured Guaranty Corp. | |
AGM | – Assured Guaranty Municipal Corp. | |
AMBAC | – American Municipal Bond Assurance Corp. | |
BAN | – Bond Anticipation Notes | |
BHAC | – Berkshire Hathaway Assurance Corp. | |
CAB | – Capital Appreciation Bonds | |
COP | – Certificates of Participation | |
Conv. | – Convertible | |
FHA | – Federal Housing Administration | |
FGIC | – Financial Guaranty Insurance Co. | |
GO | – General Obligation | |
Gtd. | – Guaranteed | |
INS | – Insurer | |
LOC | – Letter of Credit | |
NATL | – National Public Finance Guarantee Corp. | |
RADIAN | – Radian Asset Assurance, Inc. | |
RB | – Revenue Bonds | |
Ref. | – Refunding | |
SGI | – Syncora Guarantee, Inc. | |
Sub. | – Subordinated | |
Sr. | – Senior | |
VRD | – Variable Rate Demand |
Notes to Schedule of Investments:
(a) | Principal and/or interest payments are secured by the bond insurance company listed. | |
(b) | Zero coupon bond issued at a discount. | |
(c) | Underlying security related to Dealer Trusts entered into by the Fund. See Note 1J. | |
(d) | Advance refunded; secured by an escrow fund of U.S. Government obligations or other highly rated collateral. | |
(e) | Security has an irrevocable call by the issuer or mandatory put by the holder. Maturity date reflects such call or put. | |
(f) | Security subject to the alternative minimum tax. | |
(g) | Demand security payable upon demand by the Fund at specified time intervals no greater than thirteen months. Interest rate is redetermined periodically. Rate shown is the rate in effect on August 31, 2011. | |
(h) | Principal and interest payments are fully enhanced by a letter of credit from the bank listed or a predecessor bank, branch or subsidiary. | |
(i) | Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended. The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The value of this security at August 31, 2011 represented 0.23% of the Fund’s Net Assets. | |
(j) | Security is subject to a shortfall agreement which may require the Fund to pay amounts to a counterparty in the event of a significant decline in the market value of the security underlying the Dealer Trusts. In case of a shortfall, the maximum potential amount of payments the Fund could ultimately be required to make under the agreement is $615,000. However, such shortfall payment would be reduced by the proceeds from the sale of the security underlying the Dealer Trusts. | |
(k) | Current coupon rate for inverse floating rate municipal obligations. This rate resets periodically as the rate on the related security changes. Positions in inverse floating rate municipal obligations have a total vale of $7,377,920 which represents 1.78% of Net Assets. | |
(l) | Interest or dividend rate is redetermined periodically. Rate shown is the rate in effect on August 31, 2011. | |
(m) | This table provides a listing of those entities that have either issued, guaranteed, backed or otherwise enhanced the credit quality of more than 5% of the securities held in the portfolio. In instances where the entity has guaranteed, backed or otherwise enhanced the credit quality of a security, it is not primarily responsible for the issuer’s obligations but may be called upon to satisfy the issuer’s obligations. |
Entities | Percentage | |||
Assured Guaranty Municipal Corp. | 18.4 | % | ||
National Public Finance Guarantee Corp. | 17.2 | |||
American Municipal Bond Assurance Corp. | 11.7 | |||
(n) | Floating rate note obligations related to securities held. The interest rates shown reflect the rates in effect at August 31, 2011. At August 31, 2011, the Fund’s investments with a value of $34,087,989 are held by Dealer Trusts and serve as collateral for the $20,620,000 in the floating rate note obligations outstanding at that date. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
16 Invesco California Tax-Free Income Fund
Statement of Assets and Liabilities
August 31, 2011
Assets: | ||||
Investments, at value (Cost $426,145,121) | $ | 436,208,309 | ||
Receivable for: | ||||
Investments sold | 3,202,750 | |||
Fund shares sold | 53,085 | |||
Interest | 5,440,878 | |||
Investment for trustee deferred compensation and retirement plans | 4,906 | |||
Other assets | 8,750 | |||
Total assets | 444,918,678 | |||
Liabilities: | ||||
Floating rate note obligations | 20,620,000 | |||
Payable for: | ||||
Investments purchased | 6,696,905 | |||
Fund shares reacquired | 301,684 | |||
Amount due custodian | 834,638 | |||
Dividends | 730,051 | |||
Accrued fees to affiliates | 176,004 | |||
Accrued other operating expenses | 131,358 | |||
Trustee deferred compensation and retirement plans | 71,011 | |||
Total liabilities | 29,561,651 | |||
Net assets applicable to shares outstanding | $ | 415,357,027 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 433,842,618 | ||
Undistributed net investment income | 1,267,924 | |||
Undistributed net realized gain (loss) | (29,816,703 | ) | ||
Unrealized appreciation | 10,063,188 | |||
$ | 415,357,027 | |||
Net assets: | ||||
Class A | $ | 148,884,257 | ||
Class B | $ | 220,477,794 | ||
Class C | $ | 21,799,595 | ||
Class Y | $ | 24,195,381 | ||
Shares outstanding, $0.01 par value per share, with an unlimited number of shares authorized: | ||||
Class A | 13,128,381 | |||
Class B | 19,303,849 | |||
Class C | 1,909,894 | |||
Class Y | 2,125,377 | |||
Class A: | ||||
Net asset value per share | $ | 11.34 | ||
Maximum offering price per share | ||||
(Net asset value of $11.34 divided by 95.25%) | $ | 11.91 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 11.42 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 11.41 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 11.38 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
17 Invesco California Tax-Free Income Fund
Statement of Operations
For the year ended August 31, 2011
Investment income: | ||||
Interest | $ | 17,763,548 | ||
Expenses: | ||||
Advisory fees | 1,502,257 | |||
Administrative services fees | 103,515 | |||
Custodian fees | 19,230 | |||
Distribution fees: | ||||
Class A | 132,624 | |||
Class B | 553,785 | |||
Class C | 125,765 | |||
Interest, facilities and maintenance fees | 148,761 | |||
Transfer agent fees | 130,443 | |||
Trustees’ and officers’ fees and benefits | 25,407 | |||
Other | 143,781 | |||
Total expenses | 2,885,568 | |||
Net investment income | 14,877,980 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain (loss) from investment securities | (6,917,277 | ) | ||
Change in net unrealized appreciation (depreciation) of investment securities | (2,277,744 | ) | ||
Net realized and unrealized gain (loss) | (9,195,021 | ) | ||
Net increase in net assets resulting from operations | $ | 5,682,959 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
18 Invesco California Tax-Free Income Fund
Statement of Changes in Net Assets
For the year ended August 31, 2011, the eight months ended August 31, 2010 and the year ended December 31, 2009
Eight months | ||||||||||||
Year ended | ended | Year ended | ||||||||||
August 31, | August 31, | December 31, | ||||||||||
2011 | 2010 | 2009 | ||||||||||
Operations: | ||||||||||||
Net investment income | $ | 14,877,980 | $ | 10,514,315 | $ | 15,794,946 | ||||||
Net realized gain (loss) | (6,917,277 | ) | (2,623,315 | ) | (2,671,016 | ) | ||||||
Change in net unrealized appreciation (depreciation) | (2,277,744 | ) | 17,229,887 | 33,565,363 | ||||||||
Net increase in net assets resulting from operations | 5,682,959 | 25,120,887 | 46,689,293 | |||||||||
Distributions to shareholders from net investment income: | ||||||||||||
Class A | (2,485,113 | ) | (1,378,626 | ) | (1,074,299 | ) | ||||||
Class B | (10,580,607 | ) | (7,178,057 | ) | (12,491,580 | ) | ||||||
Class C | (701,576 | ) | (463,014 | ) | (718,214 | ) | ||||||
Class Y | (1,184,834 | ) | (851,291 | ) | (1,394,249 | ) | ||||||
Total distributions from net investment income | (14,952,130 | ) | (9,870,988 | ) | (15,678,342 | ) | ||||||
Share transactions–net: | ||||||||||||
Class A | 121,086,985 | (1,379,537 | ) | (529,261 | ) | |||||||
Class B | (24,979,384 | ) | (21,543,146 | ) | (25,717,984 | ) | ||||||
Class C | 4,897,332 | (520,499 | ) | (1,452,113 | ) | |||||||
Class Y | (1,665,056 | ) | (1,800,697 | ) | (3,693,538 | ) | ||||||
Net increase (decrease) in net assets resulting from share transactions | 99,339,877 | (25,243,879 | ) | (31,392,896 | ) | |||||||
Net increase (decrease) in net assets | 90,070,706 | (9,993,980 | ) | (381,945 | ) | |||||||
Net assets: | ||||||||||||
Beginning of year | 325,286,321 | 335,280,301 | 335,662,246 | |||||||||
End of year (includes undistributed net investment income of $1,267,924, $1,183,458 and $364,824, respectively) | $ | 415,357,027 | $ | 325,286,321 | $ | 335,280,301 | ||||||
Notes to Financial Statements
August 31, 2011
NOTE 1—Significant Accounting Policies
Invesco California Tax-Free Income Fund (the “Fund”), is a series portfolio of AIM Counselor Series Trust (Invesco Counselor Series Trust), formerly AIM Counselor Series Trust, (the “Trust”). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end series management investment company consisting of twelve separate portfolios, each authorized to issue an unlimited number of shares of beneficial interest. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class.
The Fund’s investment objective is to provide as high a level of current income exempt from federal and California income tax, consistent with the preservation of capital.
The Fund currently consists of four different classes of shares: Class A, Class B, Class C and Class Y. Class A shares are sold with a front-end sales charge unless certain waiver criteria are met and under certain circumstances load waived shares may be subject to contingent deferred sales charges (“CDSC”). Class B shares and Class C shares are sold with a CDSC. Class Y shares are sold at net asset value. Generally, Class B shares will automatically convert to Class A shares on or about the month-end which is at least eight years after the date of purchase.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. | |
Securities are fair valued using an evaluated quote provided by an independent pricing service approved by the Board of Trustees. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices and may reflect appropriate factors such as institution-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, individual trading characteristics and other market data. Short-term obligations, including commercial paper, having 60 days or less to maturity are recorded at amortized cost which approximates value. Securities with |
19 Invesco California Tax-Free Income Fund
a demand feature exercisable within one to seven days are valued at par. Debt securities are subject to interest rate and credit risks. In addition, all debt securities involve some risk of default with respect to interest and principal payments. | ||
Securities for which market quotations either are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. Some of the factors which may be considered in determining fair value are fundamental analytical data relating to the investment; the nature and duration of any restrictions on transferability or disposition; trading in similar securities by the same issuer or comparable companies; relevant political, economic or issuer specific news; and other relevant factors under the circumstances. | ||
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments. | ||
B. | Securities Transactions and Investment Income — Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income, adjusted for amortization of premiums and accretion of discounts on investments, is recorded on the accrual basis from settlement date. | |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held. | ||
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund’s net asset value and, accordingly, they reduce the Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser. | ||
The Fund allocates realized capital gains and losses to a class based on the relative net assets of each class. The Fund allocates income to a class based on the relative value of the settled shares of each class. | ||
C. | Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. | |
D. | Distributions — Distributions from income are declared daily and paid monthly. Distributions from net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to treat a portion of the proceeds from redemptions as distributions for federal income tax purposes. | |
E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable and tax-exempt earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. | |
In addition, the Fund intends to invest in such municipal securities to allow it to qualify to pay shareholders “exempt-interest dividends”, as defined in the Internal Revenue Code. | ||
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period. | ||
F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. | |
G. | Interest, Facilities and Maintenance Fees — Interest, Facilities and Maintenance Fees include interest and related borrowing costs such as commitment fees and other expenses associated with lines of credit and interest and administrative expenses related to establishing and maintaining floating rate obligations, if any. | |
H. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. | |
I. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
20 Invesco California Tax-Free Income Fund
J. | Floating Rate Obligations Related to Securities Held — The Fund invests in inverse floating rate securities, such as Residual Interest Bonds (“RIBs”) or Tender Option Bonds (“TOBs”) for investment purposes and to enhance the yield of the Fund. Inverse floating rate investments 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. Such transactions may be purchased in the secondary market without first owning the underlying bond or by the sale of fixed rate bonds by the Fund to special purpose trusts established by a broker dealer (“Dealer Trusts”) in exchange for cash and residual interests in the Dealer Trusts’ assets and cash flows, which are in the form of inverse floating rate securities. The Dealer Trusts finance the purchases of the fixed rate bonds by issuing floating rate notes to third parties and allowing the Fund to retain residual interest in the bonds. The floating rate notes issued by the Dealer Trusts have interest rates that reset weekly and the floating rate note holders have the option to tender their notes to the Dealer Trusts for redemption at par at each reset date. The residual interests held by the Fund (inverse floating rate investments) include the right of the Fund (1) to cause the holders of the floating rate notes to tender their notes at par at the next interest rate reset date, and (2) to transfer the municipal bond from the Dealer Trusts to the Fund, thereby collapsing the Dealer Trusts. | |
TOBs are presently classified as private placement securities. Private placement securities are subject to restrictions on resale because they have not been registered under the Securities Act of 1933, as amended or are otherwise not readily marketable. As a result of the absence of a public trading market for these securities, they may be less liquid than publicly traded securities. Although these securities may be resold in privately negotiated transactions, the prices realized from these sales could be less than those originally paid by the Fund or less than what may be considered the fair value of such securities. | ||
The Fund accounts for the transfer of bonds to the Dealer Trusts as secured borrowings, with the securities transferred remaining in the Fund’s investment assets, and the related floating rate notes reflected as Fund liabilities under the caption Floating rate note obligations on the Statement of Assets and Liabilities. The Fund records the interest income from the fixed rate bonds under the caption Interest and records the expenses related to floating rate obligations and any administrative expenses of the Dealer Trusts as a component of Interest, facilities and maintenance fees on the Statement of Operations. | ||
The Fund generally invests in inverse floating rate securities that include embedded leverage, thus exposing the Fund to greater risks and increased costs. The primary risks associated with inverse floating rate securities are varying degrees of liquidity and the changes in the value of such securities in response to changes in market rates of interest to a greater extent than the value of an equal principal amount of a fixed rate security having similar credit quality, redemption provisions and maturity which may cause the Fund’s net asset value to be more volatile than if it had not invested in inverse floating rate securities. In certain instances, the short-term floating rate interests created by the 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 RIBs or TOBs created by the contribution of long-term fixed income bonds by the Fund, the Fund will 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. | ||
K. | Other Risks — The value of, payment of interest on, repayment of principal for and the ability to sell a municipal security may be affected by constitutional amendments, legislative enactments, executive orders, administrative regulations, voter initiatives and the economics of the regions in which the issuers are located. | |
Since, many municipal securities are issued to finance similar projects, especially those relating to education, health care, transportation and utilities, conditions in those sectors can affect the overall municipal securities market and a Fund’s investments in municipal securities. | ||
There is some risk that a portion or all of the interest received from certain tax-free municipal securities could become taxable as a result of determinations by the Internal Revenue Service. |
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisors, Inc. (the “Advisor” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Advisor based on the annual rate of the Fund’s average daily net assets.
Average Net Assets | Rate | |||
First $500 million | 0 | .47% | ||
Next $250 million | 0 | .445% | ||
Next $250 million | 0 | .42% | ||
Next $250 million | 0 | .395% | ||
Over $1.25 billion | 0 | .37% | ||
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide discretionary investment management services to the Fund based on the percentage of assets allocated to such Sub-Adviser(s).
The Adviser has contractually agreed, through June 30, 2012, to waive advisory fees and/or reimburse expenses to the extent necessary to limit total annual fund operating expenses and/or reimbursement (excluding certain items discussed below) of Class A, Class B, Class C and Class Y shares to 0.85%, 1.35%, 1.35% and 0.60% of average daily net assets, respectively. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the net annual fund operating expenses and/or reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items; and (5) expenses that the Fund has incurred but did not
21 Invesco California Tax-Free Income Fund
actually pay because of an expense offset arrangement. Unless the Board of the Trustees and Invesco mutually agree to amend or continue the fee waiver agreement, it will terminate on June 30, 2012. The Adviser did not waive fees and/or reimburse expenses during the period under this expense limitation.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco for certain administrative costs incurred in providing accounting services to the Fund. For the year ended August 31, 2011, expenses incurred under the agreement are shown in the Statement of Operations as administrative services fees.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (“IIS”) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. IIS may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. All fees payable by IIS to intermediaries that provide omnibus account services or sub-accounting are charged back to the Fund, subject to certain limitations approved by the Trust’s Board of Trustees. For the year ended August 31, 2011, expenses incurred under the agreement are shown in the Statement of Operations as transfer agent fees.
Shares of the Fund are distributed by Invesco Distributors, Inc. (“IDI”), an affiliate of the Adviser. The Fund has adopted a Plan of Distribution (the “Plan”) pursuant to Rule 12b-1 under the 1940 Act. The Plan provides that the Fund will reimburse IDI for distribution related expenses that IDI incurs up to a maximum of the following annual rates; (1) Class A — up to 0.25% of the average daily net assets of Class A shares; (2) Class B — up to 1.00% of the average daily net assets of Class B shares and (3) Class C — up to 1.00% of the average daily net assets of Class C shares.
In the case of Class B shares, provided that the Plan continues in effect, any cumulative expenses incurred by IDI, but not yet reimbursed to IDI may be recovered through the payment of future distribution fees from the Fund pursuant to the Plan and contingent deferred sales charges paid by investors upon redemption of Class B shares.
For the year ended August 31, 2011, expenses incurred under these agreements are shown in the Statement of Operations as distribution fees.
Front-end sales commissions and CDSC (collectively the “sales charges”) are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the year ended August 31, 2011, IDI advised the Fund that IDI retained $7,347 in front-end sales commissions from the sale of Class A shares and $162, $25,796 and $5,537 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of Invesco, IIS and/or IDI.
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3) generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
Level 1 — | Prices are determined using quoted prices in an active market for identical assets. | |
Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. | |
Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of August 31, 2011. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
During the year ended August 31, 2011, there were no significant transfers between investment levels.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Municipal Obligations | $ | — | $ | 436,208,309 | $ | — | $ | 436,208,309 | ||||||||
NOTE 4—Trustees’ and Officers’ Fees and Benefits
“Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and “Trustees’ and Officers’ Fees and Benefits” also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. “Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
During the year ended August 31, 2011, the Fund paid legal fees of $2,286 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust.
22 Invesco California Tax-Free Income Fund
NOTE 5—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with The State Street Bank and Trust Company (“SSB”), the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
Inverse floating rate obligations resulting from the transfer of bonds to Dealer Trusts are accounted for as secured borrowings. The average floating rate notes outstanding and average annual interest and fees related to inverse floating rate note obligations during the year ended August 31, 2011 were $14,708,077 and 1.01%, respectively.
NOTE 6—Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Year Ended August 31, 2011, the Eight Months Ended August 31, 2010 and the Year Ended December 31, 2009:
August 31, | August 31, | December 31, | ||||||||||
2011 | 2010 | 2009 | ||||||||||
Tax-exempt income | $ | 14,952,130 | $ | 9,724,416 | $ | 15,678,323 | ||||||
Ordinary income | — | 146,572 | 19 | |||||||||
Total distributions | $ | 14,952,130 | $ | 9,870,988 | $ | 15,678,342 | ||||||
Tax Components of Net Assets at Period-End:
2011 | ||||
Undistributed ordinary income | $ | 848,264 | ||
Net unrealized appreciation — investments | 10,562,787 | |||
Temporary book/tax differences | (71,001 | ) | ||
Post-October deferrals | (6,575,533 | ) | ||
Capital loss carryforward | (23,250,108 | ) | ||
Shares of beneficial interest | 433,842,618 | |||
Total net assets | $ | 415,357,027 | ||
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund’s net unrealized appreciation difference is attributable primarily to market discount and tender option bonds.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund’s temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund has a capital loss carryforward as of August 31, 2011 which expires as follows:
Capital Loss | ||||
Expiration | Carryforward* | |||
August 31, 2015 | $ | 803,875 | ||
August 31, 2016 | 6,835,050 | |||
August 31, 2017 | 7,025,583 | |||
August 31, 2018 | 6,678,872 | |||
August 31, 2019 | 1,906,728 | |||
Total capital loss carryforward | $ | 23,250,108 | ||
* | Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. To the extent that unrealized gains as of June 6, 2011, the date of reorganization of Invesco Van Kampen California Insured Tax Free Fund into the Fund and realized on securities held in each fund at such date of reorganization, the capital loss carryforward may be further limited for up to five years from the date of the reorganization. |
23 Invesco California Tax-Free Income Fund
NOTE 7—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended August 31, 2011 was $75,023,528 and $108,639,532, respectively. Cost of investments on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed Federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investment Securities on a Tax Basis | ||||
Aggregate unrealized appreciation of investment securities | $ | 22,727,182 | ||
Aggregate unrealized (depreciation) of investment securities | (12,164,395 | ) | ||
Net unrealized appreciation of investment securities | $ | 10,562,787 | ||
Cost of investments for tax purposes is $425,645,522. |
NOTE 8—Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment for the reclassification of bond market discount, on August 31, 2011, undistributed net investment income was decreased by $34,562 and undistributed net realized gain (loss) was increased by $34,562. Further, primarily as a result of differing book/tax treatment of capital loss carryforward acquired in the reorganization of Invesco Van Kampen California Insured Tax Free Fund into the Fund, undistributed net investment income was increased by $193,178, undistributed net realized gain (loss) was decreased by $14,827,568 and shares of beneficial interest increased by $14,634,390. These reclassifications had no effect on the net assets of the Fund.
NOTE 9—Share Information
Summary of Share Activity | ||||||||||||||||||||||||
Year ended | Eight months ended | Year ended | ||||||||||||||||||||||
August 31, 2011(a) | August 31, 2010 | December 31, 2009 | ||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||
Sold: | ||||||||||||||||||||||||
Class A | 432,719 | $ | 4,969,152 | 16,592,673 | $ | 188,126,111 | 240,802 | $ | 2,646,138 | |||||||||||||||
Class B | 59,636 | 658,621 | 16,273,049 | 187,452,860 | 476,617 | 5,223,297 | ||||||||||||||||||
Class C | 165,169 | 1,907,834 | 90,112 | 1,035,827 | 78,373 | 864,886 | ||||||||||||||||||
Class Y | 24,439 | 277,898 | 9,681 | 114,432 | 6,220 | 70,350 | ||||||||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||||||||||
Class A | 128,377 | 1,432,340 | 107,362 | 1,226,512 | 94,573 | 1,032,819 | ||||||||||||||||||
Class B | 484,791 | 5,409,350 | 502,966 | 5,768,076 | 1,066,514 | 11,724,571 | ||||||||||||||||||
Class C | 34,194 | 381,591 | 34,647 | 397,150 | 63,528 | 697,878 | ||||||||||||||||||
Class Y | 52,335 | 582,229 | 61,690 | 705,418 | 120,543 | 1,320,593 | ||||||||||||||||||
Issued in connection with acquisitions:(b) | ||||||||||||||||||||||||
Class A | 11,299,147 | 125,271,435 | — | — | — | — | ||||||||||||||||||
Class B | 325,145 | 3,632,906 | — | — | — | — | ||||||||||||||||||
Class C | 725,528 | 8,098,467 | — | — | — | — | ||||||||||||||||||
Class Y | 112,963 | 1,257,024 | — | — | — | — | ||||||||||||||||||
Reacquired: | ||||||||||||||||||||||||
Class A | (946,367 | ) | (10,585,942 | ) | (16,660,323 | ) | (190,732,160 | ) | (389,291 | ) | (4,208,218 | ) | ||||||||||||
Class B | (3,121,803 | ) | (34,680,261 | ) | (18,818,269 | ) | (214,764,082 | ) | (3,903,492 | ) | (42,665,852 | ) | ||||||||||||
Class C | (498,429 | ) | (5,490,560 | ) | (171,039 | ) | (1,953,476 | ) | (274,857 | ) | (3,014,877 | ) | ||||||||||||
Class Y | (341,225 | ) | (3,782,207 | ) | (229,966 | ) | (2,620,547 | ) | (463,743 | ) | (5,084,481 | ) | ||||||||||||
Net increase (decrease) in share activity | 8,936,619 | $ | 99,339,877 | (2,207,417 | ) | $ | (25,243,879 | ) | (2,884,213 | ) | $ | (31,392,896 | ) | |||||||||||
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 64% of the outstanding shares of the Fund. IDI has an agreement with these entities to sell Fund shares. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. | |
(b) | As of the opening of business on June 6, 2011, the Fund acquired all the net asset of Invesco Van Kampen California Insured Tax Free Fund pursuant to a plan of reorganization approved by the Trustees of the Fund on November 10, 2010 and by the shareholders of Invesco Van Kampen California Insured Tax Free Fund on April 14, 2011. The acquisition was accomplished by a tax-free exchange of 12,462,783 shares of the Fund for 8,677,034 shares outstanding of Invesco Van Kampen California Insured Tax Free Fund as of the close of business on June 3, 2011. Each class of Invesco Van Kampen California Insured Tax Free Fund was exchanged for the like class of shares of the Fund based on the relative net asset value of Invesco Van Kampen California Insured Tax Free Fund to the net asset value of the Fund on the close of business, June 3, 2011. Invesco Van Kampen California Insured Tax Free Fund’s net assets at that date of $138,259,832 including $(2,892,055) of unrealized appreciation (depreciation), was combined with those of the Fund. The net assets of the Fund immediately before the acquisition were $275,128,915. The net assets of the Fund immediately after the acquisition were $413,388,748. |
24 Invesco California Tax-Free Income Fund
NOTE 10—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Supplemental | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratio of | ratio of | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
expenses | Ratio of | expenses to | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
to average | expenses | average net | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net gains | net assets | to average net | assets | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(losses) | with fee | assets without | (excluding | Ratio of net | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset | on securities | Dividends | Distributions | waivers | fee waivers | interest, | investment | |||||||||||||||||||||||||||||||||||||||||||||||||||||
value, | Net | (both | Total from | from net | from net | Net asset | Net assets, | and/or | and/or | facilities and | income | |||||||||||||||||||||||||||||||||||||||||||||||||
beginning | investment | realized and | investment | investment | realized | Total | value, end | Total | end of period | expenses | expenses | maintenance | to average | Portfolio | ||||||||||||||||||||||||||||||||||||||||||||||
of period | income | unrealized) | operations | income | gains | Distributions | of period | Return(a) | (000s omitted) | absorbed | absorbed | fees)(b) | net assets | turnover(c) | ||||||||||||||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | $ | 11.75 | $ | 0.52 | (d) | $ | (0.41 | ) | $ | 0.11 | $ | (0.52 | ) | $ | — | $ | (0.52 | ) | $ | 11.34 | 1.13 | % | $ | 148,884 | 0.90 | %(e) | 0.90 | %(e) | 0.85 | %(e) | 4.66 | %(e) | 25 | % | ||||||||||||||||||||||||||
Eight months ended 08/31/10 | 11.21 | 0.37 | 0.52 | 0.89 | (0.35 | ) | — | (0.35 | ) | 11.75 | 8.05 | 26,015 | 0.88 | (f) | 0.91 | (f) | 0.84 | (f) | 4.88 | (f) | 15 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/09 | 10.23 | 0.51 | 0.97 | 1.48 | (0.50 | ) | — | (0.50 | ) | 11.21 | 14.74 | 24,377 | 0.86 | 0.92 | 0.85 | 4.65 | 19 | |||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/08 | 11.83 | 0.49 | (1.56 | ) | (1.07 | ) | (0.49 | ) | (0.04 | ) | (0.53 | ) | 10.23 | (9.28 | ) | 22,799 | 0.86 | 0.90 | 0.86 | 4.33 | 10 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/07 | 12.16 | 0.50 | (0.31 | ) | 0.19 | (0.49 | ) | (0.03 | ) | (0.52 | ) | 11.83 | 1.62 | 24,645 | 1.00 | 1.04 | 0.84 | 4.12 | 5 | |||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/06 | 12.16 | 0.49 | 0.06 | 0.55 | (0.49 | ) | (0.06 | ) | (0.55 | ) | 12.16 | 4.64 | 299,414 | 0.86 | 0.89 | 0.85 | 4.06 | 5 | ||||||||||||||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 11.83 | 0.52 | (d) | (0.41 | ) | 0.11 | (0.52 | ) | — | (0.52 | ) | 11.42 | 1.16 | (g) | 220,478 | 0.89 | (e)(g) | 0.89 | (e)(g) | 0.84 | (e)(g) | 4.67 | (e)(g) | 25 | ||||||||||||||||||||||||||||||||||||
Eight months ended 08/31/10 | 11.28 | 0.37 | 0.53 | 0.90 | (0.35 | ) | — | (0.35 | ) | 11.83 | 8.10 | 254,907 | 0.88 | (f) | 0.91 | (f) | 0.84 | (f) | 4.88 | (f) | 15 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/09 | 10.30 | 0.51 | 0.98 | 1.49 | (0.51 | ) | — | (0.51 | ) | 11.28 | 14.68 | 266,270 | 0.85 | 0.94 | 0.84 | 4.66 | 19 | |||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/08 | 11.91 | 0.50 | (1.57 | ) | (1.07 | ) | (0.50 | ) | (0.04 | ) | (0.54 | ) | 10.30 | (9.23 | ) | 267,308 | 0.85 | 0.89 | 0.85 | 4.34 | 10 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/07 | 12.24 | 0.50 | (0.30 | ) | 0.20 | (0.50 | ) | (0.03 | ) | (0.53 | ) | 11.91 | 1.65 | 344,606 | 0.97 | 1.01 | 0.81 | 4.15 | 5 | |||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/06 | 12.24 | 0.52 | 0.05 | 0.57 | (0.51 | ) | (0.06 | ) | (0.57 | ) | 12.24 | 4.81 | 132,162 | 0.69 | 0.72 | 0.68 | 4.23 | 5 | ||||||||||||||||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 11.82 | 0.46 | (d) | (0.40 | ) | 0.06 | (0.47 | ) | — | (0.47 | ) | 11.41 | 0.65 | 21,800 | 1.40 | (e) | 1.40 | (e) | 1.35 | (e) | 4.16 | (e) | 25 | |||||||||||||||||||||||||||||||||||||
Eight months ended 08/31/10 | 11.27 | 0.34 | 0.52 | 0.86 | (0.31 | ) | — | (0.31 | ) | 11.82 | 7.76 | 17,528 | 1.38 | (f) | 1.41 | (f) | 1.34 | (f) | 4.38 | (f) | 15 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/09 | 10.29 | 0.46 | 0.97 | 1.43 | (0.45 | ) | — | (0.45 | ) | 11.27 | 14.11 | 17,245 | 1.36 | 1.42 | 1.35 | 4.15 | 19 | |||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/08 | 11.90 | 0.44 | (1.57 | ) | (1.13 | ) | (0.44 | ) | (0.04 | ) | (0.48 | ) | 10.29 | (9.74 | ) | 17,105 | 1.36 | 1.40 | 1.36 | 3.83 | 10 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/07 | 12.23 | 0.44 | (0.30 | ) | 0.14 | (0.44 | ) | (0.03 | ) | (0.47 | ) | 11.90 | 1.14 | 22,800 | 1.50 | 1.54 | 1.34 | 3.62 | 5 | |||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/06 | 12.23 | 0.43 | 0.06 | 0.49 | (0.43 | ) | (0.06 | ) | (0.49 | ) | 12.23 | 4.12 | 23,320 | 1.36 | 1.39 | 1.35 | 3.56 | 5 | ||||||||||||||||||||||||||||||||||||||||||
Class Y | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 11.79 | 0.55 | (d) | (0.41 | ) | 0.14 | (0.55 | ) | — | (0.55 | ) | 11.38 | 1.40 | 24,195 | 0.65 | (e) | 0.65 | (e) | 0.60 | (e) | 4.91 | (e) | 25 | |||||||||||||||||||||||||||||||||||||
Eight months ended 08/31/10 | 11.25 | 0.39 | 0.52 | 0.91 | (0.37 | ) | — | (0.37 | ) | 11.79 | 8.21 | 26,837 | 0.63 | (f) | 0.66 | (f) | 0.59 | (f) | 5.13 | (f) | 15 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/09 | 10.26 | 0.54 | 0.98 | 1.52 | (0.53 | ) | — | (0.53 | ) | 11.25 | 15.10 | 27,388 | 0.61 | 0.67 | 0.60 | 4.90 | 19 | |||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/08 | 11.86 | 0.52 | (1.56 | ) | (1.04 | ) | (0.52 | ) | (0.04 | ) | (0.56 | ) | 10.26 | (9.02 | ) | 28,450 | 0.61 | 0.65 | 0.61 | 4.58 | 10 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/07 | 12.20 | 0.53 | (0.32 | ) | 0.21 | (0.52 | ) | (0.03 | ) | (0.55 | ) | 11.86 | 1.80 | 49,024 | 0.76 | 0.80 | 0.60 | 4.36 | 5 | |||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/06 | 12.20 | 0.53 | 0.05 | 0.58 | (0.52 | ) | (0.06 | ) | (0.58 | ) | 12.20 | 4.90 | 53,954 | 0.61 | 0.64 | 0.60 | 4.31 | 5 | ||||||||||||||||||||||||||||||||||||||||||
(a) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges and is not annualized for periods less than one year, if applicable. | |
(b) | For the year ended August 31, 2011 and prior, ratio does not exclude facilities and maintenance fees. | |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. For the period ending August 31, 2011, the portfolio turnover calculation excludes the value of securities purchased of $139,542,348 and sold of $13,399,363 in the effort to realign the Fund’s portfolio holdings after the reorganization of Invesco Van Kampen California Insured Tax Free Fund into the Fund. | |
(d) | Calculated using average shares outstanding. | |
(e) | Ratios are based on average daily net assets (000’s) of $53,049, $225,787, $16,769 and $24,024 for Class A, Class B, Class C and Class Y shares, respectively. | |
(f) | Annualized. | |
(g) | The total return, ratio of expenses to average net assets and ratio of net investment income to average net assets reflect actual 12b-1 fees of 0.25%. |
25 Invesco California Tax-Free Income Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Counselor Series Trust (Invesco Counselor Series Trust)
and Shareholders of Invesco California Tax-Free Income Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Invesco California Tax-Free Income Fund (one of the funds constituting AIM Counselor Series Trust (Invesco Counselor Series Trust), hereafter referred to as the “Fund”) at August 31, 2011, the results of its operations for the year then ended, the changes in its net assets and the financial highlights for the year then ended and the eight month period ended August 31, 2010, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at August 31, 2011 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. The statement of changes in net assets and the financial highlights of the Fund for the periods ended December 31, 2009 and prior were audited by other independent auditors whose report dated February 25, 2010 expressed an unqualified opinion on those financial statements.
PRICEWATERHOUSECOOPERS LLP
October 21, 2011
Houston, Texas
26 Invesco California Tax-Free Income Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments or contingent deferred sales charges on redemptions, and redemption fees, if any; and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period March 1, 2011 through August 31, 2011.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the hypothetical information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
HYPOTHETICAL | ||||||||||||||||||||||||||||||
ACTUAL | (5% annual return before expenses) | |||||||||||||||||||||||||||||
Beginning | Ending | Expenses | Ending | Expenses | Annualized | |||||||||||||||||||||||||
Account Value | Account Value | Paid During | Account Value | Paid During | Expense | |||||||||||||||||||||||||
Class | (03/01/10) | (08/31/10)1 | Period2 | (08/31/10) | Period2 | Ratio | ||||||||||||||||||||||||
Class A | $ | 1,000.00 | $ | 1,076.90 | $ | 4.66 | $ | 1,020.72 | $ | 4.53 | 0.89 | % | ||||||||||||||||||
Class B | 1,000.00 | 1,077.60 | 4.61 | 1,020.77 | 4.48 | 0.88 | ||||||||||||||||||||||||
Class C | 1,000.00 | 1,074.90 | 7.27 | 1,018.20 | 7.07 | 1.39 | ||||||||||||||||||||||||
Class Y | 1,000.00 | 1,078.10 | 3.35 | 1,021.98 | 3.26 | 0.64 | ||||||||||||||||||||||||
1 | The actual ending account value is based on the actual total return of the Fund for the period March 1, 2011 through August 31, 2011, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund’s expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half year. |
27 Invesco California Tax-Free Income Fund
Approval of Investment Advisory and Sub-Advisory Contracts |
The Board of Trustees (the Board) of AIM Counselor Series Trust (Invesco Counselor Series Trust) is required under the Investment Company Act of 1940, as amended, to approve annually the renewal of the Invesco California Tax-Free Income Fund (the Fund) investment advisory agreement with Invesco Advisers, Inc. (Invesco Advisers) and the Master Intergroup Sub-Advisory Contract for Mutual Funds (the sub-advisory contracts) with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers). During contract renewal meetings held on June 14-15, 2011, the Board as a whole, and the disinterested or “independent” Trustees, who comprise 80% of the Board, voting separately, approved the continuance of the Fund’s investment advisory agreement and the sub-advisory contracts for another year, effective July 1, 2011. In doing so, the Board considered the process that it follows in reviewing and approving the Fund’s investment advisory agreement and sub-advisory contracts and the information that it is provided. The Board determined that the Fund’s investment advisory agreement and the sub-advisory contracts are in the best interests of the Fund and its shareholders and the compensation to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is responsible for overseeing the management of a number of the series portfolios of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies and limitations and investment risks of these funds. The Sub-Committees meet regularly and at designated contract renewal meetings each year to conduct a review of the performance, fees, expenses and other matters related to their assigned Invesco Funds. Each Sub-Committee recommends to the Investments Committee, which in turn recommends to the full Board, whether to approve the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Trustees receive comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and an independent company, Lipper, Inc. (Lipper). The Trustees also receive an independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. The independent Trustees are assisted in their annual evaluation of the Fund’s investment advisory agreement by the Senior Officer and by independent legal counsel. The independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in private sessions with the Senior Officer and counsel.
In evaluating the fairness and reasonableness of the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Trustees also considered information provided in connection with fund acquisitions approved by the Trustees to rationalize the Invesco Funds product range following the acquisition of the retail mutual fund business of Morgan Stanley (the Morgan Stanley Transaction). The Trustees recognized that the advisory fees for the Invesco Funds include advisory fees that are the result of years of review and negotiation between the Trustees and Invesco Advisers as well as advisory fees inherited from Morgan Stanley and Van Kampen funds acquired in the Morgan Stanley Transaction. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these same arrangements throughout the year and in prior years. One Trustee may have weighed a particular piece of information differently than another Trustee.
The discussion below serves as the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 15, 2011, and may not reflect consideration of factors that became known to the Board after that date, including, for example, changes to the Fund’s performance, advisory fees, expense limitations and/or fee waivers.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers, with whom the Board met during the year. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s consideration of Invesco Advisers’ performance and investment process oversight, independent credit analysis and investment risk management.
In determining whether to continue the Fund’s investment advisory agreement, the Board considered the prior relationship between Invesco Advisers and the Fund, as well as the Board’s knowledge of Invesco Advisers’ operations, and concluded that it is beneficial to maintain the current relationship, in part, because of such knowledge. The Board also considered services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution and legal and compliance. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and the advisory services are provided in accordance with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services provided by the Affiliated Sub-Advisers under the sub-advisory contracts and the credentials and experience of the officers and employees of the Affiliated Sub-Advisers who provide these services. The Board concluded that the sub-advisory contracts benefit the Fund and its shareholders by permitting Invesco Advisers to use the resources and talents of the Affiliated Sub-Advisers in managing the Fund. The Board concluded that the nature, extent and quality of the services provided by the Affiliated Sub-Advisers are appropriate and satisfactory and in accordance with the terms of the Fund’s sub-advisory contracts.
B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
28 Invesco California Tax-Free Income Fund
The Board compared the Fund’s performance during the past one, three and five calendar years to the performance of funds in the Lipper performance universe and against the Lipper California Municipal Debt Funds Index. The Board noted that performance of Class A shares of the Fund was in the third quintile of the performance universe for the one year period and the fourth 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 performance of Class A shares of the Fund was below the performance of the Index for the one, three and five year periods. Invesco Advisers advised the Board that a team change in December 2009 resulted in a strategy shift focusing on credit analysis and sector allocations which had positively affected one year performance. Although the independent written evaluation of the Fund’s Senior Officer only considered Fund performance through the most recent calendar year, the Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
C. | Advisory and Sub-Advisory Fees and Fee Waivers |
The Board compared the Fund’s contractual advisory fee rate to the contractual advisory fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the contractual advisory fee rate for Class A shares of the Fund was below the median contractual advisory fee rate of funds in the expense group. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using audited financial data from the most recent annual report of each fund in the expense group that was publicly available as of the end of the past calendar year and including only one fund per investment adviser. The Board noted that comparative data is as of varying dates, which may affect the comparability of data during times of market volatility.
The Board also compared the Fund’s effective fee rate (the advisory fee after advisory fee waivers and before expense limitations/waivers) to the advisory fee rates of other mutual funds advised by Invesco Advisers and its affiliates with investment strategies comparable to those of the Fund. The Board noted that the Fund’s rate was: below the total account level fee of a mutual fund sub-advised by Invesco Advisers.
Other than the mutual fund described above, the Board noted that Invesco Advisers and the Affiliated Sub-Advisers do not manage other mutual funds or client accounts in a manner substantially similar to the management of the Fund.
The Board noted that Invesco Advisers has contractually agreed to waive fees and/or limit expenses of the Fund through at least June 30, 2012 in an amount necessary to limit total annual operating expenses to a specified percentage of average daily net assets for each class of the Fund. The Board also considered the effect this fee waiver would have on the Fund’s total estimated expenses.
The Board also considered the services provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the allocation of fees between Invesco Advisers and the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board noted that Invesco Advisers provides services to sub-advised Invesco Funds, including oversight of the Affiliated Sub-Advisers as well as the additional services described above other than day-to-day that Invesco Advisers provides services to sub-advised Invesco Funds, including oversight of the Affiliated Sub-Advisers as well as the additional services described above other than day-to-day portfolio management. The Board also noted that the sub-advisory fees have no direct effect on the Fund or its shareholders, as they are paid by Invesco Advisers to the Affiliated Sub-Advisers.
Based upon the information and considerations described above, the Board concluded that the Fund’s advisory and sub-advisory fees are fair and reasonable.
D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule. The Board also noted that the 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 Invesco Advisers.
E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the profitability of Invesco Advisers and its affiliates in providing these services. The Board reviewed with Invesco Advisers the methodology used to prepare the profitability information. The Board considered the profitability of Invesco Advisers in connection with managing the Fund and the Invesco Funds. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its subsidiaries provide to the Fund and the Invesco Funds. The Board concluded that the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund is not excessive given the nature, quality and extent of the services provided to the Invesco Funds. The Board considered whether Invesco Advisers and each Affiliated Sub-Adviser are financially sound and have the resources necessary to perform their obligations under the investment advisory agreement and sub-advisory contracts. The Board concluded that Invesco Advisers and each Affiliated Sub-Adviser have the financial resources necessary to fulfill these obligations.
F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund, including the fees received for their provision of administrative, transfer agency and distribution services to the Fund. The Board considered the performance of Invesco Advisers 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 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 Fund; that Invesco Advisers 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; and 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.
The Board considered the benefits realized by Invesco Advisers and the Affiliated Sub-Advisers as a result of portfolio brokerage transactions executed through “soft dollar” arrangements. The Board noted that soft dollar arrangements shift the payment obligation for research and execution services from Invesco Advisers and the Affiliated Sub-Advisers to the Invesco Funds and therefore may reduce Invesco Advisers’ and the Affiliated Sub-Advisers’ expenses. The Board concluded that the soft dollar arrangements are appropriate. The Board also concluded that, based on their review and representations made by the Chief Compliance Officer of the Invesco Funds, these arrangements are consistent with regulatory requirements.
The Board considered that the Fund’s uninvested cash and cash collateral from any securities lending arrangements may be invested in money market funds advised by Invesco Advisers pursuant to procedures approved by the Board. The Board noted that Invesco Advisers receives advisory fees from these affiliated money market funds attributable to such investments, although Invesco Advisers has contractually agreed to waive through varying periods the advisory fees payable by the Invesco Funds. The waiver is in an amount equal to 100% of the net advisory fee Invesco Advisers receives from the affiliated money market funds with respect to the Fund’s investment in the affiliated money market funds of uninvested cash, but not cash collateral. The Board concluded that the Fund’s investment of uninvested cash and cash collateral from any securities lending arrangements in the affiliated money market funds is in the best interests of the Fund and its shareholders.
29 Invesco California Tax-Free Income Fund
Tax Information
Form 1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific state’s requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended August 31, 2011:
Federal and State Income Tax | ||||
Qualified Dividend Income* | 0.00% | |||
Corporate Dividends Received Deduction* | 0.00% | |||
Tax-Exempt Interest Dividends* | 100% |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Fund’s fiscal year. |
30 Invesco California Tax-Free Income Fund
Trustees and Officers
The address of each trustee and officer is AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”), 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Number of Funds | ||||||||
in Fund Complex | ||||||||
Name, Year of Birth and | Trustee and/ | Principal Occupation(s) | Overseen by | Other Directorship(s) | ||||
Position(s) Held with the Trust | or Officer Since | During Past 5 Years | Trustee | Held by Trustee | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 — 1960 Trustee | 2007 | 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 | 143 | 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. Taylor2 — 1954 Trustee, President and Principal Executive Officer | 2006 | 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 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 Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust); Trustee and Executive Vice President, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s 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 Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Tax-Free Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. | 143 | None | ||||||
Wayne W. Whalen3 — 1939 Trustee | 2010 | Of Counsel, and prior to 2010, partner in the law firm of Skadden, Arps, Slate, Meagher & Flom LLP, legal counsel to funds in the Fund Complex | 161 | Director of the Abraham Lincoln Presidential Library Foundation | ||||
Independent Trustees | ||||||||
Bruce L. Crockett — 1944 Trustee and Chair | 2003 | Chairman, Crockett Technology Associates (technology consulting company) Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer COMSAT Corporation; and Chairman, Board of Governors of INTELSAT (international communications company) | 143 | ACE Limited (insurance company); and Investment Company Institute | ||||
1 | Mr. Flanagan is considered an interested person of the Trust because he is an officer of the adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the adviser to the Trust. |
2 | Mr. Taylor is considered an interested person of the Trust because he is an officer and a director of the adviser to, and a director of the principal underwriter of, the Trust. |
3 | Mr. Whalen has been deemed to be an interested person of the Trust because of his prior service as counsel to the predecessor funds of certain Invesco open-end funds and his affiliation with the law firm that served as counsel to such predecessor funds and continues to serve as counsel to the Invesco Van Kampen closed-end funds. |
T-1 Invesco California Tax-Free Income Fund
Trustees and Officers—(continued)
The address of each trustee and officer is AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”), 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Number of Funds | ||||||||
in Fund Complex | ||||||||
Name, Year of Birth and | Trustee and/ | Principal Occupation(s) | Overseen by | Other Directorship(s) | ||||
Position(s) Held with the Trust | or Officer Since | During Past 5 Years | Trustee | Held by Trustee | ||||
Independent Trustees | ||||||||
David C. Arch — 1945 Trustee | 2010 | Chairman and Chief Executive Officer of Blistex Inc., a consumer health care products manufacturer. | 161 | 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 | ||||
Bob R. Baker — 1936 Trustee | 1983 | Retired | 143 | None | ||||
Formerly: President and Chief Executive Officer, AMC Cancer Research Center; and Chairman and Chief Executive Officer, First Columbia Financial Corporation | ||||||||
Frank S. Bayley — 1939 Trustee | 2003 | Retired Formerly: Director, Badgley Funds, Inc. (registered investment company) (2 portfolios) and Partner, law firm of Baker & McKenzie | 143 | Director and Chairman, C.D. Stimson Company (a real estate investment company) | ||||
James T. Bunch — 1942 Trustee | 2000 | 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 | 143 | Vice Chairman, Board of Governors, Western Golf Association/Evans Scholars Foundation and Director, Denver Film Society | ||||
Rodney Dammeyer — 1940 Trustee | 2010 | President 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. | 161 | 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 | 2003 | 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) | 161 | Board of Nature’s 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 | 2003 | 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) | 143 | Administaff | ||||
Formerly: Chief Executive Officer, Texana Timber LP (sustainable forestry company) and member of the U.S. House of Representatives | ||||||||
Carl Frischling — 1937 Trustee | 2003 | Partner, law firm of Kramer Levin Naftalis and Frankel LLP | 143 | Director, Reich & Tang Funds (6 portfolios) | ||||
Prema Mathai-Davis — 1950 Trustee | 2003 | Retired | 143 | None | ||||
Formerly: Chief Executive Officer, YWCA of the U.S.A. | ||||||||
Larry Soll — 1942 Trustee | 1997 | Retired | 143 | None | ||||
Formerly, Chairman, Chief Executive Officer and President, Synergen Corp. (a biotechnology company) | ||||||||
T-2 Invesco California Tax-Free Income Fund
Trustees and Officers—(continued)
The address of each trustee and officer is AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”), 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Number of Funds | ||||||||
in Fund Complex | ||||||||
Name, Year of Birth and | Trustee and/ | Principal Occupation(s) | Overseen by | Other Directorship(s) | ||||
Position(s) Held with the Trust | or Officer Since | During Past 5 Years | Trustee | Held by Trustee | ||||
Independent Trustees | ||||||||
Hugo F. Sonnenschein — 1940 Trustee | 2010 | President Emeritus and Honorary Trustee 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. | 161 | 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 | 2005 | Retired Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios) and Partner, Deloitte & Touche | 143 | None | ||||
Other Officers | ||||||||
Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer of Invesco Funds | N/A | N/A | ||||
John M. Zerr — 1962 Senior Vice President, Chief Legal Officer and Secretary | 2006 | 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 | N/A | N/A | ||||
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) | ||||||||
Lisa O. Brinkley — 1959 Vice President | 2004 | Global Compliance Director, Invesco Ltd.; Chief Compliance Officer, Invesco Investment Services, Inc.(formerly known as Invesco Aim Investment Services, Inc.); and Vice President, The Invesco Funds Formerly: Chief Compliance Officer, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) and Van Kampen Investor Services Inc.; Senior Vice President, Invesco Management Group, Inc.; Senior Vice President and Chief Compliance Officer, Invesco Advisers, Inc. and The Invesco Funds; Vice President and Chief Compliance Officer, Invesco Aim Capital Management, Inc. and Invesco Distributors, Inc.; Vice President, Invesco Investment Services, Inc. and Fund Management Company | N/A | N/A | ||||
Sheri Morris — 1964 Vice President, Treasurer and Principal Financial Officer | 2003 | 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) | N/A | N/A | ||||
Formerly: 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, 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. | ||||||||
T-3 Invesco California Tax-Free Income Fund
Trustees and Officers—(continued)
The address of each trustee and officer is AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”), 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Number of Funds | ||||||||
in Fund Complex | ||||||||
Name, Year of Birth and | Trustee and/ | Principal Occupation(s) | Overseen by | Other Directorship(s) | ||||
Position(s) Held with the Trust | or Officer Since | During Past 5 Years | Trustee | Held by Trustee | ||||
Other Officers | ||||||||
Karen Dunn Kelley — 1960 Vice President | 2003 | Head of Invesco’s 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 Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust); and President and Principal Executive Officer, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust only). | N/A | N/A | ||||
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 Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Tax-Free Investments Trust only) | ||||||||
Lance A. Rejsek — 1967 Anti-Money Laundering Compliance Officer | 2005 | 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.), The Invesco Funds, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management) and Van Kampen Funds Inc. | N/A | N/A | ||||
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Investor Services Inc., Fund Management Company, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc. | ||||||||
Todd L. Spillane — 1958 Chief Compliance Officer | 2006 | 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, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, INVESCO Private Capital Investments, Inc. (holding company) and Invesco Private Capital, Inc. (registered investment adviser); Vice President, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.), Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.). Formerly: 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 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 | N/A | N/A | ||||
The Statement of Additional Information of the Trust includes additional information about the Fund’s Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Fund’s prospectus for information on the Fund’s sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 2500 Houston, TX 77046-1173 | Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 | Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 2500 Houston, TX 77046-1173 | Auditors PricewaterhouseCoopers LLP 1201 Louisiana Street, Suite 2900 Houston, TX 77002-5678 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2600 One Commerce Square Philadelphia, PA 19103 | Counsel to the Independent Trustees Kramer, Levin, Naftalis & Frankel LLP 1177 Avenue of the Americas New York, NY 10036-2714 | Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 2500 Houston, TX 77046-1173 | Custodian State Street Bank and Trust Company 225 Franklin Boston, MA 02110-2801 |
T-4 Invesco California Tax-Free Income Fund
![(IMAGE)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8463512.gif)
Invesco mailing information
Send general correspondence to Invesco Investment Services, Inc., P.O. Box 219078, Kansas City, MO 64121-9078.
Invesco privacy policy
You share personal and financial information with us that is necessary for your transactions and your account records. We take very seriously the obligation to keep that information confidential and private.
Invesco collects nonpublic personal information about you from account applications or other forms you complete and from your transactions with us or our affiliates. We do not disclose information about you or our former customers to service providers or other third parties except to the extent necessary to service your account and in other limited circumstances as permitted by law. For example, we use this information to facilitate the delivery of transaction confirmations, financial reports, prospectuses and tax forms.
Even within Invesco, only people involved in the servicing of your accounts and compliance monitoring have access to your information. To ensure the highest level of confidentiality and security, Invesco maintains physical, electronic and procedural safeguards that meet or exceed federal standards. Special measures, such as data encryption and authentication, apply to your communications with us on our website. More detail is available to you at invesco.com/privacy.
Important notice regarding delivery of security holder documents
To reduce Fund expenses, only one copy of most shareholder documents may be mailed to shareholders with multiple accounts at the same address (Householding). Mailing of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact Invesco Investment Services, Inc. at 800 959 4246 or contact your financial institution. We will begin sending you individual copies for each account within 30 days after receiving your request.
Fund holdings and proxy voting information
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is available at invesco.com/completeqtrholdings. Shareholders can also look up the Fund’s Forms N-Q on the SEC website at sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-09913 and 333-36074.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov.
![(INVESCO LOGO)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8463513.gif)
Information regarding how the Fund voted proxies related to its portfolio securities during the 12 months ended June 30, 2011, is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov.
Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the U.S. distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
MS-CTFI-AR-1 | Invesco Distributors, Inc. |
![]() |
Annual Report to Shareholders | August 31, 2011 |
Invesco Equally-Weighted S&P 500 Fund
Nasdaq:
A: VADAX § B: VADBX § C: VADCX § R: VADRX § Y: VADDX
A: VADAX § B: VADBX § C: VADCX § R: VADRX § Y: VADDX
2 | Letters to Shareholders | |
4 | Performance Summary | |
4 | Management Discussion | |
6 | Long-Term Fund Performance | |
8 | Supplemental Information | |
9 | Schedule of Investments | |
19 | Financial Statements | |
21 | Notes to Financial Statements | |
28 | Financial Highlights | |
29 | Auditor’s Report | |
30 | Fund Expenses | |
31 | Approval of Investment Advisory and Sub-Advisory Agreements | |
33 | Tax Information | |
T-1 | Trustees and Officers |
Letters to Shareholders
![(PHOTO OF PHILIP TAYLOR)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8463702.jpg)
Philip Taylor
Dear Shareholders:
Enclosed is important information about your Fund and its performance. I encourage you to read this report to learn more about your Fund’s short- and long-term performance and its holdings as of the close of the reporting period. This report also includes useful information about your Fund’s management team and a discussion of how your Fund was managed during the reporting period.
Data indicated that economic growth in the U.S. and most of Europe was anemic during the reporting period. In the U.S., unemployment remained high, and the housing market remained weak. Concerns about European sovereign debt persisted. Nonetheless, equity markets rose in late 2010 and early 2011 as investors anticipated better news ahead. But contentious negotiations to raise the U.S. government’s debt ceiling heightened investor unease, and following the first-ever downgrade of U.S. creditworthiness in August, global stock markets declined as many investors sought safer havens.
Where you can get current information about your Fund
In light of economic uncertainty and market volatility, I suggest you check the timely market updates and commentary from many of our fund managers and other investment professionals at invesco.com/us. On our website, you also can obtain information about your account at any hour of the day or night. I invite you to visit and explore the tools and information we offer at invesco.com/us.
Our commitment to investment excellence
As we’ve seen over the last several years, market conditions can change – often suddenly and dramatically. That’s one reason financial advisers typically advise their clients to be well diversified and to maintain a long-term investment focus. While diversification can’t guarantee a profit or protect against loss, it can cushion the impact of dramatic market moves. Maintaining a long-term investment focus for your long-term goals – financing your retirement or your children’s education, for example – may help you avoid making rash investment decisions based on short-term market swings.
Invesco’s investment professionals apply these same principles to the funds they manage.
Invesco offers a broad array of traditional mutual funds, as well as other investment products, including single-country, sector, regional and global investments spanning equity, fixed income and alternative asset classes. Across our product line, investment excellence is our ultimate goal. Each of our funds is managed by specialized teams of investment professionals, and as a company, we maintain a single focus – investment management – that allows our fund managers to concentrate on doing what they do best: managing your money.
Our funds are managed strictly according to their stated investment objectives and strategies, with robust risk oversight using consistent, repeatable investment processes that don’t change in response to short-term market events. This disciplined approach can’t guarantee a profit; no investment can do that, since all involve some measure of risk. But it can ensure that your money is managed the way we said it would be, and that it’s managed with a long-term focus.
Our adherence to stated investment objectives and strategies allows your financial adviser to build a diversified portfolio that meets your individual risk tolerance and financial goals. It also means that when your goals change, your financial adviser will be able to find an Invesco fund that’s appropriate for your needs.
Questions?
If you have questions about your account, please contact one of our client service representatives at 800 959 4246. If you have a general Invesco-related question or comment for me, I invite you to email me directly at phil@invesco.com.
All of us at Invesco look forward to serving your investment management needs for many years to come. Thank you for investing with us.
Sincerely,
![-s- Philip Taylor](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8463703.gif)
Philip Taylor
Senior Managing Director, Invesco Ltd.
Senior Managing Director, Invesco Ltd.
2 | Invesco Equally-Weighted S&P 500 Fund |
![(PHOTO OF BRUCE CROCKETT)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8463704.jpg)
Bruce Crockett
Dear Fellow Shareholders:
Although the world’s economies are gradually recovering from the financial crisis, it has not been a smooth path. Unrest in the Middle East, persistently weak job and housing markets in the U.S. and continued government balance sheet repair in Europe are contributing to a slow, labored march toward global recovery.
In this environment, investors face risks that could make it more difficult to achieve their long-term financial goals – a secure retirement, home ownership, a child’s college education. Although the markets are complex and dynamic, there are ways to simplify the process and potentially increase your odds of achieving your goals. The best approach is to create a solid financial plan that helps you save and invest in ways that anticipate your needs over the long term.
Your financial adviser can help you define your financial plan, develop an appropriate investment strategy and put you in a better position to achieve your financial goals over the long term. This can take some of the guesswork out of the process and help you make thoughtful investments. Your financial adviser also can help you better understand your tolerance for risk, so that your investment approach lets you sleep at night while getting you closer to your goals. Lastly, your financial adviser can develop an asset allocation strategy that seeks to balance your investment approach, providing some protection against a decline in the markets while allowing you to participate in rising markets. Invesco calls this type of approach “intentional investing.” It means thinking carefully, planning thoughtfully and acting deliberately.
While no investment can guarantee favorable returns, your Board remains committed to managing costs and enhancing the performance of Invesco’s funds as part of our Investor First orientation. We continue to oversee the funds with the same strong sense of responsibility for your money and your continued trust that we’ve always maintained.
Thanks to the approval of our fund shareholders, Invesco has made great progress in realigning our U.S. mutual fund product line following our acquisition of Morgan Stanley’s retail asset management business, including Van Kampen Investments. When completed, the realignment will reduce overlap in the product lineup, enhance efficiency across our product line and build a solid foundation for further growth to meet client and shareholder needs. I would like to thank those of you who voted your proxy, and I hope our shareholders haven’t been too inconvenienced by the process.
As always, please contact me at bruce@brucecrockett.com with any questions or concerns you may have. On behalf of your Board, we look forward to continuing to represent your interests and serving your needs.
Sincerely,
![-s- Bruce L. Crockett](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8463705.gif)
Bruce L. Crockett
Independent Chair
Invesco Funds Board of Trustees
Independent Chair
Invesco Funds Board of Trustees
3 | Invesco Equally-Weighted S&P 500 Fund |
Management’s Discussion of Fund Performance
Performance summary
For the 12 months ended August 31, 2011, Invesco Equally-Weighted S&P 500 Fund, at net asset value, underperformed the S&P 500 Equal Weight Index but outperformed the Lipper Multi-Cap Core Funds Index. The Fund seeks to achieve a high level of total return on its assets through a combination of capital appreciation and current income. The energy sector contributed the most to the Fund’s overall positive performance for the reporting period.
Your Fund’s long-term performance appears later in this report.
Fund vs. Indexes
Total returns, 8/31/10 to 8/31/11, at net asset value (NAV). Performance shown does not include applicable contingent deferred sales charges (CDSC) or front-end sales charges, which would have reduced performance.
Class A Shares | 19.91 | % | ||
Class B Shares | 18.98 | |||
Class C Shares | 19.04 | |||
Class R Shares | 19.62 | |||
Class Y Shares | 20.19 | |||
S&P 500 Index▼ (Broad Market Index) | 18.48 | |||
S&P 500 Equal Weight Indexn (Style-Specific Index) | 20.62 | |||
Lipper Multi-Cap Core Funds Index▼ (Peer Group Index) | 16.96 | |||
▼Lipper Inc.; nInvesco, Bloomberg L.P. |
The Fund recently adopted a three-tier benchmark structure to compare its performance to broad market, style-specific and peer group market measures. |
How we invest
The Fund invests in a diversified portfolio of common stocks represented in the S&P 500 Index. The S&P 500 Index is a well-known stock market index that includes common stocks of 500 companies. The Fund generally invests in each stock included in the S&P 500 Index in approximately equal proportions. This approach differs from the S&P 500 Index because stocks in the S&P 500 Index are represented in proportion to their market value, or market capitalization. For example, the 50 largest companies in the S&P 500 Index represent approximately 50% of the S&P 500 Index’s value; however, these same 50 companies represent roughly 10% of the Fund’s
value. The Fund may invest in foreign securities represented in the S&P 500 Index, including American Depositary Receipts. The sale of a security by the Fund is a function of Standard & Poor’s either adding a stock to the S&P 500 Index or deleting a stock from the index. Securities that are added to or deleted from the Fund are driven by changes to the S&P 500 Index, not by a stock selection model.
Market conditions and your Fund
The fiscal year covered by this report began with U.S. equity markets posting very strong results across most capitalization ranges. These gains were the result of continuing improvement in the overall U.S. economy. Third quarter
2010 gross domestic product, the broadest measure of overall U.S. economic activity, was strong when initially reported and was subsequently revised upward. But companies found themselves much too early in the recovery cycle to start testing pricing power. Also, improvement in retail sales over the previous year offered encouraging signs that the American consumer is willing to spend. The strong performance of the equity markets continued during the beginning of 2011.
The market stumbled in May and June as ongoing concerns over slower economic growth and Greek sovereign-debt fears clouded the recovery picture. The expiration of the U.S. Federal Reserve’s bond buying program and haggling over raising the U.S. debt ceiling also weighed heavily on the market. The uncertainty continued in July over concerns about job creation. The country’s ability to pay its debts became a growing issue throughout the month, as the battle between Congress and the White House over raising the debt ceiling grew to a fever pitch. With the threat of a downgrade from the major ratings agencies, the stakes were of the highest order.
Even though an agreement to raise the debt limit was reached at the eleventh hour, the fiscal year ended on a sour note. The fateful and unprecedented decision by Standard & Poor’s to downgrade U.S. government debt helped to precipitate a wave of selling and an increase in stock-market volatility. The downgrade also caused most investors to lower their expectations for future economic growth. As a result, the U.S. dollar and oil fell, while gold and, ironically, U.S. Treasuries, rallied.
Portfolio Composition
By sector
Consumer Discretionary | 16.1 | % | ||
Financials | 15.0 | |||
Information Technology | 14.5 | |||
Industrials | 11.5 | |||
Health Care | 10.3 | |||
Energy | 8.6 | |||
Consumer Staples | 8.4 | |||
Utilities | 7.1 | |||
Materials | 6.1 | |||
Telecommunication Services | 1.5 | |||
Money Market Funds | ||||
Plus Other Assets Less Liabilities | 0.9 |
Top 10 Equity Holdings*
1. | Motorola Mobility Holdings Inc. | 0.3 | % | |||||
2. | CF Industries Holdings, Inc. | 0.3 | ||||||
3. | Cabot Oil & Gas Corp. | 0.3 | ||||||
4. | Range Resources Corp. | 0.3 | ||||||
5. | MasterCard, Inc.-Class A | 0.3 | ||||||
6. | AutoNation, Inc. | 0.3 | ||||||
7. | Newmont Mining Corp. | 0.3 | ||||||
8. | Apple Inc. | 0.3 | ||||||
9. | Wynn Resorts Ltd. | 0.3 | ||||||
10. | EQT Corp. | 0.3 |
Top Five Industries
1. Multi-Utilities | 3.3 | % | ||
2. Oil & Gas Exploration & Production | 3.2 | |||
3. Packaged Foods & Meats | 2.9 | |||
4. Electric Utilities | 2.8 | |||
5. Semiconductors | 2.7 |
Total Net Assets | $964.2 million | |
Total Number of Holdings* | 500 |
The Fund’s holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
*Excluding money market fund holdings.
4 | Invesco Equally-Weighted S&P 500 Fund |
The Fund stayed true to its process by maintaining balanced exposure to all constituents of the S&P 500 Index. On an absolute basis, all sectors in the Fund posted positive returns for the reporting period. Sectors that contributed most to overall Fund performance were the consumer discretionary, energy, information technology (IT), health care, and industrials sectors. The telecommunication services sector contributed the least to the Fund’s overall positive performance.
The energy sector delivered the strongest performance during the fiscal year. Three of the top contributors to Fund performance for the year, Cabot Oil & Gas, Massey Energy and Tesoro, are in the energy sector. Massey Energy was eliminated from the portfolio before the close of the reporting period following its acquisition by another company. Also contributing was CF Industries Holdings, a manufacturer and distributor of nitrogen and phosphate fertilizer products. Currently, CF Industries Holdings is the world’s second-largest producer of nitrogen.1
Also contributing to the Fund’s positive performance was IT company National Semiconductor. During the fiscal year, Texas Instruments announced a definitive agreement to acquire National Semiconductor for $25 per share in an all-cash transaction totaling about $6.5 billion. The boards of directors of both companies unanimously approved the transaction.
While the IT sector was a solid contributor to the Fund’s overall performance, several individual IT holdings detracted from Fund performance. These included communications equipment makers Tellabs and F5 Networks as well as Internet software and service company Akamai Technologies.
Also detracting from Fund performance was mortgage finance company Hudson City Bancorp. During the fiscal year, Hudson City named Denis J. Salamone as president. Mr. Salamone joined the company in 2001 as senior executive vice president, chief operating officer and a member of the board of directors.
During the reporting period, the Fund invested in S&P 500 futures contracts, a derivative instrument, to gain exposure to the equity market. These futures contracts added to the Fund’s performance.
Despite some meaningful challenges, the U.S. economy continued to grow over the 12 months ended August 31, 2011. U.S. equity markets, reflecting this economic expansion, posted some sizable gains over the reporting period. Some significant economic challenges remain, including housing weakness, unemployment, government and household deleveraging and Europe’s sovereign debt crisis. However, slower growth does not mean no growth or, worse, contraction.
We welcome new investors who joined the Fund during the fiscal year and thank all of our shareholders for your investment in Invesco Equally-Weighted S&P 500 Fund.
1 Reuters
The views and opinions expressed in management’s discussion of Fund performance are those of Invesco Advisers, Inc. These views and opinions are subject to change at any time based on factors such as market and economic conditions. These views and opinions may not be relied upon as investment advice or recommendations, or as an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but Invesco Advisers, Inc. makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
See important Fund and, if applicable, index disclosures later in this report.
![(PHOTO OF ANTHONY MUNCHAK)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8463706.jpg)
Anthony Munchak
Chartered Financial Analyst, portfolio manager, is manager of Invesco Equally-Weighted S&P 500 Fund. He joined Invesco in 2000. Mr. Munchak earned a B.S. and M.S. in finance from Boston College and an M.B.A. from Bentley College.
![(PHOTO OF GLEN MURPHY)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8463707.jpg)
Glen Murphy
Chartered Financial Analyst, portfolio manager, is manager of Invesco Equally-Weighted S&P 500 Fund. He joined Invesco in 1995. Mr. Murphy earned a B.B.A. from the University of Massachusetts and an M.S. in finance from Boston College.
![(PHOTO OF FRANCIS ORLANDO)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8463708.jpg)
Francis Orlando
Chartered Financial Analyst, portfolio manager, is manager of Invesco Equally-Weighted S&P 500 Fund. He joined Invesco in 1987. Mr. Orlando earned a B.A. in business administration from Merrimack College and an M.B.A. from Boston University.
![(PHOTO OF DANIEL TSAI)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8463709.jpg)
Daniel Tsai
Chartered Financial Analyst, portfolio manager, is manager of Invesco Equally-Weighted S&P 500 Fund. He joined Invesco in 2000. Mr. Tsai earned a B.S. in mechanical engineering from National Taiwan University and an M.S. in mechanical engineering from the University of Michigan. He also earned an M.S. in computer science from Wayne State University.
![(PHOTO OF ANNE UNFLAT)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8463710.jpg)
Anne Unflat
Portfolio manager, is manager of Invesco Equally-Weighted S&P 500 Fund. She joined Invesco in 1988. Ms. Unflat graduated magna cum laude from Queens College with a B.A. in economics. She earned an M.B.A. in finance from St. John’s University.
5 | Invesco Equally-Weighted S&P 500 Fund |
Your Fund’s Long-Term Performance
Results of a $10,000 Investment – Oldest Share Class since Inception
Index data from 11/30/87, Fund data from 12/1/87
![(PERFORMANCE CHART)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8463711.gif)
Past performance cannot guarantee comparable future results.
As noted earlier in this report, during the reporting period, the Fund has adopted a three-tier benchmark structure to compare its performance to broad market, style-specific and peer group market measures. These additional benchmarks will now be included in the chart above. Benchmarks not shown do not have sufficient history dating back to the Fund’s inception.
The data shown in the chart include reinvested distributions, applicable sales charges and Fund expenses including management fees. Results for Class B
shares are calculated as if a hypothetical shareholder had liquidated his entire investment in the Fund at the close of the reporting period and paid the contingent deferred sales charges, if applicable. Index results include reinvested dividends, but they do not reflect sales charges. Performance of the peer group, if applicable, reflects fund expenses and management fees; performance of a market index does not. Performance shown in the chart and table(s) does not reflect deduction of taxes a shareholder would pay on Fund distributions or sale of Fund shares.
This chart, which is a logarithmic chart, presents the fluctuations in the value of the Fund and its indexes. We believe that a logarithmic chart is more effective than other types of charts in illustrating changes in value during the early years shown in the chart. The vertical axis, the one that indicates the dollar value of an investment, is constructed with each segment representing a percent change in the value of the investment. In this chart, each segment represents a doubling, or 100% change, in the value of the investment. In other words, the space between $5,000 and $10,000 is the same size as the space between $10,000 and $20,000, and so on.
6 | Invesco Equally-Weighted S&P 500 Fund |
Average Annual Total Returns | ||||
As of 8/31/11, including maximum applicable sales charges | ||||
Class A Shares | ||||
Inception (7/28/97) | 5.94 | % | ||
10 Years | 4.98 | |||
5 Years | 1.25 | |||
1 Year | 13.32 | |||
Class B Shares | ||||
Inception (12/1/87) | 10.26 | % | ||
10 Years | 4.95 | |||
5 Years | 1.34 | |||
1 Year | 13.98 | |||
Class C Shares | ||||
Inception (7/28/97) | 5.59 | % | ||
10 Years | 4.80 | |||
5 Years | 1.65 | |||
1 Year | 18.04 | |||
Class R Shares | ||||
Inception (3/31/08) | 3.02 | % | ||
1 Year | 19.62 | |||
Class Y Shares | ||||
Inception (7/28/97) | 6.62 | % | ||
10 Years | 5.84 | |||
5 Years | 2.65 | |||
1 Year | 20.19 |
Average Annual Total Returns | ||||
As of 6/30/11, the most recent calendar quarter-end, including maximum applicable sales charges | ||||
Class A Shares | ||||
Inception (7/28/97) | 6.80 | % | ||
10 Years | 5.66 | |||
5 Years | 3.62 | |||
1 Year | 28.35 | |||
Class B Shares | ||||
Inception (12/1/87) | 10.82 | % | ||
10 Years | 5.62 | |||
5 Years | 3.71 | |||
1 Year | 29.80 | |||
Class C Shares | ||||
Inception (7/28/97) | 6.45 | % | ||
10 Years | 5.47 | |||
5 Years | 4.02 | |||
1 Year | 33.83 | |||
Class R Shares | ||||
Inception (3/31/08) | 6.50 | % | ||
1 Year | 35.56 | |||
Class Y Shares | ||||
Inception (7/28/97) | 7.49 | % | ||
10 Years | 6.52 | |||
5 Years | 5.05 | |||
1 Year | 36.16 |
Effective June 1, 2010, Class A, Class B, Class C, Class R, Class W and Class I shares of the predecessor fund, Morgan Stanley Equally-Weighted S&P 500 Fund, advised by Morgan Stanley Investment Advisors Inc. were reorganized into Class A, Class B, Class C, Class R, Class A and Class Y shares, respectively, of Invesco Equally-Weighted S&P 500 Fund. Returns shown above for Class A, Class B, Class C, Class R and Class Y shares are blended returns of the predecessor fund and Invesco Equally-Weighted S&P 500 Fund. Share class returns will differ from the predecessor fund because of different expenses.
The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Please visit
invesco.com/performance for the most recent month-end performance. Performance figures reflect reinvested distributions, changes in net asset value and the effect of the maximum sales charge unless otherwise stated. Investment return and principal value will fluctuate so that you may have a gain or loss when you sell shares.
The total annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Class A, Class B, Class C, Class R and Class Y shares was 0.62%, 1.37%, 1.37%, 0.87% and 0.37%, respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.
Class A share performance reflects the maximum 5.50% sales charge, and Class B and Class C share performance reflects the applicable contingent deferred sales charge (CDSC) for the period involved. The CDSC on Class B shares declines from 5% beginning at the time of purchase to 0% at the beginning of the seventh year. The CDSC on Class C shares is 1% for the first year after purchase. Class R and Class Y shares do not have a front-end sales charge or a CDSC; therefore, performance is at net asset value.
The performance of the Fund’s share classes will differ primarily due to different sales charge structures and class expenses.
7 | Invesco Equally-Weighted S&P 500 Fund |
Invesco Equally-Weighted S&P 500 Fund’s investment objective is to achieve a high level of total return on its assets through a combination of capital appreciation and current income.
n | Unless otherwise stated, information presented in this report is as of August 31, 2011, and is based on total net assets. | |
n | Unless otherwise noted, all data provided by Invesco. | |
n | To access your Fund’s reports/prospectus, visit invesco.com/fundreports. |
About share classes
n | Class B shares may not be purchased or acquired by exchange from share classes other than Class B shares. Please see the prospectus for more information. | |
n | Class R shares are available only to certain retirement plans. Please see the prospectus for more information. | |
n | Class Y shares are available to only certain investors. Please see the prospectus for more information. |
Principal risks of investing in the Fund
n | Common stocks. In general, common stock values fluctuate, and sometimes widely fluctuate, in response to activities specific to the company as well as general market, economic and political conditions. | |
n | Derivatives. 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, 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 transactions may not be liquid. Certain derivative transactions may give rise to a form of leverage. Leverage magnifies the potential for gain and the risk of loss. |
About indexes used in this report
n | The S&P 500® Index is an unmanaged index considered representative of the U.S. stock market. | |
n | The S&P 500 Equal Weight Index is the equally weighted version of the S&P 500 Index. | |
n | The Lipper Multi-Cap Core Funds Index is an unmanaged index considered representative of multi-cap core funds tracked by Lipper. | |
n | A direct investment cannot be made in an index. Unless otherwise indicated, index results include reinvested dividends, and they do not reflect sales charges. Performance of the peer group, if applicable, reflects fund expenses; performance of a market index does not. |
Other information
n | The Chartered Financial Analyst® (CFA®) designation is globally recognized and attests to a charterholder’s success in a rigorous and comprehensive study program in the field of investment management and research analysis. | |
n | The returns shown in management’s discussion of Fund performance are based on net asset values calculated for shareholder transactions. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes, and as such, the net asset values for shareholder transactions and the returns based on those net asset values may differ from the net asset values and returns reported in the Financial Highlights. |
n | Industry classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. |
This report must be accompanied or preceded by a currently effective Fund prospectus, which contains more complete information, including sales charges and expenses. Investors should read it carefully before investing.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
Fund Nasdaq Symbols
Class A Shares | VADAX | |
Class B Shares | VADBX | |
Class C Shares | VADCX | |
Class R Shares | VADRX | |
Class Y Shares | VADDX |
8 | Invesco Equally-Weighted S&P 500 Fund |
Schedule of Investments(a)
August 31, 2011
Shares | Value | |||||||
Common Stocks & Other Equity Interests–99.07% | ||||||||
Advertising–0.35% | ||||||||
Interpublic Group of Cos., Inc. (The) | 179,067 | $ | 1,545,348 | |||||
Omnicom Group Inc. | 44,885 | 1,820,087 | ||||||
3,365,435 | ||||||||
Aerospace & Defense–2.43% | ||||||||
Boeing Co. (The) | 27,429 | 1,833,903 | ||||||
General Dynamics Corp. | 28,382 | 1,818,719 | ||||||
Goodrich Corp. | 22,323 | 1,990,765 | ||||||
Honeywell International Inc. | 36,421 | 1,741,288 | ||||||
ITT Corp. | 36,111 | 1,709,495 | ||||||
L-3 Communications Holdings, Inc. | 24,846 | 1,685,056 | ||||||
Lockheed Martin Corp. | 25,423 | 1,886,132 | ||||||
Northrop Grumman Corp. | 31,444 | 1,717,471 | ||||||
Precision Castparts Corp. | 13,299 | 2,179,041 | ||||||
Raytheon Co. | 41,710 | 1,803,123 | ||||||
Rockwell Collins, Inc. | 33,762 | 1,703,631 | ||||||
Textron Inc. | 93,569 | 1,578,509 | ||||||
United Technologies Corp. | 24,052 | 1,785,861 | ||||||
23,432,994 | ||||||||
Agricultural Products–0.20% | ||||||||
Archer-Daniels-Midland Co. | 67,424 | 1,920,236 | ||||||
Air Freight & Logistics–0.79% | ||||||||
C.H. Robinson Worldwide, Inc. | 26,445 | 1,864,373 | ||||||
Expeditors International of Washington, Inc. | 42,789 | 1,946,899 | ||||||
FedEx Corp. | 23,383 | 1,840,710 | ||||||
United Parcel Service, Inc.–Class B | 29,408 | 1,981,805 | ||||||
7,633,787 | ||||||||
Airlines–0.17% | ||||||||
Southwest Airlines Co. | 185,941 | 1,602,811 | ||||||
Aluminum–0.18% | ||||||||
Alcoa Inc. | 138,099 | 1,769,048 | ||||||
Apparel Retail–1.26% | ||||||||
Abercrombie & Fitch Co.–Class A | 31,065 | 1,976,044 | ||||||
Gap, Inc. (The) | 114,088 | 1,884,734 | ||||||
Limited Brands, Inc. | 57,349 | 2,164,351 | ||||||
Ross Stores, Inc. | 27,053 | 2,070,231 | ||||||
TJX Cos., Inc. (The) | 40,635 | 2,219,484 | ||||||
Urban Outfitters, Inc.(b) | 70,607 | 1,848,138 | ||||||
12,162,982 | ||||||||
Apparel, Accessories & Luxury Goods–0.67% | ||||||||
Coach, Inc. | 34,297 | 1,928,177 | ||||||
Polo Ralph Lauren Corp. | 16,399 | 2,248,467 | ||||||
VF Corp. | 19,787 | 2,316,266 | ||||||
6,492,910 | ||||||||
Application Software–1.11% | ||||||||
Adobe Systems Inc.(b) | 66,782 | 1,685,578 | ||||||
Autodesk, Inc.(b) | 57,004 | 1,607,513 | ||||||
Citrix Systems, Inc.(b) | 27,436 | 1,657,957 | ||||||
Compuware Corp.(b) | 215,716 | 1,824,957 | ||||||
Intuit Inc. | 41,375 | 2,041,029 | ||||||
Salesforce.com, Inc.(b) | 14,578 | 1,876,918 | ||||||
10,693,952 | ||||||||
Asset Management & Custody Banks–1.94% | ||||||||
Ameriprise Financial, Inc. | 35,901 | 1,640,676 | ||||||
Bank of New York Mellon Corp. (The) | 77,641 | 1,604,839 | ||||||
BlackRock, Inc. | 10,858 | 1,788,855 | ||||||
Federated Investors, Inc.–Class B | 83,335 | 1,475,863 | ||||||
Franklin Resources, Inc. | 16,354 | 1,961,172 | ||||||
Invesco Ltd.(c) | 88,290 | 1,615,707 | ||||||
Janus Capital Group Inc. | 220,629 | 1,610,592 | ||||||
Legg Mason, Inc. | 63,827 | 1,817,155 | ||||||
Northern Trust Corp. | 43,503 | 1,671,820 | ||||||
State Street Corp. | 46,860 | 1,664,467 | ||||||
T. Rowe Price Group Inc. | 35,512 | 1,899,182 | ||||||
18,750,328 | ||||||||
Auto Parts & Equipment–0.18% | ||||||||
Johnson Controls, Inc. | 54,815 | 1,747,502 | ||||||
Automobile Manufacturers–0.18% | ||||||||
Ford Motor Co.(b) | 159,171 | 1,769,982 | ||||||
Automotive Retail–0.90% | ||||||||
AutoNation, Inc.(b) | 61,437 | 2,480,826 | ||||||
AutoZone, Inc.(b) | 6,973 | 2,140,711 | ||||||
CarMax, Inc.(b) | 69,544 | 1,954,882 | ||||||
O’Reilly Automotive, Inc.(b) | 32,798 | 2,127,934 | ||||||
8,704,353 | ||||||||
Biotechnology–1.05% | ||||||||
Amgen Inc. | 35,077 | 1,943,441 | ||||||
Biogen Idec Inc.(b) | 21,467 | 2,022,191 | ||||||
Celgene Corp.(b) | 35,144 | 2,090,014 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
9 Invesco Equally-Weighted S&P 500 Fund
Shares | Value | |||||||
Biotechnology–(continued) | ||||||||
Cephalon Inc.(b) | 25,521 | $ | 2,058,014 | |||||
Gilead Sciences, Inc.(b) | 51,453 | 2,052,203 | ||||||
10,165,863 | ||||||||
Brewers–0.21% | ||||||||
Molson Coors Brewing Co.–Class B | 45,569 | 1,993,644 | ||||||
Broadcasting–0.62% | ||||||||
CBS Corp.–Class B | 78,601 | 1,968,955 | ||||||
Discovery Communications, Inc.–Class A(b) | 50,314 | 2,127,276 | ||||||
Scripps Networks Interactive–Class A | 43,152 | 1,849,063 | ||||||
5,945,294 | ||||||||
Building Products–0.15% | ||||||||
Masco Corp. | 167,700 | 1,487,499 | ||||||
Cable & Satellite–0.73% | ||||||||
Cablevision Systems Corp.–Class A | 80,671 | 1,456,918 | ||||||
Comcast Corp.–Class A | 86,085 | 1,851,688 | ||||||
DIRECTV–Class A(b) | 43,605 | 1,917,312 | ||||||
Time Warner Cable, Inc. | 27,252 | 1,785,006 | ||||||
7,010,924 | ||||||||
Casinos & Gaming–0.45% | ||||||||
International Game Technology | 124,492 | 1,899,748 | ||||||
Wynn Resorts Ltd. | 15,717 | 2,431,734 | ||||||
4,331,482 | ||||||||
Coal & Consumable Fuels–0.57% | ||||||||
Alpha Natural Resources, Inc.(b) | 48,352 | 1,599,001 | ||||||
CONSOL Energy Inc. | 44,356 | 2,025,295 | ||||||
Peabody Energy Corp. | 37,760 | 1,842,688 | ||||||
5,466,984 | ||||||||
Commercial Printing–0.17% | ||||||||
R. R. Donnelley & Sons Co. | 106,614 | 1,625,863 | ||||||
Communications Equipment–1.85% | ||||||||
Cisco Systems, Inc. | 135,885 | 2,130,677 | ||||||
F5 Networks, Inc.(b) | 20,927 | 1,708,062 | ||||||
Harris Corp. | 45,877 | 1,851,137 | ||||||
JDS Uniphase Corp.(b) | 131,154 | 1,701,067 | ||||||
Juniper Networks, Inc.(b) | 69,355 | 1,451,600 | ||||||
Motorola Mobility Holdings Inc.(b) | 81,958 | 3,091,456 | ||||||
Motorola Solutions, Inc. | 44,727 | 1,882,559 | ||||||
QUALCOMM, Inc. | 38,569 | 1,984,761 | ||||||
Tellabs, Inc. | 499,805 | 2,039,204 | ||||||
17,840,523 | ||||||||
Computer & Electronics Retail–0.36% | ||||||||
Best Buy Co., Inc. | 65,597 | 1,678,627 | ||||||
GameStop Corp.–Class A(b) | 76,936 | 1,841,079 | ||||||
3,519,706 | ||||||||
Computer Hardware–0.61% | ||||||||
Apple Inc.(b) | 6,349 | 2,443,286 | ||||||
Dell Inc.(b) | 127,058 | 1,888,717 | ||||||
Hewlett-Packard Co. | 58,119 | 1,512,837 | ||||||
5,844,840 | ||||||||
Computer Storage & Peripherals–0.96% | ||||||||
EMC Corp.(b) | 78,753 | 1,779,030 | ||||||
Lexmark International, Inc.–Class A(b) | 73,304 | 2,342,796 | ||||||
NetApp, Inc.(b) | 41,211 | 1,550,358 | ||||||
SanDisk Corp.(b) | 49,687 | 1,821,029 | ||||||
Western Digital Corp.(b) | 60,776 | 1,792,284 | ||||||
9,285,497 | ||||||||
Construction & Engineering–0.62% | ||||||||
Fluor Corp. | 33,633 | 2,042,196 | ||||||
Jacobs Engineering Group, Inc.(b) | 49,663 | 1,849,450 | ||||||
Quanta Services, Inc.(b) | 108,144 | 2,075,283 | ||||||
5,966,929 | ||||||||
Construction & Farm Machinery & Heavy Trucks–1.00% | ||||||||
Caterpillar Inc. | 21,200 | 1,929,200 | ||||||
Cummins Inc. | 21,727 | 2,018,873 | ||||||
Deere & Co. | 25,902 | 2,093,400 | ||||||
Joy Global Inc. | 24,399 | 2,036,097 | ||||||
PACCAR Inc. | 42,650 | 1,604,919 | ||||||
9,682,489 | ||||||||
Construction Materials–0.19% | ||||||||
Vulcan Materials Co. | 52,333 | 1,833,225 | ||||||
Consumer Electronics–0.18% | ||||||||
Harman International Industries, Inc. | 47,241 | 1,709,652 | ||||||
Consumer Finance–0.83% | ||||||||
American Express Co. | 41,942 | 2,084,937 | ||||||
Capital One Financial Corp. | 41,650 | 1,917,982 | ||||||
Discover Financial Services | 88,099 | 2,216,571 | ||||||
SLM Corp. | 127,456 | 1,749,971 | ||||||
7,969,461 | ||||||||
Data Processing & Outsourced Services–1.85% | ||||||||
Automatic Data Processing, Inc. | 39,369 | 1,969,631 | ||||||
Computer Sciences Corp. | 52,836 | 1,619,952 | ||||||
Fidelity National Information Services, Inc. | 65,597 | 1,848,523 | ||||||
Fiserv, Inc.(b) | 33,243 | 1,855,957 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
10 Invesco Equally-Weighted S&P 500 Fund
Shares | Value | |||||||
Data Processing & Outsourced Services–(continued) | ||||||||
MasterCard, Inc.–Class A | 7,644 | $ | 2,520,303 | |||||
Paychex, Inc. | 68,676 | 1,852,878 | ||||||
Total System Services, Inc. | 114,602 | 2,080,026 | ||||||
Visa Inc.–Class A | 27,329 | 2,401,673 | ||||||
Western Union Co. | 103,101 | 1,703,229 | ||||||
17,852,172 | ||||||||
Department Stores–0.95% | ||||||||
JC Penney Co., Inc. | 59,323 | 1,579,771 | ||||||
Kohl’s Corp. | 40,578 | 1,880,385 | ||||||
Macy’s, Inc. | 74,594 | 1,935,714 | ||||||
Nordstrom, Inc. | 46,485 | 2,113,208 | ||||||
Sears Holdings Corp.(b) | 27,477 | 1,645,598 | ||||||
9,154,676 | ||||||||
Distillers & Vintners–0.40% | ||||||||
Brown-Forman Corp.–Class B | 27,880 | 2,000,390 | ||||||
Constellation Brands, Inc.–Class A(b) | 96,270 | 1,903,258 | ||||||
3,903,648 | ||||||||
Distributors–0.23% | ||||||||
Genuine Parts Co. | 39,699 | 2,184,239 | ||||||
Diversified Banks–0.56% | ||||||||
Comerica, Inc. | 59,116 | 1,512,779 | ||||||
U.S. Bancorp | 83,029 | 1,927,103 | ||||||
Wells Fargo & Co. | 74,430 | 1,942,623 | ||||||
5,382,505 | ||||||||
Diversified Chemicals–0.96% | ||||||||
Dow Chemical Co. (The) | 58,791 | 1,672,604 | ||||||
E. I. du Pont de Nemours and Co. | 41,037 | 1,980,856 | ||||||
Eastman Chemical Co. | 21,407 | 1,771,001 | ||||||
FMC Corp. | 25,670 | 1,949,123 | ||||||
PPG Industries, Inc. | 24,001 | 1,838,237 | ||||||
9,211,821 | ||||||||
Diversified Metals & Mining–0.41% | ||||||||
Freeport-McMoRan Copper & Gold Inc. | 42,441 | 2,000,669 | ||||||
Titanium Metals Corp. | 123,435 | 1,978,663 | ||||||
3,979,332 | ||||||||
Diversified REIT’s–0.20% | ||||||||
Vornado Realty Trust | 22,236 | 1,910,295 | ||||||
Diversified Support Services–0.42% | ||||||||
Cintas Corp. | 63,509 | 2,031,018 | ||||||
Iron Mountain Inc. | 62,494 | 2,033,555 | ||||||
4,064,573 | ||||||||
Drug Retail–0.37% | ||||||||
CVS Caremark Corp. | 54,492 | 1,956,808 | ||||||
Walgreen Co. | 45,538 | 1,603,393 | ||||||
3,560,201 | ||||||||
Education Services–0.40% | ||||||||
Apollo Group, Inc.–Class A(b) | 48,805 | 2,285,294 | ||||||
DeVry, Inc. | 36,415 | 1,608,815 | ||||||
3,894,109 | ||||||||
Electric Utilities–2.77% | ||||||||
American Electric Power Co., Inc. | 54,043 | 2,087,681 | ||||||
Duke Energy Corp. | 108,548 | 2,052,643 | ||||||
Edison International | 51,839 | 1,927,892 | ||||||
Entergy Corp. | 29,331 | 1,912,675 | ||||||
Exelon Corp. | 48,735 | 2,101,453 | ||||||
FirstEnergy Corp. | 46,506 | 2,057,890 | ||||||
NextEra Energy, Inc. | 35,920 | 2,037,382 | ||||||
Northeast Utilities | 58,571 | 2,032,414 | ||||||
Pepco Holdings, Inc. | 105,563 | 2,056,367 | ||||||
Pinnacle West Capital Corp. | 46,390 | 2,052,294 | ||||||
PPL Corp. | 75,117 | 2,169,379 | ||||||
Progress Energy, Inc. | 42,565 | 2,077,172 | ||||||
Southern Co. | 51,097 | 2,113,372 | ||||||
26,678,614 | ||||||||
Electrical Components & Equipment–0.56% | ||||||||
Emerson Electric Co. | 39,074 | 1,818,895 | ||||||
Rockwell Automation, Inc. | 25,709 | 1,648,718 | ||||||
Roper Industries, Inc. | 25,420 | 1,956,069 | ||||||
5,423,682 | ||||||||
Electronic Components–0.38% | ||||||||
Amphenol Corp.–Class A | 40,554 | 1,905,227 | ||||||
Corning Inc. | 114,280 | 1,717,628 | ||||||
3,622,855 | ||||||||
Electronic Equipment & Instruments–0.16% | ||||||||
FLIR Systems, Inc. | 61,363 | 1,587,461 | ||||||
Electronic Manufacturing Services–0.38% | ||||||||
Jabil Circuit, Inc. | 111,219 | 1,874,040 | ||||||
Molex Inc. | 81,531 | 1,781,452 | ||||||
3,655,492 | ||||||||
Environmental & Facilities Services–0.61% | ||||||||
Republic Services, Inc. | 66,782 | 2,027,502 | ||||||
Stericycle, Inc.(b) | 23,540 | 2,064,693 | ||||||
Waste Management, Inc. | 55,367 | 1,829,326 | ||||||
5,921,521 | ||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
11 Invesco Equally-Weighted S&P 500 Fund
Shares | Value | |||||||
Fertilizers & Agricultural Chemicals–0.50% | ||||||||
CF Industries Holdings, Inc. | 14,950 | $ | 2,733,159 | |||||
Monsanto Co. | 30,890 | 2,129,248 | ||||||
4,862,407 | ||||||||
Food Distributors–0.19% | ||||||||
Sysco Corp. | 65,831 | 1,838,660 | ||||||
Food Retail–0.82% | ||||||||
Kroger Co. (The) | 84,758 | 1,996,898 | ||||||
Safeway Inc. | 89,455 | 1,639,710 | ||||||
SUPERVALU Inc. | 235,169 | 1,874,297 | ||||||
Whole Foods Market, Inc. | 36,526 | 2,411,812 | ||||||
7,922,717 | ||||||||
Footwear–0.23% | ||||||||
NIKE, Inc.–Class B | 25,079 | 2,173,095 | ||||||
Gas Utilities–0.43% | ||||||||
Nicor Inc. | 37,725 | 2,097,510 | ||||||
ONEOK, Inc. | 29,323 | 2,079,001 | ||||||
4,176,511 | ||||||||
General Merchandise Stores–0.67% | ||||||||
Big Lots, Inc.(b) | 62,783 | 2,128,344 | ||||||
Family Dollar Stores, Inc. | 38,672 | 2,064,698 | ||||||
Target Corp. | 43,718 | 2,258,909 | ||||||
6,451,951 | ||||||||
Gold–0.26% | ||||||||
Newmont Mining Corp. | 39,430 | 2,469,107 | ||||||
Health Care Distributors–0.81% | ||||||||
AmerisourceBergen Corp. | 49,614 | 1,963,722 | ||||||
Cardinal Health, Inc. | 46,358 | 1,970,215 | ||||||
McKesson Corp. | 24,683 | 1,972,912 | ||||||
Patterson Cos. Inc. | 63,668 | 1,860,379 | ||||||
7,767,228 | ||||||||
Health Care Equipment–2.58% | ||||||||
Baxter International Inc. | 34,861 | 1,951,519 | ||||||
Becton, Dickinson and Co. | 23,894 | 1,944,494 | ||||||
Boston Scientific Corp.(b) | 299,588 | 2,031,207 | ||||||
C.R. Bard, Inc. | 18,718 | 1,783,077 | ||||||
CareFusion Corp.(b) | 76,301 | 1,954,069 | ||||||
Covidien PLC (Ireland) | 38,746 | 2,021,766 | ||||||
Edwards Lifesciences Corp.(b) | 24,213 | 1,826,871 | ||||||
Intuitive Surgical, Inc.(b) | 5,905 | 2,251,872 | ||||||
Medtronic, Inc. | 53,265 | 1,868,003 | ||||||
St. Jude Medical, Inc. | 42,212 | 1,922,334 | ||||||
Stryker Corp. | 35,247 | 1,721,463 | ||||||
Varian Medical Systems, Inc.(b) | 30,727 | 1,750,210 | ||||||
Zimmer Holdings, Inc.(b) | 32,782 | 1,864,968 | ||||||
24,891,853 | ||||||||
Health Care Facilities–0.17% | ||||||||
Tenet Healthcare Corp.(b) | 317,349 | 1,675,603 | ||||||
Health Care Services–0.93% | ||||||||
DaVita, Inc.(b) | 24,196 | 1,780,342 | ||||||
Express Scripts, Inc.(b) | 36,539 | 1,715,140 | ||||||
Laboratory Corp. of America Holdings(b) | 21,079 | 1,760,729 | ||||||
Medco Health Solutions, Inc.(b) | 36,864 | 1,995,817 | ||||||
Quest Diagnostics Inc. | 33,589 | 1,681,801 | ||||||
8,933,829 | ||||||||
Health Care Supplies–0.20% | ||||||||
DENTSPLY International Inc. | 56,053 | 1,973,066 | ||||||
Health Care Technology–0.24% | ||||||||
Cerner Corp.(b) | 34,748 | 2,291,978 | ||||||
Home Entertainment Software–0.21% | ||||||||
Electronic Arts Inc.(b) | 91,466 | 2,065,302 | ||||||
Home Furnishings–0.20% | ||||||||
Leggett & Platt, Inc. | 86,709 | 1,924,073 | ||||||
Home Improvement Retail–0.39% | ||||||||
Home Depot, Inc. (The) | 58,928 | 1,967,017 | ||||||
Lowe’s Cos., Inc. | 89,141 | 1,776,580 | ||||||
3,743,597 | ||||||||
Homebuilding–0.52% | ||||||||
D.R. Horton, Inc. | 183,427 | 1,929,652 | ||||||
Lennar Corp.–Class A | 116,507 | 1,712,653 | ||||||
Pulte Group Inc.(b) | 282,922 | 1,358,026 | ||||||
5,000,331 | ||||||||
Homefurnishing Retail–0.23% | ||||||||
Bed Bath & Beyond Inc.(b) | 39,127 | 2,224,761 | ||||||
Hotels, Resorts & Cruise Lines–0.78% | ||||||||
Carnival Corp. | 57,674 | 1,904,972 | ||||||
Marriott International Inc.–Class A | 61,363 | 1,796,709 | ||||||
Starwood Hotels & Resorts Worldwide, Inc. | 39,209 | 1,747,153 | ||||||
Wyndham Worldwide Corp. | 64,434 | 2,092,816 | ||||||
7,541,650 | ||||||||
Household Appliances–0.17% | ||||||||
Whirlpool Corp. | 26,747 | 1,676,770 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
12 Invesco Equally-Weighted S&P 500 Fund
Shares | Value | |||||||
Household Products–0.86% | ||||||||
Clorox Co. (The) | 30,117 | $ | 2,099,155 | |||||
Colgate-Palmolive Co. | 23,147 | 2,082,536 | ||||||
Kimberly-Clark Corp. | 30,718 | 2,124,457 | ||||||
Procter & Gamble Co. | 31,439 | 2,002,035 | ||||||
8,308,183 | ||||||||
Housewares & Specialties–0.39% | ||||||||
Fortune Brands, Inc. | 32,049 | 1,830,639 | ||||||
Newell Rubbermaid Inc. | 138,193 | 1,912,591 | ||||||
3,743,230 | ||||||||
Human Resource & Employment Services–0.19% | ||||||||
Robert Half International, Inc. | 78,601 | 1,880,136 | ||||||
Hypermarkets & Super Centers–0.42% | ||||||||
Costco Wholesale Corp. | 25,545 | 2,006,304 | ||||||
Wal-Mart Stores, Inc. | 38,511 | 2,049,171 | ||||||
4,055,475 | ||||||||
Independent Power Producers & Energy Traders–0.62% | ||||||||
AES Corp. (The)(b) | 165,787 | 1,800,447 | ||||||
Constellation Energy Group Inc. | 55,442 | 2,133,963 | ||||||
NRG Energy, Inc.(b) | 87,267 | 2,045,538 | ||||||
5,979,948 | ||||||||
Industrial Conglomerates–0.75% | ||||||||
3M Co. | 22,163 | 1,839,086 | ||||||
Danaher Corp. | 39,240 | 1,797,584 | ||||||
General Electric Co. | 110,016 | 1,794,361 | ||||||
Tyco International Ltd. (Switzerland) | 43,755 | 1,819,333 | ||||||
7,250,364 | ||||||||
Industrial Gases–0.60% | ||||||||
Air Products & Chemicals, Inc. | 22,591 | 1,849,525 | ||||||
Airgas, Inc. | 30,671 | 1,989,934 | ||||||
Praxair, Inc. | 20,128 | 1,982,407 | ||||||
5,821,866 | ||||||||
Industrial Machinery–1.69% | ||||||||
Dover Corp. | 32,651 | 1,878,085 | ||||||
Eaton Corp. | 43,281 | 1,858,919 | ||||||
Flowserve Corp. | 19,246 | 1,815,668 | ||||||
Illinois Tool Works Inc. | 37,031 | 1,723,423 | ||||||
Ingersoll-Rand PLC (Ireland) | 46,602 | 1,561,633 | ||||||
Pall Corp. | 37,957 | 1,940,741 | ||||||
Parker Hannifin Corp. | 23,841 | 1,750,645 | ||||||
Snap-On Inc. | 35,395 | 1,872,749 | ||||||
Stanley Black & Decker Inc. | 29,787 | 1,846,198 | ||||||
16,248,061 | ||||||||
Industrial REIT’s–0.17% | ||||||||
Prologis, Inc. | 60,361 | 1,643,630 | ||||||
Insurance Brokers–0.41% | ||||||||
Aon Corp. | 41,186 | 1,924,622 | ||||||
Marsh & McLennan Cos., Inc. | 68,284 | 2,029,400 | ||||||
3,954,022 | ||||||||
Integrated Oil & Gas–1.15% | ||||||||
Chevron Corp. | 20,513 | 2,028,941 | ||||||
ConocoPhillips | 28,279 | 1,924,951 | ||||||
Exxon Mobil Corp. | 25,742 | 1,905,938 | ||||||
Hess Corp. | 29,361 | 1,742,282 | ||||||
Murphy Oil Corp. | 32,221 | 1,726,401 | ||||||
Occidental Petroleum Corp. | 19,905 | 1,726,560 | ||||||
11,055,073 | ||||||||
Integrated Telecommunication Services–1.01% | ||||||||
AT&T Inc. | 66,109 | 1,882,784 | ||||||
CenturyLink Inc. | 51,564 | 1,864,039 | ||||||
Frontier Communications Corp. | 258,476 | 1,935,985 | ||||||
Verizon Communications, Inc. | 57,285 | 2,071,999 | ||||||
Windstream Corp. | 155,520 | 1,975,104 | ||||||
9,729,911 | ||||||||
Internet Retail–0.93% | ||||||||
Amazon.com, Inc.(b) | 10,911 | 2,349,029 | ||||||
Expedia, Inc. | 75,256 | 2,281,009 | ||||||
Netflix Inc.(b) | 8,279 | 1,945,648 | ||||||
Priceline.com Inc.(b) | 4,399 | 2,363,407 | ||||||
8,939,093 | ||||||||
Internet Software & Services–1.16% | ||||||||
Akamai Technologies, Inc.(b) | 68,979 | 1,513,399 | ||||||
eBay, Inc.(b) | 70,533 | 2,177,354 | ||||||
Google Inc.–Class A(b) | 4,194 | 2,268,786 | ||||||
Monster Worldwide, Inc.(b) | 150,905 | 1,424,543 | ||||||
VeriSign, Inc. | 62,179 | 1,936,876 | ||||||
Yahoo! Inc.(b) | 138,475 | 1,883,953 | ||||||
11,204,911 | ||||||||
Investment Banking & Brokerage–0.69% | ||||||||
Charles Schwab Corp. (The) | 127,857 | 1,576,477 | ||||||
E*TRADE Financial Corp.(b) | 148,265 | 1,832,555 | ||||||
Goldman Sachs Group, Inc. (The) | 14,823 | 1,722,729 | ||||||
Morgan Stanley | 89,102 | 1,559,285 | ||||||
6,691,046 | ||||||||
IT Consulting & Other Services–0.99% | ||||||||
Accenture PLC–Class A (Ireland) | 33,841 | 1,813,539 | ||||||
Cognizant Technology Solutions Corp.–Class A(b) | 30,068 | 1,907,815 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
13 Invesco Equally-Weighted S&P 500 Fund
Shares | Value | |||||||
IT Consulting & Other Services–(continued) | ||||||||
International Business Machines Corp. | 12,370 | $ | 2,126,527 | |||||
SAIC, Inc.(b) | 123,210 | 1,848,150 | ||||||
Teradata Corp.(b) | 36,246 | 1,897,840 | ||||||
9,593,871 | ||||||||
Leisure Products–0.41% | ||||||||
Hasbro, Inc. | 46,849 | 1,814,930 | ||||||
Mattel, Inc. | 77,849 | 2,091,803 | ||||||
3,906,733 | ||||||||
Life & Health Insurance–1.27% | ||||||||
Aflac, Inc. | 45,184 | 1,704,340 | ||||||
Lincoln National Corp. | 75,480 | 1,566,210 | ||||||
MetLife, Inc. | 50,388 | 1,693,037 | ||||||
Principal Financial Group, Inc. | 69,903 | 1,772,740 | ||||||
Prudential Financial, Inc. | 34,366 | 1,725,517 | ||||||
Torchmark Corp. | 48,494 | 1,852,956 | ||||||
Unum Group | 81,238 | 1,912,342 | ||||||
12,227,142 | ||||||||
Life Sciences Tools & Services–0.89% | ||||||||
Agilent Technologies, Inc.(b) | 42,888 | 1,581,281 | ||||||
Life Technologies Corp.(b) | 39,300 | 1,650,600 | ||||||
PerkinElmer, Inc. | 78,510 | 1,795,524 | ||||||
Thermo Fisher Scientific, Inc.(b) | 32,693 | 1,795,826 | ||||||
Waters Corp.(b) | 22,088 | 1,764,168 | ||||||
8,587,399 | ||||||||
Managed Health Care–1.19% | ||||||||
Aetna Inc. | 47,077 | 1,884,492 | ||||||
CIGNA Corp. | 41,607 | 1,944,711 | ||||||
Coventry Health Care Inc.(b) | 59,514 | 1,956,821 | ||||||
Humana Inc. | 26,243 | 2,037,507 | ||||||
UnitedHealth Group Inc. | 40,716 | 1,934,824 | ||||||
WellPoint Inc. | 26,681 | 1,688,907 | ||||||
11,447,262 | ||||||||
Metal & Glass Containers–0.36% | ||||||||
Ball Corp. | 53,786 | 1,931,993 | ||||||
Owens-Illinois, Inc.(b) | 79,523 | 1,506,166 | ||||||
3,438,159 | ||||||||
Motorcycle Manufacturers–0.22% | ||||||||
Harley-Davidson, Inc. | 55,367 | 2,140,488 | ||||||
Movies & Entertainment–0.82% | ||||||||
News Corp.–Class A | 126,742 | 2,188,834 | ||||||
Time Warner Inc. | 57,904 | 1,833,241 | ||||||
Viacom Inc.–Class B | 42,870 | 2,068,049 | ||||||
Walt Disney Co. (The) | 53,475 | 1,821,358 | ||||||
7,911,482 | ||||||||
Multi-Line Insurance–0.91% | ||||||||
American International Group, Inc.(b) | 72,701 | 1,841,516 | ||||||
Assurant, Inc. | 58,070 | 2,042,322 | ||||||
Genworth Financial Inc.–Class A(b) | 199,432 | 1,378,075 | ||||||
Hartford Financial Services Group, Inc. (The) | 83,232 | 1,593,061 | ||||||
Loews Corp. | 50,152 | 1,886,718 | ||||||
8,741,692 | ||||||||
Multi-Sector Holdings–0.19% | ||||||||
Leucadia National Corp. | 61,886 | 1,833,682 | ||||||
Multi-Utilities–3.26% | ||||||||
Ameren Corp. | 71,651 | 2,168,159 | ||||||
CenterPoint Energy, Inc. | 108,548 | 2,172,046 | ||||||
CMS Energy Corp. | 103,363 | 2,036,251 | ||||||
Consolidated Edison, Inc. | 38,540 | 2,166,333 | ||||||
Dominion Resources, Inc. | 42,681 | 2,080,272 | ||||||
DTE Energy Co. | 41,312 | 2,088,735 | ||||||
Integrys Energy Group, Inc. | 40,409 | 2,023,279 | ||||||
NiSource Inc. | 104,317 | 2,228,211 | ||||||
PG&E Corp. | 48,226 | 2,042,371 | ||||||
Public Service Enterprise Group Inc. | 64,454 | 2,199,815 | ||||||
SCANA Corp. | 52,481 | 2,110,786 | ||||||
Sempra Energy | 38,228 | 2,007,735 | ||||||
TECO Energy, Inc. | 109,306 | 2,000,300 | ||||||
Wisconsin Energy Corp. | 65,177 | 2,062,200 | ||||||
Xcel Energy, Inc. | 82,826 | 2,043,317 | ||||||
31,429,810 | ||||||||
Office Electronics–0.18% | ||||||||
Xerox Corp. | 206,518 | 1,714,099 | ||||||
Office REIT’s–0.21% | ||||||||
Boston Properties, Inc. | 19,572 | 2,041,164 | ||||||
Office Services & Supplies–0.36% | ||||||||
Avery Dennison Corp. | 55,503 | 1,615,692 | ||||||
Pitney Bowes Inc. | 90,529 | 1,838,644 | ||||||
3,454,336 | ||||||||
Oil & Gas Drilling–0.97% | ||||||||
Diamond Offshore Drilling, Inc. | 30,207 | 1,925,092 | ||||||
Helmerich & Payne, Inc. | 34,861 | 1,987,774 | ||||||
Nabors Industries Ltd. (Bermuda)(b) | 84,652 | 1,560,983 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
14 Invesco Equally-Weighted S&P 500 Fund
Shares | Value | |||||||
Oil & Gas Drilling–(continued) | ||||||||
Noble Corp. (Switzerland)(b) | 54,101 | $ | 1,826,450 | |||||
Rowan Cos., Inc.(b) | 56,069 | 2,022,409 | ||||||
9,322,708 | ||||||||
Oil & Gas Equipment & Services–1.26% | ||||||||
Baker Hughes Inc. | 29,331 | 1,792,418 | ||||||
Cameron International Corp.(b) | 44,116 | 2,292,267 | ||||||
FMC Technologies, Inc.(b) | 50,816 | 2,259,279 | ||||||
Halliburton Co. | 44,202 | 1,961,243 | ||||||
National Oilwell Varco Inc. | 29,459 | 1,947,829 | ||||||
Schlumberger Ltd. | 24,870 | 1,942,844 | ||||||
12,195,880 | ||||||||
Oil & Gas Exploration & Production–3.15% | ||||||||
Anadarko Petroleum Corp. | 28,873 | 2,129,384 | ||||||
Apache Corp. | 17,362 | 1,789,501 | ||||||
Cabot Oil & Gas Corp. | 33,711 | 2,557,317 | ||||||
Chesapeake Energy Corp. | 72,597 | 2,351,417 | ||||||
Denbury Resources Inc.(b) | 108,375 | 1,728,581 | ||||||
Devon Energy Corp. | 26,434 | 1,793,018 | ||||||
EOG Resources, Inc. | 19,894 | 1,841,986 | ||||||
EQT Corp. | 40,433 | 2,418,702 | ||||||
Marathon Oil Corp. | 66,236 | 1,783,073 | ||||||
Newfield Exploration Co.(b) | 31,933 | 1,630,180 | ||||||
Noble Energy, Inc. | 24,384 | 2,154,570 | ||||||
Pioneer Natural Resources Co. | 24,101 | 1,883,975 | ||||||
QEP Resources Inc. | 52,699 | 1,855,532 | ||||||
Range Resources Corp. | 39,111 | 2,532,828 | ||||||
Southwestern Energy Co.(b) | 49,421 | 1,875,527 | ||||||
30,325,591 | ||||||||
Oil & Gas Refining & Marketing–0.85% | ||||||||
Marathon Petroleum Corp. | 51,780 | 1,918,967 | ||||||
Sunoco, Inc. | 52,266 | 1,993,425 | ||||||
Tesoro Corp.(b) | 97,470 | 2,345,128 | ||||||
Valero Energy Corp. | 84,407 | 1,917,727 | ||||||
8,175,247 | ||||||||
Oil & Gas Storage & Transportation–0.61% | ||||||||
El Paso Corp. | 102,997 | 1,971,363 | ||||||
Spectra Energy Corp. | 76,387 | 1,983,770 | ||||||
Williams Cos., Inc. (The) | 71,854 | 1,939,339 | ||||||
5,894,472 | ||||||||
Other Diversified Financial Services–0.53% | ||||||||
Bank of America Corp. | 190,468 | 1,556,123 | ||||||
Citigroup Inc. | 53,112 | 1,649,128 | ||||||
JPMorgan Chase & Co. | 49,857 | 1,872,629 | ||||||
5,077,880 | ||||||||
Packaged Foods & Meats–2.85% | ||||||||
Campbell Soup Co. | 59,531 | 1,897,253 | ||||||
ConAgra Foods, Inc. | 82,523 | 2,015,212 | ||||||
Dean Foods Co.(b) | 160,934 | 1,390,470 | ||||||
General Mills, Inc. | 53,602 | 2,032,052 | ||||||
H.J. Heinz Co. | 37,837 | 1,991,740 | ||||||
Hershey Co. (The) | 36,546 | 2,143,423 | ||||||
Hormel Foods Corp. | 70,241 | 1,939,354 | ||||||
J M Smucker Co. (The) | 26,403 | 1,903,392 | ||||||
Kellogg Co. | 37,038 | 2,011,904 | ||||||
Kraft Foods Inc.–Class A | 58,996 | 2,066,040 | ||||||
McCormick & Co., Inc. | 40,888 | 1,954,037 | ||||||
Mead Johnson Nutrition Co. | 31,314 | 2,231,122 | ||||||
Sara Lee Corp. | 106,894 | 1,928,368 | ||||||
Tyson Foods, Inc.–Class A | 111,892 | 1,954,753 | ||||||
27,459,120 | ||||||||
Paper Packaging–0.38% | ||||||||
Bemis Co., Inc. | 64,089 | 1,990,604 | ||||||
Sealed Air Corp. | 88,520 | 1,630,539 | ||||||
3,621,143 | ||||||||
Paper Products–0.40% | ||||||||
International Paper Co. | 76,559 | 2,078,577 | ||||||
MeadWestvaco Corp. | 65,513 | 1,802,918 | ||||||
3,881,495 | ||||||||
Personal Products–0.39% | ||||||||
Avon Products, Inc. | 74,349 | 1,677,313 | ||||||
Estee Lauder Cos. Inc. (The)–Class A | 20,901 | 2,041,192 | ||||||
3,718,505 | ||||||||
Pharmaceuticals–2.26% | ||||||||
Abbott Laboratories | 39,361 | 2,066,846 | ||||||
Allergan, Inc. | 25,162 | 2,058,503 | ||||||
Bristol-Myers Squibb Co. | 73,916 | 2,199,001 | ||||||
Eli Lilly and Co. | 54,492 | 2,043,995 | ||||||
Forest Laboratories, Inc.(b) | 52,590 | 1,800,682 | ||||||
Hospira, Inc.(b) | 37,586 | 1,736,473 | ||||||
Johnson & Johnson | 30,685 | 2,019,073 | ||||||
Merck & Co., Inc. | 57,479 | 1,903,704 | ||||||
Mylan Inc.(b) | 91,363 | 1,896,696 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
15 Invesco Equally-Weighted S&P 500 Fund
Shares | Value | |||||||
Pharmaceuticals–(continued) | ||||||||
Pfizer, Inc.(d) | 100,404 | $ | 1,905,668 | |||||
Watson Pharmaceuticals, Inc.(b) | 32,018 | 2,149,048 | ||||||
21,779,689 | ||||||||
Property & Casualty Insurance–1.60% | ||||||||
ACE Ltd. (Switzerland) | 31,630 | 2,042,666 | ||||||
Allstate Corp. (The) | 68,606 | 1,799,535 | ||||||
Berkshire Hathaway Inc.–Class B(b) | 26,938 | 1,966,474 | ||||||
Chubb Corp. | 32,463 | 2,009,135 | ||||||
Cincinnati Financial Corp. | 70,435 | 1,966,545 | ||||||
Progressive Corp. (The) | 99,911 | 1,916,293 | ||||||
Travelers Cos., Inc. (The) | 35,120 | 1,772,155 | ||||||
XL Group PLC (Ireland) | 95,412 | 1,985,524 | ||||||
15,458,327 | ||||||||
Publishing–0.58% | ||||||||
Gannett Co., Inc. | 148,373 | 1,713,708 | ||||||
McGraw-Hill Cos., Inc. (The) | 51,355 | 2,162,559 | ||||||
Washington Post Co. (The)–Class B | 4,855 | 1,727,215 | ||||||
5,603,482 | ||||||||
Railroads–0.58% | ||||||||
CSX Corp. | 81,991 | 1,798,882 | ||||||
Norfolk Southern Corp. | 28,662 | 1,939,844 | ||||||
Union Pacific Corp. | 20,339 | 1,874,646 | ||||||
5,613,372 | ||||||||
Real Estate Services–0.13% | ||||||||
CB Richard Ellis Group, Inc.–Class A(b) | 84,829 | 1,286,008 | ||||||
Regional Banks–1.68% | ||||||||
BB&T Corp. | 77,671 | 1,731,287 | ||||||
Fifth Third Bancorp | 162,088 | 1,721,374 | ||||||
First Horizon National Corp. | 199,042 | 1,401,256 | ||||||
Huntington Bancshares Inc. | 317,845 | 1,598,760 | ||||||
KeyCorp | 245,085 | 1,627,364 | ||||||
M&T Bank Corp. | 23,110 | 1,757,978 | ||||||
PNC Financial Services Group, Inc. | 35,199 | 1,764,878 | ||||||
Regions Financial Corp. | 324,435 | 1,472,935 | ||||||
SunTrust Banks, Inc. | 77,701 | 1,546,250 | ||||||
Zions Bancorp. | 87,870 | 1,532,453 | ||||||
16,154,535 | ||||||||
Research & Consulting Services–0.39% | ||||||||
Dun & Bradstreet Corp. (The) | 27,125 | 1,814,391 | ||||||
Equifax Inc. | 59,236 | 1,915,100 | ||||||
3,729,491 | ||||||||
Residential REIT’s–0.66% | ||||||||
Apartment Investment & Management Co.–Class A | 80,150 | 2,129,586 | ||||||
AvalonBay Communities, Inc. | 15,758 | 2,149,076 | ||||||
Equity Residential | 34,430 | 2,106,427 | ||||||
6,385,089 | ||||||||
Restaurants–1.13% | ||||||||
Chipotle Mexican Grill, Inc.(b) | 7,562 | 2,369,704 | ||||||
Darden Restaurants, Inc. | 43,170 | 2,076,477 | ||||||
McDonald’s Corp. | 24,650 | 2,229,839 | ||||||
Starbucks Corp. | 57,406 | 2,217,020 | ||||||
Yum! Brands, Inc. | 37,099 | 2,017,072 | ||||||
10,910,112 | ||||||||
Retail REIT’s–0.43% | ||||||||
Kimco Realty Corp. | 114,731 | 2,030,739 | ||||||
Simon Property Group, Inc. | 17,843 | 2,096,552 | ||||||
4,127,291 | ||||||||
Semiconductor Equipment–0.94% | ||||||||
Applied Materials, Inc. | 163,917 | 1,855,540 | ||||||
KLA-Tencor Corp. | 53,391 | 1,958,382 | ||||||
MEMC Electronic Materials, Inc.(b) | 240,450 | 1,678,341 | ||||||
Novellus Systems, Inc.(b) | 62,150 | 1,738,336 | ||||||
Teradyne, Inc.(b) | 147,619 | 1,786,190 | ||||||
9,016,789 | ||||||||
Semiconductors–2.71% | ||||||||
Advanced Micro Devices, Inc.(b) | 290,601 | 1,984,805 | ||||||
Altera Corp. | 47,539 | 1,729,944 | ||||||
Analog Devices, Inc. | 55,609 | 1,836,209 | ||||||
Broadcom Corp.–Class A(b) | 64,342 | 2,293,792 | ||||||
First Solar, Inc.(b) | 16,735 | 1,673,165 | ||||||
Intel Corp.(d) | 95,953 | 1,931,534 | ||||||
Linear Technology Corp. | 64,969 | 1,860,063 | ||||||
LSI Corp.(b) | 301,811 | 2,055,333 | ||||||
Microchip Technology Inc. | 57,020 | 1,871,397 | ||||||
Micron Technology, Inc.(b) | 259,796 | 1,535,394 | ||||||
National Semiconductor Corp. | 82,725 | 2,059,853 | ||||||
NVIDIA Corp.(b) | 128,584 | 1,711,453 | ||||||
Texas Instruments Inc. | 65,115 | 1,706,664 | ||||||
Xilinx, Inc. | 61,745 | 1,922,739 | ||||||
26,172,345 | ||||||||
Soft Drinks–0.83% | ||||||||
Coca-Cola Co. (The) | 30,999 | 2,183,879 | ||||||
Coca-Cola Enterprises, Inc. | 71,100 | 1,963,782 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
16 Invesco Equally-Weighted S&P 500 Fund
Shares | Value | |||||||
Soft Drinks–(continued) | ||||||||
Dr. Pepper Snapple Group, Inc. | 50,177 | $ | 1,930,811 | |||||
PepsiCo, Inc. | 29,600 | 1,907,128 | ||||||
7,985,600 | ||||||||
Specialized Consumer Services–0.21% | ||||||||
H&R Block, Inc. | 132,091 | 1,997,216 | ||||||
Specialized Finance–0.97% | ||||||||
CME Group Inc. | 7,320 | 1,955,318 | ||||||
IntercontinentalExchange Inc.(b) | 17,222 | 2,031,335 | ||||||
Moody’s Corp. | 55,961 | 1,725,278 | ||||||
NASDAQ OMX Group, Inc. (The)(b) | 85,506 | 2,025,637 | ||||||
NYSE Euronext | 61,013 | 1,664,435 | ||||||
9,402,003 | ||||||||
Specialized REIT’s–1.41% | ||||||||
HCP, Inc. | 54,844 | 2,044,584 | ||||||
Health Care REIT, Inc. | 38,962 | 1,985,504 | ||||||
Host Hotels & Resorts Inc. | 126,426 | 1,495,620 | ||||||
Plum Creek Timber Co., Inc. | 51,919 | 1,971,364 | ||||||
Public Storage | 18,199 | 2,251,762 | ||||||
Ventas, Inc. | 38,606 | 2,064,649 | ||||||
Weyerhaeuser Co. | 100,059 | 1,804,064 | ||||||
13,617,547 | ||||||||
Specialty Chemicals–0.81% | ||||||||
Ecolab Inc. | 37,704 | 2,020,934 | ||||||
International Flavors & Fragrances Inc. | 32,925 | 1,910,309 | ||||||
Sherwin-Williams Co. (The) | 24,656 | 1,867,445 | ||||||
Sigma-Aldrich Corp. | 30,556 | 1,967,501 | ||||||
7,766,189 | ||||||||
Specialty Stores–0.41% | ||||||||
Staples, Inc. | 132,435 | 1,952,092 | ||||||
Tiffany & Co. | 27,563 | 1,983,433 | ||||||
3,935,525 | ||||||||
Steel–0.88% | ||||||||
AK Steel Holding Corp. | 143,658 | 1,291,485 | ||||||
Allegheny Technologies, Inc. | 34,700 | 1,739,164 | ||||||
Cliffs Natural Resources Inc. | 24,955 | 2,067,522 | ||||||
Nucor Corp. | 51,564 | 1,860,429 | ||||||
United States Steel Corp. | 49,530 | 1,491,844 | ||||||
8,450,444 | ||||||||
Systems Software–1.19% | ||||||||
BMC Software, Inc.(b) | 39,376 | 1,599,059 | ||||||
CA, Inc. | 94,219 | 1,977,657 | ||||||
Microsoft Corp.(d) | 83,815 | 2,229,479 | ||||||
Oracle Corp. | 65,198 | 1,830,108 | ||||||
Red Hat, Inc.(b) | 49,373 | 1,952,208 | ||||||
Symantec Corp.(b) | 109,660 | 1,880,669 | ||||||
11,469,180 | ||||||||
Thrifts & Mortgage Finance–0.35% | ||||||||
Hudson City Bancorp, Inc. | 248,985 | 1,546,197 | ||||||
People’s United Financial Inc. | 155,639 | 1,828,758 | ||||||
3,374,955 | ||||||||
Tires & Rubber–0.18% | ||||||||
Goodyear Tire & Rubber Co. (The)(b) | 137,446 | 1,712,577 | ||||||
Tobacco–0.84% | ||||||||
Altria Group, Inc. | 75,117 | 2,042,431 | ||||||
Lorillard, Inc. | 18,269 | 2,035,532 | ||||||
Philip Morris International Inc. | 29,704 | 2,059,081 | ||||||
Reynolds American Inc. | 53,517 | 2,010,634 | ||||||
8,147,678 | ||||||||
Trading Companies & Distributors–0.44% | ||||||||
Fastenal Co. | 61,867 | 2,071,307 | ||||||
W.W. Grainger, Inc. | 14,073 | 2,168,649 | ||||||
4,239,956 | ||||||||
Trucking–0.19% | ||||||||
Ryder System, Inc. | 39,499 | 1,859,613 | ||||||
Wireless Telecommunication Services–0.53% | ||||||||
American Tower Corp.–Class A(b) | 40,522 | 2,182,515 | ||||||
MetroPCS Communications, Inc.(b) | 126,979 | 1,417,086 | ||||||
Sprint Nextel Corp.(b) | 391,948 | 1,473,724 | ||||||
5,073,325 | ||||||||
Total Common Stocks & Other Equity Interests (Cost $505,843,167) | 955,230,527 | |||||||
Money Market Funds–0.90% | ||||||||
Liquid Assets Portfolio–Institutional Class(e) | 4,355,033 | 4,355,033 | ||||||
Premier Portfolio–Institutional Class(e) | 4,355,032 | 4,355,032 | ||||||
Total Money Market Funds (Cost $8,710,065) | 8,710,065 | |||||||
TOTAL INVESTMENTS–99.97% (Cost $514,553,232) | 963,940,592 | |||||||
OTHER ASSETS LESS LIABILITIES–0.03% | 260,120 | |||||||
NET ASSETS–100.00% | $ | 964,200,712 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
17 Invesco Equally-Weighted S&P 500 Fund
Investment Abbreviation:
REIT | – Real Estate Investment Trust |
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. | |
(b) | Non-income producing security. | |
(c) | The Fund’s Adviser is a subsidiary of Invesco Ltd. and therefore, Invesco Ltd. is considered to be affiliated with the Fund. See Note 5. | |
(d) | All or a portion of the value was pledged as collateral to cover margin requirements for open futures contracts. See Note 1I and Note 4. | |
(e) | The money market fund and the Fund are affiliated by having the same investment adviser. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
18 Invesco Equally-Weighted S&P 500 Fund
Statement of Assets and Liabilities
August 31, 2011
Assets: | ||||
Investments, at value (Cost $504,200,445) | $ | 953,614,820 | ||
Investments in affiliates (Cost $10,352,787) | 10,325,772 | |||
Total investments, at value (Cost $514,553,232) | 963,940,592 | |||
Receivable for: | ||||
Variation margin | 107,837 | |||
Fund shares sold | 2,531,202 | |||
Dividends | 1,831,496 | |||
Investment for trustee deferred compensation and retirement plans | 3,823 | |||
Other assets | 41,838 | |||
Total assets | 968,456,788 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares reacquired | 3,008,674 | |||
Accrued fees to affiliates | 1,030,586 | |||
Accrued other operating expenses | 134,886 | |||
Trustee deferred compensation and retirement plans | 81,930 | |||
Total liabilities | 4,256,076 | |||
Net assets applicable to shares outstanding | $ | 964,200,712 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 561,261,999 | ||
Undistributed net investment income | 11,837,067 | |||
Undistributed net realized gain (loss) | (58,957,611 | ) | ||
Unrealized appreciation | 450,059,257 | |||
$ | 964,200,712 | |||
Net assets: | ||||
Class A | $ | 639,477,927 | ||
Class B | $ | 77,702,163 | ||
Class C | $ | 67,788,024 | ||
Class R | $ | 1,176,152 | ||
Class Y | $ | 178,056,446 | ||
Shares outstanding, $0.01 par value per share, with an unlimited number of shares authorized: | ||||
Class A | 21,395,690 | |||
Class B | 2,615,879 | |||
Class C | 2,353,290 | |||
Class R | 39,512 | |||
Class Y | 5,908,832 | |||
Class A: | ||||
Net asset value per share | $ | 29.89 | ||
Maximum offering price per share (Net asset value of $29.89 ¸ 94.50%) | $ | 31.63 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 29.70 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 28.81 | ||
Class R: | ||||
Net asset value and offering price per share | $ | 29.77 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 30.13 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
19 Invesco Equally-Weighted S&P 500 Fund
Statement of Operations
For the year ended August 31, 2011
Investment income: | ||||
Dividends | $ | 18,882,294 | ||
Dividends from affiliates | 54,829 | |||
Total investment income | 18,937,123 | |||
Expenses: | ||||
Advisory fees | 1,247,860 | |||
Administrative services fees | 279,173 | |||
Custodian fees | 56,041 | |||
Distribution fees: | ||||
Class A | 1,690,348 | |||
Class B | 1,086,792 | |||
Class C | 706,721 | |||
Class R | 2,381 | |||
Transfer agent fees | 1,355,752 | |||
Trustees’ and officers’ fees and benefits | 43,880 | |||
Other | 285,860 | |||
Total expenses | 6,754,808 | |||
Less: Fees waived and expense offset arrangement(s) | (20,417 | ) | ||
Net expenses | 6,734,391 | |||
Net investment income | 12,202,732 | |||
Realized and unrealized gain from: | ||||
Net realized gain from: | ||||
Investment securities | 72,578,880 | |||
Futures contracts | 1,936,722 | |||
74,515,602 | ||||
Change in net unrealized appreciation of: | ||||
Investment securities | 87,318,289 | |||
Futures contracts | 972,607 | |||
88,290,896 | ||||
Net realized and unrealized gain | 162,806,498 | |||
Net increase in net assets resulting from operations | $ | 175,009,230 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
20 Invesco Equally-Weighted S&P 500 Fund
Statement of Changes in Net Assets
For the year ended August 31, 2011, the two months ended August 31, 2010 and the year ended June 30, 2010
Two months | ||||||||||||
Year ended | ended | Year ended | ||||||||||
August 31, | August 31, | June 30, | ||||||||||
2011 | 2010 | 2010 | ||||||||||
Operations: | ||||||||||||
Net investment income | $ | 12,202,732 | $ | 2,656,524 | $ | 10,126,037 | ||||||
Net realized gain | 74,515,602 | 2,252,815 | 71,238,173 | |||||||||
Change in net unrealized appreciation | 88,290,896 | 13,919,070 | 120,955,977 | |||||||||
Net increase in net assets resulting from operations | 175,009,230 | 18,828,409 | 202,320,187 | |||||||||
Distributions to shareholders from net investment income: | ||||||||||||
Class A | (8,801,770 | ) | — | (5,859,977 | ) | |||||||
Class B | (420,658 | ) | — | (1,053,529 | ) | |||||||
Class C | (250,401 | ) | — | (469,837 | ) | |||||||
Class R | (1,842 | ) | — | (1,726 | ) | |||||||
Class Y | (2,834,438 | ) | — | (1,887,353 | ) | |||||||
Total distributions from net investment income | (12,309,109 | ) | — | (9,272,422 | ) | |||||||
Share transactions–net: | ||||||||||||
Class A | (18,582,780 | ) | (7,423,452 | ) | (44,779,495 | ) | ||||||
Class B | (55,334,686 | ) | (10,928,145 | ) | (73,731,588 | ) | ||||||
Class C | 1,679,975 | (1,832,417 | ) | (6,601,606 | ) | |||||||
Class R | 995,638 | (7,779 | ) | 121,331 | ||||||||
Class Y | (6,087,350 | ) | 390,731 | (30,263,606 | ) | |||||||
Net increase (decrease) in net assets resulting from share transactions | (77,329,203 | ) | (19,801,062 | ) | (155,254.964 | ) | ||||||
Net increase (decrease) in net assets | 85,370,918 | (972,653 | ) | 37,792,801 | ||||||||
Net assets: | ||||||||||||
Beginning of year | 878,829,794 | 879,802,447 | 842,009,646 | |||||||||
End of year (includes undistributed net investment income of $11,837,067, $12,316,840 and $9,670,755, respectively) | $ | 964,200,712 | $ | 878,829,794 | $ | 879,802,447 | ||||||
Notes to Financial Statements
August 31, 2011
NOTE 1—Significant Accounting Policies
Invesco Equally-Weighted S&P 500 Fund (the “Fund”), is a series portfolio of AIM Counselor Series Trust (Invesco Counselor Series Trust (the “Trust”). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end series management investment company consisting of thirteen separate portfolios, each authorized to issue an unlimited number of shares of beneficial interest. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class.
The Fund’s investment objective is to achieve a high level of total return on its assets through a combination of capital appreciation and current income.
The Fund currently consists of five different classes of shares: Class A, Class B, Class C, Class R and Class Y. Class A shares are sold with a front-end sales charge unless certain waiver criteria are met and under certain circumstances load waived shares may be subject to contingent deferred sales charges (“CDSC”). Class C shares are sold with a CDSC. Class R and Class Y shares are sold at net asset value. Effective November 30, 2010, new or additional investments in Class B shares are no longer permitted. Existing shareholders of Class B shares may continue to reinvest dividends and capital gains distributions in Class B shares until they convert. Also, shareholders in Class B shares will be able to exchange those shares for Class B shares of other Invesco Funds offering such shares until they convert. Generally, Class B shares will automatically convert to Class A shares on or about the month-end which is at least eight years after the date of purchase. Redemption of Class B shares prior to conversion date will be subject to a CDSC.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. |
21 Invesco Equally-Weighted S&P 500 Fund
A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”). | ||
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded. | ||
Debt obligations (including convertible bonds) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations, including commercial paper, having 60 days or less to maturity are recorded at amortized cost which approximates value. Debt securities are subject to interest rate and credit risks. In addition, all debt securities involve some risk of default with respect to interest and/or principal payments. | ||
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trade is not the current value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economical upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards. | ||
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including Corporate Loans. | ||
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value. | ||
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments. | ||
B. | Securities Transactions and Investment Income — Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. | |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held. | ||
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund’s net asset value and, accordingly, they reduce the Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser. | ||
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class. | ||
C. | Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees |
22 Invesco Equally-Weighted S&P 500 Fund
and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. | ||
D. | Distributions — Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to treat a portion of the proceeds from redemptions as distributions for federal income tax purposes. | |
E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. | |
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period. | ||
F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. | |
G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. | |
H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. | |
I. | Futures Contracts — The Fund may enter into futures contracts to manage exposure to interest rate, equity and market price movements and/or currency risks. A futures contract is an agreement between two parties to purchase or sell a specified underlying security, currency or commodity (or delivery of a cash settlement price, in the case of an index future) for a fixed price at a future date. The Fund currently invests only in exchange-traded futures and they are standardized as to maturity date and underlying financial instrument. Initial margin deposits required upon entering into futures contracts are satisfied by the segregation of specific securities or cash as collateral at the futures commission merchant (broker). During the period the futures contracts are open, changes in the value of the contracts are recognized as unrealized gains or losses by recalculating the value of the contracts on a daily basis. Subsequent or variation margin payments are received or made depending upon whether unrealized gains or losses are incurred. These amounts are reflected as receivables or payables on the Statement of Assets and Liabilities. When the contracts are closed or expire, the Fund recognizes a realized gain or loss equal to the difference between the proceeds from, or cost of, the closing transaction and the Fund’s basis in the contract. The net realized gain (loss) and the change in unrealized gain (loss) on futures contracts held during the period is included on the Statement of Operations. The primary risks associated with futures contracts are market risk and the absence of a liquid secondary market. If the Fund were unable to liquidate a futures contract and/or enter into an offsetting closing transaction, the Fund would continue to be subject to market risk with respect to the value of the contracts and continue to be required to maintain the margin deposits on the futures contracts. Futures contracts have minimal counterparty risk since the exchange’s clearinghouse, as counterparty to all exchange-traded futures, guarantees the futures against default. Risks may exceed amounts recognized in the Statement of Assets and Liabilities. | |
J. | Collateral — To the extent the Fund has pledged or segregated a security as collateral and that security is subsequently sold, it is the Fund’s practice to replace such collateral no later than the next business day. |
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser based on the annual rate of the Fund’s average daily net assets as follows:
Average Daily Net Assets | Rate | |||
First $2 billion | 0 | .12% | ||
Over $2 billion | 0 | .10% | ||
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Sub-Adviser(s).
The Adviser has contractually agreed, through June 30, 2012, to waive advisory fees and/or reimburse expenses to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Class A, Class B, Class C, Class R and Class Y shares to 0.75%, 1.50%, 1.50%, 1.00% and 0.50% of average daily net assets, respectively. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the net annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless the Board of the Trustees and
23 Invesco Equally-Weighted S&P 500 Fund
Invesco mutually agree to amend or continue the fee waiver agreement, it will terminate on June 30, 2012. The Adviser did not waive fees and/or reimburse expenses during the period under this expense limitation.
Further, the Adviser has contractually agreed, through at least June 30, 2012, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the year ended August 31, 2011, the Adviser waived advisory fees of $19,884.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco for certain administrative costs incurred in providing accounting services to the Fund. For the year ended August 31, 2011, expenses incurred under the agreement are shown in the Statement of Operations as administrative services fees.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (“IIS”) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. IIS may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. All fees payable by IIS to intermediaries that provide omnibus account services or sub-accounting are charged back to the Fund, subject to certain limitations approved by the Trust’s Board of Trustees. For the year ended August 31, 2011, the expenses incurred under the agreement are shown in the Statement of Operations as transfer agent fees.
Shares of the Fund are distributed by Invesco Distributors, Inc. (“IDI”), an affiliate of the Adviser. The Fund has adopted a Plan of Distribution (the “Plan”) pursuant to Rule 12b-1 under the 1940 Act. The Plan provides that the Fund will reimburse IDI for distribution related expenses that IDI incurs up to a maximum of the following annual rates: (1) Class A — up to 0.25% of the average daily net assets of Class A shares; (2) Class B — up to 1.00% of the average daily net assets of Class B shares; (3) Class C — up to 1.00% of the average daily net assets of Class C shares; and (4) Class R — up to 0.50% of the average daily net assets of Class R shares.
In the case of Class B shares, provided that the Plan continues in effect, any cumulative expenses incurred by IDI, but not yet reimbursed to IDI, may be recovered through the payment of future distribution fees from the Fund pursuant to the Plan and contingent deferred sales charges paid by investors upon redemption of Class B shares.
For the year ended August 31, 2011, expenses incurred under these agreements are shown in the Statement of Operations as distribution fees.
Front-end sales commissions and CDSC (collectively the “sales charges”) are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the year ended August 31, 2011, IDI advised the Fund that IDI retained $38,886 in front-end sales commissions from the sale of Class A shares and $249, $61,621 and $3,681 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of the Adviser, Invesco Ltd., IIS and/or IDI.
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3) generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
Level 1 — | Prices are determined using quoted prices in an active market for identical assets. | |
Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. | |
Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of August 31, 2011. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
During the year ended August 31, 2011, there were no significant transfers between investment levels.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 963,940,592 | $ | — | $ | — | $ | 963,940,592 | ||||||||
Futures* | 671,897 | — | — | 671,897 | ||||||||||||
Total Investments | $ | 964,612,489 | $ | — | $ | — | $ | 964,612,489 | ||||||||
* | Unrealized appreciation. |
NOTE 4—Derivative Investments
The Fund has implemented the required disclosures about derivative instruments and hedging activities in accordance with GAAP. This disclosure is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their
24 Invesco Equally-Weighted S&P 500 Fund
effects on an entity’s financial position and financial performance. The enhanced disclosure has no impact on the results of operations reported in the financial statements.
Value of Derivative Instruments at Period-End
The table below summarizes the value of the Fund’s derivative instruments, detailed by primary risk exposure, held as of August 31, 2011:
Value | ||||||||
Risk Exposure/Derivative Type | Assets | Liabilities | ||||||
Equity risk | ||||||||
Futures contracts(a) | $ | 673,065 | $ | (1,168 | ) | |||
(a) | Includes cumulative appreciation (depreciation) of futures contracts. Only current day’s variation margin receivable is reported within the Statement of Assets and Liabilities. |
Effect of Derivative Instruments for the year ended August 31, 2011
The table below summarizes the gains on derivative instruments, detailed by primary risk exposure, recognized in earnings during the period:
Location of Gain on | ||||
Statement of Operations | ||||
Futures* | ||||
Realized Gain | ||||
Equity risk | $ | 1,936,722 | ||
Change in Unrealized Appreciation | ||||
Equity risk | 972,607 | |||
Total | $ | 2,909,329 | ||
* | The average notional value of futures outstanding during the period was $15,731,136. |
Open Futures Contracts | ||||||||||||||||
Number of | Month/ | Notional | Unrealized | |||||||||||||
Contract | Contracts | Commitment | Value | Appreciation | ||||||||||||
S&P 500 E-Mini | 173 | September-2011/Long | $ | 10,533,105 | $ | 671,897 | ||||||||||
NOTE 5—Investment in Affiliate
The Fund’s Adviser is a subsidiary of Invesco Ltd. and therefore, Invesco Ltd. is considered to be affiliated with the Fund. The following is a summary of the transactions in and earnings from investments in Invesco Ltd. for the twelve months ended August 31, 2011.
Change in | ||||||||||||||||||||||||||||
Unrealized | ||||||||||||||||||||||||||||
Value | Purchases | Proceeds | Appreciation | Realized | Value | Dividend | ||||||||||||||||||||||
08/31/10 | at Cost | from Sales | (Depreciation) | Gain (Loss) | 08/31/11 | Income | ||||||||||||||||||||||
Invesco, Ltd. | $ | 1,748,514 | $ | 261,834 | $ | (471,621 | ) | $ | 150,237 | $ | (73,257 | ) | $ | 1,615,707 | $ | 40,303 | ||||||||||||
NOTE 6—Expense Offset Arrangement(s)
The expense offset arrangements are comprised of transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder. For the year ended August 31, 2011, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $533.
NOTE 7—Trustees’ and Officers’ Fees and Benefits
“Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and “Trustees’ and Officers’ Fees and Benefits” also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. “Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
During the year ended August 31, 2011, the Fund paid legal fees of $3,644 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A partner of that firm is a Trustee of the Trust.
25 Invesco Equally-Weighted S&P 500 Fund
NOTE 8—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 9—Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Year Ended August 31, 2011, two months ended August 31, 2010 and the Fiscal Year Ended June 30, 2010:
August 31, 2011 | August 31, 2010 | June 30, 2010 | ||||||||||
Ordinary income | $ | 12,309,109 | $ | — | $ | 9,272,422 | ||||||
Tax Components of Net Assets at Period-End:
2011 | ||||
Undistributed ordinary income | $ | 11,599,528 | ||
Net unrealized appreciation — investments | 415,364,995 | |||
Temporary book/tax differences | (81,930 | ) | ||
Capital loss carryforward | (23,943,880 | ) | ||
Shares of beneficial interest | 561,261,999 | |||
Total net assets | $ | 964,200,712 | ||
The difference between book-basis and tax-basis unrealized appreciation is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund’s net unrealized appreciation difference is attributable primarily to wash sales.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund’s temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund utilized $67,713,898 of capital loss carryforward in the current period to offset net realized capital gain for federal income tax purposes. The Fund has a capital loss carryforward as of August 31, 2011 which expires as follows:
Capital Loss | ||||
Expiration | Carryforward* | |||
August 31, 2017 | $ | 23,943,880 | ||
* | Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. |
NOTE 10—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended August 31, 2011 was $223,669,959 and $291,437,120, respectively. Cost of investments on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed Federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investment Securities on a Tax Basis | ||||
Aggregate unrealized appreciation of investment securities | $ | 429,160,416 | ||
Aggregate unrealized (depreciation) of investment securities | (13,795,421 | ) | ||
Net unrealized appreciation of investment securities | $ | 415,364,995 | ||
Cost of investments for tax purposes is $548,575,597. |
NOTE 11—Reclassification of Permanent Differences—
Primarily as a result of differing book/tax treatment of real estate investment trusts distributions, on August 31, 2011, undistributed net investment income was decreased by $373,396, undistributed net realized gain (loss) was increased by $373,396. This reclassification had no effect on the net assets of the Fund.
26 Invesco Equally-Weighted S&P 500 Fund
NOTE 12—Share Information
Summary of Share Activity | ||||||||||||||||||||||||
Year ended | Two months ended | Year ended | ||||||||||||||||||||||
August 31, 2011(a) | August 31, 2010 | June 30, 2010 | ||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||
Sold: | ||||||||||||||||||||||||
Class A | 3,133,592 | $ | 98,814,686 | 169,578 | $ | 4,450,136 | 2,724,971 | $ | 69,929,082 | |||||||||||||||
Class B | 127,382 | 3,844,372 | 12,287 | 319,874 | 175,476 | 4,444,539 | ||||||||||||||||||
Class C | 634,600 | 19,144,631 | 17,659 | 446,294 | 186,847 | 4,577,184 | ||||||||||||||||||
Class R | 35,762 | 1,125,853 | 384 | 9,924 | 5,381 | 137,925 | ||||||||||||||||||
Class Y | 2,142,366 | 68,697,799 | 249,691 | 6,529,012 | 549,168 | 13,969,777 | ||||||||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||||||||||
Class A | 257,336 | 7,789,564 | — | — | 224,579 | 5,695,319 | ||||||||||||||||||
Class B | 12,636 | 382,126 | — | — | 40,171 | 1,015,527 | ||||||||||||||||||
Class C | 7,811 | 229,099 | — | — | 18,629 | 456,604 | ||||||||||||||||||
Class R | 52 | 1,575 | — | — | 31 | 792 | ||||||||||||||||||
Class Y | 83,013 | 2,528,575 | — | — | 73,263 | 1,869,683 | ||||||||||||||||||
Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||||||||||
Class A | 1,120,505 | 34,961,343 | 226,963 | 5,965,412 | 129,389 | 3,510,993 | ||||||||||||||||||
Class B | (1,126,176 | ) | (34,961,343 | ) | (228,827 | ) | (5,965,412 | ) | (130,102 | ) | (3,510,993 | ) | ||||||||||||
Reacquired: | ||||||||||||||||||||||||
Class A | (5,164,472 | ) | (160,148,373 | ) | (686,526 | ) | (17,839,000 | ) | (4,918,358 | ) | (123,914,889 | ) | ||||||||||||
Class B | (804,551 | ) | (24,599,841 | ) | (203,247 | ) | (5,282,607 | ) | (2,996,031 | ) | (75,680,661 | ) | ||||||||||||
Class C | (586,530 | ) | (17,693,755 | ) | (90,618 | ) | (2.278,711 | ) | (479,138 | ) | (11,635,394 | ) | ||||||||||||
Class R | (4,437 | ) | (131,790 | ) | (685 | ) | (17,703 | ) | (630 | ) | (17,386 | ) | ||||||||||||
Class Y | (2,424,226 | ) | (77,313,724 | ) | (233,702 | ) | (6,138,281 | ) | (1,835,049 | ) | (46,103,066 | ) | ||||||||||||
Net increase (decrease) in share activity | (2,555,337 | ) | $ | (77,329,203 | ) | (767,043 | ) | $ | (19,801,062 | ) | (6,231,403 | ) | $ | (155,254,964 | ) | |||||||||
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 71% of the outstanding shares of the Fund. IDI has an agreement with these entities to sell Fund shares. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
27 Invesco Equally-Weighted S&P 500 Fund
NOTE 13—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Ratio of | Ratio of | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net gains | expenses | expenses | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
(losses) | to average | to average net | Ratio of net | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset | on securities | Dividends | Distributions | net assets | assets without | nvestment | ||||||||||||||||||||||||||||||||||||||||||||||||||
value, | Net | (both | Total from | from net | from net | Net asset | Net assets, | with fee waivers | fee waivers | income to | ||||||||||||||||||||||||||||||||||||||||||||||
beginning | investment | realized and | investment | investment | realized | Total | value, end | Total | end of period | and/or expenses | and/or expenses | average | Portfolio | |||||||||||||||||||||||||||||||||||||||||||
of period | income(a) | unrealized) | operations | income | gains | Distributions | of period | Return(b) | (000s omitted) | absorbed | absorbed | net assets | turnover(c) | |||||||||||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | $ | 25.26 | $ | 0.39 | $ | 4.65 | $ | 5.04 | $ | (0.41 | ) | $ | — | $ | (0.41 | ) | $ | 29.89 | 19.91 | % | $ | 639,478 | 0.56 | %(d) | 0.56 | %(d) | 1.26 | %(d) | 22 | % | ||||||||||||||||||||||||||
Two months 08/31/10 | 24.74 | 0.08 | 0.44 | 0.52 | — | — | — | 25.26 | 2.10 | 556,910 | 0.65 | (e) | 0.65 | (e) | 1.81 | (e) | 0 | |||||||||||||||||||||||||||||||||||||||
Year ended 06/30/10 | 20.14 | 0.30 | 4.56 | 4.86 | (0.26 | ) | — | (0.26 | ) | 24.74 | 24.08 | 552,673 | 0.64 | 0.64 | 1.17 | 24 | ||||||||||||||||||||||||||||||||||||||||
Year ended 06/30/09 | 33.39 | 0.37 | (9.39 | ) | (9.02 | ) | (0.46 | ) | (3.77 | ) | (4.23 | ) | 20.14 | (24.61 | ) | 486,937 | 0.75 | (f) | 0.75 | (f) | 1.62 | (f) | 39 | |||||||||||||||||||||||||||||||||
Year ended 06/30/08 | 45.39 | 0.48 | (7.81 | ) | (7.33 | ) | (0.48 | ) | (4.19 | ) | (4.67 | ) | 33.39 | (17.31 | ) | 799,622 | 0.62 | (f) | 0.62 | (f) | 1.22 | (f) | 25 | |||||||||||||||||||||||||||||||||
Year ended 06/30/07 | 40.04 | 0.45 | 7.54 | 7.99 | (0.40 | ) | (2.24 | ) | (2.64 | ) | 45.39 | 20.44 | 1,070,820 | 0.62 | (f) | 0.62 | (f) | 1.05 | (f) | 14 | ||||||||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 25.05 | 0.16 | 4.60 | 4.76 | (0.11 | ) | — | (0.11 | ) | 29.70 | 18.98 | 77,702 | 1.31 | (d) | 1.31 | (d) | 0.51 | (d) | 22 | |||||||||||||||||||||||||||||||||||||
Two months 08/31/10 | 24.56 | 0.05 | 0.44 | 0.49 | — | — | — | 25.05 | 2.00 | 110,367 | 1.40 | (e) | 1.40 | (e) | 1.06 | (e) | 0 | |||||||||||||||||||||||||||||||||||||||
Year ended 06/30/10 | 20.08 | 0.10 | 4.54 | 4.64 | (0.16 | ) | — | (0.16 | ) | 24.56 | 23.09 | 118,559 | 1.39 | 1.39 | 0.42 | 24 | ||||||||||||||||||||||||||||||||||||||||
Year ended 06/30/09 | 33.02 | 0.20 | (9.22 | ) | (9.02 | ) | (0.15 | ) | (3.77 | ) | (3.92 | ) | 20.08 | (25.14 | ) | 155,328 | 1.50 | (f) | 1.50 | (f) | 0.87 | (f) | 39 | |||||||||||||||||||||||||||||||||
Year ended 06/30/08 | 44.85 | 0.18 | (7.74 | ) | (7.56 | ) | (0.08 | ) | (4.19 | ) | (4.27 | ) | 33.02 | (17.96 | ) | 352,174 | 1.37 | (f) | 1.37 | (f) | 0.47 | (f) | 25 | |||||||||||||||||||||||||||||||||
Year ended 06/30/07 | 39.57 | 0.12 | 7.45 | 7.57 | (0.05 | ) | (2.24 | ) | (2.29 | ) | 44.85 | 19.54 | 630,489 | 1.38 | (f) | 1.38 | (f) | 0.29 | (f) | 14 | ||||||||||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 24.29 | 0.16 | 4.47 | 4.63 | (0.11 | ) | — | (0.11 | ) | 28.81 | 19.04 | 67,788 | 1.31 | (d) | 1.31 | (d) | 0.51 | (d) | 22 | |||||||||||||||||||||||||||||||||||||
Two months 08/31/10 | 23.82 | 0.04 | 0.43 | 0.47 | — | — | — | 24.29 | 1.97 | 55,797 | 1.40 | (e) | 1.40 | (e) | 1.06 | (e) | 0 | |||||||||||||||||||||||||||||||||||||||
Year ended 06/30/10 | 19.49 | 0.10 | 4.42 | 4.52 | (0.19 | ) | — | (0.19 | ) | 23.82 | 23.15 | 56,462 | 1.39 | 1.39 | 0.42 | 24 | ||||||||||||||||||||||||||||||||||||||||
Year ended 06/30/09 | 32.33 | 0.19 | (9.06 | ) | (8.87 | ) | (0.20 | ) | (3.77 | ) | (3.97 | ) | 19.49 | (25.17 | ) | 51,534 | 1.50 | (f) | 1.50 | (f) | 0.87 | (f) | 39 | |||||||||||||||||||||||||||||||||
Year ended 06/30/08 | 44.08 | 0.19 | (7.58 | ) | (7.39 | ) | (0.17 | ) | (4.19 | ) | (4.36 | ) | 32.33 | (17.89 | ) | 88,658 | 1.35 | (f) | 1.35 | (f) | 0.49 | (f) | 25 | |||||||||||||||||||||||||||||||||
Year ended 06/30/07 | 38.97 | 0.14 | 7.33 | 7.47 | (0.12 | ) | (2.24 | ) | (2.36 | ) | 44.08 | 19.53 | 124,080 | 1.34 | (f) | 1.34 | (f) | 0.33 | (f) | 14 | ||||||||||||||||||||||||||||||||||||
Class R | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 25.14 | 0.31 | 4.63 | 4.94 | (0.31 | ) | — | (0.31 | ) | 29.77 | 19.62 | 1,176 | 0.81 | (d) | 0.81 | (d) | 1.01 | (d) | 22 | |||||||||||||||||||||||||||||||||||||
Two months 08/31/10 | 24.63 | 0.07 | 0.44 | 0.51 | — | — | — | 25.14 | 2.07 | 205 | 0.90 | (e) | 0.90 | (e) | 1.56 | (e) | 0 | |||||||||||||||||||||||||||||||||||||||
Year ended 06/30/10 | 20.10 | 0.23 | 4.56 | 4.79 | (0.26 | ) | — | (0.26 | ) | 24.63 | 23.78 | 208 | 0.89 | 0.89 | 0.92 | 24 | ||||||||||||||||||||||||||||||||||||||||
Year ended 06/30/09 | 33.36 | 0.30 | (9.35 | ) | (9.05 | ) | (0.44 | ) | (3.77 | ) | (4.21 | ) | 20.10 | (24.78 | ) | 73 | 1.00 | (f) | 1.00 | (f) | 1.37 | (f) | 39 | |||||||||||||||||||||||||||||||||
Year ended 06/30/08(g) | 34.26 | 0.09 | (0.99 | ) | (0.90 | ) | — | — | — | 33.36 | (2.63 | ) | 97 | 0.86 | (e)(f) | 0.86 | (e)(f) | 0.98 | (e)(f) | 25 | ||||||||||||||||||||||||||||||||||||
Class Y | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 25.47 | 0.47 | 4.68 | 5.15 | (0.49 | ) | — | (0.49 | ) | 30.13 | 20.19 | 178,056 | 0.31 | (d) | 0.31 | (d) | 1.51 | (d) | 22 | |||||||||||||||||||||||||||||||||||||
Two months 08/31/10 | 24.94 | 0.09 | 0.44 | 0.53 | — | — | — | 25.47 | 2.12 | 155,551 | 0.40 | (e) | 0.40 | (e) | 2.06 | (e) | 0 | |||||||||||||||||||||||||||||||||||||||
Year ended 06/30/10 | 20.27 | 0.36 | 4.59 | 4.95 | (0.28 | ) | — | (0.28 | ) | 24.94 | 24.39 | 151,901 | 0.39 | 0.39 | 1.42 | 24 | ||||||||||||||||||||||||||||||||||||||||
Year ended 06/30/09 | 33.62 | 0.43 | (9.46 | ) | (9.03 | ) | (0.55 | ) | (3.77 | ) | (4.32 | ) | 20.27 | (24.41 | ) | 148,051 | 0.50 | (f) | 0.50 | (f) | 1.87 | (f) | 39 | |||||||||||||||||||||||||||||||||
Year ended 06/30/08 | 45.68 | 0.59 | (7.87 | ) | (7.28 | ) | (0.59 | ) | (4.19 | ) | (4.78 | ) | 33.62 | (17.11 | ) | 351,338 | 0.37 | (f) | 0.37 | (f) | 1.47 | (f) | 25 | |||||||||||||||||||||||||||||||||
Year ended 06/30/07 | 40.28 | 0.56 | 7.58 | 8.14 | (0.50 | ) | (2.24 | ) | (2.74 | ) | 45.68 | 20.72 | 537,295 | 0.38 | (f) | 0.38 | (f) | 1.29 | (f) | 14 | ||||||||||||||||||||||||||||||||||||
(a) | Calculated using average shares outstanding. | |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year, if applicable. | |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. | |
(d) | Ratios are based on average daily net assets (000’s omitted) of $676,139, $108,679, $71,299, $476 and $183,290 for Class A, Class B, Class C, Class R and Class Y shares, respectively. | |
(e) | Annualized. | |
(f) | The ratios reflect the rebate of certain Fund expenses in connection with investments in a Morgan Stanley affiliate during the period. The effect of the rebate on the ratios is less than 0.005%. | |
(g) | Commencement date of March 31, 2008. |
28 Invesco Equally-Weighted S&P 500 Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Counselor Series Trust (Invesco Counselor Series Trust)
and Shareholders of Invesco Equally-Weighted S&P 500 Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Invesco Equally-Weighted S&P 500 Fund (one of the funds constituting AIM Counselor Series Trust (Invesco Counselor Series Trust), hereafter referred to as the “Fund”) at August 31, 2011, the results of its operations for the year then ended, the changes in its net assets and the financial highlights for the year then ended, the two month period ended August 31, 2010, and the year ended June 30, 2010, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at August 31, 2011 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. The financial highlights of the Fund for the periods ended June 30, 2009 and prior were audited by other independent auditors whose report dated August 24, 2009 expressed an unqualified opinion on those financial statements.
PRICEWATERHOUSECOOPERS LLP
October 21, 2011
Houston, Texas
29 Invesco Equally-Weighted S&P 500 Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments or contingent deferred sales charges on redemptions, and redemption fees, if any; and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period March 1, 2011 through August 31, 2011.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the hypothetical information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
HYPOTHETICAL | ||||||||||||||||||||||||||||||
ACTUAL | (5% annual return before expenses) | |||||||||||||||||||||||||||||
Beginning | Ending | Expenses | Ending | Expenses | Annualized | |||||||||||||||||||||||||
Account Value | Account Value | Paid During | Account Value | Paid During | Expense | |||||||||||||||||||||||||
Class | (03/01/11) | (08/31/11)1 | Period2 | (08/31/11) | Period2 | Ratio | ||||||||||||||||||||||||
A | $ | 1,000.00 | $ | 914.90 | $ | 2.99 | $ | 1,022.08 | $ | 3.16 | 0.62 | % | ||||||||||||||||||
B | 1,000.00 | 911.30 | 6.60 | 1,018.30 | 6.97 | 1.37 | ||||||||||||||||||||||||
C | 1,000.00 | 911.70 | 6.60 | 1,018.30 | 6.97 | 1.37 | ||||||||||||||||||||||||
R | 1,000.00 | 913.80 | 4.20 | 1,020.82 | 4.43 | 0.87 | ||||||||||||||||||||||||
Y | 1,000.00 | 915.80 | 1.79 | 1,023.34 | 1.89 | 0.37 | ||||||||||||||||||||||||
1 | The actual ending account value is based on the actual total return of the Fund for the period March 1, 2011 through August 31, 2011, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund’s expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half year. |
30 Invesco Equally-Weighted S&P 500 Fund
Approval of Investment Advisory and Sub-Advisory Contracts |
The Board of Trustees (the Board) of AIM Counselor Series Trust (Invesco Counselor Series Trust) is required under the Investment Company Act of 1940, as amended, to approve annually the renewal of the Invesco Equally-Weighted S&P 500 Fund (the Fund) investment advisory agreement with Invesco Advisers, Inc. (Invesco Advisers) and the Master Intergroup Sub-Advisory Contract for Mutual Funds (the sub-advisory contracts) with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers). During contract renewal meetings held on June 14-15, 2011, the Board as a whole, and the disinterested or “independent” Trustees, who comprise 80% of the Board, voting separately, approved the continuance of the Fund’s investment advisory agreement and the sub-advisory contracts for another year, effective July 1, 2011. In doing so, the Board considered the process that it follows in reviewing and approving the Fund’s investment advisory agreement and sub-advisory contracts and the information that it is provided. The Board determined that the Fund’s investment advisory agreement and the sub-advisory contracts are in the best interests of the Fund and its shareholders and the compensation to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is responsible for overseeing the management of a number of the series portfolios of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies and limitations and investment risks of these funds. The Sub-Committees meet regularly and at designated contract renewal meetings each year to conduct a review of the performance, fees, expenses and other matters related to their assigned Invesco Funds. Each Sub-Committee recommends to the Investments Committee, which in turn recommends to the full Board, whether to approve the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Trustees receive comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and an independent company, Lipper, Inc. (Lipper). The Trustees also receive an independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. The independent Trustees are assisted in their annual evaluation of the Fund’s investment advisory agreement by the Senior Officer and by independent legal counsel. The independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in private sessions with the Senior Officer and counsel.
In evaluating the fairness and reasonableness of the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Trustees also considered information provided in connection with fund acquisitions approved by the Trustees to rationalize the Invesco Funds product range following the acquisition of the retail mutual fund business of Morgan Stanley (the Morgan Stanley Transaction). The Trustees recognized that the advisory fees for the Invesco Funds include advisory fees that are the result of years of review and negotiation between the Trustees and Invesco Advisers as well as advisory fees inherited from Morgan Stanley and Van Kampen funds acquired in the Morgan Stanley Transaction. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these same arrangements throughout the year and in prior years. One Trustee may have weighed a particular piece of information differently than another Trustee.
The discussion below serves as the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 15, 2011, and may not reflect consideration of factors that became known to the Board after that date, including, for example, changes to the Fund’s performance, advisory fees, expense limitations and/or fee waivers.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers, with whom the Board met during the year. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s consideration of Invesco Advisers’ performance and investment process oversight, independent credit analysis and investment risk management.
In determining whether to continue the Fund’s investment advisory agreement, the Board considered the prior relationship between Invesco Advisers and the Fund, as well as the Board’s knowledge of Invesco Advisers’ operations, and concluded that it is beneficial to maintain the current relationship, in part, because of such knowledge. The Board also considered services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution and legal and compliance. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and the advisory services are provided in accordance with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services provided by the Affiliated Sub-Advisers under the sub-advisory contracts and the credentials and experience of the officers and employees of the Affiliated Sub-Advisers who provide these services. The Board noted that the Affiliated Sub-Advisers have offices and personnel that are located in financial centers around the world. As a result, the Affiliated Sub-Advisers can provide research and investment analysis on the markets and economies of various countries in which the Fund invests and make recommendations on securities of companies located in such countries. The Board concluded that the sub-advisory contracts benefit the Fund and its shareholders by permitting Invesco Advisers to use the resources and talents of the Affiliated Sub-Advisers in managing the Fund. The Board concluded that the nature, extent and quality of the services provided by the Affiliated Sub-Advisers are appropriate and satisfactory and in accordance with the terms of the Fund’s sub-advisory contracts.
31 Invesco Equally-Weighted S&P 500 Fund
B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
The Board compared the Fund’s performance during the past one, three and five calendar years to the performance of funds in the Lipper performance universe and against the Lipper Multi-Cap Core Funds Index. The Board noted that performance of Class A shares of the Fund was in the first quintile of the performance universe for the one and three year periods and the second quintile for the five year period (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board noted that performance of Class A shares of the Fund was above the performance of the Index for the one, three and five year periods. Although the independent written evaluation of the Fund’s Senior Officer only considered Fund performance through the most recent calendar year, the Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
C. | Advisory and Sub-Advisory Fees and Fee Waivers |
The Board compared the Fund’s contractual advisory fee rate to the contractual advisory fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the contractual advisory fee rate for Class A shares of the Fund was below the median contractual advisory fee rate of funds in the expense group. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using audited financial data from the most recent annual report of each fund in the expense group that was publicly available as of the end of the past calendar year and including only one fund per investment adviser. The Board noted that comparative data is as of varying dates, which may affect the comparability of data during times of market volatility.
The Board also compared the Fund’s effective fee rate (the advisory fee after advisory fee waivers and before expense limitations/waivers) to the advisory fee rates of other mutual funds advised by Invesco Advisers and its affiliates with investment strategies comparable to those of the Fund. The Board noted that the Fund’s rate was the same as the rate of one mutual fund and above the rate of the other mutual fund, which was a fund-of-funds that does not pay an advisory fee.
Other than the mutual funds described above, the Board noted that Invesco Advisers and the Affiliated Sub-Advisers do not manage other mutual funds or client accounts in a manner substantially similar to the management of the Fund.
The Board noted that Invesco Advisers has contractually agreed to waive fees and/or limit expenses of the Fund through at least June 30, 2012 in an amount necessary to limit total annual operating expenses to a specified percentage of average daily net assets for each class of the Fund. The Board noted that at the current expense ratio for the Fund, this expense waiver does not have any impact.
The Board also considered the services provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the allocation of fees between Invesco Advisers and the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board noted that Invesco Advisers provides services to sub-advised Invesco Funds, including oversight of the Affiliated Sub-Advisers as well as the additional services described above other than day-to-day portfolio management. The Board also noted that the sub-advisory fees have no direct effect on the Fund or its shareholders, as they are paid by Invesco Advisers to the Affiliated Sub-Advisers.
Based upon the information and considerations described above, the Board concluded that the Fund’s advisory and sub-advisory fees are fair and reasonable.
D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule. The Board also noted that the 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 Invesco Advisers.
E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the profitability of Invesco Advisers and its affiliates in providing these services. The Board reviewed with Invesco Advisers the methodology used to prepare the profitability information. The Board considered the profitability of Invesco Advisers in connection with managing the Fund and the Invesco Funds. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its subsidiaries provide to the Fund and the Invesco Funds. The Board concluded that the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund is not excessive given the nature, quality and extent of the services provided to the Invesco Funds. The Board considered whether Invesco Advisers and each Affiliated Sub-Adviser are financially sound and have the resources necessary to perform their obligations under the investment advisory agreement and sub-advisory contracts. The Board concluded that Invesco Advisers and each Affiliated Sub-Adviser have the financial resources necessary to fulfill these obligations.
F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund, including the fees received for their provision of administrative, transfer agency and distribution services to the Fund. The Board considered the performance of Invesco Advisers 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 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 Fund; that Invesco Advisers 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; and 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.
The Board considered the benefits realized by Invesco Advisers and the Affiliated Sub-Advisers as a result of portfolio brokerage transactions executed through “soft dollar” arrangements. The Board noted that soft dollar arrangements shift the payment obligation for research and execution services from Invesco Advisers and the Affiliated Sub-Advisers to the Invesco Funds and therefore may reduce Invesco Advisers’ and the Affiliated Sub-Advisers’ expenses. The Board concluded that the soft dollar arrangements are appropriate. The Board also concluded that, based on their review and representations made by the Chief Compliance Officer of the Invesco Funds, these arrangements are consistent with regulatory requirements.
The Board considered that the Fund’s uninvested cash and cash collateral from any securities lending arrangements may be invested in money market funds advised by Invesco Advisers pursuant to procedures approved by the Board. The Board noted that Invesco Advisers receives advisory fees from these affiliated money market funds attributable to such investments, although Invesco Advisers has contractually agreed to waive through varying periods the advisory fees payable by the Invesco Funds. The waiver is in an amount equal to 100% of the net advisory fee Invesco Advisers receives from the affiliated money market funds with respect to the Fund’s investment in the affiliated money market funds of uninvested cash, but not cash collateral. The Board concluded that the Fund’s investment of uninvested cash and cash collateral from any securities lending arrangements in the affiliated money market funds is in the best interests of the Fund and its shareholders.
32 Invesco Equally-Weighted S&P 500 Fund
Tax Information
Form 1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific state’s requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended August 31, 2011:
Federal and State Income Tax | ||||
Qualified Dividend Income* | 100% | |||
Corporate Dividends Received Deduction* | 100% |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Fund’s fiscal year. |
33 Invesco Equally-Weighted S&P 500 Fund
Trustees and Officers
The address of each trustee and officer is AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”), 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Number of Funds | ||||||||
in Fund Complex | ||||||||
Name, Year of Birth and | Trustee and/ | Principal Occupation(s) | Overseen by | Other Directorship(s) | ||||
Position(s) Held with the Trust | or Officer Since | During Past 5 Years | Trustee | Held by Trustee | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 — 1960 Trustee | 2007 | 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 | 143 | 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. Taylor2 — 1954 Trustee, President and Principal Executive Officer | 2006 | 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 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 Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust); Trustee and Executive Vice President, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s 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 Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Tax-Free Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. | 143 | None | ||||||
Wayne W. Whalen3 — 1939 Trustee | 2010 | Of Counsel, and prior to 2010, partner in the law firm of Skadden, Arps, Slate, Meagher & Flom LLP, legal counsel to funds in the Fund Complex | 161 | Director of the Abraham Lincoln Presidential Library Foundation | ||||
Independent Trustees | ||||||||
Bruce L. Crockett — 1944 Trustee and Chair | 2003 | Chairman, Crockett Technology Associates (technology consulting company) Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer COMSAT Corporation; and Chairman, Board of Governors of INTELSAT (international communications company) | 143 | ACE Limited (insurance company); and Investment Company Institute | ||||
1 | Mr. Flanagan is considered an interested person of the Trust because he is an officer of the adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the adviser to the Trust. |
2 | Mr. Taylor is considered an interested person of the Trust because he is an officer and a director of the adviser to, and a director of the principal underwriter of, the Trust. |
3 | Mr. Whalen has been deemed to be an interested person of the Trust because of his prior service as counsel to the predecessor funds of certain Invesco open-end funds and his affiliation with the law firm that served as counsel to such predecessor funds and continues to serve as counsel to the Invesco Van Kampen closed-end funds. |
T-1 Invesco Equally-Weighted S&P 500 Fund
Trustees and Officers—(continued)
The address of each trustee and officer is AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”), 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Number of Funds | ||||||||
in Fund Complex | ||||||||
Name, Year of Birth and | Trustee and/ | Principal Occupation(s) | Overseen by | Other Directorship(s) | ||||
Position(s) Held with the Trust | or Officer Since | During Past 5 Years | Trustee | Held by Trustee | ||||
Independent Trustees | ||||||||
David C. Arch — 1945 Trustee | 2010 | Chairman and Chief Executive Officer of Blistex Inc., a consumer health care products manufacturer. | 161 | 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 | ||||
Bob R. Baker — 1936 Trustee | 1983 | Retired | 143 | None | ||||
Formerly: President and Chief Executive Officer, AMC Cancer Research Center; and Chairman and Chief Executive Officer, First Columbia Financial Corporation | ||||||||
Frank S. Bayley — 1939 Trustee | 2003 | Retired Formerly: Director, Badgley Funds, Inc. (registered investment company) (2 portfolios) and Partner, law firm of Baker & McKenzie | 143 | Director and Chairman, C.D. Stimson Company (a real estate investment company) | ||||
James T. Bunch — 1942 Trustee | 2000 | 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 | 143 | Vice Chairman, Board of Governors, Western Golf Association/Evans Scholars Foundation and Director, Denver Film Society | ||||
Rodney Dammeyer — 1940 Trustee | 2010 | President 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. | 161 | 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 | 2003 | 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) | 161 | Board of Nature’s 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 | 2003 | 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) | 143 | Administaff | ||||
Formerly: Chief Executive Officer, Texana Timber LP (sustainable forestry company) and member of the U.S. House of Representatives | ||||||||
Carl Frischling — 1937 Trustee | 2003 | Partner, law firm of Kramer Levin Naftalis and Frankel LLP | 143 | Director, Reich & Tang Funds (6 portfolios) | ||||
Prema Mathai-Davis — 1950 Trustee | 2003 | Retired | 143 | None | ||||
Formerly: Chief Executive Officer, YWCA of the U.S.A. | ||||||||
Larry Soll — 1942 Trustee | 1997 | Retired | 143 | None | ||||
Formerly, Chairman, Chief Executive Officer and President, Synergen Corp. (a biotechnology company) | ||||||||
T-2 Invesco Equally-Weighted S&P 500 Fund
Trustees and Officers—(continued)
The address of each trustee and officer is AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”), 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Number of Funds | ||||||||
in Fund Complex | ||||||||
Name, Year of Birth and | Trustee and/ | Principal Occupation(s) | Overseen by | Other Directorship(s) | ||||
Position(s) Held with the Trust | or Officer Since | During Past 5 Years | Trustee | Held by Trustee | ||||
Independent Trustees | ||||||||
Hugo F. Sonnenschein — 1940 Trustee | 2010 | President Emeritus and Honorary Trustee 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. | 161 | 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 | 2005 | Retired Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios) and Partner, Deloitte & Touche | 143 | None | ||||
Other Officers | ||||||||
Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer of Invesco Funds | N/A | N/A | ||||
John M. Zerr — 1962 Senior Vice President, Chief Legal Officer and Secretary | 2006 | 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 | N/A | N/A | ||||
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) | ||||||||
Lisa O. Brinkley — 1959 Vice President | 2004 | Global Compliance Director, Invesco Ltd.; Chief Compliance Officer, Invesco Investment Services, Inc.(formerly known as Invesco Aim Investment Services, Inc.); and Vice President, The Invesco Funds Formerly: Chief Compliance Officer, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) and Van Kampen Investor Services Inc.; Senior Vice President, Invesco Management Group, Inc.; Senior Vice President and Chief Compliance Officer, Invesco Advisers, Inc. and The Invesco Funds; Vice President and Chief Compliance Officer, Invesco Aim Capital Management, Inc. and Invesco Distributors, Inc.; Vice President, Invesco Investment Services, Inc. and Fund Management Company | N/A | N/A | ||||
Sheri Morris — 1964 Vice President, Treasurer and Principal Financial Officer | 2003 | 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) | N/A | N/A | ||||
Formerly: 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, 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. | ||||||||
T-3 Invesco Equally-Weighted S&P 500 Fund
Trustees and Officers—(continued)
The address of each trustee and officer is AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”), 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Number of Funds | ||||||||
in Fund Complex | ||||||||
Name, Year of Birth and | Trustee and/ | Principal Occupation(s) | Overseen by | Other Directorship(s) | ||||
Position(s) Held with the Trust | or Officer Since | During Past 5 Years | Trustee | Held by Trustee | ||||
Other Officers | ||||||||
Karen Dunn Kelley — 1960 Vice President | 2003 | Head of Invesco’s 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 Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust); and President and Principal Executive Officer, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust only). | N/A | N/A | ||||
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 Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Tax-Free Investments Trust only) | ||||||||
Lance A. Rejsek — 1967 Anti-Money Laundering Compliance Officer | 2005 | 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.), The Invesco Funds, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management) and Van Kampen Funds Inc. | N/A | N/A | ||||
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Investor Services Inc., Fund Management Company, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc. | ||||||||
Todd L. Spillane — 1958 Chief Compliance Officer | 2006 | 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, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, INVESCO Private Capital Investments, Inc. (holding company) and Invesco Private Capital, Inc. (registered investment adviser); Vice President, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.), Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.). Formerly: 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 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 | N/A | N/A | ||||
The Statement of Additional Information of the Trust includes additional information about the Fund’s Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Fund’s prospectus for information on the Fund’s sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 2500 Houston, TX 77046-1173 | Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 | Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 2500 Houston, TX 77046-1173 | Auditors PricewaterhouseCoopers LLP 1201 Louisiana Street, Suite 2900 Houston, TX 77002-5678 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2600 One Commerce Square Philadelphia, PA 19103 | Counsel to the Independent Trustees Kramer, Levin, Naftalis & Frankel LLP 1177 Avenue of the Americas New York, NY 10036-2714 | Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 2500 Houston, TX 77046-1173 | Custodian State Street Bank and Trust Company 225 Franklin Boston, MA 02110-2801 |
T-4 Invesco Equally-Weighted S&P 500 Fund
![(EDELIVER GRAPHIC)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8463712.gif)
Invesco mailing information
Send general correspondence to Invesco Investment Services, Inc., P.O. Box 219078, Kansas City, MO 64121-9078.
Invesco privacy policy
You share personal and financial information with us that is necessary for your transactions and your account records. We take very seriously the obligation to keep that information confidential and private.
Invesco collects nonpublic personal information about you from account applications or other forms you complete and from your transactions with us or our affiliates. We do not disclose information about you or our former customers to service providers or other third parties except to the extent necessary to service your account and in other limited circumstances as permitted by law. For example, we use this information to facilitate the delivery of transaction confirmations, financial reports, prospectuses and tax forms.
Even within Invesco, only people involved in the servicing of your accounts and compliance monitoring have access to your information. To ensure the highest level of confidentiality and security, Invesco maintains physical, electronic and procedural safeguards that meet or exceed federal standards. Special measures, such as data encryption and authentication, apply to your communications with us on our website. More detail is available to you at invesco.com/privacy.
Important notice regarding delivery of security holder documents
To reduce Fund expenses, only one copy of most shareholder documents may be mailed to shareholders with multiple accounts at the same address (Householding). Mailing of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact Invesco Investment Services, Inc. at 800 959 4246 or contact your financial institution. We will begin sending you individual copies for each account within 30 days after receiving your request.
Fund holdings and proxy voting information
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is available at invesco.com/completeqtrholdings. Shareholders can also look up the Fund’s Forms N-Q on the SEC website at sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-09913 and 333-36074.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client
Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov.
![(INVESCO LOGO)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8463700.gif)
Information regarding how the Fund voted proxies related to its portfolio securities during the 12 months ended June 30, 2011, is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov.
Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the U.S. distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
MS-EWSP-AR-1 | Invesco Distributors, Inc. |
![]() |
Annual Report to Shareholders | August 31, 2011 |
Invesco S&P 500 Index Fund
Nasdaq:
A: SPIAX • B: SPIBX • C: SPICX • Y: SPIDX
A: SPIAX • B: SPIBX • C: SPICX • Y: SPIDX
2 | Letters to Shareholders | |
4 | Performance Summary | |
4 | Management Discussion | |
6 | Long-Term Fund Performance | |
8 | Supplemental Information | |
9 | Schedule of Investments | |
18 | Financial Statements | |
20 | Notes to Financial Statements | |
27 | Financial Highlights | |
28 | Auditor’s Report | |
29 | Fund Expenses | |
30 | Approval of Investment Advisory and Sub-Advisory Agreements | |
32 | Tax Information | |
T-1 | Trustees and Officers |
Letters to Shareholders
![]() Philip Taylor | Dear Shareholders: Enclosed is important information about your Fund and its performance. I encourage you to read this report to learn more about your Fund’s short- and long-term performance and its holdings as of the close of the reporting period. This report also includes useful information about your Fund’s management team and a discussion of how your Fund was managed during the reporting period. Data indicated that economic growth in the U.S. and most of Europe was anemic during the reporting period. In the U.S., unemployment remained high, and the housing market remained weak. Concerns about European sovereign debt persisted. Nonetheless, equity markets rose in late 2010 and early 2011 as investors anticipated better news ahead. But contentious negotiations to raise the U.S. government’s debt ceiling heightened investor unease, and following the first-ever downgrade of U.S. creditworthiness in August, global stock markets declined as many investors sought safer havens. |
Where you can get current information about your Fund
In light of economic uncertainty and market volatility, I suggest you check the timely market updates and commentary from many of our fund managers and other investment professionals at invesco.com/us. On our website, you also can obtain information about your account at any hour of the day or night. I invite you to visit and explore the tools and information we offer at invesco.com/us.
Our commitment to investment excellence
As we’ve seen over the last several years, market conditions can change — often suddenly and dramatically. That’s one reason financial advisers typically advise their clients to be well diversified and to maintain a long-term investment focus. While diversification can’t guarantee a profit or protect against loss, it can cushion the impact of dramatic market moves. Maintaining a long-term investment focus for your long-term goals — financing your retirement or your children’s education, for example — may help you avoid making rash investment decisions based on short-term market swings.
Invesco’s investment professionals apply these same principles to the funds they manage.
Invesco offers a broad array of traditional mutual funds, as well as other investment products, including single-country, sector, regional and global investments spanning equity, fixed income and alternative asset classes. Across our product line, investment excellence is our ultimate goal. Each of our funds is managed by specialized teams of investment professionals, and as a company, we maintain a single focus — investment management — that allows our fund managers to concentrate on doing what they do best: managing your money.
Our funds are managed strictly according to their stated investment objectives and strategies, with robust risk oversight using consistent, repeatable investment processes that don’t change in response to short-term market events. This disciplined approach can’t guarantee a profit; no investment can do that, since all involve some measure of risk. But it can ensure that your money is managed the way we said it would be, and that it’s managed with a long-term focus.
Our adherence to stated investment objectives and strategies allows your financial adviser to build a diversified portfolio that meets your individual risk tolerance and financial goals. It also means that when your goals change, your financial adviser will be able to find an Invesco fund that’s appropriate for your needs.
Questions?
If you have questions about your account, please contact one of our client service representatives at 800 959 4246. If you have a general Invesco-related question or comment for me, I invite you to email me directly at phil@invesco.com.
All of us at Invesco look forward to serving your investment management needs for many years to come. Thank you for investing with us.
Sincerely,
![(PHILIP TAYLOR LOGO)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464003.gif)
Philip Taylor
Senior Managing Director, Invesco Ltd.
Senior Managing Director, Invesco Ltd.
2 | Invesco S&P 500 Index Fund |
![]() Bruce Crockett | Dear Fellow Shareholders: Although the world’s economies are gradually recovering from the financial crisis, it has not been a smooth path. Unrest in the Middle East, persistently weak job and housing markets in the U.S. and continued government balance sheet repair in Europe are contributing to a slow, labored march toward global recovery. In this environment, investors face risks that could make it more difficult to achieve their long-term financial goals — a secure retirement, home ownership, a child’s college education. Although the markets are complex and dynamic, there are ways to simplify the process and potentially increase your odds of achieving your goals. The best approach is to create a solid financial plan that helps you save and invest in ways that anticipate your needs over the long term. |
Your financial adviser can help you define your financial plan, develop an appropriate investment strategy and put you in a better position to achieve your financial goals over the long term. This can take some of the guesswork out of the process and help you make thoughtful investments. Your financial adviser also can help you better understand your tolerance for risk, so that your investment approach lets you sleep at night while getting you closer to your goals. Lastly, your financial adviser can develop an asset allocation strategy that seeks to balance your investment approach, providing some protection against a decline in the markets while allowing you to participate in rising markets. Invesco calls this type of approach “intentional investing.” It means thinking carefully, planning thoughtfully and acting deliberately.
While no investment can guarantee favorable returns, your Board remains committed to managing costs and enhancing the performance of Invesco’s funds as part of our Investor First orientation. We continue to oversee the funds with the same strong sense of responsibility for your money and your continued trust that we’ve always maintained.
Thanks to the approval of our fund shareholders, Invesco has made great progress in realigning our U.S. mutual fund product line following our acquisition of Morgan Stanley’s retail asset management business, including Van Kampen Investments. When completed, the realignment will reduce overlap in the product lineup, enhance efficiency across our product line and build a solid foundation for further growth to meet client and shareholder needs. I would like to thank those of you who voted your proxy, and I hope our shareholders haven’t been too inconvenienced by the process.
As always, please contact me at bruce@brucecrockett.com with any questions or concerns you may have. On behalf of your Board, we look forward to continuing to represent your interests and serving your needs.
Sincerely,
![(BRUCE CROCKETT LOGO)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464005.gif)
Bruce L. Crockett
Independent Chair
Invesco Funds Board of Trustees
Independent Chair
Invesco Funds Board of Trustees
3 | Invesco S&P 500 Index Fund |
Management’s Discussion of Fund Performance
Performance summary
For the 12 months ended August 31, 2011, Invesco S&P 500 Index Fund, at net asset value, underperformed the S&P 500 Index and the Lipper S&P 500 Objective Funds Index. The Fund seeks to provide investment results that, before expenses, correspond to the total return (appreciation and income) of the S&P 500 Index. The consumer discretionary, consumer staples, energy, health care and information technology (IT) sectors contributed the most to the Fund’s overall positive performance for the reporting period.
Your Fund’s long-term performance appears later in this report.
Fund vs. Indexes
Total returns, 8/31/10 to 8/31/11, at net asset value (NAV). Performance shown does not include applicable contingent deferred sales charges (CDSC) or front-end sales charges, which would have reduced performance.
Class A Shares | 17.94 | % | ||
Class B Shares | 17.02 | |||
Class C Shares | 17.01 | |||
Class Y Shares | 18.21 | |||
S&P 500 Index▼ (Broad Market / Style-Specific Index) | 18.48 | |||
Lipper S&P 500 Objective Funds Index▼ (Peer Group Index) | 18.24 | |||
▼ | Lipper Inc. |
How we invest
The Fund normally invests at least 80% of its assets in common stocks of companies included in the S&P 500 Index. The Fund’s assets are managed by investing in stocks in approximately the same proportion as they are represented in the S&P 500 Index. For example, if the common stock of a specific company represents 5% of the S&P 500 Index, the Fund typically invests 5% of its assets in that stock. The S&P 500 Index is a well-known stock market index that includes common stocks of 500 companies representing a significant portion of the market value of all common stocks publicly traded in the United States. The Fund may invest in foreign companies, including those in emerging market countries, that are included in the S&P
500 Index. Buy and sell decisions for the Fund are a function of changes in the S&P 500 Index rather than independent decisions made by the investment team.
Market conditions and your Fund
The fiscal year covered by this report began with U.S. equity markets posting very strong results across most capitalization ranges. These gains were the result of continuing improvement in the overall U.S. economy. Third quarter 2010 gross domestic product, the broadest measure of overall U.S. economic activity, was strong when initially reported and was subsequently revised upward. But companies found them-selves much too early in the recovery cycle to start testing pricing power. Also, improvement in retail sales over the previous year offered encouraging signs
that the American consumer is willing to spend. The strong performance of the equity markets continued during the beginning of 2011.
The market stumbled in May and June as ongoing concerns over slower economic growth and Greek sovereign-debt fears clouded the recovery picture. The expiration of the U.S. Federal Reserve’s bond buying program and haggling over raising the U.S. debt ceiling also weighed heavily on the market. The uncertainty continued in July over concerns about job creation. The country’s ability to pay its debts became a growing issue throughout the month, as the battle between Congress and the White House over raising the debt ceiling grew to a fever pitch. With the threat of a down-grade from the major ratings agencies, the stakes were of the highest order.
Even though an agreement to raise the debt limit was reached at the eleventh hour, the fiscal year ended on a sour note. The fateful and unprecedented decision by Standard & Poor’s to down-grade U.S. government debt helped to precipitate a wave of selling and an increase in stock-market volatility. The downgrade also caused most investors to lower their expectations for future economic growth. As a result, the U.S. dollar and oil fell, while gold and, ironically, U.S. Treasuries, rallied.
The Fund stayed true to its process by maintaining the same exposure to all constituents of the S&P 500 Index as the index itself. On an absolute basis, all sectors in the Fund, aside from the financials sector, posted positive returns for the fiscal year. Sectors that contributed most to overall Fund Performance
Portfolio Composition
By sector
Information Technology | 18.4 | % | ||
Financials | 14.0 | |||
Energy | 12.3 | |||
Health Care | 11.7 | |||
Consumer Staples | 11.3 | |||
Consumer Discretionary | 10.7 | |||
Industrials | 10.4 | |||
Materials | 3.6 | |||
Utilities | 3.6 | |||
Telecommunication Services | 3.1 | |||
Money Market Funds | ||||
Plus Other Assets Less Liabilities | 0.9 | |||
Top 10 Equity Holdings*
1. Exxon Mobil Corp. | 3.2 | % | ||
2. Apple Inc. | 3.2 | |||
3. International Business Machines Corp. | 1.9 | |||
4. Chevron Corp. | 1.8 | |||
5. Microsoft Corp. | 1.8 | |||
6. Johnson & Johnson | 1.6 | |||
7. Procter & Gamble Co. | 1.6 | |||
8. General Electric Co. | 1.5 | |||
9. AT&T Inc. | 1.5 | |||
10. Coca-Cola Co. | 1.4 | |||
Top Five Industries
1. Integrated Oil & Gas | 6.8 | % | ||
2. Pharmaceuticals | 5.9 | |||
3. Computer Hardware | 3.9 | |||
4. Systems Software | 3.1 | |||
5. Other Diversified Financial Services | 2.9 | |||
Total Net Assets | $493.0 million | |||
Total Number of Holdings* | 500 |
The Fund’s holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
*Excluding money market fund holdings.
*Excluding money market fund holdings.
4 | Invesco S&P 500 Index Fund |
were the consumer discretionary, consumer staples, energy, health care and IT sectors. The financials sector was the primary detractor at the sector level.
Among individual stocks, Apple and International Business Machines were top contributors in the IT sector. At the end of the reporting period, Steve Jobs, chief executive officer of Apple, announced his resignation from the company he founded. He named Tim Cook, Apple’s chief operating officer, as his successor. Holdings in the energy sector were also strong performers during the fiscal year. Top contributors in this sector included Exxon Mobil and Chevron.
Detracting from Fund performance were several financials sector companies, including Morgan Stanley, Citigroup and Bank of America.
During the reporting period, the Fund invested in S&P 500 futures contracts, a derivative instrument, as a means to gain exposure to the equity market. These futures contracts contributed to the Fund’s performance.
Despite some meaningful challenges, the U.S. economy continued to grow over the 12 months ended August 31, 2011. U.S. equity markets, reflecting this economic expansion, posted some sizable gains over the reporting period. Some significant economic challenges remain, including housing weakness, unemployment, government and household deleveraging and Europe’s sovereign debt crisis. However, slower growth does not mean no growth or, worse, contraction.
We welcome new investors who joined the Fund during the fiscal year and thank all of our shareholders for your investment in Invesco S&P 500 Index Fund.
The views and opinions expressed in management’s discussion of Fund performance are those of Invesco Advisers, Inc. These views and opinions are subject to change at any time based on factors such as market and economic conditions. These views and opinions may not be relied upon as investment advice or recommendations, or as an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but Invesco Advisers, Inc. makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
See important Fund and, if applicable, index disclosures later in this report.
![(PHOTO OF ANTHONY MUNCHAK)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464006.jpg)
Anthony Munchak
Chartered Financial Analyst, portfolio manager, is manager of Invesco S&P 500 Index Fund. He joined Invesco in 2000. Mr. Munchak earned a B.S. and M.S. in finance from Boston College and an M.B.A. from Bentley College.
![(PHOTO OF GLEN MURPHY)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464007.jpg)
Glen Murphy
Chartered Financial Analyst, portfolio manager, is manager of Invesco S&P 500 Index Fund. He joined Invesco in 1995. Mr. Murphy earned a B.B.A. from the University of Massachusetts and an M.S. in finance from Boston College.
![(PHOTO OF FRANCIS ORLANDO)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464008.jpg)
Francis Orlando
Chartered Financial Analyst, portfolio manager, is manager of Invesco S&P 500 Index Fund. He joined Invesco in 1987. Mr. Orlando earned a B.A. in business administration from Merrimack College and an M.B.A. from Boston University.
![(PHOTO OF DANIEL TSAI)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464009.jpg)
Daniel Tsai
Chartered Financial Analyst, portfolio manager, is manager of Invesco S&P 500 Index Fund. He joined Invesco in 2000. Mr. Tsai earned a B.S. in mechanical engineering from National Taiwan University and an M.S. in mechanical engineering from the University of Michigan. He also earned an M.S. in computer science from Wayne State University.
![(PHOTO OF ANNE UNFLAT)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464010.jpg)
Anne Unflat
Portfolio manager, is manager of Invesco S&P 500 Index Fund. She joined Invesco in 1988. Ms. Unflat graduated magna cum laude from Queens College with a B.A. in economics. She earned an M.B.A. in finance from St. John’s University.
5 | Invesco S&P 500 Index Fund |
Your Fund’s Long-Term Performance
Results of a $10,000 Investment — Oldest Share Classes since Inception
Fund data from 9/26/97, index data from 9/30/97
![(PERFORMANCE CHART)](https://capedge.com/proxy/N-CSR/0000950123-11-095702/h84657h8464011.gif)
Past performance cannot guarantee comparable future results.
The data shown in the chart include reinvested distributions, applicable sales charges and Fund expenses including management fees. Results for Class B shares are calculated as if a hypothetical shareholder had liquidated his entire investment in the Fund at the close of the reporting period and paid the contingent deferred sales charges, if applicable. Index results include reinvested dividends, but they do not reflect sales
charges. Performance of the peer group, if applicable, reflects fund expenses and management fees; performance of a market index does not. Performance shown in the chart and table(s) does not reflect deduction of taxes a shareholder would pay on Fund distributions or sale of Fund shares.
This chart, which is a logarithmic chart, presents the fluctuations in the value of the Fund and its indexes. We believe that a logarithmic chart is more effective than other types of charts in illustrating
changes in value during the early years shown in the chart. The vertical axis, the one that indicates the dollar value of an investment, is constructed with each segment representing a percent change in the value of the investment. In this chart, each segment represents a doubling, or 100% change, in the value of the investment. In other words, the space between $5,000 and $10,000 is the same size as the space between $10,000 and $20,000.
6 Invesco S&P 500 Index Fund
Average Annual Total Returns | ||||||||
As of 8/31/11, including maximum applicable | ||||||||
sales charges | ||||||||
Class A Shares | ||||||||
Inception (9/26/97) | 2.64 | % | ||||||
10 Years | 1.57 | |||||||
5 Years | -0.76 | |||||||
1 Year | 11.46 | |||||||
Class B Shares | ||||||||
Inception (9/26/97) | 2.61 | % | ||||||
10 Years | 1.53 | |||||||
5 Years | -0.77 | |||||||
1 Year | 12.02 | |||||||
Class C Shares | ||||||||
Inception (9/26/97) | 2.29 | % | ||||||
10 Years | 1.39 | |||||||
5 Years | -0.39 | |||||||
1 Year | 16.01 | |||||||
Class Y Shares | ||||||||
Inception (9/26/97) | 3.30 | % | ||||||
10 Years | 2.39 | |||||||
5 Years | 0.62 | |||||||
1 Year | 18.21 |
Average Annual Total Returns | ||||||||
As of 6/30/11, the most recent calendar quarter-end, | ||||||||
including maximum applicable sales charges | ||||||||
Class A Shares | ||||||||
Inception (9/26/97) | 3.26 | % | ||||||
10 Years | 1.60 | |||||||
5 Years | 1.37 | |||||||
1 Year | 22.92 | |||||||
Class B Shares | ||||||||
Inception (9/26/97) | 3.22 | % | ||||||
10 Years | 1.55 | |||||||
5 Years | 1.38 | |||||||
1 Year | 24.07 | |||||||
Class C Shares | ||||||||
Inception (9/26/97) | 2.90 | % | ||||||
10 Years | 1.41 | |||||||
5 Years | 1.77 | |||||||
1 Year | 28.08 | |||||||
Class Y Shares | ||||||||
Inception (9/26/97) | 3.92 | % | ||||||
10 Years | 2.41 | |||||||
5 Years | 2.77 | |||||||
1 Year | 30.37 |
Effective June 1, 2010, Class A, Class B, Class C and Class I shares of the predecessor fund, Morgan Stanley S&P 500 Index Fund, advised by Morgan Stanley Investment Advisors Inc. were reorganized into Class A, Class B, Class C and Class Y shares, respectively, of Invesco S&P 500 Index Fund. Returns shown above for Class A, Class B, Class C and Class Y shares are blended returns of the predecessor fund and Invesco S&P 500 Index Fund. Share class returns will differ from the predecessor fund because of different expenses.
The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Please visit invesco.com/performance for the
most recent month-end performance. Performance figures reflect reinvested distributions, changes in net asset value and the effect of the maximum sales charge unless otherwise stated. Investment return and principal value will fluctuate so that you may have a gain or loss when you sell shares.
The total annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Class A, Class B, Class C, and Class Y shares was 0.61%, 1.36%, 1.36% and 0.36%, respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.
Class A share performance reflects the maximum 5.50% sales charge, and Class B and Class C share performance reflects the applicable contingent deferred sales charge (CDSC) for the period involved. The CDSC on Class B shares declines from 5% beginning at the time of purchase to 0% at the beginning of the seventh year. The CDSC on Class C shares is 1% for the first year after purchase. Class Y shares do not have a front-end sales charge or a CDSC; therefore, performance is at net asset value.
The performance of the Fund’s share classes will differ primarily due to different sales charge structures and class expenses.
7 Invesco S&P 500 Index Fund
Invesco S&P 500 Index Fund’s investment objective is to provide investment results that, before expenses, correspond to the total return (i.e., the combination of capital changes and income) of the Standard & Poor’s 500 Composite Stock Price Index.
n | Unless otherwise stated, information presented in this report is as of August 31, 2011, and is based on total net assets. | |
n | Unless otherwise noted, all data provided by Invesco. | |
n | To access your Fund’s reports/prospectus, visit invesco.com/fundreports. |
About share classes
n | Class B shares may not be purchased or acquired by exchange from share classes other than Class B shares. Please see the prospectus for more information. | |
n | Class Y shares are available to only certain investors. Please see the prospectus for more information. |
Principal risks of investing in the Fund
n | Equity risk. A principal risk of investing in the Fund is associated with its common stock investments. In general, stock values fluctuate in response to activities specific to the company as well as general market, economic and political conditions. Stock prices can fluctuate widely in response to these factors. | |
n | Index risk. The Fund is operated as a passively managed index fund. As such, the adverse performance of a particular stock ordinarily will not result in the elimination of the stock from the Fund’s portfolio. The Fund will remain invested in common stocks even when stock prices are generally falling. Ordinarily, the adviser will not sell the Fund’s portfolio securities except to reflect additions or deletions of the stocks that comprise the S&P 500 Index, or as may be necessary to raise cash to pay Fund shareholders who sell Fund shares. |
The Fund’s ability to correlate its performance, before expenses, with the S&P 500 Index may be affected by, among other things, changes in securities markets, the manner in which the S&P 500 Index is calculated and the timing of purchases and sales, and also depends to some extent on the size of the Fund’s portfolio, the size of cash flows into and out of the Fund and differences between how and when the Fund and the Index are valued.
n | Management risk. The investment techniques and risk analysis used by the Fund’s portfolio managers may not produce the desired results. |
About indexes used in this report
n | The S&P 500® Index is an unmanaged index considered representative of the U.S. stock market. | |
n | The Lipper S&P 500 Objective Funds Index is an unmanaged index considered representative of S&P 500 funds tracked by Lipper. | |
n | A direct investment cannot be made in an index. Unless otherwise indicated, index results include reinvested dividends, and they do not reflect sales charges. Performance of the peer group, if applicable, reflects fund expenses; performance of a market index does not. |
Other information
n | The Chartered Financial Analyst® (CFA®) designation is globally recognized and attests to a charterholder’s success in a rigorous and comprehensive study program in the field of investment management and research analysis. | |
n | The returns shown in management’s discussion of Fund performance are based on net asset values calculated for shareholder transactions. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes, and as such, the net asset values for shareholder transactions and the returns based on those net asset values may differ from the net asset values and returns reported in the Financial Highlights. | |
n | Industry classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. |
This report must be accompanied or preceded by a currently effective Fund prospectus, which contains more complete information, including sales charges and expenses. Investors should read it carefully before investing.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
Fund Nasdaq Symbols
Class A Shares | SPIAX | |
Class B Shares | SPIBX | |
Class C Shares | SPICX | |
Class Y Shares | SPIDX |
8 Invesco S&P 500 Index Fund
Schedule of Investments(a)
August 31, 2011
Shares | Value | |||||||
Common Stocks & Other Equity Interests–99.13% | ||||||||
Advertising–0.14% | ||||||||
Interpublic Group of Cos., Inc. (The) | 21,463 | $ | 185,226 | |||||
Omnicom Group Inc. | 12,322 | 499,657 | ||||||
684,883 | ||||||||
Aerospace & Defense–2.61% | ||||||||
Boeing Co. (The) | 32,426 | 2,168,002 | ||||||
General Dynamics Corp. | 16,339 | 1,047,003 | ||||||
Goodrich Corp. | 5,475 | 488,261 | ||||||
Honeywell International Inc. | 34,566 | 1,652,601 | ||||||
ITT Corp. | 8,065 | 381,797 | ||||||
L-3 Communications Holdings, Inc. | 4,616 | 313,057 | ||||||
Lockheed Martin Corp. | 12,507 | 927,894 | ||||||
Northrop Grumman Corp. | 12,212 | 667,020 | ||||||
Precision Castparts Corp. | 6,318 | 1,035,204 | ||||||
Raytheon Co. | 15,644 | 676,290 | ||||||
Rockwell Collins, Inc. | 6,791 | 342,674 | ||||||
Textron Inc. | 12,129 | 204,616 | ||||||
United Technologies Corp. | 40,200 | 2,984,850 | ||||||
12,889,269 | ||||||||
Agricultural Products–0.17% | ||||||||
Archer-Daniels-Midland Co. | 29,957 | 853,175 | ||||||
Air Freight & Logistics–1.00% | ||||||||
C.H. Robinson Worldwide, Inc. | 7,157 | 504,569 | ||||||
Expeditors International of Washington, Inc. | 9,327 | 424,379 | ||||||
FedEx Corp. | 13,863 | 1,091,295 | ||||||
United Parcel Service, Inc.–Class B | 43,316 | 2,919,065 | ||||||
4,939,308 | ||||||||
Airlines–0.06% | ||||||||
Southwest Airlines Co. | 34,772 | 299,735 | ||||||
Aluminum–0.12% | ||||||||
Alcoa Inc. | 46,721 | 598,496 | ||||||
Apparel Retail–0.49% | ||||||||
Abercrombie & Fitch Co.–Class A | 3,817 | 242,799 | ||||||
Gap, Inc. (The) | 17,164 | 283,549 | ||||||
Limited Brands, Inc. | 11,043 | 416,763 | ||||||
Ross Stores, Inc. | 5,144 | 393,645 | ||||||
TJX Cos., Inc. (The) | 16,958 | 926,246 | ||||||
Urban Outfitters, Inc.(b) | 5,453 | 142,732 | ||||||
2,405,734 | ||||||||
Apparel, Accessories & Luxury Goods–0.32% | ||||||||
Coach, Inc. | 12,895 | 724,957 | ||||||
Polo Ralph Lauren Corp. | 2,829 | 387,884 | ||||||
VF Corp. | 3,846 | 450,213 | ||||||
1,563,054 | ||||||||
Application Software–0.55% | ||||||||
Adobe Systems Inc.(b) | 22,156 | 559,218 | ||||||
Autodesk, Inc.(b) | 10,096 | 284,707 | ||||||
Citrix Systems, Inc.(b) | 8,239 | 497,883 | ||||||
Compuware Corp.(b) | 9,622 | 81,402 | ||||||
Intuit Inc.(b) | 12,003 | 592,108 | ||||||
Salesforce.com, Inc.(b) | 5,271 | 678,641 | ||||||
2,693,959 | ||||||||
Asset Management & Custody Banks–1.13% | ||||||||
Ameriprise Financial, Inc. | 10,600 | 484,420 | ||||||
Bank of New York Mellon Corp. (The) | 54,539 | 1,127,321 | ||||||
BlackRock, Inc. | 4,404 | 725,559 | ||||||
Federated Investors, Inc.–Class B | 4,092 | 72,470 | ||||||
Franklin Resources, Inc. | 6,323 | 758,254 | ||||||
Invesco Ltd.(c) | 20,294 | 371,380 | ||||||
Janus Capital Group Inc. | 8,171 | 59,648 | ||||||
Legg Mason, Inc. | 6,532 | 185,966 | ||||||
Northern Trust Corp. | 10,658 | 409,587 | ||||||
State Street Corp. | 22,137 | 786,306 | ||||||
T. Rowe Price Group Inc. | 11,402 | 609,779 | ||||||
5,590,690 | ||||||||
Auto Parts & Equipment–0.19% | ||||||||
Johnson Controls, Inc. | 29,799 | 949,992 | ||||||
Automobile Manufacturers–0.38% | ||||||||
Ford Motor Co.(b) | 166,826 | 1,855,105 | ||||||
Automotive Retail–0.23% | ||||||||
AutoNation, Inc.(b) | 2,781 | 112,297 | ||||||
AutoZone, Inc.(b) | 1,125 | 345,375 | ||||||
CarMax, Inc.(b) | 9,919 | 278,823 | ||||||
O’Reilly Automotive, Inc.(b) | 6,044 | 392,135 | ||||||
1,128,630 | ||||||||
Biotechnology–1.24% | ||||||||
Amgen Inc. | 40,835 | 2,262,463 | ||||||
Biogen Idec Inc.(b) | 10,599 | 998,426 | ||||||
Celgene Corp.(b) | 20,326 | 1,208,787 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
9 Invesco S&P 500 Index Fund
Shares | Value | |||||||
Biotechnology–(continued) | ||||||||
Cephalon Inc.(b) | 3,329 | $ | 268,450 | |||||
Gilead Sciences, Inc.(b) | 34,568 | 1,378,745 | ||||||
6,116,871 | ||||||||
Brewers–0.06% | ||||||||
Molson Coors Brewing Co.–Class B | 6,958 | 304,413 | ||||||
Broadcasting–0.29% | ||||||||
CBS Corp.–Class B | 29,373 | 735,794 | ||||||
Discovery Communications, Inc.–Class A(b) | 12,212 | 516,323 | ||||||
Scripps Networks Interactive–Class A | 4,021 | 172,300 | ||||||
1,424,417 | ||||||||
Building Products–0.03% | ||||||||
Masco Corp. | 15,715 | 139,392 | ||||||
Cable & Satellite–1.06% | ||||||||
Cablevision Systems Corp.–Class A | 10,109 | 182,569 | ||||||
Comcast Corp.–Class A | 121,498 | 2,613,422 | ||||||
DIRECTV–Class A(b) | 33,722 | 1,482,756 | ||||||
Time Warner Cable Inc. | 14,774 | 967,697 | ||||||
5,246,444 | ||||||||
Casinos & Gaming–0.15% | ||||||||
International Game Technology | 13,171 | 200,990 | ||||||
Wynn Resorts Ltd. | 3,342 | 517,074 | ||||||
718,064 | ||||||||
Coal & Consumable Fuels–0.28% | ||||||||
Alpha Natural Resources, Inc.(b) | 9,950 | 329,046 | ||||||
CONSOL Energy Inc. | 9,954 | 454,500 | ||||||
Peabody Energy Corp. | 11,890 | 580,232 | ||||||
1,363,778 | ||||||||
Commercial Printing–0.03% | ||||||||
R. R. Donnelley & Sons Co. | 8,262 | 125,996 | ||||||
Communications Equipment–2.00% | ||||||||
Cisco Systems, Inc. | 241,583 | 3,788,022 | ||||||
F5 Networks, Inc.(b) | 3,588 | 292,853 | ||||||
Harris Corp. | 5,584 | 225,314 | ||||||
JDS Uniphase Corp.(b) | 9,919 | 128,649 | ||||||
Juniper Networks, Inc.(b) | 23,413 | 490,034 | ||||||
Motorola Mobility Holdings Inc.(b) | 12,955 | 488,663 | ||||||
Motorola Solutions, Inc.(b) | 14,913 | 627,688 | ||||||
QUALCOMM, Inc. | 73,329 | 3,773,510 | ||||||
Tellabs, Inc. | 15,956 | 65,101 | ||||||
9,879,834 | ||||||||
Computer & Electronics Retail–0.10% | ||||||||
Best Buy Co., Inc. | 14,170 | 362,610 | ||||||
GameStop Corp.–Class A(b) | 6,252 | 149,611 | ||||||
512,221 | ||||||||
Computer Hardware–3.87% | ||||||||
Apple Inc.(b) | 40,617 | 15,630,640 | ||||||
Dell Inc.(b) | 72,113 | 1,071,960 | ||||||
Hewlett-Packard Co. | 91,102 | 2,371,385 | ||||||
19,073,985 | ||||||||
Computer Storage & Peripherals–0.70% | ||||||||
EMC Corp.(b) | 90,374 | 2,041,549 | ||||||
Lexmark International, Inc.–Class A(b) | 3,481 | 111,253 | ||||||
NetApp, Inc.(b) | 16,157 | 607,826 | ||||||
SanDisk Corp.(b) | 10,426 | 382,113 | ||||||
Western Digital Corp.(b) | 10,190 | 300,503 | ||||||
3,443,244 | ||||||||
Construction & Engineering–0.17% | ||||||||
Fluor Corp. | 7,646 | 464,265 | ||||||
Jacobs Engineering Group, Inc.(b) | 5,609 | 208,879 | ||||||
Quanta Services, Inc.(b) | 9,469 | 181,710 | ||||||
854,854 | ||||||||
Construction & Farm Machinery & Heavy Trucks–1.19% | ||||||||
Caterpillar Inc. | 28,305 | 2,575,755 | ||||||
Cummins Inc. | 8,590 | 798,183 | ||||||
Deere & Co. | 18,434 | 1,489,836 | ||||||
Joy Global Inc. | 4,657 | 388,626 | ||||||
PACCAR Inc. | 16,052 | 604,037 | ||||||
5,856,437 | ||||||||
Construction Materials–0.04% | ||||||||
Vulcan Materials Co. | 5,717 | 200,267 | ||||||
Consumer Electronics–0.02% | ||||||||
Harman International Industries, Inc. | 3,057 | 110,633 | ||||||
Consumer Finance–0.84% | ||||||||
American Express Co. | 45,937 | 2,283,528 | ||||||
Capital One Financial Corp. | 20,164 | 928,552 | ||||||
Discover Financial Services | 23,959 | 602,808 | ||||||
SLM Corp.(b) | 23,165 | 318,056 | ||||||
4,132,944 | ||||||||
Data Processing & Outsourced Services–1.25% | ||||||||
Automatic Data Processing, Inc. | 21,947 | 1,098,009 | ||||||
Computer Sciences Corp. | 6,792 | 208,243 | ||||||
Fidelity National Information Services, Inc. | 11,796 | 332,411 | ||||||
Fiserv, Inc.(b) | 6,292 | 351,282 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
10 Invesco S&P 500 Index Fund
Shares | Value | |||||||
Data Processing & Outsourced Services–(continued) | ||||||||
MasterCard, Inc.–Class A | 4,135 | $ | 1,363,351 | |||||
Paychex, Inc. | 14,144 | 381,605 | ||||||
Total System Services, Inc. | 7,119 | 129,210 | ||||||
Visa Inc.–Class A | 21,037 | 1,848,732 | ||||||
Western Union Co. | 27,770 | 458,760 | ||||||
6,171,603 | ||||||||
Department Stores–0.36% | ||||||||
JC Penney Co., Inc. | 9,405 | 250,455 | ||||||
Kohl’s Corp. | 12,330 | 571,372 | ||||||
Macy’s, Inc. | 18,744 | 486,407 | ||||||
Nordstrom, Inc. | 7,360 | 334,586 | ||||||
Sears Holdings Corp.(b) | 1,843 | 110,377 | ||||||
1,753,197 | ||||||||
Distillers & Vintners–0.10% | ||||||||
Brown-Forman Corp.–Class B | 4,564 | 327,467 | ||||||
Constellation Brands, Inc.–Class A(b) | 7,877 | 155,728 | ||||||
483,195 | ||||||||
Distributors–0.08% | ||||||||
Genuine Parts Co. | 6,906 | 379,968 | ||||||
Diversified Banks–1.67% | ||||||||
Comerica Inc. | 8,824 | 225,806 | ||||||
U.S. Bancorp | 84,623 | 1,964,100 | ||||||
Wells Fargo & Co. | 232,311 | 6,063,317 | ||||||
8,253,223 | ||||||||
Diversified Chemicals–0.91% | ||||||||
Dow Chemical Co. (The) | 51,633 | 1,468,959 | ||||||
E. I. du Pont de Nemours and Co. | 40,790 | 1,968,933 | ||||||
Eastman Chemical Co. | 3,074 | 254,312 | ||||||
FMC Corp. | 3,199 | 242,900 | ||||||
PPG Industries, Inc. | 6,929 | 530,692 | ||||||
4,465,796 | ||||||||
Diversified Metals & Mining–0.41% | ||||||||
Freeport-McMoRan Copper & Gold Inc. | 41,608 | 1,961,401 | ||||||
Titanium Metals Corp.(b) | 4,003 | 64,168 | ||||||
2,025,569 | ||||||||
Diversified REIT’s–0.12% | ||||||||
Vornado Realty Trust | 7,164 | 615,459 | ||||||
Diversified Support Services–0.09% | ||||||||
Cintas Corp. | 4,947 | 158,205 | ||||||
Iron Mountain Inc. | 8,798 | 286,287 | ||||||
444,492 | ||||||||
Drug Retail–0.72% | ||||||||
CVS Caremark Corp. | 59,556 | 2,138,656 | ||||||
Walgreen Co. | 40,209 | 1,415,759 | ||||||
3,554,415 | ||||||||
Education Services–0.08% | ||||||||
Apollo Group, Inc.–Class A(b) | 5,370 | 251,450 | ||||||
DeVry, Inc. | 2,722 | 120,258 | ||||||
371,708 | ||||||||
Electric Utilities–1.96% | ||||||||
American Electric Power Co., Inc. | 21,160 | 817,411 | ||||||
Duke Energy Corp. | 58,474 | 1,105,743 | ||||||
Edison International | 14,279 | 531,036 | ||||||
Entergy Corp. | 7,856 | 512,290 | ||||||
Exelon Corp. | 29,092 | 1,254,447 | ||||||
FirstEnergy Corp. | 18,368 | 812,784 | ||||||
NextEra Energy, Inc. | 18,533 | 1,051,192 | ||||||
Northeast Utilities | 7,744 | 268,717 | ||||||
Pepco Holdings, Inc. | 9,898 | 192,813 | ||||||
Pinnacle West Capital Corp. | 4,793 | 212,042 | ||||||
PPL Corp. | 25,349 | 732,079 | ||||||
Progress Energy, Inc. | 12,935 | 631,228 | ||||||
Southern Co. | 37,295 | 1,542,521 | ||||||
9,664,303 | ||||||||
Electrical Components & Equipment–0.46% | ||||||||
Emerson Electric Co. | 33,015 | 1,536,848 | ||||||
Rockwell Automation, Inc. | 6,333 | 406,136 | ||||||
Roper Industries, Inc. | 4,236 | 325,960 | ||||||
2,268,944 | ||||||||
Electronic Components–0.28% | ||||||||
Amphenol Corp.–Class A | 7,719 | 362,639 | ||||||
Corning Inc. | 68,954 | 1,036,378 | ||||||
1,399,017 | ||||||||
Electronic Equipment & Instruments–0.04% | ||||||||
FLIR Systems, Inc. | 6,989 | 180,805 | ||||||
Electronic Manufacturing Services–0.06% | ||||||||
Jabil Circuit, Inc. | 8,608 | 145,045 | ||||||
Molex Inc. | 6,138 | 134,115 | ||||||
279,160 | ||||||||
Environmental & Facilities Services–0.29% | ||||||||
Republic Services, Inc. | 13,325 | 404,547 | ||||||
Stericycle, Inc.(b) | 3,795 | 332,860 | ||||||
Waste Management, Inc. | 20,827 | 688,124 | ||||||
1,425,531 | ||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
11 Invesco S&P 500 Index Fund
Shares | Value | |||||||
Fertilizers & Agricultural Chemicals–0.44% | ||||||||
CF Industries Holdings, Inc. | 3,118 | $ | 570,033 | |||||
Monsanto Co. | 23,541 | 1,622,681 | ||||||
2,192,714 | ||||||||
Food Distributors–0.14% | ||||||||
Sysco Corp. | 25,627 | 715,762 | ||||||
Food Retail–0.29% | ||||||||
Kroger Co. (The) | 26,637 | 627,568 | ||||||
Safeway Inc. | 15,552 | 285,068 | ||||||
SUPERVALU Inc. | 9,318 | 74,264 | ||||||
Whole Foods Market, Inc. | 6,558 | 433,025 | ||||||
1,419,925 | ||||||||
Footwear–0.29% | ||||||||
NIKE, Inc.–Class B | 16,659 | 1,443,502 | ||||||
Gas Utilities–0.09% | ||||||||
Nicor Inc. | 1,982 | 110,199 | ||||||
ONEOK, Inc. | 4,656 | 330,111 | ||||||
440,310 | ||||||||
General Merchandise Stores–0.40% | ||||||||
Big Lots, Inc.(b) | 3,340 | 113,226 | ||||||
Family Dollar Stores, Inc. | 5,352 | 285,744 | ||||||
Target Corp. | 30,269 | 1,563,999 | ||||||
1,962,969 | ||||||||
Gold–0.28% | ||||||||
Newmont Mining Corp. | 21,683 | 1,357,789 | ||||||
Health Care Distributors–0.43% | ||||||||
AmerisourceBergen Corp. | 12,032 | 476,227 | ||||||
Cardinal Health, Inc. | 15,398 | 654,415 | ||||||
McKesson Corp. | 11,073 | 885,065 | ||||||
Patterson Cos. Inc. | 4,232 | 123,659 | ||||||
2,139,366 | ||||||||
Health Care Equipment–1.87% | ||||||||
Baxter International Inc. | 25,052 | 1,402,411 | ||||||
Becton, Dickinson and Co. | 9,607 | 781,818 | ||||||
Boston Scientific Corp.(b) | 67,123 | 455,094 | ||||||
C.R. Bard, Inc. | 3,736 | 355,891 | ||||||
CareFusion Corp.(b) | 9,813 | 251,311 | ||||||
Covidien PLC (Ireland) | 21,773 | 1,136,115 | ||||||
Edwards Lifesciences Corp.(b) | 5,067 | 382,305 | ||||||
Intuitive Surgical, Inc.(b) | 1,730 | 659,735 | ||||||
Medtronic, Inc. | 46,969 | 1,647,203 | ||||||
St. Jude Medical, Inc. | 14,443 | 657,734 | ||||||
Stryker Corp. | 14,653 | 715,653 | ||||||
Varian Medical Systems, Inc.(b) | 5,124 | 291,863 | ||||||
Zimmer Holdings, Inc.(b) | 8,431 | 479,640 | ||||||
9,216,773 | ||||||||
Health Care Facilities–0.02% | ||||||||
Tenet Healthcare Corp.(b) | 21,501 | 113,525 | ||||||
Health Care Services–0.60% | ||||||||
DaVita, Inc.(b) | 4,155 | 305,725 | ||||||
Express Scripts, Inc.(b) | 21,442 | 1,006,488 | ||||||
Laboratory Corp. of America Holdings(b) | 4,444 | 371,207 | ||||||
Medco Health Solutions, Inc.(b) | 17,559 | 950,644 | ||||||
Quest Diagnostics Inc. | 6,910 | 345,984 | ||||||
2,980,048 | ||||||||
Health Care Supplies–0.04% | ||||||||
DENTSPLY International Inc. | 6,216 | 218,803 | ||||||
Health Care Technology–0.09% | ||||||||
Cerner Corp.(b) | 6,372 | 420,297 | ||||||
Home Entertainment Software–0.07% | ||||||||
Electronic Arts Inc.(b) | 14,601 | 329,691 | ||||||
Home Furnishings–0.03% | ||||||||
Leggett & Platt, Inc. | 6,270 | 139,131 | ||||||
Home Improvement Retail–0.70% | ||||||||
Home Depot, Inc. (The) | 69,935 | 2,334,430 | ||||||
Lowe’s Cos., Inc. | 57,189 | 1,139,777 | ||||||
3,474,207 | ||||||||
Homebuilding–0.06% | ||||||||
D.R. Horton, Inc. | 12,343 | 129,848 | ||||||
Lennar Corp.–Class A | 7,041 | 103,503 | ||||||
Pulte Group Inc.(b) | 14,795 | 71,016 | ||||||
304,367 | ||||||||
Homefurnishing Retail–0.13% | ||||||||
Bed Bath & Beyond Inc.(b) | 10,906 | 620,115 | ||||||
Hotels, Resorts & Cruise Lines–0.33% | ||||||||
Carnival Corp. | 18,968 | 626,513 | ||||||
Marriott International Inc.–Class A | 12,456 | 364,712 | ||||||
Starwood Hotels & Resorts Worldwide, Inc. | 8,597 | 383,082 | ||||||
Wyndham Worldwide Corp. | 7,478 | 242,885 | ||||||
1,617,192 | ||||||||
Household Appliances–0.14% | ||||||||
Stanley Black & Decker Inc. | 7,431 | 460,573 | ||||||
Whirlpool Corp. | 3,362 | 210,764 | ||||||
671,337 | ||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
12 Invesco S&P 500 Index Fund
Shares | Value | |||||||
Household Products–2.30% | ||||||||
Clorox Co. (The) | 5,844 | $ | 407,327 | |||||
Colgate-Palmolive Co. | 21,472 | 1,931,836 | ||||||
Kimberly-Clark Corp. | 17,255 | 1,193,355 | ||||||
Procter & Gamble Co. (The) | 122,600 | 7,807,168 | ||||||
11,339,686 | ||||||||
Housewares & Specialties–0.11% | ||||||||
Fortune Brands, Inc. | 6,818 | 389,444 | ||||||
Newell Rubbermaid Inc. | 12,789 | 177,000 | ||||||
566,444 | ||||||||
Human Resource & Employment Services–0.03% | ||||||||
Robert Half International, Inc. | 6,495 | 155,360 | ||||||
Hypermarkets & Super Centers–1.21% | ||||||||
Costco Wholesale Corp. | 19,187 | 1,506,947 | ||||||
Wal-Mart Stores, Inc. | 83,888 | 4,463,680 | ||||||
5,970,627 | ||||||||
Independent Power Producers & Energy Traders–0.18% | ||||||||
AES Corp. (The)(b) | 28,851 | 313,322 | ||||||
Constellation Energy Group Inc. | 8,783 | 338,057 | ||||||
NRG Energy, Inc.(b) | 10,547 | 247,222 | ||||||
898,601 | ||||||||
Industrial Conglomerates–2.46% | ||||||||
3M Co. | 31,210 | 2,589,806 | ||||||
Danaher Corp. | 23,916 | 1,095,592 | ||||||
General Electric Co.(d) | 465,820 | 7,597,524 | ||||||
Tyco International Ltd. | 20,596 | 856,382 | ||||||
12,139,304 | ||||||||
Industrial Gases–0.46% | ||||||||
Air Products & Chemicals, Inc. | 9,347 | 765,239 | ||||||
Airgas, Inc. | 3,055 | 198,208 | ||||||
Praxair, Inc. | 13,354 | 1,315,236 | ||||||
2,278,683 | ||||||||
Industrial Machinery–0.76% | ||||||||
Dover Corp. | 8,191 | 471,146 | ||||||
Eaton Corp. | 14,986 | 643,649 | ||||||
Flowserve Corp. | 2,416 | 227,925 | ||||||
Illinois Tool Works Inc. | 21,962 | 1,022,112 | ||||||
Ingersoll-Rand PLC (Ireland) | 14,549 | 487,537 | ||||||
Pall Corp. | 5,097 | 260,610 | ||||||
Parker Hannifin Corp. | 7,094 | 520,912 | ||||||
Snap-On Inc. | 2,525 | 133,598 | ||||||
3,767,489 | ||||||||
Industrial REIT’s–0.11% | ||||||||
Prologis, Inc. | 19,952 | 543,293 | ||||||
Insurance Brokers–0.28% | ||||||||
Aon Corp. | 14,502 | 677,678 | ||||||
Marsh & McLennan Cos., Inc. | 24,058 | 715,004 | ||||||
1,392,682 | ||||||||
Integrated Oil & Gas–6.76% | ||||||||
Chevron Corp. | 88,295 | 8,733,258 | ||||||
ConocoPhillips | 62,084 | 4,226,058 | ||||||
Exxon Mobil Corp. | 216,367 | 16,019,813 | ||||||
Hess Corp. | 13,279 | 787,976 | ||||||
Murphy Oil Corp. | 8,465 | 453,555 | ||||||
Occidental Petroleum Corp. | 35,702 | 3,096,791 | ||||||
33,317,451 | ||||||||
Integrated Telecommunication Services–2.74% | ||||||||
AT&T Inc. | 260,109 | 7,407,905 | ||||||
CenturyLink Inc. | 27,002 | 976,122 | ||||||
Frontier Communications Corp. | 43,711 | 327,396 | ||||||
Verizon Communications Inc. | 124,260 | 4,494,484 | ||||||
Windstream Corp. | 22,399 | 284,467 | ||||||
13,490,374 | ||||||||
Internet Retail–1.07% | ||||||||
Amazon.com, Inc.(b) | 15,685 | 3,376,824 | ||||||
Expedia, Inc. | 8,791 | 266,455 | ||||||
Netflix Inc.(b) | 1,932 | 454,039 | ||||||
Priceline.com Inc.(b) | 2,172 | 1,166,929 | ||||||
5,264,247 | ||||||||
Internet Software & Services–1.78% | ||||||||
Akamai Technologies, Inc.(b) | 8,200 | 179,908 | ||||||
eBay Inc.(b) | 50,165 | 1,548,594 | ||||||
Google Inc.–Class A(b) | 11,039 | 5,971,657 | ||||||
Monster Worldwide, Inc.(b) | 5,685 | 53,666 | ||||||
VeriSign, Inc. | 7,411 | 230,853 | ||||||
Yahoo! Inc.(b) | 57,228 | 778,587 | ||||||
8,763,265 | ||||||||
Investment Banking & Brokerage–0.91% | ||||||||
Charles Schwab Corp. (The) | 43,991 | 542,409 | ||||||
E*TRADE Financial Corp.(b) | 11,041 | 136,467 | ||||||
Goldman Sachs Group, Inc. (The) | 22,740 | 2,642,843 | ||||||
Morgan Stanley | 65,277 | 1,142,347 | ||||||
4,464,066 | ||||||||
IT Consulting & Other Services–2.45% | ||||||||
Accenture PLC–Class A (Ireland) | 28,517 | 1,528,226 | ||||||
Cognizant Technology Solutions Corp.–Class A(b) | 13,362 | 847,819 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
13 Invesco S&P 500 Index Fund
Shares | Value | |||||||
IT Consulting & Other Services–(continued) | ||||||||
International Business Machines Corp. | 53,199 | $ | 9,145,440 | |||||
SAIC, Inc.(b) | 12,239 | 183,585 | ||||||
Teradata Corp.(b) | 7,374 | 386,103 | ||||||
12,091,173 | ||||||||
Leisure Products–0.13% | ||||||||
Hasbro, Inc. | 5,983 | 231,781 | ||||||
Mattel, Inc. | 15,266 | 410,198 | ||||||
641,979 | ||||||||
Life & Health Insurance–0.93% | ||||||||
Aflac, Inc. | 20,542 | 774,844 | ||||||
Lincoln National Corp. | 13,734 | 284,981 | ||||||
MetLife, Inc. | 46,427 | 1,559,947 | ||||||
Principal Financial Group, Inc. | 14,112 | 357,880 | ||||||
Prudential Financial, Inc. | 21,433 | 1,076,151 | ||||||
Torchmark Corp. | 5,026 | 192,043 | ||||||
Unum Group | 13,518 | 318,214 | ||||||
4,564,060 | ||||||||
Life Sciences Tools & Services–0.46% | ||||||||
Agilent Technologies, Inc.(b) | 15,287 | 563,632 | ||||||
Life Technologies Corp.(b) | 7,899 | 331,758 | ||||||
PerkinElmer, Inc. | 4,934 | 112,840 | ||||||
Thermo Fisher Scientific, Inc.(b) | 16,833 | 924,637 | ||||||
Waters Corp.(b) | 4,058 | 324,112 | ||||||
2,256,979 | ||||||||
Managed Health Care–1.07% | ||||||||
Aetna Inc. | 16,668 | 667,220 | ||||||
CIGNA Corp. | 11,853 | 554,009 | ||||||
Coventry Health Care, Inc.(b) | 6,555 | 215,528 | ||||||
Humana Inc. | 7,390 | 573,760 | ||||||
UnitedHealth Group Inc. | 47,587 | 2,261,334 | ||||||
WellPoint Inc. | 16,126 | 1,020,776 | ||||||
5,292,627 | ||||||||
Metal & Glass Containers–0.08% | ||||||||
Ball Corp. | 7,418 | 266,455 | ||||||
Owens-Illinois, Inc.(b) | 7,176 | 135,913 | ||||||
402,368 | ||||||||
Motorcycle Manufacturers–0.08% | ||||||||
Harley-Davidson, Inc. | 10,362 | 400,595 | ||||||
Movies & Entertainment–1.48% | ||||||||
News Corp.–Class A | 100,370 | 1,733,390 | ||||||
Time Warner Inc. | 47,033 | 1,489,065 | ||||||
Viacom Inc.–Class B | 25,699 | 1,239,720 | ||||||
Walt Disney Co. (The) | 83,020 | 2,827,661 | ||||||
7,289,836 | ||||||||
Multi-Line Insurance–0.34% | ||||||||
American International Group, Inc.(b) | 19,160 | 485,323 | ||||||
Assurant, Inc. | 4,202 | 147,784 | ||||||
Genworth Financial Inc.–Class A(b) | 21,545 | 148,876 | ||||||
Hartford Financial Services Group, Inc. (The) | 19,557 | 374,321 | ||||||
Loews Corp. | 13,646 | 513,363 | ||||||
1,669,667 | ||||||||
Multi-Sector Holdings–0.05% | ||||||||
Leucadia National Corp. | 8,696 | 257,662 | ||||||
Multi-Utilities–1.41% | ||||||||
Ameren Corp. | 10,578 | 320,090 | ||||||
CenterPoint Energy, Inc. | 18,684 | 373,867 | ||||||
CMS Energy Corp. | 11,083 | 218,335 | ||||||
Consolidated Edison, Inc. | 12,850 | 722,299 | ||||||
Dominion Resources, Inc. | 25,290 | 1,232,635 | ||||||
DTE Energy Co. | 7,430 | 375,661 | ||||||
Integrys Energy Group, Inc. | 3,436 | 172,041 | ||||||
NiSource Inc. | 12,279 | 262,279 | ||||||
PG&E Corp. | 17,478 | 740,193 | ||||||
Public Service Enterprise Group Inc. | 22,219 | 758,334 | ||||||
SCANA Corp. | 5,006 | 201,341 | ||||||
Sempra Energy | 10,488 | 550,830 | ||||||
TECO Energy, Inc. | 9,440 | 172,752 | ||||||
Wisconsin Energy Corp. | 10,266 | 324,816 | ||||||
Xcel Energy, Inc. | 21,265 | 524,608 | ||||||
6,950,081 | ||||||||
Office Electronics–0.10% | ||||||||
Xerox Corp. | 61,543 | 510,807 | ||||||
Office REIT’s–0.14% | ||||||||
Boston Properties, Inc. | 6,391 | 666,517 | ||||||
Office Services & Supplies–0.06% | ||||||||
Avery Dennison Corp. | 4,648 | 135,303 | ||||||
Pitney Bowes Inc. | 8,953 | 181,836 | ||||||
317,139 | ||||||||
Oil & Gas Drilling–0.26% | ||||||||
Diamond Offshore Drilling, Inc. | 3,057 | 194,823 | ||||||
Helmerich & Payne, Inc. | 4,667 | 266,112 | ||||||
Nabors Industries Ltd.(b) | 12,617 | 232,657 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
14 Invesco S&P 500 Index Fund
Shares | Value | |||||||
Oil & Gas Drilling–(continued) | ||||||||
Noble Corp.(b) | 11,075 | $ | 373,892 | |||||
Rowan Cos., Inc.(b) | 5,613 | 202,461 | ||||||
1,269,945 | ||||||||
Oil & Gas Equipment & Services–2.00% | ||||||||
Baker Hughes, Inc. | 19,089 | 1,166,529 | ||||||
Cameron International Corp.(b) | 10,761 | 559,141 | ||||||
FMC Technologies, Inc.(b) | 10,555 | 469,275 | ||||||
Halliburton Co. | 40,189 | 1,783,186 | ||||||
National Oilwell Varco Inc. | 18,582 | 1,228,642 | ||||||
Schlumberger Ltd. | 59,600 | 4,655,952 | ||||||
9,862,725 | ||||||||
Oil & Gas Exploration & Production–2.27% | ||||||||
Anadarko Petroleum Corp. | 21,851 | 1,611,511 | ||||||
Apache Corp. | 16,841 | 1,735,802 | ||||||
Cabot Oil & Gas Corp. | 4,634 | 351,535 | ||||||
Chesapeake Energy Corp. | 28,885 | 935,585 | ||||||
Denbury Resources Inc.(b) | 17,448 | 278,296 | ||||||
Devon Energy Corp. | 18,578 | 1,260,146 | ||||||
EOG Resources, Inc. | 11,786 | 1,091,266 | ||||||
EQT Corp. | 6,529 | 390,565 | ||||||
Marathon Oil Corp. | 31,276 | 841,950 | ||||||
Newfield Exploration Co.(b) | 5,770 | 294,558 | ||||||
Noble Energy, Inc. | 7,710 | 681,256 | ||||||
Pioneer Natural Resources Co. | 5,140 | 401,794 | ||||||
QEP Resources Inc. | 7,735 | 272,349 | ||||||
Range Resources Corp. | 7,032 | 455,392 | ||||||
Southwestern Energy Co.(b) | 15,280 | 579,876 | ||||||
11,181,881 | ||||||||
Oil & Gas Refining & Marketing–0.31% | ||||||||
Marathon Petroleum Corp. | 15,638 | 579,544 | ||||||
Sunoco, Inc. | 5,351 | 204,087 | ||||||
Tesoro Corp.(b) | 6,363 | 153,094 | ||||||
Valero Energy Corp. | 25,046 | 569,045 | ||||||
1,505,770 | ||||||||
Oil & Gas Storage & Transportation–0.42% | ||||||||
El Paso Corp. | 33,774 | 646,434 | ||||||
Spectra Energy Corp. | 28,548 | 741,392 | ||||||
Williams Cos., Inc. (The) | 25,832 | 697,206 | ||||||
2,085,032 | ||||||||
Other Diversified Financial Services–2.87% | ||||||||
Bank of America Corp. | 445,067 | 3,636,198 | ||||||
Citigroup Inc. | 128,282 | 3,983,156 | ||||||
JPMorgan Chase & Co. | 174,534 | 6,555,497 | ||||||
14,174,851 | ||||||||
Packaged Foods & Meats–1.71% | ||||||||
Campbell Soup Co. | 8,013 | 255,374 | ||||||
ConAgra Foods, Inc. | 17,959 | 438,559 | ||||||
Dean Foods Co.(b) | 8,040 | 69,466 | ||||||
General Mills, Inc. | 28,039 | 1,062,959 | ||||||
H.J. Heinz Co. | 14,102 | 742,329 | ||||||
Hershey Co. (The) | 6,768 | 396,943 | ||||||
Hormel Foods Corp. | 6,053 | 167,123 | ||||||
J M Smucker Co. (The) | 5,071 | 365,568 | ||||||
Kellogg Co. | 10,987 | 596,814 | ||||||
Kraft Foods, Inc.–Class A | 77,210 | 2,703,894 | ||||||
McCormick & Co., Inc. | 5,809 | 277,612 | ||||||
Mead Johnson Nutrition Co. | 8,975 | 639,469 | ||||||
Sara Lee Corp. | 25,698 | 463,592 | ||||||
Tyson Foods, Inc.–Class A | 13,165 | 229,993 | ||||||
8,409,695 | ||||||||
Paper Packaging–0.06% | ||||||||
Bemis Co., Inc. | 4,657 | 144,646 | ||||||
Sealed Air Corp. | 7,075 | 130,322 | ||||||
274,968 | ||||||||
Paper Products–0.15% | ||||||||
International Paper Co. | 19,204 | 521,388 | ||||||
MeadWestvaco Corp. | 7,482 | 205,905 | ||||||
727,293 | ||||||||
Personal Products–0.19% | ||||||||
Avon Products, Inc. | 18,894 | 426,248 | ||||||
Estee Lauder Cos. Inc. (The)–Class A | 4,989 | 487,226 | ||||||
913,474 | ||||||||
Pharmaceuticals–5.91% | ||||||||
Abbott Laboratories | 68,268 | 3,584,753 | ||||||
Allergan, Inc. | 13,384 | 1,094,945 | ||||||
Bristol-Myers Squibb Co. | 74,931 | 2,229,197 | ||||||
Eli Lilly and Co. | 44,746 | 1,678,423 | ||||||
Forest Laboratories, Inc.(b) | 12,568 | 430,328 | ||||||
Hospira, Inc.(b) | 7,406 | 342,157 | ||||||
Johnson & Johnson | 120,398 | 7,922,188 | ||||||
Merck & Co., Inc. | 135,571 | 4,490,112 | ||||||
Mylan Inc.(b) | 19,292 | 400,502 | ||||||
Pfizer Inc. | 347,039 | 6,586,800 | ||||||
Watson Pharmaceuticals, Inc.(b) | 5,568 | 373,724 | ||||||
29,133,129 | ||||||||
Property & Casualty Insurance–2.00% | ||||||||
ACE Ltd. (Switzerland) | 14,818 | 956,946 | ||||||
Allstate Corp. (The) | 22,969 | 602,477 | ||||||
Berkshire Hathaway Inc.–Class B(b) | 76,041 | 5,550,993 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
15 Invesco S&P 500 Index Fund
Shares | Value | |||||||
Property & Casualty Insurance–(continued) | ||||||||
Chubb Corp. (The) | 12,819 | $ | 793,368 | |||||
Cincinnati Financial Corp. | 7,144 | 199,460 | ||||||
Progressive Corp. (The) | 28,711 | 550,677 | ||||||
Travelers Cos., Inc. (The) | 18,397 | 928,313 | ||||||
XL Group PLC (Ireland) | 13,589 | 282,787 | ||||||
9,865,021 | ||||||||
Publishing–0.16% | ||||||||
Gannett Co., Inc. | 10,546 | 121,806 | ||||||
McGraw-Hill Cos., Inc. (The) | 13,382 | 563,516 | ||||||
Washington Post Co. (The)–Class B | 235 | 83,604 | ||||||
768,926 | ||||||||
Railroads–0.83% | ||||||||
CSX Corp. | 48,436 | 1,062,686 | ||||||
Norfolk Southern Corp. | 15,514 | 1,049,988 | ||||||
Union Pacific Corp. | 21,544 | 1,985,710 | ||||||
4,098,384 | ||||||||
Real Estate Services–0.04% | ||||||||
CB Richard Ellis Group, Inc.–Class A(b) | 12,819 | 194,336 | ||||||
Regional Banks–0.83% | ||||||||
BB&T Corp. | 30,590 | 681,851 | ||||||
Fifth Third Bancorp | 40,352 | 428,538 | ||||||
First Horizon National Corp. | 11,565 | 81,418 | ||||||
Huntington Bancshares Inc. | 37,922 | 190,748 | ||||||
KeyCorp | 41,761 | 277,293 | ||||||
M&T Bank Corp. | 5,494 | 417,929 | ||||||
PNC Financial Services Group, Inc. | 23,115 | 1,158,986 | ||||||
Regions Financial Corp. | 55,187 | 250,549 | ||||||
SunTrust Banks, Inc. | 23,581 | 469,262 | ||||||
Zions Bancorp. | 8,035 | 140,130 | ||||||
4,096,704 | ||||||||
Research & Consulting Services–0.06% | ||||||||
Dun & Bradstreet Corp. (The) | 2,134 | 142,743 | ||||||
Equifax Inc. | 5,355 | 173,127 | ||||||
315,870 | ||||||||
Residential REIT’s–0.29% | ||||||||
Apartment Investment & Management Co.–Class A | 5,249 | 139,466 | ||||||
AvalonBay Communities, Inc. | 3,798 | 517,971 | ||||||
Equity Residential | 12,941 | 791,731 | ||||||
1,449,168 | ||||||||
Restaurants–1.47% | ||||||||
Chipotle Mexican Grill, Inc.(b) | 1,373 | 430,257 | ||||||
Darden Restaurants, Inc. | 6,037 | 290,380 | ||||||
McDonald’s Corp. | 45,573 | 4,122,533 | ||||||
Starbucks Corp. | 32,924 | 1,271,525 | ||||||
Yum! Brands, Inc. | 20,448 | 1,111,758 | ||||||
7,226,453 | ||||||||
Retail REIT’s–0.37% | ||||||||
Kimco Realty Corp. | 17,873 | 316,352 | ||||||
Simon Property Group, Inc. | 12,875 | 1,512,813 | ||||||
1,829,165 | ||||||||
Semiconductor Equipment–0.24% | ||||||||
Applied Materials, Inc. | 57,900 | 655,428 | ||||||
KLA-Tencor Corp. | 7,331 | 268,901 | ||||||
MEMC Electronic Materials, Inc.(b) | 10,120 | 70,637 | ||||||
Novellus Systems, Inc.(b) | 3,907 | 109,279 | ||||||
Teradyne, Inc.(b) | 8,138 | 98,470 | ||||||
1,202,715 | ||||||||
Semiconductors–2.04% | ||||||||
Advanced Micro Devices, Inc.(b) | 25,366 | 173,250 | ||||||
Altera Corp. | 14,152 | 514,991 | ||||||
Analog Devices, Inc. | 13,159 | 434,510 | ||||||
Broadcom Corp.–Class A(b) | 20,956 | 747,082 | ||||||
First Solar, Inc.(b) | 2,383 | 238,252 | ||||||
Intel Corp. | 232,878 | 4,687,834 | ||||||
Linear Technology Corp. | 9,983 | 285,813 | ||||||
LSI Corp.(b) | 26,601 | 181,153 | ||||||
Microchip Technology, Inc. | 8,392 | 275,426 | ||||||
Micron Technology, Inc.(b) | 37,829 | 223,569 | ||||||
National Semiconductor Corp. | 10,591 | 263,716 | ||||||
NVIDIA Corp.(b) | 26,365 | 350,918 | ||||||
Texas Instruments Inc. | 51,000 | 1,336,710 | ||||||
Xilinx, Inc. | 11,641 | 362,501 | ||||||
10,075,725 | ||||||||
Soft Drinks–2.50% | ||||||||
Coca-Cola Co. (The) | 100,549 | 7,083,677 | ||||||
Coca-Cola Enterprises, Inc. | 14,275 | 394,276 | ||||||
Dr. Pepper Snapple Group, Inc. | 9,754 | 375,334 | ||||||
PepsiCo, Inc. | 69,426 | 4,473,117 | ||||||
12,326,404 | ||||||||
Specialized Consumer Services–0.04% | ||||||||
H&R Block, Inc. | 13,406 | 202,699 | ||||||
Specialized Finance–0.39% | ||||||||
CME Group Inc. | 2,945 | 786,668 | ||||||
IntercontinentalExchange Inc.(b) | 3,228 | 380,743 | ||||||
Moody’s Corp. | 8,670 | 267,296 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
16 Invesco S&P 500 Index Fund
Shares | Value | |||||||
Specialized Finance–(continued) | ||||||||
NASDAQ OMX Group, Inc. (The)(b) | 6,555 | $ | 155,288 | |||||
NYSE Euronext | 11,492 | 313,502 | ||||||
1,903,497 | ||||||||
Specialized REIT’s–0.72% | ||||||||
HCP, Inc. | 17,833 | 664,814 | ||||||
Health Care REIT, Inc. | 7,727 | 393,768 | ||||||
Host Hotels & Resorts Inc. | 30,138 | 356,533 | ||||||
Plum Creek Timber Co., Inc. | 7,093 | 269,321 | ||||||
Public Storage | 6,111 | 756,114 | ||||||
Ventas, Inc. | 12,627 | 675,292 | ||||||
Weyerhaeuser Co. | 23,655 | 426,500 | ||||||
3,542,342 | ||||||||
Specialty Chemicals–0.28% | ||||||||
Ecolab Inc. | 10,140 | 543,504 | ||||||
International Flavors & Fragrances Inc. | 3,547 | 205,797 | ||||||
Sherwin-Williams Co. (The) | 3,898 | 295,234 | ||||||
Sigma-Aldrich Corp. | 5,384 | 346,676 | ||||||
1,391,211 | ||||||||
Specialty Stores–0.18% | ||||||||
Staples, Inc. | 31,323 | 461,701 | ||||||
Tiffany & Co. | 5,616 | 404,127 | ||||||
865,828 | ||||||||
Steel–0.30% | ||||||||
AK Steel Holding Corp. | 4,854 | 43,637 | ||||||
Allegheny Technologies, Inc. | 4,704 | 235,764 | ||||||
Cliffs Natural Resources Inc. | 6,348 | 525,932 | ||||||
Nucor Corp. | 13,881 | 500,827 | ||||||
United States Steel Corp. | 6,289 | 189,425 | ||||||
1,495,585 | ||||||||
Systems Software–3.05% | ||||||||
BMC Software, Inc.(b) | 7,738 | 314,240 | ||||||
CA, Inc. | 16,672 | 349,945 | ||||||
Microsoft Corp. | 325,943 | 8,670,084 | ||||||
Oracle Corp. | 171,149 | 4,804,152 | ||||||
Red Hat, Inc.(b) | 8,476 | 335,141 | ||||||
Symantec Corp.(b) | 33,185 | 569,123 | ||||||
15,042,685 | ||||||||
Thrifts & Mortgage Finance–0.07% | ||||||||
Hudson City Bancorp, Inc. | 23,133 | 143,656 | ||||||
People’s United Financial Inc. | 16,539 | 194,333 | ||||||
337,989 | ||||||||
Tires & Rubber–0.03% | ||||||||
Goodyear Tire & Rubber Co. (The)(b) | 10,698 | 133,297 | ||||||
Tobacco–1.86% | ||||||||
Altria Group, Inc. | 91,947 | 2,500,039 | ||||||
Lorillard, Inc. | 6,268 | 698,380 | ||||||
Philip Morris International Inc. | 78,112 | 5,414,724 | ||||||
Reynolds American Inc. | 14,828 | 557,088 | ||||||
9,170,231 | ||||||||
Trading Companies & Distributors–0.17% | ||||||||
Fastenal Co. | 12,950 | 433,566 | ||||||
W.W. Grainger, Inc. | 2,574 | 396,653 | ||||||
830,219 | ||||||||
Trucking–0.02% | ||||||||
Ryder System, Inc. | 2,289 | 107,766 | ||||||
Wireless Telecommunication Services–0.32% | ||||||||
American Tower Corp.–Class A(b) | 17,420 | 938,241 | ||||||
MetroPCS Communications, Inc.(b) | 11,635 | 129,847 | ||||||
Sprint Nextel Corp.(b) | 131,403 | 494,075 | ||||||
1,562,163 | ||||||||
Total Common Stocks & Other Equity Interests (Cost $386,091,252) | 488,706,240 | |||||||
Money Market Funds–0.84% | ||||||||
Liquid Assets Portfolio–Institutional Class(e) | 2,083,673 | 2,083,673 | ||||||
Premier Portfolio–Institutional Class(e) | 2,083,672 | 2,083,672 | ||||||
Total Money Market Funds (Cost $4,167,345) | 4,167,345 | |||||||
TOTAL INVESTMENTS–99.97% (Cost $390,258,597) | 492,873,585 | |||||||
OTHER ASSETS LESS LIABILITIES–0.03% | 140,417 | |||||||
NET ASSETS–100.00% | $ | 493,014,002 | ||||||
Investment Abbreviations:
REIT | – Real Estate Investment Trust |
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. | |
(b) | Non-income producing security. | |
(c) | The Fund’s Adviser is a subsidiary of Invesco Ltd. and therefore, Invesco Ltd. is considered to be affiliated with the Fund. See Note 4. | |
(d) | All or a portion of the value was pledged as collateral to cover margin requirements for open futures contracts. See Note 1I and Note 5. | |
(e) | The money market fund and the Fund are affiliated by having the same investment adviser. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
17 Invesco S&P 500 Index Fund
Statement of Assets and Liabilities
August 31, 2011
Assets: | ||||
Investments, at value (Cost $385,613,432) | $ | 488,334,860 | ||
Investments in affiliates, at value (Cost $4,645,165) | 4,538,725 | |||
Total investments, at value (Cost $390,258,597) | 492,873,585 | |||
Receivable for: | ||||
Variation margin | 56,760 | |||
Fund shares sold | 508,018 | |||
Dividends | 1,239,780 | |||
Investment for trustee deferred compensation and retirement plans | 3,194 | |||
Other assets | 27,111 | |||
Total assets | 494,708,448 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares reacquired | 989,536 | |||
Accrued fees to affiliates | 616,397 | |||
Accrued other operating expenses | 79,613 | |||
Trustee deferred compensation and retirement plans | 8,900 | |||
Total liabilities | 1,694,446 | |||
Net assets applicable to shares outstanding | $ | 493,014,002 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 490,396,115 | ||
Undistributed net investment income | 6,743,781 | |||
Undistributed net realized gain (loss) | (106,810,186 | ) | ||
Unrealized appreciation | 102,684,292 | |||
$ | 493,014,002 | |||
Net assets: | ||||
Class A | $ | 369,596,820 | ||
Class B | $ | 37,839,975 | ||
Class C | $ | 68,753,034 | ||
Class Y | $ | 16,824,173 | ||
Shares outstanding, $0.01 par value per share, with an unlimited number of shares authorized: | ||||
Class A | 27,903,703 | |||
Class B | 2,929,575 | |||
Class C | 5,373,903 | |||
Class Y | 1,255,780 | |||
Class A: | ||||
Net asset value per share | $ | 13.25 | ||
Maximum offering price per share (Net asset value of $13.25 ¸ 94.50%) | $ | 14.02 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 12.92 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 12.79 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 13.40 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
18 Invesco S&P 500 Index Fund
Statement of Operations
For the year ended August 31, 2011
Investment income: | ||||
Dividends | $ | 10,950,582 | ||
Dividends from affiliates | 16,180 | |||
Total investment income | 10,966,762 | |||
Expenses: | ||||
Advisory fees | 650,443 | |||
Administrative services fees | 154,668 | |||
Custodian fees | 35,914 | |||
Distribution fees: | ||||
Class A | 972,317 | |||
Class B | 568,699 | |||
Class C | 686,394 | |||
Transfer agent fees | 825,936 | |||
Trustees’ and officers’ fees and benefits | 29,813 | |||
Other | 236,411 | |||
Total expenses | 4,160,595 | |||
Less: Fees waived and expense offset arrangement(s) | (8,826 | ) | ||
Net expenses | 4,151,769 | |||
Net investment income | 6,814,993 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain (loss) from: | ||||
Investment securities | (25,737,387 | ) | ||
Futures contracts | 1,328,718 | |||
(24,408,669 | ) | |||
Change in net unrealized appreciation of: | ||||
Investment securities | 106,207,593 | |||
Futures contracts | 146,260 | |||
106,353,853 | ||||
Net realized and unrealized gain | 81,945,184 | |||
Net increase in net assets resulting from operations | $ | 88,760,177 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
19 Invesco S&P 500 Index Fund
Statement of Changes in Net Assets
For the years ended August 31, 2011 and 2010
2011 | 2010 | |||||||
Operations: | ||||||||
Net investment income | $ | 6,814,993 | $ | 7,024,327 | ||||
Net realized gain (loss) | (24,408,669 | ) | (2,587,089 | ) | ||||
Change in net unrealized appreciation | 106,353,853 | 23,329,673 | ||||||
Net increase in net assets resulting from operations | 88,760,177 | 27,766,911 | ||||||
Distributions to shareholders from net investment income: | ||||||||
Class A | (4,314,633 | ) | (7,210,852 | ) | ||||
Class B | (343,807 | ) | (1,207,325 | ) | ||||
Class C | (411,023 | ) | (1,049,628 | ) | ||||
Class Y | (330,849 | ) | (532,217 | ) | ||||
Total distributions from net investment income | (5,400,312 | ) | (10,000,022 | ) | ||||
Share transactions–net: | ||||||||
Class A | (22,350,952 | ) | (23,336,922 | ) | ||||
Class B | (37,810,809 | ) | (51,502,328 | ) | ||||
Class C | (9,480,958 | ) | (9,511,104 | ) | ||||
Class Y | (10,489,324 | ) | (603,618 | ) | ||||
Net increase (decrease) in net assets resulting from share transactions | (80,132,043 | ) | (84,953,972 | ) | ||||
Net increase (decrease) in net assets | 3,227,822 | (67,187,083 | ) | |||||
Net assets: | ||||||||
Beginning of year | 489,786,180 | 556,973,263 | ||||||
End of year (includes undistributed net investment income of $6,743,781 and $5,387,726, respectively) | $ | 493,014,002 | $ | 489,786,180 | ||||
Notes to Financial Statements
August 31, 2011
NOTE 1—Significant Accounting Policies
Invesco S&P 500 Index Fund (the “Fund”), is a series portfolio of AIM Counselor Series Trust (Invesco Counselor Series Trust (the “Trust”). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end series management investment company consisting of twelve separate portfolios, each authorized to issue an unlimited number of shares of beneficial interest. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class.
The Fund’s investment objective is to provide investment results that, before expenses, correspond to the total return (i.e., the combination of capital changes and income) of the Standard & Poor’s® 500 Composite Stock Price Index.
The Fund currently consists of four different classes of shares: Class A, Class B, Class C and Class Y. Class A shares are sold with a front-end sales charge unless certain waiver criteria are met and under certain circumstances load waived shares may be subject to contingent deferred sales charges (“CDSC”). Class C shares are sold with a CDSC. Class Y shares are sold at net asset value. Effective November 30, 2010, new or additional investments in Class B shares are no longer permitted. Existing shareholders of Class B shares may continue to reinvest dividends and capital gains distributions in Class B shares until they convert. Also, shareholders in Class B shares will be able to exchange those shares for Class B shares of other Invesco Funds offering such shares until they convert. Generally, Class B shares will automatically convert to Class A shares on or about the month-end which is at least eight years after the date of purchase. Redemption of Class B shares prior to conversion date will be subject to a CDSC.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. | |
A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. |
20 Invesco S&P 500 Index Fund
Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”). | ||
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded. | ||
Debt obligations (including convertible bonds) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations, including commercial paper, having 60 days or less to maturity are recorded at amortized cost which approximates value. Debt securities are subject to interest rate and credit risks. In addition, all debt securities involve some risk of default with respect to interest and/or principal payments. | ||
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trade is not the current value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economical upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards. | ||
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including Corporate Loans. | ||
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value. | ||
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments. | ||
B. | Securities Transactions and Investment Income — Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. | |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held. | ||
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund’s net asset value and, accordingly, they reduce the Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser. | ||
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class. | ||
C. | Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. | |
D. | Distributions — Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to treat a portion of the proceeds from redemptions as distributions for federal income tax purposes. |
21 Invesco S&P 500 Index Fund
E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. | |
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period. | ||
F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. | |
G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. | |
H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. | |
I. | Futures Contracts — The Fund may enter into futures contracts to manage exposure to interest rate, equity and market price movements and/or currency risks. A futures contract is an agreement between two parties to purchase or sell a specified underlying security, currency or commodity (or delivery of a cash settlement price, in the case of an index future) for a fixed price at a future date. The Fund currently invests only in exchange-traded futures and they are standardized as to maturity date and underlying financial instrument. Initial margin deposits required upon entering into futures contracts are satisfied by the segregation of specific securities or cash as collateral at the futures commission merchant (broker). During the period the futures contracts are open, changes in the value of the contracts are recognized as unrealized gains or losses by recalculating the value of the contracts on a daily basis. Subsequent or variation margin payments are received or made depending upon whether unrealized gains or losses are incurred. These amounts are reflected as receivables or payables on the Statement of Assets and Liabilities. When the contracts are closed or expire, the Fund recognizes a realized gain or loss equal to the difference between the proceeds from, or cost of, the closing transaction and the Fund’s basis in the contract. The net realized gain (loss) and the change in unrealized gain (loss) on futures contracts held during the period is included on the Statement of Operations. The primary risks associated with futures contracts are market risk and the absence of a liquid secondary market. If the Fund were unable to liquidate a futures contract and/or enter into an offsetting closing transaction, the Fund would continue to be subject to market risk with respect to the value of the contracts and continue to be required to maintain the margin deposits on the futures contracts. Futures contracts have minimal counterparty risk since the exchange’s clearinghouse, as counterparty to all exchange-traded futures, guarantees the futures against default. Risks may exceed amounts recognized in the Statement of Assets and Liabilities. | |
J. | Collateral — To the extent the Fund has pledged or segregated a security as collateral and that security is subsequently sold, it is the Fund’s practice to replace such collateral no later than the next business day. |
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser based on the annual rate of the Fund’s average daily net assets as follows:
Average Daily Net Assets | Rate | |||
First $2 billion | 0 | .12% | ||
Over $2 billion | 0 | .10% | ||
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2012, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Class A, Class B, Class C, and Class Y shares to 0.65%, 1.40%, 1.40% and 0.40%, respectively, of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless the Board of Trustees and Invesco mutually agree to amend or continue the fee waiver agreement, it will terminate on June 30, 2012. The Adviser did not waive fees and/or reimburse expenses during the period under this limitation.
22 Invesco S&P 500 Index Fund
Further, the Adviser has contractually agreed, through at least June 30, 2012, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the year ended August 31, 2011, the Adviser waived advisory fees of $8,495.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco for certain administrative costs incurred in providing accounting services to the Fund. For the year ended August 31, 2011, expenses incurred under the agreement are shown in the Statement of Operations as administrative services fees.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (“IIS”) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. IIS may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. All fees payable by IIS to intermediaries that provide omnibus account services or sub-accounting are charged back to the Fund, subject to certain limitations approved by the Trust’s Board of Trustees. For the year ended August 31, 2011, the expenses incurred under the agreement are shown in the Statement of Operations as transfer agent fees.
Shares of the Fund are distributed by Invesco Distributors, Inc. (“IDI”), an affiliate of the Adviser. The Fund has adopted a Plan of Distribution (the “Plan”) pursuant to Rule 12b-1 under the 1940 Act. The Plan provides that the Fund will reimburse IDI for distribution related expenses that IDI incurs up to a maximum of the following annual rates: (1) Class A — up to 0.25% of the average daily net assets of Class A shares; (2) Class B — up to 1.00% of the average daily net assets of Class B shares; and (3) Class C — up to 1.00% of the average daily net assets of Class C shares.
In the case of Class B and Class C shares, provided that the Plan continues in effect, any cumulative expenses incurred by IDI, but not yet reimbursed to IDI, may be recovered through the payment of future distribution fees from the Fund pursuant to the Plan and contingent deferred sales charges paid by investors upon redemption of Class B and Class C shares.
For the year ended August 31, 2011, expenses incurred under these agreements are shown in the Statement of Operations as distribution fees.
Front-end sales commissions and CDSC (collectively the “sales charges”) are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the year ended August 31, 2011, IDI advised the Fund that IDI retained $17,225 in front-end sales commissions from the sale of Class A shares and $72, $31,237 and $4,340 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of the Adviser, Invesco Ltd., IIS and/or IDI.
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3) generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
Level 1 — | Prices are determined using quoted prices in an active market for identical assets. | |
Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. | |
Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of August 31, 2011. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
During the year ended August 31, 2011, there were no significant transfers between investment levels.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 492,873,585 | $ | — | $ | — | $ | 492,873,585 | ||||||||
Futures Contracts* | 69,304 | — | — | 69,304 | ||||||||||||
Total Investments | $ | 492,942,889 | $ | — | $ | — | $ | 492,942,889 | ||||||||
* | Unrealized appreciation |
23 Invesco S&P 500 Index Fund
NOTE 4—Investment in Affiliate
The Fund’s Adviser is a subsidiary of Invesco Ltd. and therefore, Invesco Ltd. is considered to be affiliated with the Fund. The following is a summary of the transactions in and earnings from investments in Invesco Ltd. for the year ended August 31, 2011.
Change in | ||||||||||||||||||||||||||||
Unrealized | ||||||||||||||||||||||||||||
Value | Purchases | Proceeds | Appreciation | Realized | Value | Dividend | ||||||||||||||||||||||
08/31/10 | at Cost | from Sales | (Depreciation) | Gain (Loss) | 08/31/11 | Income | ||||||||||||||||||||||
Invesco Ltd. | $ | 432,499 | $ | 5,344 | $ | (89,452 | ) | $ | 32,442 | $ | (9,453 | ) | $ | 371,380 | $ | 9,949 | ||||||||||||
NOTE 5— Derivative Investments
The Fund has implemented the required disclosures about derivative instruments and hedging activities in accordance with GAAP. This disclosure is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position and financial performance. The enhanced disclosure has no impact on the results of operations reported in the financial statements.
Value of Derivative Instruments at Period-End
The table below summarizes the value of the Fund’s derivative instruments, detailed by primary risk exposure, held as of August 31, 2011:
Value | ||||||||
Risk Exposure/Derivative Type | Assets | Liabilities | ||||||
Equity risk | ||||||||
Futures contracts(a) | $ | 69,304 | $ | — | ||||
(a) | Includes cumulative appreciation of futures contracts. Only current day’s variation margin receivable is reported within the Statement of Assets and Liabilities. |
Effect of Derivative Instruments for the year ended August 31, 2011
The table below summarizes the gains on derivative instruments, detailed by primary risk exposure, recognized in earnings during the period:
Location of Gain on Statement of Operations | Futures* | |||
Realized Gain | ||||
Equity risk | $ | 1,328,718 | ||
Change in Unrealized Appreciation | ||||
Equity risk | 146,260 | |||
Total | $ | 1,474,978 | ||
* | The average notional value of futures outstanding during the period was $5,662,540. |
Open Futures Contracts | ||||||||||||||||
Number of | Expiration | Notional | Unrealized | |||||||||||||
Long Contracts | Contracts | Month | Value | Appreciation | ||||||||||||
E-Mini S&P 500 Index | 88 | September-2011 | $ | 5,357,880 | $ | 69,304 | ||||||||||
NOTE 6—Expense Offset Arrangement(s)
The expense offset arrangement is comprised of transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions. For the year ended August 31, 2011, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $331.
NOTE 7—Trustees’ and Officers’ Fees and Benefits
“Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and “Trustees’ and Officers’ Fees and Benefits” also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. “Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
During the year ended August 31, 2011, the Fund paid legal fees of $2,739 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A partner of that firm is a Trustee of the Trust.
24 Invesco S&P 500 Index Fund
NOTE 8—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with The State Street Bank and Trust Company, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 9—Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Years Ended August 31, 2011 and 2010:
2011 | 2010 | |||||||
Ordinary income | $ | 5,400,312 | $ | 10,000,022 | ||||
Tax Components of Net Assets at Period-End:
2011 | ||||
Undistributed ordinary income | $ | 6,648,686 | ||
Net unrealized appreciation — investments | 76,500,212 | |||
Temporary book/tax differences | (8,583 | ) | ||
Post-October deferrals | (17,747,745 | ) | ||
Capital loss carryforward | (62,774,683 | ) | ||
Shares of beneficial interest | 490,396,115 | |||
Total net assets | $ | 493,014,002 | ||
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund’s net unrealized appreciation difference is attributable primarily to wash sales.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund’s temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund has a capital loss carryforward as of August 31, 2011 which expires as follows:
Capital Loss | ||||
Expiration | Carryforward* | |||
August 31, 2012 | $ | 20,294,770 | ||
August 31, 2017 | 12,322,416 | |||
August 31, 2018 | 19,847,353 | |||
August 31, 2019 | 10,310,144 | |||
Total capital loss carryforward | $ | 62,774,683 | ||
* | Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. |
25 Invesco S&P 500 Index Fund
NOTE 10—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended August 31, 2011 was $22,074,984 and $100,078,514, respectively. Cost of investments on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed Federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investment Securities on a Tax Basis | ||||
Aggregate unrealized appreciation of investment securities | $ | 133,132,166 | ||
Aggregate unrealized (depreciation) of investment securities | (56,631,954 | ) | ||
Net unrealized appreciation of investment securities | $ | 76,500,212 | ||
Cost of investments for tax purposes is $416,373,373. |
NOTE 11— Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of real estate investment trusts, on August 31, 2011, undistributed net investment income was decreased by $58,626 and undistributed net realized gain (loss) was increased by $58,626. This reclassification had no effect on the net assets of the Fund.
NOTE 12—Share Information
Summary of Share Activity | ||||||||||||||||
For the years ended August 31, | ||||||||||||||||
2011(a) | 2010 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Class A | 3,081,251 | $ | 42,089,867 | 3,738,277 | $ | 44,680,433 | ||||||||||
Class B | 126,134 | 1,618,298 | 156,856 | 1,823,526 | ||||||||||||
Class C | 396,254 | 5,177,490 | 324,099 | 3,728,918 | ||||||||||||
Class Y | 363,427 | 5,144,798 | 164,078 | 1,976,792 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Class A | 296,064 | 3,952,452 | 588,507 | 7,062,080 | ||||||||||||
Class B | 23,301 | 305,005 | 97,614 | 1,150,870 | ||||||||||||
Class C | 28,427 | 368,126 | 87,603 | 1,022,327 | ||||||||||||
Class Y | 24,456 | 329,428 | 43,861 | 531,151 | ||||||||||||
Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||
Class A | 1,898,796 | 25,882,392 | 645,541 | 7,705,077 | ||||||||||||
Class B | (1,942,798 | ) | (25,882,392 | ) | (660,060 | ) | (7,705,077 | ) | ||||||||
Reacquired: | ||||||||||||||||
Class A | (6,906,032 | ) | (94,275,663 | ) | (6,942,030 | ) | (82,784,512 | ) | ||||||||
Class B | (1,051,427 | ) | (13,851,720 | ) | (3,997,776 | ) | (46,771,647 | ) | ||||||||
Class C | (1,143,111 | ) | (15,026,574 | ) | (1,229,575 | ) | (14,262,349 | ) | ||||||||
Class Y | (1,149,798 | ) | (15,963,550 | ) | (257,580 | ) | (3,111,561 | ) | ||||||||
Net increase (decrease) in share activity | (5,955,056 | ) | $ | (80,132,043 | ) | (7,240,585 | ) | $ | (84,953,972 | ) | ||||||
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 75% of the outstanding shares of the Fund. IDI has an agreement with these entities to sell Fund shares. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
26 Invesco S&P 500 Index Fund
NOTE 13—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Ratio of | Ratio of | |||||||||||||||||||||||||||||||||||||||||||||||
Net gains | expenses | expenses | ||||||||||||||||||||||||||||||||||||||||||||||
(losses) | to average | to average net | Ratio of net | |||||||||||||||||||||||||||||||||||||||||||||
Net asset | on securities | Dividends | net assets | assets without | investment | |||||||||||||||||||||||||||||||||||||||||||
value, | Net | (both | Total from | from net | Net asset | Net assets, | with fee waivers | fee waivers | income | |||||||||||||||||||||||||||||||||||||||
beginning | investment | realized and | investment | investment | value, end | Total | end of period | and/or expenses | and/or expenses | to average | Portfolio | |||||||||||||||||||||||||||||||||||||
of period | income(a) | unrealized) | operations | income | of period | return(b) | (000s omitted)(c) | absorbed(d) | absorbed(d) | net assets(d) | turnover(e) | |||||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | $ | 11.36 | $ | 0.19 | $ | 1.85 | $ | 2.04 | $ | (0.15 | ) | $ | 13.25 | 17.94 | % | $ | 369,597 | 0.61 | %(f) | 0.61 | %(f) | 1.42 | %(f) | 4 | % | |||||||||||||||||||||||
Year ended 08/31/10 | 11.09 | 0.18 | 0.33 | 0.51 | (0.24 | ) | 11.36 | 4.44 | 335,583 | 0.60 | 0.69 | 1.47 | 7 | |||||||||||||||||||||||||||||||||||
Year ended 08/31/09 | 13.94 | 0.21 | (2.83 | ) | (2.62 | ) | (0.23 | ) | 11.09 | (18.43 | ) | 349 | 0.59 | 0.74 | 2.11 | (g) | 7 | |||||||||||||||||||||||||||||||
Year ended 08/31/08 | 16.01 | 0.23 | (2.05 | ) | (1.82 | ) | (0.25 | ) | 13.94 | (11.55 | ) | 444 | 0.59 | 0.66 | 1.50 | (g) | 10 | |||||||||||||||||||||||||||||||
Year ended 08/31/07 | 14.17 | 0.21 | 1.85 | 2.06 | (0.22 | ) | 16.01 | 14.60 | 521 | 0.58 | 0.65 | 1.37 | (g) | 3 | ||||||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 11.10 | 0.09 | 1.80 | 1.89 | (0.07 | ) | 12.92 | 17.02 | 37,840 | 1.36 | (f) | 1.36 | (f) | 0.67 | (f) | 4 | ||||||||||||||||||||||||||||||||
Year ended 08/31/10 | 10.83 | 0.08 | 0.33 | 0.41 | (0.14 | ) | 11.10 | 3.68 | 64,102 | 1.35 | 1.44 | 0.72 | 7 | |||||||||||||||||||||||||||||||||||
Year ended 08/31/09 | 13.54 | 0.13 | (2.73 | ) | (2.60 | ) | (0.11 | ) | 10.83 | (19.06 | ) | 110 | 1.34 | 1.49 | 1.36 | (h) | 7 | |||||||||||||||||||||||||||||||
Year ended 08/31/08 | 15.52 | 0.11 | (1.99 | ) | (1.88 | ) | (0.10 | ) | 13.54 | (12.20 | ) | 217 | 1.34 | 1.41 | 0.75 | (h) | 10 | |||||||||||||||||||||||||||||||
Year ended 08/31/07 | 13.72 | 0.09 | 1.79 | 1.88 | (0.08 | ) | 15.52 | 13.76 | 377 | 1.34 | 1.41 | 0.61 | (h) | 3 | ||||||||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 10.99 | 0.10 | 1.77 | 1.87 | (0.07 | ) | 12.79 | 17.01(j | ) | 68,753 | 1.27 | (f)(j) | 1.27 | (f)(j) | 0.76 | (f)(j) | 4 | |||||||||||||||||||||||||||||||
Year ended 08/31/10 | 10.74 | 0.08 | 0.33 | 0.41 | (0.16 | ) | 10.99 | 3.71 | 66,933 | 1.35 | 1.44 | 0.72 | 7 | |||||||||||||||||||||||||||||||||||
Year ended 08/31/09 | 13.46 | 0.13 | (2.72 | ) | (2.59 | ) | (0.13 | ) | 10.74 | (19.01 | ) | 74 | 1.34 | 1.49 | 1.36 | (i) | 7 | |||||||||||||||||||||||||||||||
Year ended 08/31/08 | 15.46 | 0.11 | (1.98 | ) | (1.87 | ) | (0.13 | ) | 13.46 | (12.21 | ) | 104 | 1.33 | 1.40 | 0.76 | (i) | 10 | |||||||||||||||||||||||||||||||
Year ended 08/31/07 | 13.70 | 0.09 | 1.78 | 1.87 | (0.11 | ) | 15.46 | 13.68 | 132 | 1.33 | 1.40 | 0.62 | (i) | 3 | ||||||||||||||||||||||||||||||||||
Class Y | ||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 11.48 | 0.23 | 1.86 | 2.09 | (0.17 | ) | 13.40 | 18.21 | 16,824 | 0.36 | (f) | 0.36 | (f) | 1.67 | (f) | 4 | ||||||||||||||||||||||||||||||||
Year ended 08/31/10 | 11.20 | 0.21 | 0.33 | 0.54 | (0.26 | ) | 11.48 | 4.72 | 23,168 | 0.35 | 0.44 | 1.72 | 7 | |||||||||||||||||||||||||||||||||||
Year ended 08/31/09 | 14.09 | 0.25 | (2.87 | ) | (2.62 | ) | (0.27 | ) | 11.20 | (18.22 | ) | 23 | 0.34 | 0.49 | 2.36 | (k) | 7 | |||||||||||||||||||||||||||||||
Year ended 08/31/08 | 16.17 | 0.27 | (2.06 | ) | (1.79 | ) | (0.29 | ) | 14.09 | (11.28 | ) | 74 | 0.34 | 0.41 | 1.75 | (k) | 10 | |||||||||||||||||||||||||||||||
Year ended 08/31/07 | 14.31 | 0.25 | 1.86 | 2.11 | (0.25 | ) | 16.17 | 14.86 | 96 | 0.34 | 0.41 | 1.61 | (k) | 3 | ||||||||||||||||||||||||||||||||||
(a) | Calculated using averages shares outstanding. | |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges and is not annualized for periods less than one year. | |
(c) | Net assets, end of period, for the years ended August 31, 2009 through August 31, 2007 are stated in millions. | |
(d) | The ratios reflect the rebate of certain Fund expenses in connection with investments in a Morgan Stanley affiliate during the period. The effect of the rebate on the ratios for all classes was 0.00%, 0.00% and 0.00% for the years ended 2009, 2008 and 2007, respectively. The rebate was less than 0.005% for the years ended 2009, 2008 and 2007. | |
(e) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. | |
(f) | Ratios are based on average daily net assets (000’s omitted) of $388,927, $56,870, $75,178 and $21,061 for Class A, Class B, Class C and Class Y shares, respectively. | |
(g) | Ratio of net investment income to average net assets without fee waivers and/or expense reimbursements was 1.96%, 1.43% and 1.30% for the years ended August 31, 2009 through August 31, 2007, respectively. | |
(h) | Ratio of net investment income to average net assets without fee waivers and/or expense reimbursements was 1.21%, 0.68% and 0.54% for the years ended August 31, 2009 through August 31, 2007, respectively. | |
(i) | Ratio of net investment income to average net assets without fee waivers and/or expense reimbursements was 1.21%, 0.69% and 0.55% for the years ended August 31, 2009 through August 31, 2007, respectively. | |
(j) | The total return, ratio of expenses to average net assets and ratio of net investment income to average net assets reflect actual 12b-1 fees of .91% for the year ended August 31, 2011. | |
(k) | Ratio of net investment income to average net assets without fee waivers and/or expense reimbursements was 2.21%,1.68% and 1.54% for the years ended August 31, 2009 through August 31, 2007, respectively. |
27 Invesco S&P 500 Index Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Counselor Series Trust (Invesco Counselor Series Trust)
and Shareholders of Invesco S&P 500 Index Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Invesco S&P 500 Index Fund (one of the funds constituting AIM Counselor Series Trust (Invesco Counselor Series Trust), hereafter referred to as the “Fund”) at August 31, 2011, the results of its operations for the year then ended, the changes in its net assets and the financial highlights for each of the two years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at August 31, 2011 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. The financial highlights of the Fund for the periods ended August 31, 2009 and prior were audited by other independent auditors whose report dated October 27, 2009 expressed an unqualified opinion on those financial statements.
PRICEWATERHOUSECOOPERS LLP
October��21, 2011
Houston, Texas
28 Invesco S&P 500 Index Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments or contingent deferred sales charges on redemptions, and redemption fees, if any; and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period March 1, 2011 through August 31, 2011.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the hypothetical information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
HYPOTHETICAL | ||||||||||||||||||||||||||||||
ACTUAL | (5% annual return before expenses) | |||||||||||||||||||||||||||||
Beginning | Ending | Expenses | Ending | Expenses | Annualized | |||||||||||||||||||||||||
Account Value | Account Value | Paid During | Account Value | Paid During | Expense | |||||||||||||||||||||||||
Class | (03/01/11) | (08/31/11)1 | Period2 | (08/31/11) | Period2 | Ratio | ||||||||||||||||||||||||
A | $ | 1,000.00 | $ | 925.30 | $ | 3.01 | $ | 1,022.08 | $ | 3.16 | 0.62 | % | ||||||||||||||||||
B | 1,000.00 | 921.50 | 6.64 | 1,018.30 | 6.97 | 1.37 | ||||||||||||||||||||||||
C | 1,000.00 | 921.50 | 6.05 | 1,018.90 | 6.36 | 1.25 | ||||||||||||||||||||||||
Y | 1,000.00 | 926.10 | 1.80 | 1,023.34 | 1.89 | 0.37 | ||||||||||||||||||||||||
1 | The actual ending account value is based on the actual total return of the Fund for the period March 1, 2011 through August 31, 2011, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund’s expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half year. |
29 Invesco S&P 500 Index Fund
Approval of Investment Advisory and Sub-Advisory Contracts
The Board of Trustees (the Board) of AIM Counselor Series Trust (Invesco Counselor Series Trust) is required under the Investment Company Act of 1940, as amended, to approve annually the renewal of the Invesco S&P 500 Index Fund (the Fund) investment advisory agreement with Invesco Advisers, Inc. (Invesco Advisers) and the Master Intergroup Sub-Advisory Contract for Mutual Funds (the sub-advisory contracts) with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers). During contract renewal meetings held on June 14-15, 2011, the Board as a whole, and the disinterested or “independent” Trustees, who comprise 80% of the Board, voting separately, approved the continuance of the Fund’s investment advisory agreement and the sub-advisory contracts for another year, effective July 1, 2011. In doing so, the Board considered the process that it follows in reviewing and approving the Fund’s investment advisory agreement and sub-advisory contracts and the information that it is provided. The Board determined that the Fund’s investment advisory agreement and the sub-advisory contracts are in the best interests of the Fund and its shareholders and the compensation to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is responsible for overseeing the management of a number of the series portfolios of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies and limitations and investment risks of these funds. The Sub-Committees meet regularly and at designated contract renewal meetings each year to conduct a review of the performance, fees, expenses and other matters related to their assigned Invesco Funds. Each Sub-Committee recommends to the Investments Committee, which in turn recommends to the full Board, whether to approve the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Trustees receive comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and an independent company, Lipper, Inc. (Lipper). The Trustees also receive an independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. The independent Trustees are assisted in their annual evaluation of the Fund’s investment advisory agreement by the Senior Officer and by independent legal counsel. The independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in private sessions with the Senior Officer and counsel.
In evaluating the fairness and reasonableness of the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Trustees also considered information provided in connection with fund acquisitions approved by the Trustees to rationalize the Invesco Funds product range following the acquisition of the retail mutual fund business of Morgan Stanley (the Morgan Stanley Transaction). The Trustees recognized that the advisory fees for the Invesco Funds include advisory fees that are the result of years of review and negotiation between the Trustees and Invesco Advisers as well as advisory fees inherited from Morgan Stanley and Van Kampen funds acquired in the Morgan Stanley Transaction. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these same arrangements throughout the year and in prior years. One Trustee may have weighed a particular piece of information differently than another Trustee.
The discussion below serves as the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 15, 2011, and may not reflect consideration of factors that became known to the Board after that date, including, for example, changes to the Fund’s performance, advisory fees, expense limitations and/or fee waivers.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers, with whom the Board met during the year. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s consideration of Invesco Advisers’ performance and investment process oversight, independent credit analysis and investment risk management.
In determining whether to continue the Fund’s investment advisory agreement, the Board considered the prior relationship between Invesco Advisers and the Fund, as well as the Board’s knowledge of Invesco Advisers’ operations, and concluded that it is beneficial to maintain the current relationship, in part, because of such knowledge. The Board also considered services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution and legal and compliance. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and the advisory services are provided in accordance with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services provided by the Affiliated Sub-Advisers under the sub-advisory contracts and the credentials and experience of the officers and employees of the Affiliated Sub-Advisers who provide these services. The Board noted that the Affiliated Sub-Advisers have offices and personnel that are located in financial centers around the world. As a result, the Affiliated Sub-Advisers can provide research and investment analysis on the markets and economies of various countries in which the Fund invests and make recommendations on securities of companies located in such countries. The Board concluded that the sub-advisory contracts benefit the Fund and its shareholders by permitting Invesco Advisers to use the resources and talents of the Affiliated Sub-Advisers in managing the Fund. The Board concluded that the nature, extent and quality of the services provided by the Affiliated Sub-Advisers are appropriate and satisfactory and in accordance with the terms of the Fund’s sub-advisory contracts.
30 Invesco S&P 500 Index Fund
B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
The Board compared the Fund’s performance during the past one, three and five calendar years to the performance of funds in the Lipper performance universe and against the Lipper S&P 500 Index Objective Funds Index. The Board noted that performance of Class A shares of the Fund was in the third quintile of the performance universe for the one, 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 performance of Class A shares of the Fund was below the performance of the Index for the one, three and five year periods. Although the independent written evaluation of the Fund’s Senior Officer only considered Fund performance through the most recent calendar year, the Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
C. | Advisory and Sub-Advisory Fees and Fee Waivers |
The Board compared the Fund’s contractual advisory fee rate to the contractual advisory fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the contractual advisory fee rate for Class A shares of the Fund was below the median contractual advisory fee rate of funds in the expense group. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using audited financial data from the most recent annual report of each fund in the expense group that was publicly available as of the end of the past calendar year and including only one fund per investment adviser. The Board noted that comparative data is as of varying dates, which may affect the comparability of data during times of market volatility.
The Board also compared the Fund’s effective fee rate (the advisory fee after advisory fee waivers and before expense limitations/waivers) to the advisory fee rates of other mutual funds advised by Invesco Advisers and its affiliates with investment strategies comparable to those of the Fund. The Board noted that the Fund’s rate was the same as the rate of the other mutual Fund managed by Invesco Advisers in a manner comparable to the Fund.
Other than the mutual fund described above, the Board noted that Invesco Advisers and the Affiliated Sub-Advisers do not manage other mutual funds or client accounts in a manner substantially similar to the management of the Fund.
The Board noted that Invesco Advisers has contractually agreed to waive fees and/or limit expenses of the Fund through at least June 30, 2012 in an amount necessary to limit total annual operating expenses to a specified percentage of average daily net assets for each class of the Fund. The Board noted that at the current expense ratio for the Fund, this expense waiver does not have any impact.
The Board also considered the services provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the allocation of fees between Invesco Advisers and the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board noted that Invesco Advisers provides services to sub-advised Invesco Funds, including oversight of the Affiliated Sub-Advisers as well as the additional services described above other than day-to-day portfolio management. The Board also noted that the sub-advisory fees have no direct effect on the Fund or its shareholders, as they are paid by Invesco Advisers to the Affiliated Sub-Advisers.
Based upon the information and considerations described above, the Board concluded that the Fund’s advisory and sub-advisory fees are fair and reasonable.
D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule. The Board also noted that the 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 Invesco Advisers.
E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the profitability of Invesco Advisers and its affiliates in providing these services. The Board reviewed with Invesco Advisers the methodology used to prepare the profitability information. The Board considered the profitability of Invesco Advisers in connection with managing the Fund and the Invesco Funds. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its subsidiaries provide to the Fund and the Invesco Funds. The Board concluded that the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund is not excessive given the nature, quality and extent of the services provided to the Invesco Funds. The Board considered whether Invesco Advisers and each Affiliated Sub-Adviser are financially sound and have the resources necessary to perform their obligations under the investment advisory agreement and sub-advisory contracts. The Board concluded that Invesco Advisers and each Affiliated Sub-Adviser have the financial resources necessary to fulfill these obligations.
F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund, including the fees received for their provision of administrative, transfer agency and distribution services to the Fund. The Board considered the performance of Invesco Advisers 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 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 Fund; that Invesco Advisers 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; and 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.
The Board considered the benefits realized by Invesco Advisers and the Affiliated Sub-Advisers as a result of portfolio brokerage transactions executed through “soft dollar” arrangements. The Board noted that soft dollar arrangements shift the payment obligation for research and execution services from Invesco Advisers and the Affiliated Sub-Advisers to the Invesco Funds and therefore may reduce Invesco Advisers’ and the Affiliated Sub-Advisers’ expenses. The Board concluded that the soft dollar arrangements are appropriate. The Board also concluded that, based on their review and representations made by the Chief Compliance Officer of the Invesco Funds, these arrangements are consistent with regulatory requirements.
The Board considered that the Fund’s uninvested cash and cash collateral from any securities lending arrangements may be invested in money market funds advised by Invesco Advisers pursuant to procedures approved by the Board. The Board noted that Invesco Advisers receives advisory fees from these affiliated money market funds attributable to such investments, although Invesco Advisers has contractually agreed to waive through varying periods the advisory fees payable by the Invesco Funds. The waiver is in an amount equal to 100% of the net advisory fee Invesco Advisers receives from the affiliated money market funds with respect to the Fund’s investment in the affiliated money market funds of uninvested cash, but not cash collateral. The Board concluded that the Fund’s investment of uninvested cash and cash collateral from any securities lending arrangements in the affiliated money market funds is in the best interests of the Fund and its shareholders.
31 Invesco S&P 500 Index Fund
Tax Information
Form 1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific state’s requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended August 31, 2011:
Federal and State Income Tax | ||||
Qualified Dividend Income* | 100% | |||
Corporate Dividends Received Deduction* | 100% |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Fund’s fiscal year. |
32 Invesco S&P 500 Index Fund
Trustees and Officers
The address of each trustee and officer is AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”), 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Number of Funds | ||||||||
in Fund Complex | ||||||||
Name, Year of Birth and | Trustee and/ | Principal Occupation(s) | Overseen by | Other Directorship(s) | ||||
Position(s) Held with the Trust | or Officer Since | During Past 5 Years | Trustee | Held by Trustee | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 — 1960 Trustee | 2007 | 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 | 143 | 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. Taylor2 — 1954 Trustee, President and Principal Executive Officer | 2006 | 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 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 Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust); Trustee and Executive Vice President, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s 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 Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Tax-Free Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. | 143 | None | ||||||
Wayne W. Whalen3 — 1939 Trustee | 2010 | Of Counsel, and prior to 2010, partner in the law firm of Skadden, Arps, Slate, Meagher & Flom LLP, legal counsel to funds in the Fund Complex | 161 | Director of the Abraham Lincoln Presidential Library Foundation | ||||
Independent Trustees | ||||||||
Bruce L. Crockett — 1944 Trustee and Chair | 2003 | Chairman, Crockett Technology Associates (technology consulting company) Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer COMSAT Corporation; and Chairman, Board of Governors of INTELSAT (international communications company) | 143 | ACE Limited (insurance company); and Investment Company Institute | ||||
1 | Mr. Flanagan is considered an interested person of the Trust because he is an officer of the adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the adviser to the Trust. |
2 | Mr. Taylor is considered an interested person of the Trust because he is an officer and a director of the adviser to, and a director of the principal underwriter of, the Trust. |
3 | Mr. Whalen has been deemed to be an interested person of the Trust because of his prior service as counsel to the predecessor funds of certain Invesco open-end funds and his affiliation with the law firm that served as counsel to such predecessor funds and continues to serve as counsel to the Invesco Van Kampen closed-end funds. |
T-1 Invesco S&P 500 Index Fund
Trustees and Officers—(continued)
The address of each trustee and officer is AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”), 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Number of Funds | ||||||||
in Fund Complex | ||||||||
Name, Year of Birth and | Trustee and/ | Principal Occupation(s) | Overseen by | Other Directorship(s) | ||||
Position(s) Held with the Trust | or Officer Since | During Past 5 Years | Trustee | Held by Trustee | ||||
Independent Trustees | ||||||||
David C. Arch — 1945 Trustee | 2010 | Chairman and Chief Executive Officer of Blistex Inc., a consumer health care products manufacturer. | 161 | 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 | ||||
Bob R. Baker — 1936 Trustee | 1983 | Retired | 143 | None | ||||
Formerly: President and Chief Executive Officer, AMC Cancer Research Center; and Chairman and Chief Executive Officer, First Columbia Financial Corporation | ||||||||
Frank S. Bayley — 1939 Trustee | 2003 | Retired Formerly: Director, Badgley Funds, Inc. (registered investment company) (2 portfolios) and Partner, law firm of Baker & McKenzie | 143 | Director and Chairman, C.D. Stimson Company (a real estate investment company) | ||||
James T. Bunch — 1942 Trustee | 2000 | 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 | 143 | Vice Chairman, Board of Governors, Western Golf Association/Evans Scholars Foundation and Director, Denver Film Society | ||||
Rodney Dammeyer — 1940 Trustee | 2010 | President 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. | 161 | 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 | 2003 | 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) | 161 | Board of Nature’s 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 | 2003 | 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) | 143 | Administaff | ||||
Formerly: Chief Executive Officer, Texana Timber LP (sustainable forestry company) and member of the U.S. House of Representatives | ||||||||
Carl Frischling — 1937 Trustee | 2003 | Partner, law firm of Kramer Levin Naftalis and Frankel LLP | 143 | Director, Reich & Tang Funds (6 portfolios) | ||||
Prema Mathai-Davis — 1950 Trustee | 2003 | Retired | 143 | None | ||||
Formerly: Chief Executive Officer, YWCA of the U.S.A. | ||||||||
Larry Soll — 1942 Trustee | 1997 | Retired | 143 | None | ||||
Formerly, Chairman, Chief Executive Officer and President, Synergen Corp. (a biotechnology company) | ||||||||
T-2 Invesco S&P 500 Index Fund
Trustees and Officers—(continued)
The address of each trustee and officer is AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”), 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Number of Funds | ||||||||
in Fund Complex | ||||||||
Name, Year of Birth and | Trustee and/ | Principal Occupation(s) | Overseen by | Other Directorship(s) | ||||
Position(s) Held with the Trust | or Officer Since | During Past 5 Years | Trustee | Held by Trustee | ||||
Independent Trustees | ||||||||
Hugo F. Sonnenschein — 1940 Trustee | 2010 | President Emeritus and Honorary Trustee 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. | 161 | 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 | 2005 | Retired Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios) and Partner, Deloitte & Touche | 143 | None | ||||
Other Officers | ||||||||
Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer of Invesco Funds | N/A | N/A | ||||
John M. Zerr — 1962 Senior Vice President, Chief Legal Officer and Secretary | 2006 | 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 | N/A | N/A | ||||
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) | ||||||||
Lisa O. Brinkley — 1959 Vice President | 2004 | Global Compliance Director, Invesco Ltd.; Chief Compliance Officer, Invesco Investment Services, Inc.(formerly known as Invesco Aim Investment Services, Inc.); and Vice President, The Invesco Funds Formerly: Chief Compliance Officer, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) and Van Kampen Investor Services Inc.; Senior Vice President, Invesco Management Group, Inc.; Senior Vice President and Chief Compliance Officer, Invesco Advisers, Inc. and The Invesco Funds; Vice President and Chief Compliance Officer, Invesco Aim Capital Management, Inc. and Invesco Distributors, Inc.; Vice President, Invesco Investment Services, Inc. and Fund Management Company | N/A | N/A | ||||
Sheri Morris — 1964 Vice President, Treasurer and Principal Financial Officer | 2003 | 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) | N/A | N/A | ||||
Formerly: 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, 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. | ||||||||
T-3 Invesco S&P 500 Index Fund
Trustees and Officers—(continued)
The address of each trustee and officer is AIM Counselor Series Trust (Invesco Counselor Series Trust) (the “Trust”), 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Number of Funds | ||||||||
in Fund Complex | ||||||||
Name, Year of Birth and | Trustee and/ | Principal Occupation(s) | Overseen by | Other Directorship(s) | ||||
Position(s) Held with the Trust | or Officer Since | During Past 5 Years | Trustee | Held by Trustee | ||||
Other Officers | ||||||||
Karen Dunn Kelley — 1960 Vice President | 2003 | Head of Invesco’s 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 Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust); and President and Principal Executive Officer, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust only). | N/A | N/A | ||||
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 Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Tax-Free Investments Trust only) | ||||||||
Lance A. Rejsek — 1967 Anti-Money Laundering Compliance Officer | 2005 | 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.), The Invesco Funds, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management) and Van Kampen Funds Inc. | N/A | N/A | ||||
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Investor Services Inc., Fund Management Company, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc. | ||||||||
Todd L. Spillane — 1958 Chief Compliance Officer | 2006 | 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, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, INVESCO Private Capital Investments, Inc. (holding company) and Invesco Private Capital, Inc. (registered investment adviser); Vice President, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.), Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.). Formerly: 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 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 | N/A | N/A | ||||
The Statement of Additional Information of the Trust includes additional information about the Fund’s Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Fund’s prospectus for information on the Fund’s sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 2500 Houston, TX 77046-1173 | Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 | Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 2500 Houston, TX 77046-1173 | Auditors PricewaterhouseCoopers LLP 1201 Louisiana Street, Suite 2900 Houston, TX 77002-5678 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2600 One Commerce Square Philadelphia, PA 19103 | Counsel to the Independent Trustees Kramer, Levin, Naftalis & Frankel LLP 1177 Avenue of the Americas New York, NY 10036-2714 | Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 2500 Houston, TX 77046-1173 | Custodian State Street Bank and Trust Company 225 Franklin Boston, MA 02110-2801 |
T-4 Invesco S&P 500 Index Fund
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Invesco mailing information
Send general correspondence to Invesco Investment Services, Inc., P.O. Box 219078, Kansas City, MO 64121-9078.
Invesco privacy policy
You share personal and financial information with us that is necessary for your transactions and your account records. We take very seriously the obligation to keep that information confidential and private.
Invesco collects nonpublic personal information about you from account applications or other forms you complete and from your transactions with us or our affiliates. We do not disclose information about you or our former customers to service providers or other third parties except to the extent necessary to service your account and in other limited circumstances as permitted by law. For example, we use this information to facilitate the delivery of transaction confirmations, financial reports, prospectuses and tax forms.
Even within Invesco, only people involved in the servicing of your accounts and compliance monitoring have access to your information. To ensure the highest level of confidentiality and security, Invesco maintains physical, electronic and procedural safeguards that meet or exceed federal standards. Special measures, such as data encryption and authentication, apply to your communications with us on our website. More detail is available to you at invesco.com/privacy.
Important notice regarding delivery of security holder documents
To reduce Fund expenses, only one copy of most shareholder documents may be mailed to shareholders with multiple accounts at the same address (Householding). Mailing of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact Invesco Investment Services, Inc. at 800 959 4246 or contact your financial institution. We will begin sending you individual copies for each account within 30 days after receiving your request.
Fund holdings and proxy voting information
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is available at invesco.com/completeqtrholdings. Shareholders can also look up the Fund’s Forms N-Q on the SEC website at sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-09913 and 333-36074.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov.
Information regarding how the Fund voted proxies related to its portfolio securities during the 12 months ended June 30, 2011, is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov.
Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the U.S. distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
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MS-SPI-AR-1 | Invesco Distributors, Inc. |
ITEM 2. | CODE OF ETHICS. |
There were no amendments to the Code of Ethics (the “Code”) that applies to the Registrant’s Principal Executive Officer (“PEO”) and Principal Financial Officer (“PFO”) during the period covered by the report. The Registrant did not grant any waivers, including implicit waivers, from any provisions of the Code to the PEO or PFO during the period covered by this report.
ITEM 3. | AUDIT COMMITTEE FINANCIAL EXPERT. |
The Board of Trustees has determined that the Registrant has at least one audit committee financial expert serving on its Audit Committee. The Audit Committee financial expert is Raymond Stickel, Jr. Mr. Stickel is “independent” within the meaning of that term as used in Form N-CSR.
ITEM 4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES. |
Fees Billed by PWC Related to the Registrant
The following information relates to the series funds of the Registrant covered by this report and includes information pertaining to principal accountant fees and services rendered to such funds for the two most recently completed fiscal years or, if shorter, since a fund’s commencement of operations:
Percentage of Fees | Percentage of Fees | |||||||||||||||
Billed Applicable to | Billed Applicable to | |||||||||||||||
Non-Audit Services | Non-Audit Services | |||||||||||||||
Provided for fiscal | Fees Billed for | Provided for fiscal | ||||||||||||||
Fees Billed for | year end 2011 | Services Rendered to | year end 2010 | |||||||||||||
Services Rendered to | Pursuant to Waiver of | the Registrant | Pursuant to Waiver of | |||||||||||||
the Registrant for | Pre-Approval | for fiscal | Pre-Approval | |||||||||||||
year end 2011 | Requirement(1) | fiscal year end 2010 | Requirement(1) | |||||||||||||
Audit Fees | $ | 421,750 | N/A | $ | 557,050 | N/A | ||||||||||
Audit-Related Fees(2) | $ | 25,500 | 0 | % | $ | 0 | 0 | % | ||||||||
Tax Fees(3) | $ | 194,500 | 0 | % | $ | 121,874 | 0 | % | ||||||||
All Other Fees | $ | 0 | 0 | % | $ | 0 | 0 | % | ||||||||
Total Fees | $ | 641,750 | 0 | % | $ | 678,924 | 0 | % |
PWC billed the Registrant aggregate non-audit fees of $220,000 for the fiscal year ended 2011, and $121,874 for the fiscal year ended 2010, for non-audit services rendered to the Registrant.
(1) | With respect to the provision of non-audit services, the pre-approval requirement is waived pursuant to a de minimis exception if (i) such services were not recognized as non-audit services by the Registrant at the time of engagement, (ii) the aggregate amount of all such services provided is no more than 5% of the aggregate audit and non-audit fees paid by the Registrant to PWC during a fiscal year; and (iii) such services are promptly brought to the attention of the Registrant’s Audit Committee and approved by the Registrant’s Audit Committee prior to the completion of the audit. | |
(2) | Audit-Related Fees for the fiscal year ended August 31, 2011 includes fees billed for completing agreed-upon procedures related to fund mergers. | |
(3) | Tax fees for the fiscal year end August 31, 2011 includes fees billed for reviewing tax returns. Tax fees for the fiscal year end August 31, 2010 includes fees billed for reviewing tax returns. |
Fees Billed by PWC Related to Invesco and Invesco Affiliates
PWC billed Invesco Advisers, Inc. (“Invesco”), the Registrant’s adviser, and any entity controlling, controlled by or under common control with Invesco that provides ongoing services to the Registrant (“Invesco Affiliates”) aggregate fees for pre-approved non-audit services rendered to Invesco and Invesco Affiliates for the last two fiscal years or, if shorter, since a fund’s commencement of operations as follows:
Fees Billed for Non- | Fees Billed for Non- | |||||||||||||||
Audit Services | Audit Services | |||||||||||||||
Rendered to Invesco | Percentage of Fees | Rendered to Invesco | Percentage of Fees | |||||||||||||
and Invesco Affiliates | Billed Applicable to | and Invesco Affiliates | Billed Applicable to | |||||||||||||
for fiscal year end | Non-Audit Services | for fiscal year end | Non-Audit Services | |||||||||||||
2011 That Were | Provided for fiscal year | 2010 That Were | Provided for fiscal year | |||||||||||||
Required | end 2011 Pursuant to | Required | end 2010 Pursuant to | |||||||||||||
to be Pre-Approved | Waiver of Pre- | to be Pre-Approved | Waiver of Pre- | |||||||||||||
by the Registrant’s | Approval | by the Registrant’s | Approval | |||||||||||||
Audit Committee | Requirement(1) | Audit Committee | Requirement(1) | |||||||||||||
Audit-Related Fees | $ | 0 | 0 | % | $ | 0 | 0 | % | ||||||||
Tax Fees | $ | 0 | 0 | % | $ | 0 | 0 | % | ||||||||
All Other Fees | $ | 0 | 0 | % | $ | 0 | 0 | % | ||||||||
Total Fees(2) | $ | 0 | 0 | % | $ | 0 | 0 | % |
(1) | With respect to the provision of non-audit services, the pre-approval requirement is waived pursuant to a de minimis exception if (i) such services were not recognized as non-audit services by the Registrant at the time of engagement, (ii) the aggregate amount of all such services provided is no more than 5% of the aggregate audit and non-audit fees paid by the Registrant, Invesco and Invesco Affiliates to PWC during a fiscal year; and (iii) such services are promptly brought to the attention of the Registrant’s Audit Committee and approved by the Registrant’s Audit Committee prior to the completion of the audit. | |
(2) | Including the fees for services not required to be pre-approved by the registrant’s audit committee, PWC billed Invesco and Invesco Affiliates aggregate non-audit fees of $0 for the fiscal year ended 2011, and $0 for the fiscal year ended 2010, for non-audit services rendered to Invesco and Invesco Affiliates. | |
The Audit Committee also has considered whether the provision of non-audit services that were rendered to Invesco and Invesco Affiliates that were not required to be pre-approved pursuant to SEC regulations, if any, is compatible with maintaining PWC’s independence. To the extent that such services were provided, the Audit Committee determined that the provision of such services is compatible with PWC maintaining independence with respect to the Registrant. |
PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES
POLICIES AND PROCEDURES
As adopted by the Audit Committees of
the Invesco Funds (the “Funds”)
Last Amended May 4, 2010
POLICIES AND PROCEDURES
As adopted by the Audit Committees of
the Invesco Funds (the “Funds”)
Last Amended May 4, 2010
Statement of Principles
Under the Sarbanes-Oxley Act of 2002 and rules adopted by the Securities and Exchange Commission (“SEC”) (“Rules”), the Audit Committees of the Funds’ (the “Audit Committees”) Board of Trustees (the “Board”) are responsible for the appointment, compensation and oversight of the work of independent accountants (an “Auditor”). As part of this responsibility and to assure that the Auditor’s independence is not impaired, the Audit Committees pre-approve the audit and non-audit services provided to the Funds by each Auditor, as well as all non-audit services provided by the Auditor to the Funds’ investment adviser and to affiliates of the adviser that provide ongoing services to the Funds (“Service Affiliates”) if the services directly impact the Funds’ operations or financial reporting. The SEC Rules also specify the types of services that an Auditor may not provide to its audit client. The following policies and procedures comply with the requirements for pre-approval and provide a mechanism by which management of the Funds may request and secure pre-approval of audit and non-audit services in an orderly manner with minimal disruption to normal business operations.
Proposed services either may be pre-approved without consideration of specific case-by-case services by the Audit Committees (“general pre-approval”) or require the specific pre-approval of the Audit Committees (“specific pre-approval”). As set forth in these policies and procedures, unless a type of service has received general pre-approval, it will require specific pre-approval by the Audit Committees. Additionally, any fees exceeding 110% of estimated pre-approved fee levels provided at the time the service was pre-approved will also require specific approval by the Audit Committees before payment is made. The Audit Committees will also consider the impact of additional fees on the Auditor’s independence when determining whether to approve any additional fees for previously pre-approved services.
The Audit Committees will annually review and generally pre-approve the services that may be provided by each Auditor without obtaining specific pre-approval from the Audit Committee generally on an annual basis. The term of any general pre-approval runs from the date of such pre-approval through September 30th of the following year, unless the Audit Committees consider a different period and state otherwise. The Audit Committees will add to or subtract from the list of general pre-approved services from time to time, based on subsequent determinations.
The purpose of these policies and procedures is to set forth the guidelines to assist the Audit Committees in fulfilling their responsibilities.
Delegation
The Audit Committees may from time to time delegate pre-approval authority to one or more of its members who are Independent Trustees. All decisions to pre-approve a service by a delegated member shall be reported to the Audit Committees at the next quarterly meeting.
Audit Services
The annual audit services engagement terms will be subject to specific pre-approval of the Audit Committees. Audit services include the annual financial statement audit and other procedures such as tax provision work that is required to be performed by the independent auditor to be able to form an opinion on the Funds’ financial statements. The Audit Committees will obtain, review and consider sufficient information concerning the proposed Auditor to make a reasonable evaluation of the Auditor’s qualifications and independence.
In addition to the annual Audit services engagement, the Audit Committees may grant either general or specific pre-approval of other audit services, which are those services that only the independent auditor reasonably can provide. Other Audit services may include services such as issuing consents for the
inclusion of audited financial statements with SEC registration statements, periodic reports and other documents filed with the SEC or other documents issued in connection with securities offerings.
Non-Audit Services
The Audit Committees may provide either general or specific pre-approval of any non-audit services to the Funds and its Service Affiliates if the Audit Committees believe that the provision of the service will not impair the independence of the Auditor, is consistent with the SEC’s Rules on auditor independence, and otherwise conforms to the Audit Committees’ general principles and policies as set forth herein.
Audit-Related Services
“Audit-related services” are assurance and related services that are reasonably related to the performance of the audit or review of the Fund’s financial statements or that are traditionally performed by the independent auditor. Audit-related services include, among others, accounting consultations related to accounting, financial reporting or disclosure matters not classified as “Audit services”; assistance with understanding and implementing new accounting and financial reporting guidance from rulemaking authorities; and agreed-upon procedures related to mergers, compliance with ratings agency requirements and interfund lending activities.
Tax Services
“Tax services” include, but are not limited to, the review and signing of the Funds’ federal tax returns, the review of required distributions by the Funds and consultations regarding tax matters such as the tax treatment of new investments or the impact of new regulations. The Audit Committees will scrutinize carefully the retention of the Auditor in connection with a transaction initially recommended by the Auditor, the major business purpose of which may be tax avoidance or the tax treatment of which may not be supported in the Internal Revenue Code and related regulations. The Audit Committees will consult with the Funds’ Treasurer (or his or her designee) and may consult with outside counsel or advisors as necessary to ensure the consistency of Tax services rendered by the Auditor with the foregoing policy.
No Auditor shall represent any Fund or any Service Affiliate before a tax court, district court or federal court of claims.
Under rules adopted by the Public Company Accounting Oversight Board and approved by the SEC, in connection with seeking Audit Committees’ pre-approval of permissible Tax services, the Auditor shall:
1. | Describe in writing to the Audit Committees, which writing may be in the form of the proposed engagement letter: |
a. | The scope of the service, the fee structure for the engagement, and any side letter or amendment to the engagement letter, or any other agreement between the Auditor and the Fund, relating to the service; and | ||
b. | Any compensation arrangement or other agreement, such as a referral agreement, a referral fee or fee-sharing arrangement, between the Auditor and any person (other than the Fund) with respect to the promoting, marketing, or recommending of a transaction covered by the service; |
2. | Discuss with the Audit Committees the potential effects of the services on the independence of the Auditor; and | ||
3. | Document the substance of its discussion with the Audit Committees. |
All Other Auditor Services
The Audit Committees may pre-approve non-audit services classified as “All other services” that are not categorically prohibited by the SEC, as listed in Exhibit 1 to this policy.
Pre-Approval Fee Levels or Established Amounts
Pre-approval of estimated fees or established amounts for services to be provided by the Auditor under general or specific pre-approval policies will be set periodically by the Audit Committees. Any proposed fees exceeding 110% of the maximum estimated pre-approved fees or established amounts for pre-approved audit and non-audit services will be reported to the Audit Committees at the quarterly Audit Committees meeting and will require specific approval by the Audit Committees before payment is made. The Audit Committees will always factor in the overall relationship of fees for audit and non-audit services in determining whether to pre-approve any such services and in determining whether to approve any additional fees exceeding 110% of the maximum pre-approved fees or established amounts for previously pre-approved services.
Procedures
Generally on an annual basis, Invesco Advisers, Inc. (“Invesco”) will submit to the Audit Committees for general pre-approval, a list of non-audit services that the Funds or Service Affiliates of the Funds may request from the Auditor. The list will describe the non-audit services in reasonable detail and will include an estimated range of fees and such other information as the Audit Committee may request.
Each request for services to be provided by the Auditor under the general pre-approval of the Audit Committees will be submitted to the Funds’ Treasurer (or his or her designee) and must include a detailed description of the services to be rendered. The Treasurer or his or her designee will ensure that such services are included within the list of services that have received the general pre-approval of the Audit Committees. The Audit Committees will be informed at the next quarterly scheduled Audit Committees meeting of any such services for which the Auditor rendered an invoice and whether such services and fees had been pre-approved and if so, by what means.
Each request to provide services that require specific approval by the Audit Committees shall be submitted to the Audit Committees jointly by the Fund’s Treasurer or his or her designee and the Auditor, and must include a joint statement that, in their view, such request is consistent with the policies and procedures and the SEC Rules.
Each request to provide tax services under either the general or specific pre-approval of the Audit Committees will describe in writing: (i) the scope of the service, the fee structure for the engagement, and any side letter or amendment to the engagement letter, or any other agreement between the Auditor and the audit client, relating to the service; and (ii) any compensation arrangement or other agreement between the Auditor and any person (other than the audit client) with respect to the promoting, marketing, or recommending of a transaction covered by the service. The Auditor will discuss with the Audit Committees the potential effects of the services on the Auditor’s independence and will document the substance of the discussion.
Non-audit services pursuant to the de minimis exception provided by the SEC Rules will be promptly brought to the attention of the Audit Committees for approval, including documentation that each of the conditions for this exception, as set forth in the SEC Rules, has been satisfied.
On at least an annual basis, the Auditor will prepare a summary of all the services provided to any entity in the investment company complex as defined in section 2-01(f)(14) of Regulation S-X in sufficient detail as to the nature of the engagement and the fees associated with those services.
The Audit Committees have designated the Funds’ Treasurer to monitor the performance of all services provided by the Auditor and to ensure such services are in compliance with these policies and procedures. The Funds’ Treasurer will report to the Audit Committees on a periodic basis as to the results of such monitoring. Both the Funds’ Treasurer and management of Invesco will immediately report to the chairman of the Audit Committees any breach of these policies and procedures that comes to the attention of the Funds’ Treasurer or senior management of Invesco.
Exhibit 1 to Pre-Approval of Audit and Non-Audit Services Policies and Procedures
Conditionally Prohibited Non-Audit Services (not prohibited if the Fund can reasonably conclude that the results of the service would not be subject to audit procedures in connection with the audit of the Fund’s financial statements)
• | Bookkeeping or other services related to the accounting records or financial statements of the audit client | ||
• | Financial information systems design and implementation | ||
• | Appraisal or valuation services, fairness opinions, or contribution-in-kind reports | ||
• | Actuarial services | ||
• | Internal audit outsourcing services |
Categorically Prohibited Non-Audit Services
• | Management functions | ||
• | Human resources | ||
• | Broker-dealer, investment adviser, or investment banking services | ||
• | Legal services | ||
• | Expert services unrelated to the audit | ||
• | Any service or product provided for a contingent fee or a commission | ||
• | Services related to marketing, planning, or opining in favor of the tax treatment of confidential transactions or aggressive tax position transactions, a significant purpose of which is tax avoidance | ||
• | Tax services for persons in financial reporting oversight roles at the Fund | ||
• | Any other service that the Public Company Oversight Board determines by regulation is impermissible. |
ITEM 5. | AUDIT COMMITTEE OF LISTED REGISTRANTS. |
Not applicable. |
ITEM 6. | SCHEDULE OF INVESTMENTS. |
Investments in securities of unaffiliated issuers is included as part of the reports to stockholders filed under Item 1 of this Form. |
ITEM 7. | DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable. |
ITEM 8. | PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT COMPANIES. |
Not applicable. |
ITEM 9. | PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. |
Not applicable. |
ITEM 10. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. |
None |
ITEM 11. | CONTROLS AND PROCEDURES. |
(a) | As of September 16, 2011, an evaluation was performed under the supervision and with the participation of the officers of the Registrant, including the PEO and PFO, to assess the effectiveness of the Registrant’s disclosure controls and procedures, as that term is defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”), as amended. Based on that evaluation, the Registrant’s officers, including the PEO and PFO, concluded that, as of September 16, 2011, the Registrant’s disclosure controls and procedures were reasonably designed to ensure: (1) that information required to be disclosed by the Registrant on Form N-CSR is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the Securities and Exchange Commission; and (2) that material information relating to the Registrant is made known to the PEO and PFO as appropriate to allow timely decisions regarding required disclosure. | |
(b) | There have been no changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting. |
ITEM 12. | EXHIBITS. |
12(a) (1) | Code of Ethics. | |
12(a) (2) | Certifications of principal executive officer and principal financial officer as required by Rule 30a-2(a) under the Investment Company Act of 1940. | |
12(a) (3) | Not applicable. | |
12(b) | Certifications of principal executive officer and principal financial officer as required by Rule 30a-2(b) under the Investment Company Act of 1940. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: AIM Counselor Series Trust (Invesco Counselor Series Trust) | ||||
By: | /s/ Philip A. Taylor | |||
Philip A. Taylor | ||||
Principal Executive Officer | ||||
Date: November 7, 2011
Pursuant to the requirements of the Securities and Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By: | /s/ Philip A. Taylor | |||
Philip A. Taylor | ||||
Principal Executive Officer | ||||
Date: November 7, 2011
By: | /s/ Sheri Morris | |||
Sheri Morris | ||||
Principal Financial Officer | ||||
Date: November 7, 2011
EXHIBIT INDEX
12(a)(1) | Code of Ethics. | |
12(a)(2) | Certifications of principal executive officer and principal Financial officer as required by Rule 30a-2(a) under the Investment Company Act of 1940. | |
12(a)(3) | Not applicable. | |
12(b) | Certifications of principal executive officer and principal financial officer as required by Rule 30a-2(b) under the Investment Company Act of 1940. |