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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 1000 Houston, Texas 77046
(Address of principal executive offices) (Zip code)
Philip A. Taylor 11 Greenway Plaza, Suite 1000 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: 8/31/12
Item 1. Reports to Stockholders.
![]() |
Annual Report to Shareholders August 31, 2012
Invesco Core Plus Bond Fund
Nasdaq:
A: ACPSX § B: CPBBX § C: CPCFX § R: CPBRX § Y: CPBYX § Institutional: CPIIX
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 | |
28 | Financial Statements | |
31 | 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/0000950123-12-013037/h87055h8705502.jpg)
Philip Taylor
Dear Shareholders:
This report contains information about your Fund, including a discussion from your portfolio managers about how they managed your Fund – and why it performed as it did – during the reporting period. This report also includes your Fund’s long-term performance and a complete list of your Fund’s investments as of the close of the reporting period. I hope you find this information helpful.
For much of the reporting period, investors’ attention was focused on Europe, where eurozone governments struggled to reduce debt levels, strengthen their banks and stimulate their economies. European leaders disagreed whether the wiser path to restoring the Continent’s economic well-being was more stimulus or greater austerity. In the US, economic data were mixed. Economic growth, while positive, was relatively modest. Corporate earnings, which have grown strongly in recent years, have begun to slow. And job creation has been less robust than hoped. Later in this report, your Fund’s portfolio managers discuss how economic conditions and market trends affected your Fund’s performance.
Economic conditions are always subject to sudden and unexpected change. That’s why you may find it helpful to work with a trusted, experienced financial adviser who understands your unique financial goals, needs and risk tolerances. Financial advisers can provide valuable insight and information, particularly when markets are turbulent, and they can recommend investments appropriate for specific investment goals, such as a child’s college education or your retirement. On a regular basis, a financial adviser also can determine whether your existing investments are still appropriate, given your changing needs, goals and circumstances.
Timely insight and information from many of Invesco’s investment professionals is available at our website, invesco.com/us. We offer in-depth articles, video clips and audio commentaries from many of our portfolio managers and other investment professionals on a wide range of topics of interest to investors: recent economic and market developments; retirement planning; legislative updates from Washington, DC; and general investor education. At invesco.com/us, you also can access information about your Invesco account at any time.
What we mean by Intentional Investing
Intentional InvestingSM is the science and art of investing with purpose, prudence and diligence – and it’s how Invesco’s investment professionals manage your money every day.
This highly disciplined process begins when specialized teams of investment professionals clearly define an investment objective and then establish specific investment strategies to try to achieve that objective. While our investment teams closely monitor economic and market conditions – and issues specific to individual holdings that could affect their value – they maintain a long-term investment perspective. Intentional Investing is also:
n | How we manage and mitigate risk – by embedding risk controls and processes into every aspect of our business; | ||
n | How we create products – by offering a diverse combination of investment strategies and vehicles designed to meet your needs; and | ||
n | How we connect with you, our investors – by communicating clearly, by delivering expert insights from our portfolio managers and other investment professionals, and by providing a website full of tools and articles to help you stay informed. |
As a company, Invesco believes in putting investors first, and that’s why investment management is all we do. Our sole focus on managing your money allows your financial adviser to build a truly diversified investment portfolio of Invesco funds, whatever your investment needs and goals may be – and allows him or her to find appropriate Invesco funds when your circumstances change. Of course, neither Intentional Investing nor diversification can guarantee a profit or protect against loss.
Have a question?
If you have questions about your account, please contact an Invesco client services representative at 800 959 4246. If you have an Invesco-related question or comment, feel free 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/0000950123-12-013037/h87055h8705503.gif)
Philip Taylor
Senior Managing Director, Invesco Ltd.
![-s- philip taylor](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8705503.gif)
Philip Taylor
Senior Managing Director, Invesco Ltd.
2 | Invesco Core Plus Bond Fund |
![(PHOTO OF BRUCE CROCKETT)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8705504.jpg)
Bruce Crockett
Dear Fellow Shareholders:
One of our most important responsibilities as independent Trustees of the Invesco Funds is our annual review of the funds’ advisory and sub-advisory contracts with Invesco. This annual review is required by the Investment Company Act of 1940 and focuses on the nature and quality of the services Invesco has provided as adviser to the Invesco Funds and the reasonableness of the fees that it charges for those services.
In our roles as Trustees, we spend months reviewing thousands of pages of detailed information that we request from Invesco in connection with our annual review. We focus on the quality and costs of the services to be provided by Invesco and its affiliates. Some of the most important things we look at are fund performance, expenses and fees. All of the Trustees have substantial personal investments in the Invesco Funds complex. We’re fund shareholders just like you.
We also use information from many independent sources during the review process, including materials provided by the independent Senior Officer of the Invesco Funds, who reports directly to the independent Trustees. We also meet in private sessions with independent legal counsel and review performance and fee data on the Invesco Funds prepared by Lipper Inc., an independent, third-party firm widely recognized as a leader in its field.
I’m pleased to report that the Invesco Funds Board determined in June that renewing the investment advisory agreement and the sub-advisory contracts with Invesco would serve the best interests of each fund and its shareholders. For more detailed information about our assessment and conclusions with respect to each of the Invesco Funds, visit invesco.com/us, click on the “About Us” section and go to “Legal Information.” Information on the recent investment advisory renewal process can be found by clicking the last item under “Corporate Governance.”
In much the same way we review your fund’s advisory contract each year, it’s a good idea for you to review your own investment plan with your financial adviser on a regular basis. Perhaps you need to reassess your original asset allocation because different investments may grow at varying paces, or perhaps you’re going through a significant life change. Regardless of your situation, a financial adviser can provide guidance and experience to help you reach your financial goals.
As always, please contact me at bruce@brucecrockett.com with any questions or concerns you may have. On behalf of the 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/0000950123-12-013037/h87055h8705505.gif)
Bruce L. Crockett
Independent Chair
Invesco Funds Board of Trustees
![-s- bruce l. crockett](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8705505.gif)
Bruce L. Crockett
Independent Chair
Invesco Funds Board of Trustees
3 | Invesco Core Plus Bond Fund |
Management’s Discussion of Fund Performance
Performance summary
For the fiscal year ended August 31, 2012, Invesco Core Plus Bond Fund, at net asset value (NAV), outperformed the Fund’s broad market/style-specific index. Sector and security selection were the major contributors to performance for the reporting period.
Your Fund’s long-term performance appears later in this report.
Fund vs. Indexes
Total returns, 8/31/11 to 8/31/12, 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 | 7.86 | % | ||
Class B Shares | 7.06 | |||
Class C Shares | 6.96 | |||
Class R Shares | 7.59 | |||
Class Y Shares | 8.12 | |||
Institutional Class Shares | 8.03 | |||
Barclays U.S. Aggregate Index▼(Broad Market/Style-Specific Index) | 5.78 | |||
Lipper Intermediate Investment Grade Debt Funds Index§ (Peer Group Index) | 7.60 |
Source(s): ▼Invesco, Barclays via FactSet Research Systems Inc.; §Lipper Inc. |
How we invest
The Fund primarily invests in investment grade fixed income securities generally represented by the Barclays U.S. Aggregate Index (the Fund’s broad market/ style-specific index), which includes corporate bonds, US 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 securities denominated in currencies other than the US dollar.
The Fund invests from time to time in derivative instruments such as futures contracts and swap agreements, including interest rate futures and credit derivatives, including credit default swaps (CDS) and/or credit default indexes (CDX). 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 Fund’s 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 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 analysis 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 macroeconomic risk exposure (for example, duration, yield curve positioning and 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. |
Market conditions and your Fund
As the reporting period began, reports on employment and the economy were mixed at best, and sovereign debt issues abroad weighed heavily on investors. Equity indexes sold off precipitously as the US struggled to raise the nation’s debt ceiling. As a result, Standard & Poor’s announced the first-ever downgrade to long-term US government debt. Anxiety linked to the aforementioned events and related concerns about global financial sector stability dominated bond market headlines and investors’ psyches, leading to wider credit spreads and increased demand for the perceived safe haven of US government bonds that pushed US interest rates to near-historic lows1, in spite of the earlier credit rating downgrade.
Those negative headlines faded during the fall of 2011, but signs of muted growth remained. US equity markets rebounded with a nearly uninterrupted rally throughout the winter of 2011 and into the spring of 2012. Likewise, in the bond markets, rotation into riskier assets began, as interest rates rose and corporate credit spreads tightened. In late March, markets paused, and while corporate earnings still offered more positive surprises than disappointments, confidence began to wane in the absence of new growth drivers. By May, the stock
Portfolio Composition
By security type
By security type
US Dollar Denominated Bonds & Notes | 44.5 | % | ||
US Government Sponsored | ||||
Mortgage-Backed Securities | 30.3 | |||
US Treasury Securities | 13.4 | |||
Asset-Backed Securities | 13.3 | |||
US Government Sponsored | ||||
Agency Securities | 0.9 | |||
Non-US Dollar Denominated Bonds & Notes | 0.3 | |||
Preferred Stocks | 0.3 | |||
Municipal Obligations | 0.2 | |||
Money Market Funds | ||||
Plus Other Assets Less Liabilities | -3.2 |
Top 10 Fixed Income Issuers*
1. | Federal Home Loan Mortgage Corp. | 20.7 | % | |||||
2. | US Treasury Notes | 10.8 | ||||||
3. | Federal National Mortgage Association | 8.0 | ||||||
4. | US Treasury Bonds | 2.5 | ||||||
5. | Bear Stearns Commercial | |||||||
Mortgage Securities | 2.3 | |||||||
6. | Wachovia Bank Commercial | |||||||
Mortgage Trust | 1.4 | |||||||
7. | Morgan Stanley | 1.2 | ||||||
8. | Morgan Stanley Capital I | 1.1 | ||||||
9. | Government National | |||||||
Mortgage Association | 1.0 | |||||||
10. | GS Mortgage Securities Corp. II | 0.9 |
Total Net Assets | $534.3 million | |||
Total Number of Holdings* | 898 |
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 |
market went into steady decline. Bond investors followed suit by pushing US Treasury bond yields to historic lows1 and credit spreads wider, as investors grew concerned about the possibility of a Greek exit from the European Union and the potential collapse of the euro. Economic data and earnings in the US began to show signs of deceleration amid contagion from both European and Asian weakness.
Toward the end of the reporting period, yet another European commitment to a lasting resolution to the economic crisis was coupled with an announcement that funds may be injected directly into large financial institutions. This announcement, along with a ruling by the US Supreme Court upholding the Affordable Care Act, provided some near-term clarity and resulted in risk taking that led the stock market modestly higher. Similarly, sustained low yields for government bonds and the return of robust demand for yield in the credit markets combined to drive bond market indexes higher.
With this economic and market environment as a backdrop, the Fund generated positive returns for the 12-month reporting period in absolute terms and, at net asset value, outperformed its broad market/style-specific benchmark. Overweight positions across non-government sectors and security selection during the latter part of the reporting period contributed to the outperformance.
Sector allocation decisions emphasized non-government holdings throughout the fiscal year. Despite the ebb and flow of credit market volatility throughout the reporting period, the Fund’s sustained overweight positions in financials and commercial mortgage-backed securities (CMBS) developed into principal drivers of our positive relative return, along with our strategic out-of-index “plus” sector allocations to high yield securities and emerging markets. Conversely, a small overweight position in agency MBS and underweight exposure to the energy sector during the reporting period were marginal drags on performance versus the benchmark.
Security selection among agency MBS, especially among lower coupon MBS, was an important contributor to performance. Security selection in the consumer non-cyclicals, consumer cyclicals and transports credit sub-sectors helped performance. Weak security selection in financials, CMBS and asset-backed securities (ABS) was attributable to our bias toward less risky credits within these sectors and slightly offset otherwise strong security selection for the reporting period.
The Fund benefited from incremental income earned by mortgage dollar roll transactions, 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 to generate additional return on the portfolio.
The Fund also may use active duration and yield curve positioning for risk management and for generating alpha versus its benchmark. Duration measures a portfolio’s price sensitivity to interest rate changes. Yield curve positioning refers to actively emphasizing particular 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 was mixed over the reporting period but was slightly positive overall. Although we maintained the portfolio’s duration slightly longer than the benchmark on average during a period of falling interest rates, the timing of changes and the degree of variance from the index during the reporting period detracted from relative returns. However, favorable yield curve management that emphasized longer maturities more than offset the negative effect from the Fund’s fluctuating duration position. Buying and selling US Treasury futures contracts was an important tool we used for the management of interest rate risk and to maintain our targeted portfolio duration.
Part of our strategy to manage credit and currency risk in the portfolio during the reporting period entailed buying and selling credit protection via credit derivatives and hedging currency risk associated with non-US dollar denominated bonds. We hedged credit risk for approximately 5% of the portfolio’s market value by purchasing protection via CDX and CDS for select banking sector names beginning in May 2012. We also used CDS to efficiently capture relative value opportunities within the consumer cyclicals sectors early in 2012. The currency hedging activity was carried out on an as-needed basis for select non-US dollar denominated securities and was effective in managing unwanted currency risk of non-US dollar denominated holdings.
Thank you for investing in Invesco Core Plus Bond Fund and for sharing our long-term investment horizon.
1 Source: Forbes 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.
![(PHOTO OF CHUCK BURGE)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8705506.jpg)
Chuck Burge
Portfolio manager, is manager of Invesco Core Plus Bond Fund. He joined Invesco in 2002. Mr. Burge earned a BS in economics from Texas A&M University and an MBA in finance and accounting from Rice University.
![(PHOTO OF CLAUDIA CALICH)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8705507.jpg)
Claudia Calich
Portfolio manager, is manager of Invesco Core Plus Bond Fund. She joined Invesco in 2004. Ms. Calich earned a BA in economics from Susquehanna University and an MA in international economics from the International University of Japan in Niigata.
![(PHOTO OF JOHN CRADDOCK)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8705508.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 BS in mechanical engineering from Clemson University and an MBA with a concentration in finance from Georgia Institute of Technology’s Dupree School of Management.
![(PHOTO OF DARREN HUGHES)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8705509.jpg)
Darren Hughes
Chartered Financial Analyst, portfolio manager, is manager of Invesco Core Plus Bond Fund. He joined Invesco in 1992. Mr. Hughes earned a BBA in finance and economics from Baylor University.
![(PHOTO OF SCOTT ROBERTS)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8705510.jpg)
Scott Roberts
Chartered Financial Analyst, portfolio manager, is manager of Invesco Core Plus Bond Fund. He joined Invesco in 2000. Mr. Roberts earned a BBA in finance from the University of Houston.
Chartered Financial Analyst, portfolio manager, is manager of Invesco Core Plus Bond Fund. He joined Invesco in 2000. Mr. Roberts earned a BBA in finance from the University of Houston.
5 | Invesco Core Plus Bond Fund |
Your Fund’s Long-Term Performance
Results of a $10,000 Investment – Oldest Share Class(es) 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/0000950123-12-013037/h87055h8705511.gif)
1 | Source: Lipper Inc. | |
2 | Sources: Invesco, Barclays via FactSet Research Systems 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 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
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 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. An unexpectedly high rate of defaults on the mortgages held by a mortgage pool may adversely affect the value of mortgage-backed securities and could result in losses to the Fund. The risk of such defaults is generally higher in the case of mortgage pools that include subprime mortgages. Subprime mortgages refer to loans made to borrowers with weakened credit histories or with lower capacity to make timely payments on their mortgages.
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 | US government obligations risk. The Fund may invest in obligations issued by US government agencies and instrumentalities that may receive varying levels of support from the government, which could affect the Fund’s ability to recover should they default. |
continued on page 7
6 | Invesco Core Plus Bond Fund |
Average Annual Total Returns
As of 8/31/12, including maximum applicable sales charges
As of 8/31/12, including maximum applicable sales charges
Class A Shares | ||||
Inception (6/3/09) | 6.04 | % | ||
1 Year | 2.72 | |||
Class B Shares | ||||
Inception (6/3/09) | 6.04 | % | ||
1 Year | 2.06 | |||
Class C Shares | ||||
Inception (6/3/09) | 6.82 | % | ||
1 Year | 5.96 | |||
Class R Shares | ||||
Inception (6/3/09) | 7.38 | % | ||
1 Year | 7.59 | |||
Class Y Shares | ||||
Inception (6/3/09) | 7.91 | % | ||
1 Year | 8.12 | |||
Institutional Class Shares | ||||
Inception (6/3/09) | 7.88 | % | ||
1 Year | 8.03 |
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
Average Annual Total Returns
As of 6/30/12, the most recent calendar quarter-end, including maximum applicable sales charges
As of 6/30/12, the most recent calendar quarter-end, including maximum applicable sales charges
Class A Shares | ||||
Inception (6/3/09) | 5.64 | % | ||
1 Year | 1.88 | |||
Class B Shares | ||||
Inception (6/3/09) | 5.66 | % | ||
1 Year | 1.21 | |||
Class C Shares | ||||
Inception (6/3/09) | 6.53 | % | ||
1 Year | 5.21 | |||
Class R Shares | ||||
Inception (6/3/09) | 7.06 | % | ||
1 Year | 6.74 | |||
Class Y Shares | ||||
Inception (6/3/09) | 7.63 | % | ||
1 Year | 7.37 | |||
Institutional Class Shares | ||||
Inception (6/3/09) | 7.59 | % | ||
1 Year | 7.28 |
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 1.20%, 1.95%, 1.95%, 1.45%, 0.95% and 0.66%, 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, 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 A, Class B, Class C, Class R and Class Y shares, or on Institutional Class shares in the past, 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. |
continued from page 6
About indexes used in this report
n | The Barclays U.S. Aggregate Index is an unmanaged index considered representative of the US 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 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 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, 2012, 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 for new or additional investments. Existing shareholders of Class B shares may continue to reinvest dividends and capital gains distributions in Class B shares and exchange their Class B shares for Class B shares of other funds. 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 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 | Counterparty risk. Counterparty risk is the risk that the other party to the contract will not fulfill its contractual obligations, which may cause losses or additional costs to the Fund. | |
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. The performance of derivative instruments is tied to the performance of an underlying currency, security, index or other instrument. In |
addition to risks relating to their underlying instruments, the use of derivatives may include other, possibly greater, risks. Derivatives involve costs, may be volatile, and may involve a small initial investment relative to the risk assumed. Risks associated with the use of derivatives include counterparty, leverage, correlation, liquidity, tax, market, interest rate and management risks. Derivatives may also be more difficult to purchase, sell or value than other investments. The Fund may lose more than the cash amount invested on investments in derivatives. Investors should bear in mind that, while the Fund intends to use derivative strategies, it is not obligated to actively engage in these transactions, generally or in any particular kind of derivative, if the investment manager elects not to do so due to availability, cost, market conditions or other factors. | ||
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 | Forward foreign currency exchange contracts risk. The use of forward contracts involves the risk of mismatching the Fund’s objectives under a forward contract with the value of securities denominated in a particular currency. Furthermore, such transactions reduce or preclude the opportunity for gain if the value of the currency should move in the direction opposite to the position taken. There is an additional risk to the effect that currency contracts create exposure to currencies in which the Fund’s securities are not denominated. Unanticipated changes in currency prices may result in poorer overall performance for the Fund than if it had not entered into such contracts. | |
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 |
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 | 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
August 31, 2012
Principal | ||||||||
Amount | Value | |||||||
U.S. Dollar Denominated Bonds and Notes–44.47%(a) | ||||||||
Advertising–0.19% | ||||||||
National CineMedia LLC, Sr. Sec. Gtd. Notes, 6.00%, 04/15/22(b) | $ | 10,000 | $ | 10,450 | ||||
Omnicom Group Inc., Sr. Unsec. Global Notes, 3.63%, 05/01/22 | 550,000 | 578,613 | ||||||
WPP Finance (United Kingdom), Sr. Unsec. Gtd. Global Notes, 8.00%, 09/15/14 | 365,000 | 410,163 | ||||||
999,226 | ||||||||
Aerospace & Defense–0.18% | ||||||||
BE Aerospace Inc., Sr. Unsec. Notes, 5.25%, 04/01/22 | 20,000 | 21,000 | ||||||
Bombardier Inc. (Canada), Sr. Unsec. Notes, 7.75%, 03/15/20(b) | 70,000 | 79,187 | ||||||
Huntington Ingalls Industries Inc., Sr. Unsec. Gtd. Global Notes, 6.88%, 03/15/18 | 60,000 | 64,650 | ||||||
7.13%, 03/15/21 | 40,000 | 43,500 | ||||||
Spirit Aerosystems Inc., Sr. Unsec. Gtd. Global Notes, 6.75%, 12/15/20 | 10,000 | 10,938 | ||||||
Textron Inc., Sr. Unsec. Notes, 4.63%, 09/21/16 | 675,000 | 735,298 | ||||||
954,573 | ||||||||
Agricultural Products–0.22% | ||||||||
Bunge Ltd. Finance Corp., Sr. Unsec. Gtd. Notes, 4.10%, 03/15/16 | 245,000 | 259,073 | ||||||
Cargill, Inc., Sr. Unsec. Notes, 5.60%, 09/15/12(b) | 60,000 | 60,080 | ||||||
Ingredion Inc., Sr. Unsec. Notes, 3.20%, 11/01/15 | 75,000 | 78,804 | ||||||
6.63%, 04/15/37 | 635,000 | 802,432 | ||||||
1,200,389 | ||||||||
Airlines–1.08% | ||||||||
American Airlines Inc., Sr. Sec. Gtd. Notes, 7.50%, 03/15/16 (Acquired 10/13/11-11/29/11; Cost $69,950)(b)(c) | 85,000 | 83,937 | ||||||
American Airlines Pass Through Trust, Series 2011-1, Class A, Sr. Sec. Gtd. Pass Through Ctfs., 5.25%, 01/31/21 | 1,094,102 | 1,141,969 | ||||||
Series 2011-1, Class B, Sec. Pass Through Ctfs., 7.00%, 01/31/18(b) | 353,425 | 358,726 | ||||||
Continental Airlines Pass Through Trust, Series 2007-1, Class C, Sec. Global Pass Through Ctfs., 7.34%, 04/19/14 | 11,342 | 11,625 | ||||||
Series 2009-1, Sec. Pass Through Ctfs., 9.00%, 07/08/16 | 1,217,561 | 1,415,415 | ||||||
Series 2009-2, Class B, Sec. Global Pass Through Ctfs., 9.25%, 05/10/17 | 3,910 | 4,290 | ||||||
Series 2010-1, Class B, Sec. Pass Through Ctfs., 6.00%, 01/12/19 | 26,636 | 26,703 | ||||||
Series 2012-1, Class A, Sec. Pass Through Ctfs., 4.15%, 04/11/24 | 500,000 | 505,937 | ||||||
Delta Air Lines Pass Through Trust, Series 2009-1, Class A, Sr. Sec. Pass Through Ctfs., 7.75%, 12/17/19 | 525,625 | 600,855 | ||||||
Series 2010-1, Class B, Sec. Pass Through Ctfs., 6.38%, 01/02/16(b) | 85,000 | 86,700 | ||||||
Series 2010-2, Class B, Sec. Pass Through Ctfs., 6.75%, 11/23/15(b) | 10,000 | 10,263 | ||||||
Series 2012-1, Class A, Sr. Sec. Pass Through Ctfs., 4.75%, 05/07/20 | 1,335,000 | 1,373,381 | ||||||
Delta Air Lines, Inc., Sec. Notes, 12.25%, 03/15/15(b) | 25,000 | 27,188 | ||||||
Sr. Sec. Notes, 9.50%, 09/15/14(b) | 2,000 | 2,113 | ||||||
UAL Pass Through Trust, Series 2007-1, Class A, Sec. Gtd. Global Pass Through Ctfs., 6.64%, 07/02/22 | 64,437 | 67,941 | ||||||
Series 2009-1, Sr. Sec. Gtd. Global Pass Through Ctfs., 10.40%, 11/01/16 | 7,280 | 8,409 | ||||||
Series 2009-2A, Sec. Gtd. Global Pass Through Ctfs., 9.75%, 01/15/17 | 3,987 | 4,615 | ||||||
US Airways Pass Through Trust, Series 1998-1, Class C, Sec. Pass Through Ctfs., 6.82%, 01/30/14 | 25,557 | 23,449 | ||||||
Series 2012-1, Class A, Sr. Sec. Pass Through Ctfs., 5.90%, 10/01/24 | 10,000 | 10,656 | ||||||
Series 2012-1, Class B, Sec. Pass Through Ctfs., 8.00%, 10/01/19 | 10,000 | 10,300 | ||||||
Series 2012-1, Class C, Sec. Pass Through Ctfs., 9.13%, 10/01/15 | 10,000 | 10,225 | ||||||
5,784,697 | ||||||||
Alternative Carriers–0.04% | ||||||||
Cogent Communications Group, Inc., Sr. Sec. Gtd. Notes, 8.38%, 02/15/18(b) | 30,000 | 31,762 | ||||||
Level 3 Communications Inc., Sr. Unsec. Global Notes, 11.88%, 02/01/19 | 20,000 | 22,450 | ||||||
Level 3 Financing Inc., Sr. Unsec. Gtd. Global Notes, 8.13%, 07/01/19 | 10,000 | 10,550 | ||||||
8.63%, 07/15/20 | 15,000 | 16,163 | ||||||
9.38%, 04/01/19 | 110,000 | 121,000 | ||||||
201,925 | ||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
9 Invesco Core Plus Bond Fund
Principal | ||||||||
Amount | Value | |||||||
Aluminum–0.02% | ||||||||
Century Aluminum Co., Sr. Sec. Gtd. Notes, 8.00%, 05/15/14 | $ | 88,500 | $ | 88,998 | ||||
Apparel Retail–0.08% | ||||||||
Express LLC/Express Finance Corp., Sr. Unsec. Gtd. Global Notes, 8.75%, 03/01/18 | 54,000 | 58,590 | ||||||
Gap, Inc. (The), Sr. Unsec. Notes, 5.95%, 04/12/21 | 129,000 | 139,723 | ||||||
J. Crew Group Inc., Sr. Unsec. Gtd. Global Notes, 8.13%, 03/01/19 | 80,000 | 84,400 | ||||||
Limited Brands Inc., Sr. Unsec. Gtd. Global Notes, 8.50%, 06/15/19 | 5,000 | 6,038 | ||||||
Sr. Unsec. Gtd. Notes, 6.63%, 04/01/21 | 120,000 | 135,300 | ||||||
424,051 | ||||||||
Apparel, Accessories & Luxury Goods–0.09% | ||||||||
Hanesbrands Inc., Sr. Unsec. Gtd. Global Notes, 6.38%, 12/15/20 | 95,000 | 103,312 | ||||||
Jones Group Inc./Apparel Group Holdings/Apparel Group USA/Footwear Accessories Retail, Sr. Unsec. Notes, 6.88%, 03/15/19 | 102,000 | 101,490 | ||||||
Levi Strauss & Co., Sr. Unsec. Global Notes, 6.88%, 05/01/22 | 66,000 | 68,805 | ||||||
7.63%, 05/15/20 | 100,000 | 106,750 | ||||||
Quiksilver Inc., Sr. Unsec. Gtd. Global Notes, 6.88%, 04/15/15 | 100,000 | 95,688 | ||||||
476,045 | ||||||||
Asset Management & Custody Banks–0.29% | ||||||||
Blackstone Holdings Finance Co. LLC, Sr. Unsec. Gtd. Notes, 6.25%, 08/15/42(b) | 1,070,000 | 1,094,515 | ||||||
Samson Investment Co., Sr. Unsec. Notes, 9.75%, 02/15/20(b) | 25,000 | 25,750 | ||||||
State Street Capital Trust III, Jr. Unsec. Gtd. Sub. Variable Rate Bonds, 5.46%(d)(e) | 445,000 | 446,112 | ||||||
1,566,377 | ||||||||
Auto Parts & Equipment–0.02% | ||||||||
Allison Transmission Inc., Sr. Unsec. Gtd. Notes, 7.13%, 05/15/19(b) | 121,000 | 128,563 | ||||||
Automobile Manufacturers–0.46% | ||||||||
Ford Motor Co., Sr. Unsec. Global Notes, 7.45%, 07/16/31 | 71,000 | 87,507 | ||||||
Ford Motor Credit Co LLC, Sr. Unsec. Notes, 3.98%, 06/15/16(b) | 2,300,000 | 2,378,200 | ||||||
General Motors Financial Co. Inc., Sr. Unsec. Gtd. Notes, 4.75%, 08/15/17(b) | 15,000 | 15,150 | ||||||
2,480,857 | ||||||||
Automotive Retail–0.32% | ||||||||
Advance Auto Parts, Inc., Sr. Unsec. Gtd. Notes, 5.75%, 05/01/20 | 1,500,000 | 1,722,725 | ||||||
Penske Automotive Group Inc., Sr. Gtd. Sub. Notes, 5.75%, 10/01/22(b) | 10,000 | 10,225 | ||||||
1,732,950 | ||||||||
Biotechnology–0.00% | ||||||||
STHI Holding Corp., Sec. Gtd. Notes, 8.00%, 03/15/18(b) | 20,000 | 21,450 | ||||||
Brewers–0.68% | ||||||||
Anheuser-Busch InBev Worldwide Inc. (Belgium), Sr. Unsec. Gtd. Global Notes, 3.00%, 10/15/12 | 1,670,000 | 1,674,860 | ||||||
5.38%, 11/15/14 | 125,000 | 138,010 | ||||||
SABMiller Holdings Inc. (United Kingdom), Sr. Unsec. Gtd. Notes, 3.75%, 01/15/22(b) | 950,000 | 1,039,346 | ||||||
4.95%, 01/15/42(b) | 670,000 | 784,166 | ||||||
3,636,382 | ||||||||
Broadcasting–0.67% | ||||||||
Clear Channel Worldwide Holdings Inc., Series A, Sr. Unsec. Gtd. Notes, 7.63%, 03/15/20 | 8,000 | 7,710 | ||||||
Series B, Sr. Unsec. Gtd. Sub. Global Notes, 7.63%, 03/15/20 | 60,000 | 58,650 | ||||||
COX Communications Inc., Sr. Unsec. Notes, 8.38%, 03/01/39(b) | 1,220,000 | 1,846,709 | ||||||
9.38%, 01/15/19(b) | 25,000 | 34,106 | ||||||
Discovery Communications LLC, Sr. Unsec. Gtd. Global Notes, 6.35%, 06/01/40 | 1,275,000 | 1,641,184 | ||||||
3,588,359 | ||||||||
Building Products–0.12% | ||||||||
American Standard Americas, Sr. Sec. Notes, 10.75%, 01/15/16(b) | 20,000 | 18,100 | ||||||
Associated Materials LLC/AMH New Finance Inc., Sr. Sec. Gtd. Global Notes, 9.13%, 11/01/17 | 55,000 | 53,350 | ||||||
Building Materials Corp. of America, Sr. Unsec. Gtd. Notes, 7.50%, 03/15/20(b) | 95,000 | 104,262 | ||||||
Sr. Unsec. Notes, 6.88%, 08/15/18(b) | 36,000 | 39,015 | ||||||
Gibraltar Industries Inc.–Series B, Sr. Unsec. Gtd. Sub. Global Notes, 8.00%, 12/01/15 | 60,000 | 61,688 | ||||||
Masco Corp., Sr. Unsec. Global Notes, 5.95%, 03/15/22 | 20,000 | 21,575 | ||||||
Nortek Inc., Sr. Unsec. Gtd. Global Notes, 8.50%, 04/15/21 | 126,000 | 134,820 | ||||||
Ply Gem Industries Inc., Sr. Sec. Gtd. Global Notes, 8.25%, 02/15/18 | 40,000 | 41,000 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
10 Invesco Core Plus Bond Fund
Principal | ||||||||
Amount | Value | |||||||
Building Products–(continued) | ||||||||
USG Corp., Sr. Unsec. Gtd. Notes, 7.88%, 03/30/20(b) | $ | 55,000 | $ | 59,400 | ||||
Sr. Unsec. Notes, 9.75%, 01/15/18 | 90,000 | 96,750 | ||||||
629,960 | ||||||||
Cable & Satellite–1.24% | ||||||||
British Sky Broadcasting Group PLC (United Kingdom), Sr. Unsec. Gtd. Notes, 9.50%, 11/15/18(b) | 25,000 | 34,285 | ||||||
Comcast Corp., Sr. Unsec. Gtd. Global Notes, 6.50%, 01/15/15 | 20,000 | 22,666 | ||||||
Sr. Unsec. Gtd. Notes, 6.45%, 03/15/37 | 80,000 | 103,588 | ||||||
DIRECTV Holdings LLC/DIRECTV Financing Co., Inc., Sr. Unsec. Gtd. Global Notes, 2.40%, 03/15/17 | 620,000 | 639,327 | ||||||
DISH DBS Corp., Sr. Unsec. Gtd. Notes, 4.63%, 07/15/17(b) | 70,000 | 71,225 | ||||||
5.88%, 07/15/22(b) | 15,000 | 15,206 | ||||||
Intelsat Jackson Holdings S.A. (Luxembourg), | ||||||||
Sr. Unsec. Gtd. Global Notes, | ||||||||
7.25%, 10/15/20 | 75,000 | 81,188 | ||||||
7.50%, 04/01/21 | 115,000 | 125,063 | ||||||
Sr. Unsec. Gtd. Notes, 7.25%, 10/15/20(b) | 30,000 | 32,475 | ||||||
NBC Universal Media LLC, Sr. Unsec. Global Notes, 2.10%, 04/01/14 | 775,000 | 792,120 | ||||||
5.15%, 04/30/20 | 350,000 | 413,382 | ||||||
5.95%, 04/01/41 | 740,000 | 923,769 | ||||||
Time Warner Cable, Inc., Sr. Unsec. Gtd. Notes, 5.00%, 02/01/20 | 680,000 | 788,278 | ||||||
Virgin Media Secured Finance PLC (United Kingdom), Sr. Sec. Gtd. Global Notes, 5.25%, 01/15/21 | 200,000 | 230,261 | ||||||
6.50%, 01/15/18 | 2,155,000 | 2,376,815 | ||||||
6,649,648 | ||||||||
Casinos & Gaming–0.20% | ||||||||
Ameristar Casinos Inc., Sr. Unsec. Gtd. Global Notes, 7.50%, 04/15/21 | 55,000 | 59,262 | ||||||
Caesars Entertainment Operating Co. Inc., Sec. Gtd. Global Notes, 12.75%, 04/15/18 | 15,000 | 10,538 | ||||||
Sr. Unsec. Gtd. Global Bonds, 5.63%, 06/01/15 | 5,000 | 4,163 | ||||||
Caesars Operating Escrow LLC/ Caesars Escrow Corp, Sr. Sec. Gtd. Notes, 9.00%, 02/15/20(b) | 40,000 | 40,000 | ||||||
Chester Downs & Marina LLC, Sr. Sec. Gtd. Sub. Notes, 9.25%, 02/01/20(b) | 10,000 | 10,300 | ||||||
CityCenter Holdings LLC/CityCenter Finance Corp., Sec. Gtd. PIK Global Notes, 10.75%, 01/15/17 | 61,816 | 65,989 | ||||||
Sr. Sec. Gtd. Global Notes, 7.63%, 01/15/16 | 70,000 | 74,725 | ||||||
Sr. Sec. Gtd. Notes, 7.63%, 01/15/16 | 5,000 | 5,338 | ||||||
Codere Finance Luxembourg SA (Luxembourg), Sr. Gtd. Notes, 9.25%, 02/15/19 | 10,000 | 7,950 | ||||||
MGM Resorts International, Sr. Unsec. Gtd. Global Notes, 6.63%, 07/15/15 | 150,000 | 157,312 | ||||||
Sr. Unsec. Gtd. Notes, | ||||||||
7.75%, 03/15/22 | 160,000 | 162,800 | ||||||
8.63%, 02/01/19(b) | 10,000 | 10,675 | ||||||
Seneca Gaming Corp., Sr. Unsec. Gtd. Notes, 8.25%, 12/01/18(b) | 99,000 | 102,465 | ||||||
Snoqualmie Entertainment Authority, Sr. Sec. Floating Rate Notes, 4.48%, 02/01/14(b)(d) | 160,000 | 154,400 | ||||||
Sr. Sec. Notes, 9.13%, 02/01/15(b) | 25,000 | 25,062 | ||||||
Wynn Las Vegas LLC/Wynn Las Vegas Capital Corp., Sec. Gtd. First Mortgage Global Notes, 7.75%, 08/15/20 | 85,000 | 95,625 | ||||||
Sr. Sec. Gtd. First Mortgage Notes, 5.38%, 03/15/22(b) | 55,000 | 56,100 | ||||||
1,042,704 | ||||||||
Coal & Consumable Fuels–0.02% | ||||||||
CONSOL Energy Inc., Sr. Unsec. Gtd. Global Notes, 8.25%, 04/01/20 | 35,000 | 37,800 | ||||||
Peabody Energy Corp., Sr. Unsec. Gtd. Notes, 6.00%, 11/15/18(b) | 37,000 | 37,786 | ||||||
Westmoreland Coal Co./Westmoreland Partners, Sr. Sec. Gtd. Global Notes, 10.75%, 02/01/18 | 15,000 | 13,988 | ||||||
89,574 | ||||||||
Communications Equipment–0.04% | ||||||||
Avaya Inc., Sr. Sec. Gtd. Notes, 7.00%, 04/01/19(b) | 65,000 | 59,637 | ||||||
Sr. Unsec. Gtd. Global Notes, 9.75%, 11/01/15 | 40,000 | 34,600 | ||||||
Hughes Satellite Systems Corp., Sr. Sec. Gtd. Global Notes, 6.50%, 06/15/19 | 21,000 | 22,680 | ||||||
Sr. Unsec. Gtd. Global Notes, 7.63%, 06/15/21 | 26,000 | 28,795 | ||||||
ViaSat Inc., Sr. Unsec. Gtd. Global Notes,, 6.88%, 06/15/20 | 40,000 | 41,900 | ||||||
187,612 | ||||||||
Computer & Electronics Retail–0.40% | ||||||||
Best Buy Co. Inc., Sr. Unsec. Global Notes, 7.00%, 07/15/13 | 2,010,000 | 2,066,531 | ||||||
Rent-A-Center Inc., Sr. Unsec. Gtd. Global Notes, 6.63%, 11/15/20 | 65,000 | 70,525 | ||||||
2,137,056 | ||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
11 Invesco Core Plus Bond Fund
Principal | ||||||||
Amount | Value | |||||||
Computer Storage & Peripherals–0.02% | ||||||||
Seagate HDD Cayman, Sr. Unsec. Gtd. Global Notes, 7.00%, 11/01/21 | $ | 7,000 | $ | 7,508 | ||||
7.75%, 12/15/18 | 70,000 | 76,825 | ||||||
84,333 | ||||||||
Construction & Engineering–0.25% | ||||||||
Dycom Investments Inc., Sr. Unsec. Gtd. Sub. Global Notes, 7.13%, 01/15/21 | 80,000 | 87,400 | ||||||
MasTec, Inc., Sr. Unsec. Gtd. Global Notes, 7.63%, 02/01/17 | 45,000 | 46,913 | ||||||
Tutor Perini Corp., Sr. Unsec. Gtd. Global Notes, 7.63%, 11/01/18 | 125,000 | 125,937 | ||||||
URS Corp., Sr. Unsec. Notes, 5.00%, 04/01/22(b) | 1,050,000 | 1,068,754 | ||||||
1,329,004 | ||||||||
Construction & Farm Machinery & Heavy Trucks–0.73% | ||||||||
Case New Holland Inc., Sr. Unsec. Gtd. Global Notes, 7.88%, 12/01/17 | 40,000 | 47,050 | ||||||
Commercial Vehicle Group Inc., Sec. Gtd. Global Notes, 7.88%, 04/15/19 | 51,000 | 51,956 | ||||||
Deere & Co., Sr. Unsec. Notes, 3.90%, 06/09/42 | 2,765,000 | 2,919,793 | ||||||
John Deere Capital Corp., Unsec. Global Notes, 0.88%, 04/17/15 | 670,000 | 674,865 | ||||||
Manitowoc Co. Inc. (The), Sr. Unsec. Gtd. Notes, 8.50%, 11/01/20 | 35,000 | 38,938 | ||||||
Navistar International Corp., Sr. Unsec. Gtd. Notes, 8.25%, 11/01/21 | 118,000 | 112,837 | ||||||
Titan International Inc., Sr. Sec. Gtd. Global Notes, 7.88%, 10/01/17 | 50,000 | 52,563 | ||||||
3,898,002 | ||||||||
Construction Materials–0.04% | ||||||||
Cemex Finance LLC (Mexico), Sr. Sec. Gtd. Bonds, 9.50%, 12/14/16(b) | 100,000 | 102,428 | ||||||
Texas Industries Inc., Sr. Unsec. Gtd. Global Notes, 9.25%, 08/15/20 | 100,000 | 107,125 | ||||||
209,553 | ||||||||
Consumer Finance–0.28% | ||||||||
Ally Financial Inc., Sr. Unsec. Gtd. Global Notes, 4.63%, 06/26/15 | 48,000 | 49,320 | ||||||
7.50%, 09/15/20 | 185,000 | 212,519 | ||||||
8.00%, 03/15/20 | 115,000 | 135,125 | ||||||
8.00%, 11/01/31 | 10,000 | 11,875 | ||||||
National Money Mart Co., Sr. Unsec. Gtd. Global Notes, 10.38%, 12/15/16 | 75,000 | 84,000 | ||||||
SLM Corp., Sr. Unsec. Medium-Term Global Notes, 6.25%, 01/25/16 | 355,000 | 381,224 | ||||||
Series A, Sr. Unsec. Medium-Term Notes, 5.00%, 10/01/13 | 615,000 | 638,128 | ||||||
1,512,191 | ||||||||
Data Processing & Outsourced Services–0.07% | ||||||||
CoreLogic, Inc., Sr. Unsec. Gtd. Global Notes, 7.25%, 06/01/21 | 228,000 | 244,530 | ||||||
First Data Corp., Sr. Sec. Gtd. Notes, 6.75%, 11/01/20 | 45,000 | 44,662 | ||||||
7.38%, 06/15/19(b) | 44,000 | 45,540 | ||||||
SunGard Data Systems Inc., Sr. Unsec. Gtd. Global Notes, 7.38%, 11/15/18 | 20,000 | 21,400 | ||||||
7.63%, 11/15/20 | 12,000 | 12,930 | ||||||
369,062 | ||||||||
Department Stores–0.01% | ||||||||
Sears Holdings Corp., Sr. Sec. Gtd. Global Notes, 6.63%, 10/15/18 | 45,000 | 40,950 | ||||||
Distillers & Vintners–0.01% | ||||||||
Constellation Brands Inc., Sr. Unsec. Gtd. Global Notes, 7.25%, 05/15/17 | 60,000 | 69,375 | ||||||
Sr. Unsec. Gtd. Notes, 6.00%, 05/01/22 | 5,000 | 5,650 | ||||||
75,025 | ||||||||
Diversified Banks–4.76% | ||||||||
Abbey National Treasury Services PLC (United Kingdom), Sr. Unsec. Gtd. Global Notes, 2.88%, 04/25/14 | 440,000 | 441,969 | ||||||
Sr. Unsec. Gtd. Notes, 3.88%, 11/10/14(b) | 420,000 | 423,504 | ||||||
Access Finance B.V. (Nigeria), Sr. Unsec. Gtd. Notes, 7.25%, 07/25/17(b) | 200,000 | 206,997 | ||||||
Akbank TAS (Turkey), Sr. Unsec. Notes, 5.13%, 07/22/15(b) | 100,000 | 103,033 | ||||||
6.50%, 03/09/18(b) | 200,000 | 218,937 | ||||||
Alfa Bank OJSC Via Alfa Bond Issuance PLC (Russia), Sr. Unsec. Gtd. Loan Participation Notes 7.75%, 04/28/21(b) | 200,000 | 207,459 | ||||||
ANZ National Int’l Ltd. (New Zealand), Sr. Unsec. Gtd. Notes, 2.38%, 12/21/12(b) | 1,080,000 | 1,085,458 | ||||||
Banco Bradesco S.A. (Brazil), Sr. Unsec. Notes, 4.10%, 03/23/15(b) | 415,000 | 432,375 | ||||||
Unsec. Sub. Notes, 5.75%, 03/01/22(b) | 200,000 | 211,859 | ||||||
Banco Davivienda S.A. (Colombia), Unsec. Sub. Notes, 5.88%, 07/09/22(b) | 200,000 | 208,857 | ||||||
Banco de Credito Del Peru (Peru), Sr. Unsec. Sub. Notes, 6.13%, 04/24/27(b)(d) | 110,000 | 119,258 | ||||||
Banco GNB Sudameris S.A. (Colombia), Unsec. Sub. Notes, 7.50%, 07/30/22(b) | 130,000 | 143,553 | ||||||
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) | ||||||||
Bangkok Bank PCL (Thailand), Sr. Unsec. Notes, 4.80%, 10/18/20(b) | $ | 100,000 | $ | 108,225 | ||||
Bank of Nova Scotia (Canada), Sr. Unsec. Global Notes, 2.38%, 12/17/13 | 1,525,000 | 1,562,758 | ||||||
Barclays Bank PLC (United Kingdom), Unsec. Sub. Global Notes, 5.14%, 10/14/20 | 810,000 | 824,625 | ||||||
DBS Bank Ltd. (Singapore), Unsec. Sub. Notes, 3.63%, 09/21/22(b) | 200,000 | 205,737 | ||||||
Hana Bank (South Korea), Sr. Unsec. Notes, 4.25%, 06/14/17(b) | 700,000 | 758,234 | ||||||
HBOS PLC (United Kingdom)–Series G, Unsec. Sub. Medium-Term Notes, 6.75%, 05/21/18(b) | 1,360,000 | 1,340,591 | ||||||
HSBC Holdings PLC (United Kingdom), Sr. Unsec. Global Notes, 4.00%, 03/30/22 | 1,050,000 | 1,125,024 | ||||||
ING Bank N.V. (Netherlands), Sr. Unsec. Notes, 3.00%, 09/01/15(b) | 255,000 | 258,715 | ||||||
Unsec. Notes, 3.75%, 03/07/17(b) | 330,000 | 343,311 | ||||||
Korea Development Bank (The) (South Korea), Sr. Unsec. Global Notes, 3.50%, 08/22/17 | 730,000 | 773,543 | ||||||
Lloyds TSB Bank PLC (United Kingdom), Unsec. Gtd. Sub. Medium-Term Notes, 6.50%, 09/14/20(b) | 955,000 | 969,030 | ||||||
Nordea Bank AB (Sweden), Sr. Unsec. Notes, 4.88%, 01/27/20(b) | 575,000 | 638,825 | ||||||
RBS Capital Trust II (United Kingdom), Jr. Unsec. Gtd. Sub. Global Bonds, 6.43%(d)(e) | 11,000 | 8,635 | ||||||
Royal Bank of Scotland PLC (The) (United Kingdom), Sr. Unsec. Gtd. Global Notes, 4.88%, 03/16/15 | 975,000 | 1,035,236 | ||||||
Series 2, Sr. Unsec. Gtd. Global Notes, 3.40%, 08/23/13 | 475,000 | 483,065 | ||||||
Santander U.S. Debt S.A. Unipersonal (Spain), Sr. Unsec. Gtd. Notes, 3.72%, 01/20/15(b) | 700,000 | 665,463 | ||||||
Siam Commercial Bank Ltd. (Thailand), Sr. Unsec. Notes, 3.38%, 03/19/17(b) | 200,000 | 204,285 | ||||||
Societe Generale S.A. (France), Sr. Unsec. Medium-Term Notes, 5.20%, 04/15/21(b) | 1,460,000 | 1,498,688 | ||||||
Sr. Unsec. Notes, 2.50%, 01/15/14(b) | 1,940,000 | 1,926,269 | ||||||
Standard Chartered PLC (Hong Kong), Sr. Unsec. Notes, 3.85%, 04/27/15(b) | 775,000 | 806,718 | ||||||
5.50%, 11/18/14(b) | 1,880,000 | 2,005,110 | ||||||
Turkiye Halk Bankasi A.S. (Turkey), Sr. Unsec. Bonds, 4.88%, 07/19/17(b) | 200,000 | 205,913 | ||||||
U.S. Bancorp., Sr. Unsec. Notes, 2.00%, 06/14/13 | 45,000 | 45,582 | ||||||
U.S. Bank N.A., Sub. Notes, 3.78%, 04/29/20 | 1,400,000 | 1,489,979 | ||||||
VTB Bank OJSC Via VTB Capital S.A. (Russia), | ||||||||
Sr. Unsec. Loan Participation Notes, | ||||||||
6.32%, 02/22/18(b) | 1,415,000 | 1,460,411 | ||||||
6.55%, 10/13/20(b) | 660,000 | 689,515 | ||||||
Sr. Unsec. Notes, 6.00%, 04/12/17(b) | 200,000 | 208,587 | ||||||
25,445,333 | ||||||||
Diversified Capital Markets–0.41% | ||||||||
UBS AG (Switzerland), Sr. Unsec. Global Notes, 5.88%, 12/20/17 | 200,000 | 232,815 | ||||||
Sr. Unsec. Medium-Term Bank Notes, 3.88%, 01/15/15 | 560,000 | 590,826 | ||||||
Sr. Unsec. Medium-Term Global Notes, 5.75%, 04/25/18 | 1,200,000 | 1,388,697 | ||||||
2,212,338 | ||||||||
Diversified Metals & Mining–0.64% | ||||||||
Anglo American Capital PLC (United Kingdom), Sr. Unsec. Gtd. Notes, 9.38%, 04/08/19(b) | 170,000 | 227,530 | ||||||
FMG Resources Pty. Ltd. (Australia), | ||||||||
Sr. Unsec. Gtd. Notes, | ||||||||
6.38%, 02/01/16(b) | 75,000 | 72,224 | ||||||
7.00%, 11/01/15(b) | 60,000 | 59,400 | ||||||
Sr. Unsec. Notes, 6.88%, 04/01/22(b) | 10,000 | 9,268 | ||||||
Freeport-McMoRan Copper & Gold Inc., Sr. Unsec. Global Notes, 3.55%, 03/01/22 | 500,000 | 499,335 | ||||||
Midwest Vanadium Pty. Ltd. (Australia), Sr. Sec. Gtd. Mortgage Notes, 11.50%, 02/15/18(b) | 45,000 | 31,565 | ||||||
Rio Tinto Finance USA PLC (United Kingdom), Sr. Unsec. Gtd. Global Notes, 3.50%, 03/22/22 | 1,700,000 | 1,781,672 | ||||||
Southern Copper Corp., Sr. Unsec. Global Notes, 5.38%, 04/16/20 | 150,000 | 168,873 | ||||||
6.75%, 04/16/40 | 225,000 | 263,107 | ||||||
Vedanta Resources PLC (India), Sr. Unsec. Notes, 9.50%, 07/18/18(b) | 100,000 | 103,008 | ||||||
Volcan Cia Minera S.A.A. (Peru), Sr. Unsec. Notes, 5.38%, 02/02/22(b) | 190,000 | 206,339 | ||||||
3,422,321 | ||||||||
Diversified REIT’s–0.79% | ||||||||
Dexus Diversified Trust/Dexus Office Trust (Australia), Sr. Unsec. Gtd. Notes, 5.60%, 03/15/21(b) | 2,765,000 | 2,877,178 | ||||||
Qatari Diar Finance QSC (Qatar), Unsec. Gtd. Unsub. Notes, 5.00%, 07/21/20(b) | 1,175,000 | 1,349,293 | ||||||
4,226,471 | ||||||||
Drug Retail–0.04% | ||||||||
CVS Pass-Through Trust, Sec. Global Pass Through Ctfs., 6.04%, 12/10/28 | 208,661 | 238,222 | ||||||
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–1.86% | ||||||||
Comision Federal de Electridad (Mexico), Sr. Unsec. Notes, 5.75%, 02/14/42(b) | $ | 200,000 | $ | 229,139 | ||||
DCP Midstream LLC, Sr. Unsec. Notes, 9.75%, 03/15/19(b) | 569,000 | 733,293 | ||||||
Enel Finance International N.V. (Italy), Sr. Unsec. Gtd. Notes, 3.88%, 10/07/14(b) | 1,270,000 | 1,292,503 | ||||||
LSP Energy L.P./LSP Batesville Funding Corp.–Series D, Sr. Sec. Bonds, 8.16%, 07/15/25(c) | 5,000 | 5,025 | ||||||
Majapahit Holding B.V. (Indonesia), Sr. Unsec. Gtd. Notes, 7.75%, 01/20/20(b) | 100,000 | 123,553 | ||||||
Mississippi Power Co–Series 12 Class A, Sr. Unsec. Notes, 4.25%, 03/15/42 | 1,350,000 | 1,410,473 | ||||||
Ohio Power Co.–Series M, Sr. Unsec. Notes, 5.38%, 10/01/21 | 2,715,000 | 3,292,862 | ||||||
PPL Electric Utilities Corp., Sec. First Mortgage Bonds, 6.25%, 05/15/39 | 770,000 | 1,110,296 | ||||||
Virginia Electric & Power Co., Sr. Unsec. Notes, 5.00%, 06/30/19 | 800,000 | 964,486 | ||||||
5.10%, 11/30/12 | 780,000 | 788,731 | ||||||
9,950,361 | ||||||||
Electrical Components & Equipment–0.02% | ||||||||
Belden Inc., Sr. Sub. Gtd. Notes, 5.50%, 09/01/22(b) | 40,000 | 40,200 | ||||||
Polypore International Inc., Sr. Unsec. Gtd. Global Notes, 7.50%, 11/15/17 | 55,000 | 59,469 | ||||||
99,669 | ||||||||
Electronic Components–0.25% | ||||||||
Corning, Inc., Sr. Unsec. Notes, 4.75%, 03/15/42 | 1,155,000 | 1,255,637 | ||||||
6.63%, 05/15/19 | 85,000 | 105,284 | ||||||
1,360,921 | ||||||||
Electronic Manufacturing Services–0.03% | ||||||||
Jabil Circuit Inc., Sr. Unsec. Global Notes, 4.70%, 09/15/22 | 13,000 | 13,162 | ||||||
Sanmina-SCI Corp., Sr. Unsec. Gtd. Notes, 7.00%, 05/15/19(b) | 122,000 | 123,220 | ||||||
136,382 | ||||||||
Environmental & Facilities Services–0.21% | ||||||||
Clean Harbors Inc., Sr. Unsec. Gtd. Notes, 5.25%, 08/01/20(b) | 10,000 | 10,275 | ||||||
Waste Management, Inc., Sr. Unsec. Gtd. Notes, 5.00%, 03/15/14 | 1,050,000 | 1,116,837 | ||||||
1,127,112 | ||||||||
Forest Products–0.00% | ||||||||
Millar Western Forest Products Ltd. (Canada), Sr. Unsec. Global Notes, 8.50%, 04/01/21 | 20,000 | 13,950 | ||||||
Gas Utilities–0.04% | ||||||||
AmeriGas Finance LLC/ Corp., Sr. Unsec. Gtd. Global Notes, 7.00%, 05/20/22 | 35,000 | 37,625 | ||||||
Ferrellgas L.P./Ferrellgas Finance Corp., Sr. Unsec. Global Notes, 6.50%, 05/01/21 | 73,000 | 72,452 | ||||||
Suburban Propane Partners, L.P./Suburban Energy Finance Corp., Sr. Unsec. Notes, 7.38%, 03/15/20 | 80,000 | 86,000 | ||||||
7.38%, 08/01/21(b) | 33,000 | 35,063 | ||||||
231,140 | ||||||||
General Merchandise Stores–0.11% | ||||||||
Dollar General Corp., Sr. Unsec. Gtd. Global Notes, 4.13%, 07/15/17 | 575,000 | 599,437 | ||||||
Gold–1.46% | ||||||||
AngloGold Ashanti Holdings PLC (South Africa), Sr. Unsec. Gtd. Global Notes, 5.13%, 08/01/22 | 110,000 | 112,338 | ||||||
Barrick Gold Corp. (Canada), Sr. Unsec. Global Notes, 2.90%, 05/30/16 | 1,210,000 | 1,277,861 | ||||||
3.85%, 04/01/22 | 750,000 | 776,227 | ||||||
Barrick North America Finance LLC (Canada), Sr. Unsec. Gtd. Global Notes, 5.70%, 05/30/41 | 600,000 | 694,033 | ||||||
Gold Fields Orogen Holding BVI Ltd. (South Africa), Sr. Unsec. Gtd. Notes, 4.88%, 10/07/20(b) | 2,135,000 | 2,137,554 | ||||||
Kinross Gold Corp. (Canada), Sr. Unsec. Gtd. Global Notes, 5.13%, 09/01/21 | 1,365,000 | 1,396,822 | ||||||
6.88%, 09/01/41 | 1,365,000 | 1,422,466 | ||||||
7,817,301 | ||||||||
Health Care Equipment–0.01% | ||||||||
Biomet Inc., Sr. Unsec. Notes, 6.50%, 08/01/20 | 10,000 | 10,425 | ||||||
DJO Finance LLC/Corp., Sr. Unsec. Gtd. Global Notes, 7.75%, 04/15/18 | 54,000 | 49,950 | ||||||
Sr. Unsec. Gtd. Sub. Global Notes, 9.75%, 10/15/17 | 21,000 | 18,165 | ||||||
78,540 | ||||||||
Health Care Facilities–0.08% | ||||||||
CHS/Community Health systems, Sr. Sec. Gtd. Global Notes, 5.13%, 08/15/18 | 7,000 | 7,263 | ||||||
HCA, Inc., Sr. Sec. Gtd. Global Notes, 5.88%, 03/15/22 | 90,000 | 96,075 | ||||||
7.88%, 02/15/20 | 42,000 | 47,145 | ||||||
HealthSouth Corp., Sr. Unsec. Gtd. Notes, 7.25%, 10/01/18 | 10,000 | 10,925 | ||||||
7.75%, 09/15/22 | 5,000 | 5,475 | ||||||
8.13%, 02/15/20 | 45,000 | 49,781 | ||||||
Select Medical Holdings Corp., Sr. Unsec. Floating Rate Global Notes, 6.49%, 09/15/15(d) | 34,000 | 34,021 | ||||||
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 Facilities–(continued) | ||||||||
Tenet Healthcare Corp., Sr. Unsec. Global Notes, 8.00%, 08/01/20 | $ | 27,000 | $ | 28,822 | ||||
9.25%, 02/01/15 | 145,000 | 161,675 | ||||||
441,182 | ||||||||
Health Care Services–0.84% | ||||||||
DaVita Inc., Sr. Unsec. Gtd. Global Notes, 5.75%, 08/15/22 | 25,000 | 26,156 | ||||||
Express Scripts Holding Co., Sr. Unsec. Gtd. Global Notes, 6.25%, 06/15/14 | 2,525,000 | 2,762,848 | ||||||
Sr. Unsec. Gtd. Notes, 3.13%, 05/15/16 | 190,000 | 202,642 | ||||||
Highmark, Inc., Sr. Unsec. Notes, 6.13%, 05/15/41(b) | 730,000 | 798,090 | ||||||
Medco Health Solutions Inc., Sr. Unsec. Notes, 2.75%, 09/15/15 | 585,000 | 612,332 | ||||||
Prospect Medical Holdings Inc., Sr. Sec. Notes, 8.38%, 05/01/19(b) | 35,000 | 35,962 | ||||||
Radiation Therapy Services Inc., Sr. Sec. Gtd. Global Notes, 8.88%, 01/15/17 | 45,000 | 43,650 | ||||||
4,481,680 | ||||||||
Health Care Technology–0.01% | ||||||||
MedAssets Inc., Sr. Unsec. Gtd. Global Notes, 8.00%, 11/15/18 | 45,000 | 48,938 | ||||||
Homebuilding–0.07% | ||||||||
Beazer Homes USA Inc., Sr. Unsec. Gtd. Global Notes, 6.88%, 07/15/15 | 65,000 | 65,081 | ||||||
8.13%, 06/15/16 | 27,000 | 28,013 | ||||||
K. Hovnanian Enterprises Inc., Sr. Sec. Gtd. Global Notes, 10.63%, 10/15/16 | 95,000 | 99,987 | ||||||
KB Home, Sr. Unsec. Gtd. Notes, 7.50%, 09/15/22 | 20,000 | 20,700 | ||||||
Lennar Corp., Sr. Unsec. Gtd. Global Notes, 6.95%, 06/01/18 | 62,000 | 67,658 | ||||||
M/I Homes Inc., Sr. Unsec. Gtd. Global Notes, 8.63%, 11/15/18 | 15,000 | 15,975 | ||||||
Meritage Homes Corp., Sr. Unsec. Gtd. Global Notes,, 7.00%, 04/01/22 | 20,000 | 21,200 | ||||||
Taylor Morrison Communities Inc./ Monarch Communities Inc., Sr. Unsec. Gtd. Notes, 7.75%, 04/15/20(b) | 38,000 | 40,660 | ||||||
Toll Brothers Finance Corp., Sr. Unsec. Gtd. Notes, 5.88%, 02/15/22 | 18,000 | 19,710 | ||||||
378,984 | ||||||||
Hotels, Resorts & Cruise Lines–0.58% | ||||||||
Choice Hotels International, Inc., Sr. Unsec. Gtd. Notes, 5.75%, 07/01/22 | 5,000 | 5,381 | ||||||
Hyatt Hotels Corp., Sr. Unsec. Notes, 6.88%, 08/15/19(b) | 120,000 | 144,097 | ||||||
Royal Caribbean Cruises Ltd., Sr. Unsec. Global Notes, 7.25%, 03/15/18 | 25,000 | 27,938 | ||||||
7.50%, 10/15/27 | 10,000 | 10,350 | ||||||
Wyndham Worldwide Corp., Sr. Unsec. Notes, 5.63%, 03/01/21 | 1,530,000 | 1,690,937 | ||||||
7.38%, 03/01/20 | 1,035,000 | 1,243,583 | ||||||
3,122,286 | ||||||||
Household Products–0.01% | ||||||||
Central Garden & Pet Co., Sr. Gtd. Sub. Notes, 8.25%, 03/01/18 | 65,000 | 68,494 | ||||||
Housewares & Specialties–0.01% | ||||||||
American Greetings Corp., Sr. Unsec. Gtd. Notes, 7.38%, 12/01/21 | 45,000 | 49,500 | ||||||
Independent Power Producers & Energy Traders–0.07% | ||||||||
AES Corp. (The), Sr. Unsec. Global Notes, 7.75%, 10/15/15 | 10,000 | 11,350 | ||||||
8.00%, 10/15/17 | 140,000 | 164,500 | ||||||
Calpine Corp., Sr. Sec. Gtd. Notes, 7.25%, 10/15/17(b) | 55,000 | 59,125 | ||||||
7.50%, 02/15/21(b) | 58,000 | 64,670 | ||||||
NRG Energy Inc., Sr. Unsec. Gtd. Global Notes, 7.63%, 01/15/18 | 45,000 | 48,262 | ||||||
347,907 | ||||||||
Industrial Conglomerates–0.77% | ||||||||
General Electric Capital Corp., Sr. Unsec. Notes, 2.25%, 11/09/15 | 65,000 | 67,335 | ||||||
Hutchison Whampoa International Ltd. (Hong Kong), Sr. Unsec. Gtd. Notes, 7.63%, 04/09/19(b) | 925,000 | 1,167,642 | ||||||
Unsec. Gtd. Notes, 5.75%, 09/11/19(b) | 1,000,000 | 1,164,041 | ||||||
Unsec. Gtd. Sub. Notes, 6.00%(b)(e) | 200,000 | 208,250 | ||||||
Sigma Alimentos S.A. de C.V. (Mexico), Sr. Unsec. Gtd. Notes, 5.63%, 04/14/18(b) | 1,350,000 | 1,489,835 | ||||||
4,097,103 | ||||||||
Industrial Machinery–0.27% | ||||||||
Actuant Corp., Sr. Unsec. Gtd. Notes, 5.63%, 06/15/22(b) | 20,000 | 20,700 | ||||||
Cleaver-Brooks Inc., Sr. Sec. Notes, 12.25%, 05/01/16(b) | 5,000 | 5,312 | ||||||
Mcron Finance Sub LLC/Mcron Finance Corp., Sr. Sec. Notes, 8.38%, 05/15/19(b) | 10,000 | 10,325 | ||||||
Pentair, Inc., Sr. Unsec. Gtd. Notes, 5.00%, 05/15/21 | 1,230,000 | 1,374,566 | ||||||
SPX Corp., Sr. Unsec. Gtd. Global Notes, 6.88%, 09/01/17 | 20,000 | 22,400 | ||||||
1,433,303 | ||||||||
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 Oil & Gas–0.26% | ||||||||
Gazprom OAO Via Gaz Capital S.A. (Russia), Sr. Unsec. Loan Participation Notes, 4.95%, 05/23/16(b) | $ | 200,000 | $ | 212,300 | ||||
KazMunayGas National Co. (Kazakhstan), Sr. Unsec. Bonds, 7.00%, 05/05/20(b) | 210,000 | 258,529 | ||||||
Lukoil International Finance B.V. (Russia), Sr. Unsec. Gtd. Notes, 7.25%, 11/05/19(b) | 100,000 | 119,013 | ||||||
Petrobras International Finance Co. (Brazil), Sr. Unsec. Gtd. Global Notes, 5.38%, 01/27/21 | 140,000 | 156,350 | ||||||
Petroleos de Venezuela S.A. (Venezuela), Sr. Unsec. Gtd. Notes, 8.50%, 11/02/17(b) | 200,000 | 177,945 | ||||||
Petroleos de Venezuela S.A. (Venezuela)-REGS, Sr. Unsec. Gtd. Euro Notes, 8.50%, 11/02/17(b) | 110,000 | 97,900 | ||||||
Petroleos Mexicanos (Mexico), Sr. Unsec. Gtd. Notes, 6.50%, 06/02/41(b) | 100,000 | �� | 125,595 | |||||
5.50%, 06/27/44(b) | 200,000 | 218,745 | ||||||
1,366,377 | ||||||||
Integrated Telecommunication Services–1.07% | ||||||||
AT&T Corp., Sr. Unsec. Gtd. Global Notes, 8.00%, 11/15/31 | 13,000 | 20,104 | ||||||
AT&T Inc., Sr. Unsec. Global Notes, 1.70%, 06/01/17 | 1,430,000 | 1,476,030 | ||||||
2.50%, 08/15/15 | 905,000 | 954,219 | ||||||
2.95%, 05/15/16 | 160,000 | 172,472 | ||||||
4.45%, 05/15/21 | 85,000 | 99,924 | ||||||
CenturyLink Inc.–Series U, Sr. Unsec. Global Notes, 7.65%, 03/15/42 | 910,000 | 942,940 | ||||||
France Telecom S.A. (France), Sr. Unsec. Global Notes, 5.38%, 01/13/42 | 290,000 | 336,803 | ||||||
Globo Comunicacao e Participacoes S.A. (Brazil), Sr. Sec. Notes, 6.25%, 12/31/49 | 100,000 | 106,831 | ||||||
Telefonica Emisiones S.A. Unipersonal (Spain), Sr. Unsec. Gtd. Global Notes, 5.46%, 02/16/21 | 415,000 | 385,223 | ||||||
Verizon Communications, Inc., Sr. Unsec. Global Notes, 4.75%, 11/01/41 | 590,000 | 667,740 | ||||||
Windstream Georgia Communications Corp., Sr. Unsec. Notes, 6.50%, 11/15/13 | 531,000 | 543,930 | ||||||
5,706,216 | ||||||||
Internet Software & Services–0.02% | ||||||||
Equinix Inc., Sr. Unsec. Notes, 7.00%, 07/15/21 | 100,000 | 112,750 | ||||||
8.13%, 03/01/18 | 15,000 | 16,725 | ||||||
129,475 | ||||||||
Investment Banking & Brokerage–2.85% | ||||||||
Charles Schwab Corp. (The)–Series A, Jr. Unsec. Sub. Notes, 7.00%(e) | 2,400,000 | 2,676,000 | ||||||
E*TRADE Financial Corp., Sr. Unsec. Notes, 6.75%, 06/01/16 | 5,000 | 5,225 | ||||||
Goldman Sachs Group, Inc. (The), | ||||||||
Sr. Unsec. Global Notes, | ||||||||
5.13%, 01/15/15 | 780,000 | 836,223 | ||||||
5.25%, 07/27/21 | 1,110,000 | 1,183,598 | ||||||
5.75%, 01/24/22 | 2,405,000 | 2,662,517 | ||||||
Sr. Unsec. Medium-Term Global Notes, 3.70%, 08/01/15 | 660,000 | 691,493 | ||||||
Macquarie Group Ltd. (Australia), Sr. Unsec. Notes, 6.00%, 01/14/20(b) | 505,000 | 505,811 | ||||||
Morgan Stanley, | ||||||||
Sr. Unsec. Global Notes, | ||||||||
4.00%, 07/24/15 | 450,000 | 459,486 | ||||||
6.38%, 07/24/42 | 1,825,000 | 1,879,819 | ||||||
Sr. Unsec. Medium-Term Global Notes, 6.00%, 05/13/14 | 955,000 | 1,010,213 | ||||||
Sr. Unsec. Notes, | ||||||||
2.88%, 01/24/14 | 100,000 | 100,864 | ||||||
3.45%, 11/02/15 | 2,010,000 | 2,023,560 | ||||||
5.75%, 01/25/21 | 985,000 | 1,023,119 | ||||||
Raymond James Financial, Inc., Sr. Unsec. Notes, 4.25%, 04/15/16 | 170,000 | 179,228 | ||||||
15,237,156 | ||||||||
Leisure Facilities–0.01% | ||||||||
Speedway Motorsports Inc., Sr. Unsec. Gtd. Global Notes, 6.75%, 02/01/19 | 25,000 | 26,438 | ||||||
Leisure Products–0.02% | ||||||||
Toys R US-Delaware Inc., Sr. Sec. Gtd. Notes, 7.38%, 09/01/16(b) | 85,000 | 86,063 | ||||||
Life & Health Insurance–1.74% | ||||||||
Forethought Financial Group, Inc., Sr. Unsec. Notes, 8.63%, 04/15/21(b) | 50,000 | 51,370 | ||||||
MetLife, Inc., Sr. Unsec. Global Notes, 4.13%, 08/13/42 | 2,200,000 | 2,239,982 | ||||||
Nationwide Financial Services, Inc., Sr. Unsec. Notes, 5.38%, 03/25/21(b) | 735,000 | 782,320 | ||||||
Pacific Life Global Funding, Sr. Sec. Notes, 5.15%, 04/15/13(b) | 1,385,000 | 1,420,692 | ||||||
Pacific LifeCorp., Sr. Unsec. Notes, 6.00%, 02/10/20(b) | 425,000 | 471,751 | ||||||
Prudential Financial, Inc., Jr. Unsec. Sub. Global Notes, 8.88%, 06/15/38 | 1,640,000 | 2,004,900 | ||||||
Series D, Sr. Unsec. Medium-Term Notes, | ||||||||
2.75%, 01/14/13 | 50,000 | 50,374 | ||||||
3.88%, 01/14/15 | 1,405,000 | 1,489,974 | ||||||
4.75%, 09/17/15 | 550,000 | 604,229 | ||||||
7.38%, 06/15/19 | 130,000 | 162,796 | ||||||
9,278,388 | ||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
16 Invesco Core Plus Bond Fund
Principal | ||||||||
Amount | Value | |||||||
Life Sciences Tools & Services–0.45% | ||||||||
Life Technologies Corp., Sr. Notes, 6.00%, 03/01/20 | $ | 2,005,000 | $ | 2,386,432 | ||||
Patheon Inc. (Canada), Sr. Sec. Gtd. Notes, 8.63%, 04/15/17(b) | 5,000 | 4,931 | ||||||
2,391,363 | ||||||||
Managed Health Care–0.62% | ||||||||
Cigna Corp., Sr. Unsec. Global Notes, 5.38%, 02/15/42 | 725,000 | 822,732 | ||||||
Sr. Unsec. Notes, | ||||||||
4.50%, 03/15/21 | 180,000 | 200,400 | ||||||
5.88%, 03/15/41 | 125,000 | 150,384 | ||||||
UnitedHealth Group, Inc., Sr. Unsec. Notes, 4.88%, 02/15/13 | 2,120,000 | 2,161,399 | ||||||
3,334,915 | ||||||||
Marine–0.00% | ||||||||
Navios Maritime Acquisition Corp./Navios Acquisition Finance U.S. Inc., Sr. Sec. Gtd. Mortgage Global Notes, 8.63%, 11/01/17 | 2,000 | 1,910 | ||||||
Movies & Entertainment–0.09% | ||||||||
AMC Entertainment Inc., Sr. Unsec. Gtd. Global Notes, 8.75%, 06/01/19 | 95,000 | 104,144 | ||||||
NAI Entertainment Holdings LLC, Sr. Sec. Notes, 8.25%, 12/15/17(b) | 27,000 | 30,240 | ||||||
Time Warner, Inc., Sr. Unsec. Gtd. Notes, 5.88%, 11/15/16 | 285,000 | 338,115 | ||||||
472,499 | ||||||||
Multi-Line Insurance–0.38% | ||||||||
American Financial Group, Inc., Sr. Unsec. Notes, 9.88%, 06/15/19 | 10,000 | 12,731 | ||||||
CNA Financial Corp., Sr. Unsec. Global Bonds, 5.88%, 08/15/20 | 20,000 | 23,073 | ||||||
Fairfax Financial Holdings Ltd. (Canada), Sr. Unsec. Notes, 5.80%, 05/15/21(b) | 3,000 | 3,047 | ||||||
Hartford Financial Services Group Inc. (The), Jr. Unsec. Sub. Deb., 8.13%, 06/15/38 | 75,000 | 85,125 | ||||||
Liberty Mutual Group Inc., Jr. Unsec. Gtd. Sub. Bonds, 7.80%, 03/15/37(b) | 320,000 | 342,400 | ||||||
Sr. Unsec. Gtd. Notes, 4.95%, 05/01/22(b) | 10,000 | 10,431 | ||||||
Metropolitan Life Global Funding I, Sr. Sec. Global Notes, 5.13%, 04/10/13(b) | 1,460,000 | 1,500,119 | ||||||
Nationwide Mutual Insurance Co., Unsec. Sub. Notes, 9.38%, 08/15/39(b) | 25,000 | 33,972 | ||||||
2,010,898 | ||||||||
Office REIT’s–0.14% | ||||||||
Digital Realty Trust L.P., Sr. Unsec. Gtd. Global Notes, 4.50%, 07/15/15 | 675,000 | 719,330 | ||||||
DuPont Fabros Technology L.P., Sr. Unsec. Gtd. Global Notes, 8.50%, 12/15/17 | 30,000 | 33,225 | ||||||
752,555 | ||||||||
Office Services & Supplies–0.22% | ||||||||
IKON Office Solutions, Inc., Sr. Unsec. Notes, 6.75%, 12/01/25 | 5,000 | 4,844 | ||||||
Steelcase, Inc., Sr. Unsec. Notes, 6.38%, 02/15/21 | 1,090,000 | 1,178,920 | ||||||
1,183,764 | ||||||||
Oil & Gas Drilling–0.42% | ||||||||
Atwood Oceanics Inc., Sr. Unsec. Notes, 6.50%, 02/01/20 | 6,000 | 6,435 | ||||||
Transocean Inc., Sr. Unsec. Gtd. Global Notes, 4.95%, 11/15/15 | 930,000 | 1,014,502 | ||||||
6.38%, 12/15/21 | 1,000,000 | 1,208,270 | ||||||
2,229,207 | ||||||||
Oil & Gas Equipment & Services–0.05% | ||||||||
Bristow Group, Inc., Sr. Unsec. Gtd. Global Notes, 7.50%, 09/15/17 | 82,000 | 84,972 | ||||||
Key Energy Services, Inc., Sr. Unsec. Gtd. Notes, 6.75%, 03/01/21 | 90,000 | 92,700 | ||||||
SESI, LLC, Sr. Unsec. Gtd. Global Notes, 6.38%, 05/01/19 | 77,000 | 81,981 | ||||||
259,653 | ||||||||
Oil & Gas Exploration & Production–1.74% | ||||||||
Access Midstream Partners L.P./ACMP Finance Corp., Sr. Unsec. Gtd. Global Notes, 5.88%, 04/15/21 | 66,000 | 67,815 | ||||||
6.13%, 07/15/22 | 5,000 | 5,225 | ||||||
Anadarko Petroleum Corp., Sr. Unsec. Notes, 7.63%, 03/15/14 | 50,000 | 54,765 | ||||||
Apache Corp., Sr. Unsec. Global Notes, 4.75%, 04/15/43 | 1,325,000 | 1,526,996 | ||||||
Berry Petroleum Co., Sr. Unsec. Notes, 6.75%, 11/01/20 | 80,000 | 85,900 | ||||||
Chaparral Energy Inc., Sr. Unsec. Gtd. Global Notes, 8.25%, 09/01/21 | 90,000 | 98,550 | ||||||
Sr. Unsec. Gtd. Notes, 7.63%, 11/15/22(b) | 15,000 | 15,938 | ||||||
Chesapeake Energy Corp., Sr. Unsec. Gtd. Global Notes, 6.88%, 11/15/20 | 25,000 | 26,063 | ||||||
Sr. Unsec. Gtd. Notes, | ||||||||
6.13%, 02/15/21 | 5,000 | 5,006 | ||||||
6.63%, 08/15/20 | 131,000 | 135,094 | ||||||
Cimarex Energy Co., Sr. Unsec. Gtd. Notes, 5.88%, 05/01/22 | 25,000 | 26,688 | ||||||
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) | ||||||||
Continental Resources Inc., | ||||||||
Sr. Unsec. Gtd. Global Notes, | ||||||||
7.13%, 04/01/21 | $ | 50,000 | $ | 56,187 | ||||
8.25%, 10/01/19 | 45,000 | 50,906 | ||||||
Sr. Unsec. Gtd. Notes, 5.00%, 09/15/22(b) | 35,000 | 36,400 | ||||||
Dolphin Energy Ltd. (United Arab Emirates), Sr. Sec. Bonds, 5.50%, 12/15/21(b) | 200,000 | 229,398 | ||||||
EV Energy Partners L.P./EV Energy Finance Corp., Sr. Unsec. Gtd. Global Notes, 8.00%, 04/15/19 | 35,000 | 36,400 | ||||||
EXCO Resources Inc., Sr. Unsec. Gtd. Notes, 7.50%, 09/15/18 | 121,000 | 109,807 | ||||||
Forest Oil Corp., Sr. Unsec. Gtd. Global Notes, 7.25%, 06/15/19 | 40,000 | 39,100 | ||||||
Laredo Petroleum Inc., Sr. Unsec. Gtd. Global Notes, 7.38%, 05/01/22 | 7,000 | 7,560 | ||||||
McMoRan Exploration Co., Sr. Unsec. Gtd. Notes, 11.88%, 11/15/14 | 95,000 | 99,691 | ||||||
Newfield Exploration Co., Sr. Unsec. Global Notes, 5.63%, 07/01/24 | 12,000 | 13,043 | ||||||
Sr. Unsec. Sub. Global Notes, 7.13%, 05/15/18 | 85,000 | 90,312 | ||||||
Oasis Petroleum Inc., Sr. Unsec. Gtd. Global Notes, 6.88%, 01/15/23 | 30,000 | 30,825 | ||||||
Pemex Project Funding Master Trust (Mexico), Sr. Unsec. Gtd. Global Bonds, 6.63%, 06/15/35 | 340,000 | 426,613 | ||||||
Pertamina Persero PT (Indonesia), Sr. Unsec. Notes, 4.88%, 05/03/22(b) | 200,000 | 215,150 | ||||||
6.00%, 05/03/42(b) | 200,000 | 219,255 | ||||||
Petrobras International Finance Co. (Brazil), Sr. Unsec. Gtd. Global Notes, 3.50%, 02/06/17 | 1,495,000 | 1,548,440 | ||||||
5.75%, 01/20/20 | 645,000 | 730,891 | ||||||
6.88%, 01/20/40 | 625,000 | 786,895 | ||||||
Petrohawk Energy Corp., Sr. Unsec. Gtd. Global Notes, 7.88%, 06/01/15 | 1,930,000 | 2,018,056 | ||||||
Petroleos Mexicanos (Mexico), Sr. Unsec. Gtd. Global Notes, 5.50%, 01/21/21 | 20,000 | 23,357 | ||||||
Plains Exploration & Production Co., Sr. Unsec. Gtd. Notes, 7.63%, 06/01/18 | 100,000 | 107,500 | ||||||
8.63%, 10/15/19 | 5,000 | 5,688 | ||||||
QEP Resources Inc., Sr. Unsec. Notes, 5.38%, 10/01/22 | 38,000 | 39,140 | ||||||
Range Resources Corp., Sr. Unsec. Gtd. Sub. Notes, 5.75%, 06/01/21 | 75,000 | 80,250 | ||||||
5.00%, 08/15/22 | 10,000 | 10,463 | ||||||
SM Energy Co., Sr. Unsec. Global Notes, 6.63%, 02/15/19 | 110,000 | 115,500 | ||||||
6.50%, 11/15/21 | 25,000 | 26,250 | ||||||
Whiting Petroleum Corp., Sr. Unsec. Gtd. Sub. Notes, 6.50%, 10/01/18 | 75,000 | 80,719 | ||||||
WPX Energy Inc., Sr. Unsec. Global Notes, 6.00%, 01/15/22 | 35,000 | 37,275 | ||||||
9,319,111 | ||||||||
Oil & Gas Refining & Marketing–0.18% | ||||||||
Crosstex Energy, L.P./Crosstex Energy Finance Corp., Sr. Unsec. Gtd. Notes, 7.13%, 06/01/22(b) | 15,000 | 14,775 | ||||||
United Refining Co., Sr. Sec. Gtd. Global Notes, 10.50%, 02/28/18 | 100,000 | 107,250 | ||||||
Valero Energy Corp., Sr. Unsec. Gtd. Global Notes, 6.63%, 06/15/37 | 680,000 | 822,988 | ||||||
945,013 | ||||||||
Oil & Gas Storage & Transportation–0.90% | ||||||||
Atlas Pipeline Partners L.P./Atlas Pipeline Finance Corp., Sr. Unsec. Gtd. Global Notes, 8.75%, 06/15/18 | 37,000 | 39,868 | ||||||
Copano Energy LLC/Copano Energy Finance Corp., Sr. Unsec. Gtd. Notes, 7.13%, 04/01/21 | 132,000 | 138,600 | ||||||
Eagle Rock Energy Partners L.P./Eagle Rock Energy Finance Corp., Sr. Unsec. Gtd. Notes, 8.38%, 06/01/19(b) | 25,000 | 24,500 | ||||||
Energy Transfer Equity L.P., Sr. Sec. Gtd. Notes, 7.50%, 10/15/20 | 82,000 | 95,017 | ||||||
Enterprise Products Operating LLC, Sr. Unsec. Gtd. Global Notes, 5.25%, 01/31/20 | 150,000 | 174,944 | ||||||
Sr. Unsec. Gtd. Notes, 6.45%, 09/01/40 | 1,005,000 | 1,247,943 | ||||||
Series N, Sr. Unsec. Gtd. Notes, 6.50%, 01/31/19 | 420,000 | 515,934 | ||||||
MarkWest Energy Partners L.P./MarkWest Energy Finance Corp., Sr. Unsec. Gtd. Notes, 6.25%, 06/15/22 | 30,000 | 31,950 | ||||||
6.50%, 08/15/21 | 130,000 | 140,725 | ||||||
Overseas Shipholding Group, Inc., Sr. Unsec. Notes, 8.13%, 03/30/18 | 30,000 | 18,825 | ||||||
Plains All American Pipeline L.P./PAA Finance Corp., Sr. Unsec. Global Notes, 3.65%, 06/01/22 | 400,000 | 422,460 | ||||||
Regency Energy Partners L.P./Regency Energy Finance Corp., Sr. Unsec. Gtd. Notes, 6.88%, 12/01/18 | 37,000 | 40,006 | ||||||
Targa Resources Partners L.P./Targa Resources Partners Finance Corp., Sr. Unsec. Gtd. Global Notes, 6.88%, 02/01/21 | 105,000 | 113,400 | ||||||
Sr. Unsec. Gtd. Notes, 6.38%, 08/01/22(b) | 15,000 | 15,750 | ||||||
Teekay Corp. (Canada), Sr. Unsec. Global Notes, 8.50%, 01/15/20 | 35,000 | 36,488 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
18 Invesco Core Plus Bond Fund
Principal | ||||||||
Amount | Value | |||||||
Oil & Gas Storage & Transportation–(continued) | ||||||||
Texas Eastern Transmission L.P., Sr. Unsec. Notes, 7.00%, 07/15/32 | $ | 255,000 | $ | 347,227 | ||||
Williams Partners L.P., Sr. Unsec. Global Notes, 3.80%, 02/15/15 | 1,305,000 | 1,387,291 | ||||||
4,790,928 | ||||||||
Other Diversified Financial Services–2.01% | ||||||||
Bank of America Corp., | ||||||||
Sr. Unsec. Global Notes, | ||||||||
3.70%, 09/01/15 | 700,000 | 735,283 | ||||||
4.50%, 04/01/15 | 40,000 | 42,601 | ||||||
6.50%, 08/01/16 | 10,000 | 11,459 | ||||||
Series L, Sr. Unsec. Medium-Term Global Notes, 5.65%, 05/01/18 | 220,000 | 246,422 | ||||||
Bear Stearns Cos., LLC (The), Unsec. Sub. Notes, 5.55%, 01/22/17 | 115,000 | 130,364 | ||||||
Citigroup, Inc., Sr. Unsec. Global Notes, 6.01%, 01/15/15 | 2,145,000 | 2,346,246 | ||||||
Sr. Unsec. Notes, 4.75%, 05/19/15 | 25,000 | 26,870 | ||||||
ERAC USA Finance LLC, Sr. Unsec. Gtd. Notes, 2.25%, 01/10/14(b) | 2,000,000 | 2,021,606 | ||||||
5.80%, 10/15/12(b) | 300,000 | 301,747 | ||||||
General Electric Capital Corp., Sr. Unsec. Global Notes, 5.90%, 05/13/14 | 25,000 | 27,207 | ||||||
JPMorgan Chase & Co., Sr. Unsec. Floating Rate Medium-Term Notes, 1.08%, 02/26/13(d) | 40,000 | 40,107 | ||||||
Sr. Unsec. Global Notes, | ||||||||
6.30%, 04/23/19 | 190,000 | 231,761 | ||||||
5.60%, 07/15/41 | 825,000 | 1,007,217 | ||||||
Merrill Lynch & Co., Inc.–Series C, Sr. Unsec. Medium-Term Global Notes, 5.45%, 02/05/13 | 3,530,000 | 3,594,626 | ||||||
Twin Reefs Pass-Through Trust, Sec. Pass Through Ctfs., 0.00% (Acquired 12/07/04-10/03/06; Cost $1,104,600)(b)(c)(e)(f) | 1,110,000 | — | ||||||
10,763,516 | ||||||||
Packaged Foods & Meats–0.51% | ||||||||
Del Monte Corp., Sr. Unsec. Gtd. Global Notes, 7.63%, 02/15/19 | 85,000 | 85,000 | ||||||
Grupo Bimbo S.A.B. de C.V. (Mexico), Sr. Unsec. Gtd. Notes, 4.88%, 06/30/20(b) | 1,065,000 | 1,191,463 | ||||||
4.50%, 01/25/22(b) | 100,000 | 108,744 | ||||||
Kraft Foods Inc., Sr. Unsec. Global Notes, 2.63%, 05/08/13 | 960,000 | 971,725 | ||||||
7.00%, 08/11/37 | 70,000 | 97,888 | ||||||
MHP S.A. (Ukraine), Sr. Unsec. Gtd. Notes, 10.25%, 04/29/15(b) | 200,000 | 198,501 | ||||||
Post Holdings Inc., Sr. Unsec. Gtd. Notes, 7.38%, 02/15/22(b) | 65,000 | 68,575 | ||||||
2,721,896 | ||||||||
Paper Packaging–0.01% | ||||||||
Cascades Inc. (Canada), Sr. Unsec. Gtd. Global Notes, 7.88%, 01/15/20 | 40,000 | 41,900 | ||||||
Paper Products–0.20% | ||||||||
Boise Cascade LLC, Sr. Unsec. Gtd. Sub. Global Notes, 7.13%, 10/15/14 | 128,000 | 128,240 | ||||||
Clearwater Paper Corp., Sr. Unsec. Gtd. Global Notes, 7.13%, 11/01/18 | 20,000 | 21,950 | ||||||
International Paper Co., Sr. Unsec. Global Notes, 4.75%, 02/15/22 | 265,000 | 298,918 | ||||||
6.00%, 11/15/41 | 415,000 | 496,393 | ||||||
Mercer International Inc., Sr. Unsec. Gtd. Global Notes, 9.50%, 12/01/17 | 70,000 | 74,550 | ||||||
NewPage Corp., Sr. Sec. Gtd. Global Notes, 11.38%, 12/31/14(c) | 40,000 | 27,300 | ||||||
P.H. Glatfelter Co., Sr. Unsec. Gtd. Global Notes, 7.13%, 05/01/16 | 20,000 | 20,400 | ||||||
1,067,751 | ||||||||
Personal Products–0.26% | ||||||||
Estee Lauder Cos. Inc. (The), Sr. Unsec. Global Notes, 3.70%, 08/15/42 | 1,340,000 | 1,327,874 | ||||||
NBTY Inc., Sr. Unsec. Gtd. Global Notes, 9.00%, 10/01/18 | 60,000 | 67,650 | ||||||
1,395,524 | ||||||||
Pharmaceuticals–0.04% | ||||||||
Elan Finance PLC/Corp. (Ireland), Sr. Unsec. Gtd. Global Notes, 8.75%, 10/15/16 | 100,000 | 109,250 | ||||||
Endo Health Solutions Inc., Sr. Unsec. Gtd. Global Notes, 7.00%, 12/15/20 | 75,000 | 81,562 | ||||||
Mylan Inc., Sr. Unsec. Gtd. Notes, 6.00%, 11/15/18(b) | 35,000 | 37,625 | ||||||
228,437 | ||||||||
Railroads–0.28% | ||||||||
CSX Corp., Sr. Unsec. Global Notes, 6.15%, 05/01/37 | 130,000 | 168,895 | ||||||
Sr. Unsec. Notes, 5.50%, 04/15/41 | 900,000 | 1,089,929 | ||||||
Georgian Railway JSC, Sr. Unsec. Notes, 7.75%, 07/11/22 | 200,000 | 221,027 | ||||||
1,479,851 | ||||||||
Real Estate Services–0.01% | ||||||||
CB Richard Ellis Services Inc., Sr. Unsec. Gtd. Global Notes, 6.63%, 10/15/20 | 28,000 | 30,730 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
19 Invesco Core Plus Bond Fund
Principal | ||||||||
Amount | Value | |||||||
Regional Banks–0.76% | ||||||||
CIT Group Inc., Sr. Unsec. Global Notes, 5.25%, 03/15/18 | $ | 90,000 | $ | 94,500 | ||||
Sr. Unsec. Gtd. Notes, 7.00%, 05/02/17(b) | 21,115 | 21,115 | ||||||
Sr. Unsec. Notes, | ||||||||
5.00%, 05/15/17 | 15,000 | 15,750 | ||||||
5.50%, 02/15/19(b) | 155,000 | 162,750 | ||||||
Series C, Sr. Unsec. Notes, 5.25%, 04/01/14(b) | 10,000 | 10,444 | ||||||
Fifth Third Bancorp, Sr. Unsec. Notes, 3.50%, 03/15/22 | 1,550,000 | 1,615,207 | ||||||
First Niagara Financial Group Inc., Unsec. Sub. Notes, 7.25%, 12/15/21 | 650,000 | 750,279 | ||||||
Nationwide Building Society (United Kingdom), Sr. Unsec. Notes, 6.25%, 02/25/20(b) | 465,000 | 515,936 | ||||||
PNC Funding Corp., Sr. Unsec. Gtd. Notes, 6.70%, 06/10/19 | 330,000 | 419,165 | ||||||
Regions Financial Corp., Sr. Unsec. Notes, 5.75%, 06/15/15 | 225,000 | 240,188 | ||||||
Unsec. Sub. Notes, 7.38%, 12/10/37 | 10,000 | 10,225 | ||||||
Susquehanna Bancshare Inc., Sr. Unsec. Global Notes, 5.38%, 08/15/22 | 7,000 | 7,233 | ||||||
Synovus Financial Corp., Sr. Unsec. Global Notes, 7.88%, 02/15/19 | 35,000 | 39,025 | ||||||
Unsec. Sub. Global Notes, 5.13%, 06/15/17 | 135,000 | 131,119 | ||||||
4,032,936 | ||||||||
Research & Consulting Services–0.02% | ||||||||
FTI Consulting Inc., Sr. Unsec. Gtd. Global Notes, 6.75%, 10/01/20 | 102,000 | 107,610 | ||||||
Residential REIT’s–0.40% | ||||||||
Essex Portfolio LP, Unsec. Gtd. Notes, 3.63%, 08/15/22(b) | 2,135,000 | 2,143,205 | ||||||
Retail REIT’s–0.18% | ||||||||
Simon Property Group L.P., Sr. Unsec. Notes, 4.75%, 03/15/42 | 610,000 | 670,765 | ||||||
WEA Finance LLC (Australia), Sr. Unsec. Gtd. Notes, 7.13%, 04/15/18(b) | 250,000 | 299,276 | ||||||
970,041 | ||||||||
Semiconductor Equipment–0.04% | ||||||||
Amkor Technology Inc., Sr. Unsec. Global Notes, 6.63%, 06/01/21 | 65,000 | 65,812 | ||||||
7.38%, 05/01/18 | 42,000 | 43,785 | ||||||
Sensata Technologies B.V. (Luxembourg), Sr. Unsec. Gtd. Notes, 6.50%, 05/15/19(b) | 120,000 | 127,350 | ||||||
236,947 | ||||||||
Semiconductors–0.03% | ||||||||
Advanced Micro Devices, Sr. Unsec. Notes, 7.50%, 08/15/22 | 5,000 | 4,950 | ||||||
Freescale Semiconductor Inc., Sr. Sec. Gtd. Notes, 9.25%, 04/15/18(b) | 55,000 | 59,675 | ||||||
Sr. Unsec. Gtd. Global Notes, 8.05%, 02/01/20 | 100,000 | 98,500 | ||||||
163,125 | ||||||||
Sovereign Debt–2.42% | ||||||||
Argentina Boden Bonds (Argentina), Sr. Unsec. Bonds, 7.00%, 10/03/15 | 400,000 | 337,489 | ||||||
Chile Government International Bond (Chile), Sr. Unsec. Global Notes, 3.25%, 09/14/21 | 290,000 | 313,635 | ||||||
Colombia Government International Bond (Colombia), Sr. Unsec. Global Bonds, 6.13%, 01/18/41 | 170,000 | 232,475 | ||||||
Dominican Republic International Bond (Dominican Repubic), Sr. Unsec. Bonds, 7.50%, 05/06/21(b) | 100,000 | 114,500 | ||||||
Sr. Unsec. Notes, 9.04%, 01/23/18(b) | 65,579 | 74,596 | ||||||
Guatemala Government Bond (Guatemala), Sr. Unsec. Bonds, 8.13%, 10/06/19(b)(g) | 150,000 | 196,125 | ||||||
REGS, Sr. Unsec. Euro Bonds, 8.13%, 10/06/19(b)(g) | 90,000 | 117,675 | ||||||
Hungary Government (Hungary), Sr. Unsec. Global Notes, 4.75%, 02/03/15 | 60,000 | 60,750 | ||||||
Indonesia Government International Bond (Indonesia), Sr. Unsec. Bonds, 6.63%, 02/17/37(b) | 300,000 | 390,750 | ||||||
Unsec. Notes, 3.75%, 04/25/22(b) | 300,000 | 310,875 | ||||||
Lithuania Government International Bond (Lithuania), Sr. Unsec. Notes, 6.13%, 03/09/21(b) | 200,000 | 230,000 | ||||||
Mexico Government International Bond (Mexico), Sr. Unsec. Global Notes, 3.63%, 03/15/22 | 1,800,000 | 1,970,338 | ||||||
Sr. Unsec. Medium-Term Global Notes, 4.75%, 03/08/44 | 60,000 | 67,350 | ||||||
Series A, Sr. Unsec. Medium-Term Global Notes, 6.05%, 01/11/40 | 300,000 | 401,250 | ||||||
Panama Government International Bond (Panama), Sr. Unsec. Global Bonds, 5.20%, 01/30/20 | 250,000 | 301,250 | ||||||
Perusahaan Penerbit SBSN (Indonesia), Sr. Unsec. Notes, 4.00%, 11/21/18(b) | 200,000 | 206,500 | ||||||
Peruvian Government International Bond (Peru), Sr. Unsec. Global Bonds, 8.75%, 11/21/33 | 136,000 | 234,600 | ||||||
Philippine Government International Bond (Philippines), Sr. Unsec. Global Bonds, 5.00%, 01/13/37 | 300,000 | 351,000 | ||||||
6.38%, 10/23/34 | 300,000 | 407,625 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
20 Invesco Core Plus Bond Fund
Principal | ||||||||
Amount | Value | |||||||
Sovereign Debt–(continued) | ||||||||
Poland Government International Bond (Poland), Sr. Unsec. Global Notes, 5.00%, 03/23/22 | $ | 210,000 | $ | 242,025 | ||||
5.13%, 04/21/21 | 220,000 | 256,437 | ||||||
Provincia de Buenos Aires (Argentina), Sr. Unsec. Notes, 11.75%, 10/05/15(b) | 300,000 | 249,750 | ||||||
Romanian Government International Bond (Romania), Sr. Unsec. Notes, 6.75%, 02/07/22(b) | 110,000 | 119,763 | ||||||
Russian Foreign Bond (Russia), Sr. Unsec. Euro Bonds, 3.63%, 04/29/15(b) | 1,700,000 | 1,786,989 | ||||||
5.00%, 04/29/20(b) | 600,000 | 685,800 | ||||||
Senegal Government International Bond (Senegal), Sr. Unsec. Notes, 8.75%, 05/13/21(b) | 200,000 | 230,750 | ||||||
South Africa Government International Bond (South Africa), Sr. Unsec. Global Notes, 5.88%, 05/30/22 | 100,000 | 124,000 | ||||||
Sri Lanka Government International Bond (Sri Lanka), Sr. Unsec. Notes, 6.25%, 10/04/20(b) | 150,000 | 159,000 | ||||||
Euro REGS, Notes, 7.40%, 01/22/15(b) | 150,000 | 162,375 | ||||||
Turkey Government International Bond (Turkey), Sr. Unsec. Global Bonds, 5.63%, 03/30/21 | 150,000 | 174,750 | ||||||
Sr. Unsec. Global Notes, 6.75%, 05/30/40 | 100,000 | 129,250 | ||||||
Unsec. Global Notes, | ||||||||
5.13%, 03/25/22 | 200,000 | 224,500 | ||||||
6.00%, 01/14/41 | 200,000 | 236,250 | ||||||
Ukraine Government International Bond (Ukraine), Sr. Unsec. Notes, 6.75%, 11/14/17(b) | 150,000 | 136,875 | ||||||
7.95%, 02/23/21(b) | 200,000 | 189,500 | ||||||
Uruguay Government International Bond (Uruguay), Unsec. Global Notes, 8.00%, 11/18/22 | 250,000 | 361,875 | ||||||
Venezuela Government International Bond (Venezuela), Sr. Unsec. Global Bonds., 9.25%, 09/15/27 | 600,000 | 527,250 | ||||||
Vietnam Government International Bond (Vietnam), Sr. Unsec. Bonds, 6.75%, 01/29/20(b) | 100,000 | 109,630 | ||||||
Vnesheconcombank Via VEB Finance PLC (Russia), Sr. Unsec. Notes, 6.03%, 07/05/22 | 200,000 | 221,260 | ||||||
Wakala Global Sukuk BHD (Malaysia), Bonds, 2.99%, 07/06/16(b) | 250,000 | 260,233 | ||||||
12,907,045 | ||||||||
Specialized Finance–1.37% | ||||||||
International Lease Finance Corp., | ||||||||
Sr. Sec. Notes, 6.50%, 09/01/14(b) | 1,915,000 | 2,058,625 | ||||||
Sr. Unsec. Global Notes, | ||||||||
4.88%, 04/01/15 | 1,050,000 | 1,088,062 | ||||||
5.75%, 05/15/16 | 400,000 | 417,600 | ||||||
5.88%, 04/01/19 | 20,000 | 20,594 | ||||||
5.88%, 08/15/22 | 75,000 | 75,094 | ||||||
6.25%, 05/15/19 | 100,000 | 104,719 | ||||||
8.75%, 03/15/17 | 85,000 | 98,547 | ||||||
Sr. Unsec. Notes, 8.25%, 12/15/20 | 155,000 | 182,222 | ||||||
Series C, Sr. Unsec. Medium-Term Notes, 5.63%, 09/20/13 | 10,000 | 10,375 | ||||||
National Rural Utilities Cooperative Finance Corp., Sr. Sec. Collateral Trust Bonds, 2.63%, 09/16/12 | 25,000 | 25,016 | ||||||
Sr. Sec. Collateral Trust Global Bonds, 10.38%, 11/01/18 | 2,130,000 | 3,140,067 | ||||||
Waha Aerospace B.V. (United Arab Emirates), Sr. Unsec. Gtd. Bonds, 3.93%, 07/28/20(b) | 80,000 | 85,757 | ||||||
7,306,678 | ||||||||
Specialized REIT’s–1.25% | ||||||||
American Tower Corp., Sr. Unsec. Global Notes, 4.63%, 04/01/15 | 430,000 | 458,746 | ||||||
Sr. Unsec. Notes, 4.50%, 01/15/18 | 100,000 | 109,977 | ||||||
Entertainment Properties Trust, Sr. Unsec. Gtd. Global Notes, 7.75%, 07/15/20 | 3,880,000 | 4,344,871 | ||||||
Host Hotels & Resorts L.P., Sr. Gtd. Global Notes, 6.00%, 11/01/20 | 70,000 | 77,875 | ||||||
Sr. Unsec. Notes, 5.25%, 03/15/22(b) | 40,000 | 43,100 | ||||||
MPT Operating Partnership L.P./MPT Finance Corp., Sr. Unsec. Gtd. Global Notes, 6.88%, 05/01/21 | 10,000 | 10,925 | ||||||
Omega Healthcare Investors, Inc., Sr. Unsec. Gtd. Global Notes, 6.75%, 10/15/22 | 20,000 | 22,325 | ||||||
Senior Housing Properties Trust, Sr. Unsec. Notes, 4.30%, 01/15/16 | 1,495,000 | 1,538,355 | ||||||
Ventas Realty L.P./Ventas Capital Corp., Sr. Unsec. Gtd. Notes, 4.75%, 06/01/21 | 50,000 | 54,927 | ||||||
6,661,101 | ||||||||
Specialty Chemicals–0.03% | ||||||||
Ashland Inc., Sr. Unsec. Notes, 4.75%, 08/15/22(b) | 15,000 | 15,188 | ||||||
Ferro Corp., Sr. Unsec. Notes, 7.88%, 08/15/18 | 90,000 | 85,162 | ||||||
PolyOne Corp., Sr. Unsec. Notes, 7.38%, 09/15/20 | 42,000 | 45,990 | ||||||
146,340 | ||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
21 Invesco Core Plus Bond Fund
Principal | ||||||||
Amount | Value | |||||||
Specialty Stores–0.02% | ||||||||
Michaels Stores Inc., Sr. Unsec. Gtd. Global Notes, 7.75%, 11/01/18 | $ | 80,000 | $ | 85,600 | ||||
Steel–0.78% | ||||||||
ArcelorMittal (Luxembourg), Sr. Unsec. Global Notes, 4.00%, 08/05/15 | 30,000 | 29,758 | ||||||
4.75%, 02/25/17 | 400,000 | 396,100 | ||||||
6.13%, 06/01/18 | 845,000 | 861,166 | ||||||
6.50%, 02/25/22 | 20,000 | 19,547 | ||||||
6.75%, 03/01/41 | 1,280,000 | 1,114,404 | ||||||
United States Steel Corp., Sr. Unsec. Notes, 7.00%, 02/01/18 | 50,000 | 51,125 | ||||||
Vale Overseas Ltd. (Brazil), Sr. Unsec. Gtd. Global Notes, 4.38%, 01/11/22 | 130,000 | 133,325 | ||||||
4.63%, 09/15/20 | 730,000 | 769,281 | ||||||
6.88%, 11/10/39 | 655,000 | 779,686 | ||||||
4,154,392 | ||||||||
Systems Software–0.00% | ||||||||
Allen Systems Group Inc., Sec. Gtd. Notes, 10.50%, 11/15/16 (Acquired 12/20/10; Cost $30,675)(b) | 30,000 | 17,700 | ||||||
Technology Distributors–0.01% | ||||||||
Anixter Inc., Sr. Unsec. Gtd. Global Notes, 5.63%, 05/01/19 | 50,000 | 52,500 | ||||||
Tires & Rubber–0.01% | ||||||||
Cooper Tire & Rubber Co., Sr. Unsec. Notes, 8.00%, 12/15/19 | 45,000 | 49,669 | ||||||
Tobacco–0.40% | ||||||||
Altria Group, Inc., Sr. Unsec. Gtd. Global Notes, 4.75%, 05/05/21 | 1,845,000 | 2,132,882 | ||||||
Trading Companies & Distributors–0.05% | ||||||||
Air Lease Corp., Sr. Unsec. Notes, 5.63%, 04/01/17(b) | 55,000 | 55,069 | ||||||
Aircastle Ltd., Sr. Unsec. Global Notes, 6.75%, 04/15/17 | 110,000 | 118,525 | ||||||
7.63%, 04/15/20 | 15,000 | 16,725 | ||||||
Interline Brands, Inc., Sr. Unsec. Gtd. Global Notes, 7.00%, 11/15/18 | 37,000 | 39,636 | ||||||
UR Merger Sub Corp., Sec. Gtd. Notes, 5.75%, 07/15/18(b) | 5,000 | 5,312 | ||||||
Sr. Unsec. Global Notes, 8.25%, 02/01/21 | 30,000 | 33,000 | ||||||
268,267 | ||||||||
Trucking–0.24% | ||||||||
Avis Budget Car Rental LLC/Avis Budget Finance Inc., | ||||||||
Sr. Unsec. Gtd. Global Notes, | ||||||||
8.25%, 01/15/19 | 105,000 | 114,450 | ||||||
9.75%, 03/15/20 | 15,000 | 16,950 | ||||||
Sr. Unsec. Gtd. Notes, 8.25%, 01/15/19(b) | 15,000 | 16,350 | ||||||
Hertz Corp. (The), | ||||||||
Sr. Unsec. Gtd. Global Notes, | ||||||||
6.75%, 04/15/19 | 100,000 | 105,500 | ||||||
7.38%, 01/15/21 | 25,000 | 27,313 | ||||||
7.50%, 10/15/18 | 80,000 | 86,800 | ||||||
Sr. Unsec. Gtd. Notes, 6.75%, 04/15/19(b) | 20,000 | 21,100 | ||||||
Ryder System, Inc., Sr. Unsec. Medium-Term Notes, 3.15%, 03/02/15 | 860,000 | 890,426 | ||||||
1,278,889 | ||||||||
Wireless Telecommunication Services–0.87% | ||||||||
America Movil S.A.B de C.V. (Mexico), Sr. Unsec. Gtd. Global Notes, 6.13%, 03/30/40 | 1,115,000 | 1,442,414 | ||||||
Clearwire Communications LLC/Clearwire Finance, Inc., Sr. Sec. Gtd. Notes, 12.00%, 12/01/15(b) | 30,000 | 29,850 | ||||||
Cricket Communications, Inc., Sr. Unsec. Gtd. Global Notes, 7.75%, 10/15/20 | 152,000 | 148,580 | ||||||
Crown Castle Towers LLC, Sr. Sec. Gtd. Notes, 3.21%, 08/15/15(b) | 25,000 | 25,813 | ||||||
4.88%, 08/15/20(b) | 1,835,000 | 2,023,087 | ||||||
Digicel Group Ltd. (Ireland), Sr. Unsec. Notes, 8.88%, 01/15/15(b) | 200,000 | 204,750 | ||||||
MetroPCS Wireless Inc., Sr. Unsec. Gtd. Notes, 6.63%, 11/15/20 | 100,000 | 105,000 | ||||||
7.88%, 09/01/18 | 20,000 | 21,463 | ||||||
Sprint Capital Corp., Sr. Unsec. Gtd. Global Notes, 6.88%, 11/15/28 | 25,000 | 22,750 | ||||||
6.90%, 05/01/19 | 57,000 | 58,425 | ||||||
Sprint Nextel Corp., Sr. Unsec. Global Notes, 11.50%, 11/15/21 | 15,000 | 18,788 | ||||||
Sr. Unsec. Gtd. Notes, | ||||||||
7.00%, 03/01/20(b) | 105,000 | 115,237 | ||||||
9.00%, 11/15/18(b) | 40,000 | 47,350 | ||||||
VimpelCom Holdings B.V. (Russia), Sr. Unsec. Gtd. Notes, 7.50%, 03/01/22(b) | 200,000 | 201,500 | ||||||
Wind Acquisition Finance S.A. (Italy), Sr. Sec. Gtd. Notes, 11.75%, 07/15/17(b) | 200,000 | 184,000 | ||||||
4,649,007 | ||||||||
Total U.S. Dollar Denominated Bonds and Notes (Cost $220,589,039) | 237,583,859 | |||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
22 Invesco Core Plus Bond Fund
Principal | ||||||||
Amount | Value | |||||||
U.S. Government Sponsored Mortgage-Backed Securities–30.26% | ||||||||
Collateralized Mortgage Obligations–1.09% | ||||||||
Fannie Mae REMICs, 1.01%, 06/25/37(d) | $ | 1,616,196 | $ | 1,639,147 | ||||
4.00%, 08/25/18 | 6,250 | 6,248 | ||||||
7.00%, 05/25/33, IO | 35,340 | 8,859 | ||||||
6.00%, 07/25/33, IO | 55,041 | 9,549 | ||||||
FDIC Structured Sale Gtd. Notes, 0.78%, 02/25/48 (Acquired 03/05/10; Cost $922,607)(b)(d) | 896,089 | 898,479 | ||||||
Fontainebleu Miami Beach Trust, 3.88%, 05/05/27(b) | 3,000,000 | 3,165,421 | ||||||
Freddie Mae REMICs, 5.00%, 11/15/17 | 82,844 | 85,024 | ||||||
5,812,727 | ||||||||
| ||||||||
Federal Home Loan Mortgage Corp. (FHLMC)–19.84% | ||||||||
Pass Through Ctfs., 6.00%, 08/01/14 to 02/01/34 | 872,248 | 971,301 | ||||||
5.50%, 05/01/16 to 07/01/40 | 11,330,844 | 12,443,317 | ||||||
6.50%, 05/01/16 to 09/01/36 | 2,151,194 | 2,474,487 | ||||||
7.00%, 06/01/16 to 10/01/34 | 3,184,093 | 3,736,611 | ||||||
7.50%, 04/01/17 to 05/01/35 | 1,343,731 | 1,652,273 | ||||||
3.50%, 08/01/26 | 3,047,135 | 3,286,838 | ||||||
8.50%, 08/01/31 | 131,572 | 165,789 | ||||||
8.00%, 08/01/32 | 106,449 | 132,405 | ||||||
5.00%, 07/01/34 to 06/01/40 | 12,612,245 | 13,916,323 | ||||||
Pass Through Ctfs., ARM, 2.81%, 12/01/36(d) | 353,895 | 379,228 | ||||||
2.93%, 05/01/37(d) | 584,772 | 628,599 | ||||||
3.14%, 02/01/37(d) | 115,762 | 124,253 | ||||||
Pass Through Ctfs., TBA, 2.50%, 10/01/27(h) | 10,000,000 | 10,356,250 | ||||||
3.50%, 10/01/42(h) | 14,500,000 | 15,313,360 | ||||||
4.00%, 10/01/42(h) | 19,500,000 | 20,834,531 | ||||||
4.50%, 10/01/42(h) | 18,205,000 | 19,585,310 | ||||||
106,000,875 | ||||||||
Federal National Mortgage Association (FNMA)–8.29% | ||||||||
Pass Through Ctfs., 7.50%, 11/01/15 to 08/01/37 | 1,759,424 | 2,144,643 | ||||||
7.00%, 12/01/15 to 02/01/34 | 1,590,670 | 1,848,578 | ||||||
6.50%, 05/01/16 to 01/01/37 | 703,610 | 810,517 | ||||||
6.00%, 05/01/17 to 10/01/39 | 438,522 | 483,692 | ||||||
5.00%, 03/01/18 to 12/01/39 | 4,003,805 | 4,428,020 | ||||||
5.50%, 11/01/18 to 06/01/40 | 6,698,753 | 7,410,375 | ||||||
8.00%, 08/01/21 to 04/01/33 | 253,347 | 311,382 | ||||||
9.50%, 04/01/30 | 62,311 | 75,467 | ||||||
8.50%, 10/01/32 | 203,489 | 255,773 | ||||||
Pass Through Ctfs., ARM 2.32%, 05/01/35(d) | 954,293 | 1,017,141 | ||||||
2.61%, 01/01/37(d) | 416,907 | 444,539 | ||||||
3.04%, 03/01/38(d) | 222,079 | 237,323 | ||||||
Pass Through Ctfs., TBA, 2.50%, 09/01/27(h) | 4,500,000 | 4,675,781 | ||||||
3.00%, 10/01/27 to 10/01/42(h) | 5,000,000 | 5,240,313 | ||||||
4.00%, 10/01/42(h) | 12,960,000 | 13,881,374 | ||||||
5.00%, 10/01/42(h) | 945,000 | 1,031,970 | ||||||
44,296,888 | ||||||||
Government National Mortgage Association (GNMA)–1.04% | ||||||||
Government National Mortgage Association, | ||||||||
Pass Through Ctfs., | ||||||||
7.50%, 06/15/23 to 05/15/32 | 63,461 | 73,959 | ||||||
9.00%, 09/15/24 to 10/15/24 | 24,988 | 25,279 | ||||||
8.50%, 02/15/25 | 7,887 | 8,028 | ||||||
8.00%, 08/15/25 to 09/15/26 | 107,931 | 125,919 | ||||||
6.56%, 01/15/27 | 175,985 | 207,617 | ||||||
7.00%, 04/15/28 to 09/15/32 | 531,872 | 635,622 | ||||||
6.00%, 11/15/28 to 02/15/33 | 203,808 | 231,964 | ||||||
6.50%, 01/15/29 to 09/15/34 | 369,510 | 439,590 | ||||||
5.50%, 06/15/35 | 323,945 | 363,177 | ||||||
5.00%, 07/15/35 to 08/15/35 | 79,720 | 88,598 | ||||||
Pass Through Ctfs., ARM, 2.00%, 01/20/25 to 05/20/25(d) | 106,342 | 110,930 | ||||||
3.00%, 06/20/25(d) | 11,781 | 12,298 | ||||||
Pass Through Ctfs., TBA, 3.50%, 09/01/42(h) | 3,000,000 | 3,243,750 | ||||||
5,566,731 | ||||||||
Total U.S. Government Sponsored Mortgage-Backed Securities (Cost $158,207,918) | 161,677,221 | |||||||
U.S. Treasury Securities–13.41% | ||||||||
U.S. Treasury Bills–0.08% | ||||||||
0.10%, 11/15/12(i)(j) | 430,000 | 429,936 | ||||||
U.S. Treasury Notes–10.86% | ||||||||
1.88%, 02/28/14 | 8,010,000 | 8,207,121 | ||||||
2.25%, 05/31/14 | 19,595,000 | 20,279,294 | ||||||
2.63%, 07/31/14 | 4,300,000 | 4,495,852 | ||||||
2.38%, 10/31/14 | 1,875,000 | 1,961,133 | ||||||
2.13%, 11/30/14 | 625,000 | 651,172 | ||||||
2.63%, 12/31/14 | 2,000,000 | 2,110,625 | ||||||
1.25%, 08/31/15 | 350,000 | 359,953 | ||||||
2.00%, 04/30/16 | 1,000,000 | 1,058,750 | ||||||
1.00%, 10/31/16 | 3,000,000 | 3,066,563 | ||||||
0.88%, 04/30/17 | 1,700,000 | 1,726,031 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
23 Invesco Core Plus Bond Fund
Principal | ||||||||
Amount | Value | |||||||
U.S. Treasury Notes–(continued) | ||||||||
2.75%, 05/31/17 | $ | 4,000,000 | $ | 4,410,625 | ||||
3.63%, 08/15/19 | 100,000 | 117,891 | ||||||
2.00%, 11/15/21 | 1,250,000 | 1,310,547 | ||||||
1.75%, 05/15/22 | 7,575,000 | 7,728,867 | ||||||
1.63%, 08/15/22 | 455,000 | 457,630 | ||||||
3.88%, 08/15/40 | 50,000 | 62,734 | ||||||
58,004,788 | ||||||||
U.S. Treasury Bonds–2.47% | ||||||||
6.25%, 05/15/30 | 2,000,000 | 3,188,438 | ||||||
3.50%, 02/15/39 | 940,000 | 1,108,025 | ||||||
4.25%, 05/15/39 | 20,000 | 26,584 | ||||||
4.50%, 08/15/39 | 1,405,000 | 1,939,778 | ||||||
3.13%, 02/15/42 | 6,360,000 | 6,963,206 | ||||||
13,226,031 | ||||||||
Total U.S. Treasury Securities (Cost $68,442,063) | 71,660,755 | |||||||
Asset-Backed Securities–13.27% | ||||||||
ARI Fleet Lease Trust–Series 2010-A, Class A, Floating Rate Pass Through Ctfs., 1.69%, 08/15/18(b)(d) | 57,043 | 57,076 | ||||||
Banc of America Merrill Lynch Commercial Mortgage Inc., Series 2003-1, Class A2, Pass Through Ctfs., 4.65%, 09/11/36 | 27,416 | 27,700 | ||||||
Series 2005-6, Class A3, Variable Rate Pass Through Ctfs., 5.37%, 09/10/47(d) | 35,024 | 34,993 | ||||||
Banc of America Mortgage Securities Inc., Series 2005-12, Class A2, Floating Rate Pass Through Ctfs., 1.14%, 01/25/36(d) | 981,879 | 838,565 | ||||||
Bear Stearns Adjustable Rate Mortgage Trust, Series 2003-6, Class 1A3, Floating Rate Pass Through Ctfs., 2.46%, 08/25/33(d) | 913,365 | 933,335 | ||||||
Bear Stearns Commercial Mortgage Securities, Series 2004-PWR6, Class A6, Pass Through Ctfs., 4.83%, 11/11/41 | 1,405,000 | 1,516,641 | ||||||
Series 2005-PWR8, Class A4, Pass Through Ctfs., 4.67%, 06/11/41 | 2,675,000 | 2,922,031 | ||||||
Series 2005-T18, Class A4, Variable Rate Pass Through Ctfs., 4.93%, 02/13/42(d) | 45,000 | 49,262 | ||||||
Series 2006-PW11, Class A4, Variable Rate Pass Through Ctfs., 5.62%, 03/11/39(d) | 2,948,000 | 3,351,698 | ||||||
Series 2006-PW11, Class AAB, Variable Rate Pass Through Ctfs., 5.62%, 03/11/39(d) | 27,003 | 28,354 | ||||||
Series 2006-T24, Class A3, Pass Through Ctfs., 5.53%, 10/12/41 | 807,984 | 834,328 | ||||||
Series 2006-T24, Class A4, Pass Through Ctfs., | ||||||||
5.54%, 10/12/41 | 3,040,000 | 3,524,942 | ||||||
Chase Issuance Trust, Series 2007-A17, Class A, Pass Through Ctfs., 5.12%, 10/15/14 | 2,560,000 | 2,575,064 | ||||||
Citibank Credit Card Issuance Trust, Series 2009-A5, Class A5, Pass Through Ctfs., 2.25%, 12/23/14 | 3,050,000 | 3,068,007 | ||||||
Citigroup Commercial Mortgage Trust, Series 2006-C4, Class A3, Variable Rate Pass Through Ctfs., 5.92%, 03/15/49(d) | 625,000 | 721,474 | ||||||
Citigroup Mortgage Loan Trust, Inc., Series 2004-UST1, Class A4, Floating Rate Pass Through Ctfs., 2.51%, 08/25/34(d) | 2,749,699 | 2,823,959 | ||||||
Commercial Mortgage Trust, Series 2001-J2A, Class A2F, Floating Rate Pass Through Ctfs., 0.74%, 07/16/34(b)(d) | 418 | 418 | ||||||
Countrywide Asset-Backed Ctfs., Series 2003-1, Class 3A, Floating Rate Pass Through Ctfs., 0.92%, 06/25/33(d) | 213,009 | 175,161 | ||||||
Series 2007-4, Class A1B, Pass Through Ctfs., 5.81%, 09/25/37 | 192,733 | 192,157 | ||||||
Countrywide Home Loan Mortgage Pass Through Trust, Series 2007-13, Class A10, Pass Through Ctfs., 6.00%, 08/25/37 | 1,659,831 | 1,469,594 | ||||||
Credit Suisse Mortgage Capital Ctfs., Series 2009-2R, Class 1A11, Floating Rate Pass Through Ctfs., 2.62%, 09/26/34(b)(d) | 1,143,163 | 1,087,979 | ||||||
Series 2010-6R, Class 1A1, Pass Through Ctfs., 5.50%, 02/27/37 (Acquired 03/01/10; Cost $567,532)(b) | 551,002 | 582,362 | ||||||
Discover Card Master Trust, Series 2010-A1, Class A1, Floating Rate Pass Through Ctfs., 0.90%, 09/15/15(d) | 1,175,000 | 1,178,489 | ||||||
First Horizon Alternative Mortgage Securities, Series 2005-FA8, Class 2A1, Pass Through Ctfs., 5.00%, 11/25/20 | 552,197 | 557,808 | ||||||
Series 2006-FA5, Class A3, Pass Through Ctfs., 6.25%, 08/25/36 | 614,526 | 493,981 | ||||||
GE Capital Credit Card Master Note Trust, Series 2010-3, Class A, Pass Through Ctfs., 2.21%, 06/15/16 | 70,000 | 70,955 | ||||||
GS Mortgage Securities Corp. II, Series 2005-GG4, Class A4A, Pass Through Ctfs., 4.75%, 07/10/39 | 2,760,000 | 3,003,449 | ||||||
Series 2012-ALOH, Class B, Pass Through Ctfs., 4.05%, 04/10/34(b) | 1,500,000 | 1,611,525 | ||||||
Harborview Mortgage Loan Trust, Series 2005-9, Class 2A1C, Floating Rate Pass Through Ctfs., 0.69%, 06/20/35(d) | 57,439 | 46,521 | ||||||
JP Morgan Chase Commercial Mortgage Securities Corp., Series 2006-LDP9, Class A3, Pass Through Ctfs., 5.34%, 05/15/47 | 900,000 | 1,022,801 | ||||||
LB-UBS Commercial Mortgage Trust, Series 2005-C1, Class A4, Pass Through Ctfs., 4.74%, 02/15/30 | 780,000 | 842,456 | ||||||
Series 2006-C1, Class A4, Pass Through Ctfs., 5.16%, 02/15/31 | 845,000 | 947,899 | ||||||
Series 2006-C7, Class A3, Pass Through Ctfs., 5.35%, 11/15/38 | 300,000 | 345,446 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
24 Invesco Core Plus Bond Fund
Principal | ||||||||
Amount | Value | |||||||
Asset-Backed Securities–(continued) | ||||||||
Lehman Mortgage Trust, Series 2006-1, Class 3A5, Pass Through Ctfs., 5.50%, 02/25/36 | $ | 849,400 | $ | 828,062 | ||||
Morgan Stanley Capital I, Series 2005-HQ5, Class A3, Pass Through Ctfs., 5.01%, 01/14/42 | 4,604 | 4,644 | ||||||
Series 2005-HQ7, Class A4, Variable Rate Pass Through Ctfs., 5.38%, 11/14/42(d) | 35,000 | 39,151 | ||||||
Series 2005-HQ7, Class AJ, Variable Rate Pass Through Ctfs., 5.38%, 11/14/42(d) | 2,615,000 | 2,713,149 | ||||||
Series 2005-T19, Class A4A, Pass Through Ctfs., 4.89%, 06/12/47 | 2,638,000 | 2,911,831 | ||||||
Series 2008-T29, Class A1, Pass Through Ctfs., 6.23%, 01/11/43 | 403,649 | 404,121 | ||||||
Provident Bank Home Equity Loan Trust, Series 2000-2, Class A1, Floating Rate Pass Through Ctfs., 0.78%, 08/25/31(d) | 395,377 | 228,040 | ||||||
RBSCF Trust, Series 2010-RR3, Class MS4A, Variable Rate Pass Through Ctfs., 4.97%, 08/16/14(b)(d) | 3,600,000 | 3,816,767 | ||||||
Santander Drive Auto Receivables Trust, Series 2011-1, Class D, Pass Through Ctfs., 4.01%, 02/15/17 | 1,545,000 | 1,579,970 | ||||||
Sequoia Mortgage Trust, Series 2012-1, Class 1A1, Floating Rate Pass Through Ctfs., 2.87%, 01/25/42(d) | 1,756,061 | 1,817,401 | ||||||
Series 2012-2, Class A1, Variable Rate Pass Through Ctfs., 3.50%, 04/25/42(d) | 2,846,455 | 3,014,699 | ||||||
Specialty Underwriting & Residential Finance, Series 2004, BC2, Class A2, Floating Rate Pass Through Ctfs., 0.51%, 05/25/35(d) | 41,645 | 33,857 | ||||||
Structured Adjustable Rate Mortgage Loan Trust, Series 2007-3, Class 4A2, Floating Rate Pass Through Ctfs., 5.30%, 04/25/47(d) | 1,100,000 | 662,650 | ||||||
Structured Asset Investment Loan Trust, Series 2003-BC12, Class 3A, Floating Rate Pass Through Ctfs., 0.98%, 11/25/33(d) | 39,528 | 35,645 | ||||||
Suntrust Alternative Loan Trust, Series 2005-1F, Class 2A8, Pass Through Ctfs., 6.00%, 12/25/35 | 921,973 | 740,090 | ||||||
TIAA Seasoned Commercial Mortgage Trust, Series 2007-C4, Class A2, Variable Rate Pass Through Ctfs., 5.30%, 08/15/39(d) | 22,679 | 22,701 | ||||||
Wachovia Bank Commercial Mortgage Trust, Series 2005-C18, Class A4, Pass Through Ctfs., 4.94%, 04/15/42 | 3,670,000 | 4,024,289 | ||||||
Series 2005-C21, Class A4, Variable Rate Pass Through Ctfs., 5.41%, 10/15/44(d) | 1,364,785 | 1,523,718 | ||||||
Series 2005-C21, Class AJ, Variable Rate Pass Through Ctfs., 5.41%, 10/15/44(d) | 1,515,000 | 1,590,220 | ||||||
Series 2005-C21, Class AM, Variable Rate Pass Through Ctfs., 5.41%, 10/15/44(d) | 1,680,000 | 1,864,928 | ||||||
WaMu Mortgage Pass Through Ctfs., Series 2003-AR8, Class A, Floating Rate Pass Through Ctfs., 2.46%, 08/25/33(d) | 2,088,482 | 2,141,884 | ||||||
Series 2005-AR10, Class 1A3, Floating Rate Pass Through Ctfs., 2.50%, 09/25/35(d) | 525,000 | 446,831 | ||||||
Wells Fargo Mortgage Backed Securities Trust, Series 2004-K, Class 1A2, Floating Rate Pass Through Ctfs., 2.62%, 07/25/34(d) | 1,111,280 | 1,135,289 | ||||||
Series 2004-Z, Class 2A1, Floating Rate Pass Through Ctfs., 2.61%, 12/25/34(d) | 2,333,455 | 2,368,614 | ||||||
Total Asset-Backed Securities (Cost $62,680,622) | 70,884,981 | |||||||
U.S. Government Sponsored Agency Securities–0.94% | ||||||||
Federal Home Loan Mortgage Corp. (FHLMC)–0.94% | ||||||||
Federal Home Loan Mortgage Corp., Sr. Unsec. Global Notes, 5.50%, 08/23/17 | 2,740,000 | 3,376,372 | ||||||
Sr. Unsec. Global Notes,, 6.25%, 07/15/32 | 1,080,000 | 1,653,144 | ||||||
Total U.S. Government Sponsored Agency Securities (Cost $4,261,654) | 5,029,516 | |||||||
Shares | ||||||||
Preferred Stocks–0.35% | ||||||||
Consumer Finance–0.01% | ||||||||
Ally Financial, Inc., Series A, 8.50% Pfd. | 510 | 12,515 | ||||||
Ally Financial, Inc., Series G, 7.00% Pfd.(b) | 4 | 3,643 | ||||||
GMAC Capital Trust I, Series 2, 8.13% Jr. Gtd. Sub. Pfd.(d) | 555 | 13,775 | ||||||
29,933 | ||||||||
Diversified Banks–0.01% | ||||||||
Royal Bank of Scotland PLC (The) (United Kingdom), Series T, 7.25% Jr. Sub. Pfd. | 1,910 | 43,529 | ||||||
Multi-Line Insurance–0.02% | ||||||||
Hartford Financial Services Group Inc., 7.88% Jr. Sub. Pfd. | 4,070 | 114,571 | ||||||
Office REIT’s–0.00% | ||||||||
DuPont Fabros Technology, Inc., Series B, 7.63% Pfd. | 200 | 5,400 | ||||||
Regional Banks–0.16% | ||||||||
BB&T Corp., Series E, 5.63% Pfd. | 1,965 | 50,343 | ||||||
PNC Financial Services Group Inc., Series P, 6.13% Pfd. | 27,000 | 747,630 | ||||||
Zions Bancorp, Series C, 9.50% Pfd. | 3,000 | 78,990 | ||||||
876,963 | ||||||||
Reinsurance–0.15% | ||||||||
Reinsurance Group of America, Inc., Jr. Unsec. Sub. 6.20% Pfd. | 30,000 | 804,900 | ||||||
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 | $ | 7,445 | |||||
Total Preferred Stocks (Cost $1,735,681) | 1,882,741 | |||||||
Principal | ||||||||
Amount | ||||||||
Non-U.S. Dollar Denominated Bonds & Notes–0.29%(k) | ||||||||
Brazil–0.02% | ||||||||
Itau Unibanco Holding S.A., Sr. Unsec. Notes, 10.50%, 11/23/15(b) | BRL | 150,000 | 81,020 | |||||
Canada–0.02% | ||||||||
Gateway Casinos & Entertainment Ltd., Sec. Gtd. Notes, 8.88%, 11/15/17(b) | CAD | 49,000 | 52,186 | |||||
Great Canadian Gaming Corp., Sr. Unsec. Gtd. Notes, 6.63%, 07/25/22(b) | CAD | 45,000 | 46,556 | |||||
98,742 | ||||||||
Czech Republic–0.01% | ||||||||
Central European Media Enterprises Ltd. (Czech Republic)-REGS, Jr. Sec. Gtd. Euro Notes, 11.63%, 09/15/16(b) | EUR | 50,000 | 66,359 | |||||
Luxembourg–0.02% | ||||||||
Codere Finance Luxembourg S.A. (Luxembourg)-REGS, Sr. Sec. Gtd. Euro Notes, 8.25%, 06/15/15(b) | EUR | 100,000 | 106,930 | |||||
Mexico–0.08% | ||||||||
Cemex Finance Europe B.V., Gtd. Euro Notes, 4.75%, 03/05/14 | EUR | 50,000 | 61,328 | |||||
Mexican Bonos, Series M, Bonds, 8.00%, 06/11/20 | MXN | 2,000,000 | 179,364 | |||||
Series M10, Bonds, 7.75%, 12/14/17 | MXN | 350,000 | 29,917 | |||||
Series M20, Bonds, 10.00%, 12/05/24 | MXN | 1,300,000 | 137,813 | |||||
408,422 | ||||||||
Peru–0.02% | ||||||||
Peruvian Government International Bond, Sr. Unsec. Notes, 8.60%, 08/12/17(b) | PEN | 210,000 | 96,689 | |||||
Poland–0.01% | ||||||||
CEDC Finance Corp. International Inc., Sr. Sec. Gtd. Notes, 8.88%, 12/01/16(b) | EUR | 100,000 | 79,883 | |||||
Russia–0.02% | ||||||||
RusHydro JSC via RusHydro Finance Ltd., Sr. Unsec. Medium-Term Euro Loan Participation Notes, 7.88%, 10/28/15 | RUB | 2,800,000 | 84,604 | |||||
South Korea–0.01% | ||||||||
Export-Import Bank of Korea, Sr. Unsec. Notes, 4.00%, 11/26/15(b) | PHP | 3,300,000 | 79,547 | |||||
Spain–0.02% | ||||||||
Cirsa Funding Luxembourg S.A., REGS, Sr. Unsec. Gtd. Euro Notes, 8.75%, 05/15/18(b) | EUR | 100,000 | 111,018 | |||||
United Kingdom–0.03% | ||||||||
Boparan Finance PLC, REGS, Sr. Unsec. Gtd. Euro Notes, 9.75%, 04/30/18(b) | EUR | 100,000 | 133,662 | |||||
United States–0.03% | ||||||||
Morgan Stanley, Sr. Unsec. Notes, 10.09%, 05/03/17(b) | BRL | 340,000 | 177,991 | |||||
Total Non-U.S. Dollar Denominated Bonds & Notes (Cost $1,620,640) | 1,524,867 | |||||||
Municipal Obligations–0.23% | ||||||||
Georgia (State of) Municipal Electric Authority (Plant Vogtle Units 3 & 4 Project J); | ||||||||
Series 2010 A, Taxable RB, 6.64%, 04/01/57 | $ | 500,000 | 593,460 | |||||
Series 2010, Build America RB, 6.66%, 04/01/57 | 550,000 | 646,607 | ||||||
Total Municipal Obligations (Cost $1,050,000) | 1,240,067 | |||||||
Shares | ||||||||
Money Market Funds–13.33% | ||||||||
Liquid Assets Portfolio–Institutional Class(l) | 35,600,265 | 35,600,265 | ||||||
Premier Portfolio–Institutional Class(l) | 35,600,264 | 35,600,264 | ||||||
Total Money Market Funds (Cost $71,200,529) | 71,200,529 | |||||||
TOTAL INVESTMENTS–116.55% (Cost $589,788,146) | 622,684,536 | |||||||
OTHER ASSETS LESS LIABILITIES–(16.55)% | (88,417,306 | ) | ||||||
NET ASSETS–100.00% | $ | 534,267,230 | ||||||
Investment Abbreviations:
ARM | – Adjustable Rate Mortgage | |
BRL | – Brazilian Real | |
CAD | – Canadian Dollar | |
Conv. | – Convertible | |
Ctfs. | – Certificates | |
Deb. | – Debentures | |
EUR | – Euro | |
Gtd. | – Guaranteed | |
IO | – Interest Only | |
Jr. | – Junior | |
MXN | – Mexican Peso | |
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 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
26 Invesco Core Plus Bond Fund
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, 2012 was $80,369,269, which represented 15.04% of the Fund’s Net Assets. | |
(c) | 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, 2012 was $116,262, which represented 0.02% of the Fund’s Net Assets | |
(d) | Interest or dividend rate is redetermined periodically. Rate shown is the rate in effect on August 31, 2012. | |
(e) | Perpetual bond with no specified maturity date. | |
(f) | Zero coupon bond issued at a discount. | |
(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 1I. | |
(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 1L 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.
27 Invesco Core Plus Bond Fund
Statement of Assets and Liabilities
August 31, 2012
Assets: | ||||
Investments, at value (Cost $518,587,617) | $ | 551,484,007 | ||
Investments in affiliated money market funds, at value and cost | 71,200,529 | |||
Total investments, at value (Cost $589,788,146) | 622,684,536 | |||
Foreign currencies, at value (Cost $19,109) | 19,046 | |||
Receivable for: | ||||
Investments sold | 87,113,344 | |||
Fund shares sold | 1,542,013 | |||
Dividends and interest | 4,312,103 | |||
Principal paydowns | 74,517 | |||
Premiums paid on swap agreements | 709,865 | |||
Investment for trustee deferred compensation and retirement plans | 39,314 | |||
Other assets | 34,083 | |||
Total assets | 716,528,821 | |||
Liabilities: | ||||
Payable for: | ||||
Investments purchased | 180,641,413 | |||
Fund shares reacquired | 465,594 | |||
Dividends | 186,931 | |||
Foreign currency contracts outstanding | 7,260 | |||
Variation margin | 72,078 | |||
Accrued fees to affiliates | 293,253 | |||
Accrued other operating expenses | 169,354 | |||
Trustee deferred compensation and retirement plans | 89,281 | |||
Unrealized depreciation on swap agreements | 336,427 | |||
Total liabilities | 182,261,591 | |||
Net assets applicable to shares outstanding | $ | 534,267,230 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 590,353,521 | ||
Undistributed net investment income | (605,532 | ) | ||
Undistributed net realized gain (loss) | (87,888,291 | ) | ||
Unrealized appreciation | 32,407,532 | |||
$ | 534,267,230 | |||
Net Assets: | ||||
Class A | $ | 295,311,039 | ||
Class B | $ | 22,465,448 | ||
Class C | $ | 37,950,418 | ||
Class R | $ | 3,313,231 | ||
Class Y | $ | 5,752,600 | ||
Institutional Class | $ | 169,474,494 | ||
Shares outstanding, $0.01 par value per share, with an unlimited number of shares authorized: | ||||
Class A | 26,972,513 | |||
Class B | 2,052,399 | |||
Class C | 3,467,384 | |||
Class R | 302,712 | |||
Class Y | 525,249 | |||
Institutional Class | 15,484,521 | |||
Class A: | ||||
Net asset value per share | $ | 10.95 | ||
Maximum offering price per share (Net asset value of $10.95 divided by 95.25%) | $ | 11.50 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 10.95 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 10.94 | ||
Class R: | ||||
Net asset value and offering price per share | $ | 10.95 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 10.95 | ||
Institutional Class: | ||||
Net asset value and offering price per share | $ | 10.94 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
28 Invesco Core Plus Bond Fund
Statement of Operations
For the year ended August 31, 2012
Investment income: | ||||
Interest | $ | 20,116,173 | ||
Dividends (net of foreign withholding taxes of $(187)) | 49,330 | |||
Dividends from affiliated money market funds | 45,973 | |||
Total investment income | 20,211,476 | |||
Expenses: | ||||
Advisory fees | 2,177,913 | |||
Administrative services fees | 157,081 | |||
Custodian fees | 40,620 | |||
Distribution fees: | ||||
Class A | 633,717 | |||
Class B | 236,892 | |||
Class C | 342,542 | |||
Class R | 13,493 | |||
Transfer agent fees — A, B, C, R and Y | 648,523 | |||
Transfer agent fees — Institutional | 2,056 | |||
Trustees’ and officers’ fees and benefits | 45,998 | |||
Other | 287,161 | |||
Total expenses | 4,585,996 | |||
Less: Fees waived, expenses reimbursed and expense offset arrangement(s) | (983,809 | ) | ||
Net expenses | 3,602,187 | |||
Net investment income | 16,609,289 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain (loss) from: | ||||
Investment securities | 12,530,762 | |||
Foreign currencies | (7,446 | ) | ||
Foreign currency contracts | 79,300 | |||
Futures contracts | (522,671 | ) | ||
Swap agreements | (128,426 | ) | ||
11,951,519 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | 9,026,193 | |||
Foreign currencies | 2,999 | |||
Foreign currency contracts | 1,284 | |||
Futures contracts | (220,217 | ) | ||
Swap agreements | (423,833 | ) | ||
8,386,426 | ||||
Net realized and unrealized gain | 20,337,945 | |||
Net increase in net assets resulting from operations | $ | 36,947,234 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
29 Invesco Core Plus Bond Fund
Statement of Changes in Net Assets
For the years ended August 31, 2012 and 2011
August 31, | August 31, | |||||||
2012 | 2011 | |||||||
Operations: | ||||||||
Net investment income | $ | 16,609,289 | $ | 3,753,920 | ||||
Net realized gain | 11,951,519 | 1,916,741 | ||||||
Change in net unrealized appreciation (depreciation) | 8,386,426 | (2,194,422 | ) | |||||
Net increase in net assets resulting from operations | 36,947,234 | 3,476,239 | ||||||
Distributions to shareholders from net investment income: | ||||||||
Class A | (10,466,088 | ) | (2,136,426 | ) | ||||
Class B | (808,278 | ) | (189,459 | ) | ||||
Class C | (1,160,409 | ) | (236,568 | ) | ||||
Class R | (104,533 | ) | (20,998 | ) | ||||
Class Y | (238,402 | ) | (23,561 | ) | ||||
Institutional Class | (7,232,345 | ) | (1,613,593 | ) | ||||
Total distributions from net investment income | (20,010,055 | ) | (4,220,605 | ) | ||||
Distributions to shareholders from net realized gains: | ||||||||
Class A | (418,836 | ) | (112,008 | ) | ||||
Class B | (43,158 | ) | (14,844 | ) | ||||
Class C | (58,620 | ) | (13,430 | ) | ||||
Class R | (4,312 | ) | (2,158 | ) | ||||
Class Y | (9,454 | ) | (1,898 | ) | ||||
Institutional Class | (289,097 | ) | (1,619 | ) | ||||
Total distributions from net realized gains | (823,477 | ) | (145,957 | ) | ||||
Share transactions–net: | ||||||||
Class A | 61,184,360 | 218,551,835 | ||||||
Class B | (2,679,847 | ) | 23,586,221 | |||||
Class C | 3,325,390 | 32,838,422 | ||||||
Class R | 918,843 | 2,155,216 | ||||||
Class Y | 341,572 | 5,079,304 | ||||||
Institutional Class | (2,421,580 | ) | 166,735,618 | |||||
Net increase in net assets resulting from share transactions | 60,668,738 | 448,946,616 | ||||||
Net increase in net assets | 76,782,440 | 448,056,293 | ||||||
Net Assets: | ||||||||
Beginning of year | 457,484,790 | 9,428,497 | ||||||
End of year (includes undistributed net investment income of $(605,532) and $262,719, respectively) | $ | 534,267,230 | $ | 457,484,790 | ||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
30 Invesco Core Plus Bond Fund
Notes to Financial Statements
August 31, 2012
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.
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 to Class A shares. 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 to Class A shares. 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 the 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. 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 economic 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. |
31 Invesco Core Plus Bond Fund
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 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 the 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 the 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. | Dollar Rolls and Forward Commitment Transactions — The Fund may enter into dollar roll transactions to enhance the Fund’s performance. The Fund executes its dollar roll transactions in the to be announced (“TBA”) market whereby the Fund makes a forward commitment to purchase a security and, instead of accepting delivery, the position is offset by the sale of the security with a simultaneous agreement to repurchase at a future date. | |
The Fund accounts for dollar roll transactions as purchases and sales and realizes gains and losses on these transactions. These transactions increase the Fund’s portfolio turnover rate. The Fund will segregate liquid assets in an amount equal to its dollar roll commitments. Dollar roll transactions are considered borrowings under the 1940 Act. | ||
Dollar roll 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. Dollar rolls transactions also involve the risk that the 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. |
32 Invesco Core Plus Bond Fund
J. | 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. | ||
K. | 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. | |
L. | 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. | |
M. | 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. | ||
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. |
33 Invesco Core Plus Bond Fund
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. | ||
N. | 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. | |
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).
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. 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 non-routine items, including litigation expenses; 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, 2013, 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, 2012, the Adviser waived advisory fees of $333,230 and reimbursed Class specific expenses of $513,449, $47,983, $69,383, $5,466, $10,998 and $2,056 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, 2012, 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
34 Invesco Core Plus Bond Fund
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, 2012, 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, 2012, 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, 2012, IDI advised the Fund that IDI retained $149,098 in front-end sales commissions from the sale of Class A shares and $138, $27,820 and $2,773 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, 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, 2012. 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.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 73,079,627 | $ | 3,643 | $ | — | $ | 73,083,270 | ||||||||
U.S. Treasury Securities | — | 71,660,755 | — | 71,660,755 | ||||||||||||
U.S. Government Sponsored Securities | — | 166,706,737 | — | 166,706,737 | ||||||||||||
Corporate Debt Securities | — | 224,676,814 | 0 | 224,676,814 | ||||||||||||
Asset-Backed Securities | — | 70,884,981 | — | 70,884,981 | ||||||||||||
Municipal Obligations | — | 1,240,067 | — | 1,240,067 | ||||||||||||
Foreign Securities Debt | — | 1,524,867 | — | 1,524,867 | ||||||||||||
Foreign Sovereign Debt | — | 12,907,045 | — | 12,907,045 | ||||||||||||
73,079,627 | 549,604,909 | 0 | 622,684,536 | |||||||||||||
Foreign Currency Contracts* | — | (7,260 | ) | — | (7,260 | ) | ||||||||||
Futures* | (145,597 | ) | — | — | (145,597 | ) | ||||||||||
Swap Agreements* | — | (336,427 | ) | — | (336,427 | ) | ||||||||||
Total Investments | $ | 72,934,030 | $ | 549,261,222 | $ | 0 | $ | 622,195,252 | ||||||||
* | Unrealized appreciation (depreciation). |
35 Invesco Core Plus Bond Fund
NOTE 4—Derivative Investments
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, 2012:
Value | ||||||||
Risk Exposure/Derivative Type | Assets | Liabilities | ||||||
Credit risk | ||||||||
Swap agreements(a) | $ | 38,122 | $ | (374,549 | ) | |||
Currency risk | ||||||||
Foreign currency contracts(b) | — | (7,260 | ) | |||||
Interest rate risk | ||||||||
Futures contracts(c) | 25,471 | (171,068 | ) | |||||
(a) | Values are disclosed on the Statement of Assets and Liabilities under Unrealized depreciation 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 payable is reported within the Statement of Assets and Liabilities. |
Effect of Derivative Instruments for the year ended August 31, 2012
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 | ||||||||||||
Futures* | Contracts* | Swap Agreements* | ||||||||||
Realized Gain (Loss) | ||||||||||||
Credit risk | $ | — | $ | — | $ | (128,426 | ) | |||||
Currency risk | — | 79,300 | — | |||||||||
Interest rate risk | (522,671 | ) | — | — | ||||||||
Change in Unrealized Appreciation (Depreciation) | ||||||||||||
Credit risk | $ | — | $ | — | $ | (423,833 | ) | |||||
Currency risk | — | 1,284 | — | |||||||||
Interest rate risk | (220,217 | ) | — | — | ||||||||
Total | $ | (742,888 | ) | $ | 80,584 | $ | (552,259 | ) | ||||
* | The average notional value of futures, foreign currency contracts and swap agreements outstanding during the period was $34,757,224, $857,349 and $14,204,167, respectively. |
Open Foreign Currency Contracts | ||||||||||||||||||||||
Unrealized | ||||||||||||||||||||||
Settlement | Contract to | Notional | Appreciation | |||||||||||||||||||
Date | Counterparty | Deliver | Receive | Value | (Depreciation) | |||||||||||||||||
11/09/12 | RBC Dain Rauscher | EUR | 474,000 | USD | 589,546 | $ | 596,806 | $ | (7,260 | ) | ||||||||||||
Currency Abbreviations:
�� | ||
EUR | – Euro | |
USD | – U.S. Dollar |
Open Futures Contracts | ||||||||||||||||
Unrealized | ||||||||||||||||
Number of | Expiration | Notional | Appreciation | |||||||||||||
Long Contracts | Contracts | Month | Value | (Depreciation) | ||||||||||||
U.S. Ultra Bond | 10 | December-2012 | $ | 1,690,000 | $ | 23,104 | ||||||||||
U.S. 5 Year Notes | 4 | December-2012 | 498,656 | 2,367 | ||||||||||||
Subtotal | $ | 2,188,656 | $ | 25,471 | ||||||||||||
Short Contracts | ||||||||||||||||
U.S. 10 Year Treasury | 155 | December-2012 | $ | (20,726,406 | ) | $ | (171,068 | ) | ||||||||
Total | $ | (18,537,750 | ) | $ | (145,597 | ) | ||||||||||
36 Invesco Core Plus Bond Fund
Open Credit Default Swap Agreements | ||||||||||||||||||||||||||||||
Implied | Unrealized | |||||||||||||||||||||||||||||
Buy/Sell | (Pay)/Receive | Expiration | Credit | Notional | Upfront | Appreciation | ||||||||||||||||||||||||
Counterparty | Reference Entity | Protection | Fixed Rate | Date | Spread(a) | Value | Payments | (Depreciation) | ||||||||||||||||||||||
Bank of America | Royal Caribbean Cruises Ltd. | Sell | 5.00 | % | 03/20/17 | 4.59 | % | 2,300,000 | $ | — | $ | 38,122 | ||||||||||||||||||
Morgan Stanley | Carnival Corp. | Buy | (1.00 | ) | 03/20/17 | 1.03 | 2,300,000 | 56,685 | (54,119 | ) | ||||||||||||||||||||
Deutsche Bank | JP Morgan Chase & Co. | Buy | (1.00 | ) | 06/20/17 | 1.14 | 5,500,000 | 147,173 | (111,016 | ) | ||||||||||||||||||||
Bank of America | Citigroup Inc. | Buy | (1.00 | ) | 06/20/17 | 2.16 | 5,500,000 | 410,007 | (123,787 | ) | ||||||||||||||||||||
Morgan Stanley | Markit North America Investment Grade, Index Series 18 | Buy | (1.00 | ) | 06/20/17 | 1.02 | 11,000,000 | 96,000 | (85,627 | ) | ||||||||||||||||||||
Total Credit Default Swap Agreements | $ | 709,865 | $ | (336,427 | ) | |||||||||||||||||||||||||
(a) | Implied credit spreads represent the current level as of August 31, 2012 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. |
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, 2012, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $1,244.
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.
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 State Street Bank and Trust Company, the custodian bank. Such balances, if any at period end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. 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 Years Ended August 31, 2012 and 2011:
2012 | 2011 | |||||||
Ordinary income | $ | 20,605,590 | $ | 4,331,065 | ||||
Long-term capital gain | 227,942 | 35,497 | ||||||
Total distributions | $ | 20,833,532 | $ | 4,366,562 | ||||
37 Invesco Core Plus Bond Fund
Tax Components of Net Assets at Period-End:
2012 | ||||
Undistributed ordinary income | $ | 176,249 | ||
Net unrealized appreciation — investments | 31,989,496 | |||
Net unrealized appreciation (depreciation) — other investments | (336,000 | ) | ||
Temporary book/tax differences | (84,036 | ) | ||
Capital loss carryforward | (87,832,000 | ) | ||
Shares of beneficial interest | 590,353,521 | |||
Total net assets | $ | 534,267,230 | ||
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, book to tax accretion and amortization differences, 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 Regulated Investment Company Modernization Act of 2010 (the “Act”) eliminated the eight-year carryover period for capital losses that arise in taxable years beginning after its enactment date of December 22, 2010. Consequently, these capital losses can be carried forward for an unlimited period. However, capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Additionally, post-enactment capital loss carryovers will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. 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 $9,277,522 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, 2012, which expires as follows:
Capital Loss Carryforward* | ||||||||||||
Expiration | Short-Term | Long-Term | Total | |||||||||
August 31, 2015 | $ | 4,121,893 | $ | — | $ | 4,121,893 | ||||||
August 31, 2016 | 83,710,107 | — | 83,710,107 | |||||||||
Total capital loss carryforward | $ | 87,832,000 | $ | — | $ | 87,832,000 | ||||||
* | 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. |
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, 2012 was $1,571,317,163 and $1,570,221,540, respectively. During the same period, purchases and sales of U.S. Treasury obligations were $38,420,629 and $36,298,499. 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 | $ | 34,292,216 | ||
Aggregate unrealized (depreciation) of investment securities | (2,302,720 | ) | ||
Net unrealized appreciation of investment securities | $ | 31,989,496 | ||
Cost of investments for tax purposes is $590,695,040. |
NOTE 10—Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of mortgage-backed dollar rolls, bond premium amortization, capital loss carryforward and swap income, on August 31, 2012, undistributed net investment income was increased by $2,532,515, undistributed net realized gain (loss) was decreased by $2,665,783 and shares of beneficial interest was increased by $133,268. This reclassification 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, 2012(a) | August 31, 2011 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Class A | 9,948,952 | $ | 106,394,842 | 3,555,224 | $ | 37,571,601 | ||||||||||
Class B | 484,939 | 5,170,584 | 290,130 | 3,142,492 | ||||||||||||
Class C | 1,374,205 | 14,701,103 | 830,507 | 8,927,924 | ||||||||||||
Class R | 128,962 | 1,380,248 | 38,733 | 411,788 | ||||||||||||
Class Y | 65,961 | 707,807 | 385,873 | 4,594,680 | ||||||||||||
Institutional Class | 1,896,102 | 20,306,223 | 275,983 | 2,304,800 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Class A | 894,234 | 9,577,150 | 173,838 | 1,840,925 | ||||||||||||
Class B | 66,220 | 707,879 | 15,791 | 167,169 | ||||||||||||
Class C | 98,725 | 1,056,143 | 19,819 | 209,824 | ||||||||||||
Class R | 10,094 | 108,082 | 1,778 | 18,825 | ||||||||||||
Class Y | 5,812 | 62,515 | 1,723 | 18,262 | ||||||||||||
Institutional Class | 703,096 | 7,518,852 | 151,933 | 1,610,096 | ||||||||||||
Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||
Class A | 368,284 | 3,989,575 | 134,643 | 1,421,518 | ||||||||||||
Class B | (369,811 | ) | (3,989,575 | ) | (134,644 | ) | (1,421,518 | ) | ||||||||
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 | (5,503,380 | ) | (58,777,207 | ) | (2,075,980 | ) | (22,032,201 | ) | ||||||||
Class B | (431,301 | ) | (4,568,735 | ) | (231,759 | ) | (2,451,104 | ) | ||||||||
Class C | (1,164,354 | ) | (12,431,856 | ) | (422,772 | ) | (4,468,342 | ) | ||||||||
Class R | (53,449 | ) | (569,487 | ) | (34,795 | ) | (368,619 | ) | ||||||||
Class Y | (40,125 | ) | (428,750 | ) | (31,966 | ) | (340,471 | ) | ||||||||
Institutional Class | (2,841,591 | ) | (30,246,655 | ) | (2,320,283 | ) | (24,627,630 | ) | ||||||||
Net increase in share activity | 5,641,575 | $ | 60,668,738 | 42,285,700 | $ | 448,946,616 | ||||||||||
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 27% 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 Fund 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, 31% 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 reorganization 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 08/31/12 | $ | 10.60 | $ | 0.37 | $ | 0.44 | $ | 0.81 | $ | (0.44 | ) | $ | (0.02 | ) | $ | (0.46 | ) | $ | 10.95 | 7.86 | % | $ | 295,311 | 0.74 | %(d) | 1.01 | %(d) | 3.44 | %(d) | 297 | % | |||||||||||||||||||||||||
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 | 1.20 | 3.27 | 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 08/31/12 | 10.60 | 0.29 | 0.44 | 0.73 | (0.36 | ) | (0.02 | ) | (0.38 | ) | 10.95 | 7.06 | 22,465 | 1.49 | (d) | 1.76 | (d) | 2.69 | (d) | 297 | ||||||||||||||||||||||||||||||||||||
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 | 1.95 | 2.52 | 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 08/31/12 | 10.60 | 0.29 | 0.44 | 0.73 | (0.37 | ) | (0.02 | ) | (0.39 | ) | 10.94 | 6.96 | 37,950 | 1.49 | (d) | 1.76 | (d) | 2.69 | (d) | 297 | ||||||||||||||||||||||||||||||||||||
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 | 1.95 | 2.52 | 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 08/31/12 | 10.60 | 0.34 | 0.44 | 0.78 | (0.41 | ) | (0.02 | ) | (0.43 | ) | 10.95 | 7.59 | 3,313 | 0.99 | (d) | 1.26 | (d) | 3.19 | (d) | 297 | ||||||||||||||||||||||||||||||||||||
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 | 1.45 | 3.02 | 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 08/31/12 | 10.60 | 0.39 | 0.45 | 0.84 | (0.47 | ) | (0.02 | ) | (0.49 | ) | 10.95 | 8.12 | 5,753 | 0.49 | (d) | 0.76 | (d) | 3.69 | (d) | 297 | ||||||||||||||||||||||||||||||||||||
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 | 0.95 | 3.52 | 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 08/31/12 | 10.60 | 0.39 | 0.44 | 0.83 | (0.47 | ) | (0.02 | ) | (0.49 | ) | 10.94 | 8.03 | 169,474 | 0.49 | (d) | 0.56 | (d) | 3.69 | (d) | 297 | ||||||||||||||||||||||||||||||||||||
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 | 0.66 | 3.52 | 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 $253,487, $23,689, $34,254, $2,699, $5,429 and $164,423 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. |
NOTE 13—Subsequent Event
Effective September 24, 2012, Institutional Class shares were renamed Class R5 shares, the Fund began offering Class R6 shares and the maximum sales charge for Class A shares changed from 4.75% to 4.25%.
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, 2012, 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, 2012 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
October 23, 2012
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, 2012 through August 31, 2012.
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 | (03/01/12) | (08/31/12)1 | Period2 | (08/31/12) | Period2 | Ratio | ||||||||||||||||||||||||
Class A | $ | 1,000.00 | $ | 1,038.20 | $ | 3.79 | $ | 1,021.42 | $ | 3.76 | 0.74 | % | ||||||||||||||||||
Class B | 1,000.00 | 1,034.40 | 7.62 | 1,017.65 | 7.56 | 1.49 | ||||||||||||||||||||||||
Class C | 1,000.00 | 1,033.40 | 7.62 | 1,017.65 | 7.56 | 1.49 | ||||||||||||||||||||||||
Class R | 1,000.00 | 1,036.90 | 5.07 | 1,020.16 | 5.03 | 0.99 | ||||||||||||||||||||||||
Class Y | 1,000.00 | 1,039.50 | 2.51 | 1,022.67 | 2.49 | 0.49 | ||||||||||||||||||||||||
Institutional | 1,000.00 | 1,038.60 | 2.51 | 1,022.68 | 2.49 | 0.49 | ||||||||||||||||||||||||
1 | The actual ending account value is based on the actual total return of the Fund for the period March 1, 2012 through August 31, 2012, 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 184/366 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 19-20, 2012, 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, 2012. 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 primarily 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, 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 and on what terms 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. In addition to meetings with Invesco Advisers and fund 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 independent legal 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 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 previously approved by a different board that, at the time, was responsible for overseeing Morgan Stanley and Van Kampen funds, which have become Invesco Funds following the acquisition of the retail mutual fund business of Morgan Stanley. 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 or factor 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 20, 2012, 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 Sub-Committees 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 prior relationship and 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 consistent 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 consistent 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 only two calendar years of comparative performance data was available for the Fund. The Board compared the Fund’s performance during the past two years to the performance of funds in the Lipper performance universe and
43 Invesco Core Plus Bond Fund
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 its performance universe for the one year period and the fifth quintile for the two 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 two year periods. 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 its 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 tended to be more comparable, reflecting a more comparable scope of services. 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 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 and were assisted in their review by a report from the Senior Officer. 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. The Board noted that Invesco Advisers proposes sharing economies of scale in administration expenses by lowering per class administrative fees.
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 for the year ended December 31, 2011. 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 Invesco Funds and the Fund. The Board did not deem the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund to be excessive given the nature, quality and extent of the services provided to the Invesco Funds. The Board received and accepted information from Invesco Advisers demonstrating that 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.
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. Invesco Advisers noted that the Fund does not execute brokerage transactions through “soft dollar” arrangements to any significant degree.
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, 2012:
Federal and State Income Tax | ||||
Long-Term Capital Gain Dividends | $ | 227,942 | ||
Qualified Dividend Income* | 0.23% | |||
Corporate Dividends Received Deduction* | 0.23% | |||
U.S. Treasury Obligations* | 7.80% |
* | 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 1000, 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 | Other Directorship(s) | |||||||
Name, Year of Birth and | Trustee and/or | Principal Occupation(s) | Funds in | Held by Trustee During | ||||
Position(s) Held with the Trust | Officer Since | During Past 5 Years | Fund Complex Overseen by Trustee | Past 5 Years | ||||
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 | 129 | 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. | 129 | None | ||||
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. | ||||||||
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 certain funds in the Fund Complex | 147 | Director of the Mutual Fund Directors Forum, a nonprofit membership organization for investment directors; Chairman and Director of the Abraham Lincoln Presidential Library Foundation; and Director of the Stevenson Center for Democracy | ||||
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 is considered an “interested person” (within the meaning of Section 2(a)(19) of the 1940 Act) of certain Funds in the Invesco Fund Complex by reason of he and his firm currently providing legal services as legal counsel to such Funds in the Invesco Fund Complex. |
T-1 Invesco Core Plus Bond Fund
Trustees and Officers—(continued)
Number of | Other Directorship(s) | |||||||
Name, Year of Birth and | Trustee and/or | Principal Occupation(s) | Funds in | Held by Trustee During | ||||
Position(s) Held with the Trust | Officer Since | During Past 5 Years | Fund Complex Overseen by Trustee | Past 5 Years | ||||
Independent Trustees | ||||||||
Bruce L. Crockett — 1944 Trustee and Chair | 2003 | Chairman, Crockett Technologies 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) | 129 | ACE Limited (insurance company); and Investment Company Institute | ||||
David C. Arch — 1945 Trustee | 2010 | Retired. Chairman and Chief Executive Officer of Blistex Inc., a consumer health care products manufacturer | 147 | Member of the Heartland Alliance Advisory Board, a nonprofit organization serving human needs based in Chicago. Board member of the Illinois Manufacturers’ Association. Member of the Board of Visitors, Institute for the Humanities, University of Michigan | ||||
Frank S. Bayley — 1939 Trustee | 2003 | Retired Formerly: Director, Badgley Funds, Inc. (registered investment company) (2 portfolios) and Partner, law firm of Baker & McKenzie | 129 | 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 | 129 | Chairman, Board of Governors, Western Golf Association, Chairman-elect, Evans Scholars Foundation and Director, Denver Film Society | ||||
Rodney F. Dammeyer — 1940 Trustee | 2010 | Chairman of CAC, LLC, a private company offering capital investment and management advisory services Formerly: Prior to January 2004, Director of TeleTech Holdings Inc.; Prior to 2002, Director of Arris Group, Inc.; Prior to 2001, Managing Partner at Equity Group Corporate Investments. Prior to 1995, Vice Chairman of Anixter International. Prior to 1985, experience includes Senior Vice President and Chief Financial Officer of Household International, Inc, Executive Vice President and Chief Financial Officer of Northwest Industries, Inc. and Partner of Arthur Andersen & Co. | 147 | 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) 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) | 129 | Director of Nature’s Sunshine Products, Inc. | ||||
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) Formerly: Chief Executive Officer, Texana Timber LP (sustainable forestry company) and member of the U.S. House of Representatives | 129 | Insperity (formerly known as Administaff) | ||||
Carl Frischling — 1937 Trustee | 2003 | Partner, law firm of Kramer Levin Naftalis and Frankel LLP | 129 | Director, Reich & Tang Funds (6 portfolios) | ||||
Prema Mathai-Davis — 1950 Trustee | 2003 | Retired Formerly: Chief Executive Officer, YWCA of the U.S.A. | 129 | None | ||||
Larry Soll — 1942 Trustee | 1997 | Retired Formerly, Chairman, Chief Executive Officer and President, Synergen Corp. (a biotechnology company) | 129 | None | ||||
T-2 Invesco Core Plus Bond Fund
Trustees and Officers—(continued)
Number of | Other Directorship(s) | |||||||
Name, Year of Birth and | Trustee and/or | Principal Occupation(s) | Funds in | Held by Trustee | ||||
Position(s) Held with the Trust | Officer Since | During Past 5 Years | Fund Complex Overseen by Trustee | During Past 5 Years | ||||
Independent Trustees—(continued) | ||||||||
Hugo F. Sonnenschein — 1940 Trustee | 2010 | Distinguished Service Professor and President Emeritus of the University of Chicago and the Adam Smith Distinguished Service Professor in the Department of Economics at the University of Chicago. Prior to July 2000, President of the University of Chicago | 147 | 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 | 129 | None | ||||
Other Officers | ||||||||
Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer, The 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 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) | N/A | N/A | ||||
Lisa O. Brinkley — 1959 Vice President | 2004 | Global Assurance Officer, Invesco Ltd. and Vice President, The Invesco Funds Formerly: Chief Compliance Officer, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.), Invesco Investment Services, Inc.(formerly known as Invesco Aim Investment Services, 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 | ||||
T-3 Invesco Core Plus Bond Fund
Trustees and Officers—(continued)
Number of | Other Directorship(s) | |||||||
Name, Year of Birth and | Trustee and/or | Principal Occupation(s) | Funds in | Held by Trustee | ||||
Position(s) Held with the Trust | Officer Since | During Past 5 Years | Fund Complex Overseen by Trustee | During Past 5 Years | ||||
Other Officers—(continued) | ||||||||
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., INVESCO Global Asset Management Limited, Invesco Management Company Limited and INVESCO Management S.A.; 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) 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) | 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); and 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 Formerly: Vice President, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc. | N/A | N/A | ||||
Yinka Akinsola — 1977 Anti-Money Laundering Compliance Officer | 2011 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.), Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.), Invesco Management Group, Inc., The Invesco Funds, Invesco Van Kampen Closed-End Funds, Van Kampen Exchange Corp., Van Kampen Funds Inc., PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, and PowerShares Actively Managed Exchange-Traded Fund Trust Formerly: Regulatory Analyst III, Financial Industry Regulatory Authority (FINRA). | N/A | N/A | ||||
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; Vice President, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) and Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.) Formerly: Senior Vice President, Van Kampen Investments Inc.; Senior Vice President and Chief Compliance Officer, Invesco Advisers, Inc. and Invesco Aim Capital Management, Inc.; Chief Compliance Officer, INVESCO Private Capital Investments, Inc. (holding company), Invesco Private Capital, Inc. (registered investment adviser), Invesco Global Asset Management (N.A.), Inc., Invesco Senior Secured Management, Inc. (registered investment adviser) and Van Kampen Investor Services Inc., 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 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 1000 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 1000 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 1000 Houston, TX 77046-1173 | Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
T-4 Invesco Core Plus Bond Fund
![(IMAGE)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8705512.gif)
Go Paperless with eDelivery Visit invesco.com/edelivery to receive quarterly statements, tax forms, fund reports and prospectuses with a service that’s all about eeees: — environmentally friendly. Go green by reducing the num- — efficient. Stop waiting for regular mail. Your documents ber of trees used to produce paper. will be sent via email as soon as they’re available. — economical. Help reduce your fund’s printing and delivery — easy. Download, save and print files using your home expenses and put more capital back in your fund’s returns. computer with a few clicks of your mouse. This service is provided by Invesco Investment Services, Inc. |
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 shown below.
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, 2012, 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 US 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.
![(IMAGE)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8705513.gif)
SEC file numbers: 811-09913 and 333-36074 | CPB-AR-1 | Invesco Distributors, Inc. |
![]() |
Annual Report to Shareholders August 31, 2012
Invesco Floating Rate Fund
Nasdaq:
A: AFRAX n C: AFRCX n R: AFRRX n Y: AFRYX n Institutional: AFRIX
A: AFRAX n C: AFRCX n R: AFRRX n Y: AFRYX n Institutional: AFRIX
2 | Letters to Shareholders | |
4 | Performance Summary | |
4 | Management Discussion | |
6 | Long-Term Fund Performance | |
8 | Supplemental Information | |
9 | Schedule of Investments | |
25 | Financial Statements | |
28 | Notes to Financial Statements | |
36 | Financial Highlights | |
37 | Auditor’s Report | |
38 | Fund Expenses | |
39 | Approval of Investment Advisory and Sub-Advisory Agreements | |
41 | Tax Information | |
T-1 | Trustees and Officers |
Letters to Shareholders
![(PHOTO OF PHILIP TAYLOR)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8707002.jpg)
Philip Taylor
Dear Shareholders:
This report contains information about your Fund, including a discussion from your portfolio managers about how they managed your Fund – and why it performed as it did – during the reporting period. This report also includes your Fund’s long-term performance and a complete list of your Fund’s investments as of the close of the reporting period. I hope you find this information helpful.
For much of the reporting period, investors’ attention was focused on Europe, where eurozone governments struggled to reduce debt levels, strengthen their banks and stimulate their economies. European leaders disagreed whether the wiser path to restoring the Continent’s economic well-being was more stimulus or greater austerity. In the US, economic data were mixed. Economic growth, while positive, was relatively modest. Corporate earnings, which have grown strongly in recent years, have begun to slow. And job creation has been less robust than hoped. Later in this report, your Fund’s portfolio managers discuss how economic conditions and market trends affected your Fund’s performance.
Economic conditions are always subject to sudden and unexpected change. That’s why you may find it helpful to work with a trusted, experienced financial adviser who understands your unique financial goals, needs and risk tolerances. Financial advisers can provide valuable insight and information, particularly when markets are turbulent, and they can recommend investments appropriate for specific investment goals, such as a child’s college education or your retirement. On a regular basis, a financial adviser also can determine whether your existing investments are still appropriate, given your changing needs, goals and circumstances.
Timely insight and information from many of Invesco’s investment professionals is available at our website, invesco.com/us. We offer in-depth articles, video clips and audio commentaries from many of our portfolio managers and other investment professionals on a wide range of topics of interest to investors: recent economic and market developments; retirement planning; legislative updates from Washington, DC; and general investor education. At invesco.com/us, you also can access information about your Invesco account at any time.
What we mean by Intentional Investing
Intentional InvestingSM is the science and art of investing with purpose, prudence and diligence – and it’s how Invesco’s investment professionals manage your money every day.
This highly disciplined process begins when specialized teams of investment professionals clearly define an investment objective and then establish specific investment strategies to try to achieve that objective. While our investment teams closely monitor economic and market conditions – and issues specific to individual holdings that could affect their value – they maintain a long-term investment perspective. Intentional Investing is also:
n | How we manage and mitigate risk – by embedding risk controls and processes into every aspect of our business; | ||
n | How we create products – by offering a diverse combination of investment strategies and vehicles designed to meet your needs; and | ||
n | How we connect with you, our investors – by communicating clearly, by delivering expert insights from our portfolio managers and other investment professionals, and by providing a website full of tools and articles to help you stay informed. |
As a company, Invesco believes in putting investors first, and that’s why investment management is all we do. Our sole focus on managing your money allows your financial adviser to build a truly diversified investment portfolio of Invesco funds, whatever your investment needs and goals may be – and allows him or her to find appropriate Invesco funds when your circumstances change. Of course, neither Intentional Investing nor diversification can guarantee a profit or protect against loss.
Have a question?
If you have questions about your account, please contact an Invesco client services representative at 800 959 4246. If you have an Invesco-related question or comment, feel free 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/0000950123-12-013037/h87055h8707003.gif)
Philip Taylor
Senior Managing Director, Invesco Ltd.
![-s- Philip Taylor](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8707003.gif)
Philip Taylor
Senior Managing Director, Invesco Ltd.
2 | Invesco Floating Rate Fund |
![(PHOTO OF BRUCE CROCKETT)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8707004.jpg)
Bruce Crockett
Dear Fellow Shareholders:
One of our most important responsibilities as independent Trustees of the Invesco Funds is our annual review of the funds’ advisory and sub-advisory contracts with Invesco. This annual review is required by the Investment Company Act of 1940 and focuses on the nature and quality of the services Invesco has provided as adviser to the Invesco Funds and the reasonableness of the fees that it charges for those services.
In our roles as Trustees, we spend months reviewing thousands of pages of detailed information that we request from Invesco in connection with our annual review. We focus on the quality and costs of the services to be provided by Invesco and its affiliates. Some of the most important things we look at are fund performance, expenses and fees. All of the Trustees have substantial personal investments in the Invesco Funds complex. We’re fund shareholders just like you.
We also use information from many independent sources during the review process, including materials provided by the independent Senior Officer of the Invesco Funds, who reports directly to the independent Trustees. We also meet in private sessions with independent legal counsel and review performance and fee data on the Invesco Funds prepared by Lipper Inc., an independent, third-party firm widely recognized as a leader in its field.
I’m pleased to report that the Invesco Funds Board determined in June that renewing the investment advisory agreement and the sub-advisory contracts with Invesco would serve the best interests of each fund and its shareholders. For more detailed information about our assessment and conclusions with respect to each of the Invesco Funds, visit invesco.com/us, click on the “About Us” section and go to “Legal Information.” Information on the recent investment advisory renewal process can be found by clicking the last item under “Corporate Governance.”
In much the same way we review your fund’s advisory contract each year, it’s a good idea for you to review your own investment plan with your financial adviser on a regular basis. Perhaps you need to reassess your original asset allocation because different investments may grow at varying paces, or perhaps you’re going through a significant life change. Regardless of your situation, a financial adviser can provide guidance and experience to help you reach your financial goals.
As always, please contact me at bruce@brucecrockett.com with any questions or concerns you may have. On behalf of the 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/0000950123-12-013037/h87055h8707005.gif)
Bruce L. Crockett
Independent Chair
Invesco Funds Board of Trustees
![-s- Bruce L. Crockett](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8707005.gif)
Bruce L. Crockett
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, 2012, Invesco Floating Rate Fund, at net asset value (NAV), outperformed its style-specific benchmark, the CS Leveraged Loan Index, as well as its peer group, the Lipper Loan Participation Funds Classification Average. 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, 8/31/11 to 8/31/12, 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 | 10.75 | |||
Class C Shares | 10.24 | |||
Class R Shares | 10.61 | |||
Class Y Shares | 11.19 | |||
Institutional Class Shares | 11.13 | |||
Barclays U.S. Aggregate Index▼ (Broad Market Index) | 5.78 | |||
CS Leveraged Loan Index■ (Style-Specific Index) | 9.83 | |||
Lipper Loan Participation Funds Classification Average♦ (Peer Group) | 9.88 |
Source(s): ▼ Invesco, Barclays via FactSet Research Systems Inc.; ■ Invesco, Bloomberg L.P.; ♦ Lipper Inc.
How we invest
We seek total return, comprised of current income and capital appreciation, by investing primarily in senior secured floating rate loans made by banks and other lending institutions and in senior secured floating rate debt instruments. Our credit analysts review all holdings and prospective holdings. Key consideration is given to the following:
Portfolio Composition
By credit quality†
Baa2 | 1.3 | % | ||
Baa3 | 0.7 | |||
Ba1 | 5.7 | |||
Ba2 | 11.1 | |||
Ba3 | 25.6 | |||
B1 | 24.2 | |||
B2 | 11.4 | |||
B3 | 2.6 | |||
Caa1 | 5.1 | |||
Caa2 | 0.6 | |||
Caa3 | 0.1 | |||
Ca or Lower | 0.2 | |||
Non-Rated | 10.6 | |||
Equity | 0.8 |
† | 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. |
n | Management. Factors include direct operating experience in managing a business, management depth and incentives and track record operating in a leveraged environment. |
n | Industry position and dynamics. Factors include a company’s industry position, life cycle phase of the industry, barriers to entry and current industry capacity and utilization. |
Top 10 Issuers*
1. | Reynolds Group Holdings Inc. | 2.2 | % | |||||
2. | Caesars Entertainment Operating Co. | 2.0 | ||||||
3. | Univision Communications Inc. | 1.8 | ||||||
4. | First Data Corp. | 1.7 | ||||||
5. | Clear Channel Communications, Inc. | 1.4 | ||||||
6. | Kinetic Concepts, Inc. | 1.4 | ||||||
7. | Tribune Co. | 1.3 | ||||||
8. | Mediacom Communications Corp. | 1.1 | ||||||
9. | Banc of America Large Loan Inc. | 1.1 | ||||||
10. | Texas Competitive Electric Holdings Co., LLC | 1.0 |
Total Net Assets | $932.4 million | |||
Total Number of Holdings* | 473 |
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. |
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 a firm’s track record of quality transactions, access to additional capital and control or ownership of the sponsoring firm. | |
n | Cash flow. We examine a 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 the business cycles, seasonality, international pressures and so forth. | |
n | Recovery and loan-to-value. These factors focus on further examination of the default probability and the rate of recovery associated with loans. |
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.
Utilizing our proprietary risk rating system, our analysts assign, continuously monitor and update probability of default and expected recovery ratings for every asset in the portfolio. Using the resulting risk adjusted returns, analysts monitor positions relative to market levels to detect early sell signals in an attempt to minimize principal loss and maximize relative value.
Market conditions and your Fund
During the fiscal year covered by this report, the senior secured loan market, while experiencing a few periods of price declines, generated a strong 12-month return. Although loan prices fell amid concern about the ongoing eurozone sovereign debt crisis, each dip in the loan market was followed by a rally that pushed loans to a new high.
Furthermore, while loan performance was correlated with equities and other high risk assets, for the first time since the financial crisis began, loans were less volatile than other asset classes as collateralized loan obligation (CLO) issuance – a factor largely missing from the loan market since 2007 – created stable demand for loans. Still, loan
4 Invesco Floating Rate Fund
market swings due to macroeconomic events seemed to overshadow generally good underlying credit performance.
Assurances by the US Federal Reserve to keep interest rates low through 2014 continued to dampen interest in loans from retail investors; however, institutional demand for loans steadily increased throughout 2012. Increased demand from institutional investors, whether in the form of CLO buying or unlevered strategic allocations, was driven by competitive yields offered by senior secured loans and a more favorable economic outlook.
Corporate issuers in the senior secured loan market benefited from robust capital markets during the last two years, and issuers maintained generally good credit performance, strengthened their balance sheets, improved liquidity and addressed near-term maturities. The default rate rose slightly from the 2011 low, but at the close of the reporting period, loan defaults remained comfortably below historical averages.1
We managed the Fund with a view toward taking advantage of what appeared to be a slowly 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 dated fixed income investments.
We managed the Fund with a view toward taking advantage of what appeared to be a slowly 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 dated fixed income investments.
As part of the Fund’s investment strategy, we seek to take advantage of market opportunities by decreasing risk in the Fund when we believe loans are overbought and increasing risk when we believe loans are oversold. The Fund benefited from some of the newer primary deals that exhibited lower levels of market volatility during the reporting period. On an industry basis, the Fund benefited from its utilities and gaming holdings; our allocation to structured products also benefited Fund performance.
At the close of the reporting period, fundamentals remained favorable for bank loans, with corporate balance sheets generally healthy and default rates below 2%.1 The eurozone sovereign debt crisis continued to be a source of concern for both technical and fundamental reasons. As a result of our caution over the near-term technicals in the loan market, we repositioned the Fund from a credit perspective during the reporting period by decreasing our exposure to lower quality issues and increasing our exposure to higher quality issues. In addition, we increased diversification in the
portfolio by adding to the Fund’s high yield bond exposure; however, high yield bonds remained a small part of the Fund’s overall holdings. Diversification, of course, cannot guarantee a profit or protect against loss.
At the close of the reporting period, the Fund was less aggressively positioned than it had been at the beginning of the reporting period, and we felt that it reflected an appropriate mix of caution and aggressiveness given the current market environment.
As always, we appreciate your continued participation in Invesco Floating Rate Fund.
1 | Source: Standard & Poor’s |
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/0000950123-12-013037/h87055h8707006.jpg)
Tom Ewald
Portfolio manager, is lead manager of Invesco Floating Rate Fund. He joined Invesco in 2000. Mr. Ewald earned a BA from Harvard College and an MBA from the University of Virginia Darden School of Business.
Portfolio manager, is lead manager of Invesco Floating Rate Fund. He joined Invesco in 2000. Mr. Ewald earned a BA from Harvard College and an MBA from the University of Virginia Darden School of Business.
![(PHOTO OF TOM EWALD)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8707007.jpg)
Greg Stoeckle
Portfolio manager, is manager of Invesco Floating Rate Fund. He joined Invesco in 1999. Mr. Stoeckle earned a BS in applied math and economics from Ursinus College and an MBA in finance from Saint Joseph’s University.
Portfolio manager, is manager of Invesco Floating Rate Fund. He joined Invesco in 1999. Mr. Stoeckle earned a BS in applied math and economics from Ursinus College and an MBA in finance 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(es)
Fund and index data from 8/31/02*
Fund and index data from 8/31/02*
![(BAR GRAPH)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8707008.gif)
1 | Sources: Invesco, Bloomberg L.P. | |
2 | Sources: Invesco, Barclays via FactSet Research Systems Inc. | |
3 | Source: Lipper Inc. | |
* | During the reporting period, Invesco changed its policy regarding growth of $10,000 charts. For funds older than 10 years, we previously showed performance since inception. Going forward, we will show performance for the most recent 10 years, since this more accurately reflects the experience of the typical shareholder. As a result, charts now may include benchmarks that did not appear previously, because the funds’ inception predated the benchmarks’ inception. Also, all charts will now be presented using a linear format. |
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; perfor-
mance 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.
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 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 | 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. |
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. |
About indexes used in this report
n | The Barclays U.S. Aggregate Index is an unmanaged index considered representative of the US investment-grade, fixed-rate bond market. | |
n | The CS Leveraged Loan Index represents tradable, senior-secured, US dollar-denominated, non-investment grade loans. | |
n | The Lipper Loan Participation Funds Classification Average represents an average of all the funds in the Lipper Loan Participation Funds classification. |
continued on page 7
6 Invesco Floating Rate Fund
Average Annual Total Returns
As of 8/31/12, including maximum applicable sales charges
Class A Shares | ||||
Inception (5/1/97) | 4.03 | % | ||
10 Years | 3.98 | |||
5 Years | 2.97 | |||
1 Year | 7.96 | |||
Class C Shares | ||||
Inception (3/31/00) | 3.35 | % | ||
10 Years | 3.80 | |||
5 Years | 2.89 | |||
1 Year | 9.24 | |||
Class R Shares | ||||
10 Years | 4.10 | % | ||
5 Years | 3.28 | |||
1 Year | 10.61 | |||
Class Y Shares | ||||
10 Years | 4.32 | % | ||
5 Years | 3.65 | |||
1 Year | 11.19 | |||
Institutional Class Shares | ||||
10 Years | 4.46 | % | ||
5 Years | 3.81 | |||
1 Year | 11.13 |
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.
Average Annual Total Returns
As of 6/30/12, the most recent calendar quarter-end, including maximum applicable sales charges
Class A Shares | ||||
Inception (5/1/97) | 3.93 | % | ||
10 Years | 3.63 | |||
5 Years | 1.80 | |||
1 Year | 1.05 | |||
Class C Shares | ||||
Inception (3/31/00) | 3.24 | % | ||
10 Years | 3.46 | |||
5 Years | 1.79 | |||
1 Year | 2.29 | |||
Class R Shares | ||||
10 Years | 3.76 | % | ||
5 Years | 2.14 | |||
1 Year | 3.41 | |||
Class Y Shares | ||||
10 Years | 3.97 | % | ||
5 Years | 2.47 | |||
1 Year | 3.92 | |||
Institutional Class Shares | ||||
10 Years | 4.11 | % | ||
5 Years | 2.66 | |||
1 Year | 4.01 |
Class R 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.
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 1.00%, 1.50%, 1.25%, 0.75% and 0.69%, 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.
Had the adviser not waived fees and/or reimbursed expenses in the past, performance would have been lower.
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 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, 2012, 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 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 | 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 | Counterparty risk. Counterparty risk is the risk that the other party to the contract will not fulfill its contractual obligations, which may cause losses or additional costs to the Fund. | |
n | Credit linked notes risk. Risks of credit linked notes include those risks associated with the underlying reference obli- |
gation 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. The performance of derivative instruments is tied to the performance of an underlying currency, security, index or other instrument. In addition to risks relating to their underlying instruments, the use of derivatives may include other, possibly greater, risks. Derivatives involve costs, may be volatile, and may involve a small initial investment relative to the risk assumed. Risks associated with the use of derivatives include counterparty, leverage, correlation, liquidity, tax, market and interest rate and management risks. Derivatives may also be more difficult to purchase, sell or value than other investments. The Fund may lose more than the cash amount invested on investments in derivatives. Investors should bear in mind that, while the Fund intends to use derivative strategies, it is not obligated to actively engage in these trans- |
actions, generally or in any particular kind of derivative, if the investment manager elects not to do so due to availability, cost, market conditions or other factors. | ||
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 | 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 | Industry focus risk. To the extent a 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. |
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
August 31, 2012
Principal | ||||||||||||||||
Interest | Maturity | Amount | ||||||||||||||
Rate | Date | (000) | Value | |||||||||||||
Variable Rate Senior Loan Interests–88.12%(a)(b) | ||||||||||||||||
Aerospace & Defense–2.74% | ||||||||||||||||
ARINC Inc., Second Lien Term Loan | 6.24 | % | 10/25/15 | $ | 1,142 | $ | 1,123,707 | |||||||||
Aveos Fleet Performance Inc. (Canada), Revolver Loan (Acquired 01/28/11-04/19/11; Cost $497,455)(c)(d) | 0.00 | % | 03/12/13 | 497 | 470,095 | |||||||||||
Second Lien Term Loan (Take Back) (Acquired 10/23/07-12/30/11; Cost $1,587,792)(c)(d) | 0.00 | % | 03/12/15 | 1,375 | 962,201 | |||||||||||
Term Loan (Acquired 03/12/10; Cost $562,246)(c)(d) | 0.00 | % | 03/12/13 | 565 | 532,676 | |||||||||||
Booz Allen Hamilton Inc., Term Loan B | 4.50 | % | 07/31/19 | 2,566 | 2,575,384 | |||||||||||
Camp Systems International, Inc., First Lien Term Loan | 6.50 | % | 05/31/19 | 708 | 715,339 | |||||||||||
DAE Aviation Holdings, Inc., | ||||||||||||||||
Tranche B-1 Term Loan | 5.45 | % | 07/31/14 | 2,235 | 2,235,489 | |||||||||||
Tranche B-2 Term Loan | 5.45 | % | 07/31/14 | 1,911 | 1,911,067 | |||||||||||
DynCorp International LLC, Term Loan B | 6.25 | % | 07/07/16 | 1,590 | 1,592,018 | |||||||||||
IAP Worldwide Services, Inc., PIK First Lien Term Loan(e) | 9.25 | % | 12/28/12 | 3,254 | 2,806,535 | |||||||||||
PRV Aerospace LLC, Term Loan B (Acquired 05/11/12; Cost $1,693,993) | 6.50 | % | 05/09/18 | 1,702 | 1,703,843 | |||||||||||
Sequa Corp., Term Loan | 3.72 | % | 12/03/14 | 3,615 | 3,603,408 | |||||||||||
Term Loan | 6.25 | % | 12/03/14 | 1,972 | 1,983,981 | |||||||||||
SI Organization, Inc., Term Loan B | 4.50 | % | 11/22/16 | 301 | 294,879 | |||||||||||
TASC, Inc., Term Loan B | 4.50 | % | 12/18/15 | 2,104 | 2,088,117 | |||||||||||
Wyle Services Corp., Term Loan B | 5.00 | % | 03/27/17 | 924 | 920,109 | |||||||||||
25,518,848 | ||||||||||||||||
Air Transport–0.33% | ||||||||||||||||
Delta Air Lines, Inc., Revolver Loan(f) | 0.00 | % | 03/28/13 | 1,500 | 1,478,910 | |||||||||||
Term Loan B | 4.25 | % | 03/07/16 | 1,610 | 1,593,549 | |||||||||||
3,072,459 | ||||||||||||||||
Automotive–4.16% | ||||||||||||||||
August Lux U.K. Holding Co., Second Lien Term Loan (Acquired 05/04/12; Cost $249,452) | 10.50 | % | 04/29/19 | 256 | 257,462 | |||||||||||
Term Loan (Acquired 05/03/12; Cost $541,220) | 6.25 | % | 04/27/18 | 552 | 555,868 | |||||||||||
August U.S. Holding Co., Inc., Second Lien Term Loan (Acquired 05/04/12; Cost $192,058) | 10.50 | % | 04/29/19 | 197 | 198,223 | |||||||||||
Term Loan B (Acquired 05/03/12; Cost $416,337) | 6.25 | % | 04/27/18 | 424 | 427,599 | |||||||||||
Federal-Mogul Corp., Term Loan B | 2.18 | % | 12/29/14 | 5,180 | 4,957,580 | |||||||||||
Term Loan C | 2.18 | % | 12/28/15 | 1,304 | 1,248,235 | |||||||||||
General Motors Holdings, Revolver Loan(f) | 0.00 | % | 10/27/15 | 8,254 | 7,631,747 | |||||||||||
Goodyear Tire & Rubber Company (The), Second Lien Term Loan | 4.75 | % | 04/30/19 | 2,069 | 2,065,988 | |||||||||||
KAR Auction Services, Inc., Term Loan B | 5.00 | % | 05/19/17 | 6,246 | 6,269,164 | |||||||||||
Key Safety Systems, Inc., First Lien Term Loan | 2.58 | % | 03/08/14 | 3,414 | 3,362,038 | |||||||||||
Metaldyne Co., LLC, Term Loan B | 5.25 | % | 05/18/17 | 1,745 | 1,760,043 | |||||||||||
Schaeffler AG (Germany), Term Loan C2 | 6.00 | % | 01/27/17 | 5,737 | 5,770,348 | |||||||||||
TI Group Automotive Systems, LLC, Term Loan | 6.75 | % | 03/14/18 | 4,117 | 4,012,006 | |||||||||||
Tomkins LLC, New Term Loan B | 4.25 | % | 09/29/16 | 45 | 44,820 | |||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
9 Invesco Floating Rate Fund
Principal | ||||||||||||||||
Interest | Maturity | Amount | ||||||||||||||
Rate | Date | (000) | Value | |||||||||||||
Automotive–(continued) | ||||||||||||||||
Veyance Technologies, Inc., Delayed Draw Term Loan | 2.49 | % | 07/31/14 | $ | 25 | $ | 24,307 | |||||||||
Term Loan | 2.49 | % | 07/31/14 | 174 | 169,703 | |||||||||||
38,755,131 | ||||||||||||||||
Beverage and Tobacco–0.18% | ||||||||||||||||
DS Waters Enterprises, L.P., First Lien Term Loan (Acquired 02/27/12-03/26/12; Cost $1,625,814) | 10.50 | % | 08/29/17 | 1,651 | 1,702,690 | |||||||||||
Building & Development–3.94% | ||||||||||||||||
Capital Automotive L.P., Term Loan B | 5.25 | % | 03/10/17 | 8,764 | 8,800,225 | |||||||||||
CB Richard Ellis Services, Inc., Term Loan C | 3.48 | % | 03/05/18 | 334 | 333,262 | |||||||||||
Term Loan D | 3.74 | % | 09/04/19 | 8,897 | 8,869,517 | |||||||||||
Central Parking Corp., Second Lien Term Loan | 5.00 | % | 11/22/14 | 26 | 24,374 | |||||||||||
Syn LOC | 2.50 | % | 05/22/14 | 63 | 62,484 | |||||||||||
Term Loan | 2.50 | % | 05/22/14 | 137 | 135,643 | |||||||||||
Champion OPCO, LLC, PIK Term Loan(e) | 10.50 | % | 12/31/13 | 1,152 | 825,727 | |||||||||||
Custom Building Products, Inc., Term Loan B | 5.75 | % | 03/19/15 | 974 | 971,737 | |||||||||||
HD Supply, Inc., Term Loan B | 7.25 | % | 10/12/17 | 3,045 | 3,122,322 | |||||||||||
Lake at Las Vegas Joint Venture, LLC, PIK Exit Revolver Loan (Acquired 08/09/12; Cost $19,988)(e)(f) | 0.00 | % | 02/28/17 | 20 | 18,489 | |||||||||||
PIK Exit Revolver Loan (Acquired 02/29/12; Cost $122,483)(e) | 5.00 | % | 02/28/17 | 122 | 113,297 | |||||||||||
Nortek, Inc., Term Loan | 5.25 | % | 04/26/17 | 1,696 | 1,712,457 | |||||||||||
Re/Max International, Inc., Term Loan | 5.50 | % | 04/15/16 | 2,070 | 2,067,846 | |||||||||||
Realogy Corp., Extended LOC | 4.50 | % | 10/10/16 | 82 | 79,163 | |||||||||||
Extended Term Loan | 4.49 | % | 10/10/16 | 6,742 | 6,536,950 | |||||||||||
Revolver Loan(f) | 0.00 | % | 04/08/16 | 2,515 | 2,200,410 | |||||||||||
Revolver Loan | 3.46 | % | 04/08/16 | 831 | 726,915 | |||||||||||
United Subcontractors, Inc., Term Loan (Acquired 02/15/06-06/29/12; Cost $1,375,519) | 4.47 | % | 06/30/15 | 119 | 112,815 | |||||||||||
36,713,633 | ||||||||||||||||
Business Equipment & Services–6.94% | ||||||||||||||||
Acosta, Inc., Term Loan C | 5.75 | % | 03/01/18 | 665 | 668,132 | |||||||||||
Advantage Sales & Marketing, Inc., Second Lien Term Loan | 9.25 | % | 06/18/18 | 318 | 318,271 | |||||||||||
Affinion Group, Inc., Term Loan B | 5.00 | % | 07/15/15 | 2,683 | 2,297,200 | |||||||||||
Asurion LLC, First Lien Term Loan | 5.50 | % | 05/24/18 | 7,361 | 7,395,978 | |||||||||||
Second Lien Term Loan | 9.00 | % | 05/24/19 | 980 | 1,017,311 | |||||||||||
Bright Horizons Family Solutions, Inc., Term Loan B | 4.24 | % | 05/28/15 | 2,387 | 2,380,942 | |||||||||||
Brock Holdings III, Inc., Term Loan B | 6.01 | % | 03/16/17 | 238 | 238,536 | |||||||||||
Connolly Holdings, Inc., First Lien Term Loan | 6.50 | % | 07/13/18 | 2,086 | 2,091,122 | |||||||||||
Emdeon, Inc., Term Loan B1 | 5.00 | % | 11/02/18 | 721 | 723,360 | |||||||||||
Expert Global Solutions, Inc., Term Loan B | 8.00 | % | 04/03/18 | 2,889 | 2,894,369 | |||||||||||
First Data Corp., Extended Term Loan B | 5.24 | % | 03/24/17 | 4,291 | 4,220,849 | |||||||||||
Extended Term Loan B | 4.24 | % | 03/23/18 | 6,985 | 6,622,871 | |||||||||||
Term Loan B | 5.24 | % | 03/24/17 | 2,434 | 2,397,604 | |||||||||||
Term Loan B3 | 2.99 | % | 09/24/14 | 88 | 87,209 | |||||||||||
Hillman Group, Inc., Term Loan B | 5.00 | % | 05/27/16 | 1,531 | 1,536,592 | |||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
10 Invesco Floating Rate Fund
Principal | ||||||||||||||||
Interest | Maturity | Amount | ||||||||||||||
Rate | Date | (000) | Value | |||||||||||||
Business Equipment & Services–(continued) | ||||||||||||||||
iPayment, Inc., Term Loan B | 5.75 | % | 05/08/17 | $ | 3,035 | $ | 3,048,027 | |||||||||
Koosharem Corp. (Select Remedy), First Lien Term Loan(c) | 10.25 | % | 06/30/14 | 735 | 524,568 | |||||||||||
Second Lien Term Loan (Acquired 07/18/07-09/30/11; Cost $362,300)(c)(g) | — | 12/31/14 | 362 | 45,287 | ||||||||||||
Kronos Inc. Second Lien Tranche B1 | 10.46 | % | 06/11/18 | 3,256 | 3,288,206 | |||||||||||
Lamar Media Corp., Term Loan B | 4.00 | % | 12/30/16 | 129 | 129,489 | |||||||||||
Lonestar Intermediate Super Holdings, LLC, Term Loan B | 11.00 | % | 09/02/19 | 2,788 | 2,973,126 | |||||||||||
RGIS Services, LLC Term Loan C | 5.50 | % | 10/18/17 | 884 | 879,178 | |||||||||||
Sabre, Inc. Incremental Term Loan | 7.25 | % | 12/29/17 | 2,225 | 2,224,126 | |||||||||||
Securus Technologies Holdings, Inc., Term Loan | 6.50 | % | 05/31/17 | 1,476 | 1,471,209 | |||||||||||
Add on Term Loan | 6.50 | % | 05/31/17 | 534 | 530,515 | |||||||||||
SS&C Technologies Inc., Term Loan B-1 | 5.00 | % | 06/07/19 | 2,701 | 2,713,257 | |||||||||||
Term Loan B-2 | 5.00 | % | 06/07/19 | 279 | 280,682 | |||||||||||
SSI Investments II Ltd., Term Loan B | 6.50 | % | 05/26/17 | 769 | 775,984 | |||||||||||
Term Loan C | 6.50 | % | 05/26/17 | 595 | 600,456 | |||||||||||
Sungard Data Systems, Inc., Term Loan B | 3.92 | % | 02/26/16 | 3,889 | 3,894,549 | |||||||||||
Term Loan C | 3.99 | % | 02/28/17 | 1,379 | 1,378,291 | |||||||||||
West Corp., Revolver Loan(f) | 0.00 | % | 01/15/16 | 1,748 | 1,573,039 | |||||||||||
Term Loan B4 | 5.50 | % | 07/15/16 | 1,836 | 1,844,359 | |||||||||||
Term Loan B5 | 5.50 | % | 07/15/16 | 70 | 70,189 | |||||||||||
Term Loan B6 | 5.75 | % | 06/29/18 | 1,596 | 1,605,652 | |||||||||||
64,740,535 | ||||||||||||||||
Cable & Satellite Television–5.91% | ||||||||||||||||
AMC Networks Inc., Term Loan B | 4.00 | % | 12/31/18 | 1,166 | 1,168,076 | |||||||||||
Atlantic Broadband Finance, LLC, First Lien Term Loan | 5.25 | % | 04/04/19 | 2,289 | 2,300,059 | |||||||||||
Second Lien Term Loan | 9.75 | % | 10/04/19 | 2,182 | 2,288,639 | |||||||||||
Bresnan Broadband Holdings, LLC, Term Loan B | 4.50 | % | 12/14/17 | 2,396 | 2,408,214 | |||||||||||
Cequel Communications, LLC, Term Loan B | 4.00 | % | 02/14/19 | 4,284 | 4,286,277 | |||||||||||
Charter Communications Operating, LLC, Extended Term Loan | 3.49 | % | 09/06/16 | 6,712 | 6,713,613 | |||||||||||
CSC Holdings, Inc., Incremental B-2 Term Loan | 1.98 | % | 03/29/16 | 3,459 | 3,462,666 | |||||||||||
Kabel Deutschland GmbH (Germany), Term Loan F | 4.25 | % | 02/01/19 | 2,674 | 2,678,828 | |||||||||||
MCC Illinois, LLC, Term Loan E | 4.50 | % | 10/23/17 | 1,973 | 1,952,734 | |||||||||||
Mediacom Communications Corp. | ||||||||||||||||
Term Loan D-1 | 1.94 | % | 01/30/15 | 1,961 | 1,911,707 | |||||||||||
Term Loan D-2 | 1.94 | % | 01/30/15 | 271 | 264,403 | |||||||||||
Term Loan F | 4.50 | % | 10/23/17 | 7,879 | 7,813,557 | |||||||||||
TWCC Holding Corp., Term Loan B | 4.25 | % | 02/13/17 | 1,994 | 2,004,939 | |||||||||||
UPC Financing Partnership (Netherlands), | ||||||||||||||||
Facility Term Loan AB | 4.75 | % | 12/29/17 | 483 | 486,514 | |||||||||||
Term Loan X | 3.75 | % | 12/29/17 | 5,000 | 4,950,000 | |||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
11 Invesco Floating Rate Fund
Principal | ||||||||||||||||
Interest | Maturity | Amount | ||||||||||||||
Rate | Date | (000) | Value | |||||||||||||
Cable & Satellite Television–(continued) | ||||||||||||||||
WaveDivision Holdings LLC, Term Loan B | 2.48 | % | 06/30/14 | $ | 2,370 | $ | 2,370,517 | |||||||||
Term Loan C | 2.48 | % | 06/30/14 | 1,500 | 1,500,450 | |||||||||||
WideOpenWest Finance LLC, First Lien Term Loan | 6.25 | % | 07/17/18 | 4,021 | 4,029,382 | |||||||||||
Yankee Cable Acquisition, LLC, Term Loan B | 5.25 | % | 08/26/16 | 2,485 | 2,490,758 | |||||||||||
55,081,333 | ||||||||||||||||
Chemicals & Plastics–4.38% | ||||||||||||||||
Ascend Performance Materials LLC, Term Loan B | 6.75 | % | 04/10/18 | 3,596 | 3,580,507 | |||||||||||
Aster Zweite Beteiligungs GmbH (Germany), Extended Term Loan B5 | 5.97 | % | 12/30/16 | 721 | 687,824 | |||||||||||
Extended Term Loan C5 | 5.97 | % | 12/30/16 | 738 | 704,286 | |||||||||||
Emerald Performance Materials, LLC, Term Loan B (Acquired 05/15/12; Cost $1,168,600) | 6.75 | % | 05/18/18 | 1,180 | 1,179,879 | |||||||||||
Houghton International, Inc., Term Loan B | 6.75 | % | 01/29/16 | 1,702 | 1,719,480 | |||||||||||
Ineos Holdings Ltd., Term Loan | 6.50 | % | 05/04/18 | 6,194 | 6,219,587 | |||||||||||
Kronos Worldwide Inc. Term Loan B | 5.75 | % | 06/13/18 | 4,260 | 4,286,664 | |||||||||||
Momentive Specialty Chemicals Inc., Extended Term Loan C-5B (Acquired 01/29/10-04/16/10; Cost $2,933,215) | 4.25 | % | 05/05/15 | 3,041 | 2,934,439 | |||||||||||
Extended Term Loan C-7B | 4.25 | % | 05/05/15 | 4,116 | 3,941,253 | |||||||||||
Term Loan C-3 Credit Linked Deposit | 2.38 | % | 05/03/13 | 88 | 84,448 | |||||||||||
OM Group, Inc., Term Loan B | 5.75 | % | 08/02/17 | 1,494 | 1,504,001 | |||||||||||
OMNOVA Solutions, Inc., Term Loan B | 5.50 | % | 05/31/17 | 4,156 | 4,189,349 | |||||||||||
Phillips Plastics Corp., Term Loan | 6.50 | % | 02/10/17 | 747 | 744,619 | |||||||||||
PolyOne Corp., Term Loan | 5.00 | % | 12/20/17 | 881 | 887,986 | |||||||||||
Potters Holdings II, L.P., First Lien Term Loan | 6.00 | % | 05/05/17 | 1,572 | 1,565,755 | |||||||||||
PQ Corp., Term Loan B | 3.98 | % | 07/30/14 | 4,435 | 4,372,727 | |||||||||||
Taminco Global Chemical Corp., Term Loan B1 | 5.25 | % | 02/15/19 | 1,294 | 1,300,958 | |||||||||||
Univar Inc., Term Loan B | 5.00 | % | 06/30/17 | 944 | 940,758 | |||||||||||
40,844,520 | ||||||||||||||||
Clothing & Textiles–0.67% | ||||||||||||||||
Ascena Retail Group, Inc., Term Loan B | 4.75 | % | 06/14/18 | 813 | 820,013 | |||||||||||
Levi Strauss & Co., Term Loan | 2.50 | % | 04/04/14 | 4,002 | 3,964,932 | |||||||||||
Warnaco, Inc., Term Loan | 3.75 | % | 06/15/18 | 669 | 671,714 | |||||||||||
Wolverine Worldwide, Inc., Term Loan B(g) | — | 06/26/19 | 804 | 812,149 | ||||||||||||
6,268,808 | ||||||||||||||||
Conglomerates–0.39% | ||||||||||||||||
Goodman Global Holdings, Inc., First Lien Term Loan | 5.75 | % | 10/28/16 | 2,267 | 2,277,833 | |||||||||||
Second Lien Term Loan | 9.00 | % | 10/30/17 | 188 | 191,139 | |||||||||||
Rexnord LLC, Term Loan B | 5.00 | % | 04/02/18 | 1,187 | 1,195,315 | |||||||||||
3,664,287 | ||||||||||||||||
Containers & Glass Products–2.87% | ||||||||||||||||
BWAY Corp., Canadian Term Loan C | 4.25 | % | 02/23/18 | 205 | 205,544 | |||||||||||
Term Loan B | 4.25 | % | 02/23/18 | 2,034 | 2,039,514 | |||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
12 Invesco Floating Rate Fund
Principal | ||||||||||||||||
Interest | Maturity | Amount | ||||||||||||||
Rate | Date | (000) | Value | |||||||||||||
Containers & Glass Products–(continued) | ||||||||||||||||
Consolidated Container Company LLC, Term Loan | 6.25 | % | 07/03/19 | $ | 1,278 | $ | 1,291,045 | |||||||||
Exopack, LLC, Term Loan | 6.50 | % | 05/31/17 | 2,803 | 2,732,966 | |||||||||||
Hoffmaster Group, Inc., First Lien Term Loan | 6.50 | % | 01/03/18 | 1,377 | 1,373,665 | |||||||||||
Pertus Sechszehnte GmbH (Germany), Term Loan B2 | 2.71 | % | 06/12/15 | 500 | 438,750 | |||||||||||
Term Loan C2 | 2.96 | % | 06/13/16 | 500 | 441,250 | |||||||||||
Ranpak Corp., Term Loan | 4.75 | % | 04/20/17 | 488 | 484,944 | |||||||||||
Reynolds Group Holdings Inc., Term Loan B | 6.50 | % | 02/09/18 | 1,414 | 1,426,309 | |||||||||||
Term Loan C | 6.50 | % | 08/09/18 | 13,137 | 13,340,002 | |||||||||||
Sealed Air Corp., Term Loan B | 4.75 | % | 10/03/18 | 986 | 994,448 | |||||||||||
TricorBraun, Inc., Term Loan B | 5.50 | % | 05/03/18 | 2,017 | 2,021,117 | |||||||||||
26,789,554 | ||||||||||||||||
Cosmetics & Toiletries–1.88% | ||||||||||||||||
Bausch & Lomb, Inc., Term Loan B | 5.25 | % | 05/17/19 | 6,355 | 6,388,921 | |||||||||||
Huish Detergents, Inc., Incremental Term Loan B | 2.24 | % | 04/25/14 | 3,243 | 3,049,853 | |||||||||||
Second Lien Term Loan | 4.49 | % | 10/26/14 | 1,000 | 905,310 | |||||||||||
National Vision, Inc. Term Loan B | 7.00 | % | 08/10/18 | 1,783 | 1,809,521 | |||||||||||
Nice-Pak Products, Inc., Term Loan (Acquired 07/25/07-01/05/10; Cost $552,395) | 5.25 | % | 06/18/14 | 557 | 473,834 | |||||||||||
Revlon Consumer Products Corp., Term Loan B | 4.75 | % | 11/17/17 | 4,874 | 4,875,208 | |||||||||||
17,502,647 | ||||||||||||||||
Drugs–2.07% | ||||||||||||||||
Catalent Pharma Solutions, Inc., Extended Term Loan B | 4.23 | % | 09/15/16 | 148 | 148,338 | |||||||||||
Incremental Term Loan | 5.25 | % | 09/15/17 | 1,002 | 1,009,823 | |||||||||||
Grifols Inc., Term Loan B | 4.50 | % | 06/01/17 | 5,255 | 5,280,431 | |||||||||||
Harlan Sprague Dawley, Inc., Term Loan B | 3.83 | % | 07/11/14 | 2,294 | 2,149,409 | |||||||||||
Medpace, Inc., Term Loan (Acquired 06/21/11-08/17/12; Cost $2,828,413) | 6.50 | % | 06/16/17 | 2,878 | 2,762,622 | |||||||||||
Quintiles Transnational Corp., Term Loan | 7.50 | % | 02/22/17 | 748 | 759,307 | |||||||||||
Term Loan B | 5.00 | % | 06/08/18 | 2,672 | 2,683,799 | |||||||||||
Warner Chilcott Co., PLC, Incremental Term Loan B1 | 4.25 | % | 03/15/18 | 663 | 660,707 | |||||||||||
Term Loan B1 | 4.25 | % | 03/15/18 | 1,745 | 1,739,863 | |||||||||||
Term Loan B2 | 4.25 | % | 03/15/18 | 872 | 869,931 | |||||||||||
Term Loan B3 | 4.25 | % | 03/15/18 | 1,199 | 1,196,155 | |||||||||||
19,260,385 | ||||||||||||||||
Ecological Services & Equipment–0.48% | ||||||||||||||||
Safety-Kleen Systems, Inc., Term Loan B | 5.00 | % | 02/17/17 | 225 | 223,518 | |||||||||||
ServiceMaster Co. (The), LOC | 3.06 | % | 07/24/14 | 3,750 | 3,675,000 | |||||||||||
WCA Waste Corp., Term Loan B | 5.50 | % | 03/22/18 | 578 | 580,030 | |||||||||||
4,478,548 | ||||||||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
13 Invesco Floating Rate Fund
Principal | ||||||||||||||||
Interest | Maturity | Amount | ||||||||||||||
Rate | Date | (000) | Value | |||||||||||||
Electronics & Electrical–3.62% | ||||||||||||||||
Aeroflex Inc., Term Loan B | 5.75 | % | 05/09/18 | $ | 218 | $ | 215,147 | |||||||||
Blackboard, Inc., First Lien Term Loan | 7.50 | % | 10/04/18 | 2,916 | 2,880,520 | |||||||||||
Incremental Term Loan | 7.50 | % | 10/04/18 | 1,074 | 1,060,887 | |||||||||||
Second Lien Term Loan | 11.50 | % | 04/04/19 | 1,095 | 1,017,984 | |||||||||||
DEI Sales, Inc., Term Loan B | 7.00 | % | 07/13/17 | 1,680 | 1,663,759 | |||||||||||
DG FastChannel, Inc., Term Loan B | 5.75 | % | 07/26/18 | 4,101 | 3,971,583 | |||||||||||
Eastman Kodak Co., DIP Term Loan B | 8.50 | % | 07/19/13 | 1,237 | 1,230,792 | |||||||||||
Freescale Semiconductor, Inc., Extended Term Loan B | 4.50 | % | 12/01/16 | 6,755 | 6,507,910 | |||||||||||
Lawson Software Inc., Term Loan B | 6.25 | % | 04/05/18 | 1,725 | 1,746,798 | |||||||||||
Mirion Technologies, Inc., First Lien Term Loan (Acquired 03/28/12-04/10/12; Cost $1,749,399) | 6.25 | % | 03/30/18 | 1,769 | 1,777,786 | |||||||||||
ProQuest LLC, Term Loan B | 6.00 | % | 04/13/18 | 1,811 | 1,810,659 | |||||||||||
Semtech Corp., Term Loan B | 4.25 | % | 03/20/17 | 1,068 | 1,071,811 | |||||||||||
Sophia, L.P., Term Loan B | 6.25 | % | 07/19/18 | 6,615 | 6,686,416 | |||||||||||
Spectrum Brands, Inc., Term Loan B | 5.00 | % | 06/17/16 | 2,137 | 2,148,998 | |||||||||||
33,791,050 | ||||||||||||||||
Equipment Leasing–0.32% | ||||||||||||||||
BakerCorp International, Inc., Term Loan B | 4.75 | % | 06/01/18 | 436 | 435,573 | |||||||||||
Delos Aircraft Inc., Term Loan 2 | 4.75 | % | 04/12/16 | 396 | 401,444 | |||||||||||
Flying Fortress Inc., First Lien Term Loan | 5.00 | % | 06/30/17 | 2,140 | 2,159,895 | |||||||||||
2,996,912 | ||||||||||||||||
Financial Intermediaries–1.44% | ||||||||||||||||
Bankruptcy Management Solutions, Inc., First Lien Term Loan, | 7.50 | % | 08/20/14 | 46 | 14,735 | |||||||||||
Second Lien Term Loan, | 8.24 | % | 08/20/15 | 20 | 579 | |||||||||||
Moneygram International, Inc., Term Loan B | 4.25 | % | 11/20/17 | 708 | 703,707 | |||||||||||
Term Loan B1 | 4.25 | % | 11/17/17 | 947 | 941,299 | |||||||||||
Nuveen Investments, Inc., Extended Term Loan | 5.95 | % | 05/12/17 | 5,584 | 5,614,579 | |||||||||||
First Lien Term Loan | 5.95 | % | 05/13/17 | 1,780 | 1,785,925 | |||||||||||
Residential Capital, LLC, DIP Term Loan A1 | 5.00 | % | 11/18/13 | 2,032 | 2,044,951 | |||||||||||
DIP Term Loan A2 | 6.75 | % | 11/18/13 | 342 | 347,212 | |||||||||||
RJO Holdings Corp., HoldCo Term Loan B | 6.99 | % | 12/10/15 | 1,658 | 1,235,458 | |||||||||||
Trans Union, LLC, Term Loan B | 5.50 | % | 02/12/18 | 722 | 728,564 | |||||||||||
13,417,009 | ||||||||||||||||
Food & Drug Retailers–0.78% | ||||||||||||||||
Pantry, Inc. (The), Term Loan B | 5.75 | % | 08/02/19 | 1,283 | 1,291,438 | |||||||||||
Rite Aid Corp., Term Loan 2 | 1.99 | % | 06/04/14 | 4,039 | 4,001,633 | |||||||||||
Term Loan 5 | 4.50 | % | 03/02/18 | 1,995 | 1,978,990 | |||||||||||
7,272,061 | ||||||||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
14 Invesco Floating Rate Fund
Principal | ||||||||||||||||
Interest | Maturity | Amount | ||||||||||||||
Rate | Date | (000) | Value | |||||||||||||
Food Products–3.35% | ||||||||||||||||
Candy Intermediate Holdings, Inc., Term Loan | 7.50 | % | 06/18/18 | $ | 2,032 | $ | 2,046,475 | |||||||||
Dean Foods Co., Extended Term Loan A | 2.74 | % | 04/02/14 | 997 | 995,860 | |||||||||||
Extended Term Loan B2 | 3.49 | % | 04/02/17 | 3,127 | 3,117,505 | |||||||||||
Del Monte Foods Co., Term Loan | 4.50 | % | 03/08/18 | 6,737 | 6,670,076 | |||||||||||
Dole Food Co., Inc., Term Loan B2 | 5.04 | % | 07/06/18 | 1,589 | 1,594,445 | |||||||||||
Term Loan C2 | 5.02 | % | 07/06/18 | 2,844 | 2,853,223 | |||||||||||
JBS USA Holdings Inc., Term Loan B | 4.25 | % | 05/25/18 | 3,375 | 3,337,192 | |||||||||||
Pierre Foods, Inc., First Lien Term Loan | 7.00 | % | 09/30/16 | 4,460 | 4,493,740 | |||||||||||
Second Lien Term Loan | 11.25 | % | 09/29/17 | 244 | 246,630 | |||||||||||
Pinnacle Foods Finance LLC, Term Loan E | 4.75 | % | 10/17/18 | 252 | 252,143 | |||||||||||
Term Loan F | 4.75 | % | 10/17/18 | 3,631 | 3,607,821 | |||||||||||
Smart Balance, Inc., Term Loan | 7.00 | % | 07/02/18 | 2,010 | 2,029,135 | |||||||||||
31,244,245 | ||||||||||||||||
Food Service–1.43% | ||||||||||||||||
Aramark Corp., Extended LC-3 Facility | 3.50 | % | 07/26/16 | 82 | 82,123 | |||||||||||
U.S. Term Loan C | 3.64 | % | 07/26/16 | 1,103 | 1,102,586 | |||||||||||
Burger King Corp., Term Loan B | 4.50 | % | 10/19/16 | 1,608 | 1,617,546 | |||||||||||
Focus Brands, Inc., Term Loan B (Acquired 02/22/12; Cost $761,069) | 6.27 | % | 02/21/18 | 768 | 777,724 | |||||||||||
Landry’s, Inc., Term Loan B | 6.50 | % | 04/24/18 | 3,943 | 3,995,487 | |||||||||||
OSI Restaurant Partners, LLC, Revolver Loan | 0.69 | % | 06/14/13 | 1,389 | 1,382,359 | |||||||||||
Term Loan B | 2.56 | % | 06/14/14 | 1,875 | 1,866,807 | |||||||||||
QCE LLC, First Lien Term Loan | 9.00 | % | 01/24/17 | 11 | 9,298 | |||||||||||
Restaurant Holding Co., LLC, Term Loan B (Acquired 02/28/12-06/07/12; Cost $503,978) | 9.00 | % | 02/17/17 | 510 | 515,345 | |||||||||||
Wendy’s International, Inc., Term Loan B | 4.75 | % | 05/15/19 | 1,967 | 1,980,744 | |||||||||||
13,330,019 | ||||||||||||||||
Forest Products–0.46% | ||||||||||||||||
Cenveo Corp., Term Loan B | 6.63 | % | 12/21/16 | 3,626 | 3,634,626 | |||||||||||
Xerium Technologies, Inc., Term Loan B | 6.25 | % | 05/22/17 | 627 | 623,674 | |||||||||||
4,258,300 | ||||||||||||||||
Healthcare–8.18% | ||||||||||||||||
Alere, Inc., Incremental Term Loan | 4.75 | % | 06/30/17 | 1,151 | 1,151,285 | |||||||||||
Incremental Term Loan B2 | 4.75 | % | 06/30/17 | 519 | 518,612 | |||||||||||
Term Loan B | 4.75 | % | 06/30/17 | 997 | 997,270 | |||||||||||
AMN Healthcare, Inc., Term Loan B (Acquired 04/12/12; Cost $997,820) | 6.00 | % | 04/05/18 | 1,007 | 1,017,334 | |||||||||||
Biomet Inc., Extended Term Loan B | 4.12 | % | 07/25/17 | 1,781 | 1,787,079 | |||||||||||
CareStream Health, Inc., Term Loan B | 5.00 | % | 02/25/17 | 5,207 | 5,098,103 | |||||||||||
Community Health Systems, Inc., Extended Term Loan B | 3.92 | % | 01/25/17 | 1,415 | 1,419,084 | |||||||||||
CONMED Corp., Term Loan (Acquired 02/04/10; Cost $341,992) | 1.74 | % | 04/12/13 | 347 | 343,950 | |||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
15 Invesco Floating Rate Fund
Principal | ||||||||||||||||
Interest | Maturity | Amount | ||||||||||||||
Rate | Date | (000) | Value | |||||||||||||
Healthcare–(continued) | ||||||||||||||||
DaVita, Inc., Term Loan B | 4.50 | % | 10/20/16 | $ | 4,968 | $ | 4,994,823 | |||||||||
DJO Finance LLC, Extended Term Loan B2 | 5.23 | % | 11/01/16 | 4,297 | 4,305,797 | |||||||||||
Term Loan B3 | 6.25 | % | 09/15/17 | 3,835 | 3,856,021 | |||||||||||
Drumm Investors, LLC, Term Loan | 5.00 | % | 05/04/18 | 3,396 | 3,260,157 | |||||||||||
Genoa Healthcare Group, LLC, | ||||||||||||||||
PIK Second Lien Term Loan (Acquired 12/30/11-07/31/12; Cost $745,740)(e) | 14.00 | % | 02/10/15 | 763 | 553,385 | |||||||||||
Term Loan B (Acquired 12/30/11; Cost $49,454) | 7.25 | % | 08/08/14 | 49 | 45,003 | |||||||||||
HCA, Inc., Extended Term Loan B2 | 3.61 | % | 03/31/17 | 448 | 442,938 | |||||||||||
Extended Term Loan B3 | 3.48 | % | 05/01/18 | 6,389 | 6,305,507 | |||||||||||
HCR Healthcare, LLC, Term Loan | 5.00 | % | 04/06/18 | 2,228 | 2,179,927 | |||||||||||
Health Management Associates, Inc., Term Loan B | 4.50 | % | 11/16/18 | 1,637 | 1,644,660 | |||||||||||
Hologic Inc., Term Loan B | 4.50 | % | 08/01/19 | 2,885 | 2,909,883 | |||||||||||
IMS Health, Inc., Term Loan B | 4.50 | % | 08/25/17 | 4,035 | 4,057,313 | |||||||||||
Kindred Healthcare, Inc., Term Loan | 5.25 | % | 06/01/18 | 3,248 | 3,180,379 | |||||||||||
Kinetic Concepts, Inc., Term Loan B | 7.00 | % | 05/04/18 | 12,420 | 12,567,792 | |||||||||||
Sun Healthcare Group Inc., Term Loan B | 8.75 | % | 10/15/16 | 880 | 876,665 | |||||||||||
Surgery Center Holdings, Inc., Term Loan B (Acquired 05/09/11; Cost $1,437,171) | 6.50 | % | 02/06/17 | 1,443 | 1,435,697 | |||||||||||
TriZetto Group, Inc., Term Loan B | 4.75 | % | 05/02/18 | 2,601 | 2,561,728 | |||||||||||
Valeant Pharmaceuticals International, Inc., Series A Tranche B | 4.75 | % | 02/13/19 | 8,129 | 8,172,529 | |||||||||||
Series B Tranche B | 4.75 | % | 02/13/19 | 605 | 608,187 | |||||||||||
76,291,108 | ||||||||||||||||
Home Furnishings–0.95% | ||||||||||||||||
National Bedding Co., LLC, Second Lien Term Loan | 5.25 | % | 02/28/14 | 4,580 | 4,570,177 | |||||||||||
Springs Windows Fashions, LLC, Term Loan B | 6.00 | % | 05/31/17 | 1,201 | 1,177,077 | |||||||||||
Yankee Candle Co., Inc. (The), Term Loan B | 5.25 | % | 04/02/19 | 3,088 | 3,109,723 | |||||||||||
8,856,977 | ||||||||||||||||
Industrial Equipment–1.40% | ||||||||||||||||
Generac Power Systems, Inc., Term Loan B | 6.25 | % | 05/30/18 | 1,298 | 1,327,069 | |||||||||||
Grede LLC, Term Loan B | 7.00 | % | 04/03/17 | 2,069 | 2,071,626 | |||||||||||
Hupah Finance Inc., Term Loan B | 6.25 | % | 01/21/19 | 281 | 283,111 | |||||||||||
Manitowoc Co., Inc. (The), Term Loan B | 4.25 | % | 11/13/17 | 1,674 | 1,684,692 | |||||||||||
Tank Intermediate Holding Corp., Term Loan B | 6.75 | % | 07/09/19 | 2,806 | 2,809,984 | |||||||||||
Terex Corp., Term Loan B | 5.50 | % | 04/28/17 | 1,947 | 1,964,142 | |||||||||||
Unifrax Corp., Term Loan | 6.50 | % | 11/28/18 | 2,930 | 2,961,778 | |||||||||||
13,102,402 | ||||||||||||||||
Insurance–0.23% | ||||||||||||||||
HMSC Corp., First Lien Term Loan | 2.48 | % | 04/03/14 | 370 | 346,129 | |||||||||||
Second Lien Term Loan | 5.73 | % | 10/03/14 | 105 | 79,426 | |||||||||||
Sedgwick CMS Holdings, Inc., Term Loan | 5.00 | % | 12/30/16 | 1,483 | 1,486,268 | |||||||||||
USI Holdings Corp., Term Loan | 2.74 | % | 05/05/14 | 196 | 194,989 | |||||||||||
2,106,812 | ||||||||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
16 Invesco Floating Rate Fund
Principal | ||||||||||||||||
Interest | Maturity | Amount | ||||||||||||||
Rate | Date | (000) | Value | |||||||||||||
Leisure Goods, Activities & Movies–2.85% | ||||||||||||||||
24 Hour Fitness Worldwide, Inc., Term Loan | 7.50 | % | 04/22/16 | $ | 4,165 | $ | 4,202,843 | |||||||||
Alpha D2 Ltd. (United Kingdom), Term Loan B | 5.75 | % | 04/28/17 | 2,597 | 2,622,284 | |||||||||||
AMC Entertainment, Inc., Term Loan B3 | 4.75 | % | 02/22/18 | 1,348 | 1,352,420 | |||||||||||
AMF Bowling Centers, Inc., Second Lien Term Loan | 6.48 | % | 12/08/13 | 67 | 35,188 | |||||||||||
Term Loan B | 3.23 | % | 06/07/13 | 1,283 | 1,110,885 | |||||||||||
EMI Music Publishing Limited, Term Loan B | 5.50 | % | 06/29/18 | 2,463 | 2,486,551 | |||||||||||
IMG Worldwide, Inc., Term Loan B | 5.50 | % | 06/16/16 | 4,824 | 4,818,297 | |||||||||||
Live Nation Entertainment, Inc., Term Loan B | 4.50 | % | 11/07/16 | 2,191 | 2,192,286 | |||||||||||
Sabre Holdings Corp., Extended Term Loan | 5.98 | % | 12/29/17 | 3,321 | 3,278,410 | |||||||||||
Six Flags Theme Parks, Inc., Term Loan B | 4.25 | % | 12/20/18 | 869 | 872,871 | |||||||||||
Topps Company, Inc. (The), Term Loan (Acquired 10/12/07-02/26/10; Cost $1,582,937) | 3.00 | % | 10/13/14 | 1,646 | 1,588,039 | |||||||||||
Zuffa LLC, Incremental Term Loan | 7.50 | % | 06/19/15 | 1,675 | 1,681,388 | |||||||||||
Term Loan | 2.25 | % | 06/19/15 | 301 | 291,495 | |||||||||||
26,532,957 | ||||||||||||||||
Lodging & Casinos–3.66% | ||||||||||||||||
Boyd Gaming Corp., Class A Revolver Loan(f) | 0.00 | % | 12/17/15 | 937 | 884,674 | |||||||||||
Class A Revolver Loan | 3.68 | % | 12/17/15 | 1,708 | 1,613,229 | |||||||||||
Revolver Loan | 6.00 | % | 12/17/15 | 244 | 246,456 | |||||||||||
Term Loan | 3.71 | % | 12/17/15 | 210 | 207,873 | |||||||||||
Caesars Entertainment Operating Co., Extended Term Loan B5 | 4.49 | % | 01/26/18 | 2,410 | 2,039,148 | |||||||||||
Extended Term Loan B6 | 5.49 | % | 01/26/18 | 14,378 | 12,684,453 | |||||||||||
Term Loan B1 | 3.24 | % | 01/28/15 | 447 | 425,765 | |||||||||||
Term Loan B2 | 3.24 | % | 01/28/15 | 3,000 | 2,855,415 | |||||||||||
Cannery Casino Resorts, LLC, Delayed Draw Term Loan | 4.48 | % | 05/17/13 | 1,940 | 1,917,956 | |||||||||||
Second Lien Term Loan | 4.48 | % | 05/16/14 | 1,084 | 1,017,605 | |||||||||||
Term Loan B | 4.48 | % | 05/17/13 | 1,957 | 1,934,315 | |||||||||||
Golden Nugget, Inc., Second Lien Term Loan | 3.49 | % | 11/03/14 | 117 | 103,768 | |||||||||||
Isle of Capri Casinos, Inc., Term Loan B | 4.75 | % | 11/01/13 | 1,920 | 1,932,154 | |||||||||||
Las Vegas Sands LLC, Extended Term Loan B | 2.84 | % | 11/23/16 | 1,386 | 1,366,910 | |||||||||||
Tropicana Entertainment Inc., Term Loan B | 7.50 | % | 03/16/18 | 1,651 | 1,657,285 | |||||||||||
Twin River Worldwide Holdings, Inc., Term Loan | 8.50 | % | 11/05/15 | 3,215 | 3,238,547 | |||||||||||
34,125,553 | ||||||||||||||||
Nonferrous Metals & Minerals–0.77% | ||||||||||||||||
Arch Coal Inc., Term Loan B | 5.75 | % | 05/16/18 | 2,732 | 2,738,285 | |||||||||||
Noranda Aluminum Acquisition Corp., Term Loan B | 5.75 | % | 02/28/19 | 2,134 | 2,150,607 | |||||||||||
Walter Energy, Inc., Term Loan B | 4.00 | % | 04/02/18 | 2,284 | 2,253,124 | |||||||||||
7,142,016 | ||||||||||||||||
Oil & Gas–2.52% | ||||||||||||||||
Buffalo Gulf Coast Terminals LLC, Term Loan B | 7.50 | % | 10/31/17 | 3,876 | 3,953,893 | |||||||||||
Chesapeake Energy Corp., Term Loan | 8.50 | % | 12/01/17 | 5,889 | 5,914,284 | |||||||||||
Citgo Petroleum Corp., Term Loan B | 8.00 | % | 06/24/15 | 867 | �� | 874,812 | ||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
17 Invesco Floating Rate Fund
Principal | ||||||||||||||||
Interest | Maturity | Amount | ||||||||||||||
Rate | Date | (000) | Value | |||||||||||||
Oil & Gas–(continued) | ||||||||||||||||
Delphi Acquisition Holding I B.V. (Netherlands), | ||||||||||||||||
Term Loan B1 | 1.98 | % | 01/12/15 | $ | 221 | $ | 217,271 | |||||||||
Term Loan B2 | 2.21 | % | 01/12/15 | 937 | 922,536 | |||||||||||
Term Loan C1 | 3.09 | % | 01/11/16 | 205 | 202,670 | |||||||||||
Term Loan C2 | 3.09 | % | 01/11/16 | 937 | 923,223 | |||||||||||
Glenn Pool Oil & Gas Trust, Term Loan | 4.50 | % | 05/02/16 | 1,402 | 1,408,520 | |||||||||||
NGPL PipeCo LLC, Term Loan B | 6.75 | % | 09/15/17 | 3,740 | 3,758,335 | |||||||||||
Obsidian Natural Gas Trust (United Kingdom), Term Loan (Acquired 12/09/10-05/05/11; Cost $1,609,352) | 7.00 | % | 11/02/15 | 1,587 | 1,594,578 | |||||||||||
Tervita Corporation (Canada), Delay Draw Term Loan | 3.23 | % | 11/14/14 | 945 | 930,889 | |||||||||||
Term Loan B | 3.23 | % | 11/14/14 | 1,172 | 1,154,445 | |||||||||||
Willbros United States Holdings, Inc., Term Loan B | 9.50 | % | 06/30/14 | 1,668 | 1,679,523 | |||||||||||
23,534,979 | ||||||||||||||||
Publishing–2.56% | ||||||||||||||||
Affiliated Media, Inc., Term Loan | 8.50 | % | 03/19/14 | 2,325 | 2,267,303 | |||||||||||
Endurance Business Media, Inc., First Lien Term Loan | 6.50 | % | 12/15/14 | 63 | 17,580 | |||||||||||
F&W Media, Inc., Term Loan (Acquired 11/19/09; Cost $44,344) | 7.75 | % | 06/09/14 | 47 | 44,067 | |||||||||||
GateHouse Media, Inc., Delayed Draw Term Loan | 2.24 | % | 08/28/14 | 591 | 185,653 | |||||||||||
Term Loan | 2.49 | % | 08/28/14 | 253 | 79,550 | |||||||||||
Term Loan B | 2.24 | % | 08/28/14 | 991 | 311,318 | |||||||||||
Harland Clarke Holdings Corp., Revolver Loan(f) | 0.00 | % | 06/28/13 | 1,347 | 1,171,879 | |||||||||||
Extended Term Loan B2 | 5.52 | % | 06/30/17 | 1,745 | 1,554,384 | |||||||||||
Merrill Communications, LLC, PIK Second Lien Term Loan(e) | 16.00 | % | 11/15/13 | 1,169 | 798,494 | |||||||||||
Term Loan | 9.75 | % | 12/24/12 | 5,799 | 5,587,151 | |||||||||||
Tribune Co., Term Loan B(c)(d) | 5.25 | % | 06/04/14 | 15,662 | 11,827,792 | |||||||||||
23,845,171 | ||||||||||||||||
Radio & Television–5.32% | ||||||||||||||||
Barrington Broadcasting Group LLC, Term Loan B | 7.50 | % | 06/14/17 | 314 | 317,657 | |||||||||||
Clear Channel Communications, Inc., Term Loan A | 3.63 | % | 07/29/14 | 6,809 | 6,418,248 | |||||||||||
Term Loan B | �� | 3.88 | % | 01/28/16 | 8,473 | 6,603,874 | ||||||||||
FoxCo Acquisition Sub, LLC, Term Loan B | 4.75 | % | 07/14/15 | 487 | 488,934 | |||||||||||
Granite Broadcasting Corp., Term Loan B | 8.50 | % | 05/23/18 | 1,859 | 1,853,100 | |||||||||||
Gray Television Inc., Term Loan B | 3.75 | % | 12/31/14 | 101 | 100,710 | |||||||||||
Harron Communications Corp., Term Loan B | 5.50 | % | 10/06/17 | 4,045 | 4,055,541 | |||||||||||
High Plains Broadcasting Operating Co. LLC, Term Loan | 9.00 | % | 09/14/16 | 382 | 385,385 | |||||||||||
Intelsat Jackson Holdings S.A., Term Loan B | 5.25 | % | 04/02/18 | 7,345 | 7,396,824 | |||||||||||
LIN Television Corp., Term Loan B | 5.00 | % | 12/21/18 | 698 | 703,202 | |||||||||||
Local TV Finance, LLC, Extended Term Loan B2 | 4.24 | % | 05/07/15 | 769 | 768,491 | |||||||||||
NEP II, Inc., Extended Term Loan B2 | 3.67 | % | 02/16/17 | 4,057 | 3,998,847 | |||||||||||
Newport Television LLC, Term Loan B | 9.00 | % | 09/14/16 | 1,381 | 1,394,140 | |||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
18 Invesco Floating Rate Fund
Principal | ||||||||||||||||
Interest | Maturity | Amount | ||||||||||||||
Rate | Date | (000) | Value | |||||||||||||
Radio & Television–(continued) | ||||||||||||||||
Raycom TV Broadcasting, Inc., Term Loan B (Acquired 06/01/11; Cost $2,104,370) | 4.50 | % | 05/31/17 | $ | 2,113 | $ | 2,102,343 | |||||||||
Univision Communications Inc., Extended Term Loan | 4.48 | % | 03/31/17 | 13,451 | 13,043,226 | |||||||||||
49,630,522 | ||||||||||||||||
Retailers (except Food & Drug)–1.72% | ||||||||||||||||
Academy, Ltd., Term Loan | 6.00 | % | 08/03/18 | 136 | 136,509 | |||||||||||
Claire’s Stores, Inc., Term Loan B | 3.05 | % | 05/29/14 | 1,006 | 990,606 | |||||||||||
Destination Maternity Corp., Term Loan B (Acquired 03/09/07; Cost $35,799) | 2.49 | % | 03/13/13 | 36 | 35,262 | |||||||||||
FTD, Inc., Term Loan | 4.75 | % | 06/11/18 | 2,196 | 2,196,410 | |||||||||||
Guitar Center Inc., Extended Term Loan | 5.72 | % | 04/10/17 | 3,387 | 3,199,021 | |||||||||||
Gymboree Corp., Term Loan | 5.00 | % | 02/23/18 | 99 | 96,141 | |||||||||||
J. Crew Operating Corp., Term Loan B | 4.75 | % | 03/07/18 | 1,069 | 1,070,151 | |||||||||||
Party City Holdings, Inc., Term Loan B | 5.75 | % | 07/26/19 | 3,592 | 3,615,720 | |||||||||||
Pilot Travel Centers LLC, Term Loan B2 | 4.25 | % | 08/07/19 | 1,527 | 1,533,935 | |||||||||||
Savers, Inc., Term Loan B | 6.25 | % | 07/09/19 | 1,608 | 1,627,337 | |||||||||||
Toys ‘R’ Us-Delaware, Inc., Term Loan | 6.00 | % | 09/01/16 | 1,070 | 1,053,473 | |||||||||||
Term Loan B2 | 5.25 | % | 05/25/18 | 327 | 314,312 | |||||||||||
Term Loan B3 | 5.25 | % | 05/25/18 | 216 | 208,072 | |||||||||||
16,076,949 | ||||||||||||||||
Steel–0.35% | ||||||||||||||||
JMC Steel Group, Inc., Term Loan | 4.75 | % | 04/03/17 | 1,098 | 1,102,545 | |||||||||||
Tube City IMS Corp., Term Loan | 5.75 | % | 03/20/19 | 1,001 | 1,010,007 | |||||||||||
WireCo WorldGroup, Inc., Term Loan | 6.00 | % | 02/15/17 | 1,166 | 1,179,567 | |||||||||||
3,292,119 | ||||||||||||||||
Surface Transport–0.92% | ||||||||||||||||
Avis Budget Car Rental, LLC, Incremental Term Loan | 6.25 | % | 09/21/18 | 709 | 715,211 | |||||||||||
CEVA Group PLC (United Kingdom), Extended Syn. LOC | 0.36 | % | 08/31/16 | 216 | 204,074 | |||||||||||
Extended Tranche B EGL Term Loan | 5.45 | % | 08/31/16 | 1,260 | 1,191,515 | |||||||||||
Hertz Corp., LOC | 3.75 | % | 03/09/18 | 552 | 529,525 | |||||||||||
JHCI Acquisition, Inc., First Lien Term Loan | 2.74 | % | 06/19/14 | 1,861 | 1,766,485 | |||||||||||
Kenan Advantage Group, Inc., Term Loan (Acquired 12/20/10; Cost $895,978) | 4.50 | % | 06/10/16 | 902 | 904,672 | |||||||||||
Swift Transportation Co. Inc., Term Loan B2 | 5.00 | % | 12/21/17 | 2,927 | 2,945,267 | |||||||||||
U.S. Shipping Corp., Restated Term Loan | 9.20 | % | 08/07/13 | 319 | 305,222 | |||||||||||
Second Lien Term Loan | 2.50 | % | 08/07/13 | 95 | 30,023 | |||||||||||
8,591,994 | ||||||||||||||||
Telecommunications–5.73% | ||||||||||||||||
Avaya, Inc., Extended Term Loan B3 | 4.93 | % | 10/26/17 | 5,373 | 4,824,291 | |||||||||||
Cellular South, Inc., Term Loan B | 4.50 | % | 07/27/17 | 3,167 | 3,158,201 | |||||||||||
Consolidated Communications, Inc., Delay Draw Term Loan | 2.74 | % | 12/31/14 | 995 | 991,682 | |||||||||||
Term Loan B | 2.74 | % | 12/31/14 | 2,985 | 2,975,045 | |||||||||||
Fairpoint Communications, Inc., Term Loan B | 6.50 | % | 01/22/16 | 1,798 | 1,679,807 | |||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
19 Invesco Floating Rate Fund
Principal | ||||||||||||||||
Interest | Maturity | Amount | ||||||||||||||
Rate | Date | (000) | Value | |||||||||||||
Telecommunications–(continued) | ||||||||||||||||
Genesys Telecom Holdings, U.S., Inc., Term Loan B | 6.75 | % | 01/31/19 | $ | 2,688 | $ | 2,716,198 | |||||||||
Global Tel*Link Corp., Term Loan B | 6.00 | % | 12/14/17 | 3,035 | 3,041,155 | |||||||||||
Level 3 Communications, Inc., Term Loan B | 5.25 | % | 08/01/19 | 8,328 | 8,361,843 | |||||||||||
Term Loan B3 | 5.75 | % | 08/31/18 | 181 | 182,318 | |||||||||||
MetroPCS Wireless, Inc., Term Loan B | 4.00 | % | 03/16/18 | 9,165 | 9,168,743 | |||||||||||
NeuStar, Inc., Term Loan B | 5.00 | % | 11/08/18 | 1,931 | 1,950,557 | |||||||||||
Syniverse Technologies, Inc., Term Loan | 5.00 | % | 04/23/19 | 4,243 | 4,237,988 | |||||||||||
TowerCo Finance LLC, Term Loan B | 4.50 | % | 02/02/17 | 2,403 | 2,407,496 | |||||||||||
U.S. TelePacific Corp., Term Loan B | 5.75 | % | 02/23/17 | 2,294 | 2,201,261 | |||||||||||
Windstream Corp., Term Loan B2 | 3.15 | % | 12/17/15 | 338 | 337,960 | |||||||||||
Term Loan B3 | 4.00 | % | 08/08/19 | 1,796 | 1,802,376 | |||||||||||
Zayo Group, LLC, Term Loan B | 7.13 | % | 07/02/19 | 3,295 | 3,351,452 | |||||||||||
53,388,373 | ||||||||||||||||
Utilities–2.62% | ||||||||||||||||
AES Corp., Term Loan | 4.25 | % | 06/01/18 | 4,050 | 4,070,192 | |||||||||||
BRSP, LLC, Term Loan B | 7.50 | % | 06/04/14 | 2,167 | 2,175,146 | |||||||||||
Calpine Corp., Term Loan | 4.50 | % | 04/02/18 | 1,354 | 1,359,364 | |||||||||||
Term Loan B | 4.50 | % | 04/02/18 | 997 | 1,000,900 | |||||||||||
LSP Madison Funding Corp., Term Loan | 5.50 | % | 06/28/19 | 2,010 | 2,020,340 | |||||||||||
NRG Energy, Inc., Term Loan B | 4.00 | % | 07/02/18 | 985 | 988,261 | |||||||||||
NSG Holdings LLC, Syn LOC | 1.97 | % | 06/15/14 | 27 | 26,271 | |||||||||||
Term Loan | 1.97 | % | 06/15/14 | 23 | 23,071 | |||||||||||
Star West Generation LLC, Term Loan B | 6.00 | % | 05/17/18 | 3,232 | 3,212,062 | |||||||||||
Texas Competitive Electric Holdings Co., LLC, Extended Term Loan | 4.77 | % | 10/10/17 | 5,010 | 3,414,258 | |||||||||||
Term Loan | 3.77 | % | 10/10/14 | 8,006 | 5,898,984 | |||||||||||
TPF Generation Holdings LLC, Second Lien Term Loan C | 4.71 | % | 12/15/14 | 149 | 146,486 | |||||||||||
Syn LOC | 2.36 | % | 12/13/13 | 93 | 92,936 | |||||||||||
24,428,271 | ||||||||||||||||
Total Variable Rate Senior Loan Interests | 821,649,177 | |||||||||||||||
U.S. Dollar Denominated Bonds and Notes–6.00% | ||||||||||||||||
Air Transport–0.05% | ||||||||||||||||
Continental Airlines, Inc.(h) | 6.75 | % | 09/15/15 | 460 | 481,850 | |||||||||||
Airlines–0.03% | ||||||||||||||||
Delta Air Lines Pass Through Trust(h) | 4.75 | % | 05/07/20 | 313 | 321,999 | |||||||||||
Cable & Satellite Television–0.14% | ||||||||||||||||
UPC Broadband Holdings, B.V. (Netherlands)(h) | 7.25 | % | 11/15/21 | 1,074 | 1,167,975 | |||||||||||
UPC Broadband Holdings, B.V. (Netherlands)(h) | 6.88 | % | 01/15/22 | 173 | 184,127 | |||||||||||
1,352,102 | ||||||||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
20 Invesco Floating Rate Fund
Principal | ||||||||||||||||
Interest | Maturity | Amount | ||||||||||||||
Rate | Date | (000) | Value | |||||||||||||
Casinos & Gaming–0.04% | ||||||||||||||||
Chester Downs & Marina LLC(h) | 9.25 | % | 02/01/20 | $ | 331 | $ | 340,930 | |||||||||
Chemicals & Plastics–0.07% | ||||||||||||||||
INEOS Holdings Ltd. (United Kingdom)(h) | 8.38 | % | 02/15/19 | 241 | 255,460 | |||||||||||
INEOS Holdings Ltd. (United Kingdom)(h) | 7.50 | % | 05/01/20 | 157 | 161,318 | |||||||||||
Taminco Global Chemical Corp.(h) | 9.75 | % | 03/31/20 | 226 | 240,690 | |||||||||||
657,468 | ||||||||||||||||
Containers & Glass Products–0.85% | ||||||||||||||||
Berry Plastics Holding Inc.(i) | 4.75 | % | 02/15/15 | 3,246 | 3,250,869 | |||||||||||
Reynolds Group Holdings Inc.(h) | 7.88 | % | 08/15/19 | 2,423 | 2,692,559 | |||||||||||
Reynolds Group Holdings Inc.(h) | 9.88 | % | 08/15/19 | �� | 1,879 | 1,991,740 | ||||||||||
7,935,168 | ||||||||||||||||
Data Processing & Outsourced Services–0.21% | ||||||||||||||||
First Data Corp.(h) | 6.75 | % | 11/01/20 | 1,957 | 1,942,322 | |||||||||||
Equipment Leasing–0.45% | ||||||||||||||||
Air Lease Corp.(h) | 7.38 | % | 01/30/19 | 4,045 | 4,176,462 | |||||||||||
Forest Products–0.18% | ||||||||||||||||
Verso Paper Holdings, LLC(h) | 11.75 | % | 01/15/19 | 1,626 | 1,678,845 | |||||||||||
Healthcare–1.06% | ||||||||||||||||
Accellent Inc. | 8.38 | % | 02/01/17 | 1,688 | 1,753,410 | |||||||||||
Apria Healthcare Group, Inc. | 11.25 | % | 11/01/14 | 4,075 | 4,248,187 | |||||||||||
Biomet Inc.(h) | 6.50 | % | 08/01/20 | 469 | 488,933 | |||||||||||
Community Health Systems, Inc. | 8.00 | % | 11/15/19 | 1,382 | 1,497,743 | |||||||||||
DJO Finance LLC(h) | 8.75 | % | 03/15/18 | 1,301 | 1,398,575 | |||||||||||
Kindred Healthcare, Inc. | 8.25 | % | 06/01/19 | 542 | 527,095 | |||||||||||
9,913,943 | ||||||||||||||||
Independent Power Producers & Energy Traders–0.31% | ||||||||||||||||
Calpine Corp.(h) | 7.88 | % | 01/15/23 | — | 292 | |||||||||||
Calpine Corp.(h) | 7.50 | % | 02/15/21 | 2,578 | 2,874,130 | |||||||||||
2,874,422 | ||||||||||||||||
Oil & Gas–0.44% | ||||||||||||||||
Coffeyville Resources LLC(h) | 9.00 | % | 04/01/15 | 3,059 | 3,273,130 | |||||||||||
NGPL PipeCo LLC(h) | 9.63 | % | 06/01/19 | 786 | 872,460 | |||||||||||
4,145,590 | ||||||||||||||||
Oil & Gas Storage & Transportation–0.10% | ||||||||||||||||
Targa Resources Partners L.P./Targa Resources Partners Finance Corp.(h) | 6.38 | % | 08/01/22 | 865 | 908,250 | |||||||||||
Packaged Foods & Meats–0.10% | ||||||||||||||||
Post Holdings Inc.(h) | 7.38 | % | 02/15/22 | 883 | 931,565 | |||||||||||
Radio & Television–0.34% | ||||||||||||||||
Univision Communications Inc.(h) | 6.75 | % | 09/15/22 | 3,130 | 3,157,387 | |||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
21 Invesco Floating Rate Fund
Principal | ||||||||||||||||
Interest | Maturity | Amount | ||||||||||||||
Rate | Date | (000) | Value | |||||||||||||
Telecommunications–0.63% | ||||||||||||||||
Goodman Networks, Inc.(h) | 12.13 | % | 07/01/18 | $ | 2,600 | $ | 2,743,000 | |||||||||
Paetec Holding Corp. | 8.88 | % | 06/30/17 | 578 | 630,020 | |||||||||||
Wind Telecomunicazioni S.p.A. (Italy)(h) | 7.25 | % | 02/15/18 | 1,094 | 1,009,215 | |||||||||||
Windstream Corp. | 7.50 | % | 06/01/22 | 1,484 | 1,524,810 | |||||||||||
5,907,045 | ||||||||||||||||
Tires & Rubber–0.09% | ||||||||||||||||
Goodyear Tire & Rubber Co. (The) | 7.00 | % | 05/15/22 | 797 | 834,858 | |||||||||||
Trucking–0.08% | ||||||||||||||||
Avis Budget Car Rental LLC/Avis Budget Finance Inc.(h) | 8.25 | % | 01/15/19 | 644 | 701,960 | |||||||||||
Utilities–0.53% | ||||||||||||||||
NRG Energy Inc.(h) | 7.63 | % | 05/15/19 | 4,698 | 4,921,155 | |||||||||||
Wireless Telecommunication Services–0.30% | ||||||||||||||||
Wind Acquisition Finance S.A. (Italy)(h) | 7.25 | % | 02/15/18 | 3,019 | 2,785,027 | |||||||||||
Total U.S. Dollar Denominated Bonds and Notes | 55,968,348 | |||||||||||||||
Structured Products–2.72% | ||||||||||||||||
Apidos CDO Ltd.(h)(i) | 6.50 | % | 07/15/23 | 958 | 851,858 | |||||||||||
Apidos Cinco CDO Ltd. (Cayman Islands)(h)(i) | 4.25 | % | 05/14/20 | 345 | 269,579 | |||||||||||
Apidos Quattro CDO Ltd. (Cayman Islands)(h)(i) | 3.60 | % | 01/20/19 | 408 | 311,000 | |||||||||||
Ares XI CLO Ltd.(h)(i) | 3.00 | % | 10/11/21 | 724 | 551,611 | |||||||||||
Atrium IV CDO Corp.(h) | 9.18 | % | 06/08/19 | 205 | 190,928 | |||||||||||
Banc of America Large Loan Inc.(h)(i) | 1.99 | % | 11/15/13 | 10,151 | 9,950,194 | |||||||||||
Columbus Nova CLO Ltd.(h)(i) | 3.60 | % | 05/16/19 | 1,093 | 826,337 | |||||||||||
Columbus Nova CLO Ltd.(h)(i) | 3.60 | % | 05/16/19 | 429 | 324,335 | |||||||||||
Flagship CLO VI(h)(i) | 4.75 | % | 06/10/21 | 1,154 | 901,621 | |||||||||||
Flagship CLO VI(h)(i) | 4.75 | % | 06/10/21 | 987 | 771,104 | |||||||||||
Four Corners CLO II, Ltd.(h)(i) | 1.85 | % | 01/26/20 | 103 | 79,766 | |||||||||||
Four Corners CLO II, Ltd.(h)(i) | 1.85 | % | 01/26/20 | 310 | 240,071 | |||||||||||
Genesis CLO Ltd.(h)(i) | 6.50 | % | 10/10/14 | 1,007 | 959,010 | |||||||||||
Gramercy Park CLO Ltd.(h)(i) | 5.50 | % | 07/17/23 | 1,336 | 1,110,082 | |||||||||||
Halcyon Loan Investors CLO II, Ltd. (Cayman Islands)(h)(i) | 3.60 | % | 04/24/21 | 917 | 691,811 | |||||||||||
ING Investment Management CLO III, Ltd. (Cayman Islands)(h)(i) | 3.50 | % | 12/13/20 | 1,188 | 876,976 | |||||||||||
ING Investment Management CLO IV, Ltd. (Cayman Islands)(h)(i) | 4.25 | % | 06/14/22 | 293 | 222,553 | |||||||||||
Madison Park Funding IV Ltd.(h)(i) | 3.60 | % | 03/22/21 | 1,344 | 1,007,163 | |||||||||||
Pacifica CDO VI, Ltd.(h)(i) | 3.75 | % | 08/15/21 | 565 | 394,573 | |||||||||||
Sierra CLO II Ltd.(i) | 3.50 | % | 01/22/21 | 733 | 521,795 | |||||||||||
Silverado CLO Ltd.(h)(i) | 3.75 | % | 10/16/20 | 886 | 670,841 | |||||||||||
Slater Mill Loan Fund, Ltd.(h)(i) | 5.50 | % | 08/17/22 | 1,108 | 978,732 | |||||||||||
Symphony CLO IX, Ltd.(h)(i) | 5.00 | % | 04/16/22 | 1,901 | 1,675,374 | |||||||||||
Symphony CLO VIII, Ltd.(h)(i) | 5.75 | % | 01/09/23 | 1,035 | 962,363 | |||||||||||
Total Structured Products | 25,339,677 | |||||||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
22 Invesco Floating Rate Fund
Shares | Value | |||||||||||||||
Common Stocks & Other Equity Interests–0.80% | ||||||||||||||||
Aerospace & Defense–0.01% | ||||||||||||||||
ACTS Aero Technical Support & Services, Inc.(h)(j) | 122,977 | 61,489 | ||||||||||||||
Automotive–0.01% | ||||||||||||||||
Dayco Products, LLC(h)(j) | 856 | 24,075 | ||||||||||||||
Dayco Products, LLC(h)(j) | 3,261 | 91,716 | ||||||||||||||
115,791 | ||||||||||||||||
Broadcasting–0.01% | ||||||||||||||||
New Vision Television–Class A–Wts., expiring 09/30/14 (Acquired 09/30/09; Cost $0)(h)(j) | 5,707 | 28,535 | ||||||||||||||
New Vision Television–Class B–Wts., expiring 09/30/14 (Acquired 09/30/09; Cost $0)(h)(j) | 1,027 | 10,270 | ||||||||||||||
38,805 | ||||||||||||||||
Building & Development–0.00% | ||||||||||||||||
Lake at Las Vegas Joint Venture, LLC–Class A (Acquired 04/28/10; Cost $664,569)(h)(j) | 518 | 0 | ||||||||||||||
Lake at Las Vegas Joint Venture, LLC–Class B (Acquired 06/30/10; Cost $3,408,940)(h)(j) | 4 | 0 | ||||||||||||||
Lake at Las Vegas Joint Venture, LLC–Class C–Wts. expiring 07/15/15 (Acquired 06/30/10; Cost $0)(h)(j) | 17 | 0 | ||||||||||||||
Lake at Las Vegas Joint Venture, LLC–Class D–Wts. expiring 07/15/15 (Acquired 06/30/10; Cost $0)(h)(j) | 24 | 0 | ||||||||||||||
Lake at Las Vegas Joint Venture, LLC–Class E–Wts. expiring 07/15/15 (Acquired 06/30/10; Cost $0)(h)(j) | 27 | 0 | ||||||||||||||
Lake at Las Vegas Joint Venture, LLC–Class F–Wts. expiring 07/15/15 (Acquired 06/30/10; Cost $0)(h)(j) | 30 | 0 | ||||||||||||||
Lake at Las Vegas Joint Venture, LLC–Class G–Wts. expiring 07/15/15 (Acquired 06/30/10; Cost $0)(h)(j) | 34 | 0 | ||||||||||||||
0 | ||||||||||||||||
Building Products–0.17% | ||||||||||||||||
Masonite Worldwide Holdings, Inc. (Canada)(h)(j) | 53,093 | 1,579,517 | ||||||||||||||
Chemicals & Plastics–0.01% | ||||||||||||||||
Metokote Corp.–Wts., expiring 11/22/23 (Acquired 12/11/05-05/22/12; Cost $0)(h)(j) | 95 | 102,506 | ||||||||||||||
Construction & Engineering–0.00% | ||||||||||||||||
United Subcontractors, Inc.(h)(j) | 4,840 | 12,101 | ||||||||||||||
Electric Utilities–0.00% | ||||||||||||||||
Bicent Power, LLC–Series A–Wts. expiring 08/21/22(h)(j) | 101 | 0 | ||||||||||||||
Bicent Power, LLC–Series B–Wts. expiring 08/21/22(h)(j) | 164 | 0 | ||||||||||||||
0 | ||||||||||||||||
Environmental & Facilities Services–0.20% | ||||||||||||||||
Safety-Kleen Systems, Inc.(h)(j)(k) | 150,812 | 1,847,447 | ||||||||||||||
Financial Intermediaries–0.00% | ||||||||||||||||
Bankruptcy Management Solutions, Inc.(h)(k) | 214 | 2 | ||||||||||||||
Bankruptcy Management Solutions, Inc.–Wts. expiring 10/01/17 (Acquired 07/21/06; Cost $0)(h)(k) | 18 | 0 | ||||||||||||||
2 | ||||||||||||||||
Lodging & Casinos–0.02% | ||||||||||||||||
Twin River Worldwide Holdings Inc.–Class A(h)(j) | 18,663 | 214,624 | ||||||||||||||
Paper Products–0.00% | ||||||||||||||||
Xerium Technologies, Inc.(j) | 1,766 | 7,823 | ||||||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
23 Invesco Floating Rate Fund
Shares | Value | |||||||||||||||
Publishing–0.00% | ||||||||||||||||
Endurance Business Media, Inc.–Class A(h)(j) | 124 | $ | 1,235 | |||||||||||||
F&W Media, Inc.(h)(k) | 288 | 36 | ||||||||||||||
F&W Media, Inc.–Wts. expiring 06/09/14(h)(k) | 496 | 62 | ||||||||||||||
1,333 | ||||||||||||||||
Radio & Television–0.34% | ||||||||||||||||
Ion Media Networks, Inc.(h)(j) | 4,471 | 3,129,700 | ||||||||||||||
Surface Transport–0.00% | ||||||||||||||||
U.S. Shipping Corp. (Acquired 09/28/07-09/30/09; Cost $87,805)(h)(j) | 87,805 | 0 | ||||||||||||||
U.S. Shipping Corp. (Acquired 09/28/07-09/30/09; Cost $0)(h)(j) | 6,189 | 0 | ||||||||||||||
0 | ||||||||||||||||
Telecommunications–0.03% | ||||||||||||||||
FairPoint Communications, Inc.(j) | 44,928 | 293,380 | ||||||||||||||
Total Common Stocks & Other Equity Interests | 7,404,518 | |||||||||||||||
Money Market Funds–5.03% | ||||||||||||||||
Liquid Assets Portfolio–Institutional Class(l) | 23,449,818 | 23,449,818 | ||||||||||||||
Premier Portfolio–Institutional Class(l) | 23,449,818 | 23,449,818 | ||||||||||||||
Total Money Market Funds | 46,899,636 | |||||||||||||||
TOTAL INVESTMENTS–102.67% (Cost $964,318,073) | 957,261,356 | |||||||||||||||
OTHER ASSETS LESS LIABILITIES–(2.67%) | (24,892,412 | ) | ||||||||||||||
NET ASSETS–100.00% | $ | 932,368,944 | ||||||||||||||
Investment Abbreviations:
CDO | – Collateralized Debt Obligation | |
CLO | – Collateralized Loan Obligation | |
DIP | – Debtor-in-possession | |
LOC | – Letter of Credit | |
PIK | – Payment in Kind | |
Syn LOC | – Synthetic Letter of Credit | |
Wts. | – Warrants |
Notes to Schedule of Investments:
(a) | Variable rate senior loan interests 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. | |
(b) | Variable rate senior loan 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. | |
(c) | 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, 2012 was $14,362,619, which represented 1.54% of the Fund’s Net Assets. | |
(d) | The borrower has filed for protection in federal bankruptcy court. | |
(e) | All or a portion of this security is Payment-in-Kind. | |
(f) | 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. | |
(g) | This floating rate interest will settle after August 31, 2012, at which time the interest rate will be determined. | |
(h) | 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, 2012 was $73,622,553, which represented 7.90% of the Fund’s Net Assets. | |
(i) | Interest or dividend rate is redetermined periodically. Rate shown is the rate in effect on August 31, 2012. | |
(j) | Non-income producing securities acquired through the restructuring of senior loans. | |
(k) | Acquired as part of a bankruptcy restructuring. | |
(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.
24 Invesco Floating Rate Fund
Statement of Assets and Liabilities
August 31, 2012
Assets: | ||||
Investments, at value (Cost $917,418,437) | $ | 910,361,720 | ||
Investments in affiliated money market funds, at value and cost | 46,899,636 | |||
Total investments, at value (Cost $964,318,073) | 957,261,356 | |||
Cash segregated as collateral | 889,094 | |||
Receivable for: | ||||
Investments sold | 14,790,154 | |||
Interest and fees | 4,615,103 | |||
Fund shares sold | 5,465,472 | |||
Investments matured | 70,077 | |||
Investment for trustee deferred compensation and retirement plans | 34,459 | |||
Other assets | 33,546 | |||
Total assets | 983,159,261 | |||
Liabilities: | ||||
Payable for: | ||||
Investments purchased | 46,157,498 | |||
Amount due to custodian | 777,324 | |||
Income distributions | 604,759 | |||
Fund shares repurchased | 2,576,491 | |||
Accrued fees to affiliates | 432,921 | |||
Accrued other operating expenses | 135,488 | |||
Trustee deferred compensation and retirement plans | 105,836 | |||
Total liabilities | 50,790,317 | |||
Net assets applicable to shares outstanding | $ | 932,368,944 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 960,836,879 | ||
Undistributed net investment income | 352,951 | |||
Undistributed net realized gain (loss) | (21,764,169 | ) | ||
Unrealized appreciation (depreciation) | (7,056,717 | ) | ||
$ | 932,368,944 | |||
Net Assets: | ||||
Class A | $ | 448,142,142 | ||
Class C | $ | 258,799,927 | ||
Class R | $ | 1,778,715 | ||
Class Y | $ | 165,608,826 | ||
Institutional Class | $ | 58,039,334 | ||
Shares outstanding, $0.01 par value per share, with an unlimited number of shares authorized: | ||||
Class A | 57,678,295 | |||
Class C | 33,459,070 | |||
Class R | 228,462 | |||
Class Y | 21,350,205 | |||
Institutional Class | 7,468,235 | |||
Class A: | ||||
Net asset value per share | $ | 7.77 | ||
Maximum offering price per share (Net asset value of $7.77 divided by 97.50%) | $ | 7.97 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 7.73 | ||
Class R: | ||||
Net asset value and offering price per share | $ | 7.79 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 7.76 | ||
Institutional Class: | ||||
Net asset value and offering price per share | $ | 7.77 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
25 Invesco Floating Rate Fund
Statement of Operations
For the year ended August 31, 2012
Investment income: | ||||
Interest | $ | 48,251,786 | ||
Dividends (net of foreign withholding taxes of $69,191) | 523,287 | |||
Dividends from affiliated money market funds | 35,737 | |||
Other income | 1,787,063 | |||
Total investment income | 50,597,873 | |||
Expenses: | ||||
Advisory fees | 5,386,489 | |||
Administrative services fees | 233,511 | |||
Custodian fees | 69,148 | |||
Distribution fees: | ||||
Class A | 1,037,105 | |||
Class C | 1,916,189 | |||
Class R | 7,792 | |||
Interest, facilities and maintenance fees | 250,547 | |||
Transfer agent fees — A, C, R & Y | 827,984 | |||
Transfer agent fees — Institutional | 8,176 | |||
Trustees’ and officers’ fees and benefits | 71,639 | |||
Other | 459,095 | |||
Total expenses | 10,267,675 | |||
Less: Fees waived and expense offset arrangement(s) | (38,562 | ) | ||
Net expenses | 10,229,113 | |||
Net investment income | 40,368,760 | |||
Realized and unrealized gain: | ||||
Net realized gain from investment securities | 6,889,134 | |||
Change in net unrealized appreciation of investment securities | 39,591,498 | |||
Net realized and unrealized gain | 46,480,632 | |||
Net increase in net assets resulting from operations | $ | 86,849,392 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
26 Invesco Floating Rate Fund
Statement of Changes in Net Assets
For the years ended August 31, 2012 and 2011
2012 | 2011 | |||||||
Operations: | ||||||||
Net investment income | $ | 40,368,760 | $ | 42,115,867 | ||||
Net realized gain | 6,889,134 | 3,254,086 | ||||||
Change in net unrealized appreciation (depreciation) | 39,591,498 | (32,747,303 | ) | |||||
Net increase in net assets resulting from operations | 86,849,392 | 12,622,650 | ||||||
Distributions to shareholders from net investment income: | ||||||||
Class A | (19,919,096 | ) | (21,622,255 | ) | ||||
Class C | (11,021,656 | ) | (10,387,775 | ) | ||||
Class R | (71,261 | ) | (61,928 | ) | ||||
Class Y | (6,619,187 | ) | (6,645,821 | ) | ||||
Institutional Class | (2,766,115 | ) | (3,168,407 | ) | ||||
Total distributions to shareholders from net investment income | (40,397,315 | ) | (41,886,186 | ) | ||||
Share transactions–net: | ||||||||
Class A | (25,517,343 | ) | 106,565,026 | |||||
Class C | (23,017,848 | ) | 86,405,542 | |||||
Class R | 204,697 | 456,201 | ||||||
Class Y | 33,082,924 | 37,146,862 | ||||||
Institutional Class | 6,259,440 | 12,014,497 | ||||||
Net increase (decrease) in net assets resulting from share transactions | (8,988,130 | ) | 242,588,128 | |||||
Net increase in net assets | 37,463,947 | 213,324,592 | ||||||
Net assets: | ||||||||
Beginning of year | 894,904,997 | 681,580,405 | ||||||
End of year (includes undistributed net investment income of $352,951 and $403,190, respectively) | $ | 932,368,944 | $ | 894,904,997 | ||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
27 Invesco Floating Rate Fund
Statement of Cash Flows
For the year ended August 31, 2012
Cash provided by operating activities: | ||||
Net increase in net assets resulting from operations | $ | 86,849,392 | ||
Adjustments to reconcile net increase in net assets from operations to net cash provided by operating activities: | ||||
Purchases of investments | (734,007,873 | ) | ||
Proceeds from disposition of investments and principal payments | 763,799,562 | |||
Increase in receivables and other assets | (510,811 | ) | ||
Amortization of premiums and accretion of discounts on investment securities | (5,818,993 | ) | ||
Increase in accrued expenses and other payables | 183,156 | |||
Change in net unrealized appreciation on investment securities | (39,591,498 | ) | ||
Net realized gain from investment securities | (6,889,134 | ) | ||
Net cash provided by operating activities | 64,013,801 | |||
Cash provided by (used in) financing activities: | ||||
Dividends paid to shareholders | (13,082,631 | ) | ||
Proceeds from shares of beneficial interest sold | 316,988,164 | |||
Increase in payable for amount due custodian | 777,324 | |||
Disbursements from shares of beneficial interest reacquired | (359,662,920 | ) | ||
Net cash provided by (used in) financing activities | (54,980,063 | ) | ||
Net increase in cash and cash equivalents | 9,033,738 | |||
Cash and cash equivalents at beginning of period | 37,865,898 | |||
Cash and cash equivalents at end of period | $ | 46,899,636 | ||
Non-cash financing activities: | ||||
Value of shares of beneficial interest issued in reinvestment of dividends paid to shareholders | 29,022,434 | |||
Supplemental disclosure of cash flow information: | ||||
Cash paid during the year ended August 31, 2012 for interest, facilities and maintenance fees was $234,247. |
Notes to Financial Statements
August 31, 2012
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 |
28 Invesco Floating Rate Fund
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. | ||
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. 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 economic 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 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 |
29 Invesco Floating Rate Fund
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 the 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 the 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 board 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 had a 2% redemption fee that was retained by the Fund to offset transaction costs and other expenses associated with short-term redemptions and exchanges. The fee, subject to certain exceptions, was imposed on certain redemptions or exchanges of shares within 31 days of purchase. The redemption fee was recorded as an increase in shareholder capital and was allocated among the share classes based on the relative net assets of each class. Effective January 1, 2012, the Fund eliminated the 2% redemption fee 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. |
30 Invesco Floating Rate Fund
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 note obligations, if any. |
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 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 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, including litigation expenses; 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. 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, 2013, 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, 2012, the Adviser waived advisory fees of $36,792.
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, 2012, expenses incurred under the agreement are shown in the Statement of Operations as Administrative services fees.
Also, Invesco has entered into service agreements whereby State Street Bank and Trust Company (“SSB”) serves as the custodian, fund accountant and provides certain administrative services to the Fund.
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, 2012, 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, 2012, 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, 2012, IDI advised the Fund that IDI retained $94,926 in front-end sales commissions from the sale of Class A shares and $32,885 and $67,352 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, IIS and/or IDI.
31 Invesco Floating Rate 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, 2012. 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.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 53,985,727 | $ | 215,921 | $ | 102,506 | $ | 54,304,154 | ||||||||
Variable Rate Senior Loan Interests | — | 821,649,177 | — | 821,649,177 | ||||||||||||
Bonds and Notes | — | 55,968,348 | — | 55,968,348 | ||||||||||||
Structured Products | — | 25,339,677 | — | 25,339,677 | ||||||||||||
Total Investments | $ | 53,985,727 | $ | 903,173,123 | $ | 102,506 | $ | 957,261,356 | ||||||||
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, 2012, the Fund received credits from these arrangements, which resulted in the reduction of the Fund’s total expenses of $1,770.
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.
NOTE 6—Borrowings
The Board of Trustees of the Fund 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. This agreement has been renewed will expire on September 17, 2013. Prior to September 20, 2011, the fund was party to a commiteed line of credit with JPMorgan Chase Bank.
Additionally, the Fund is permitted to temporarily carry a negative or overdrawn balance in its account with SSB, the custodian bank. Such balances, if any at period end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. 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.
32 Invesco Floating Rate Fund
NOTE 7—Unfunded Loan Commitments
As of August 31, 2012, 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:
Principal | ||||||||||
Borrower | Amount | Value | ||||||||
Boyd Gaming Corp. | Revolver Loan | $ | 936,782 | $ | 884,674 | |||||
Delta Air Lines, Inc. | Revolver Loan | 1,500,000 | 1,478,910 | |||||||
General Motors Holdings | Revolver Loan | 8,254,240 | 7,631,747 | |||||||
Harland Clarke Holdings Corp. | Revolver Loan | 1,346,988 | 1,171,879 | |||||||
Lake at Las Vegas Joint Venture, LLC | Revolver Loan | 19,988 | 18,489 | |||||||
Realogy Corp. | Revolver Loan | 2,514,754 | 2,200,410 | |||||||
West Corp. | Revolver Loan | 1,747,822 | 1,573,039 | |||||||
$ | 16,320,574 | $ | 14,959,148 | |||||||
NOTE 8—Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Years Ended August 31, 2012 and 2011:
2012 | 2011 | |||||||
Ordinary income | $ | 40,397,315 | $ | 41,886,186 | ||||
Tax Components of Net Assets at Period-End:
2012 | ||||
Undistributed ordinary income | $ | 364,154 | ||
Net unrealized appreciation (depreciation) — investments | (8,975,729 | ) | ||
Temporary book/tax differences | (101,514 | ) | ||
Capital loss carryforward | (19,754,846 | ) | ||
Shares of beneficial interest | 960,836,879 | |||
Total net assets | $ | 932,368,944 | ||
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 Regulated Investment Company Modernization Act of 2010 (the “Act”) eliminated the eight-year carryover period for capital losses that arise in taxable years beginning after its enactment date of December 22, 2010. Consequently, these capital losses can be carried forward for an unlimited period. However, capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Additionally, post-enactment capital loss carryovers will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. 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.
33 Invesco Floating Rate Fund
The Fund utilized $6,140,287 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, 2012, which expires as follows:
Capital Loss Carryforward* | ||||||||||||
Expiration | Short-Term | Long-Term | Total | |||||||||
August 31, 2013 | $ | 2,087,714 | $ | — | $ | 2,087,714 | ||||||
August 31, 2014 | 2,498,917 | — | 2,498,917 | |||||||||
August 31, 2016 | 1,685,685 | — | 1,685,685 | |||||||||
August 31, 2017 | 13,482,530 | — | 13,482,530 | |||||||||
$ | 19,754,846 | $ | — | $ | 19,754,846 | |||||||
* | 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 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, 2012 was $718,525,281 and $696,598,864, 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 | $ | 13,664,634 | ||
Aggregate unrealized (depreciation) of investment securities | (22,640,363 | ) | ||
Net unrealized appreciation (depreciation) of investment securities | $ | (8,975,729 | ) | |
Cost of investments for tax purposes is $966,237,085. |
NOTE 10—Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of restructured senior loans, on August 31, 2012, undistributed net investment income was decreased by $21,684 and undistributed net realized gain (loss) was increased by $21,684. This reclassification had no effect on the net assets of the Fund.
34 Invesco Floating Rate Fund
NOTE 11—Share Information
Summary of Share Activity | ||||||||||||||||
Years ended August 31, | ||||||||||||||||
2012(a) | 2011 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Class A | 22,275,912 | $ | 170,426,665 | 51,924,957 | $ | 402,865,246 | ||||||||||
Class C | 5,871,052 | 44,618,527 | 20,380,816 | 157,385,082 | ||||||||||||
Class R | 86,374 | 660,015 | 109,739 | 849,859 | ||||||||||||
Class Y | 12,131,084 | 92,783,961 | 17,975,403 | 139,258,574 | ||||||||||||
Institutional Class | 1,687,281 | 12,812,506 | 8,017,545 | 61,791,412 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Class A | 1,902,814 | 14,507,416 | 2,102,175 | 16,229,673 | ||||||||||||
Class C | 1,032,010 | 7,833,248 | 947,654 | 7,276,456 | ||||||||||||
Class R | 8,616 | 65,877 | 7,276 | 56,294 | ||||||||||||
Class Y | 509,053 | 3,887,695 | 365,792 | 2,813,264 | ||||||||||||
Institutional Class | 357,609 | 2,728,198 | 339,446 | 2,621,455 | ||||||||||||
Reacquired:(b) | ||||||||||||||||
Class A | (27,781,004 | ) | (210,451,424 | ) | (40,848,669 | ) | (312,529,893 | ) | ||||||||
Class C | (10,015,718 | ) | (75,469,623 | ) | (10,289,375 | ) | (78,255,996 | ) | ||||||||
Class R | (68,852 | ) | (521,195 | ) | (58,867 | ) | (449,952 | ) | ||||||||
Class Y | (8,435,063 | ) | (63,588,732 | ) | (13,724,851 | ) | (104,924,976 | ) | ||||||||
Institutional Class | (1,232,413 | ) | (9,281,264 | ) | �� | (6,729,184 | ) | (52,398,370 | ) | |||||||
Net increase (decrease) in share activity | (1,671,245 | ) | $ | (8,988,130 | ) | 30,519,857 | $ | 242,588,128 | ||||||||
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 67% 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 Fund 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, 5% of the outstanding shares of the Fund are owned by affiliated mutual funds. Affiliated mutual funds are other mutual funds that are also advised by Invesco. | ||
(b) | Net of redemption fees of $21,733 and $122,957 allocated among the classes based on relative net assets of each class for the years ended August 31, 2012 and 2011, respectively. |
35 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 to | |||||||||||||||||||||||||||||||||||||||
beginning | investment | realized and | investment | investment | value, end | Total | end of period | and/or expenses | and/or expenses | 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 08/31/12 | $ | 7.36 | $ | 0.37 | $ | 0.41 | $ | 0.78 | $ | (0.37 | ) | $ | 7.77 | 10.75 | % | $ | 448,142 | 1.11 | %(e)(f) | 1.11 | %(e)(f) | 4.80 | %(e) | 82 | % | |||||||||||||||||||||||
Year ended 08/31/11 | 7.47 | 0.35 | (0.11 | ) | 0.24 | (0.35 | ) | 7.36 | 3.07 | 450,750 | 0.99 | (f) | 1.00 | (f) | 4.53 | 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 | ||||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/12 | 7.32 | 0.33 | 0.41 | 0.74 | (0.33 | ) | 7.73 | 10.24 | 258,800 | 1.61 | (e)(f) | 1.61 | (e)(f) | 4.30 | (e) | 82 | ||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 7.44 | 0.31 | (0.12 | ) | 0.19 | (0.31 | ) | 7.32 | 2.41 | 267,796 | 1.49 | (f) | 1.50 | (f) | 4.03 | 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 | ||||||||||||||||||||||||||||||
Class R | ||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/12 | 7.37 | 0.35 | 0.42 | 0.77 | (0.35 | ) | 7.79 | 10.61 | 1,779 | 1.36 | (e)(f) | 1.36 | (e)(f) | 4.55 | (e) | 82 | ||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 7.49 | 0.33 | (0.12 | ) | 0.21 | (0.33 | ) | 7.37 | 2.68 | 1,491 | 1.24 | (f) | 1.25 | (f) | 4.28 | 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 | ||||||||||||||||||||||||||||||
Class Y | ||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/12 | 7.34 | 0.38 | 0.42 | 0.80 | (0.38 | ) | 7.76 | 11.19 | 165,609 | 0.86 | (e)(f) | 0.86 | (e)(f) | 5.05 | (e) | 82 | ||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 7.46 | 0.37 | (0.12 | ) | 0.25 | (0.37 | ) | 7.34 | 3.19 | 125,900 | 0.74 | (f) | 0.75 | (f) | 4.78 | 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 08/31/12 | 7.36 | 0.39 | 0.41 | 0.80 | (0.39 | ) | 7.77 | 11.13 | 58,039 | 0.77 | (e)(f) | 0.77 | (e)(f) | 5.14 | (e) | 82 | ||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 7.47 | 0.38 | (0.12 | ) | 0.26 | (0.37 | ) | 7.36 | 3.40 | 48,967 | 0.68 | (f) | 0.69 | (f) | 4.84 | 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 | ||||||||||||||||||||||||||||||
(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 $414,842, $255,492, $1,558, $130,550 and $53,639 for Class A, Class C, Class R, Class Y and Institutional Class shares, respectively. | |
(f) | Ratio includes line of credit expense of 0.03%, 0.01%, 0.02%, 0.02%, and 0.06% for the years ended August 31, 2012, August 31, 2011, August 31, 2010, August 31, 2009 and August 31, 2008, 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. |
NOTE 13—Subsequent Events
Effective September 24, 2012, Institutional Class shares were renamed Class R5 shares and the Fund began offering Class R6 shares.
36 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, of changes in net assets, of cash flows 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, 2012, 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 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, 2012 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
October 24, 2012
Houston, Texas
37 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, 2012 through August 31, 2012.
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 | (03/01/12) | (08/31/12)1 | Period2 | (08/31/12) | Period2 | Ratio | ||||||||||||||||||||||||
A | $ | 1,000.00 | $ | 1,038.50 | $ | 5.74 | $ | 1,019.51 | $ | 5.69 | 1.12 | % | ||||||||||||||||||
C | 1,000.00 | 1,034.60 | 8.29 | 1,016.99 | 8.21 | 1.62 | ||||||||||||||||||||||||
R | 1,000.00 | 1,037.20 | 7.02 | 1,018.25 | 6.95 | 1.37 | ||||||||||||||||||||||||
Y | 1,000.00 | 1,039.80 | 4.46 | 1,020.76 | 4.42 | 0.87 | ||||||||||||||||||||||||
Institutional | 1,000.00 | 1,038.80 | 4.13 | 1,021.09 | 4.09 | 0.81 | ||||||||||||||||||||||||
1 | The actual ending account value is based on the actual total return of the Fund for the period March 1, 2012 through August 31, 2012, 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 184/366 to reflect the most recent fiscal half year. |
38 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 19-20, 2012, 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, 2012. 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 primarily 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, 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 and on what terms 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. In addition to meetings with Invesco Advisers and fund 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 independent legal 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 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 previously approved by a different board that, at the time, was responsible for overseeing Morgan Stanley and Van Kampen funds, which have become Invesco Funds following the acquisition of the retail mutual fund business of Morgan Stanley. 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 or factor 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 20, 2012, 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 Sub-Committees 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 prior relationship and 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 consistent 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 consistent 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. The Board noted that performance of Class A shares of the Fund was in the third quintile of its performance universe for the one
39 Invesco Floating Rate Fund
year period, the first 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 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 its 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 funds advised by Invesco Advisers and its affiliates with investment strategies comparable to those of the Fund. The Board noted that Invesco Advisers advises or sub-advises two off-shore funds with comparable investment strategies, both of which had higher effective fee rates than 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 tended to be more comparable, reflecting a more comparable scope of services. 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 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 and were assisted in their review by a report from the Senior Officer. 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. The Board noted that Invesco Advisers proposes sharing economies of scale in administration expenses by lowering per class administrative fees.
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 for the year ended December 31, 2011. 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 Invesco Funds and the Fund. The Board did not deem the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund to be excessive given the nature, quality and extent of the services provided to the Invesco Funds. The Board received and accepted information from Invesco Advisers demonstrating that 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.
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. Invesco Advisers noted that the Fund does not execute brokerage transactions through “soft dollar” arrangements to any significant degree.
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.
40 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, 2012:
Federal and State Income Tax | ||||
Qualified Dividend Income* | 0.00% | |||
Corporate Dividends Received Deduction* | 0.00% |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Fund’s fiscal year. |
41 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 1000, 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 | Other Directorship(s) | |||||||
Name, Year of Birth and | Trustee and/or | Principal Occupation(s) | Funds in | Held by Trustee During | ||||
Position(s) Held with the Trust | Officer Since | During Past 5 Years | Fund Complex Overseen by Trustee | Past 5 Years | ||||
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 | 129 | 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. | 129 | None | ||||
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. | ||||||||
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 certain funds in the Fund Complex | 147 | Director of the Mutual Fund Directors Forum, a nonprofit membership organization for investment directors; Chairman and Director of the Abraham Lincoln Presidential Library Foundation; and Director of the Stevenson Center for Democracy | ||||
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 is considered an “interested person” (within the meaning of Section 2(a)(19) of the 1940 Act) of certain Funds in the Invesco Fund Complex by reason of he and his firm currently providing legal services as legal counsel to such Funds in the Invesco Fund Complex. |
T-1 Invesco Floating Rate Fund
Trustees and Officers—(continued)
Number of | Other Directorship(s) | |||||||
Name, Year of Birth and | Trustee and/or | Principal Occupation(s) | Funds in | Held by Trustee During | ||||
Position(s) Held with the Trust | Officer Since | During Past 5 Years | Fund Complex Overseen by Trustee | Past 5 Years | ||||
Independent Trustees | ||||||||
Bruce L. Crockett — 1944 Trustee and Chair | 2003 | Chairman, Crockett Technologies 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) | 129 | ACE Limited (insurance company); and Investment Company Institute | ||||
David C. Arch — 1945 Trustee | 2010 | Retired. Chairman and Chief Executive Officer of Blistex Inc., a consumer health care products manufacturer | 147 | Member of the Heartland Alliance Advisory Board, a nonprofit organization serving human needs based in Chicago. Board member of the Illinois Manufacturers’ Association. Member of the Board of Visitors, Institute for the Humanities, University of Michigan | ||||
Frank S. Bayley — 1939 Trustee | 2003 | Retired Formerly: Director, Badgley Funds, Inc. (registered investment company) (2 portfolios) and Partner, law firm of Baker & McKenzie | 129 | 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 | 129 | Chairman, Board of Governors, Western Golf Association, Chairman-elect, Evans Scholars Foundation and Director, Denver Film Society | ||||
Rodney F. Dammeyer — 1940 Trustee | 2010 | Chairman of CAC, LLC, a private company offering capital investment and management advisory services Formerly: Prior to January 2004, Director of TeleTech Holdings Inc.; Prior to 2002, Director of Arris Group, Inc.; Prior to 2001, Managing Partner at Equity Group Corporate Investments. Prior to 1995, Vice Chairman of Anixter International. Prior to 1985, experience includes Senior Vice President and Chief Financial Officer of Household International, Inc, Executive Vice President and Chief Financial Officer of Northwest Industries, Inc. and Partner of Arthur Andersen & Co. | 147 | 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) 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) | 129 | Director of Nature’s Sunshine Products, Inc. | ||||
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) Formerly: Chief Executive Officer, Texana Timber LP (sustainable forestry company) and member of the U.S. House of Representatives | 129 | Insperity (formerly known as Administaff) | ||||
Carl Frischling — 1937 Trustee | 2003 | Partner, law firm of Kramer Levin Naftalis and Frankel LLP | 129 | Director, Reich & Tang Funds (6 portfolios) | ||||
Prema Mathai-Davis — 1950 Trustee | 2003 | Retired Formerly: Chief Executive Officer, YWCA of the U.S.A. | 129 | None | ||||
Larry Soll — 1942 Trustee | 1997 | Retired Formerly, Chairman, Chief Executive Officer and President, Synergen Corp. (a biotechnology company) | 129 | None | ||||
T-2 Invesco Floating Rate Fund
Trustees and Officers—(continued)
Number of | Other Directorship(s) | |||||||
Name, Year of Birth and | Trustee and/or | Principal Occupation(s) | Funds in | Held by Trustee | ||||
Position(s) Held with the Trust | Officer Since | During Past 5 Years | Fund Complex Overseen by Trustee | During Past 5 Years | ||||
Independent Trustees—(continued) | ||||||||
Hugo F. Sonnenschein — 1940 Trustee | 2010 | Distinguished Service Professor and President Emeritus of the University of Chicago and the Adam Smith Distinguished Service Professor in the Department of Economics at the University of Chicago. Prior to July 2000, President of the University of Chicago | 147 | 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 | 129 | None | ||||
Other Officers | ||||||||
Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer, The 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 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) | N/A | N/A | ||||
Lisa O. Brinkley — 1959 Vice President | 2004 | Global Assurance Officer, Invesco Ltd. and Vice President, The Invesco Funds Formerly: Chief Compliance Officer, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.), Invesco Investment Services, Inc.(formerly known as Invesco Aim Investment Services, 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 | ||||
T-3 Invesco Floating Rate Fund
Trustees and Officers—(continued)
Number of | Other Directorship(s) | |||||||
Name, Year of Birth and | Trustee and/or | Principal Occupation(s) | Funds in | Held by Trustee | ||||
Position(s) Held with the Trust | Officer Since | During Past 5 Years | Fund Complex Overseen by Trustee | During Past 5 Years | ||||
Other Officers—(continued) | ||||||||
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., INVESCO Global Asset Management Limited, Invesco Management Company Limited and INVESCO Management S.A.; 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) 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) | 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); and 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 Formerly: Vice President, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc. | N/A | N/A | ||||
Yinka Akinsola — 1977 Anti-Money Laundering Compliance Officer | 2011 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.), Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.), Invesco Management Group, Inc., The Invesco Funds, Invesco Van Kampen Closed-End Funds, Van Kampen Exchange Corp., Van Kampen Funds Inc., PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, and PowerShares Actively Managed Exchange-Traded Fund Trust Formerly: Regulatory Analyst III, Financial Industry Regulatory Authority (FINRA). | N/A | N/A | ||||
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; Vice President, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) and Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.) Formerly: Senior Vice President, Van Kampen Investments Inc.; Senior Vice President and Chief Compliance Officer, Invesco Advisers, Inc. and Invesco Aim Capital Management, Inc.; Chief Compliance Officer, INVESCO Private Capital Investments, Inc. (holding company), Invesco Private Capital, Inc. (registered investment adviser), Invesco Global Asset Management (N.A.), Inc., Invesco Senior Secured Management, Inc. (registered investment adviser) and Van Kampen Investor Services Inc., 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 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 1000 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 1000 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 1000 Houston, TX 77046-1173 | Custodian State Street Bank and Trust Company 225 Franklin Street 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 shown below.
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 US 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.
SEC file numbers: 811-09913 and 333-36074 | FLR-AR-1 | Invesco Distributors, Inc. |
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Annual Report to Shareholders | August 31, 2012 |
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 | |
10 | Schedule of Investments | |
14 | Financial Statements | |
16 | Notes to Financial Statements | |
24 | Financial Highlights | |
25 | Auditor’s Report | |
26 | Fund Expenses | |
27 | Approval of Investment Advisory and Sub-Advisory Agreements | |
29 | Tax Information | |
T-1 | Trustees and Officers |
Letters to Shareholders
![(PHOTO OF PHILLIP TAYLOR)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8703402.jpg)
Philip Taylor
Dear Shareholders:
This report contains information about your Fund, including a discussion from your portfolio managers about how they managed your Fund – and why it performed as it did – during the reporting period. This report also includes your Fund’s long-term performance and a complete list of your Fund’s investments as of the close of the reporting period. I hope you find this information helpful.
For much of the reporting period, investors’ attention was focused on Europe, where eurozone governments struggled to reduce debt levels, strengthen their banks and stimulate their economies. European leaders disagreed whether the wiser path to restoring the Continent’s economic well-being was more stimulus or greater austerity. In the US, economic data were mixed. Economic growth, while positive, was relatively modest. Corporate earnings, which have grown strongly in recent years, have begun to slow. And job creation has been less robust than hoped. Later in this report, your Fund’s portfolio managers discuss how economic conditions and market trends affected your Fund’s performance.
Economic conditions are always subject to sudden and unexpected change. That’s why you may find it helpful to work with a trusted, experienced financial adviser who understands your unique financial goals, needs and risk tolerances. Financial advisers can provide valuable insight and information, particularly when markets are turbulent, and they can recommend investments appropriate for specific investment goals, such as a child’s college education or your retirement. On a regular basis, a financial adviser also can determine whether your existing investments are still appropriate, given your changing needs, goals and circumstances.
Timely insight and information from many of Invesco’s investment professionals is available at our website, invesco.com/us. We offer in-depth articles, video clips and audio commentaries from many of our portfolio managers and other investment professionals on a wide range of topics of interest to investors: recent economic and market developments; retirement planning; legislative updates from Washington, DC; and general investor education. At invesco.com/us, you also can access information about your Invesco account at any time.
What we mean by Intentional Investing
Intentional InvestingSM is the science and art of investing with purpose, prudence and diligence – and it’s how Invesco’s investment professionals manage your money every day.
This highly disciplined process begins when specialized teams of investment professionals clearly define an investment objective and then establish specific investment strategies to try to achieve that objective. While our investment teams closely monitor economic and market conditions – and issues specific to individual holdings that could affect their value – they maintain a long-term investment perspective. Intentional Investing is also:
n | How we manage and mitigate risk – by embedding risk controls and processes into every aspect of our business; | ||
n | How we create products – by offering a diverse combination of investment strategies and vehicles designed to meet your needs; and | ||
n | How we connect with you, our investors – by communicating clearly, by delivering expert insights from our portfolio managers and other investment professionals, and by providing a website full of tools and articles to help you stay informed. |
As a company, Invesco believes in putting investors first, and that’s why investment management is all we do. Our sole focus on managing your money allows your financial adviser to build a truly diversified investment portfolio of Invesco funds, whatever your investment needs and goals may be – and allows him or her to find appropriate Invesco funds when your circumstances change. Of course, neither Intentional Investing nor diversification can guarantee a profit or protect against loss.
Have a question?
If you have questions about your account, please contact an Invesco client services representative at 800 959 4246. If you have an Invesco-related question or comment, feel free 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/0000950123-12-013037/h87055h8703403.gif)
Philip Taylor
Senior Managing Director, Invesco Ltd.
Senior Managing Director, Invesco Ltd.
2 Invesco Global Real Estate Income Fund
![(PHOTO OF BRUCE L. CROCKETT)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8703404.jpg)
Bruce Crockett
Dear Fellow Shareholders:
One of our most important responsibilities as independent Trustees of the Invesco Funds is our annual review of the funds’ advisory and sub-advisory contracts with Invesco. This annual review is required by the Investment Company Act of 1940 and focuses on the nature and quality of the services Invesco has provided as adviser to the Invesco Funds and the reasonableness of the fees that it charges for those services.
In our roles as Trustees, we spend months reviewing thousands of pages of detailed information that we request from Invesco in connection with our annual review. We focus on the quality and costs of the services to be provided by Invesco and its affiliates. Some of the most important things we look at are fund performance, expenses and fees. All of the Trustees have substantial personal investments in the Invesco Funds complex. We’re fund shareholders just like you.
We also use information from many independent sources during the review process, including materials provided by the independent Senior Officer of the Invesco Funds, who reports directly to the independent Trustees. We also meet in private sessions with independent legal counsel and review performance and fee data on the Invesco Funds prepared by Lipper Inc., an independent, third-party firm widely recognized as a leader in its field.
I’m pleased to report that the Invesco Funds Board determined in June that renewing the investment advisory agreement and the sub-advisory contracts with Invesco would serve the best interests of each fund and its shareholders. For more detailed information about our assessment and conclusions with respect to each of the Invesco Funds, visit invesco.com/us, click on the “About Us” section and go to “Legal Information.” Information on the recent investment advisory renewal process can be found by clicking the last item under “Corporate Governance.”
In much the same way we review your fund’s advisory contract each year, it’s a good idea for you to review your own investment plan with your financial adviser on a regular basis. Perhaps you need to reassess your original asset allocation because different investments may grow at varying paces, or perhaps you’re going through a significant life change. Regardless of your situation, a financial adviser can provide guidance and experience to help you reach your financial goals.
As always, please contact me at bruce@brucecrockett.com with any questions or concerns you may have. On behalf of the 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/0000950123-12-013037/h87055h8703405.gif)
Bruce L. Crockett
Independent Chair
Invesco Funds Board of Trustees
Independent Chair
Invesco Funds Board of Trustees
3 Invesco Global Real Estate Income Fund
Management’s Discussion of Fund Performance
Performance summary
Investors favored US securities over international securities as the European debt crisis, political upheaval in the Middle East and potential economic slowing in Asia remained at the forefront of investor concerns during the fiscal year ended August 31, 2012. A general preference for yield, however, kept real estate securities among the best performers for the reporting period. As a result, the Fund at net asset value outperformed both its broad market and Lipper peer group benchmarks, the MSCI World Index and the Lipper Global Real Estate Funds Classification Average, respectively.
Your Fund’s long-term performance appears later in this report.
Fund vs. Indexes
Total returns, 8/31/11 to 8/31/12, 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 | 12.32 | % | ||
Class B Shares | 11.49 | |||
Class C Shares | 11.49 | |||
Class Y Shares | 12.62 | |||
Institutional Class Shares | 12.63 | |||
MSCI World Index▼ (Broad Market Index) | 8.12 | |||
S&P 500 Index§ (Former Broad Market Index)* | 18.00 | |||
Custom Global Real Estate Income Indexu (Style-Specific Index) | 13.53 | |||
Custom Select Real Estate Income Index▲ (Former Style-Specific Index)* | 17.45 | |||
Lipper Global Real Estate Funds Classification Averageª (Peer Group) | 11.45 | |||
Lipper Real Estate Funds Indexª (Former Peer Group Index)* | 15.74 | |||
Source(s): ▼Invesco, MSCI via FactSet Research Systems Inc.; §Invesco, S&P-Dow Jones via FactSet Research Systems Inc.; uInvesco, Lipper Inc.; ▲Invesco, Lipper Inc., Bloomberg L.P.; ªLipper Inc.
* | During the reporting period, the Fund has elected to use 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 Classification Average as its peer group benchmark because they more appropriately reflect the Fund’s investment style than the S&P 500 Index, the Custom Select Real Estate Income Index and the Lipper Real Estate Funds Index. |
How we invest
Effective September 1, 2011, 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
Portfolio Composition
By property type
Diversified | 14.1 | % | ||
Mortgage-Backed Securities | 13.7 | |||
Office REITs | 6.2 | |||
Retail REITs | 6.1 | |||
Lodging/Resorts | 5.9 | |||
Office | 5.8 | |||
Health Care | 4.6 | |||
Non-US-Dollar-Denominated Bonds & Notes | 4.5 | |||
Regional Malls | 4.3 | |||
Shopping Centers | 3.5 | |||
Apartments | 2.7 | |||
Industrial | 2.7 | |||
Specialty Properties | 2.7 | |||
Other Properties, Each Less Than 2% of Portfolio | 18.8 | |||
Money Market Funds Plus Other Assets Less Liabilities | 4.4 |
percentage of its assets in non-US 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 holds primarily real estate-oriented securities. We focus on public
Top 10 Equity Holdings*
1. | Hospitality Properties Trust | 1.9 | % | |||||
2. | Kilroy Realty Corp., Series G Pfd. | 1.4 | ||||||
3. | Land Securities Group PLC | 1.3 | ||||||
4. | National Retail Properties Inc. | 1.3 | ||||||
5. | British Land Co. PLC | 1.3 | ||||||
6. | Senior Housing Properties Trust | 1.3 | ||||||
7. | Digital Realty Trust, Inc. | 1.3 | ||||||
8. | Stockland | 1.2 | ||||||
9. | Liberty Property Trust | 1.2 | ||||||
10. | Kilroy Realty Corp., Series H Pfd. | 1.0 |
Total Net Assets | $509.5 million | |||
Total Number of Holdings* | 212 |
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.
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 limiting the size of any one holding.
We will consider selling a holding when:
n | Relative yields and/or valuation falls 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
As the reporting period began, reports on employment and the economy were mixed at best, and sovereign debt issues abroad weighed heavily on investors. Equity indexes sold off precipitously as the US struggled very publicly to raise the nation’s debt ceiling. As a result, Standard & Poor’s announced the first-ever downgrade to long-term US government debt. Uncertainty created by the downgrade combined with the continuing eurozone debt-crisis saga to reignite fears of a global recession through October.
As those negative headlines faded during the fall of 2011, signs of muted growth remained. US equity markets rebounded with a nearly uninterrupted rally throughout the winter and into the spring of 2012. In late March, markets paused, and while company earnings still offered more positive surprises than disappointments, confidence began to wane in the absence of new growth drivers. By May, the market went into steady decline as investors grew concerned about the real possibility of a Greek exit from the European Union and possible collapse of the euro. Economic data and earnings in the US began to show signs of deceleration amid contagion from both European and Asian weakness.
4 Invesco Global Real Estate Income Fund
Toward the end of the reporting period, yet another European commitment to lasting resolution to the economic crisis was coupled with an announcement that funds may be injected directly into large financial institutions. This announcement, along with a ruling by the US Supreme Court upholding the Affordable Care Act, provided some near-term clarity and resulted in risk taking that led the markets modestly higher as the reporting period ended.
On an absolute basis, each component of the capital structure contributed to Fund performance during the fiscal year. Real estate common stock had the greatest contribution to performance, followed by real estate preferred securities, commercial mortgage-backed securities – mortgage-backed fixed income securities that are secured by the loan on a commercial property – and real estate corporate debt.
From a real estate investment trust (REIT) sector standpoint, diversified REITs, health care REITs and lodging/ resorts had the greatest contribution to performance. Conversely, residential developers, manufactured homes and timber REITs were laggards, though they still produced positive results for the Fund. From a country standpoint, the US, Canada and Australia were strong contributors, while France, Belgium and the Netherlands detracted from performance.
In terms of positioning changes during the fiscal year, the most significant was a decrease in US common stocks (equity REITs) and an increase in international common stocks, given favorable relative value and higher yields. Approximately the same mix of equity to fixed income investments was held at the end of the fiscal year as at the beginning. We believed certain fixed income investments offered attractive yields and total return potential with lower volatility than equities. Additionally, fixed income securities with higher positioning within the capital structure, such as real estate corporate debt and preferred securities, may provide an additional level of protection from potential fundamental or property value decline. Among real estate common stocks, we favored certain international companies that may offer relatively more stable economic growth profiles than US 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 Global Real Estate Income 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 JOE RODRIGUEZ JR.)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8703406.jpg)
Joe Rodriguez Jr.
Portfolio manager, is lead manager of Invesco Global Real Estate Income Fund. He joined Invesco in 1990. Mr. Rodriguez earned a BBA in economics and finance and an MBA in finance from Baylor University.
Portfolio manager, is lead manager of Invesco Global Real Estate Income Fund. He joined Invesco in 1990. Mr. Rodriguez earned a BBA in economics and finance and an MBA in finance from Baylor University.
![(PHOTO OF MARK BLACKBURN)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8703407.jpg)
Mark Blackburn
Chartered Financial Analyst, portfolio manager, is manager of Invesco Global Real Estate Income Fund. He joined Invesco in 1998. Mr. Blackburn earned a BS in accounting from Louisiana State University and an MBA from Southern Methodist University. He is also a Certified Public Accountant.
Chartered Financial Analyst, portfolio manager, is manager of Invesco Global Real Estate Income Fund. He joined Invesco in 1998. Mr. Blackburn earned a BS in accounting from Louisiana State University and an MBA from Southern Methodist University. He is also a Certified Public Accountant.
![(PHOTO OF PAUL CURBO)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8703408.jpg)
Paul Curbo
Chartered Financial Analyst, portfolio manager, is manager of Invesco Global Real Estate Income Fund. He joined Invesco in 1998. Mr. Curbo earned a BBA in finance from The University of Texas at Austin.
Chartered Financial Analyst, portfolio manager, is manager of Invesco Global Real Estate Income Fund. He joined Invesco in 1998. Mr. Curbo earned a BBA in finance from The University of Texas at Austin.
![(PHOTO OF DARIN TURNER)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8703409.jpg)
Darin Turner
Portfolio manager, is manager of Invesco Global Real Estate Income Fund. He joined Invesco in 2005. Mr. Turner earned a BBA in finance from Baylor University, an MS in real estate from The University of Texas at Arlington and an MBA specializing in investments from Southern Methodist University.
Portfolio manager, is manager of Invesco Global Real Estate Income Fund. He joined Invesco in 2005. Mr. Turner earned a BBA in finance from Baylor University, an MS in real estate from The University of Texas at Arlington and an MBA specializing in investments from Southern Methodist University.
5 Invesco Global Real Estate Income Fund
Results of a $10,000 Investment – Oldest Share Class(es)
Fund and index data from 8/31/02*
Fund and index data from 8/31/02*
![(PERFORMANCE GRAPH)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8703410.gif)
1 | Sources: Invesco, Lipper Inc., Bloomberg L.P. | |
2 | Sources: Invesco, Lipper Inc. | |
3 | Source: Lipper Inc. | |
4 | Sources: Invesco, S&P-Dow Jones via FactSet Research Systems Inc. | |
5 | Sources: Invesco, MSCI via FactSet Research Systems Inc. |
* | During the reporting period, Invesco changed its policy regarding growth of $10,000 charts. For funds older than 10 years, we previously showed performance since inception. Going forward, we will show performance for the most recent 10 years, since this more accurately reflects the experience of the typical shareholder. As a result, charts now may include benchmarks that did not appear previously, because the funds’ inception predated the benchmarks’ inception. Also, all charts will now be presented using a linear format. |
Past performance cannot guarantee comparable future results.
During the reporting period, the Fund has elected to use 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 Classification Average as its peer group benchmark because they more appropriately reflect the Fund’s investment style than
the S&P 500 Index, the Custom Select Real Estate Income Index and the Lipper Real Estate Funds Index. Because this is the first reporting period since we have adopted the new indexes, 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.
6 Invesco Global Real Estate Income Fund
Average Annual Total Returns
As of 8/31/12, including maximum applicable sales charges
Class A Shares | ||||||||
Inception (5/31/02) | 9.49 | % | ||||||
10 | Years | 10.00 | ||||||
5 | Years | 2.12 | ||||||
1 | Year | 6.12 | ||||||
Class B Shares | ||||||||
10 | Years | 9.63 | % | |||||
5 | Years | 2.32 | ||||||
1 | Year | 6.49 | ||||||
Class C Shares | ||||||||
10 | Years | 9.63 | % | |||||
5 | Years | 2.52 | ||||||
1 | Year | 10.49 | ||||||
Class Y Shares | ||||||||
10 | Years | 10.71 | % | |||||
5 | Years | 3.43 | ||||||
1 | Year | 12.62 | ||||||
Institutional Class Shares | ||||||||
10 | Years | 10.86 | % | |||||
5 | Years | 3.73 | ||||||
1 | Year | 12.63 | ||||||
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 share 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.
Institutional Class shares incepted on March 9, 2007. Performance shown prior to that date is that of Class A
Average Annual Total Returns
As of 6/30/12, the most recent calendar quarter-end, including maximum applicable sales charges
Class A Shares | ||||||||
Inception (5/31/02) | 9.29 | % | ||||||
10 | Years | 9.13 | ||||||
5 | Years | 0.86 | ||||||
1 | Year | 0.31 | ||||||
Class B Shares | ||||||||
10 | Years | 8.76 | % | |||||
5 | Years | 1.08 | ||||||
1 | Year | 0.60 | ||||||
Class C Shares | ||||||||
10 | Years | 8.75 | % | |||||
5 | Years | 1.24 | ||||||
1 | Year | 4.48 | ||||||
Class Y Shares | ||||||||
10 | Years | 9.82 | % | |||||
5 | Years | 2.14 | ||||||
1 | Year | 6.55 | ||||||
Institutional Class Shares | ||||||||
10 | Years | 9.97 | % | |||||
5 | Years | 2.46 | ||||||
1 | Year | 6.69 | ||||||
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, in which 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 1.31%, 2.06%, 2.06%, 1.06% and 0.97%, 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 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.
Fund performance was positively affected 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.
Had the adviser not waived fees and/ or reimbursed expenses in the past, performance would have been lower.
7 Invesco Global Real Estate Income Fund
Invesco Global Real Estate Income Fund’s investment objective is current income and, secondarily,
capital appreciation.
capital appreciation.
n | Unless otherwise stated, information presented in this report is as of August 31, 2012, 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 for new or additional investments. Existing shareholders of Class B shares may continue to reinvest dividends and capital gains distributions in Class B shares and exchange their Class B shares for Class B shares of other funds. 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 | Concentration risk. To the extent the Fund invests a greater amount in any one sector or industry, the Fund’s performance will depend to a greater extent on the overall condition of the sector or industry, and there is increased risk to the Fund if conditions adversely affect that sector or industry. | |
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 | Debt securities risk. The Fund may invest in debt securities that are affected by changing interest rates and |
changes in their effective maturities and credit quality. | ||
n | Developing markets securities risk. Securities issued by foreign companies and governments located in developing/emerging 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 | 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 | 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. An unexpectedly high rate of defaults on the mortgages held by a mortgage pool may adversely affect the value of mortgage-backed securities and could result in losses to the Fund. The risk of such defaults is generally higher in the case of mortgage pools that include subprime mortgages. Subprime mortgages refer to loans made to borrowers with weakened credit histories or with lower capacity to make timely payments on their mortgages. | |
n | Nondiversification 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 |
continued on page 9
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 Global Real Estate Income Fund
that affect property values, rents or occupancies of real estate related to the Fund’s holdings. Real estate companies, including 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. | |
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 | Synthetic securities risk. Fluctuations in the values of synthetic securities may not correlate perfectly with the instruments they are designed to replicate. Synthetic securities may be subject to interest rate changes, market price fluctuations, counterparty risk and liquidity risk. |
About indexes used in this report
n | The MSCI World IndexSM is an unmanaged index considered representative of stocks of developed countries. | |
n | The S&P 500® Index is an unmanaged index considered representative of the US stock market. | |
n | The Custom Global Real Estate Income Index, created by Invesco to serve as a benchmark for Invesco Global Real Estate Income Fund, comprises the following indexes: FTSE EPRA/NAREIT Developed Real Estate (50%) and Wachovia Hybrid and Preferred Securities REIT (50%). | |
n | The Custom Select Real Estate Income Index, created by Invesco to serve as a benchmark for Invesco Select Real Estate Income Fund (renamed Invesco Global Real Estate Income Fund), comprises the following indexes: FTSE NAREIT Equity REIT (50%) and Wachovia Hybrid and Preferred Securities REIT (50%). | |
n | The Lipper Global Real Estate Funds Classification Average represents an average of all funds in the Lipper Global Real Estate Funds classification. | |
n | The Lipper Real Estate Funds Index is an unmanaged index considered representative of real estate funds tracked by Lipper. | |
n | The FTSE EPRA/NAREIT Developed Real Estate Index is an unmanaged index considered representative of global real estate companies and REITs. | |
n | The Wachovia Hybrid and Preferred Securities REIT Index measures the performance of US preferred shares. | |
n | The FTSE NAREIT Equity REIT Index is an unmanaged index considered representative of US REITs. | |
n | The Fund is not managed to track the performance of any particular index, including the indexes defined here, and consequently, the performance of the Fund may deviate significantly from the performance of the indexes. | |
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 | 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. |
9 Invesco Global Real Estate Income Fund
Schedule of Investments
August 31, 2012
Shares | Value | |||||||
Real Estate Investment Trusts, Common Stocks & Other Equity Interests–54.57% | ||||||||
Australia–6.03% | ||||||||
BWP Trust | 476,177 | $ | 976,774 | |||||
CFS Retail Property Trust | 1,420,701 | 2,817,068 | ||||||
Challenger Diversified Property Group | 921,026 | 2,198,206 | ||||||
Charter Hall Group | 959,691 | 2,665,872 | ||||||
Charter Hall Retail REIT | 1,034,154 | 3,718,338 | ||||||
Commonwealth Property Office Fund | 1,099,989 | 1,170,604 | ||||||
Dexus Property Group | 801,719 | 793,439 | ||||||
GPT Group | 633,042 | 2,295,747 | ||||||
Investa Office Fund | 780,662 | 2,288,946 | ||||||
Mirvac Group | 1,617,781 | 2,262,780 | ||||||
Stockland | 1,928,026 | 6,350,202 | ||||||
Westfield Group | 120,044 | 1,229,132 | ||||||
Westfield Retail Trust | 650,273 | 1,946,289 | ||||||
30,713,397 | ||||||||
Belgium–0.15% | ||||||||
Intervest Offices & Warehouses | 33,141 | 772,541 | ||||||
Canada–5.81% | ||||||||
Artis REIT | 170,800 | 2,875,829 | ||||||
Boardwalk REIT | 45,800 | 2,988,916 | ||||||
Brookfield Canada Office Properties | 105,401 | 3,050,097 | ||||||
Calloway REIT | 85,100 | 2,529,090 | ||||||
Canadian Apartment Properties REIT | 98,500 | 2,477,736 | ||||||
Chartwell Seniors Housing REIT | 331,700 | 3,482,194 | ||||||
Cominar REIT | 104,300 | 2,560,158 | ||||||
Dundee REIT | 57,800 | 2,241,883 | ||||||
H&R REIT | 106,500 | 2,732,985 | ||||||
Primaris Retail REIT | 104,200 | 2,520,712 | ||||||
RioCan REIT | 77,300 | 2,165,560 | ||||||
29,625,160 | ||||||||
China–1.70% | ||||||||
Agile Property Holdings Ltd. | 936,000 | 1,078,170 | ||||||
CapitaRetail China Trust | 2,222,000 | 2,638,447 | ||||||
China Overseas Land & Investment Ltd. | 414,000 | 937,641 | ||||||
Guangzhou R&F Properties Co. Ltd.–Class H | 1,079,200 | 1,251,103 | ||||||
Shimao Property Holdings Ltd. | 904,000 | 1,369,277 | ||||||
Soho China Ltd. | 2,160,000 | 1,381,331 | ||||||
8,655,969 | ||||||||
France–1.70% | ||||||||
Gecina S.A. | 12,551 | 1,199,798 | ||||||
Klepierre | 34,319 | 1,105,648 | ||||||
Mercialys S.A. | 122,622 | 2,517,769 | ||||||
Unibail-Rodamco S.E. | 18,924 | 3,852,320 | ||||||
8,675,535 | ||||||||
Germany–0.72% | ||||||||
Deutsche Euroshop AG | 68,625 | 2,508,157 | ||||||
GSW Immobilien AG | 32,313 | 1,150,292 | ||||||
3,658,449 | ||||||||
Hong Kong–2.79% | ||||||||
Champion REIT | 5,065,000 | 2,235,756 | ||||||
Fortune REIT | 2,379,000 | 1,726,891 | ||||||
Hang Lung Properties Ltd. | 733,000 | 2,512,643 | ||||||
Hongkong Land Holdings Ltd. | 157,000 | 957,700 | ||||||
Kerry Properties Ltd. | 478,000 | 2,276,666 | ||||||
Link REIT (The) | 481,000 | 2,145,771 | ||||||
Sino Land Co. Ltd. | 1,425,000 | 2,343,689 | ||||||
14,199,116 | ||||||||
Japan–5.27% | ||||||||
Advance Residence Investment | 1,166 | 2,353,103 | ||||||
Industrial & Infrastructure Fund Investment Corp. | 458 | 3,286,548 | ||||||
Japan Prime Realty Investment Corp. | 692 | 1,948,298 | ||||||
Japan Real Estate Investment Corp. | 192 | 1,877,931 | ||||||
Kenedix Realty Investment Corp. | 602 | 1,981,766 | ||||||
Mitsui Fudosan Co., Ltd. | 70,000 | 1,307,061 | ||||||
Nippon Building Fund Inc. | 212 | 2,147,852 | ||||||
Nomura Real Estate Office Fund, Inc. | 510 | 2,939,684 | ||||||
Nomura Real Estate Residential Fund, Inc. | 456 | 2,464,582 | ||||||
ORIX JREIT Inc. | 527 | 2,416,096 | ||||||
Tokyu Land Corp. | 403,000 | 1,988,933 | ||||||
United Urban Investment Corp. | 1,903 | 2,129,791 | ||||||
26,841,645 | ||||||||
New Zealand–0.40% | ||||||||
AMP NZ Office Ltd. | 1,167,536 | 901,762 | ||||||
Kiwi Income Property Trust | 1,278,088 | 1,126,084 | ||||||
2,027,846 | ||||||||
Singapore–2.99% | ||||||||
Ascendas REIT | 1,660,000 | 3,143,132 | ||||||
Ascott Residence Trust | 1,332,000 | 1,335,847 | ||||||
CapitaCommercial Trust | 769,000 | 877,006 | ||||||
Frasers Centrepoint Trust | 1,758,000 | 2,517,675 | ||||||
Mapletree Industrial Trust | 1,514,000 | 1,651,990 | ||||||
Mapletree Logistics Trust | 2,113,000 | 1,881,763 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
10 Invesco Global Real Estate Income Fund
Shares | Value | |||||||
Singapore–(continued) | ||||||||
Starhill Global REIT | 1,865,000 | $ | 1,099,787 | |||||
Suntec REIT | 2,341,000 | 2,714,012 | ||||||
15,221,212 | ||||||||
South Africa–1.89% | ||||||||
Capital Property Fund | 651,910 | 847,161 | ||||||
Fountainhead Property Trust | 1,911,557 | 1,908,028 | ||||||
Growthpoint Properties Ltd. | 1,060,491 | 3,464,864 | ||||||
Hyprop Investments Ltd. | 201,706 | 1,765,873 | ||||||
SA Corporate Real Estate Fund | 3,903,307 | 1,664,444 | ||||||
9,650,370 | ||||||||
United Kingdom–4.88% | ||||||||
British Land Co. PLC | 761,343 | 6,510,840 | ||||||
Hammerson PLC | 429,688 | 3,117,725 | ||||||
Hansteen Holdings PLC | 1,809,900 | 2,155,184 | ||||||
Land Securities Group PLC | 523,119 | 6,569,698 | ||||||
Safestore Holdings PLC | 1,115,781 | 1,806,956 | ||||||
SEGRO PLC | 1,273,723 | 4,681,601 | ||||||
24,842,004 | ||||||||
United States–20.24% | ||||||||
Alexandria Real Estate Equities, Inc. | 18,900 | 1,396,710 | ||||||
AvalonBay Communities, Inc. | 17,300 | 2,448,296 | ||||||
BioMed Realty Trust, Inc. | 78,000 | 1,445,340 | ||||||
CBL & Associates Properties, Inc. | 128,700 | 2,750,319 | ||||||
Cohen & Steers Quality Income Realty Fund, Inc. | 206,873 | 2,244,572 | ||||||
Corporate Office Properties Trust | 49,800 | 1,113,528 | ||||||
DCT Industrial Trust Inc. | 122,200 | 772,304 | ||||||
DiamondRock Hospitality Co. | 221,900 | 2,134,678 | ||||||
Digital Realty Trust, Inc. | 86,300 | 6,430,213 | ||||||
DuPont Fabros Technology Inc. | 19,600 | 540,176 | ||||||
EastGroup Properties, Inc. | 19,800 | 1,061,280 | ||||||
Entertainment Properties Trust | 37,000 | 1,686,830 | ||||||
Equity Lifestyle Properties, Inc. | 23,700 | 1,629,612 | ||||||
Equity One, Inc. | 56,400 | 1,195,680 | ||||||
Essex Property Trust, Inc. | 17,600 | 2,674,848 | ||||||
Extra Space Storage Inc. | 50,900 | 1,736,199 | ||||||
Government Properties Income Trust | 207,950 | 4,697,591 | ||||||
Healthcare Realty Trust, Inc. | 190,800 | 4,628,808 | ||||||
Hersha Hospitality Trust | 260,600 | 1,297,788 | ||||||
Highwoods Properties, Inc. | 67,500 | 2,201,175 | ||||||
Hospitality Properties Trust | 399,300 | 9,611,151 | ||||||
Inland Real Estate Corp. | 385,750 | 3,163,150 | ||||||
Kimco Realty Corp. | 48,500 | 985,520 | ||||||
Liberty Property Trust | 161,900 | 5,970,872 | ||||||
LTC Properties, Inc. | 49,800 | 1,680,252 | ||||||
Mack-Cali Realty Corp. | 60,500 | 1,615,350 | ||||||
Mid-America Apartment Communities, Inc. | 19,800 | 1,346,400 | ||||||
National Retail Properties Inc. | 210,100 | 6,525,706 | ||||||
Neuberger Berman Real Estate Securities Income Fund Inc. | 10,150 | 48,720 | ||||||
Pebblebrook Hotel Trust | 59,300 | 1,401,259 | ||||||
Piedmont Office Realty Trust Inc.–Class A | 104,700 | 1,776,759 | ||||||
PS Business Parks, Inc. | 12,700 | 865,759 | ||||||
Public Storage | 12,200 | 1,775,832 | ||||||
Retail Opportunity Investments Corp. | 211,100 | 2,653,527 | ||||||
RLJ Lodging Trust | 42,900 | 765,336 | ||||||
Senior Housing Properties Trust | 293,150 | 6,484,478 | ||||||
Simon Property Group, Inc. | 7,300 | 1,158,510 | ||||||
Tanger Factory Outlet Centers, Inc. | 56,500 | 1,895,575 | ||||||
UDR, Inc. | 43,900 | 1,108,475 | ||||||
Ventas, Inc. | 36,900 | 2,416,581 | ||||||
Washington REIT | 56,000 | 1,504,160 | ||||||
Weingarten Realty Investors | 63,000 | 1,759,590 | ||||||
Weyerhaeuser Co. | 102,200 | 2,545,802 | ||||||
103,144,711 | ||||||||
Total Real Estate Investment Trusts, Common Stocks & Other Equity Interests (Cost $251,853,997) | 278,027,955 | |||||||
Preferred Stocks–21.06% | ||||||||
United States–21.06% | ||||||||
Alexandria Real Estate Equities Inc., Series D, $1.75% Conv. Pfd. | 35,000 | 942,812 | ||||||
BioMed Realty Trust, Inc., Series A, 7.38% Pfd. | 70,000 | 1,789,900 | ||||||
Brandywine Realty Trust, Series D, 7.38% Pfd. | 10,355 | 264,570 | ||||||
CBL & Associates Properties, Inc., Series D, 7.38% Pfd. | 184,700 | 4,728,320 | ||||||
Chesapeake Lodging Trust, Series A, 7.75% Pfd. | 90,000 | 2,322,000 | ||||||
Corporate Office Properties Trust, Series J, 7.63% Pfd. | 22,000 | 560,120 | ||||||
Series L, 7.38% Pfd. | 80,000 | 2,060,000 | ||||||
Digital Realty Trust Inc., Series F, 6.63% Pfd. | 80,000 | 2,128,800 | ||||||
DuPont Fabros Technology, Inc., Series A, 7.88% Pfd. | 59,400 | 1,587,762 | ||||||
Series B, 7.63% Pfd. | 140,400 | 3,790,800 | ||||||
Eagle Hospitality Properties Trust Inc., Series A, 8.25% Pfd. | 195,800 | 521,318 | ||||||
Entertainment Properties Trust, Series C, $1.44 Conv. Pfd. | 50,000 | 1,036,000 | ||||||
Series E, $2.25 Conv. Pfd. | 54,400 | 1,553,664 | ||||||
Equity Lifestyle Properties, Inc., Series A, 8.03% Pfd. | 4,400 | 112,200 | ||||||
Essex Property Trust, Inc., Series H, 7.13% Pfd. | 120,000 | 3,202,800 | ||||||
Health Care REIT, Inc., Series I, $3.25 Conv. Pfd. | 82,500 | 4,578,750 | ||||||
Series J, 6.50% Pfd. | 80,000 | 2,151,200 | ||||||
Hersha Hospitality Trust, Series A, 8.00% Pfd. | 7,520 | 191,835 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
11 Invesco Global Real Estate Income Fund
Shares | Value | |||||||
United States–(continued) | ||||||||
Hospitality Properties Trust, Series C, 7.00% Pfd. | 98,800 | $ | 2,490,748 | |||||
Hospitality Properties Trust, Series D, 7.13% Pfd. | 80,125 | 2,190,618 | ||||||
Hudson Pacific Properties Inc. Series B, 8.38% Pfd. | 44,000 | 1,179,200 | ||||||
Inland Real Estate Corp., Series A, 8.13% Pfd. | 39,385 | 1,034,644 | ||||||
Kilroy Realty Corp., Series G, 6.88% Pfd. | 274,000 | 7,148,660 | ||||||
Series H, 6.38% Pfd. | 198,000 | 4,930,200 | ||||||
Kimco Realty Corp., Series J, 5.50% Pfd. | 89,800 | 2,226,142 | ||||||
LaSalle Hotel Properties, Series G, 7.25% Pfd. | 91,450 | 2,327,403 | ||||||
Series H, 7.50% Pfd. | 103,900 | 2,811,534 | ||||||
National Retail Properties Inc., Series D, 6.63% Pfd. | 136,000 | 3,610,800 | ||||||
Pebblebrook Hotel Trust, Series A, 7.88% Pfd. | 178,700 | 4,681,940 | ||||||
ProLogis, Inc., Series Q, 8.54% Pfd. | 950 | 57,831 | ||||||
PS Business Parks, Inc., Series R, 6.88% Pfd. | 45,000 | 1,224,000 | ||||||
Series S, 6.45% Pfd. | 120,000 | 3,270,000 | ||||||
Public Storage, 5.90% Pfd. | 40,000 | 1,068,400 | ||||||
Series R, 6.35% Pfd. | 170,000 | 4,692,000 | ||||||
Series T, 5.75% Pfd. | 80,000 | 2,128,800 | ||||||
Regency Centers, Series 6, 6.63% Pfd. | 120,000 | 3,241,500 | ||||||
SL Green Realty Corp., Series C, 7.63% Pfd. | 181,100 | 4,605,373 | ||||||
SL Green Realty Corp., Series I, 6.50% Pfd. | 196,000 | 4,890,200 | ||||||
Sunstone Hotel Investors, Inc., Series A, 8.00% Pfd. | 76,475 | 1,937,877 | ||||||
Sunstone Hotel Investors, Inc., Series D, 8.00% Pfd. | 55,960 | 1,450,483 | ||||||
Taubman Centers, Inc., Series J, 6.50% Pfd. | 99,000 | 2,500,740 | ||||||
Terreno Realty Corp., Series A 7.75% Pfd. | 38,250 | 1,000,237 | ||||||
Vornado Realty Trust, Series H, 6.75% Pfd. | 91,800 | 2,349,162 | ||||||
Vornado Realty Trust, Series I, 6.63% Pfd. | 184,203 | 4,721,123 | ||||||
Total Preferred Stocks (Cost $103,383,167) | 107,292,466 | |||||||
Principal | ||||||||
Amount | ||||||||
Mortgage-Backed Securities–13.70% | ||||||||
Ireland–0.70% | ||||||||
DECO Series 2012-MHLA, Class C, Floating Rate Pass Through Ctfs., 3.02%, 07/28/21(a)(b)(c) | GBP | 1,166,667 | 1,636,652 | |||||
Titan Europe PLC, Series 2005-CT1X, Class C, Floating Rate Pass Through Ctfs., 1.36%, 07/28/14(a)(b) | GBP | 1,250,248 | 1,935,393 | |||||
3,572,045 | ||||||||
United Kingdom–0.85% | ||||||||
Eclipse Ltd. Series 2006-4, Class A, Floating Rate Pass Through Ctfs., 1.00%, 10/25/18(a)(b) | GBP | 1,906,679 | 2,542,877 | |||||
Mall Funding PLC (The), Series 1, Class A, Floating Rate Pass Through Ctfs., 1.46%, 04/22/17(a)(b) | GBP | 1,193,451 | 1,771,677 | |||||
4,314,554 | ||||||||
United States–12.15% | ||||||||
Banc of America Large Loan Inc., Series 2006-BIX1, Class E, Floating Rate Pass Through Ctfs., 0.48%, 10/15/19(b)(c) | $ | 1,900,000 | 1,801,794 | |||||
Bear Stearns Commercial Mortgage Securities, | ||||||||
Series 2004-PWR6, Class B, Variable Rate Pass Through Ctfs., 4.95%, 11/11/41(b)(c) | 50,000 | 53,733 | ||||||
Series 2005-T18, Class AJ, Variable Rate Pass Through Ctfs., 5.01%, 02/13/42(b) | 350,000 | 371,822 | ||||||
Series 2006-T22, Class AJ, Variable Rate Pass Through Ctfs., 5.71%, 04/12/38(b) | 2,900,000 | 3,000,721 | ||||||
Series 2006-T24, Class AJ, Variable Rate Pass Through Ctfs., 5.60%, 10/12/41(b) | 5,950,000 | 5,139,937 | ||||||
Citigroup Commercial Mortgage Trust, | ||||||||
Series 2005-EMG, Class D, Variable Rate Pass Through Ctfs., 5.03%, 09/20/51(b)(c) | 500,000 | 495,183 | ||||||
Credit Suisse First Boston Mortgage Securities Corp., | ||||||||
Series 2003-C3, Class G, Variable Rate Pass Through Ctfs., 4.62%, 05/15/38(b)(c) | 25,000 | 23,325 | ||||||
Series 2005-C5, Class C, Variable Rate Pass Through Ctfs., 5.10%, 08/15/38(b) | 4,975,000 | 4,856,851 | ||||||
DLJ Commercial Mortgage Corp., Series 1998-CG1, Class B4, Variable Rate Pass Through Ctfs., 7.21%, 06/10/31(b)(c) | 340,000 | 348,147 | ||||||
FREMF Mortgage Trust, Series 2012-K705, Class C, Variable Rate Pass Through Ctfs., 4.31%, 09/25/44(b)(c) | 3,000,000 | 2,853,212 | ||||||
GMAC Commercial Mortgage Securities Inc., Series 1998-C2, Class F, Pass Through Ctfs., 6.50%, 05/15/35(c) | 159,428 | 164,563 | ||||||
GS Mortgage Securities Corp II, | ||||||||
Series 2003-C1, Class J, Variable Rate Pass Through Ctfs., 5.31%, 01/10/40(b)(c) | 900,000 | 901,525 | ||||||
Series 2011-ALF, Class D, Pass Through Ctfs., 4.21%, 02/10/21(c) | 3,500,000 | 3,524,150 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., Series 2011-C4, Class TAC1, Pass Through Ctfs., 7.99%, 07/15/46(c) | 1,962,476 | 2,152,496 | ||||||
LB-UBS Commercial Mortgage Trust, | ||||||||
Series 2002-C7, Class B, Pass Through Ctfs., 5.08%, 01/15/36 | 96,000 | 96,792 | ||||||
Series 2005-C1, Class C, Variable Rate Pass Through Ctfs., 4.84%, 02/15/40(b) | 170,000 | 171,099 | ||||||
Series 2006-C4, Class AJ, Variable Rate Pass Through Ctfs., 6.08%, 06/15/38(b) | 5,260,000 | 4,701,180 | ||||||
Merrill Lynch Mortgage Trust, | ||||||||
Series 2004-KEY2, Class D, Variable Rate Pass Through Ctfs., 5.05%, 08/12/39(b) | 4,975,000 | 4,638,449 | ||||||
Series 2004-MKB1, Class B, Variable Rate Pass Through Ctfs., 5.28%, 02/12/42(b) | 25,000 | 26,524 | ||||||
Series 2005-CIP1, Class AJ, Variable Rate Pass Through Ctfs., 5.14%, 07/12/38(b) | 2,850,000 | 2,895,752 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
12 Invesco Global Real Estate Income Fund
Principal | ||||||||
Amount | Value | |||||||
United States–(continued) | ||||||||
Morgan Stanley Capital I, | ||||||||
Series 2005-HQ7, Class AJ, Variable Rate Pass Through Ctfs., 5.38%, 11/14/42(b) | $ | 5,360,000 | $ | 5,561,177 | ||||
Series 2005-IQ10, Class B, Variable Rate Pass Through Ctfs., 5.45%, 09/15/42(b) | 5,475,000 | 5,293,408 | ||||||
Series 2006-IQ11, Class B, Variable Rate Pass Through Ctfs., 5.90%, 10/15/42(b) | 270,000 | 225,440 | ||||||
Series 2007-HQ11, Class AJ, Variable Rate Pass Through Ctfs., 5.51%, 02/12/44(b) | 3,975,000 | 3,578,985 | ||||||
Series 2007-T27, Class AJ, Variable Rate Pass Through Ctfs., 5.82%, 06/11/42(b) | 2,950,000 | 2,810,369 | ||||||
Series 2007-T27, Class AM, Variable Rate Pass Through Ctfs., 5.82%, 06/11/42(b) | 25,000 | 27,463 | ||||||
Wachovia Bank Commercial Mortgage Trust, | ||||||||
Series 2003-C5, Class B, Pass Through Ctfs., 4.11%, 06/15/35 | 180,000 | 182,872 | ||||||
Series 2004-C15, Class 175B, Variable Rate Pass Through Ctfs., 6.04%, 10/15/41(b)(c) | 2,700,000 | 2,674,438 | ||||||
Series 2004-C15, Class 175C, Variable Rate Pass Through Ctfs., 6.04%, 10/15/41(b)(c) | 396,000 | 388,611 | ||||||
Series 2005-C21, Class D, Variable Rate Pass Through Ctfs., 5.41%, 10/15/44(b) | 3,000,000 | 2,925,282 | ||||||
61,885,300 | ||||||||
Total Mortgage-Backed Securities (Cost $67,570,513) | 69,771,899 | |||||||
Non U.S. Dollar Denominated Bonds & Notes–4.46%(a) | ||||||||
Australia–4.46% | ||||||||
CFS Retail Property Trust, Sr. Unsec. Conv. Euro Notes, 5.75%, 07/04/14(d) | AUD | 2,100,000 | 2,243,762 | |||||
GPT RE Ltd., Sr. Unsec. Gtd. Medium-Term Notes, 6.75%, 01/24/19 | AUD | 2,980,000 | 3,276,711 | |||||
Mirvac Group Finance Ltd., Sr. Unsec. Gtd. Medium-Term Notes, 8.00%, 09/16/16 | AUD | 5,000,000 | 5,543,454 | |||||
Stockland Trust Management Ltd., Sr. Unsec. Gtd. Medium-Term Notes, 6.00%, 05/15/13 | AUD | 2,470,000 | 2,573,936 | |||||
8.50%, 02/18/15 | AUD | 2,000,000 | 2,242,226 | |||||
7.50%, 07/01/16 | AUD | 2,250,000 | 2,507,015 | |||||
Westfield Retail Trust, DIP, Sr. Unsec. Gtd. Medium-Term Notes, 7.00%, 10/18/16 | AUD | 3,900,000 | 4,325,461 | |||||
Total Non U.S. Dollar Denominated Bonds & Notes (Cost $21,977,442) | 22,712,565 | |||||||
U.S. Dollar Denominated Bonds & Notes–1.84% | ||||||||
Brazil–0.39% | ||||||||
BR Properties S.A., Sr. Unsec. Gtd. Notes, 9.00%(c)(e) | 1,850,000 | 2,004,434 | ||||||
China–0.87% | ||||||||
Country Garden Holdings Co. Ltd., Sr. Unsec. Notes, 11.75%, 09/10/14(c) | 1,000,000 | 1,090,174 | ||||||
KWG Property Holdings Ltd., Sr. Unsec. Gtd. Notes, 12.50%, 08/18/17(c) | 2,300,000 | 2,351,750 | ||||||
Franshion Development Ltd., Sr. Unsec. Gtd. Notes, 6.75%, 04/15/21(c) | 1,000,000 | 1,001,394 | ||||||
4,443,318 | ||||||||
United States–0.58% | ||||||||
Senior Housing Properties Trust, Sr. Unsec. Notes, 4.30%, 01/15/16 | 900,000 | 926,100 | ||||||
Host Hotels & Resorts L.P., Sr. Unsec. Gtd. Conv. Notes, 2.63%, 04/15/17(c)(d) | 2,000,000 | 2,007,500 | ||||||
2,933,600 | ||||||||
Total U.S. Dollar Denominated Bonds & Notes (Cost $8,802,171) | 9,381,352 | |||||||
Shares | ||||||||
Money Market Funds–3.30% | ||||||||
Liquid Assets Portfolio–Institutional Class(f) | 8,398,918 | 8,398,918 | ||||||
Premier Portfolio–Institutional Class(f) | 8,398,919 | 8,398,919 | ||||||
Total Money Market Funds (Cost $16,797,837) | 16,797,837 | |||||||
TOTAL INVESTMENTS–98.93% (Cost $470,385,127) | 503,984,074 | |||||||
OTHER ASSETS LESS LIABILITIES–1.07% | 5,476,380 | |||||||
NET ASSETS–100.00% | $ | 509,460,454 | ||||||
Investment Abbreviations:
AUD | – Australian Dollar | |
Conv. | – Convertible | |
Ctfs. | – Certificates | |
DIP | – Debtor-in-possession | |
GBP | – British Pound | |
Gtd. | – Guaranteed | |
Pfd. | – Preferred | |
REIT | – Real Estate Investment Trust | |
Sr. | – Senior | |
Unsec. | – Unsec. |
Notes to Schedule of Investments:
(a) | Foreign denominated security. Principal amount is denominated in currency indicated. | |
(b) | Interest or dividend rate is redetermined periodically. Rate shown is the rate in effect on August 31, 2012. | |
(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, 2012 was $25,473,080, which represented 5.00% of the Fund’s Net Assets. | |
(d) | Security has an irrevocable call by the issuer or mandatory put by the holder. Maturity date reflects such call or put. | |
(e) | Perpetual bond with no specified maturity date. | |
(f) | 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.
13 Invesco Global Real Estate Income Fund
Statement of Assets and Liabilities
August 31, 2012
Assets: | ||||
Investments, at value (Cost $453,587,290) | $ | 487,186,237 | ||
Investments in affiliated money market funds, at value and cost | 16,797,837 | |||
Total investments, at value (Cost $470,385,127) | 503,984,074 | |||
Foreign currencies, at value (Cost $2,080,184) | 2,089,864 | |||
Receivable for: | ||||
Investments sold | 1,931,583 | |||
Fund shares sold | 4,644,980 | |||
Dividends and interest | 1,513,345 | |||
Foreign currency contracts outstanding | 87 | |||
Investment for trustee deferred compensation and retirement plans | 32,665 | |||
Other assets | 37,498 | |||
Total assets | 514,234,096 | |||
Liabilities: | ||||
Payable for: | ||||
Investments purchased | 3,902,983 | |||
Fund shares reacquired | 515,312 | |||
Accrued fees to affiliates | 232,661 | |||
Accrued other operating expenses | 24,086 | |||
Trustee deferred compensation and retirement plans | 98,600 | |||
Total liabilities | 4,773,642 | |||
Net assets applicable to shares outstanding | $ | 509,460,454 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 473,724,505 | ||
Undistributed net investment income | 3,560,721 | |||
Undistributed net realized gain (loss) | (1,443,339 | ) | ||
Unrealized appreciation | 33,618,567 | |||
$ | 509,460,454 | |||
Net Assets: | ||||
Class A | $ | 318,463,866 | ||
Class B | $ | 1,606,488 | ||
Class C | $ | 44,789,738 | ||
Class Y | $ | 114,524,617 | ||
Institutional Class | $ | 30,075,745 | ||
Shares outstanding, $0.01 par value per share, with an unlimited number of shares authorized: | ||||
Class A | 35,501,179 | |||
Class B | 179,482 | |||
Class C | 5,004,994 | |||
Class Y | 12,801,098 | |||
Institutional Class | 3,357,586 | |||
Class A: | ||||
Net asset value per share | $ | 8.97 | ||
Maximum offering price per share (Net asset value of $8.97 divided by 94.50%) | $ | 9.49 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 8.95 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 8.95 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 8.95 | ||
Institutional Class: | ||||
Net asset value and offering price per share | $ | 8.96 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
14 Invesco Global Real Estate Income Fund
Statement of Operations
For the year ended August 31, 2012
Investment income: | ||||
Dividends (net of foreign withholding taxes of $744,588) | $ | 18,072,353 | ||
Dividends from affiliated money market funds | 16,914 | |||
Interest | 4,530,400 | |||
Total investment income | 22,619,667 | |||
Expenses: | ||||
Advisory fees | 2,757,292 | |||
Administrative services fees | 121,535 | |||
Custodian fees | 58,334 | |||
Distribution fees: | ||||
Class A | 597,713 | |||
Class B | 16,625 | |||
Class C | 325,691 | |||
Transfer agent fees — A, B, C and Y | 606,934 | |||
Transfer agent fees — Institutional | 37,289 | |||
Trustees’ and officers’ fees and benefits | 39,001 | |||
Other | 280,383 | |||
Total expenses | 4,840,797 | |||
Less: Fees waived and expense offset arrangement(s) | (17,431 | ) | ||
Net expenses | 4,823,366 | |||
Net investment income | 17,796,301 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain (loss) from: | ||||
Investment securities | 5,167,014 | |||
Foreign currencies | (26,100 | ) | ||
5,140,914 | ||||
Change in net unrealized appreciation of: | ||||
Investment securities | 23,775,598 | |||
Foreign currencies | 4,279 | |||
Foreign currency contracts | 87 | |||
23,779,964 | ||||
Net realized and unrealized gain | 28,920,878 | |||
Net increase in net assets resulting from operations | $ | 46,717,179 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
15 Invesco Global Real Estate Income Fund
Statement of Changes in Net Assets
For the years ended August 31, 2012 and 2011
2012 | 2011 | |||||||
Operations: | ||||||||
Net investment income | $ | 17,796,301 | $ | 10,145,196 | ||||
Net realized gain | 5,140,914 | 31,820,565 | ||||||
Change in net unrealized appreciation (depreciation) | 23,779,964 | (14,156,592 | ) | |||||
Net increase in net assets resulting from operations | 46,717,179 | 27,809,169 | ||||||
Distributions to shareholders from net investment income: | ||||||||
Class A | (10,974,958 | ) | (6,385,644 | ) | ||||
Class B | (66,882 | ) | (55,232 | ) | ||||
Class C | (1,252,416 | ) | (635,236 | ) | ||||
Class Y | (2,665,994 | ) | (1,010,913 | ) | ||||
Institutional Class | (1,805,834 | ) | (1,576,407 | ) | ||||
Total distributions from net investment income | (16,766,084 | ) | (9,663,432 | ) | ||||
Share transactions–net: | ||||||||
Class A | 96,606,755 | 43,730,695 | ||||||
Class B | (276,855 | ) | (38,388 | ) | ||||
Class C | 15,641,770 | 8,493,706 | ||||||
Class Y | 82,201,168 | 2,300,978 | ||||||
Institutional Class | (7,962,465 | ) | (5,027,618 | ) | ||||
Net increase in net assets resulting from share transactions | 186,210,373 | 49,459,373 | ||||||
Net increase in net assets | 216,161,468 | 67,605,110 | ||||||
Net assets: | ||||||||
Beginning of year | 293,298,986 | 225,693,876 | ||||||
End of year (includes undistributed net investment income of $3,560,721 and $1,690,425, respectively) | $ | 509,460,454 | $ | 293,298,986 | ||||
Notes to Financial Statements
August 31, 2012
NOTE 1—Significant Accounting Policies
Invesco Global Real Estate Income Fund, formerly 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 objective is 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 to Class A shares. 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 to Class A shares. 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 the 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 |
16 Invesco Global Real Estate Income Fund
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. 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 economic 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 |
17 Invesco Global Real Estate Income Fund
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 the ex-dividend date. Distributions from net realized capital gain, if any, are generally paid annually and recorded on the 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 the 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 had a 2% redemption fee that was retained by the Fund to offset transaction costs and other expenses associated with short-term redemptions and exchanges. The fee, subject to certain exceptions, was imposed on certain redemptions or exchanges of shares within 31 days of purchase. The redemption fee was recorded as an increase in shareholder capital and was allocated among the share classes based on the relative net assets of each class. Effective January 1, 2012, the Fund eliminated the 2% redemption fee assessed on shares of the Fund redeemed or exchanged within 31 days of purchase. | |
J. | 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 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 (excluding certain items discussed below) of Class A, Class B, Class C, Class Y and Institutional Class
18 Invesco Global Real Estate Income Fund
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 to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigaton expenses; 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 20, 2013. The Adviser did not waive fees and/or reimburse expenses during the period under this expense limitation.
The Adviser has contractually agreed, through at least June 30, 2013, 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, 2012, the Adviser waived advisory fees of $16,675.
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, 2012, 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, 2012, 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, 2012, 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, 2012, IDI advised the Fund that IDI retained $113,608 in front-end sales commissions from the sale of Class A shares and $1,411, $2,977 and $4,795 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, 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. |
19 Invesco Global Real Estate Income Fund
The following is a summary of the tiered valuation input levels, as of August 31, 2012. 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, 2012, there were transfers from Level 1 to Level 2 of $14,727,474 and from Level 2 to Level 1 of $12,747,954, due to foreign fair value adjustments, additionally, there were transfers from Level 2 to Level 1 of $7,996,940, due to securities trading on an exchange.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Australia | $ | 10,612,028 | $ | 42,813,934 | $ | — | $ | 53,425,962 | ||||||||
Belgium | 772,541 | — | — | 772,541 | ||||||||||||
Brazil | — | 2,004,434 | — | 2,004,434 | ||||||||||||
Canada | 29,625,160 | — | — | 29,625,160 | ||||||||||||
China | 4,019,777 | 9,079,510 | — | 13,099,287 | ||||||||||||
France | — | 8,675,535 | — | 8,675,535 | ||||||||||||
Germany | — | 3,658,449 | — | 3,658,449 | ||||||||||||
Hong Kong | 4,830,363 | 9,368,753 | — | 14,199,116 | ||||||||||||
Ireland | — | 3,572,045 | — | 3,572,045 | ||||||||||||
Japan | — | 26,841,645 | — | 26,841,645 | ||||||||||||
New Zealand | — | 2,027,846 | — | 2,027,846 | ||||||||||||
Singapore | 14,344,206 | 877,006 | — | 15,221,212 | ||||||||||||
South Africa | 9,650,370 | — | — | 9,650,370 | ||||||||||||
United Kingdom | 18,331,165 | 10,825,393 | — | 29,156,558 | ||||||||||||
United States | 222,471,552 | 69,582,362 | — | 292,053,914 | ||||||||||||
$ | 314,657,162 | $ | 189,326,912 | $ | — | $ | 503,984,074 | |||||||||
Foreign Currency Contracts* | — | 87 | — | 87 | ||||||||||||
Total Investments | $ | 314,657,162 | $ | 189,326,999 | $ | — | $ | 503,984,161 | ||||||||
* | Unrealized appreciation. |
NOTE 4—Derivative Investments
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, 2012:
Value | ||||||||
Risk Exposure/Derivative Type | Assets | Liabilities | ||||||
Currency risk | ||||||||
Foreign currency contracts(a) | $ | 1,141 | $ | (1,054 | ) | |||
(a) | Values are disclosed on the Statement of Assets and Liabilities under Foreign currency contracts outstanding. |
Effect of Derivative Instruments for the year ended August 31, 2012
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 | ||||
Foreign Currency | ||||
Contracts* | ||||
Change in Unrealized Appreciation | ||||
Currency risk | $ | 87 | ||
* | The average notional value of foreign currency contracts outstanding during the period was $2,257,277. |
20 Invesco Global Real Estate Income Fund
Open Foreign Currency Contracts | ||||||||||||||||||||||||
Unrealized | ||||||||||||||||||||||||
Settlement | Contract to | Notional | Appreciation | |||||||||||||||||||||
Date | Counterparty | Deliver | Receive | Value | (Depreciation) | |||||||||||||||||||
09/04/12 | Citibank Capital | AUD | 1,506,696 | USD | 1,555,814 | $ | 1,556,718 | $ | (904 | ) | ||||||||||||||
09/04/12 | Bank of New York | USD | 2,620,045 | AUD | 2,536,591 | 2,620,806 | 761 | |||||||||||||||||
09/05/12 | State Street | EUR | 59,445 | USD | 74,711 | 74,782 | (71 | ) | ||||||||||||||||
09/04/12 | Credit Suisse | USD | 45,137 | ZAR | 378,286 | 45,058 | (79 | ) | ||||||||||||||||
09/05/12 | Deutsche Banc | USD | 220,934 | ZAR | 1,858,048 | 221,314 | 380 | |||||||||||||||||
Total open foreign currency contracts | $ | 87 | ||||||||||||||||||||||
Currency Abbreviations:
AUD | – Australian Dollar | |
EUR | – European Dollar | |
USD | – U.S. Dollar | |
ZAR | – South African Rand |
NOTE 5—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, 2012, the Fund received credits from these arrangements, which resulted in the reduction of the Fund’s total expenses of $756.
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.
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. Such balances, if any at period end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. 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, 2012 and 2011:
2012 | 2011 | |||||||
Ordinary income | $ | 16,766,084 | $ | 9,663,432 | ||||
Tax Components of Net Assets at Period-End:
2012 | ||||
Undistributed ordinary income | $ | 11,796,183 | ||
Net unrealized appreciation — investments | 24,273,832 | |||
Net unrealized appreciation — other investments | 19,620 | |||
Temporary book/tax differences | (94,241 | ) | ||
Capital loss carryforward | (259,445 | ) | ||
Shares of beneficial interest | 473,724,505 | |||
Total net assets | $ | 509,460,454 | ||
21 Invesco Global Real Estate Income 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 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 Regulated Investment Company Modernization Act of 2010 (the “Act”) eliminated the eight-year carryover period for capital losses that arise in taxable years beginning after its enactment date of December 22, 2010. Consequently, these capital losses can be carried forward for an unlimited period. However, capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Additionally, post-enactment capital loss carryovers will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. 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 $3,913,758 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, 2012, which expires as follows:
Capital Loss Carryforward* | ||||||||||||
Expiration | Short-Term | Long-Term | Total | |||||||||
August 31, 2018 | $ | 259,445 | $ | — | $ | 259,445 | ||||||
* | 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 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, 2012 was $356,920,364 and $175,151,745, 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 | $ | 30,756,956 | ||
Aggregate unrealized (depreciation) of investment securities | (6,483,124 | ) | ||
Net unrealized appreciation of investment securities | $ | 24,273,832 | ||
Cost of investments for tax purposes is $479,710,242. |
NOTE 10—Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of foreign currency transactions and passive foreign investment companies, on August 31, 2012, undistributed net investment income was increased by $840,079, undistributed net realized gain (loss) was decreased by $805,275 and shares of beneficial interest was decreased by $34,804. This reclassification had no effect on the net assets of the Fund.
22 Invesco Global Real Estate Income Fund
NOTE 11—Share Information
Summary of Share Activity | ||||||||||||||||
Years ended August 31, | ||||||||||||||||
2012(a) | 2011 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Class A | 18,683,381 | $ | 159,199,288 | 10,732,994 | $ | 89,560,522 | ||||||||||
Class B | 46,872 | 393,823 | 66,731 | 550,871 | ||||||||||||
Class C | 2,369,846 | 20,158,359 | 1,559,082 | 12,992,304 | ||||||||||||
Class Y | 11,969,982 | 101,722,029 | 1,599,691 | 13,212,606 | ||||||||||||
Institutional Class | 2,439,672 | 20,294,421 | 1,162,860 | 9,576,471 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Class A | 943,687 | 7,809,770 | 611,409 | 5,004,588 | ||||||||||||
Class B | 6,776 | 55,840 | 6,066 | 49,475 | ||||||||||||
Class C | 123,735 | 1,024,338 | 65,429 | 535,195 | ||||||||||||
Class Y | 246,272 | 2,050,366 | 99,207 | 808,386 | ||||||||||||
Institutional Class | 198,667 | 1,639,410 | 180,704 | 1,471,367 | ||||||||||||
Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||
Class A | 34,166 | 290,854 | 33,301 | 280,701 | ||||||||||||
Class B | (34,221 | ) | (290,854 | ) | (33,373 | ) | (280,701 | ) | ||||||||
Reacquired:(b) | ||||||||||||||||
Class A | (8,381,414 | ) | (70,693,157 | ) | (6,149,335 | ) | (51,115,116 | ) | ||||||||
Class B | (51,839 | ) | (435,664 | ) | (43,772 | ) | (358,033 | ) | ||||||||
Class C | (658,315 | ) | (5,540,927 | ) | (608,844 | ) | (5,033,793 | ) | ||||||||
Class Y | (2,540,668 | ) | (21,571,227 | ) | (1,418,430 | ) | (11,720,014 | ) | ||||||||
Institutional Class | (3,552,032 | ) | (29,896,296 | ) | (1,930,006 | ) | (16,075,456 | ) | ||||||||
Net increase in share activity | 21,844,567 | $ | 186,210,373 | 5,933,714 | $ | 49,459,373 | ||||||||||
(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 Fund 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 $2,724 and $0 allocated among the classes based on relative net assets of each class for the year ended August 31, 2012 and August 31, 2011, respectively. |
23 Invesco Global Real Estate Income 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) | Redemption | to average | to average net | Ratio of net | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset | on securities | Dividends | Distributions | fees added | net assets | assets without | investment | |||||||||||||||||||||||||||||||||||||||||||||||||||||
value, | Net | (both | Total from | from net | from net | to shares of | Net asset | Net assets, | with fee waivers | fee waivers | income | |||||||||||||||||||||||||||||||||||||||||||||||||
beginning | investment | realized and | investment | investment | realized | Total | beneficial | value, end | Total | end of period | and/or expenses | and/or expenses | to average | Portfolio | ||||||||||||||||||||||||||||||||||||||||||||||
of period | income(a) | unrealized) | operations | income | gains | distributions | interest | of period | return(b) | (000s omitted) | absorbed | absorbed | net assets | turnover(c) | ||||||||||||||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/12 | $ | 8.39 | $ | 0.41 | $ | 0.57 | $ | 0.98 | $ | (0.40 | ) | $ | — | $ | (0.40 | ) | $ | — | $ | 8.97 | (d) | 12.19 | % | $ | 318,464 | 1.31 | %(e) | 1.31 | %(e) | 4.82 | %(e) | 49 | % | |||||||||||||||||||||||||||
Year ended 08/31/11 | 7.77 | 0.32 | 0.61 | 0.93 | (0.31 | ) | — | (0.31 | ) | — | 8.39 | 12.11 | 203,100 | 1.30 | 1.30 | 3.83 | 101 | |||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/10 | 6.62 | 0.28 | 1.14 | 1.42 | (0.27 | ) | — | (0.27 | ) | — | 7.77 | 21.85 | 147,568 | 1.37 | 1.38 | 3.93 | 77 | |||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/09 | 8.38 | 0.27 | (1.75 | ) | (1.48 | ) | (0.28 | ) | — | (0.28 | ) | — | 6.62 | (17.12 | ) | 94,979 | 1.73 | 1.74 | 4.83 | 59 | ||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/08 | 16.27 | 0.42 | (1.54 | ) | (1.12 | ) | (0.65 | ) | (6.18 | ) | (6.83 | ) | 0.06 | 8.38 | (7.47 | ) | 111,529 | 1.32 | 1.33 | 3.91 | 73 | |||||||||||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/12 | 8.36 | 0.34 | 0.59 | 0.93 | (0.34 | ) | — | (0.34 | ) | — | 8.95 | (d) | 11.49 | 1,606 | 2.06(e | ) | 2.06 | (e) | 4.07 | (e) | 49 | |||||||||||||||||||||||||||||||||||||||
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 | 2.05 | 3.08 | 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 | )(f) | (1.12 | ) | (0.56 | ) | (6.18 | ) | (6.74 | ) | — | 8.37 | (8.01 | ) | 1,126 | 2.07 | 2.08 | 3.16 | 73 | |||||||||||||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/12 | 8.36 | 0.34 | 0.59 | 0.93 | (0.34 | ) | — | (0.34 | ) | — | 8.95 | (d) | 11.49 | 44,790 | 2.06 | (e) | 2.06 | (e) | 4.07 | (e) | 49 | |||||||||||||||||||||||||||||||||||||||
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 | 2.05 | 3.08 | 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 | )(f) | (1.11 | ) | (0.56 | ) | (6.18 | ) | (6.74 | ) | — | 8.38 | (7.90 | ) | 1,932 | 2.07 | 2.08 | 3.16 | 73 | |||||||||||||||||||||||||||||||||||||||
Class Y | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/12 | 8.36 | 0.43 | 0.58 | 1.01 | (0.42 | ) | — | (0.42 | ) | — | 8.95 | (d) | 12.62 | 114,525 | 1.06 | (e) | 1.06 | (e) | 5.07 | (e) | 49 | |||||||||||||||||||||||||||||||||||||||
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 | 1.05 | 4.08 | 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(g) | 7.15 | 0.26 | (0.63 | ) | (0.37 | ) | (0.18 | ) | — | (0.18 | ) | — | 6.60 | (4.23 | ) | 2,755 | 1.53 | (h) | 1.53 | (h) | 5.03 | (h) | 59 | |||||||||||||||||||||||||||||||||||||
Institutional Class | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/12 | 8.38 | 0.44 | 0.57 | 1.01 | (0.43 | ) | — | (0.43 | ) | — | 8.96 | (d) | 12.63 | 30,076 | 0.98 | (e) | 0.98 | (e) | 5.15 | (e) | 49 | |||||||||||||||||||||||||||||||||||||||
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 | 0.96 | 4.17 | 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 | )(f) | (1.00 | ) | (0.70 | ) | (6.18 | ) | (6.88 | ) | — | 8.39 | (6.91 | ) | 12,696 | 0.88 | 0.89 | 4.35 | 73 | |||||||||||||||||||||||||||||||||||||||
(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) | Includes redemption fees added to shares of beneficial interest which were less than $0.005 per share. | |
(e) | Ratios are based on average daily net assets (000’s) of $239,085, $1,663, $32,569, $58,709 and $37,202 for Class A, Class B, Class C, Class Y and Institutional Class shares, respectively. | |
(f) | 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, respectively for the year ended August 31, 2008. | |
(g) | Commencement date of October 31, 2008. | |
(h) | Annualized. |
NOTE 13—Subsequent Event
Effective September 24, 2012, Institutional Class shares were renamed Class R5 shares and the Fund began offering Class R6 shares.
24 Invesco Global 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 Global 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 Global Real Estate Income Fund, (formerly known as 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, 2012, 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, 2012 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
October 23, 2012
Houston, Texas
25 Invesco Global 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, 2012 through August 31, 2012.
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 | (03/01/12) | (08/31/12)1 | Period2 | (08/31/12) | Period2 | Ratio | ||||||||||||||||||||||||
A | $ | 1,000.00 | $ | 1,070.80 | $ | 6.71 | $ | 1,018.65 | $ | 6.55 | 1.29 | % | ||||||||||||||||||
B | 1,000.00 | 1,066.90 | 10.60 | 1,014.88 | 10.33 | 2.04 | ||||||||||||||||||||||||
C | 1,000.00 | 1,067.00 | 10.60 | 1,014.88 | 10.33 | 2.04 | ||||||||||||||||||||||||
Y | 1,000.00 | 1,072.30 | 5.42 | 1,019.91 | 5.28 | 1.04 | ||||||||||||||||||||||||
Institutional | 1,000.00 | 1,072.80 | 5.31 | 1,020.01 | 5.18 | 1.02 | ||||||||||||||||||||||||
1 | The actual ending account value is based on the actual total return of the Fund for the period March 1, 2012 through August 31, 2012, 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 184/366 to reflect the most recent fiscal half year. |
26 Invesco Global 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 Global 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 19-20, 2012, 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, 2012. 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 primarily 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, 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 and on what terms 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. In addition to meetings with Invesco Advisers and fund 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 independent legal 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 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 previously approved by a different board that, at the time, was responsible for overseeing Morgan Stanley and Van Kampen funds, which have become Invesco Funds following the acquisition of the retail mutual fund business of Morgan Stanley. 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 or factor 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 20, 2012, 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 Sub-Committees 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 prior relationship and 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 consistent 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 consistent with the terms of the Fund’s sub-advisory contracts.
27 Invesco Global 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 Global Real Estate Funds Index. The Board noted that performance of Class A shares of the Fund was in the first quintile of the Lipper 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 and three year periods (there being no Index data for the five year period). 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 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 and were assisted in their review by a report from the Senior Officer. 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. The Board noted that Invesco Advisers proposes sharing economies of scale in administration expenses by lowering per class administrative fees.
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 for the year ended December 31, 2011. 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 Invesco Funds and the Fund. The Board did not deem the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund to be excessive given the nature, quality and extent of the services provided to the Invesco Funds. The Board received and accepted information from Invesco Advisers demonstrating that 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.
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 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 also considered periodic reports from the Chief Compliance Officer of the Invesco Funds demonstrating that these arrangements are consistent with regulatory requirements. The Board did not deem the soft dollar arrangements to be inappropriate.
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.
The Board also considered use of an affiliated broker to execute certain trades for the Fund and that such trades are executed in compliance with rules under the Investment Company Act of 1940, as amended.
28 Invesco Global 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, 2012:
Federal and State Income Tax | ||||
Qualified Dividend Income* | 1.23% | |||
Corporate Dividends Received Deduction* | 0.00% |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Fund’s fiscal year. |
29 Invesco Global 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 1000, 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 | Other Directorship(s) | |||||||
Name, Year of Birth and | Trustee and/or | Principal Occupation(s) | Funds in | Held by Trustee During | ||||
Position(s) Held with the Trust | Officer Since | During Past 5 Years | Fund Complex Overseen by Trustee | Past 5 Years | ||||
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 | 129 | 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. | 129 | None | ||||
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. | ||||||||
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 certain funds in the Fund Complex | 147 | Director of the Mutual Fund Directors Forum, a nonprofit membership organization for investment directors; Chairman and Director of the Abraham Lincoln Presidential Library Foundation; and Director of the Stevenson Center for Democracy | ||||
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 is considered an “interested person” (within the meaning of Section 2(a)(19) of the 1940 Act) of certain Funds in the Invesco Fund Complex by reason of he and his firm currently providing legal services as legal counsel to such Funds in the Invesco Fund Complex. |
T-1 Invesco Global Real Estate Income Fund
Trustees and Officers—(continued)
Number of | Other Directorship(s) | |||||||
Name, Year of Birth and | Trustee and/or | Principal Occupation(s) | Funds in | Held by Trustee During | ||||
Position(s) Held with the Trust | Officer Since | During Past 5 Years | Fund Complex Overseen by Trustee | Past 5 Years | ||||
Independent Trustees | ||||||||
Bruce L. Crockett — 1944 Trustee and Chair | 2003 | Chairman, Crockett Technologies 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) | 129 | ACE Limited (insurance company); and Investment Company Institute | ||||
David C. Arch — 1945 Trustee | 2010 | Retired. Chairman and Chief Executive Officer of Blistex Inc., a consumer health care products manufacturer | 147 | Member of the Heartland Alliance Advisory Board, a nonprofit organization serving human needs based in Chicago. Board member of the Illinois Manufacturers’ Association. Member of the Board of Visitors, Institute for the Humanities, University of Michigan | ||||
Frank S. Bayley — 1939 Trustee | 2003 | Retired Formerly: Director, Badgley Funds, Inc. (registered investment company) (2 portfolios) and Partner, law firm of Baker & McKenzie | 129 | 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 | 129 | Chairman, Board of Governors, Western Golf Association, Chairman-elect, Evans Scholars Foundation and Director, Denver Film Society | ||||
Rodney F. Dammeyer — 1940 Trustee | 2010 | Chairman of CAC, LLC, a private company offering capital investment and management advisory services Formerly: Prior to January 2004, Director of TeleTech Holdings Inc.; Prior to 2002, Director of Arris Group, Inc.; Prior to 2001, Managing Partner at Equity Group Corporate Investments. Prior to 1995, Vice Chairman of Anixter International. Prior to 1985, experience includes Senior Vice President and Chief Financial Officer of Household International, Inc, Executive Vice President and Chief Financial Officer of Northwest Industries, Inc. and Partner of Arthur Andersen & Co. | 147 | 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) 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) | 129 | Director of Nature’s Sunshine Products, Inc. | ||||
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) Formerly: Chief Executive Officer, Texana Timber LP (sustainable forestry company) and member of the U.S. House of Representatives | 129 | Insperity (formerly known as Administaff) | ||||
Carl Frischling — 1937 Trustee | 2003 | Partner, law firm of Kramer Levin Naftalis and Frankel LLP | 129 | Director, Reich & Tang Funds (6 portfolios) | ||||
Prema Mathai-Davis — 1950 Trustee | 2003 | Retired Formerly: Chief Executive Officer, YWCA of the U.S.A. | 129 | None | ||||
Larry Soll — 1942 Trustee | 1997 | Retired Formerly, Chairman, Chief Executive Officer and President, Synergen Corp. (a biotechnology company) | 129 | None | ||||
T-2 Invesco Global Real Estate Income Fund
Trustees and Officers—(continued)
Number of | Other Directorship(s) | |||||||
Name, Year of Birth and | Trustee and/or | Principal Occupation(s) | Funds in | Held by Trustee | ||||
Position(s) Held with the Trust | Officer Since | During Past 5 Years | Fund Complex Overseen by Trustee | During Past 5 Years | ||||
Independent Trustees—(continued) | ||||||||
Hugo F. Sonnenschein — 1940 Trustee | 2010 | Distinguished Service Professor and President Emeritus of the University of Chicago and the Adam Smith Distinguished Service Professor in the Department of Economics at the University of Chicago. Prior to July 2000, President of the University of Chicago | 147 | 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 | 129 | None | ||||
Other Officers | ||||||||
Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer, The 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 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) | N/A | N/A | ||||
Lisa O. Brinkley — 1959 Vice President | 2004 | Global Assurance Officer, Invesco Ltd. and Vice President, The Invesco Funds Formerly: Chief Compliance Officer, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.), Invesco Investment Services, Inc.(formerly known as Invesco Aim Investment Services, 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 | ||||
T-3 Invesco Global Real Estate Income Fund
Trustees and Officers—(continued)
Number of | Other Directorship(s) | |||||||
Name, Year of Birth and | Trustee and/or | Principal Occupation(s) | Funds in | Held by Trustee | ||||
Position(s) Held with the Trust | Officer Since | During Past 5 Years | Fund Complex Overseen by Trustee | During Past 5 Years | ||||
Other Officers—(continued) | ||||||||
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., INVESCO Global Asset Management Limited, Invesco Management Company Limited and INVESCO Management S.A.; 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) 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) | 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); and 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 Formerly: Vice President, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc. | N/A | N/A | ||||
Yinka Akinsola — 1977 Anti-Money Laundering Compliance Officer | 2011 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.), Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.), Invesco Management Group, Inc., The Invesco Funds, Invesco Van Kampen Closed-End Funds, Van Kampen Exchange Corp., Van Kampen Funds Inc., PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, and PowerShares Actively Managed Exchange-Traded Fund Trust Formerly: Regulatory Analyst III, Financial Industry Regulatory Authority (FINRA). | N/A | N/A | ||||
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; Vice President, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) and Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.) Formerly: Senior Vice President, Van Kampen Investments Inc.; Senior Vice President and Chief Compliance Officer, Invesco Advisers, Inc. and Invesco Aim Capital Management, Inc.; Chief Compliance Officer, INVESCO Private Capital Investments, Inc. (holding company), Invesco Private Capital, Inc. (registered investment adviser), Invesco Global Asset Management (N.A.), Inc., Invesco Senior Secured Management, Inc. (registered investment adviser) and Van Kampen Investor Services Inc., 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 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 1000 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 1000 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 1000 Houston, TX 77046-1173 | Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
T-4 Invesco Global Real Estate Income Fund
![(LOGO)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8703411.gif)
Send general correspondence to Invesco Investment Services, Inc., P.O. Box 219078, Kansas City, MO 64121-9078.
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.
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.
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 shown below.
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/0000950123-12-013037/h87055h8703412.gif)
Information regarding how the Fund voted proxies related to its portfolio securities during the 12 months ended June 30, 2012, 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/0000950123-12-013037/h87055h8703412.gif)
Information regarding how the Fund voted proxies related to its portfolio securities during the 12 months ended June 30, 2012, 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 US 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.
SEC file numbers: 811-09913 and 333-36074 | GREI-AR-1 | Invesco Distributors, Inc. |
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Annual Report to Shareholders | August 31, 2012 |
Invesco U.S. Quantitative Core Fund
Nasdaq:
A: SCAUX § B: SBCUX § C: SCCUX § R: SCRUX § Y: SCAYX
Investor: SCNUX § Institutional: SCIUX
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 | |
11 | Financial Statements | |
13 | Notes to Financial Statements | |
21 | Financial Highlights | |
22 | Auditor’s Report | |
23 | Fund Expenses | |
24 | Approval of Investment Advisory and Sub-Advisory Agreements | |
26 | Tax Information | |
T-1 | Trustees and Officers |
Letters to Shareholders
![(PHOTO OF PHILIP TAYLOR)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8704202.jpg)
Philip Taylor
Dear Shareholders:
This report contains information about your Fund, including a discussion from your portfolio managers about how they managed your Fund – and why it performed as it did – during the reporting period. This report also includes your Fund’s long-term performance and a complete list of your Fund’s investments as of the close of the reporting period. I hope you find this information helpful.
For much of the reporting period, investors’ attention was focused on Europe, where eurozone governments struggled to reduce debt levels, strengthen their banks and stimulate their economies. European leaders disagreed whether the wiser path to restoring the Continent’s economic wellbeing was more stimulus or greater austerity. In the US, economic data were mixed. Economic growth, while positive, was relatively modest. Corporate earnings, which have grown strongly in recent years, have begun to slow. And job creation has been less robust than hoped. Later in this report, your Fund’s portfolio managers discuss how economic conditions and market trends affected your Fund’s performance.
Economic conditions are always subject to sudden and unexpected change. That’s why you may find it helpful to work with a trusted, experienced financial adviser who understands your unique financial goals, needs and risk tolerances. Financial advisers can provide valuable insight and information, particularly when markets are turbulent, and they can recommend investments appropriate for specific investment goals, such as a child’s college education or your retirement. On a regular basis, a financial adviser also can determine whether your existing investments are still appropriate, given your changing needs, goals and circumstances.
Timely insight and information from many of Invesco’s investment professionals is available at our website, invesco.com/us. We offer in-depth articles, video clips and audio commentaries from many of our portfolio managers and other investment professionals on a wide range of topics of interest to investors: recent economic and market developments; retirement planning; legislative updates from Washington, DC; and general investor education. At invesco.com/us, you also can access information about your Invesco account at any time.
What we mean by Intentional Investing
Intentional InvestingSM is the science and art of investing with purpose, prudence and diligence – and it’s how Invesco’s investment professionals manage your money every day.
This highly disciplined process begins when specialized teams of investment professionals clearly define an investment objective and then establish specific investment strategies to try to achieve that objective. While our investment teams closely monitor economic and market conditions – and issues specific to individual holdings that could affect their value – they maintain a long-term investment perspective. Intentional Investing is also:
n | How we manage and mitigate risk – by embedding risk controls and processes into every aspect of our business; | ||
n | How we create products – by offering a diverse combination of investment strategies and vehicles designed to meet your needs; and | ||
n | How we connect with you, our investors – by communicating clearly, by delivering expert insights from our portfolio managers and other investment professionals, and by providing a website full of tools and articles to help you stay informed. |
As a company, Invesco believes in putting investors first, and that’s why investment management is all we do. Our sole focus on managing your money allows your financial adviser to build a truly diversified investment portfolio of Invesco funds, whatever your investment needs and goals may be – and allows him or her to find appropriate Invesco funds when your circumstances change. Of course, neither Intentional Investing nor diversification can guarantee a profit or protect against loss.
Have a question?
If you have questions about your account, please contact an Invesco client services representative at 800 959 4246. If you have an Invesco-related question or comment, feel free 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/0000950123-12-013037/h87055h8704203.gif)
Philip Taylor
Senior Managing Director, Invesco Ltd.
Senior Managing Director, Invesco Ltd.
2 | Invesco U.S. Quantitative Core Fund |
![(PHOTO OF BRUCE CROCKETT)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8704204.jpg)
Bruce Crockett
Dear Fellow Shareholders:
One of our most important responsibilities as independent Trustees of the Invesco Funds is our annual review of the funds’ advisory and sub-advisory contracts with Invesco. This annual review is required by the Investment Company Act of 1940 and focuses on the nature and quality of the services Invesco has provided as adviser to the Invesco Funds and the reasonableness of the fees that it charges for those services.
In our roles as Trustees, we spend months reviewing thousands of pages of detailed information that we request from Invesco in connection with our annual review. We focus on the quality and costs of the services to be provided by Invesco and its affiliates. Some of the most important things we look at are fund performance, expenses and fees. All of the Trustees have substantial personal investments in the Invesco Funds complex. We’re fund shareholders just like you.
We also use information from many independent sources during the review process, including materials provided by the independent Senior Officer of the Invesco Funds, who reports directly to the independent Trustees. We also meet in private sessions with independent legal counsel and review performance and fee data on the Invesco Funds prepared by Lipper Inc., an independent, third-party firm widely recognized as a leader in its field.
I’m pleased to report that the Invesco Funds Board determined in June that renewing the investment advisory agreement and the sub-advisory contracts with Invesco would serve the best interests of each fund and its shareholders. For more detailed information about our assessment and conclusions with respect to each of the Invesco Funds, visit invesco.com/us, click on the “About Us” section and go to “Legal Information.” Information on the recent investment advisory renewal process can be found by clicking the last item under “Corporate Governance.”
In much the same way we review your fund’s advisory contract each year, it’s a good idea for you to review your own investment plan with your financial adviser on a regular basis. Perhaps you need to reassess your original asset allocation because different investments may grow at varying paces, or perhaps you’re going through a significant life change. Regardless of your situation, a financial adviser can provide guidance and experience to help you reach your financial goals.
As always, please contact me at bruce@brucecrockett.com with any questions or concerns you may have. On behalf of the 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/0000950123-12-013037/h87055h8704205.gif)
Bruce L. Crockett
Independent Chair
Invesco Funds Board of Trustees
Independent Chair
Invesco Funds Board of Trustees
3 | Invesco U.S. Quantitative Core Fund |
Management’s Discussion of Fund Performance
Performance summary
For the fiscal year ended August 31, 2012, Class A shares of Invesco U.S. Quantitative Core Fund, at net asset value (NAV), outperformed the S&P 500 Index and 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 consumer staples, energy and financials sectors contributed to the Fund’s positive performance. The consumer discretionary, health care, materials and telecommunication services sectors detracted from overall Fund performance.
Your Fund’s long-term performance appears later in this report.
Your Fund’s long-term performance appears later in this report.
Fund vs. Indexes
Total returns, 8/31/11 to 8/31/12, 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 | 18.54 | % | ||
Class B Shares | 17.75 | |||
Class C Shares | 17.64 | |||
Class R Shares | 18.24 | |||
Class Y Shares | 18.89 | |||
Investor Class Shares | 18.63 | |||
Institutional Class Shares | 18.90 | |||
S&P 500 Index▼ (Broad Market/Style-Specific Index) | 18.00 | |||
Lipper Large-Cap Core Funds Index§ (Peer Group Index) | 14.00 | |||
Source(s): ▼Invesco, S&P-Dow Jones via FactSet Research Systems Inc.; §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 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 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 S&P 500 Index with regard to beta, style and sector/industry exposures.
Market conditions and your Fund
As the reporting period began, reports on employment and the economy were mixed at best, and sovereign debt issues abroad weighed heavily on investors. Equity indexes sold off precipitously as the US struggled very publicly to raise the nation’s debt ceiling. As a result, Standard & Poor’s announced the first-ever downgrade to long-term US government debt. Uncertainty created by the downgrade combined with the continuing eurozone debt-crisis saga to reignite global recession fears through October.
As those negative headlines faded during the fall of 2011, signs of muted growth remained. US equity markets rebounded with a nearly uninterrupted rally throughout the winter and into the spring of 2012. In late March, markets paused, and while company earnings still offered more positive surprises than disappointments, confidence began to wane in the absence of new growth drivers. By May, the market went into steady decline as investors grew concerned about the real possibility of a Greek exit from the European Union and the potential collapse of the euro. Economic data and earnings in the US began to show signs of
Portfolio Composition
By sector
Information Technology | 22.9 | % | ||
Financials | 16.7 | |||
Health Care | 13.5 | |||
Consumer Discretionary | 12.7 | |||
Energy | 12.5 | |||
Consumer Staples | 7.1 | |||
Industrials | 5.7 | |||
Telecommunication Services | 4.4 | |||
Materials | 2.8 | |||
U.S. Treasury Bills Plus Money Market Funds Plus Other Assets Less Liabilities | 1.7 |
Top 10 Equity Holdings*
1. Apple Inc. | 6.8 | % | ||
2. Exxon Mobil Corp. | 4.7 | |||
3. General Electric Co. | 3.6 | |||
4. Microsoft Corp. | 3.4 | |||
5. Pfizer Inc. | 3.3 | |||
6. Philip Morris International Inc. | 3.0 | |||
7. Wal-Mart Stores, Inc. | 2.8 | |||
8. Verizon Communications Inc. | 2.8 | |||
9. Amgen Inc. | 2.5 | |||
10. Cisco Systems, Inc. | 2.4 |
Total Net Assets | $336.9 million | |
Total Number of Holdings* | 69 |
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 U.S. Quantitative Core Fund |
deceleration amid contagion from both European and Asian weakness.
Toward the end of the reporting period, yet another European commitment to a lasting resolution to the economic crisis was coupled with an announcement that funds may be injected directly into large financial institutions. This announcement, along with a ruling by the US Supreme Court upholding the Affordable Care Act, provided some near-term clarity and resulted in risk taking that led the markets modestly higher as the reporting period ended.
All sectors in the broad market index posted positive returns for the reporting period. All investment styles posted positive returns, with large-cap stocks generally outperforming both mid-cap and small-cap stocks for the reporting period.
Regarding the results of Invesco U.S. Quantitative Core Fund, it is important to understand our investment process to better evaluate the drivers of our relative performance versus the S&P 500 Index. 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 energy and financials sectors was particularly strong. Also contributing to Fund performance was positive stock selection in the consumer staples, information technology (IT) and industrials sectors. The consumer discretionary, health care, materials and telecommunication services sectors detracted from overall Fund performance.
Among individual stocks, Apple was the top contributor in the IT sector. As part of a consortium, Apple acquired Nortel Networks Corporation’s (not a Fund holding) patent portfolio during the fiscal year. Also, in February 2012, the company acquired app-search engine
Chomp (not a Fund holding). Holdings in the industrials sector were also strong performers during the fiscal year. General Electric was a top contributor in this sector.
Select holdings within the consumer discretionary sector, including Apollo Group and Crocs, delivered negative performance and detracted from the Fund’s overall positive performance. Apollo Group announced that Charles B. “Chas” Edelstein would retire as co-chief executive officer and director of the company on August 26, 2012. Mr. Edelstein will serve the company in a part-time advisory capacity through February 2013. Crocs was no longer held at the close of the reporting period.
Other detractors from Fund performance during the reporting period included telecommunication services company Sprint Nextel and materials company Freeport-McMoran Copper. Both of these holdings were sold before the close of the reporting period.
At the beginning of the fiscal year, the Fund’s underlying investment model struggled to add value compared to the S&P 500 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 continued to build positive momentum during the reporting period. On average, our weakest concept, relative value, showed a positive contribution for the fiscal year.
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 generated a positive return and contributed to Fund performance.
We welcome new investors who joined the Fund during the fiscal year and thank all of our shareholders for your investment in Invesco U.S. Quantitative 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.
Michael Abata
Chartered Financial Analyst, portfolio manager, is manager of Invesco U.S. Quantitative Core Fund. He joined Invesco in 2011. Mr. Abata earned a BA in economics from Binghamton University.
Glen Murphy
Chartered Financial Analyst, portfolio manager, is manager of Invesco U.S. Quantitative Core Fund. He joined Invesco in 1995. Mr. Murphy earned a BBA from the University of Massachusetts Amherst and an MS in finance from Boston College.
Daniel Tsai
Chartered Financial Analyst, portfolio manager, is manager of Invesco U.S. Quantitative Core Fund. He joined Invesco in 2000. Mr. Tsai earned a BS in mechanical engineering from National Taiwan University, an MS in mechanical engineering from the University of Michigan and an MS in computer science from Wayne State University.
Anne Unflat
Portfolio manager, is manager of Invesco U.S. Quantitative Core Fund. She joined Invesco in 1998. Ms. Unflat earned a BA in economics from Queens College and an MBA in finance from St. John’s University.
Andrew Waisburd
Portfolio manager, is manager of Invesco U.S. Quantitative Core Fund. He joined Invesco in 2008. Mr. Waisburd earned a BS in statistics from Cornell University and an MS and a PhD in finance from Indiana University.
5 | Invesco U.S. Quantitative Core Fund |
Your Fund’s Long-Term Performance
Results of a $10,000 Investment – Oldest Share Class(es) since Inception
Fund and index data from 3/31/06
![(PERFORMANCE CHART)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8704206.gif)
1 Sources: Invesco, S&P-Dow Jones via FactSet Research Systems Inc.
2 Source: 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 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
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 | Warrants risk. Warrants may be significantly less valuable on their relevant expiration date resulting in a loss of money or they may expire worthless resulting in a total loss of the investment. Warrants may also be postponed or terminated early resulting in a partial or total loss of the investment. Warrants may also be subject to illiquidity. |
About indexes used in this report
n | The S&P 500® Index is an unmanaged index considered representative of the US 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 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 U.S. Quantitative Core Fund |
Average Annual Total Returns | ||||
As of 8/31/12, including maximum applicable sales charges | ||||
Class A Shares | ||||
Inception (3/31/06) | 1.15 | % | ||
5 Years | -1.09 | |||
1 Year | 11.98 | |||
Class B Shares | ||||
Inception (3/31/06) | 1.32 | % | ||
5 Years | -0.98 | |||
1 Year | 12.75 | |||
Class C Shares | ||||
Inception (3/31/06) | 1.29 | % | ||
5 Years | -0.71 | |||
1 Year | 16.64 | |||
Class R Shares | ||||
Inception (3/31/06) | 1.81 | % | ||
5 Years | -0.20 | |||
1 Year | 18.24 | |||
Class Y Shares | ||||
Inception | 2.24 | % | ||
5 Years | 0.27 | |||
1 Year | 18.89 | |||
Investor Class Shares | ||||
Inception | 2.07 | % | ||
5 Years | 0.06 | |||
1 Year | 18.63 | |||
Institutional Class Shares | ||||
Inception (3/31/06) | 2.33 | % | ||
5 Years | 0.32 | |||
1 Year | 18.90 | |||
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.
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
Performance figures reflect reinvested distributions, changes in net asset value and the effect of the maximum
Average Annual Total Returns | ||||
As of 6/30/12, the most recent calendar quarter-end, including maximum applicable sales charges | ||||
Class A Shares | ||||
Inception (3/31/06) | 0.38 | % | ||
5 Years | -2.64 | |||
1 Year | -2.14 | |||
Class B Shares | ||||
Inception (3/31/06) | 0.56 | % | ||
5 Years | -2.54 | |||
1 Year | -2.25 | |||
Class C Shares | ||||
Inception (3/31/06) | 0.53 | % | ||
5 Years | -2.28 | |||
1 Year | 1.75 | |||
Class R Shares | ||||
Inception (3/31/06) | 1.05 | % | ||
5 Years | -1.76 | |||
1 Year | 3.29 | |||
Class Y Shares | ||||
Inception | 1.47 | % | ||
5 Years | -1.32 | |||
1 Year | 3.86 | |||
Investor Class Shares | ||||
Inception | 1.30 | % | ||
5 Years | -1.52 | |||
1 Year | 3.48 | |||
Institutional Class Shares | ||||
Inception (3/31/06) | 1.54 | % | ||
5 Years | -1.29 | |||
1 Year | 3.74 |
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, Investor Class and Institutional Class shares was 1.22%, 1.97%, 1.97%, 1.47%, 0.97%, 1.22% and 0.77%, 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 in the past, performance would have been lower.
7 | Invesco U.S. Quantitative Core Fund |
Invesco U.S. Quantitative 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, 2012, 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 for new or additional investments. Existing shareholders of Class B shares may continue to reinvest dividends and capital gains distributions in Class B shares and exchange their Class B shares for Class B shares of other funds. 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 | Convertible securities risk. The Fund may own convertible securities, the value of which may be affected by market interest rates, the risk that the issuer will default, the value of the underlying stock or the right of the issuer to buy back the convertible securities. | |
n | Depositary receipts risk. Depositary receipts involve many of the same risks as those associated with direct investment in foreign securities. In addition, the underlying issuers of certain depositary receipts, particularly unsponsored or unregistered depositary receipts, are under no obligation to distribute shareholder communications to the holders of such receipts or to pass through to them any voting rights with respect to the deposited securities. | |
n | Derivatives risk. The performance of derivative instruments is tied to the performance of an underlying currency, security, index or other |
instrument. In addition to risks relating to their underlying instruments, the use of derivatives may include other, possibly greater, risks. Derivatives involve costs, may be volatile, and may involve a small initial investment relative to the risk assumed. Risks associated with the use of derivatives include counterparty, leverage, correlation, liquidity, tax, market, interest rate and management risks. Derivatives may also be more difficult to purchase, sell or value than other investments. The Fund may lose more than the cash amount invested on investments in derivatives. | ||
Investors should bear in mind that, while the Fund intends to use derivative strategies, it is not obligated to actively engage in these transactions, generally or in any particular kind of derivative, if the investment manager elects not to do so due to availability, cost, market conditions or other factors. | ||
n | Exchange-traded funds risk. An investment by the Fund in exchange-traded funds generally presents the same primary risks as an investment in a mutual fund. In addition, an exchange-traded fund may be subject to the following: (1) a discount of the exchange-traded fund’s shares to its net asset value; (2) failure to develop an active trading market for the exchange-traded fund’s shares; (3) the listing exchange halting trading of the exchange-traded fund’s shares; (4) failure of the exchange-traded fund’s shares to track the referenced index; and (5) holding troubled securities in the referenced index. Exchange-traded funds may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the exchange-traded funds in which it invests. Further, certain of the exchange-traded funds in which the Fund may invest are leveraged. The more the Fund invests in such leveraged exchange-traded funds, 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 | Large capitalization company risk. Larger, more established companies may be unable to respond quickly to new competitive challenges such as changes in consumer tastes or innovative smaller competitors. Returns on investments in large capitalization companies could trail the returns on investments in smaller companies. | |
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 | Management risk. The investment techniques and risk analysis used by the Fund’s portfolio managers may not produce the desired results. | |
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 | 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 U.S. Quantitative Core Fund |
Schedule of Investments(a)
August 31, 2012
Shares | Value | |||||||
Common Stocks & Other Equity Interests–98.28% | ||||||||
Aerospace & Defense–0.83% | ||||||||
Textron Inc. | 105,000 | $ | 2,805,600 | |||||
Apparel Retail–1.21% | ||||||||
Gap, Inc. (The) | 15,600 | 558,792 | ||||||
TJX Cos., Inc. (The) | 76,500 | 3,502,935 | ||||||
4,061,727 | ||||||||
Biotechnology–2.45% | ||||||||
Amgen Inc. | 98,500 | 8,266,120 | ||||||
Cable & Satellite–0.21% | ||||||||
DISH Network Corp.–Class A | 22,600 | 722,974 | ||||||
Communications Equipment–2.43% | ||||||||
Cisco Systems, Inc. | 428,700 | 8,179,596 | ||||||
Computer & Electronics Retail–1.91% | ||||||||
Best Buy Co., Inc. | 139,700 | 2,478,278 | ||||||
GameStop Corp.–Class A | 207,600 | 3,961,008 | ||||||
6,439,286 | ||||||||
Computer Hardware–8.14% | ||||||||
Apple Inc. | 34,420 | 22,897,561 | ||||||
Dell Inc. | 426,600 | 4,517,694 | ||||||
27,415,255 | ||||||||
Computer Storage & Peripherals–2.42% | ||||||||
Lexmark International, Inc.–Class A | 90,700 | 1,969,097 | ||||||
Seagate Technology PLC | 193,200 | 6,184,332 | ||||||
8,153,429 | ||||||||
Construction & Engineering–0.19% | ||||||||
KBR, Inc. | 23,100 | 625,779 | ||||||
Consumer Finance–2.19% | ||||||||
Discover Financial Services | 190,500 | 7,378,065 | ||||||
Data Processing & Outsourced Services–2.37% | ||||||||
Visa Inc.–Class A | 62,300 | 7,989,975 | ||||||
Department Stores–1.99% | ||||||||
Macy’s, Inc. | 166,100 | 6,695,491 | ||||||
Diversified Banks–3.15% | ||||||||
U.S. Bancorp | 206,800 | 6,909,188 | ||||||
Wells Fargo & Co. | 108,600 | 3,695,658 | ||||||
10,604,846 | ||||||||
Drug Retail–1.31% | ||||||||
CVS Caremark Corp. | 97,200 | 4,427,460 | ||||||
Education Services–1.05% | ||||||||
Apollo Group, Inc.–Class A(b) | 131,900 | 3,541,515 | ||||||
Fertilizers & Agricultural Chemicals–2.84% | ||||||||
CF Industries Holdings, Inc. | 15,900 | 3,291,459 | ||||||
Monsanto Co. | 71,900 | 6,263,209 | ||||||
9,554,668 | ||||||||
Home Entertainment Software–0.86% | ||||||||
Activision Blizzard, Inc. | 246,600 | 2,900,016 | ||||||
Homebuilding–1.75% | ||||||||
PulteGroup Inc.(b) | 431,500 | 5,902,920 | ||||||
Hotels, Resorts & Cruise Lines–0.20% | ||||||||
Wyndham Worldwide Corp. | 13,100 | 683,034 | ||||||
Hypermarkets & Super Centers–2.83% | ||||||||
Wal-Mart Stores, Inc. | 131,500 | 9,546,900 | ||||||
Industrial Conglomerates–4.65% | ||||||||
3M Co. | 39,300 | 3,639,180 | ||||||
General Electric Co. | 581,100 | 12,034,581 | ||||||
15,673,761 | ||||||||
Integrated Oil & Gas–6.61% | ||||||||
Chevron Corp. | 57,600 | 6,460,416 | ||||||
Exxon Mobil Corp. | 181,200 | 15,818,760 | ||||||
22,279,176 | ||||||||
Integrated Telecommunication Services–4.40% | ||||||||
AT&T Inc. | 151,500 | 5,550,960 | ||||||
Verizon Communications Inc. | 215,600 | 9,257,864 | ||||||
14,808,824 | ||||||||
Internet Retail–0.97% | ||||||||
Expedia, Inc. | 63,500 | 3,261,360 | ||||||
Internet Software & Services–1.38% | ||||||||
AOL Inc.(b) | 63,600 | 2,141,412 | ||||||
IAC/InterActiveCorp | 48,300 | 2,503,872 | ||||||
4,645,284 | ||||||||
IT Consulting & Other Services–0.38% | ||||||||
International Business Machines Corp. | 6,550 | 1,276,267 | ||||||
Life & Health Insurance–1.55% | ||||||||
Lincoln National Corp. | 225,000 | 5,224,500 | ||||||
Managed Health Care–5.21% | ||||||||
Aetna Inc. | 124,200 | 4,770,522 | ||||||
Humana Inc. | 73,300 | 5,136,864 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
9 Invesco U.S. Quantitative Core Fund
Shares | Value | |||||||
Managed Health Care–(continued) | ||||||||
UnitedHealth Group Inc. | 134,900 | $ | 7,325,070 | |||||
WellPoint, Inc. | 5,600 | 335,272 | ||||||
17,567,728 | ||||||||
Motorcycle Manufacturers–0.07% | ||||||||
Harley-Davidson, Inc. | 5,300 | 222,388 | ||||||
Movies & Entertainment–1.56% | ||||||||
News Corp.–Class A | 224,300 | 5,246,377 | ||||||
Multi-Line Insurance–0.50% | ||||||||
Hartford Financial Services Group, Inc. (The) | 93,000 | 1,667,490 | ||||||
Oil & Gas Equipment & Services–1.38% | ||||||||
National Oilwell Varco Inc. | 59,100 | 4,657,080 | ||||||
Oil & Gas Exploration & Production–1.77% | ||||||||
ConocoPhillips | 95,900 | 5,446,161 | ||||||
WPX Energy Inc.(b) | 33,200 | 517,920 | ||||||
5,964,081 | ||||||||
Oil & Gas Refining & Marketing–2.71% | ||||||||
Phillips 66 | 33,500 | 1,407,000 | ||||||
Tesoro Corp. | 193,900 | 7,705,586 | ||||||
9,112,586 | ||||||||
Other Diversified Financial Services–2.28% | ||||||||
Citigroup Inc. | 258,900 | 7,691,919 | ||||||
Pharmaceuticals–5.87% | ||||||||
Eli Lilly & Co. | 131,200 | 5,892,192 | ||||||
Forest Laboratories, Inc.(b) | 83,800 | 2,907,022 | ||||||
Pfizer Inc. | 459,400 | 10,961,284 | ||||||
19,760,498 | ||||||||
Property & Casualty Insurance–1.13% | ||||||||
Berkshire Hathaway Inc.–Class B(b) | 45,200 | 3,812,168 | ||||||
Publishing–1.47% | ||||||||
McGraw-Hill Cos., Inc. (The) | 96,400 | 4,935,680 | ||||||
Regional Banks–3.30% | ||||||||
Fifth Third Bancorp | 193,500 | 2,929,590 | ||||||
Huntington Bancshares Inc. | 144,800 | 955,680 | ||||||
KeyCorp | 198,400 | 1,672,512 | ||||||
Regions Financial Corp. | 799,500 | 5,564,520 | ||||||
11,122,302 | ||||||||
Retail REIT’s–2.11% | ||||||||
Simon Property Group, Inc. | 44,800 | 7,109,760 | ||||||
Semiconductors–0.73% | ||||||||
Intel Corp. | 40,900 | 1,015,547 | ||||||
Marvell Technology Group Ltd. | 142,500 | 1,450,650 | ||||||
2,466,197 | ||||||||
Specialized Consumer Services–0.30% | ||||||||
H&R Block, Inc. | 61,500 | 1,018,440 | ||||||
Specialized Finance–0.38% | ||||||||
Moody’s Corp. | 32,300 | 1,279,080 | ||||||
Specialized REIT’s–0.07% | ||||||||
Public Storage | 1,700 | 247,452 | ||||||
Systems Software–4.17% | ||||||||
Microsoft Corp. | 365,700 | 11,270,874 | ||||||
Symantec Corp.(b) | 155,800 | 2,777,914 | ||||||
14,048,788 | ||||||||
Tobacco–3.00% | ||||||||
Philip Morris International Inc. | 113,300 | 10,117,691 | ||||||
Total Common Stocks & Other Equity Interests (Cost $268,189,948) | 331,111,533 | |||||||
�� | Principal | |||||||
Amount | ||||||||
U.S. Treasury Bills–0.27% | ||||||||
0.15%, 09/13/12 (Cost $899,956)(c)(d) | $ | 900,000 | 899,985 | |||||
Shares | ||||||||
Money Market Funds–1.45% | ||||||||
Liquid Assets Portfolio–Institutional Class(e) | 2,443,103 | 2,443,103 | ||||||
Premier Portfolio–Institutional Class(e) | 2,443,102 | 2,443,102 | ||||||
Total Money Market Funds (Cost $4,886,205) | 4,886,205 | |||||||
TOTAL INVESTMENTS–100.00% (Cost $273,976,109) | 336,897,723 | |||||||
OTHER ASSETS LESS LIABILITIES–0.00% | 16,052 | |||||||
NET ASSETS–100.00% | $ | 336,913,775 | ||||||
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) | 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. | |
(d) | Security traded on a discount basis. The interest rate shown represents the discount rate at the time of purchase by the Fund. | |
(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.
10 Invesco U.S. Quantitative Core Fund
Statement of Assets and Liabilities
August 31, 2012
Assets: | ||||
Investments, at value (Cost $269,089,904) | $ | 332,011,518 | ||
Investments in affiliated money market funds, at value and cost | 4,886,205 | |||
Total investments, at value (Cost $273,976,109) | 336,897,723 | |||
Receivable for: | ||||
Variation margin | 31,417 | |||
Fund shares sold | 88,448 | |||
Dividends | 803,786 | |||
Investment for trustee deferred compensation and retirement plans | 129,821 | |||
Other assets | 33,230 | |||
Total assets | 337,984,425 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares reacquired | 455,202 | |||
Accrued fees to affiliates | 260,929 | |||
Accrued other operating expenses | 121,954 | |||
Trustee deferred compensation and retirement plans | 232,565 | |||
Total liabilities | 1,070,650 | |||
Net assets applicable to shares outstanding | $ | 336,913,775 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 414,329,293 | ||
Undistributed net investment income | 3,055,760 | |||
Undistributed net realized gain (loss) | (143,878,188 | ) | ||
Unrealized appreciation | 63,406,910 | |||
$ | 336,913,775 | |||
Net Assets: | ||||
Class A | $ | 198,830,847 | ||
Class B | $ | 16,912,637 | ||
Class C | $ | 41,148,119 | ||
Class R | $ | 1,059,281 | ||
Class Y | $ | 4,269,234 | ||
Investor Class | $ | 63,296,389 | ||
Institutional Class | $ | 11,397,268 | ||
Shares outstanding, $0.01 par value per share, with an unlimited number of shares authorized: | ||||
Class A | 22,953,495 | |||
Class B | 1,983,254 | |||
Class C | 4,834,859 | |||
Class R | 123,047 | |||
Class Y | 490,342 | |||
Investor Class | 7,285,448 | |||
Institutional Class | 1,308,615 | |||
Class A: | ||||
Net asset value per share | $ | 8.66 | ||
Maximum offering price per share | ||||
(Net asset value of $8.66 divided by 94.50%) | $ | 9.16 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 8.53 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 8.51 | ||
Class R: | ||||
Net asset value and offering price per share | $ | 8.61 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 8.71 | ||
Investor Class: | ||||
Net asset value and offering price per share | $ | 8.69 | ||
Institutional Class: | ||||
Net asset value and offering price per share | $ | 8.71 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
11 Invesco U.S. Quantitative Core Fund
Statement of Operations
For the year ended August 31, 2012
Investment income: | ||||
Dividends (net of foreign withholding taxes of $2,908) | $ | 7,186,715 | ||
Dividends from affiliated money market funds | 7,505 | |||
Total investment income | 7,194,220 | |||
Expenses: | ||||
Advisory fees | 2,002,340 | |||
Administrative services fees | 132,512 | |||
Custodian fees | 17,622 | |||
Distribution fees: | ||||
Class A | 491,706 | |||
Class B | 185,461 | |||
Class C | 432,074 | |||
Class R | 5,370 | |||
Investor Class | 154,462 | |||
Transfer agent fees — A, B, C, R, Y and Investor | 884,454 | |||
Transfer agent fees — Institutional | 6,698 | |||
Trustees’ and officers’ fees and benefits | 41,371 | |||
Other | 210,171 | |||
Total expenses | 4,564,241 | |||
Less: Fees waived, expenses reimbursed and expense offset arrangement(s) | (638,689 | ) | ||
Net expenses | 3,925,552 | |||
Net investment income | 3,268,668 | |||
Realized and unrealized gain from: | ||||
Net realized gain from: | ||||
Investment securities | 2,539,297 | |||
Futures contracts | 1,060,983 | |||
3,600,280 | ||||
Change in net unrealized appreciation of: | ||||
Investment securities | 49,676,037 | |||
Futures contracts | 203,960 | |||
49,879,997 | ||||
Net realized and unrealized gain | 53,480,277 | |||
Net increase in net assets resulting from operations | $ | 56,748,945 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
12 Invesco U.S. Quantitative Core Fund
Statement of Changes in Net Assets
For the years ended August 31, 2012 and 2011
2012 | 2011 | |||||||
Operations: | ||||||||
Net investment income | $ | 3,268,668 | $ | 1,439,286 | ||||
Net realized gain | 3,600,280 | 17,950,764 | ||||||
Change in net unrealized appreciation (depreciation) | 49,879,997 | (31,884,101 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 56,748,945 | (12,494,051 | ) | |||||
Distributions to shareholders from net investment income: | ||||||||
Class A | (930,525 | ) | (18,026 | ) | ||||
Class B | (41,450 | ) | (754 | ) | ||||
Class C | (95,868 | ) | (862 | ) | ||||
Class R | (5,087 | ) | (14,776 | ) | ||||
Class Y | (21,355 | ) | (2,233 | ) | ||||
Investor Class | (288,346 | ) | (849,485 | ) | ||||
Institutional Class | (71,711 | ) | (175,166 | ) | ||||
Total distributions from net investment income | (1,454,342 | ) | (1,061,302 | ) | ||||
Share transactions–net: | ||||||||
Class A | (37,945,442 | ) | 223,179,943 | |||||
Class B | (6,796,360 | ) | 22,788,387 | |||||
Class C | (14,199,052 | ) | 53,420,675 | |||||
Class R | (405,549 | ) | (255,424 | ) | ||||
Class Y | (216,655 | ) | 4,036,558 | |||||
Investor Class | (10,855,010 | ) | (17,699,092 | ) | ||||
Institutional Class | (2,297,972 | ) | (2,143,210 | ) | ||||
Net increase (decrease) in net assets resulting from share transactions | (72,716,040 | ) | 283,327,837 | |||||
Net increase (decrease) in net assets | (17,421,437 | ) | 269,772,484 | |||||
Net assets: | ||||||||
Beginning of year | 354,335,212 | 84,562,728 | ||||||
End of year (includes undistributed net investment income of $3,055,760 and $1,223,460, respectively) | $ | 336,913,775 | $ | 354,335,212 | ||||
Notes to Financial Statements
August 31, 2012
NOTE 1—Significant Accounting Policies
Invesco U.S. Quantitative Core Fund, formerly 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. Existing shareholders of Class B shares may continue to reinvest dividends and capital gains distributions in Class B shares until they convert to Class A shares. 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 to Class A shares. Generally, Class B shares will automatically
13 Invesco U.S. Quantitative Core Fund
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 the 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. 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 economic 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. | ||
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 |
14 Invesco U.S. Quantitative Core 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 and net realized capital gain, if any, are generally declared and paid annually and recorded on the 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 the 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 $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% | ||
15 Invesco U.S. Quantitative Core 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).
Effective July 1, 2012, the Adviser has contractually agreed, through June 30, 2013, 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, Class R, Class Y, Investor Class and Institutional Class shares to 2.00%, 2.75%, 2.75%, 2.25%, 1.75%, 2.00% and 1.75% of average daily net assets, respectively. Prior to July 1, 2012, the Adviser has contractually agreed 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, 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, 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, including litigation expenses; 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 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, 2013, 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, 2012, the Adviser waived advisory fees $7,959 and reimbursed class level expenses of $379,262, $35,764, $83,317, $2,071, $7,409, $119,139 and $1,423 of Class A, Class B, Class C, Class R, Class Y, Investor Class 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, 2012, 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, 2012, 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, 2012, 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, 2012, IDI advised the Fund that IDI retained $9,535 in front-end sales commissions from the sale of Class A shares and $48, $28,576 and $1,290 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, 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. |
16 Invesco U.S. Quantitative Core Fund
The following is a summary of the tiered valuation input levels, as of August 31, 2012. 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.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 335,997,738 | $ | — | $ | — | $ | 335,997,738 | ||||||||
U.S. Treasury Securities | — | 899,985 | — | 899,985 | ||||||||||||
335,997,738 | 899,985 | — | 336,897,723 | |||||||||||||
Futures* | 485,296 | — | — | 485,296 | ||||||||||||
Total Investments | $ | 336,483,034 | $ | 899,985 | $ | — | $ | 337,383,019 | ||||||||
* | Unrealized appreciation. |
NOTE 4—Derivative Investments
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, 2012:
Value | ||||||||
Risk Exposure/Derivative Type | Assets | Liabilities | ||||||
Market risk | ||||||||
Futures contracts(a) | $ | 485,296 | $ | — | ||||
(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, 2012
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 | ||||
Market risk | $ | 1,060,983 | ||
Change in Unrealized Appreciation | ||||
Market risk | 203,960 | |||
Total | $ | 1,264,943 | ||
* | The average notional value of futures outstanding during the period was $6,431,145. |
Open Futures Contracts | ||||||||||||||||
Number of | Expiration | Notional | Unrealized | |||||||||||||
Long Contracts | Contracts | Month | Value | Appreciation | ||||||||||||
E-Mini S&P 500 Index | 77 | September-2012 | $ | 5,409,635 | $ | 485,296 | ||||||||||
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, 2012, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $2,345.
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.
17 Invesco U.S. Quantitative Core Fund
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. Such balances, if any at period end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. 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, 2012 and 2011:
2012 | 2011 | |||||||
Ordinary income | $ | 1,454,342 | $ | 1,061,302 | ||||
Tax Components of Net Assets at Period-End:
2012 | ||||
Undistributed ordinary income | $ | 3,270,850 | ||
Net unrealized appreciation — investments | 61,588,471 | |||
Temporary book/tax differences | (215,111 | ) | ||
Post-October deferrals | (2,889,425 | ) | ||
Capital loss carryforward | (139,170,303 | ) | ||
Shares of beneficial interest | 414,329,293 | |||
Total net assets | $ | 336,913,775 | ||
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 Regulated Investment Company Modernization Act of 2010 (the “Act”) eliminated the eight-year carryover period for capital losses that arise in taxable years beginning after its enactment date of December 22, 2010. Consequently, these capital losses can be carried forward for an unlimited period. However, capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Additionally, post-enactment capital loss carryovers will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. 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 $6,094,398 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, 2012, which expires as follows:
Capital Loss Carryforward* | ||||||||||||
Expiration | Short-Term | Long-Term | Total | |||||||||
August 31, 2015 | $ | 20,974,683 | $ | — | $ | 20,974,683 | ||||||
August 31, 2016 | 54,204,215 | — | 54,204,215 | |||||||||
August 31, 2018 | 63,991,405 | — | 63,991,405 | |||||||||
$ | 139,170,303 | $ | — | $ | 139,170,303 | |||||||
* | 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 Premium Income Fund into the Fund, are 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. |
18 Invesco U.S. Quantitative Core 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, 2012 was $151,001,381 and $220,407,011, 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 | $ | 71,710,492 | ||
Aggregate unrealized (depreciation) of investment securities | (10,122,021 | ) | ||
Net unrealized appreciation of investment securities | $ | 61,588,471 | ||
Cost of investments for tax purposes is $275,309,252. |
NOTE 10—Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of litigation and capital loss carryforward, on August 31, 2012, undistributed net investment income was increased by $17,974, undistributed net realized gain (loss) was increased by $521,926 and shares of beneficial interest was decreased by $539,900. This reclassification had no effect on the net assets of the Fund.
19 Invesco U.S. Quantitative Core Fund
NOTE 11—Share Information
Summary of Share Activity | ||||||||||||||||
Year ended August 31, | ||||||||||||||||
2012(a) | 2011 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Class A | 1,233,552 | $ | 9,581,190 | 444,064 | $ | 3,252,631 | ||||||||||
Class B | 52,399 | 404,485 | 30,958 | 318,539 | ||||||||||||
Class C | 262,766 | 2,049,034 | 60,904 | 612,804 | ||||||||||||
Class R | 10,411 | 82,193 | 28,885 | 217,255 | ||||||||||||
Class Y | 105,238 | 852,079 | 28,172 | 202,660 | ||||||||||||
Investor Class | 887,672 | 7,116,364 | 1,130,397 | 8,652,358 | ||||||||||||
Institutional Class | 126,149 | 971,236 | 110,714 | 848,843 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Class A | 110,291 | 819,460 | 2,411 | 17,863 | ||||||||||||
Class B | 4,705 | 34,581 | 3 | 17 | ||||||||||||
Class C | 9,743 | 71,514 | 107 | 789 | ||||||||||||
Class R | 494 | 3,648 | 1,985 | 14,673 | ||||||||||||
Class Y | 2,083 | 15,520 | 280 | 2,075 | ||||||||||||
Investor Class | 37,687 | 280,770 | 111,078 | 825,308 | ||||||||||||
Institutional Class | 9,615 | 71,634 | 23,584 | 174,990 | ||||||||||||
Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||
Class A | 344,576 | 2,719,115 | 151,051 | 1,168,291 | ||||||||||||
Class B | (348,922 | ) | (2,719,115 | ) | (152,536 | ) | (1,168,291 | ) | ||||||||
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 | (6,568,951 | ) | (51,065,207 | ) | (3,430,939 | ) | (25,596,127 | ) | ||||||||
Class B | (582,251 | ) | (4,516,311 | ) | (316,001 | ) | (2,335,043 | ) | ||||||||
Class C | (2,142,291 | ) | (16,319,600 | ) | (1,011,485 | ) | (7,641,369 | ) | ||||||||
Class R | (65,832 | ) | (491,390 | ) | (65,749 | ) | (487,352 | ) | ||||||||
Class Y | (138,938 | ) | (1,084,254 | ) | (132,590 | ) | (1,022,420 | ) | ||||||||
Investor Class | (2,317,894 | ) | (18,252,144 | ) | (3,589,166 | ) | (27,176,758 | ) | ||||||||
Institutional Class | (407,522 | ) | (3,340,842 | ) | (419,448 | ) | (3,167,043 | ) | ||||||||
Net increase (decrease) in share activity | (9,375,220 | ) | $ | (72,716,040 | ) | 34,963,561 | $ | 283,327,837 | ||||||||
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 18% 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 Fund 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 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 41,956,882 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 $213,098,974, 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. |
20 Invesco U.S. Quantitative 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 | (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(b) | (000s omitted) | absorbed | absorbed | net assets | turnover(c) | |||||||||||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/12 | $ | 7.34 | $ | 0.09 | $ | 1.27 | $ | 1.36 | $ | (0.04 | ) | $ | — | $ | (0.04 | ) | $ | 8.66 | 18.54 | % | $ | 198,831 | 1.03 | %(d) | 1.23 | %(d) | 1.10 | %(d) | 45 | % | ||||||||||||||||||||||||||
Year ended 08/31/11 | 6.29 | 0.07 | 1.06 | 1.13 | (0.08 | ) | — | (0.08 | ) | 7.34 | 18.00 | 204,311 | 1.00 | 1.22 | 0.90 | 125 | ||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/10 | 6.47 | 0.06 | (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 | (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 | (1.37 | ) | (1.23 | ) | (0.02 | ) | (0.05 | ) | (0.07 | ) | 9.89 | (11.03 | ) | 951 | 0.75 | 1.93 | 1.34 | 118 | ||||||||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/12 | 7.26 | 0.03 | 1.26 | 1.29 | (0.02 | ) | — | (0.02 | ) | 8.53 | 17.75 | 16,913 | 1.78 | (d) | 1.98 | (d) | 0.35 | (d) | 45 | |||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 6.22 | 0.01 | 1.06 | 1.07 | (0.03 | ) | — | (0.03 | ) | 7.26 | 17.15 | 20,750 | 1.75 | 1.97 | 0.15 | 125 | ||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/10 | 6.37 | 0.01 | (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 | (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 | (1.36 | ) | (1.30 | ) | — | (0.05 | ) | (0.05 | ) | 9.79 | (11.71 | ) | 165 | 1.50 | 2.68 | 0.59 | 118 | |||||||||||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/12 | 7.25 | 0.03 | 1.25 | 1.28 | (0.02 | ) | — | (0.02 | ) | 8.51 | 17.64 | 41,148 | 1.78 | (d) | 1.98 | (d) | 0.35 | (d) | 45 | |||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 6.22 | 0.01 | 1.05 | 1.06 | (0.03 | ) | — | (0.03 | ) | 7.25 | 16.99 | 48,592 | 1.75 | 1.97 | 0.15 | 125 | ||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/10 | 6.37 | 0.01 | (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 | (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 | (1.36 | ) | (1.30 | ) | — | (0.05 | ) | (0.05 | ) | 9.79 | (11.71 | ) | 249 | 1.50 | 2.68 | 0.59 | 118 | |||||||||||||||||||||||||||||||||||||
Class R | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/12 | 7.31 | 0.07 | 1.26 | 1.33 | (0.03 | ) | — | (0.03 | ) | 8.61 | 18.24 | 1,059 | 1.28 | (d) | 1.48 | (d) | 0.85 | (d) | 45 | |||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 6.27 | 0.05 | 1.06 | 1.11 | (0.07 | ) | — | (0.07 | ) | 7.31 | 17.68 | 1,300 | 1.25 | 1.47 | 0.65 | 125 | ||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/10 | 6.45 | 0.05 | (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 | (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 | (1.37 | ) | (1.26 | ) | — | (0.05 | ) | (0.05 | ) | 9.86 | (11.32 | ) | 53 | 1.00 | 2.18 | 1.09 | 118 | |||||||||||||||||||||||||||||||||||||
Class Y | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/12 | 7.37 | 0.11 | 1.27 | 1.38 | (0.04 | ) | — | (0.04 | ) | 8.71 | 18.89 | 4,269 | 0.78 | (d) | 0.98 | (d) | 1.35 | (d) | 45 | |||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 6.32 | 0.09 | 1.06 | 1.15 | (0.10 | ) | — | (0.10 | ) | 7.37 | 18.24 | 3,846 | 0.75 | 0.97 | 1.15 | 125 | ||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/10 | 6.50 | 0.08 | (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 | (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 08/31/12 | 7.36 | 0.09 | 1.28 | 1.37 | (0.04 | ) | — | (0.04 | ) | 8.69 | 18.63 | 63,296 | 1.03 | (d) | 1.23 | (d) | 1.10 | (d) | 45 | |||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 6.32 | 0.07 | 1.05 | 1.12 | (0.08 | ) | — | (0.08 | ) | 7.36 | 17.76 | 63,890 | 1.00 | 1.22 | 0.90 | 125 | ||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/10 | 6.50 | 0.06 | (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 | (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 08/31/12 | 7.37 | 0.11 | 1.28 | 1.39 | (0.05 | ) | — | (0.05 | ) | 8.71 | 18.90 | 11,397 | 0.76 | (d) | 0.77 | (d) | 1.37 | (d) | 45 | |||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 6.32 | 0.09 | 1.06 | 1.15 | (0.10 | ) | — | (0.10 | ) | 7.37 | 18.24 | 11,645 | 0.74 | 0.77 | 1.18 | 125 | ||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/10 | 6.50 | 0.08 | (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 | (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 | (1.36 | ) | (1.20 | ) | (0.05 | ) | (0.05 | ) | (0.10 | ) | 9.91 | (10.79 | ) | 29,374 | 0.50 | 1.57 | 1.59 | 118 | ||||||||||||||||||||||||||||||||||||
(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) of $196,682, $18,547, $43,207, $1,074, $3,842, $61,785 and $12,226 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 Shares and Investor Class Shares, respectively. | |
(f) | Annualized. |
NOTE 13—Subsequent Event
Effective September 24, 2012, Institutional Class shares were renamed Class R5 shares.
21 Invesco U.S. Quantitative 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 U.S Quantitative 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 U.S Quantitative Core Fund, (formerly known as 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, 2012, 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, 2012 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
October 23, 2012
Houston, Texas
22 Invesco U.S. Quantitative 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, 2012 through August 31, 2012.
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 | (03/01/12) | (08/31/12)1 | Period2,3 | (08/31/12) | Period2,4 | Ratio2 | ||||||||||||||||||||||||
A | $ | 1,000.00 | $ | 1,052.30 | $ | 5.62 | $ | 1,019.66 | $ | 5.53 | 1.09 | % | ||||||||||||||||||
B | 1,000.00 | 1,047.90 | 9.47 | 1,015.89 | 9.32 | 1.84 | ||||||||||||||||||||||||
C | 1,000.00 | 1,048.00 | 9.47 | 1,015.89 | 9.32 | 1.84 | ||||||||||||||||||||||||
R | 1,000.00 | 1,051.30 | 6.91 | 1,018.40 | 6.80 | 1.34 | ||||||||||||||||||||||||
Y | 1,000.00 | 1,053.20 | 4.34 | 1,020.91 | 4.27 | 0.84 | ||||||||||||||||||||||||
Investor | 1,000.00 | 1,052.10 | 5.62 | 1,019.66 | 5.53 | 1.09 | ||||||||||||||||||||||||
Institutional | 1,000.00 | 1,053.20 | 4.03 | 1,021.22 | 3.96 | 0.78 | ||||||||||||||||||||||||
1 | The actual ending account value is based on the actual total return of the Fund for the period March 1, 2012 through August 31, 2012, 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 184/366 to reflect the most recent fiscal half year. Effective July 1, 2012, 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, Investor Class and Institutional Class shares to 2.00%, 2.75%, 2.75%, 2.25%, 1.75%, 2.00% and 1.75% 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 1.25%, 2.00%, 2.00%, 1.50%, 1.00%, 1.25% and 0.81% for Class A, Class B, Class C, Class R, Class Y, Investor Class and Institutional Class shares, respectively. |
3 | The actual expenses paid restated as if the changes discussed above had been in effect throughout the entire most recent fiscal half year are $6.45, $10.30, $10.30, $7.73, $5.16, $6.45 and $4.18 for Class A, Class B, Class C, Class R, Class Y, Investor Class and Institutional Class shares, respectively. |
4 | The hypothetical expenses paid restated as if the changes discussed above had been in effect throughout the entire most recent fiscal half year are $6.34, $10.13, $10.13, $7.61, $5.08, $6.34 and $4.12 for Class A, Class B, Class C, Class R, Class Y, Investor Class and Institutional Class shares, respectively. |
23 Invesco U.S. Quantitative Core Fund
Approval of Investment Advisory and Sub-Advisory Contracts (Formerly Known as Invesco Structured Core Fund) |
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 U.S. Quantitative 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 19-20, 2012, 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, 2012. 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 primarily 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, 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 and on what terms 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. In addition to meetings with Invesco Advisers and fund 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 independent legal 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 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 previously approved by a different board that, at the time, was responsible for overseeing Morgan Stanley and Van Kampen funds, which have become Invesco Funds following the acquisition of the retail mutual fund business of Morgan Stanley. 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 or factor 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 20, 2012, 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 Sub-Committees 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 prior relationship and 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 consistent 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 consistent with the terms of the Fund’s sub-advisory contracts.
24 Invesco U.S. Quantitative 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 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 Core Funds Index. The Board noted that performance of Class A shares of the Fund was in the second quintile of the performance universe for the one year period and the fifth 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 above the performance of the Index for the one year period and below the performance of the Index for the three and five year periods. Invesco Advisers presented an analysis to the Board that included an explanation of reasons for differences in performance relative to that of the universe and index. The Board discussed actions that Invesco Advisers had taken to address performance issues and Invesco Adviser’s resources and responsiveness to performance concerns. These explanations provided a sound basis for understanding comparative performance and monitoring and addressing it going forward, and were part of the Board’s overall conclusion about the nature, extent and quality of the services provided by Invesco Advisers. 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 funds advised by Invesco Advisers and its affiliates with investment strategies comparable to those of the Fund. The Board noted that Invesco Advisers advises an off-shore fund with comparable investment strategies and noted that the effective fee rate was lower than the Fund’s.
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 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 and were assisted in their review by a report from the Senior Officer. 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. The Board noted that Invesco Advisers proposes sharing economies of scale in administration expenses by lowering per class administrative fees.
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 for the year ended December 31, 2011. 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 Invesco Funds and the Fund. The Board did not deem the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund to be excessive given the nature, quality and extent of the services provided to the Invesco Funds. The Board received and accepted information from Invesco Advisers demonstrating that 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.
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 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 also considered periodic reports from the Chief Compliance Officer of the Invesco Funds demonstrating that these arrangements are consistent with regulatory requirements. The Board did not deem the soft dollar arrangements to be inappropriate.
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.
The Board also considered use of an affiliated broker to execute certain trades for the Fund and that such trades are executed in compliance with rules under the Investment Company Act of 1940, as amended.
25 Invesco U.S. Quantitative 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, 2012:
Federal and State Income Tax | ||||
Qualified Dividend Income* | 100% | |||
Corporate Dividends Received Deduction* | 100% | |||
U.S. Treasury Obligations* | 0% |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Fund’s fiscal year. |
26 Invesco U.S. Quantitative 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 1000, 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 | Other Directorship(s) | |||||||
Name, Year of Birth and | Trustee and/or | Principal Occupation(s) | Funds in | Held by Trustee During | ||||
Position(s) Held with the Trust | Officer Since | During Past 5 Years | Fund Complex Overseen by Trustee | Past 5 Years | ||||
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 | 129 | 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. | 129 | None | ||||
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. | ||||||||
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 certain funds in the Fund Complex | 147 | Director of the Mutual Fund Directors Forum, a nonprofit membership organization for investment directors; Chairman and Director of the Abraham Lincoln Presidential Library Foundation; and Director of the Stevenson Center for Democracy | ||||
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 is considered an “interested person” (within the meaning of Section 2(a)(19) of the 1940 Act) of certain Funds in the Invesco Fund Complex by reason of he and his firm currently providing legal services as legal counsel to such Funds in the Invesco Fund Complex. |
T-1 Invesco U.S. Quantitative Core Fund
Trustees and Officers—(continued)
Number of | Other Directorship(s) | |||||||
Name, Year of Birth and | Trustee and/or | Principal Occupation(s) | Funds in | Held by Trustee During | ||||
Position(s) Held with the Trust | Officer Since | During Past 5 Years | Fund Complex Overseen by Trustee | Past 5 Years | ||||
Independent Trustees | ||||||||
Bruce L. Crockett — 1944 Trustee and Chair | 2003 | Chairman, Crockett Technologies 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) | 129 | ACE Limited (insurance company); and Investment Company Institute | ||||
David C. Arch — 1945 Trustee | 2010 | Retired. Chairman and Chief Executive Officer of Blistex Inc., a consumer health care products manufacturer | 147 | Member of the Heartland Alliance Advisory Board, a nonprofit organization serving human needs based in Chicago. Board member of the Illinois Manufacturers’ Association. Member of the Board of Visitors, Institute for the Humanities, University of Michigan | ||||
Frank S. Bayley — 1939 Trustee | 2003 | Retired Formerly: Director, Badgley Funds, Inc. (registered investment company) (2 portfolios) and Partner, law firm of Baker & McKenzie | 129 | 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 | 129 | Chairman, Board of Governors, Western Golf Association, Chairman-elect, Evans Scholars Foundation and Director, Denver Film Society | ||||
Rodney F. Dammeyer — 1940 Trustee | 2010 | Chairman of CAC, LLC, a private company offering capital investment and management advisory services Formerly: Prior to January 2004, Director of TeleTech Holdings Inc.; Prior to 2002, Director of Arris Group, Inc.; Prior to 2001, Managing Partner at Equity Group Corporate Investments. Prior to 1995, Vice Chairman of Anixter International. Prior to 1985, experience includes Senior Vice President and Chief Financial Officer of Household International, Inc, Executive Vice President and Chief Financial Officer of Northwest Industries, Inc. and Partner of Arthur Andersen & Co. | 147 | 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) 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) | 129 | Director of Nature’s Sunshine Products, Inc. | ||||
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) Formerly: Chief Executive Officer, Texana Timber LP (sustainable forestry company) and member of the U.S. House of Representatives | 129 | Insperity (formerly known as Administaff) | ||||
Carl Frischling — 1937 Trustee | 2003 | Partner, law firm of Kramer Levin Naftalis and Frankel LLP | 129 | Director, Reich & Tang Funds (6 portfolios) | ||||
Prema Mathai-Davis — 1950 Trustee | 2003 | Retired Formerly: Chief Executive Officer, YWCA of the U.S.A. | 129 | None | ||||
Larry Soll — 1942 Trustee | 1997 | Retired Formerly, Chairman, Chief Executive Officer and President, Synergen Corp. (a biotechnology company) | 129 | None | ||||
T-2 Invesco U.S. Quantitative Core Fund
Trustees and Officers—(continued)
Number of | Other Directorship(s) | |||||||
Name, Year of Birth and | Trustee and/or | Principal Occupation(s) | Funds in | Held by Trustee | ||||
Position(s) Held with the Trust | Officer Since | During Past 5 Years | Fund Complex Overseen by Trustee | During Past 5 Years | ||||
Independent Trustees—(continued) | ||||||||
Hugo F. Sonnenschein — 1940 Trustee | 2010 | Distinguished Service Professor and President Emeritus of the University of Chicago and the Adam Smith Distinguished Service Professor in the Department of Economics at the University of Chicago. Prior to July 2000, President of the University of Chicago | 147 | 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 | 129 | None | ||||
Other Officers | ||||||||
Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer, The 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 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) | N/A | N/A | ||||
Lisa O. Brinkley — 1959 Vice President | 2004 | Global Assurance Officer, Invesco Ltd. and Vice President, The Invesco Funds Formerly: Chief Compliance Officer, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.), Invesco Investment Services, Inc.(formerly known as Invesco Aim Investment Services, 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 | ||||
T-3 Invesco U.S. Quantitative Core Fund
Trustees and Officers—(continued)
Number of | Other Directorship(s) | |||||||
Name, Year of Birth and | Trustee and/or | Principal Occupation(s) | Funds in | Held by Trustee | ||||
Position(s) Held with the Trust | Officer Since | During Past 5 Years | Fund Complex Overseen by Trustee | During Past 5 Years | ||||
Other Officers—(continued) | ||||||||
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., INVESCO Global Asset Management Limited, Invesco Management Company Limited and INVESCO Management S.A.; 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) 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) | 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); and 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 Formerly: Vice President, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc. | N/A | N/A | ||||
Yinka Akinsola — 1977 Anti-Money Laundering Compliance Officer | 2011 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.), Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.), Invesco Management Group, Inc., The Invesco Funds, Invesco Van Kampen Closed-End Funds, Van Kampen Exchange Corp., Van Kampen Funds Inc., PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, and PowerShares Actively Managed Exchange-Traded Fund Trust Formerly: Regulatory Analyst III, Financial Industry Regulatory Authority (FINRA). | N/A | N/A | ||||
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; Vice President, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) and Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.) Formerly: Senior Vice President, Van Kampen Investments Inc.; Senior Vice President and Chief Compliance Officer, Invesco Advisers, Inc. and Invesco Aim Capital Management, Inc.; Chief Compliance Officer, INVESCO Private Capital Investments, Inc. (holding company), Invesco Private Capital, Inc. (registered investment adviser), Invesco Global Asset Management (N.A.), Inc., Invesco Senior Secured Management, Inc. (registered investment adviser) and Van Kampen Investor Services Inc., 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 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 1000 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 1000 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 1000 Houston, TX 77046-1173 | Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
T-4 Invesco U.S. Quantitative Core 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 shown below.
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, 2012, 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 US 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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SEC file numbers: 811-09913 and 333-36074 | USQC-AR-1 | Invesco Distributors, Inc. |
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Annual Report to Shareholders | August 31, 2012 |
Invesco American Franchise Fund
Effective September 24, 2012, after the close of the reporting period, Invesco Van Kampen American Franchise Fund was renamed Invesco American 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 | |
25 | Tax Information | |
T-1 | Trustees and Officers |
Letters to Shareholders
![(PHOTO OF PHILIP TAYLOR)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8703002.jpg)
Philip Taylor
Dear Shareholders:
This report contains information about your Fund, including a discussion from your portfolio managers about how they managed your Fund – and why it performed as it did – during the reporting period. This report also includes your Fund’s long-term performance and a complete list of your Fund’s investments as of the close of the reporting period. I hope you find this information helpful.
For much of the reporting period, investors’ attention was focused on Europe, where eurozone governments struggled to reduce debt levels, strengthen their banks and stimulate their economies. European leaders disagreed whether the wiser path to restoring the Continent’s economic well-being was more stimulus or greater austerity. In the US, economic data were mixed. Economic growth, while positive, was relatively modest. Corporate earnings, which have grown strongly in recent years, have begun to slow. And job creation has been less robust than hoped. Later in this report, your Fund’s portfolio managers discuss how economic conditions and market trends affected your Fund’s performance.
Economic conditions are always subject to sudden and unexpected change. That’s why you may find it helpful to work with a trusted, experienced financial adviser who understands your unique financial goals, needs and risk tolerances. Financial advisers can provide valuable insight and information, particularly when markets are turbulent, and they can recommend investments appropriate for specific investment goals, such as a child’s college education or your retirement. On a regular basis, a financial adviser also can determine whether your existing investments are still appropriate, given your changing needs, goals and circumstances.
Timely insight and information from many of Invesco’s investment professionals is available at our website, invesco.com/us. We offer in-depth articles, video clips and audio commentaries from many of our portfolio managers and other investment professionals on a wide range of topics of interest to investors: recent economic and market developments; retirement planning; legislative updates from Washington, DC; and general investor education. At invesco.com/us, you also can access information about your Invesco account at any time.
What we mean by Intentional Investing
Intentional InvestingSM is the science and art of investing with purpose, prudence and diligence – and it’s how Invesco’s investment professionals manage your money every day.
This highly disciplined process begins when specialized teams of investment professionals clearly define an investment objective and then establish specific investment strategies to try to achieve that objective. While our investment teams closely monitor economic and market conditions – and issues specific to individual holdings that could affect their value – they maintain a long-term investment perspective. Intentional Investing is also:
n | How we manage and mitigate risk – by embedding risk controls and processes into every aspect of our business; | ||
n | How we create products – by offering a diverse combination of investment strategies and vehicles designed to meet your needs; and | ||
n | How we connect with you, our investors – by communicating clearly, by delivering expert insights from our portfolio managers and other investment professionals, and by providing a website full of tools and articles to help you stay informed. |
As a company, Invesco believes in putting investors first, and that’s why investment management is all we do. Our sole focus on managing your money allows your financial adviser to build a truly diversified investment portfolio of Invesco funds, whatever your investment needs and goals may be – and allows him or her to find appropriate Invesco funds when your circumstances change. Of course, neither Intentional Investing nor diversification can guarantee a profit or protect against loss.
Have a question?
If you have questions about your account, please contact an Invesco client services representative at 800 959 4246. If you have an Invesco-related question or comment, feel free 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/0000950123-12-013037/h87055h8703003.gif)
Philip Taylor
Senior Managing Director, Invesco Ltd.
Senior Managing Director, Invesco Ltd.
2 Invesco American Franchise Fund
![(PHOTO OF BRUCE CROCKETT)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8703004.jpg)
Bruce Crockett
Dear Fellow Shareholders:
One of our most important responsibilities as independent Trustees of the Invesco Funds is our annual review of the funds’ advisory and sub-advisory contracts with Invesco. This annual review is required by the Investment Company Act of 1940 and focuses on the nature and quality of the services Invesco has provided as adviser to the Invesco Funds and the reasonableness of the fees that it charges for those services.
In our roles as Trustees, we spend months reviewing thousands of pages of detailed information that we request from Invesco in connection with our annual review. We focus on the quality and costs of the services to be provided by Invesco and its affiliates. Some of the most important things we look at are fund performance, expenses and fees. All of the Trustees have substantial personal investments in the Invesco Funds complex. We’re fund shareholders just like you.
We also use information from many independent sources during the review process, including materials provided by the independent Senior Officer of the Invesco Funds, who reports directly to the independent Trustees. We also meet in private sessions with independent legal counsel and review performance and fee data on the Invesco Funds prepared by Lipper Inc., an independent, third-party firm widely recognized as a leader in its field.
I’m pleased to report that the Invesco Funds Board determined in June that renewing the investment advisory agreement and the sub-advisory contracts with Invesco would serve the best interests of each fund and its shareholders. For more detailed information about our assessment and conclusions with respect to each of the Invesco Funds, visit invesco.com/us, click on the “About Us” section and go to “Legal Information.” Information on the recent investment advisory renewal process can be found by clicking the last item under “Corporate Governance.”
In much the same way we review your fund’s advisory contract each year, it’s a good idea for you to review your own investment plan with your financial adviser on a regular basis. Perhaps you need to reassess your original asset allocation because different investments may grow at varying paces, or perhaps you’re going through a significant life change. Regardless of your situation, a financial adviser can provide guidance and experience to help you reach your financial goals.
As always, please contact me at bruce@brucecrockett.com with any questions or concerns you may have. On behalf of the 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/0000950123-12-013037/h87055h8703005.gif)
Bruce L. Crockett
Independent Chair
Independent Chair
Invesco Funds Board of Trustees
3 Invesco American Franchise Fund
Management’s Discussion of Fund Performance
Performance summary
For the fiscal year ended August 31, 2012, Invesco American Franchise Fund (formerly Invesco Van Kampen American Franchise Fund), at net asset value (NAV), had positive returns but underperformed the Fund’s style-specific 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, 8/31/11 to 8/31/12, 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 | 7.55 | % | ||
Class B Shares | 7.64 | |||
Class C Shares | 6.82 | |||
Class R Shares | 7.30 | |||
Class Y Shares | 7.86 | |||
Institutional Class Shares | 7.96 | |||
S&P 500 Index▼ (Broad Market Index) | 18.00 | |||
Russell 1000 Growth Index■ (Style-Specific Index) | 17.37 | |||
Lipper Large-Cap Growth Funds Index♦ (Peer Group Index) | 13.41 | |||
Source(s): ▼Invesco, S&P-Dow Jones via FactSet Research Systems Inc.; ■Invesco, Russell via FactSet Research Sytems Inc.; ♦Lipper Inc. |
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 valuations 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. Through our analysis, we develop a mosaic of each company through detailed discussions with company management teams, competitors, distributors, suppliers, Wall Street analysts, and customers. We also utilize 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
As the reporting period began, reports on employment and the economy were mixed at best, and sovereign debt issues abroad weighed heavily on investors. Equity indexes sold off precipitously as the US struggled very publicly to raise the nation’s debt ceiling. As a result, Standard & Poor’s announced the first-ever downgrade to long-term US government debt. Uncertainty created by the downgrade combined with the continuing eurozone debt-crisis saga to reignite global recession fears through October.
As those negative headlines faded during the fall of 2011, signs of muted growth remained. US equity markets rebounded with a nearly uninterrupted rally throughout the winter and into the spring of 2012. In late March, markets paused, and while company earnings still offered more positive surprises than disappointments, confidence began to wane in the absence of new growth drivers. By May, the market went into steady decline as investors grew concerned about the real possibility of a Greek exit from the European Union and the potential collapse of the euro. Economic data and earnings in the US began to show signs of deceleration amid contagion from both European and Asian weakness.
Toward the end of the reporting period, yet another European commitment to a lasting resolution to the economic crisis was coupled with an announcement that funds may be injected directly into large financial institutions. This announcement,
Portfolio Composition
By sector
Information Technology | 36.9 | % | ||
Consumer Discretionary | 18.1 | |||
Health Care | 12.7 | |||
Industrials | 10.7 | |||
Energy | 8.0 | |||
Financials | 5.9 | |||
Consumer Staples | 3.1 | |||
Telecommunication Services | 1.9 | |||
Materials | 1.8 | |||
Money Market Funds Plus Other Assets Less Liabilities | 0.9 |
Top 10 Equity Holdings*
1. | Apple Inc. | 12.7 | % | |||||
2. | EMC Corp. | 3.8 | ||||||
3. | QUALCOMM, Inc. | 3.7 | ||||||
4. | Google Inc. | 3.3 | ||||||
5. | Occidental Petroleum Corp. | 3.3 | ||||||
6. | Wells Fargo & Co. | 2.5 | ||||||
7. | DIRECTV | 2.2 | ||||||
8. | General Electric Co. | 2.2 | ||||||
9. | Weatherford International Ltd. | 2.2 | ||||||
10. | Abbott Laboratories | 2.1 |
Total Net Assets | $5.7 billion | |||
Total Number of Holdings* | 73 |
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 American Franchise Fund
along with a ruling by the US Supreme Court upholding the Affordable Care Act, provided some near-term clarity and resulted in risk taking that led the markets modestly higher as the reporting period ended.
The Fund had positive absolute returns at NAV but underperformed the Russell 1000 Growth Index during the reporting period. The Fund underperformed the index by the widest margins in the information technology (IT), energy, health care and materials sectors. Underperformance in each of these sectors was driven predominately by stock selection. Some of this underperformance was offset by outperformance in the telecommunication services sector and beneficial stock selection in consumer staples.
The IT sector included the Fund’s two most significant detractors and the two most significant contributors. Rovi was the largest detractor and negatively affected performance in August of 2011 as consumer spending sentiment weakened. The stock declined again in the winter after the firm gave guidance that some legacy products were winding down more quickly than previously expected, and newer growth products would be delayed. Baidu was another detractor from relative performance. The search engine provider’s stock was negatively affected by the economic slowdown in China as well as modest customer share losses to a new competitor. Overall stock selection in the sector was negative and outweighed the positive contributions from the Fund’s largest position, Apple, and from Visa.
Energy was one of the poorest performing and most volatile index sectors during the reporting period as natural gas prices hit remarkable lows then rebounded somewhat, and oil prices took a similar path but with different timing. The portfolio also underperformed in the energy sector due to an emphasis on service providers and exploration companies, including Weatherford International, Halliburton and National Oilwell Varco, which were more volatile than the larger integrated oil companies that acted defensively during the reporting period.
In the health care sector, one of the leading detractors from portfolio performance was Illumina, which is the share leader in human genome mapping technology. The company launched a new machine that was to be less profitable per unit but would make the technology
accessible to a broader group of universities and research groups, with additional revenue coming from ongoing software updates for the machines. With the failure of the US Congressional “super committee”, potential buyers with federally-funded or subsidized budgets faced an increased likelihood of budget cuts, causing orders for the new machines to come in much lighter than estimates. We sold the position during the reporting period.
Some of this underperformance was offset by outperformance in the telecommunication services sector driven by strong stock selection, including Sprint Nextel. American Tower was also a significant contributor to the portfolio benefiting from strong secular tailwinds in data transmission and mobile phone penetration.
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. We thank you for your commitment to Invesco 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/0000950123-12-013037/h87055h8703006.jpg)
Erik Voss
Chartered Financial Analyst, portfolio manager, is lead manager of Invesco American Franchise Fund. He joined Invesco in 2010. Mr. Voss earned a BS in mathematics and an MS in finance from the University of Wisconsin.
Chartered Financial Analyst, portfolio manager, is lead manager of Invesco American Franchise Fund. He joined Invesco in 2010. Mr. Voss earned a BS in mathematics and an MS in finance from the University of Wisconsin.
![(PHOTO OF IDO COHEN)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8703007.jpg)
Ido Cohen
Portfolio manager, is manager of Invesco American Franchise Fund. He joined Invesco in 2010. Mr. Cohen earned a BS in economics from the Wharton School of the University of Pennsylvania.
Portfolio manager, is manager of Invesco American Franchise Fund. He joined Invesco in 2010. Mr. Cohen earned a BS in economics from the Wharton School of the University of Pennsylvania.
5 Invesco American Franchise Fund
Your Fund’s Long-Term Performance
Results of a $10,000 Investment – Oldest Share Class(es) since Inception
Fund data from 6/23/05; index data from 6/30/05
![(LINE GRAPH)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8703008.gif)
1 | Sources: Invesco, Russell via FactSet Research Systems Inc. | |
2 | Sources: Invesco, S&P-Dow Jones via FactSet Research Systems Inc. | |
3 | Source: 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 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
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. |
6 Invesco American Franchise Fund
Average Annual Total Returns
As of 8/31/12, including maximum applicable sales charges
Class A Shares | ||||||||
Inception (6/23/05) | 4.27 | % | ||||||
5 | Years | 1.79 | ||||||
1 | Year | 1.66 | ||||||
Class B Shares | ||||||||
Inception (6/23/05) | 4.42 | % | ||||||
5 | Years | 1.98 | ||||||
1 | Year | 2.64 | ||||||
Class C Shares | ||||||||
Inception (6/23/05) | 4.35 | % | ||||||
5 | Years | 2.25 | ||||||
1 | Year | 5.82 | ||||||
Class R Shares | ||||||||
Inception | 4.83 | % | ||||||
5 | Years | 2.69 | ||||||
1 | Year | 7.30 | ||||||
Class Y Shares | ||||||||
Inception (6/23/05) | 5.33 | % | ||||||
5 | Years | 3.19 | ||||||
1 | Year | 7.86 | ||||||
Institutional Class Shares | ||||||||
Inception | 5.20 | % | ||||||
5 | Years | 3.09 | ||||||
1 | Year | 7.96 |
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 (renamed Invesco 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.
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
Average Annual Total Returns
As of 6/30/12, the most recent calendar quarter-end, including maximum applicable sales charges
Class A Shares | ||||||||
Inception (6/23/05) | 3.91 | % | ||||||
5 | Years | 0.50 | ||||||
1 | Year | -9.55 | ||||||
Class B Shares | ||||||||
Inception (6/23/05) | 4.06 | % | ||||||
5 | Years | 0.65 | ||||||
1 | Year | -8.97 | ||||||
Class C Shares | ||||||||
Inception (6/23/05) | 3.99 | % | ||||||
5 | Years | 0.93 | ||||||
1 | Year | -5.96 | ||||||
Class R Shares | ||||||||
Inception | 4.48 | % | ||||||
5 | Years | 1.37 | ||||||
1 | Year | -4.54 | ||||||
Class Y Shares | ||||||||
Inception (6/23/05) | 4.97 | % | ||||||
5 | Years | 1.85 | ||||||
1 | Year | -4.13 | ||||||
Institutional Class Shares | ||||||||
Inception | 4.83 | % | ||||||
5 | Years | 1.75 | ||||||
1 | Year | -3.98 |
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%, 1.05%, 1.59%, 1.30%, 0.80% and 0.68%, respectively.1,2 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 1.16%,
1.16%, 1.70%, 1.41%, 0.91% and 0.68%, 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 in the past, 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. | |
2 | Total annual Fund operating expenses after any 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 American Franchise Fund
Invesco 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, 2012, and is based on total net asset. | |
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 for new or additional investments. Existing shareholders of Class B shares may continue to reinvest dividends and capital gains distributions in Class B shares and exchange their Class B shares for Class B shares of other funds. 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 | 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 | Derivative instruments risk. 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 | 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, ETFs may be subject to the following: (1) a discount of the ETFs shares to its net asset value; (2) failure to develop an active trading market for the ETFs shares; (3) the listing exchange halting trading of the ETFs shares; (4) failure of the ETFs 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 | Foreign risk. 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 | Forward currency contracts risk. The use of forward contracts involves the risk of mismatching the Fund’s objectives under a forward contract with the value of securities denominated in a particular currency. Furthermore, such transactions reduce or preclude the opportunity for gain if the value of the currency should move in the direction opposite to the position taken. There is an additional risk to the effect that currency contracts create exposure to currencies in which the Fund’s securities are not denominated. Unanticipated changes in currency prices may result in poorer overall performance for the Fund than if it had not entered into such contracts. | |
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. | |
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 | Medium and large-sized companies risk. 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. |
About indexes used in this report
n | The S&P 500® Index is an unmanaged index considered representative of the US 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. | |
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. | |
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). |
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 American Franchise Fund
Schedule of Investments(a)
August 31, 2012
Shares | Value | |||||||
| ||||||||
Common Stocks & Other Equity Interests–99.11% | ||||||||
Aerospace & Defense–1.38% | ||||||||
Boeing Co. (The) | 876,412 | $ | 62,575,817 | |||||
Precision Castparts Corp. | 98,327 | 15,838,513 | ||||||
78,414,330 | ||||||||
Air Freight & Logistics–0.66% | ||||||||
Expeditors International of Washington, Inc. | 1,019,014 | 37,306,102 | ||||||
Apparel Retail–1.24% | ||||||||
Gap, Inc. (The) | 1,971,188 | 70,607,954 | ||||||
Apparel, Accessories & Luxury Goods–1.61% | ||||||||
Coach, Inc. | 507,656 | 29,510,043 | ||||||
Prada S.p.A. (Italy) | 4,534,100 | 35,076,738 | ||||||
Prada S.p.A. (Italy)(b) | 3,450,100 | 26,690,690 | ||||||
91,277,471 | ||||||||
Application Software–3.10% | ||||||||
Autodesk, Inc.(c) | 731,363 | 22,708,821 | ||||||
Citrix Systems, Inc.(c) | 873,173 | 67,836,811 | ||||||
Salesforce.com, Inc.(c) | 586,229 | 85,108,726 | ||||||
175,654,358 | ||||||||
Biotechnology–3.70% | ||||||||
Alexion Pharmaceuticals, Inc.(c) | 106,848 | 11,455,174 | ||||||
Amgen Inc. | 688,892 | 57,811,817 | ||||||
Biogen Idec Inc.(c) | 300,250 | 44,013,647 | ||||||
Celgene Corp.(c) | 453,603 | 32,677,560 | ||||||
Gilead Sciences, Inc.(c) | 1,108,398 | 63,943,481 | ||||||
209,901,679 | ||||||||
Broadcasting–1.25% | ||||||||
CBS Corp.–Class B | 1,946,247 | 70,726,616 | ||||||
Cable & Satellite–4.65% | ||||||||
Comcast Corp.–Class A | 1,643,576 | 55,109,103 | ||||||
DIRECTV(c) | 2,414,407 | 125,766,461 | ||||||
DISH Network Corp.–Class A | 2,600,748 | 83,197,928 | ||||||
264,073,492 | ||||||||
Casinos & Gaming–0.51% | ||||||||
Las Vegas Sands Corp. | 688,570 | 29,188,482 | ||||||
Communications Equipment–3.72% | ||||||||
QUALCOMM, Inc. | 3,432,130 | 210,938,710 | ||||||
Computer Hardware–12.69% | ||||||||
Apple Inc. | 1,082,178 | 719,908,093 | ||||||
Computer Storage & Peripherals–3.80% | ||||||||
EMC Corp.(c) | 8,200,787 | 215,598,690 | ||||||
Construction & Engineering–0.78% | ||||||||
Foster Wheeler AG (Switzerland)(c) | 2,010,493 | 44,029,797 | ||||||
Construction & Farm Machinery & Heavy Trucks–1.73% | ||||||||
Cummins Inc. | 1,011,211 | 98,198,700 | ||||||
Data Processing & Outsourced Services–1.48% | ||||||||
Visa Inc.–Class A | 654,820 | 83,980,665 | ||||||
Department Stores–1.04% | ||||||||
Macy’s, Inc. | 1,459,857 | 58,846,836 | ||||||
Diversified Banks–2.47% | ||||||||
Wells Fargo & Co. | 4,115,554 | 140,052,302 | ||||||
Drug Retail–1.01% | ||||||||
CVS Caremark Corp. | 1,256,389 | 57,228,519 | ||||||
Fertilizers & Agricultural Chemicals–1.77% | ||||||||
Monsanto Co. | 1,150,509 | 100,220,839 | ||||||
General Merchandise Stores–1.36% | ||||||||
Dollar General Corp.(c) | 1,514,495 | 77,345,260 | ||||||
Health Care Equipment–0.64% | ||||||||
Intuitive Surgical, Inc.(c) | 73,596 | 36,193,777 | ||||||
Health Care Services–1.27% | ||||||||
Express Scripts Holding Co.(c) | 1,152,020 | 72,139,492 | ||||||
Health Care Technology–0.32% | ||||||||
Cerner Corp.(c) | 249,707 | 18,263,570 | ||||||
Home Improvement Retail–0.79% | ||||||||
Home Depot, Inc. (The) | 794,889 | 45,109,951 | ||||||
Industrial Conglomerates–3.23% | ||||||||
Danaher Corp. | 1,082,153 | 57,970,936 | ||||||
General Electric Co. | 6,056,843 | 125,437,219 | ||||||
183,408,155 | ||||||||
Industrial Machinery–0.98% | ||||||||
Ingersoll-Rand PLC | 1,187,589 | 55,531,662 | ||||||
Integrated Oil & Gas–3.31% | ||||||||
Occidental Petroleum Corp. | 2,211,577 | 188,006,161 | ||||||
Internet Retail–2.82% | ||||||||
Amazon.com, Inc.(c) | 363,564 | 90,247,492 | ||||||
Priceline.com Inc.(c) | 115,381 | 69,755,891 | ||||||
160,003,383 | ||||||||
Internet Software & Services–6.53% | ||||||||
Baidu, Inc.–ADR (China)(c) | 749,130 | 83,483,047 | ||||||
eBay Inc.(c) | 1,558,224 | 73,968,893 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
9 Invesco American Franchise Fund
Shares | Value | |||||||
Internet Software & Services–(continued) | ||||||||
Facebook Inc.–Class B (Acquired 04/04/12-04/05/12; Cost $48,698,242)(b)(c) | 1,464,275 | $ | 23,826,683 | |||||
Google Inc.–Class A(c) | 276,271 | 189,270,500 | ||||||
370,549,123 | ||||||||
Investment Banking & Brokerage–1.96% | ||||||||
Goldman Sachs Group, Inc. (The) | 1,051,762 | 111,192,279 | ||||||
IT Consulting & Other Services–1.45% | ||||||||
Cognizant Technology Solutions Corp.–Class A(c) | 1,281,730 | 82,389,604 | ||||||
Life Sciences Tools & Services–0.67% | ||||||||
Agilent Technologies, Inc. | 1,028,411 | 38,215,753 | ||||||
Movies & Entertainment–0.74% | ||||||||
Walt Disney Co. (The) | 846,527 | 41,877,691 | ||||||
Oil & Gas Equipment & Services–4.43% | ||||||||
Cameron International Corp.(c) | 424,440 | 23,221,112 | ||||||
National Oilwell Varco Inc. | 74,124 | 5,840,971 | ||||||
Schlumberger Ltd. | 1,309,037 | 94,748,098 | ||||||
Weatherford International Ltd.(c) | 10,827,322 | 127,329,307 | ||||||
251,139,488 | ||||||||
Oil & Gas Exploration & Production–0.30% | ||||||||
Anadarko Petroleum Corp. | 242,538 | 16,800,607 | ||||||
Pharmaceuticals–6.06% | ||||||||
Abbott Laboratories | 1,778,798 | 116,582,421 | ||||||
Allergan, Inc. | 874,294 | 75,302,942 | ||||||
Johnson & Johnson | 802,004 | 54,079,130 | ||||||
Pfizer Inc. | 4,114,876 | 98,180,941 | ||||||
344,145,434 | ||||||||
Property & Casualty Insurance–0.54% | ||||||||
ACE Ltd. | 414,601 | 30,568,532 | ||||||
Railroads–1.13% | ||||||||
Union Pacific Corp. | 529,474 | 64,299,322 | ||||||
Restaurants–2.11% | ||||||||
Chipotle Mexican Grill, Inc.(c) | 115,925 | 33,460,592 | ||||||
Starbucks Corp. | 1,734,934 | 86,070,076 | ||||||
119,530,668 | ||||||||
Semiconductors–1.81% | ||||||||
Broadcom Corp.–Class A(c) | 1,749,559 | 62,161,831 | ||||||
Maxim Integrated Products, Inc. | 1,493,264 | 40,527,185 | ||||||
102,689,016 | ||||||||
Soft Drinks–1.31% | ||||||||
Monster Beverage Corp.(c) | 162,073 | 9,550,962 | ||||||
PepsiCo, Inc. | 892,917 | 64,673,978 | ||||||
74,224,940 | ||||||||
Specialized REIT’s–0.95% | ||||||||
American Tower Corp. | 764,480 | 53,819,392 | ||||||
Systems Software–2.28% | ||||||||
Check Point Software Technologies Ltd. (Israel)(c) | 738,850 | 34,053,597 | ||||||
Microsoft Corp. | 2,632,045 | 81,119,627 | ||||||
Red Hat, Inc.(c) | 197,034 | 11,041,785 | ||||||
Rovi Corp.(c) | 221,692 | 3,400,755 | ||||||
129,615,764 | ||||||||
Tobacco–0.82% | ||||||||
Lorillard, Inc. | 369,166 | 46,334,025 | ||||||
Trucking–0.82% | ||||||||
J.B. Hunt Transport Services, Inc. | 884,245 | 46,369,808 | ||||||
Wireless Telecommunication Services–1.89% | ||||||||
Sprint Nextel Corp.(c) | 22,128,996 | 107,325,630 | ||||||
Total Common Stocks & Other Equity Interests (Cost $4,512,242,472) | 5,623,242,122 | |||||||
Money Market Funds–0.81% | ||||||||
Liquid Assets Portfolio–Institutional Class(d) | 23,104,411 | 23,104,411 | ||||||
Premier Portfolio–Institutional Class(d) | 23,104,411 | 23,104,411 | ||||||
Total Money Market Funds (Cost $46,208,822) | 46,208,822 | |||||||
TOTAL INVESTMENTS–99.92% (Cost $4,558,451,294) | 5,669,450,944 | |||||||
OTHER ASSETS LESS LIABILITIES–0.08% | 4,560,743 | |||||||
NET ASSETS–100.00% | $ | 5,674,011,687 | ||||||
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) | 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, 2012 was $50,517,373, which represented less than 1% of the Fund’s Net Assets. | |
(c) | Non income producing security. | |
(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 American Franchise Fund
Statement of Assets and Liabilities
August 31, 2012
Assets: | ||||
Investments, at value (Cost $4,512,242,472) | $ | 5,623,242,122 | ||
Investments in affiliated money market funds, at value and cost | 46,208,822 | |||
Total investments, at value (Cost $4,558,451,294) | 5,669,450,944 | |||
Receivable for: | ||||
Investments sold | 37,290,882 | |||
Fund shares sold | 1,264,622 | |||
Dividends | 6,497,947 | |||
Fund expenses absorbed | 10,865 | |||
Investment for trustee deferred compensation and retirement plans | 181,719 | |||
Other assets | 43,746 | |||
Total assets | 5,714,740,725 | |||
Liabilities: | ||||
Payable for: | ||||
Investments purchased | 30,022,282 | |||
Fund shares reacquired | 4,931,023 | |||
Accrued fees to affiliates | 4,648,122 | |||
Accrued other operating expenses | 409,947 | |||
Trustee deferred compensation and retirement plans | 717,664 | |||
Total liabilities | 40,729,038 | |||
Net assets applicable to shares outstanding | $ | 5,674,011,687 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 5,137,180,762 | ||
Undistributed net investment income | 2,859,270 | |||
Undistributed net realized gain (loss) | (577,027,995 | ) | ||
Unrealized appreciation | 1,110,999,650 | |||
$ | 5,674,011,687 | |||
Net Assets: | ||||
Class A | $ | 4,728,363,648 | ||
Class B | $ | 273,176,551 | ||
Class C | $ | 252,685,033 | ||
Class R | $ | 18,746,136 | ||
Class Y | $ | 99,757,698 | ||
Institutional Class | $ | 301,282,621 | ||
Shares outstanding, $0.01 par value per share, with an unlimited number of shares authorized: | ||||
Class A | 379,052,476 | |||
Class B | 22,383,644 | |||
Class C | 20,785,239 | |||
Class R | 1,507,966 | |||
Class Y | 7,936,014 | |||
Institutional Class | 24,005,448 | |||
Class A: | ||||
Net asset value per share | $ | 12.47 | ||
Maximum offering price per share (Net asset value of $12.47 divided by 94.50%) | $ | 13.20 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 12.20 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 12.16 | ||
Class R: | ||||
Net asset value and offering price per share | $ | 12.43 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 12.57 | ||
Institutional Class: | ||||
Net asset value and offering price per share | $ | 12.55 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
11 Invesco American Franchise Fund
Statement of Operations
For the year ended August 31, 2012
Investment income: | ||||
Dividends (net of foreign withholding taxes of $188,009) | $ | 57,239,470 | ||
Dividends from affiliated money market funds | 126,474 | |||
Total investment income | 57,365,944 | |||
Expenses: | ||||
Advisory fees | 35,012,732 | |||
Administrative services fees | 667,885 | |||
Custodian fees | 140,873 | |||
Distribution fees: | ||||
Class A | 11,927,070 | |||
Class B | 802,131 | |||
Class C | 2,591,377 | |||
Class R | 92,174 | |||
Transfer agent fees — A, B, C and Y | 15,937,287 | |||
Transfer agent fees — Institutional | 134,910 | |||
Trustees’ and officers’ fees and benefits | 344,135 | |||
Other | 639,591 | |||
Total expenses | 68,290,165 | |||
Less: Fees waived, expenses reimbursed and expense offset arrangement(s) | (7,441,341 | ) | ||
Net expenses | 60,848,824 | |||
Net investment income (loss) | (3,482,880 | ) | ||
Realized and unrealized gain from: | ||||
Net realized gain from: | ||||
Investment securities (includes net gains (losses) from securities sold to affiliates of $(4,949,641)) | 5,582,714 | |||
Foreign currencies | 18,080 | |||
5,600,794 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | 422,425,521 | |||
Foreign currencies | (33,289 | ) | ||
422,392,232 | ||||
Net realized and unrealized gain | 427,993,026 | |||
Net increase in net assets resulting from operations | $ | 424,510,146 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
12 Invesco American Franchise Fund
Statement of Changes in Net Assets
For the years ended August 31, 2012 and 2011
2012 | 2011 | |||||||
Operations: | ||||||||
Net investment income (loss) | $ | (3,482,880 | ) | $ | (8,859,907 | ) | ||
Net realized gain | 5,600,794 | 121,385,964 | ||||||
Change in net unrealized appreciation (depreciation) | 422,392,232 | (601,644,385 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 424,510,146 | (489,118,328 | ) | |||||
Distributions to shareholders from net realized gains: | ||||||||
Class A | (49,936,307 | ) | — | |||||
Class B | (3,657,657 | ) | — | |||||
Class C | (2,792,450 | ) | — | |||||
Class R | (188,148 | ) | — | |||||
Class Y | (1,138,913 | ) | — | |||||
Institutional Class | (2,112,110 | ) | — | |||||
Total distributions from net realized gains | (59,825,585 | ) | — | |||||
Share transactions–net: | ||||||||
Class A | (464,391,426 | ) | 5,136,608,852 | |||||
Class B | (119,780,165 | ) | 381,002,155 | |||||
Class C | (28,808,170 | ) | 261,483,995 | |||||
Class R | (165,660 | ) | 19,367,257 | |||||
Class Y | (23,439,291 | ) | 124,644,695 | |||||
Institutional Class | 79,335,971 | 215,213,465 | ||||||
Net increase (decrease) in net assets resulting from share transactions | (557,248,741 | ) | 6,138,320,419 | |||||
Net increase (decrease) in net assets | (192,564,180 | ) | 5,649,202,091 | |||||
Net assets: | ||||||||
Beginning of year | 5,866,575,867 | 217,373,776 | ||||||
End of year (includes undistributed net investment income (loss) of $2,859,270 and $(486,292), respectively) | $ | 5,674,011,687 | $ | 5,866,575,867 | ||||
Notes to Financial Statements
August 31, 2012
NOTE 1—Significant Accounting Policies
Invesco American Franchise Fund, formerly 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 to Class A shares. 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 to Class A shares. 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 the 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 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. 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 economic 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 declared and paid annually and recorded on the ex-dividend date. The Fund may elect to treat a portion of the proceeds from redemptions as distributions for federal income tax purposes. |
14 Invesco American Franchise 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 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 June 1, 2010, incremental transfer agency fees which were unique to each class of shares 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 the 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. |
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% | ||
Over $10 billion | 0 | .52% | ||
15 Invesco American Franchise 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(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, 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% (after 12b-1fee waivers), 1.80%, 1.30%, 0.80% and 0.80%, 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, including litigation expenses; 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, 2013, 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, 2012, the Adviser waived advisory fees of $181,023 and reimbursed class level expenses of $6,302,697, $423,875, $342,438, $24,354 and $137,356 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, 2012, 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, 2012, 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.
IDI has contractually agreed to limit Rule 12b-1 plan fees on Class B to 0.42% of average daily net assets, through at least June 30, 2013. The Distributor did not waive fees during the period under this expense limitation.
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, 2012, IDI advised the Fund that IDI retained $340,434 in front-end sales commissions from the sale of Class A shares and $5,338, $310,446 and $25,304 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, 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. |
16 Invesco American Franchise Fund
The following is a summary of the tiered valuation input levels, as of August 31, 2012. 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.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 5,583,856,833 | $ | 85,594,111 | $ | — | $ | 5,669,450,944 | ||||||||
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, 2012, the Fund paid legal fees of $913 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, 2012, the Fund engaged in securities purchases of $15,859,801 and securities sales of $8,438,598, which resulted in net realized gains (losses) of $(4,949,641).
NOTE 6—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, 2012, the Fund received credits from these arrangements, which resulted in the reduction of the Fund’s total expenses of $29,598.
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. Such balances, if any at period end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. 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, 2012 and 2011:
2012 | 2011 | |||||||
Long-term capital gain | $ | 59,825,585 | $ | — | ||||
Tax Components of Net Assets at Period-End:
2012 | ||||
Undistributed ordinary income | $ | 2,410,303 | ||
Net unrealized appreciation — investments | 1,084,252,245 | |||
Temporary book/tax differences | (691,699 | ) | ||
Post-October deferrals | (151,327,047 | ) | ||
Capital loss carryforward | (397,812,877 | ) | ||
Shares of beneficial interest | 5,137,180,762 | |||
Total net assets | $ | 5,674,011,687 | ||
17 Invesco 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 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 Regulated Investment Company Modernization Act of 2010 (the “Act”) eliminated the eight-year carryover period for capital losses that arise in taxable years beginning after its enactment date of December 22, 2010. Consequently, these capital losses can be carried forward for an unlimited period. However, capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Additionally, post-enactment capital loss carryovers will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. 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 $149,151,057 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, 2012, which expires as follows:
Capital Loss Carryforward* | ||||||||||||
Expiration | Short-Term | Long-Term | Total | |||||||||
August 31, 2015 | $ | 3,877,696 | $ | — | $ | 3,877,696 | ||||||
August 31, 2016 | 283,431,686 | — | 283,431,686 | |||||||||
August 31, 2018 | 110,503,495 | — | 110,503,495 | |||||||||
Total capital loss carryforward | $ | 397,812,877 | $ | — | $ | 397,812,877 | ||||||
* | 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, 2012 was $5,401,220,288 and $5,825,048,089, 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 | $ | 1,223,671,540 | ||
Aggregate unrealized (depreciation) of investment securities | (139,419,295 | ) | ||
Net unrealized appreciation of investment securities | $ | 1,084,252,245 | ||
Cost of investments for tax purposes is $4,585,198,699. |
NOTE 10—Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of foreign currency transactions and distributions, on August 31, 2012, undistributed net investment income (loss) was increased by $6,828,442, undistributed net realized gain (loss) was decreased by $6,746,047 and shares of beneficial interest was decreased by $82,395. This reclassification had no effect on the net assets of the Fund.
18 Invesco American Franchise Fund
NOTE 11—Share Information
Summary of Share Activity | ||||||||||||||||
Year ended August 31, | ||||||||||||||||
2012(a) | 2011 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Class A | 14,165,188 | $ | 170,566,557 | 15,799,630 | $ | 194,566,281 | ||||||||||
Class B | 226,851 | 2,659,926 | 715,055 | 8,527,696 | ||||||||||||
Class C | 1,717,250 | 19,978,836 | 2,491,661 | 30,223,787 | ||||||||||||
Class R | 402,087 | 4,755,689 | 128,847 | 1,596,002 | ||||||||||||
Class Y | 2,652,299 | 31,747,725 | 4,844,371 | 60,928,311 | ||||||||||||
Institutional Class | 11,756,254 | 134,787,606 | 1,771,287 | 22,307,656 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Class A | 4,169,056 | 47,193,711 | — | — | ||||||||||||
Class B | 322,943 | 3,578,212 | — | — | ||||||||||||
Class C | 231,774 | 2,572,693 | — | — | ||||||||||||
Class R | 16,635 | 188,148 | — | — | ||||||||||||
Class Y | 86,240 | 982,277 | — | — | ||||||||||||
Institutional Class | 185,905 | 2,111,886 | — | — | ||||||||||||
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 | 6,324,818 | 75,981,272 | 2,508,702 | 30,977,368 | ||||||||||||
Class B | (6,303,285 | ) | (75,981,272 | ) | (2,563,046 | ) | (30,977,368 | ) | ||||||||
Reacquired: | ||||||||||||||||
Class A | (63,303,335 | ) | (758,132,966 | ) | (25,492,374 | ) | (311,418,707 | ) | ||||||||
Class B | (4,407,859 | ) | (50,037,031 | ) | (2,034,031 | ) | (24,321,777 | ) | ||||||||
Class C | (4,365,929 | ) | (51,359,699 | ) | (1,944,263 | ) | (23,215,024 | ) | ||||||||
Class R | (422,570 | ) | (5,109,497 | ) | (131,592 | ) | (1,627,614 | ) | ||||||||
Class Y | (4,776,818 | ) | (56,169,293 | ) | (2,560,884 | ) | (31,947,376 | ) | ||||||||
Institutional Class | (4,716,593 | ) | (57,563,521 | ) | (1,000,018 | ) | (12,462,236 | ) | ||||||||
Net increase (decrease) in share activity | (46,039,089 | ) | $ | (557,248,741 | ) | 479,451,210 | $ | 6,138,320,419 | ||||||||
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 24% 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 Fund 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 tax-free 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 $6,617,371,466. |
19 Invesco 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 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
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)(a) | unrealized) | operations | income | gains | distributions | of period | return | (000s omitted) | absorbed | absorbed | net assets | turnover(b) | |||||||||||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/12 | $ | 11.72 | $ | (0.01 | ) | $ | 0.88 | $ | 0.87 | $ | — | $ | (0.12 | ) | $ | (0.12 | ) | $ | 12.47 | 7.55 | (c) | $ | 4,728,364 | 1.05 | %(d) | 1.18 | %(d) | (0.05 | )%(d) | 96 | % | |||||||||||||||||||||||||
Year ended 08/31/11 | 9.79 | (0.05 | ) | 1.98 | 1.93 | — | — | — | 11.72 | 19.71 | (c) | 4,894,163 | 1.06 | 1.17 | (0.43 | ) | 179 | |||||||||||||||||||||||||||||||||||||||
Year ended 08/31/10 | 8.87 | 0.01 | 1.03 | 1.04 | (0.12 | ) | — | (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 | ||||||||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/12 | 11.47 | (0.01 | ) | 0.86 | 0.85 | — | (0.12 | ) | (0.12 | ) | 12.20 | 7.54 | (c)(f) | 273,177 | 1.05 | (d)(f) | 1.18 | (d)(f) | (0.05 | )(d)(f) | 96 | |||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 9.64 | (0.08 | ) | 1.91 | 1.83 | — | — | — | 11.47 | 18.98 | (c)(f) | 373,157 | 1.28 | (f) | 1.65 | (f) | (0.64 | )(f) | 179 | |||||||||||||||||||||||||||||||||||||
Year ended 08/31/10 | 8.75 | (0.06 | ) | 1.01 | 0.95 | (0.06 | ) | — | (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 | ||||||||||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/12 | 11.51 | (0.09 | ) | 0.86 | 0.77 | — | (0.12 | ) | (0.12 | ) | 12.16 | 6.82 | (c) | 252,685 | 1.80 | (d) | 1.93 | (d) | (0.80 | )(d) | 96 | |||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 9.68 | (0.11 | ) | 1.94 | 1.83 | — | — | — | 11.51 | 18.90 | (c)(h) | 266,990 | 1.60 | (h) | 1.71 | (h) | (0.97 | )(h) | 179 | |||||||||||||||||||||||||||||||||||||
Year ended 08/31/10 | 8.76 | (0.05 | ) | 1.03 | 0.98 | (0.06 | ) | — | (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 | |||||||||||||||||||||||||||||||||
Class R | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/12 | 11.71 | (0.04 | ) | 0.88 | 0.84 | — | (0.12 | ) | (0.12 | ) | 12.43 | 7.30 | (c) | 18,746 | 1.30 | (d) | 1.43 | (d) | (0.30 | )(d) | 96 | |||||||||||||||||||||||||||||||||||
Year ended 08/31/11(k) | 12.81 | (0.02 | ) | (1.08 | ) | (1.10 | ) | — | — | — | 11.71 | (8.59 | )(c) | 17,698 | 1.30 | (l) | 1.42 | (l) | (0.66 | )(l) | 179 | |||||||||||||||||||||||||||||||||||
Class Y | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/12 | 11.78 | 0.02 | 0.89 | 0.91 | — | (0.12 | ) | (0.12 | ) | 12.57 | 7.86 | (c) | 99,758 | 0.80 | (d) | 0.93 | (d) | 0.20 | (d) | 96 | ||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 9.83 | (0.02 | ) | 1.97 | 1.95 | — | — | — | 11.78 | 19.84 | (c) | 117,471 | 0.81 | 0.92 | (0.18 | ) | 179 | |||||||||||||||||||||||||||||||||||||||
Year ended 08/31/10 | 8.91 | 0.04 | 1.02 | 1.06 | (0.14 | ) | — | (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 | ||||||||||||||||||||||||||||||||||||
Institutional Class | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/12 | 11.75 | 0.04 | 0.88 | 0.92 | — | (0.12 | ) | (0.12 | ) | 12.55 | 7.96 | (c) | 301,283 | 0.69 | (d) | 0.69 | (d) | 0.31 | (d) | 96 | ||||||||||||||||||||||||||||||||||||
Year ended 08/31/11(k) | 12.07 | (0.00 | ) | (0.32 | ) | (0.32 | ) | — | — | — | 11.75 | (2.65 | )(c) | 197,097 | 0.66 | (l) | 0.66 | (l) | (0.03 | )(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. | |
(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 $4,770,828, $320,852, $259,208, $18,435, $103,972 and $264,026 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 0.25% and 0.47% for the years ended August 31, 2012 and 2011, 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 (loss) to average net assets reflect actual 12b-1 fees of 0.79% and 0.88% for the years 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. |
NOTE 13—Subsequent Event
Effective September 24, 2012, Institutional Class shares were renamed Class R5 shares and the Fund began offering Class R6 shares.
20 Invesco 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 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 American Franchise Fund, (formerly known as 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, 2012, 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 three 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, 2012 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 23, 2012
Houston, Texas
21 Invesco 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. 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, 2012 through August 31, 2012.
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 | (03/01/12) | (08/31/12)1 | Period2 | (08/31/12) | Period2 | Ratio | ||||||||||||||||||||||||
A | $ | 1,000.00 | $ | 982.70 | $ | 5.23 | $ | 1,019.86 | $ | 5.33 | 1.05 | % | ||||||||||||||||||
B | 1,000.00 | 983.10 | 5.23 | 1,019.86 | 5.33 | 1.05 | ||||||||||||||||||||||||
C | 1,000.00 | 979.90 | 8.96 | 1,016.09 | 9.12 | 1.80 | ||||||||||||||||||||||||
R | 1,000.00 | 981.80 | 6.48 | 1,018.60 | 6.60 | 1.30 | ||||||||||||||||||||||||
Y | 1,000.00 | 984.30 | 3.99 | 1,021.11 | 4.06 | 0.80 | ||||||||||||||||||||||||
Institutional | 1,000.00 | 985.10 | 3.49 | 1,021.62 | 3.56 | 0.70 | ||||||||||||||||||||||||
1 | The actual ending account value is based on the actual total return of the Fund for the period March 1, 2012 through August 31, 2012, 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 184/366 to reflect the most recent fiscal half year. |
22 Invesco American Franchise Fund
Approval of Investment Advisory and Sub-Advisory Contracts |
(Formerly Known as Invesco Van Kampen American Franchise Fund)
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 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 19-20, 2012, 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, 2012. 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 primarily 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, 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 and on what terms 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. In addition to meetings with Invesco Advisers and fund 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 independent legal 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 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 previously approved by a different board that, at the time, was responsible for overseeing Morgan Stanley and Van Kampen funds, which have become Invesco Funds following the acquisition of the retail mutual fund business of Morgan Stanley. 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 or factor 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 20, 2012, 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 Sub-Committees 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 prior relationship and 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 consistent 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 consistent 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 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 fifth quintile of the performance universe for the one year period, the fourth quintile for the three year period and the third quintile for the five year
23 Invesco American Franchise Fund
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 presented an analysis to the Board that included an explanation of reasons for differences in performance relative to that of the universe and index, including differences between the Fund’s investment strategies and those of peers. The Board discussed actions that Invesco Advisers had taken or was taking to address performance issues and Invesco Adviser’s resources and responsiveness to performance concerns. These explanations provided a sound basis for understanding comparative performance and monitoring and addressing it going forward, and were part of the Board’s overall conclusion about the nature, extent and quality of the services provided by Invesco Advisers. 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 at 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, 2103 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 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 and were assisted in their review by a report from the Senior Officer. 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. The Board noted that Invesco Advisers proposes sharing economies of scale in administration expenses by lowering per class administrative fees.
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 for the year ended December 31, 2011. 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 Invesco Funds and the Fund. The Board did not deem the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund to be excessive given the nature, quality and extent of the services provided to the Invesco Funds. The Board received and accepted information from Invesco Advisers demonstrating that 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.
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 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 also considered periodic reports from the Chief Compliance Officer of the Invesco Funds demonstrating that these arrangements are consistent with regulatory requirements. The Board did not deem the soft dollar arrangements to be inappropriate.
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.
The Board also considered use of an affiliated broker to execute certain trades for the Fund and that such trades are executed in compliance with rules under the Investment Company Act of 1940, as amended.
24 Invesco American Franchise 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, 2012:
Federal and State Income Tax | ||||
Long-Term Capital Gain Dividends | $ | 59,825,585 |
25 Invesco 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 1000, 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 | Other Directorship(s) | |||||||
Name, Year of Birth and | Trustee and/or | Principal Occupation(s) | Funds in | Held by Trustee During | ||||
Position(s) Held with the Trust | Officer Since | During Past 5 Years | Fund Complex Overseen by Trustee | Past 5 Years | ||||
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 | 129 | 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. | 129 | None | ||||
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. | ||||||||
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 certain funds in the Fund Complex | 147 | Director of the Mutual Fund Directors Forum, a nonprofit membership organization for investment directors; Chairman and Director of the Abraham Lincoln Presidential Library Foundation; and Director of the Stevenson Center for Democracy | ||||
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 is considered an “interested person” (within the meaning of Section 2(a)(19) of the 1940 Act) of certain Funds in the Invesco Fund Complex by reason of he and his firm currently providing legal services as legal counsel to such Funds in the Invesco Fund Complex. |
T-1 Invesco American Franchise Fund
Trustees and Officers—(continued)
Number of | Other Directorship(s) | |||||||
Name, Year of Birth and | Trustee and/or | Principal Occupation(s) | Funds in | Held by Trustee During | ||||
Position(s) Held with the Trust | Officer Since | During Past 5 Years | Fund Complex Overseen by Trustee | Past 5 Years | ||||
Independent Trustees | ||||||||
Bruce L. Crockett — 1944 Trustee and Chair | 2003 | Chairman, Crockett Technologies 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) | 129 | ACE Limited (insurance company); and Investment Company Institute | ||||
David C. Arch — 1945 Trustee | 2010 | Retired. Chairman and Chief Executive Officer of Blistex Inc., a consumer health care products manufacturer | 147 | Member of the Heartland Alliance Advisory Board, a nonprofit organization serving human needs based in Chicago. Board member of the Illinois Manufacturers’ Association. Member of the Board of Visitors, Institute for the Humanities, University of Michigan | ||||
Frank S. Bayley — 1939 Trustee | 2003 | Retired Formerly: Director, Badgley Funds, Inc. (registered investment company) (2 portfolios) and Partner, law firm of Baker & McKenzie | 129 | 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 | 129 | Chairman, Board of Governors, Western Golf Association, Chairman-elect, Evans Scholars Foundation and Director, Denver Film Society | ||||
Rodney F. Dammeyer — 1940 Trustee | 2010 | Chairman of CAC, LLC, a private company offering capital investment and management advisory services Formerly: Prior to January 2004, Director of TeleTech Holdings Inc.; Prior to 2002, Director of Arris Group, Inc.; Prior to 2001, Managing Partner at Equity Group Corporate Investments. Prior to 1995, Vice Chairman of Anixter International. Prior to 1985, experience includes Senior Vice President and Chief Financial Officer of Household International, Inc, Executive Vice President and Chief Financial Officer of Northwest Industries, Inc. and Partner of Arthur Andersen & Co. | 147 | 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) 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) | 129 | Director of Nature’s Sunshine Products, Inc. | ||||
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) Formerly: Chief Executive Officer, Texana Timber LP (sustainable forestry company) and member of the U.S. House of Representatives | 129 | Insperity (formerly known as Administaff) | ||||
Carl Frischling — 1937 Trustee | 2003 | Partner, law firm of Kramer Levin Naftalis and Frankel LLP | 129 | Director, Reich & Tang Funds (6 portfolios) | ||||
Prema Mathai-Davis — 1950 Trustee | 2003 | Retired Formerly: Chief Executive Officer, YWCA of the U.S.A. | 129 | None | ||||
Larry Soll — 1942 Trustee | 1997 | Retired Formerly, Chairman, Chief Executive Officer and President, Synergen Corp. (a biotechnology company) | 129 | None | ||||
T-2 Invesco American Franchise Fund
Trustees and Officers—(continued)
Number of | Other Directorship(s) | |||||||
Name, Year of Birth and | Trustee and/or | Principal Occupation(s) | Funds in | Held by Trustee | ||||
Position(s) Held with the Trust | Officer Since | During Past 5 Years | Fund Complex Overseen by Trustee | During Past 5 Years | ||||
Independent Trustees—(continued) | ||||||||
Hugo F. Sonnenschein — 1940 Trustee | 2010 | Distinguished Service Professor and President Emeritus of the University of Chicago and the Adam Smith Distinguished Service Professor in the Department of Economics at the University of Chicago. Prior to July 2000, President of the University of Chicago | 147 | 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 | 129 | None | ||||
Other Officers | ||||||||
Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer, The 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 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) | N/A | N/A | ||||
Lisa O. Brinkley — 1959 Vice President | 2004 | Global Assurance Officer, Invesco Ltd. and Vice President, The Invesco Funds Formerly: Chief Compliance Officer, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.), Invesco Investment Services, Inc.(formerly known as Invesco Aim Investment Services, 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 | ||||
T-3 Invesco American Franchise Fund
Trustees and Officers—(continued)
Number of | Other Directorship(s) | |||||||
Name, Year of Birth and | Trustee and/or | Principal Occupation(s) | Funds in | Held by Trustee | ||||
Position(s) Held with the Trust | Officer Since | During Past 5 Years | Fund Complex Overseen by Trustee | During Past 5 Years | ||||
Other Officers—(continued) | ||||||||
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., INVESCO Global Asset Management Limited, Invesco Management Company Limited and INVESCO Management S.A.; 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) 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) | 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); and 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 Formerly: Vice President, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc. | N/A | N/A | ||||
Yinka Akinsola — 1977 Anti-Money Laundering Compliance Officer | 2011 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.), Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.), Invesco Management Group, Inc., The Invesco Funds, Invesco Van Kampen Closed-End Funds, Van Kampen Exchange Corp., Van Kampen Funds Inc., PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, and PowerShares Actively Managed Exchange-Traded Fund Trust Formerly: Regulatory Analyst III, Financial Industry Regulatory Authority (FINRA). | N/A | N/A | ||||
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; Vice President, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) and Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.) Formerly: Senior Vice President, Van Kampen Investments Inc.; Senior Vice President and Chief Compliance Officer, Invesco Advisers, Inc. and Invesco Aim Capital Management, Inc.; Chief Compliance Officer, INVESCO Private Capital Investments, Inc. (holding company), Invesco Private Capital, Inc. (registered investment adviser), Invesco Global Asset Management (N.A.), Inc., Invesco Senior Secured Management, Inc. (registered investment adviser) and Van Kampen Investor Services Inc., 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 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 1000 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 1000 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 1000 Houston, TX 77046-1173 | Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
T-4 Invesco 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 shown below.
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, 2012, 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 US 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.
SEC file numbers: 811-09913 and 333-36074 | VK-AMFR-AR-1 | Invesco Distributors, Inc. |
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Annual Report to Shareholders | August 31, 2012 |
Invesco Equity and Income Fund
Effective September 24, 2012, after the close of the reporting period, Invesco Van Kampen Equity and Income Fund was renamed Invesco Equity and Income Fund.
Nasdaq:
A: ACEIX § B: ACEQX § C: ACERX § R: ACESX § Y: ACETX § Institutional: ACEKX
A: ACEIX § B: ACEQX § C: ACERX § R: ACESX § Y: ACETX § Institutional: ACEKX
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 | |
30 | Financial Highlights | |
31 | Auditor’s Report | |
32 | Fund Expenses | |
33 | Approval of Investment Advisory and Sub-Advisory Agreements | |
35 | Tax Information | |
T-1 | Trustees and Officers |
Letters to Shareholders
![(PHOTO OF PHILIP TAYLOR)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8703202.jpg)
Philip Taylor
Dear Shareholders:
This report contains information about your Fund, including a discussion from your portfolio managers about how they managed your Fund – and why it performed as it did – during the reporting period. This report also includes your Fund’s long-term performance and a complete list of your Fund’s investments as of the close of the reporting period. I hope you find this information helpful.
For much of the reporting period, investors’ attention was focused on Europe, where eurozone governments struggled to reduce debt levels, strengthen their banks and stimulate their economies. European leaders disagreed whether the wiser path to restoring the Continent’s economic well-being was more stimulus or greater austerity. In the US, economic data were mixed. Economic growth, while positive, was relatively modest. Corporate earnings, which have grown strongly in recent years, have begun to slow. And job creation has been less robust than hoped. Later in this report, your Fund’s portfolio managers discuss how economic conditions and market trends affected your Fund’s performance.
Economic conditions are always subject to sudden and unexpected change. That’s why you may find it helpful to work with a trusted, experienced financial adviser who understands your unique financial goals, needs and risk tolerances. Financial advisers can provide valuable insight and information, particularly when markets are turbulent, and they can recommend investments appropriate for specific investment goals, such as a child’s college education or your retirement. On a regular basis, a financial adviser also can determine whether your existing investments are still appropriate, given your changing needs, goals and circumstances.
Timely insight and information from many of Invesco’s investment professionals is available at our website, invesco.com/us. We offer in-depth articles, video clips and audio commentaries from many of our portfolio managers and other investment professionals on a wide range of topics of interest to investors: recent economic and market developments; retirement planning; legislative updates from Washington, DC; and general investor education. At invesco.com/us, you also can access information about your Invesco account at any time.
What we mean by Intentional Investing
Intentional InvestingSM is the science and art of investing with purpose, prudence and diligence – and it’s how Invesco’s investment professionals manage your money every day.
This highly disciplined process begins when specialized teams of investment professionals clearly define an investment objective and then establish specific investment strategies to try to achieve that objective. While our investment teams closely monitor economic and market conditions – and issues specific to individual holdings that could affect their value – they maintain a long-term investment perspective. Intentional Investing is also:
n | How we manage and mitigate risk – by embedding risk controls and processes into every aspect of our business; | ||
n | How we create products – by offering a diverse combination of investment strategies and vehicles designed to meet your needs; and | ||
n | How we connect with you, our investors – by communicating clearly, by delivering expert insights from our portfolio managers and other investment professionals, and by providing a website full of tools and articles to help you stay informed. |
As a company, Invesco believes in putting investors first, and that’s why investment management is all we do. Our sole focus on managing your money allows your financial adviser to build a truly diversified investment portfolio of Invesco funds, whatever your investment needs and goals may be – and allows him or her to find appropriate Invesco funds when your circumstances change. Of course, neither Intentional Investing nor diversification can guarantee a profit or protect against loss.
Have a question?
If you have questions about your account, please contact an Invesco client services representative at 800 959 4246. If you have an Invesco-related question or comment, feel free 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/0000950123-12-013037/h87055h8703203.gif)
Philip Taylor
Senior Managing Director, Invesco Ltd.
2 | Invesco Equity and Income Fund |
![(PHOTO OF BRUCE CROCKETT)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8703204.jpg)
Bruce Crockett
Dear Fellow Shareholders:
One of our most important responsibilities as independent Trustees of the Invesco Funds is our annual review of the funds’ advisory and sub-advisory contracts with Invesco. This annual review is required by the Investment Company Act of 1940 and focuses on the nature and quality of the services Invesco has provided as adviser to the Invesco Funds and the reasonableness of the fees that it charges for those services.
In our roles as Trustees, we spend months reviewing thousands of pages of detailed information that we request from Invesco in connection with our annual review. We focus on the quality and costs of the services to be provided by Invesco and its affiliates. Some of the most important things we look at are fund performance, expenses and fees. All of the Trustees have substantial personal investments in the Invesco Funds complex. We’re fund shareholders just like you.
We also use information from many independent sources during the review process, including materials provided by the independent Senior Officer of the Invesco Funds, who reports directly to the independent Trustees. We also meet in private sessions with independent legal counsel and review performance and fee data on the Invesco Funds prepared by Lipper Inc., an independent, third-party firm widely recognized as a leader in its field.
I’m pleased to report that the Invesco Funds Board determined in June that renewing the investment advisory agreement and the sub-advisory contracts with Invesco would serve the best interests of each fund and its shareholders. For more detailed information about our assessment and conclusions with respect to each of the Invesco Funds, visit invesco.com/us, click on the “About Us” section and go to “Legal Information.” Information on the recent investment advisory renewal process can be found by clicking the last item under “Corporate Governance.”
In much the same way we review your fund’s advisory contract each year, it’s a good idea for you to review your own investment plan with your financial adviser on a regular basis. Perhaps you need to reassess your original asset allocation because different investments may grow at varying paces, or perhaps you’re going through a significant life change. Regardless of your situation, a financial adviser can provide guidance and experience to help you reach your financial goals.
As always, please contact me at bruce@brucecrockett.com with any questions or concerns you may have. On behalf of the 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/0000950123-12-013037/h87055h8703205.gif)
Bruce L. Crockett
Independent Chair
Invesco Funds Board of Trustees
Independent Chair
Invesco Funds Board of Trustees
3 | Invesco Equity and Income Fund |
Management’s Discussion of Fund Performance
Performance summary
For the fiscal year ended August 31, 2012, Invesco Equity and Income Fund, at net asset value (NAV), underperformed the Russell 1000 Value Index, the Fund’s broad market index. As the Fund uses a bottom-up stock selection approach, stock selection in various sectors was the primary reason the Fund underperformed the Barclays U.S. Aggregate Index, the Fund’s style-specific index.
Your Fund’s long-term performance appears later in this report.
Fund vs. Indexes
Total returns, 8/31/11 to 8/31/12, 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 | 12.67 | % | ||
Class B Shares | 12.36 | |||
Class C Shares | 11.77 | |||
Class R Shares | 12.23 | |||
Class Y Shares | 12.83 | |||
Institutional Class Shares | 12.96 | |||
Russell 1000 Value Index▼ (Broad Market Index) | 17.30 | |||
Barclays U.S. Government/Credit Index■ (Style-Specific Index) | 6.67 | |||
Source(s): ▼Invesco, Russell via FactSet Research Systems Inc.; ■Lipper Inc.
How we invest
We call our investment philosophy “value with a catalyst.” We believe undervalued companies that 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 undervaluation. 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 prerequisite for 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
As the reporting period began, reports on employment and the economy were mixed at best, and sovereign debt issues abroad weighed heavily on investors. Equity indexes sold off precipitously as the US struggled very publicly to raise the nation’s debt ceiling. As a result, Standard & Poor’s announced the first-ever downgrade to long-term US government debt. Uncertainty created by the downgrade combined with the continuing eurozone debt-crisis saga to reignite global recession fears through October.
As those negative headlines faded during the fall of 2011, signs of muted growth remained. US equity markets rebounded with a nearly uninterrupted rally throughout the winter and into the spring of 2012. In late March, markets paused, and while company earnings still offered more positive surprises than disappointments, confidence began to wane in the absence of new growth drivers. By May, the market went into steady decline as investors grew concerned about the real possibility of a Greek exit from the European Union and the potential collapse of the euro. Economic data and earnings in the US began to show signs of deceleration amid contagion from both European and Asian weakness.
Toward the end of the reporting period, yet another European commitment to a lasting resolution to the economic crisis was coupled with an announcement that funds may be injected directly into large financial institutions. This announcement, along with a ruling by the US Supreme Court upholding the Affordable Care Act, provided some near-term clarity and resulted in risk taking that led the markets modestly higher as the reporting period ended.
All sectors of the Russell 1000 Value Index posted positive returns during the reporting period, with many sectors posting double-digit returns. The only exceptions were the energy and materials
Portfolio Composition
By security type
Common Stocks and Other Equity Interests | 61.0 | % | ||
US Dollar Denominated Bonds and Notes | 22.0 | |||
US Treasury Securities | 8.7 | |||
Preferred Stocks | 2.1 | |||
US Government | ||||
Sponsored Agency Securities | 1.2 | |||
Municipal Obligations | 0.1 | |||
Asset-Backed Securities | 0.1 | |||
Money Market Funds | ||||
Plus Other Assets Less Liabilities | 4.8 |
Top 10 Equity Holdings*
1. | JPMorgan Chase & Co. | 2.9 | % | |||||
2. | General Electric Co. | 2.9 | ||||||
3. | Microsoft Corp. | 1.7 | ||||||
4. | Marsh & McLennan Cos., Inc. | 1.7 | ||||||
5. | eBay Inc. | 1.5 | ||||||
6. | Tyco International Ltd. | 1.5 | ||||||
7. | Pfizer Inc. | 1.4 | ||||||
8. | Merck & Co., Inc. | 1.4 | ||||||
9. | Viacom Inc.-Class B | 1.4 | ||||||
10. | Vodafone Group PLC-ADR | 1.4 |
Total Net Assets | $10.6 billion | |||
Total Number of Holdings* | 400 |
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 Equity and Income Fund |
sectors, which posted positive single-digit performance.
Strong stock selection within the industrials sector was the largest relative contributor to Fund performance versus the Russell 1000 Value Index. General Electric and Ingersoll-Rand were two top contributors within the sector, benefiting from late-cycle business. GE’s order growth increased on the industrial side due to demand for infrastructure upgrades. Ingersoll-Rand purchased heating and air conditioning company Trane in late 2007, and heating, ventilation and air conditioning upgrades in commercial and residential real estate have been a big boost to the company’s earnings.
Also, strong stock selection within the consumer discretionary sector provided a boost to relative performance. Specifically, media stocks Comcast, Time Warner and Time Warner Cable were top contributors, as effective capital deployment through stock buybacks and/or dividend increases was reflected in improved financials toward the end of the reporting period.
Strong stock selection in the materials sector was another driver of relative performance versus the Russell 1000 Value Index. Notably, paint and glass company PPG Industries was a top contributor within this sector, as the company saw increased demand from residential home improvement and commercial real estate.
Stock selection within the information technology, financials and health care sectors, along with an underweight to the utilities sector versus the Russell 1000 Value Index, also contributed to relative performance.
The largest detractor from Fund performance during the reporting period was stock selection in the consumer staples sector. Avon Products was a clear detractor within this sector because the stock, which was not held in the Russell 1000 Value Index, performed poorly for the reporting period. The stock price experienced double-digit losses during the period, as Avon announced in December 2011 that it would search for a replacement chief executive officer in 2012. Also, toward the end of the reporting period, investors were disappointed that Avon rejected an acquisition offer from Coty (not a Fund holding). We continued to review Avon to ensure this holding met our fundamental and valuation criteria.
Stock selection in the energy sector also negatively affected the Fund’s relative performance. More specifically, holdings in the exploration and production and oil and gas equipment service industries
were the largest detractors, as the price of oil declined during the reporting period. Notably, Hess, Anadarko Petroleum, Baker Hughes and Schlumberger performed poorly during the year, with their stock prices producing double-digit losses. We sold our positions in Hess and Schlumberger during the reporting period.
Finally, stock selection and an underweight position in telecommunication services stocks versus the benchmark also hurt relative performance. This was the best-performing sector within the Russell 1000 Value Index. Not owning AT&T, which performed very well during the reporting period, was the main driver of underperformance versus the benchmark in this sector.
The Fund’s allocation to investment grade corporate, government agency and US Treasury bonds was not only a valuable source of income, but also helped mitigate overall portfolio volatility and provided an absolute total return of more than 5% for the reporting period. Nevertheless, this bond allocation detracted from relative performance versus the Russell 1000 Value Index, as bonds generally underperformed equities during the reporting period. The Fund’s allocation to convertible bonds also provided positive absolute returns while detracting from relative performance, as convertible bonds also underperformed the Russell 1000 Value Index during the reporting period.
We used currency-forward contracts during the reporting period for the purpose of hedging currency exposure of non-US-based companies held in the Fund. The derivatives were used for the purpose of hedging, not for speculative purposes or leverage. The use of currency-forward contracts had a slight positive impact on the Fund’s performance relative to the Russell 1000 Value Index for the reporting period.
Equity markets experienced continued volatility during the reporting period. We believe that market volatility, coupled with the market correction that began in the third quarter of 2011 and continued into the second quarter of 2012, created opportunities to invest in companies with attractive valuations and strong fundamentals. We believe that ultimately those valuations and fundamentals will be reflected in those companies’ stock prices.
Thank you for your investment in Invesco Equity and Income Fund and for sharing our long-term investment horizon.
continued on page 6
![(PHOTO OF THOMAS BASTIAN)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8703206.jpg)
Thomas Bastian
Chartered Financial Analyst, portfolio manager, is lead manager of Invesco Equity and Income Fund. He joined Invesco in 2010. Mr. Bastian earned a BA in accounting from St. John’s University and an MBA in finance from the University of Michigan.
![(PHOTO OF CHUCK BURGE)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8703207.jpg)
Chuck Burge
Portfolio manager, is manager of Invesco Equity and Income Fund. He joined Invesco in 2002. Mr. Burge earned a BS in economics from Texas A&M University and an MBA in finance and accounting from Rice University.
![(PHOTO OF MARK LASKIN)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8703208.jpg)
Mark Laskin
Chartered Financial Analyst, portfolio manager, is manager of Invesco Equity and Income Fund. He joined Invesco in 2010. Mr. Laskin earned a BA in history from Swarthmore College. He also earned an MBA from the Wharton School and an MA from the Joseph H. Lauder Institute of Management and International Studies, both of the University of Pennsylvania.
![(PHOTO OF MARY JAYNE MALY)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8703209.jpg)
Mary Jayne Maly
Chartered Financial Analyst, portfolio manager, is manager of Invesco Equity and Income Fund. She joined Invesco in 2010. Ms. Maly earned a BA from the University of Pittsburgh and an MBA from the Thunderbird School of Global Management.
![(PHOTO OF SERGIO MARCHELI)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8703210.jpg)
Sergio Marcheli
Portfolio manager, is manager of Invesco Equity and Income Fund. He joined Invesco in 2010. Mr. Marcheli earned a BBA from the University of Houston and an MBA from the University of St. Thomas.
![(PHOTO OF JAMES ROEDER)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8703211.jpg)
James Roeder
Chartered Financial Analyst, portfolio manager, is manager of Invesco Equity and Income Fund. He joined Invesco in 2010. Mr. Roeder earned a BS in accounting from Clemson University and an MBA in economics and finance from the University of Chicago Booth School of Business.
5 | Invesco Equity and Income Fund |
Your Fund’s Long-Term Performance
Results of a $10,000 Investment – Oldest Share Class(es)
Fund and index data from 8/31/02
![(PERFORMANCE CHART)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8703212.gif)
1 Source: Invesco, Russell via FactSet Research Systems Inc.
2 Source: Lipper Inc.
2 Source: 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. 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 5
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.
continued from page 8
n | Value investing risk. 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. |
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 U.S. Government/ Credit Index is an unmanaged index comprising public obligations of the US Treasury with remaining maturities of more than one year, and government-related and corporate issues. |
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 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 Equity and Income Fund |
Average Annual Total Returns
As of 8/31/12, including maximum applicable sales charges
Class A Shares | ||||||||
Inception (8/3/60) | 10.08 | % | ||||||
10 | Years | 6.11 | ||||||
5 | Years | 1.31 | ||||||
1 | Year | 6.43 | ||||||
Class B Shares | ||||||||
Inception (5/1/92) | 9.18 | % | ||||||
10 | Years | 6.31 | ||||||
5 | Years | 2.00 | ||||||
1 | Year | 7.36 | ||||||
Class C Shares | ||||||||
Inception (7/6/93) | 8.42 | % | ||||||
10 | Years | 5.93 | ||||||
5 | Years | 1.70 | ||||||
1 | Year | 10.77 | ||||||
Class R Shares | ||||||||
Inception (10/1/02) | 7.03 | % | ||||||
5 | Years | 2.18 | ||||||
1 | Year | 12.23 | ||||||
Class Y Shares | ||||||||
Inception (12/22/04) | 4.96 | % | ||||||
5 | Years | 2.69 | ||||||
1 | Year | 12.83 | ||||||
Institutional Class Shares | ||||||||
10 | Years | 6.79 | % | |||||
5 | Years | 2.62 | ||||||
1 | Year | 12.96 |
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 (renamed Invesco 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.
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.
Average Annual Total Returns
As of 6/30/12, the most recent calendar quarter- end, including maximum applicable sales charges
Class A Shares | ||||||||
Inception (8/3/60) | 10.06 | % | ||||||
10 | Years | 5.29 | ||||||
5 | Years | 0.32 | ||||||
1 | Year | -4.44 | ||||||
Class B Shares | ||||||||
Inception (5/1/92) | 9.11 | % | ||||||
10 | Years | 5.45 | ||||||
5 | Years | 1.01 | ||||||
1 | Year | -3.93 | ||||||
Class C Shares | ||||||||
Inception (7/6/93) | 8.35 | % | ||||||
10 | Years | 5.09 | ||||||
5 | Years | 0.69 | ||||||
1 | Year | -0.68 | ||||||
Class R Shares | ||||||||
Inception (10/1/02) | 6.87 | % | ||||||
5 | Years | 1.20 | ||||||
1 | Year | 0.93 | ||||||
Class Y Shares | ||||||||
Inception (12/22/04) | 4.69 | % | ||||||
5 | Years | 1.71 | ||||||
1 | Year | 1.43 | ||||||
Institutional Class Shares | ||||||||
10 | Years | 5.96 | % | |||||
5 | Years | 1.62 | ||||||
1 | Year | 1.55 |
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 0.81%, 1.56%, 1.53%, 1.06%, 0.56% and 0.39%, 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.
7 | Invesco Equity and Income Fund |
Invesco 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, 2012, 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 for new or additional investments. Existing shareholders of Class B shares may continue to reinvest dividends and capital gains distributions in Class B shares and exchange their Class B shares for Class B shares of other funds. 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 | 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 | Derivatives risk. 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 | Foreign risk. 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 | Forward-currency contracts risk. The use of forward contracts involves the risk of mismatching the Fund’s objectives under a forward contract with the value of securities denominated in a particular currency. Furthermore, such transactions reduce or preclude the opportunity for gain if the value of the currency should move in the direction opposite to the position taken. There is an additional risk to the effect that currency contracts create exposure to currencies in which the Fund’s securities are not denominated. Unanticipated changes in currency prices may result in poorer overall performance for the Fund than if it had not entered into such contracts. |
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 | 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 | Investing in real estate investment trusts (REITs) risk. 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 be less diversified, may have lower trading volume and may be subject to more abrupt or erratic price movements than the overall securities markets. |
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 | 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. |
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 | ACEIX | |||
Class B Shares | ACEQX | |||
Class C Shares | ACERX | |||
Class R Shares | ACESX | |||
Class Y Shares | ACETX | |||
Institutional Class Shares | ACEKX |
8 | Invesco Equity and Income Fund |
Schedule of Investments(a)
August 31, 2012
Shares | Value | |||||||
Common Stocks & Other Equity Interests–61.02% | ||||||||
Agricultural Products–0.71% | ||||||||
Archer-Daniels-Midland Co. | 2,814,186 | $ | 75,279,475 | |||||
Asset Management & Custody Banks–1.19% | ||||||||
Northern Trust Corp. | 1,334,689 | 61,982,957 | ||||||
State Street Corp. | 1,528,789 | 63,597,623 | ||||||
125,580,580 | ||||||||
Biotechnology–0.26% | ||||||||
Amgen Inc. | 326,618 | 27,409,783 | ||||||
Cable & Satellite–2.72% | ||||||||
Comcast Corp.–Class A | 4,283,545 | 143,627,264 | ||||||
Time Warner Cable Inc. | 1,623,754 | 144,221,830 | ||||||
287,849,094 | ||||||||
Communications Equipment–0.33% | ||||||||
Juniper Networks, Inc.(b) | 1,976,390 | 34,468,242 | ||||||
Data Processing & Outsourced Services–0.62% | ||||||||
Western Union Co. (The) | 3,754,860 | 66,123,085 | ||||||
Department Stores–0.55% | ||||||||
Kohl’s Corp. | 1,124,938 | 58,721,764 | ||||||
Diversified Banks–1.76% | ||||||||
Comerica Inc. | 1,661,067 | 51,011,367 | ||||||
U.S. Bancorp | 1,274,404 | 42,577,838 | ||||||
Wells Fargo & Co. | 2,725,860 | 92,761,016 | ||||||
186,350,221 | ||||||||
Diversified Chemicals–0.70% | ||||||||
PPG Industries, Inc. | 668,805 | 73,581,926 | ||||||
Diversified Support Services–0.52% | ||||||||
Cintas Corp. | 1,370,061 | 55,377,866 | ||||||
Drug Retail–0.42% | ||||||||
Walgreen Co. | 1,242,411 | 44,428,617 | ||||||
Electric Utilities–1.84% | ||||||||
Edison International | 1,237,742 | 54,200,722 | ||||||
Entergy Corp. | 594,317 | 40,461,101 | ||||||
FirstEnergy Corp. | 1,183,889 | 51,735,949 | ||||||
Pinnacle West Capital Corp. | 949,985 | 48,800,730 | ||||||
195,198,502 | ||||||||
Food Distributors–0.74% | ||||||||
Sysco Corp. | 2,599,231 | 78,756,699 | ||||||
Health Care Equipment–1.24% | ||||||||
Medtronic, Inc. | 3,230,199 | 131,339,891 | ||||||
Home Improvement Retail–0.91% | ||||||||
Home Depot, Inc. (The) | 1,690,910 | 95,959,142 | ||||||
Hotels, Resorts & Cruise Lines–0.69% | ||||||||
Carnival Corp. | 2,120,736 | 73,547,124 | ||||||
Household Products–1.63% | ||||||||
Energizer Holdings, Inc. | 610,234 | 42,045,122 | ||||||
Procter & Gamble Co. (The) | 1,950,104 | 131,027,488 | ||||||
173,072,610 | ||||||||
Industrial Conglomerates–4.43% | ||||||||
General Electric Co. | 15,027,652 | 311,222,673 | ||||||
Tyco International Ltd. | 2,811,992 | 158,540,109 | ||||||
469,762,782 | ||||||||
Industrial Machinery–0.86% | ||||||||
Ingersoll-Rand PLC | 1,957,960 | 91,554,210 | ||||||
Insurance Brokers–2.64% | ||||||||
Aon PLC | 1,176,566 | 61,134,369 | ||||||
Marsh & McLennan Cos., Inc. | 5,122,433 | 175,033,536 | ||||||
Willis Group Holdings PLC | 1,172,898 | 43,772,553 | ||||||
279,940,458 | ||||||||
Integrated Oil & Gas–2.60% | ||||||||
Chevron Corp. | 1,258,234 | 141,123,525 | ||||||
Exxon Mobil Corp. | 1,149,904 | 100,386,619 | ||||||
Occidental Petroleum Corp. | 400,361 | 34,034,689 | ||||||
275,544,833 | ||||||||
Integrated Telecommunication Services–0.63% | ||||||||
Verizon Communications Inc. | 1,560,086 | 66,990,093 | ||||||
Internet Software & Services–1.50% | ||||||||
eBay Inc.(b) | 3,356,453 | 159,330,824 | ||||||
Investment Banking & Brokerage–0.94% | ||||||||
Charles Schwab Corp. (The) | 5,497,150 | 74,156,553 | ||||||
Morgan Stanley | 1,714,992 | 25,724,880 | ||||||
99,881,433 | ||||||||
Investment Companies–Exchange Traded Funds–0.27% | ||||||||
SPDR® S&P Homebuilders ETF | 1,231,600 | 29,053,444 | ||||||
IT Consulting & Other Services–0.77% | ||||||||
Amdocs Ltd.(b) | 2,541,784 | 81,947,116 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
9 Invesco Equity and Income Fund
Shares | Value | |||||||
Managed Health Care–1.95% | ||||||||
Cigna Corp. | 1,190,676 | $ | 54,497,241 | |||||
UnitedHealth Group Inc. | 1,981,252 | 107,581,984 | ||||||
WellPoint, Inc. | 743,497 | 44,513,165 | ||||||
206,592,390 | ||||||||
Movies & Entertainment–2.42% | ||||||||
Time Warner Inc. | 2,571,132 | 106,830,534 | ||||||
Viacom Inc.–Class B | 2,987,281 | 149,393,923 | ||||||
256,224,457 | ||||||||
Oil & Gas Equipment & Services–0.85% | ||||||||
Baker Hughes Inc. | 1,164,366 | 53,095,089 | ||||||
Halliburton Co. | 1,113,188 | 36,468,039 | ||||||
89,563,128 | ||||||||
Oil & Gas Exploration & Production–2.19% | ||||||||
Anadarko Petroleum Corp. | 1,886,431 | 130,673,076 | ||||||
ConocoPhillips | 734,851 | 41,732,188 | ||||||
Devon Energy Corp. | 905,676 | 52,375,243 | ||||||
WPX Energy Inc.(b) | 489,550 | 7,636,980 | ||||||
232,417,487 | ||||||||
Oil & Gas Storage & Transportation–0.66% | ||||||||
Williams Cos., Inc. (The) | 2,172,415 | 70,103,832 | ||||||
Other Diversified Financial Services–4.22% | ||||||||
Citigroup Inc. | 4,551,302 | 135,219,183 | ||||||
JPMorgan Chase & Co. | 8,396,580 | 311,848,981 | ||||||
447,068,164 | ||||||||
Packaged Foods & Meats–1.70% | ||||||||
Kraft Foods Inc.–Class A | 1,768,381 | 73,440,863 | ||||||
Unilever N.V.–New York Shares (Netherlands) | 3,054,144 | 106,223,128 | ||||||
179,663,991 | ||||||||
Personal Products–1.10% | ||||||||
Avon Products, Inc. | 7,573,086 | 117,004,179 | ||||||
Pharmaceuticals–5.13% | ||||||||
Bristol-Myers Squibb Co. | 3,530,687 | 116,547,978 | ||||||
Eli Lilly & Co. | 1,170,132 | 52,550,628 | ||||||
Hospira, Inc.(b) | 605,915 | 20,346,626 | ||||||
Merck & Co., Inc. | 3,536,585 | 152,249,984 | ||||||
Novartis AG (Switzerland) | 700,769 | 41,297,283 | ||||||
Novartis AG–ADR (Switzerland) | 123,639 | 7,295,937 | ||||||
Pfizer Inc. | 6,435,853 | 153,559,453 | ||||||
543,847,889 | ||||||||
Property & Casualty Insurance–0.53% | ||||||||
Chubb Corp. (The) | 763,965 | 56,449,374 | ||||||
Regional Banks–2.65% | ||||||||
BB&T Corp. | 2,360,045 | 74,435,819 | ||||||
Fifth Third Bancorp | 4,045,596 | 61,250,324 | ||||||
PNC Financial Services Group, Inc. | 2,337,988 | 145,329,334 | ||||||
281,015,477 | ||||||||
Semiconductor Equipment–0.57% | ||||||||
Applied Materials, Inc. | 5,178,777 | 60,539,903 | ||||||
Semiconductors–0.59% | ||||||||
Intel Corp. | 2,514,879 | 62,444,446 | ||||||
Soft Drinks–1.86% | ||||||||
Coca-Cola Co. (The) | 1,356,054 | 50,716,419 | ||||||
PepsiCo, Inc. | 2,022,988 | 146,525,021 | ||||||
197,241,440 | ||||||||
Systems Software–1.74% | ||||||||
Microsoft Corp. | 5,969,785 | 183,988,774 | ||||||
Wireless Telecommunication Services–1.39% | ||||||||
Vodafone Group PLC–ADR (United Kingdom) | 5,094,723 | 147,339,389 | ||||||
Total Common Stocks & Other Equity Interests (Cost $5,718,740,918) | 6,468,554,134 | |||||||
Principal | ||||||||
Amount | ||||||||
U.S. Dollar Denominated Bonds and Notes–22.02% | ||||||||
Advertising–0.03% | ||||||||
WPP Finance (United Kingdom), Sr. Unsec. Gtd. Global Notes, 8.00%, 09/15/14 | $ | 3,225,000 | 3,624,045 | |||||
Aerospace & Defense–0.03% | ||||||||
Raytheon Co., Sr. Unsec. Notes, 1.63%, 10/15/15 | 2,910,000 | 2,988,580 | ||||||
Agricultural Products–0.07% | ||||||||
Ingredion Inc., Sr. Unsec. Notes, | ||||||||
4.63%, 11/01/20 | 1,875,000 | 2,063,617 | ||||||
6.63%, 04/15/37 | 3,940,000 | 4,978,871 | ||||||
7,042,488 | ||||||||
Airlines–0.13% | ||||||||
Continental Airlines Pass Through Trust, | ||||||||
Series 2010-1, Class A, Sec. Pass Through Ctfs., | ||||||||
4.75%, 01/12/21 | 4,623,797 | 4,941,683 | ||||||
Series 2012-1, Class A, Sec. Pass Through Ctfs., | ||||||||
4.15%, 04/11/24 | 5,750,000 | 5,818,281 | ||||||
Delta Air Lines Pass Through Trust–Series 2010-1, Class A, Sec. Pass Through Ctfs., 6.20%, 07/02/18 | 2,811,770 | 3,085,917 | ||||||
13,845,881 | ||||||||
Airport Services–0.06% | ||||||||
BAA Funding Ltd. (United Kingdom), Sr. Sec. Notes, 2.50%, 06/25/15(c) | 6,220,000 | 6,346,768 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
10 Invesco Equity and Income Fund
Principal | ||||||||
Amount | Value | |||||||
Alternative Carriers–0.15% | ||||||||
tw telecom inc., Sr. Unsec. Conv. Deb., 2.38%, 04/01/13(d) | $ | 11,720,000 | $ | 16,202,900 | ||||
Asset Management & Custody Banks–0.41% | ||||||||
Affiliated Managers Group, Inc., Sr. Unsec. Conv. Notes, 3.95%, 08/15/13(d) | 39,246,000 | 43,464,945 | ||||||
Automobile Manufacturers–0.15% | ||||||||
Daimler Finance North America LLC (Germany), Sr. Unsec. Gtd. Notes, 1.88%, 09/15/14(c) | 10,880,000 | 10,987,285 | ||||||
Ford Motor Credit Co. LLC., Sr. Global Notes, 2.50%, 01/15/16 | 4,970,000 | 4,977,023 | ||||||
15,964,308 | ||||||||
Automotive Retail–0.16% | ||||||||
Advance Auto Parts, Inc., Sr. Unsec. Gtd. Notes, 5.75%, 05/01/20 | 9,195,000 | 10,560,305 | ||||||
AutoZone, Inc., Sr. Unsec. Global Notes, 6.50%, 01/15/14 | 5,400,000 | 5,795,207 | ||||||
Sr. Unsec. Notes, 5.88%, 10/15/12 | 1,040,000 | 1,046,405 | ||||||
17,401,917 | ||||||||
Biotechnology–1.08% | ||||||||
Dendreon Corp., Sr. Unsec. Conv. Notes, 2.88%, 01/15/16 | 20,646,000 | 13,677,975 | ||||||
Gilead Sciences Inc.–Series D, Sr. Unsec. Conv. Notes, 1.63%, 05/01/16 | 41,411,000 | 58,648,329 | ||||||
Vertex Pharmaceuticals Inc., Sr. Unsec. Sub. Conv. Notes, 3.35%, 10/01/15 | 33,044,000 | 41,676,745 | ||||||
114,003,049 | ||||||||
Brewers–0.18% | ||||||||
Anheuser-Busch InBev Worldwide, Inc. (Belgium), Sr. Unsec. Gtd. Global Notes, | ||||||||
3.63%, 04/15/15 | 6,145,000 | 6,619,293 | ||||||
0.80%, 07/15/15 | 3,745,000 | 3,769,527 | ||||||
5.38%, 01/15/20 | 950,000 | 1,166,086 | ||||||
FBG Financial Ltd. (Australia), Sr. Unsec. Gtd. Notes, 5.13%, 06/15/15(c) | 6,965,000 | 7,545,884 | ||||||
19,100,790 | ||||||||
Broadcasting–0.11% | ||||||||
COX Communications Inc., | ||||||||
Sr. Unsec. Global Notes, 5.45%, 12/15/14 | 400,000 | 440,891 | ||||||
Sr. Unsec. Notes, | ||||||||
6.25%, 06/01/18(c) | 3,700,000 | 4,425,567 | ||||||
8.38%, 03/01/39(c) | 655,000 | 991,471 | ||||||
Sr. Unsec. Notes, 7.25%, 11/15/15 | 5,000,000 | 5,812,883 | ||||||
11,670,812 | ||||||||
Cable & Satellite–0.53% | ||||||||
Comcast Corp., | ||||||||
Sr. Unsec. Gtd. Global Notes, 5.70%, 05/15/18 | 4,735,000 | 5,745,879 | ||||||
Sr. Unsec. Gtd. Notes, 6.45%, 03/15/37 | 2,465,000 | 3,191,810 | ||||||
DIRECTV Holdings LLC/DIRECTV Financing Co., Inc., Sr. Unsec. Gtd. Global Notes, | ||||||||
2.40%, 03/15/17 | 2,910,000 | 3,000,710 | ||||||
5.15%, 03/15/42 | 4,730,000 | 4,863,533 | ||||||
NBC Universal Media LLC, Sr. Unsec. Global Notes, | ||||||||
2.10%, 04/01/14 | 3,425,000 | 3,500,659 | ||||||
5.15%, 04/30/20 | 3,320,000 | 3,921,226 | ||||||
5.95%, 04/01/41 | 3,365,000 | 4,200,653 | ||||||
Time Warner Cable, Inc., Sr. Unsec. Gtd. Notes, 5.88%, 11/15/40 | 7,235,000 | 8,631,253 | ||||||
Virgin Media Secured Finance PLC (United Kingdom), Sr. Sec. Gtd. Global Notes, 6.50%, 01/15/18 | 17,130,000 | 18,893,198 | ||||||
55,948,921 | ||||||||
Casinos & Gaming–0.98% | ||||||||
International Game Technology, Sr. Unsec. Conv. Notes, 3.25%, 05/01/14 | 38,202,000 | 40,064,347 | ||||||
MGM Resorts International, Sr. Unsec. Gtd. Conv. Notes, 4.25%, 04/15/15 | 63,088,000 | 63,876,600 | ||||||
103,940,947 | ||||||||
Communications Equipment–0.30% | ||||||||
Ciena Corp., Sr. Unsec. Conv. Notes, 4.00%, 03/15/15(c) | 29,353,000 | 31,444,401 | ||||||
Computer & Electronics Retail–0.02% | ||||||||
Best Buy Co., Inc., Sr. Unsec. Notes, 5.50%, 03/15/21 | 2,139,000 | 1,931,784 | ||||||
Computer Hardware–0.05% | ||||||||
Hewlett-Packard Co., Sr. Unsec. Global Notes, 2.63%, 12/09/14 | 5,620,000 | 5,800,811 | ||||||
Computer Storage & Peripherals–1.62% | ||||||||
SanDisk Corp., Sr. Unsec. Conv. Notes, | ||||||||
1.00%, 05/15/13 | 94,995,000 | 94,282,537 | ||||||
1.50%, 08/15/17 | 69,333,000 | 77,132,963 | ||||||
171,415,500 | ||||||||
�� | ||||||||
Construction & Farm Machinery & Heavy Trucks–0.14% | ||||||||
Deere & Co., Sr. Unsec. Notes, 2.60%, 06/08/22 | 14,645,000 | 15,128,634 | ||||||
Construction Materials–0.53% | ||||||||
Cemex S.A.B. de C.V. (Mexico), Unsec. Sub. Conv. Notes, 4.88%, 03/15/15 | 60,100,000 | 56,343,750 | ||||||
Consumer Finance–0.08% | ||||||||
American Express Credit Corp.–Series C, Sr. Unsec. Medium-Term Global Notes, 7.30%, 08/20/13 | 7,230,000 | 7,689,444 | ||||||
Capital One Financial Corp., Sr. Unsec. Notes, 6.75%, 09/15/17 | 220,000 | 269,142 | ||||||
7,958,586 | ||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
11 Invesco Equity and Income Fund
Principal | ||||||||
Amount | Value | |||||||
Diversified Banks–1.91% | ||||||||
Abbey National Treasury Services PLC (United Kingdom), | ||||||||
Sr. Unsec. Gtd. Global Notes, 2.88%, 04/25/14 | $ | 2,560,000 | $ | 2,571,455 | ||||
Sr. Unsec. Gtd. Medium-Term Euro Notes, 3.88%, 11/10/14(c) | 9,000,000 | 9,075,078 | ||||||
Ally Financial, Inc., Gtd. Notes, 2.20%, 12/19/12 | 11,750,000 | 11,818,374 | ||||||
Bank of Nova Scotia (Canada), Sr. Unsec. Global Notes, 2.38%, 12/17/13 | 6,110,000 | 6,261,282 | ||||||
Barclays Bank PLC (United Kingdom), Sr. Unsec. Global Notes, | ||||||||
2.75%, 02/23/15 | 2,535,000 | 2,578,178 | ||||||
6.75%, 05/22/19 | 8,500,000 | 10,011,044 | ||||||
Unsec. Sub. Global Notes, 5.14%, 10/14/20 | 5,015,000 | 5,105,549 | ||||||
BPCE S.A. (France), Sr. Unsec. Notes, 2.38%, 10/04/13(c) | 7,025,000 | 7,039,974 | ||||||
Citibank N.A., Sr. Unsec. Gtd. Notes, 1.75%, 12/28/12 | 18,400,000 | 18,485,962 | ||||||
Danske Bank A/S (Denmark), Sr. Unsec. Notes, 3.88%, 04/14/16(c) | 9,435,000 | 9,701,704 | ||||||
HBOS PLC (United Kingdom)–Series G, Unsec. Sub. Medium-Term Notes, 6.75%, 05/21/18(c) | 8,535,000 | 8,413,193 | ||||||
HSBC Bank PLC (United Kingdom), Sr. Unsec. Notes, 4.13%, 08/12/20(c) | 8,540,000 | 9,065,543 | ||||||
HSBC Finance Corp., Sr. Unsec. Sub. Global Notes, 6.68%, 01/15/21 | 828,000 | 944,769 | ||||||
ING Bank N.V. (Netherlands), Sr. Unsec. Notes, 2.00%, 10/18/13(c) | 4,500,000 | 4,503,667 | ||||||
Unsec. Notes, 3.75%, 03/07/17(c) | 9,590,000 | 9,976,824 | ||||||
Korea Development Bank (The) (South Korea), Sr. Unsec. Global Notes, 4.38%, 08/10/15 | 3,460,000 | 3,730,486 | ||||||
National Australia Bank Ltd. (Australia), Sr. Unsec. Bonds, 3.75%, 03/02/15(c) | 3,390,000 | 3,589,198 | ||||||
Nordea Bank AB (Sweden), Sr. Unsec. Notes, 4.88%, 01/27/20(c) | 4,495,000 | 4,993,946 | ||||||
Series 2, Sr. Unsec. Notes, 3.70%, 11/13/14(c) | 880,000 | 923,101 | ||||||
Rabobank Nederland N.V. (Netherlands), Sr. Unsec. Medium-Term Global Notes, 4.75%, 01/15/20(c) | 9,100,000 | 9,932,492 | ||||||
Royal Bank of Scotland PLC (The) (United Kingdom), Sr. Unsec. Gtd. Global Notes, 4.88%, 03/16/15 | 8,215,000 | 8,722,525 | ||||||
Santander U.S. Debt S.A. Unipersonal (Spain), Sr. Unsec. Gtd. Notes, 3.72%, 01/20/15(c) | 3,200,000 | 3,042,115 | ||||||
Societe Generale S.A. (France), Sr. Unsec. Notes, 2.50%, 01/15/14(c) | 11,940,000 | 11,855,490 | ||||||
Standard Chartered PLC (Hong Kong), Sr. Unsec. Notes, | ||||||||
5.50%, 11/18/14(c) | 1,140,000 | 1,215,865 | ||||||
3.85%, 04/27/15(c) | 4,190,000 | 4,361,482 | ||||||
U.S. Bancorp., Sr. Unsec. Notes, 2.00%, 06/14/13 | 8,165,000 | 8,270,587 | ||||||
U.S. Bank N.A., Sub. Notes, 3.78%, 04/29/20 | 8,200,000 | 8,727,023 | ||||||
Wells Fargo & Co., Sr. Unsec. Global Notes, 3.63%, 04/15/15 | 750,000 | 803,047 | ||||||
Sr. Unsec. Notes, 5.63%, 12/11/17 | 8,095,000 | 9,714,991 | ||||||
Westpac Banking Corp. (Australia), Sr. Unsec. Global Notes, 2.10%, 08/02/13 | 7,235,000 | 7,348,465 | ||||||
202,783,409 | ||||||||
Diversified Capital Markets–0.13% | ||||||||
UBS AG (Switzerland), | ||||||||
Sr. Unsec. Global Notes, 5.88%, 12/20/17 | 5,200,000 | 6,053,183 | ||||||
Sr. Unsec. Medium-Term Bank Notes, 3.88%, 01/15/15 | 1,435,000 | 1,513,993 | ||||||
Sr. Unsec. Medium-Term Global Notes, 5.75%, 04/25/18 | 4,945,000 | 5,722,589 | ||||||
13,289,765 | ||||||||
Diversified Metals & Mining–0.20% | ||||||||
Anglo American Capital PLC (United Kingdom), Sr. Unsec. Gtd. Notes, 9.38%, 04/08/19(c) | 3,185,000 | 4,262,841 | ||||||
Freeport-McMoRan Copper & Gold Inc., Sr. Unsec. Global Notes, 1.40%, 02/13/15 | 5,940,000 | 5,996,909 | ||||||
Rio Tinto Finance USA Ltd. (Australia), Sr. Unsec. Gtd. Global Notes, 9.00%, 05/01/19 | 5,240,000 | 7,205,411 | ||||||
Southern Copper Corp., Sr. Unsec. Global Notes, | ||||||||
5.38%, 04/16/20 | 1,170,000 | 1,317,213 | ||||||
6.75%, 04/16/40 | 1,695,000 | 1,982,075 | ||||||
20,764,449 | ||||||||
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 | 17,018,533 | ||||||
Qatari Diar Finance QSC (Qatar), Unsec. Gtd. Unsub. Notes, 5.00%, 07/21/20(c) | 440,000 | 505,267 | ||||||
17,523,800 | ||||||||
Diversified Support Services–0.05% | ||||||||
Cintas Corp. No. 2, Sr. Unsec. Gtd. Notes, 2.85%, 06/01/16 | 4,605,000 | 4,856,817 | ||||||
Drug Retail–0.08% | ||||||||
CVS Pass-Through Trust, Sec. Global Pass Through Ctfs., 6.04%, 12/10/28 | 7,349,963 | 8,391,243 | ||||||
Electric Utilities–0.18% | ||||||||
Electricite de France S.A. (France), Sr. Unsec. Notes, 4.60%, 01/27/20(c) | 2,150,000 | 2,378,302 | ||||||
Enel Finance International N.V. (Italy), Sr. Unsec. Gtd. Notes, | ||||||||
3.88%, 10/07/14(c) | 600,000 | 610,631 | ||||||
5.13%, 10/07/19(c) | 6,755,000 | 6,747,690 | ||||||
Iberdrola Finance Ireland Ltd. (Spain), Sr. Unsec. Gtd. Notes, 3.80%, 09/11/14(c) | 2,175,000 | 2,161,822 | ||||||
Louisville Gas & Electric Co., Sec. First Mortgage Global Bonds, 1.63%, 11/15/15 | 5,525,000 | 5,677,919 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
12 Invesco Equity and Income Fund
Principal | ||||||||
Amount | Value | |||||||
Electric Utilities–(continued) | ||||||||
Ohio Power Co.–Series M, Sr. Unsec. Notes, 5.38%, 10/01/21 | $ | 1,050,000 | $ | 1,273,482 | ||||
PPL Electric Utilities Corp., Sec. First Mortgage Bonds, 6.25%, 05/15/39 | 355,000 | 511,890 | ||||||
19,361,736 | ||||||||
Electronic Components–0.01% | ||||||||
Corning, Inc., Sr. Unsec. Notes, 6.63%, 05/15/19 | 730,000 | 904,200 | ||||||
Environmental & Facilities Services–0.06% | ||||||||
Waste Management, Inc., Sr. Unsec. Gtd. Notes, 5.00%, 03/15/14 | 6,205,000 | 6,599,973 | ||||||
Fertilizers & Agricultural Chemicals–0.04% | ||||||||
Monsanto Co., Sr. Unsec. Global Notes, 3.60%, 07/15/42 | 4,150,000 | 4,164,153 | ||||||
Food Retail–0.04% | ||||||||
Delhaize Group S.A. (Belgium), Sr. Unsec. Gtd. Bonds, 5.88%, 02/01/14 | 3,850,000 | 4,053,176 | ||||||
General Merchandise Stores–0.10% | ||||||||
Target Corp., Sr. Unsec. Global Notes, 2.90%, 01/15/22 | 9,830,000 | 10,442,681 | ||||||
Gold–0.33% | ||||||||
Barrick Gold Corp. (Canada), Sr. Unsec. Global Notes, | ||||||||
2.90%, 05/30/16 | 6,045,000 | 6,384,025 | ||||||
3.85%, 04/01/22 | 3,485,000 | 3,606,870 | ||||||
Barrick North America Finance LLC (Canada), Sr. Unsec. Gtd. Global Notes, 5.70%, 05/30/41 | 4,000,000 | 4,626,885 | ||||||
Gold Fields Orogen Holding BVI Ltd. (South Africa), Sr. Unsec. Gtd. Notes, 4.88%, 10/07/20(c) | 12,145,000 | 12,159,527 | ||||||
Newmont Mining Corp., Sr. Unsec. Gtd. Global Notes, 3.50%, 03/15/22 | 8,645,000 | 8,723,599 | ||||||
35,500,906 | ||||||||
Health Care Equipment–0.51% | ||||||||
NuVasive Inc., Sr. Unsec. Conv. Notes, 2.75%, 07/01/17 | 13,684,000 | 12,897,170 | ||||||
Teleflex Inc., Sr. Unsec. Sub. Conv. Notes, 3.88%, 08/01/17 | 33,647,000 | 41,217,575 | ||||||
54,114,745 | ||||||||
Health Care Facilities–0.72% | ||||||||
Brookdale Senior Living Inc., Sr. Unsec. Conv. Notes, 2.75%, 06/15/18 | 24,795,000 | 26,468,662 | ||||||
LifePoint Hospitals Inc., Sr. Unsec. Sub. Conv. Notes, 3.50%, 05/15/14 | 46,059,000 | 49,340,704 | ||||||
75,809,366 | ||||||||
Health Care Services–0.50% | ||||||||
Express Scripts Holding Co., | ||||||||
Sr. Unsec. Gtd. Global Notes, 6.25%, 06/15/14 | 1,300,000 | 1,422,456 | ||||||
Sr. Unsec. Gtd. Notes, 3.13%, 05/15/16 | 3,800,000 | 4,052,834 | ||||||
Medco Health Solutions Inc., Sr. Unsec. Notes, 2.75%, 09/15/15 | 3,535,000 | 3,700,158 | ||||||
Omnicare Inc., | ||||||||
Sr. Unsec. Sub. Gtd. Conv. Notes, 3.75%, 04/01/42 | 29,270,000 | 27,916,263 | ||||||
Series OCR, Sr. Unsec. Gtd. Conv. Deb., | ||||||||
3.25%, 12/15/15(d) | 16,126,000 | 15,763,165 | ||||||
52,854,876 | ||||||||
Hotels, Resorts & Cruise Lines–0.09% | ||||||||
Wyndham Worldwide Corp., Sr. Unsec. Notes, | ||||||||
7.38%, 03/01/20 | 430,000 | 516,658 | ||||||
5.63%, 03/01/21 | 8,170,000 | 9,029,382 | ||||||
9,546,040 | ||||||||
Housewares & Specialties–0.09% | ||||||||
Tupperware Brands Corp., Sr. Unsec. Gtd. Global Notes, 4.75%, 06/01/21 | 8,615,000 | 9,104,982 | ||||||
Hypermarkets & Super Centers–0.01% | ||||||||
Wal-Mart Stores, Inc., Sr. Unsec. Global Notes, 6.50%, 08/15/37 | 730,000 | 1,061,830 | ||||||
Industrial Conglomerates–0.66% | ||||||||
General Electric Capital Corp., Sr. Unsec. Medium-Term Global Notes, | ||||||||
4.65%, 10/17/21 | 4,860,000 | 5,557,605 | ||||||
Series G, Sr. Unsec. Gtd. Medium-Term Global Notes, 2.63%, 12/28/12 | 48,180,000 | 48,543,665 | ||||||
Sr. Unsec. Medium-Term Notes, 6.00%, 08/07/19 | 8,500,000 | 10,317,576 | ||||||
General Electric Co., Sr. Unsec. Global Notes, 5.25%, 12/06/17 | 4,445,000 | 5,285,783 | ||||||
Koninklijke Philips Electronics N.V. (Netherlands), Sr. Unsec. Global Notes, 5.75%, 03/11/18 | 115,000 | 139,064 | ||||||
69,843,693 | ||||||||
Industrial Machinery–0.08% | ||||||||
Pentair, Inc., Sr. Unsec. Gtd. Notes, 5.00%, 05/15/21 | 7,940,000 | 8,873,214 | ||||||
Integrated Oil & Gas–0.17% | ||||||||
Hess Corp., Sr. Unsec. Global Notes, 5.60%, 02/15/41 | 3,325,000 | 3,780,787 | ||||||
Husky Energy Inc. (Canada), Sr. Unsec. Global Notes, 3.95%, 04/15/22 | 3,630,000 | 3,869,109 | ||||||
Petroleos Mexicanos (Mexico), Sr. Unsec. Gtd. Notes, 4.88%, 01/24/22(c) | 7,430,000 | 8,364,868 | ||||||
Shell International Finance B.V. (Netherlands), Sr. Unsec. Gtd. Global Notes, 3.10%, 06/28/15 | 1,965,000 | 2,107,450 | ||||||
18,122,214 | ||||||||
Integrated Telecommunication Services–0.57% | ||||||||
AT&T Corp., Sr. Unsec. Gtd. Global Notes, 8.00%, 11/15/31 | 63,000 | 97,429 | ||||||
AT&T Inc., Sr. Unsec. Global Notes, | ||||||||
2.50%, 08/15/15 | 450,000 | 474,473 | ||||||
1.60%, 02/15/17 | 5,940,000 | 6,104,992 | ||||||
3.00%, 02/15/22 | 6,410,000 | 6,760,681 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
13 Invesco Equity and Income Fund
Principal | ||||||||
Amount | Value | |||||||
Integrated Telecommunication Services–(continued) | ||||||||
6.15%, 09/15/34 | $ | 3,675,000 | $ | 4,655,857 | ||||
5.35%, 09/01/40 | 2,077,000 | 2,506,055 | ||||||
CenturyLink Inc.–Series U, Sr. Unsec. Global Notes, 7.65%, 03/15/42 | 4,245,000 | 4,398,662 | ||||||
Deutsche Telekom International Finance B.V. (Germany), Sr. Unsec. Gtd. Global Bonds, 8.75%, 06/15/30 | 2,545,000 | 3,774,733 | ||||||
France Telecom S.A. (France), Sr. Unsec. Global Notes, 5.38%, 01/13/42 | 3,260,000 | 3,786,131 | ||||||
Telecom Italia Capital S.A. (Italy), Sr. Unsec. Gtd. Global Notes, 7.00%, 06/04/18 | 9,615,000 | 10,124,094 | ||||||
Verizon Communications, Inc., Sr. Unsec. Global Notes, | ||||||||
3.00%, 04/01/16 | 3,575,000 | 3,858,898 | ||||||
6.35%, 04/01/19 | 4,090,000 | 5,234,312 | ||||||
6.40%, 02/15/38 | 3,500,000 | 4,708,227 | ||||||
4.75%, 11/01/41 | 2,925,000 | 3,310,406 | ||||||
Windstream Georgia Communications Corp., Sr. Unsec. Notes, 6.50%, 11/15/13 | 672,000 | 688,363 | ||||||
60,483,313 | ||||||||
Investment Banking & Brokerage–1.34% | ||||||||
Charles Schwab Corp. (The), Sr. Unsec. Notes, 4.45%, 07/22/20 | 7,880,000 | 8,941,695 | ||||||
Goldman Sachs Group, Inc. (The), Sr. Unsec. Global Notes, | ||||||||
6.15%, 04/01/18 | 10,325,000 | 11,720,997 | ||||||
5.25%, 07/27/21 | 5,510,000 | 5,875,338 | ||||||
Sr. Unsec. Medium-Term Global Notes, 3.70%, 08/01/15 | 1,350,000 | 1,414,417 | ||||||
Unsec. Sub. Global Notes, 6.75%, 10/01/37 | 4,585,000 | 4,778,037 | ||||||
Series C, Exchangeable Basket-Linked Conv. Medium-Term Notes, 1.00%, 03/15/17(c)(e) | 61,461,000 | 61,551,962 | ||||||
Macquarie Bank Ltd. (Australia), Sr. Unsec. Notes, 5.00%, 02/22/17(c) | 6,100,000 | 6,324,503 | ||||||
Macquarie Group Ltd. (Australia), Sr. Unsec. Notes, 6.00%, 01/14/20(c) | 950,000 | 951,525 | ||||||
Morgan Stanley, Sr. Unsec. Global Notes, | ||||||||
4.00%, 07/24/15 | 12,875,000 | 13,146,398 | ||||||
3.80%, 04/29/16 | 5,560,000 | 5,599,380 | ||||||
6.38%, 07/24/42 | 8,140,000 | 8,384,509 | ||||||
Sr. Unsec. Notes, | ||||||||
3.45%, 11/02/15 | 9,855,000 | 9,921,485 | ||||||
5.75%, 01/25/21 | 3,135,000 | 3,256,322 | ||||||
141,866,568 | ||||||||
IT Consulting & Other Services–0.00% | ||||||||
International Business Machines Corp., Sr. Unsec. Global Notes, 7.63%, 10/15/18 | 100,000 | 135,533 | ||||||
Life & Health Insurance–0.26% | ||||||||
Aegon N.V. (Netherlands), Sr. Unsec. Global Bonds, 4.63%, 12/01/15 | 3,100,000 | 3,384,542 | ||||||
MetLife, Inc., Sr. Unsec. Global Notes, 4.75%, 02/08/21 | 3,565,000 | 4,128,073 | ||||||
Series A, Sr. Unsec. Notes, 6.82%, 08/15/18 | 3,070,000 | 3,838,982 | ||||||
Pacific LifeCorp., Sr. Unsec. Notes, 6.00%, 02/10/20(c) | 3,425,000 | 3,801,760 | ||||||
Prudential Financial, Inc., Series D, Sr. Unsec. Medium-Term Notes, | ||||||||
3.88%, 01/14/15 | 950,000 | 1,007,456 | ||||||
4.75%, 09/17/15 | 5,030,000 | 5,525,946 | ||||||
7.38%, 06/15/19 | 1,020,000 | 1,277,323 | ||||||
6.63%, 12/01/37 | 3,475,000 | 4,285,959 | ||||||
27,250,041 | ||||||||
Managed Health Care–0.10% | ||||||||
Aetna, Inc., Sr. Unsec. Global Notes, 3.95%, 09/01/20 | 9,990,000 | 10,977,797 | ||||||
Movies & Entertainment–0.44% | ||||||||
Liberty Interractive LLC, Sr. Unsec. Conv. Notes, 3.13%, 03/30/13(d) | 33,234,000 | 43,536,540 | ||||||
Time Warner, Inc., Sr. Unsec. Gtd. Notes, 5.88%, 11/15/16 | 2,655,000 | 3,149,808 | ||||||
46,686,348 | ||||||||
Multi-Line Insurance–0.05% | ||||||||
CNA Financial Corp., Sr. Unsec. Global Bonds, 5.88%, 08/15/20 | 4,915,000 | 5,670,230 | ||||||
Office Electronics–0.01% | ||||||||
Xerox Corp., Sr. Unsec. Notes, 4.25%, 02/15/15 | 820,000 | 871,578 | ||||||
Office REIT’s–0.05% | ||||||||
Digital Realty Trust L.P., Sr. Unsec. Gtd. Global Notes, 4.50%, 07/15/15 | 5,210,000 | 5,552,165 | ||||||
Oil & Gas Drilling–0.01% | ||||||||
Noble Holding International Ltd., Sr. Unsec. Gtd. Global Notes, 2.50%, 03/15/17 | 1,150,000 | 1,185,258 | ||||||
Oil & Gas Equipment & Services–0.27% | ||||||||
Helix Energy Solutions Group, Inc., Sr. Unsec. Conv. Notes, | ||||||||
3.25%, 12/15/12(d) | 25,155,000 | 25,280,775 | ||||||
3.25%, 03/15/18(d) | 3,285,000 | 3,539,587 | ||||||
28,820,362 | ||||||||
Oil & Gas Exploration & Production–0.39% | ||||||||
Petrobras International Finance Co. (Brazil), Sr. Unsec. Gtd. Global Notes, 6.88%, 01/20/40 | 260,000 | 327,348 | ||||||
Petroleos Mexicanos (Mexico), Sr. Unsec. Gtd. Global Notes, 5.50%, 01/21/21 | 6,750,000 | 7,883,136 | ||||||
Southwestern Energy Co., Sr. Unsec. Gtd. Notes, 4.10%, 03/15/22(c) | 9,585,000 | 10,112,110 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
14 Invesco Equity and Income Fund
Principal | ||||||||
Amount | Value | |||||||
Oil & Gas Exploration & Production–(continued) | ||||||||
Stone Energy Corp., Sr. Unsec. Gtd. Conv. Notes, 1.75%, 03/01/17(c) | $ | 24,746,000 | $ | 22,890,050 | ||||
XTO Energy, Inc., Sr. Unsec. Notes, 5.75%, 12/15/13 | 310,000 | 331,420 | ||||||
41,544,064 | ||||||||
Oil & Gas Refining & Marketing–0.05% | ||||||||
Phillips 66, Sr. Unsec. Gtd. Notes, 1.95%, 03/05/15(c) | 4,760,000 | 4,878,074 | ||||||
Oil & Gas Storage & Transportation–0.21% | ||||||||
Enterprise Products Operating LLC, Sr. Unsec. Gtd. Global Notes, 5.25%, 01/31/20 | 2,889,000 | 3,369,422 | ||||||
Sr. Unsec. Gtd. Notes, 6.45%, 09/01/40 | 555,000 | 689,163 | ||||||
Series N, Sr. Unsec. Gtd. Notes, 6.50%, 01/31/19 | 4,420,000 | 5,429,586 | ||||||
Plains All American Pipeline L.P./ PAA Finance Corp., Sr. Unsec. Global Notes, 3.65%, 06/01/22 | 4,275,000 | 4,515,039 | ||||||
Spectra Energy Capital LLC, Sr. Unsec. Gtd. Notes, 7.50%, 09/15/38 | 2,245,000 | 3,032,364 | ||||||
Texas Eastern Transmission L.P., Sr. Unsec. Notes, 7.00%, 07/15/32 | 3,835,000 | 5,222,026 | ||||||
22,257,600 | ||||||||
Other Diversified Financial Services–1.54% | ||||||||
Bank of America Corp., Sr. Unsec. Global Notes, 5.75%, 12/01/17 | 2,825,000 | 3,177,347 | ||||||
Series L, Sr. Unsec. Medium-Term Notes, | ||||||||
7.38%, 05/15/14 | 315,000 | 345,351 | ||||||
Sr. Unsec. Medium-Term Global Notes, | ||||||||
5.65%, 05/01/18 | 10,675,000 | 11,957,049 | ||||||
Bear Stearns Cos., LLC (The), Sr. Unsec. Global Notes, 7.25%, 02/01/18 | 8,140,000 | 10,156,390 | ||||||
Citigroup Funding, Inc., Unsec. Gtd. Unsub. Global Notes, 2.25%, 12/10/12 | 70,500,000 | 70,870,952 | ||||||
Citigroup, Inc., | ||||||||
Sr. Unsec. Global Notes, | ||||||||
6.01%, 01/15/15 | 1,615,000 | 1,766,521 | ||||||
6.13%, 11/21/17 | 11,440,000 | 13,229,981 | ||||||
8.50%, 05/22/19 | 2,385,000 | 3,062,600 | ||||||
Sr. Unsec. Notes, 4.75%, 05/19/15 | 1,000,000 | 1,074,794 | ||||||
ERAC USA Finance LLC, Sr. Unsec. Gtd. Notes, | ||||||||
5.80%, 10/15/12(c) | 1,715,000 | 1,724,984 | ||||||
2.75%, 07/01/13(c) | 5,060,000 | 5,125,551 | ||||||
General Electric Capital Corp., Sr. Unsec. Global Notes, 5.90%, 05/13/14 | 1,465,000 | 1,594,357 | ||||||
ING US Inc. (Netherlands), Sr. Unsec. Gtd. Notes, 5.50%, 07/15/22(c) | 9,455,000 | 9,674,442 | ||||||
JPMorgan Chase & Co., | ||||||||
Sr. Unsec. Global Notes, | ||||||||
4.75%, 05/01/13 | 1,280,000 | 1,315,501 | ||||||
4.40%, 07/22/20 | 5,700,000 | 6,327,760 | ||||||
Sr. Unsec. Notes, 6.00%, 01/15/18 | 7,395,000 | 8,848,893 | ||||||
Unsec. Sub. Global Notes, 5.13%, 09/15/14 | 1,530,000 | 1,638,252 | ||||||
Merrill Lynch & Co., Inc., Sr. Unsec. Medium-Term Notes, 6.88%, 04/25/18 | 9,445,000 | 10,972,979 | ||||||
Twin Reefs Pass-Through Trust, Sec. Pass Through Ctfs., 1.39% (Acquired 12/07/04-10/23/06; Cost $1,609,000)(c)(f)(g) | 1,610,000 | 0 | ||||||
162,863,704 | ||||||||
Packaged Foods & Meats–0.13% | ||||||||
Grupo Bimbo S.A.B. de C.V. (Mexico), Sr. Unsec. Gtd. Notes, 4.88%, 06/30/20(c) | 5,095,000 | 5,700,006 | ||||||
Kraft Foods Inc., Sr. Unsec. Global Notes, | ||||||||
7.00%, 08/11/37 | 2,830,000 | 3,957,451 | ||||||
6.88%, 02/01/38 | 842,000 | 1,160,030 | ||||||
Sr. Unsec. Notes, 6.88%, 01/26/39 | 2,125,000 | 2,948,199 | ||||||
13,765,686 | ||||||||
Paper Products–0.03% | ||||||||
International Paper Co., Sr. Unsec. Global Notes, 6.00%, 11/15/41 | 2,855,000 | 3,414,947 | ||||||
Pharmaceuticals–0.59% | ||||||||
Endo Health Solutions Inc., Sr. Unsec. Sub. Conv. Notes, 1.75%, 04/15/15 | 28,137,000 | 34,678,852 | ||||||
Salix Pharmaceuticals Ltd., Sr. Unsec. Conv. Notes, | ||||||||
2.75%, 05/15/15 | 13,137,000 | 15,928,612 | ||||||
1.50%, 03/15/19(c) | 12,390,000 | 12,374,513 | ||||||
62,981,977 | ||||||||
Property & Casualty Insurance–0.05% | ||||||||
CNA Financial Corp., Sr. Unsec. Notes, 7.35%, 11/15/19 | 425,000 | 521,282 | ||||||
WR Berkley Corp., Sr. Unsec. Global Notes, 4.63%, 03/15/22 | 5,040,000 | 5,304,819 | ||||||
5,826,101 | ||||||||
Railroads–0.04% | ||||||||
CSX Corp., | ||||||||
Sr. Unsec. Global Notes, 6.15%, 05/01/37 | 1,750,000 | 2,273,584 | ||||||
Sr. Unsec. Notes, 5.50%, 04/15/41 | 1,660,000 | 2,010,314 | ||||||
4,283,898 | ||||||||
Regional Banks–0.20% | ||||||||
Nationwide Building Society (United Kingdom), Sr. Unsec. Notes, 6.25%, 02/25/20(c) | 8,845,000 | 9,813,878 | ||||||
PNC Funding Corp., Sr. Unsec. Gtd. Global Notes, 5.13%, 02/08/20 | 5,305,000 | 6,266,546 | ||||||
Sr. Unsec. Gtd. Notes, 6.70%, 06/10/19 | 3,635,000 | 4,617,169 | ||||||
20,697,593 | ||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
15 Invesco Equity and Income Fund
Principal | ||||||||
Amount | Value | |||||||
Restaurants–0.01% | ||||||||
Yum! Brands, Inc., Sr. Unsec. Global Bonds, 6.25%, 03/15/18 | $ | 1,175,000 | $ | 1,409,687 | ||||
Retail REIT’s–0.09% | ||||||||
Simon Property Group L.P., Sr. Unsec. Notes, 4.75%, 03/15/42 | 2,815,000 | 3,095,413 | ||||||
WEA Finance LLC (Australia), Sr. Unsec. Gtd. Notes, 7.13%, 04/15/18(c) | 5,290,000 | 6,332,684 | ||||||
9,428,097 | ||||||||
Semiconductor Equipment–0.48% | ||||||||
Lam Research Corp., Sr. Unsec. Conv. Notes, 1.25%, 05/15/18 | 33,039,000 | 32,543,415 | ||||||
Novellus Systems Inc., Sr. Unsec. Conv. Notes, 2.63%, 05/15/41 | 15,729,000 | 18,127,672 | ||||||
50,671,087 | ||||||||
Semiconductors–0.92% | ||||||||
Linear Technology Corp., Sr. Unsec. Conv. Notes, 3.00%, 05/01/14(c)(d) | 36,420,000 | 38,332,050 | ||||||
Series A, Sr. Unsec. Conv. Global Notes, | ||||||||
3.00%, 05/01/14(d) | 10,661,000 | 11,220,702 | ||||||
Micron Technology Inc.–Series A, Sr. Unsec. Conv. Notes, 1.50%, 08/01/18(c)(d) | 24,953,000 | 22,831,995 | ||||||
Xilinx Inc., Jr. Unsec. Sub. Conv. Notes, 3.13%, 03/15/37(c) | 20,622,000 | 25,107,285 | ||||||
97,492,032 | ||||||||
Sovereign Debt–0.21% | ||||||||
Brazilian Government International Bond (Brazil), Sr. Unsec. Global Bonds, 6.00%, 01/17/17 | 16,505,000 | 19,756,485 | ||||||
Peruvian Government International Bond (Peru), Sr. Unsec. Global Notes, 7.13%, 03/30/19 | 1,650,000 | 2,180,062 | ||||||
Russian Foreign Bond (Russia), Sr. Unsec. Euro Bonds, 3.63%, 04/29/15(c) | 800,000 | 840,936 | ||||||
22,777,483 | ||||||||
Specialized Finance–0.11% | ||||||||
International Lease Finance Corp., Sr. Unsec. Global Notes, 5.88%, 08/15/22 | 3,315,000 | 3,319,144 | ||||||
Moody’s Corp., Sr. Unsec. Global Notes,, 4.50%, 09/01/22 | 5,380,000 | 5,604,550 | ||||||
National Rural Utilities Cooperative Finance Corp., Sr. Sec. Collateral Trust Bonds, 2.63%, 09/16/12 | 440,000 | 440,286 | ||||||
Sr. Sec. Collateral Trust Bonds, 3.05%, 02/15/22 | 2,550,000 | 2,729,134 | ||||||
12,093,114 | ||||||||
Specialized REIT’s–0.16% | ||||||||
American Tower Corp., | ||||||||
Sr. Unsec. Global Notes, 4.63%, 04/01/15 | 2,425,000 | 2,587,118 | ||||||
Sr. Unsec. Notes, 4.50%, 01/15/18 | 4,620,000 | 5,080,926 | ||||||
Senior Housing Properties Trust, Sr. Unsec. Notes, 4.30%, 01/15/16 | 6,620,000 | 6,811,980 | ||||||
Ventas Realty L.P./Ventas Capital Corp., Sr. Unsec. Gtd. Notes, 4.25%, 03/01/22 | 2,635,000 | 2,824,369 | ||||||
17,304,393 | ||||||||
Steel–0.28% | ||||||||
ArcelorMittal (Luxembourg), Sr. Unsec. Global Bonds, 10.10%, 06/01/19 | 7,005,000 | 8,042,469 | ||||||
Sr. Unsec. Global Notes, | ||||||||
4.00%, 08/05/15 | 8,775,000 | 8,704,232 | ||||||
6.13%, 06/01/18 | 390,000 | 397,461 | ||||||
6.75%, 03/01/41 | 2,225,000 | 1,937,148 | ||||||
Vale Overseas Ltd. (Brazil), Sr. Unsec. Gtd. Global Notes, | ||||||||
5.63%, 09/15/19 | 4,655,000 | 5,187,985 | ||||||
4.63%, 09/15/20 | 320,000 | 337,219 | ||||||
6.88%, 11/10/39 | 4,075,000 | 4,850,720 | ||||||
29,457,234 | ||||||||
Thrifts & Mortgage Finance–0.09% | ||||||||
MGIC Investment Corp., Sr. Unsec. Conv. Notes, 5.00%, 05/01/17 | 16,283,000 | 9,769,800 | ||||||
Tobacco–0.01% | ||||||||
Altria Group, Inc., Sr. Unsec. Gtd. Global Notes, 4.13%, 09/11/15 | 715,000 | 784,199 | ||||||
Trading Companies & Distributors–0.00% | ||||||||
GATX Corp., Sr. Unsec. Notes, 4.75%, 10/01/12 | 450,000 | 451,381 | ||||||
Trucking–0.04% | ||||||||
Ryder System, Inc., Sr. Unsec. Medium-Term Notes, 3.15%, 03/02/15 | 4,030,000 | 4,172,579 | ||||||
Wireless Telecommunication Services–0.35% | ||||||||
America Movil S.A.B. de C.V. (Mexico), Sr. Unsec. Global Notes, 4.38%, 07/16/42 | 6,610,000 | 6,814,469 | ||||||
Sr. Unsec. Gtd. Global Notes, 2.38%, 09/08/16 | 4,450,000 | 4,633,811 | ||||||
Crown Castle Towers LLC, Sr. Sec. Gtd. Notes, 3.21%, 08/15/15(c) | 5,095,000 | 5,260,587 | ||||||
SBA Communications Corp., Sr. Unsec. Conv. Notes, 1.88%, 05/01/13 | 13,921,000 | 20,307,259 | ||||||
37,016,126 | ||||||||
Total U.S. Dollar Denominated Bonds and Notes (Cost $2,173,516,888) | 2,334,377,134 | |||||||
U.S. Treasury Securities–8.73% | ||||||||
U.S. Treasury Notes–6.79% | ||||||||
1.38%, 09/15/12 | 21,200,000 | 21,206,627 | ||||||
1.50%, 12/31/13 | 28,000,000 | 28,474,687 | ||||||
1.75%, 03/31/14 | 12,000,000 | 12,285,938 | ||||||
2.63%, 07/31/14 | 95,125,000 | 99,457,646 | ||||||
2.38%, 10/31/14 | 231,415,000 | 242,045,627 | ||||||
2.13%, 11/30/14 | 77,385,000 | 80,625,497 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
16 Invesco Equity and Income Fund
Principal | ||||||||
Amount | Value | |||||||
U.S. Treasury Notes–(continued) | ||||||||
2.25%, 01/31/15 | $ | 19,650,000 | $ | 20,586,445 | ||||
2.50%, 03/31/15 | 495,000 | 523,695 | ||||||
2.13%, 05/31/15 | 4,445,000 | 4,670,028 | ||||||
2.00%, 04/30/16 | 17,445,000 | 18,469,894 | ||||||
1.75%, 05/31/16 | 950,000 | 997,500 | ||||||
0.88%, 04/30/17 | 2,000,000 | 2,030,625 | ||||||
0.63%, 05/31/17 | 4,410,000 | 4,425,159 | ||||||
3.75%, 11/15/18 | 34,750,000 | 40,912,695 | ||||||
1.25%, 01/31/19 | 25,000,000 | 25,562,500 | ||||||
3.63%, 08/15/19 | 58,350,000 | 68,789,180 | ||||||
3.38%, 11/15/19 | 20,000,000 | 23,268,750 | ||||||
2.63%, 11/15/20 | 6,500,000 | 7,204,844 | ||||||
2.13%, 08/15/21 | 2,440,000 | 2,592,500 | ||||||
2.00%, 11/15/21 | 4,700,000 | 4,927,656 | ||||||
1.75%, 05/15/22 | 10,900,000 | 11,121,406 | ||||||
720,178,899 | ||||||||
U.S. Treasury Bonds–1.91% | ||||||||
8.00%, 11/15/21 | 3,557,000 | 5,604,498 | ||||||
6.88%, 08/15/25 | 20,000 | 31,522 | ||||||
6.13%, 11/15/27 | 19,110,000 | 29,184,553 | ||||||
5.38%, 02/15/31 | 5,205,000 | 7,668,429 | ||||||
3.50%, 02/15/39 | 31,890,000 | 37,590,337 | ||||||
4.25%, 05/15/39 | 9,900,000 | 13,159,266 | ||||||
4.50%, 08/15/39 | 1,060,000 | 1,463,463 | ||||||
4.38%, 11/15/39 | 13,200,000 | 17,898,375 | ||||||
4.63%, 02/15/40 | 18,150,000 | 25,554,633 | ||||||
4.38%, 05/15/40 | 1,280,000 | 1,737,600 | ||||||
4.25%, 11/15/40 | 500,000 | 666,484 | ||||||
3.13%, 11/15/41 | 34,000,000 | 37,256,562 | ||||||
3.00%, 05/15/42 | 22,475,000 | 23,999,086 | ||||||
201,814,808 | ||||||||
U.S. Treasury Bills–0.03% | ||||||||
0.10%, 11/15/12(h)(i) | 3,200,000 | 3,199,521 | ||||||
Total U.S. Treasury Securities (Cost $848,767,529) | 925,193,228 | |||||||
Shares | ||||||||
Preferred Stocks–2.07% | ||||||||
Health Care Facilities–0.27% | ||||||||
HealthSouth Corp., Series A, $65.00 Conv. Pfd. | 27,000 | 28,930,500 | ||||||
Health Care Services–0.15% | ||||||||
Omnicare Capital Trust II, Series B, $2.00 Conv. Pfd. | 356,855 | 16,354,665 | ||||||
Multi-Utilities–0.47% | ||||||||
CenterPoint Energy, Inc., $1.97 Conv. Pfd. | 1,300,669 | 49,425,422 | ||||||
Oil & Gas Storage & Transportation–0.45% | ||||||||
El Paso Energy Capital Trust I, $2.38 Conv. Pfd. | 875,900 | 47,911,730 | ||||||
Regional Banks–0.47% | ||||||||
KeyCorp, Series A, $7.75 Conv. Pfd. | 427,098 | 50,030,260 | ||||||
Research & Consulting Services–0.06% | ||||||||
Nielsen Holdings N.V., $3.13 Conv. Pfd. | 106,910 | 5,793,185 | ||||||
Trucking–0.20% | ||||||||
2010 Swift Mandatory Common Exchange Security Trust, $0.66 Conv. Pfd.(c) | 2,398,700 | 20,619,705 | ||||||
Total Preferred Stocks (Cost $188,512,415) | 219,065,467 | |||||||
Principal | ||||||||
Amount | ||||||||
U.S. Government Sponsored Agency Securities–1.24% | ||||||||
Federal Home Loan Mortgage Corp. (FHLMC)–0.73% | ||||||||
Sr. Unsec. Global Bonds, 6.75%, 03/15/31 | $ | 7,000,000 | 11,057,242 | |||||
Sr. Unsec. Global Notes, 3.00%, 07/28/14 | 23,700,000 | 24,941,806 | ||||||
Unsec. Global Notes, 4.88%, 06/13/18 | 33,680,000 | 41,140,682 | ||||||
77,139,730 | ||||||||
Federal National Mortgage Association (FNMA)–0.51% | ||||||||
Sr. Unsec. Global Bonds, 6.63%, 11/15/30 | 6,315,000 | 9,808,530 | ||||||
Sr. Unsec. Global Notes, | ||||||||
2.88%, 12/11/13 | 600,000 | 620,384 | ||||||
4.38%, 10/15/15 | 38,850,000 | 43,646,596 | ||||||
54,075,510 | ||||||||
Total U.S. Government Sponsored Agency Securities (Cost $118,409,423) | 131,215,240 | |||||||
Municipal Obligations–0.12% | ||||||||
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 | 3,085,992 | ||||||
Series 2010, Build America RB, 6.66%, 04/01/57 | 4,980,000 | 5,854,737 | ||||||
Texas (State of) Transportation Commission; Series 2010 B, Taxable First Tier Build America RB, 5.03%, 04/01/26 | 3,450,000 | 4,230,114 | ||||||
Total Municipal Obligations (Cost $11,089,986) | 13,170,843 | |||||||
Asset-Backed Securities–0.05% | ||||||||
ARI Fleet Lease Trust–Series 2010-A, Class A, Floating Rate Pass Through Ctfs., 1.69%, 08/15/18(c)(j) | 439,705 | 439,958 | ||||||
GE Dealer Floorplan Master Note Trust–Series 2009-2A, Class A, Floating Rate Pass Through Ctfs., 1.79%, 10/20/14(c)(j) | 5,200,000 | 5,210,954 | ||||||
Nomura Asset Acceptance Corp.–Series 2005-AR1, Class 2A1, Floating Rate Pass Through Ctfs., 0.52%, 02/25/35(j) | 11,769 | 11,674 | ||||||
Total Asset-Backed Securities (Cost $5,651,474) | 5,662,586 | |||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
17 Invesco Equity and Income Fund
Principal | ||||||||
Amount | Value | |||||||
U.S. Government Sponsored Mortgage-Backed Securities–0.00% | ||||||||
| ||||||||
Federal Home Loan Mortgage Corp. (FHLMC)–0.00% | ||||||||
Pass Through Ctfs., | ||||||||
6.50%, 05/01/29 | $ | 4 | $ | 4 | ||||
5.50%, 02/01/37 | 446 | 488 | ||||||
492 | ||||||||
Federal National Mortgage Association (FNMA)–0.00% | ||||||||
Pass Through Ctfs., | ||||||||
7.00%, 07/01/18 to 07/01/32 | 109,174 | 126,129 | ||||||
5.50%, 03/01/21 | 286 | 313 | ||||||
8.00%, 08/01/21 | 5,585 | 6,322 | ||||||
132,764 | ||||||||
Government National Mortgage Association (GNMA)–0.00% | ||||||||
Pass Through Ctfs., | ||||||||
8.00%, 04/15/26 to 01/20/31 | 44,902 | 50,240 | ||||||
7.50%, 12/20/30 | 3,298 | 4,063 | ||||||
54,303 | ||||||||
Total U.S. Government Sponsored Mortgage-Backed Securities (Cost $169,706) | 187,559 | |||||||
Shares | ||||||||
Money Market Funds–4.51% | ||||||||
Liquid Assets Portfolio–Institutional Class(k) | 239,131,128 | 239,131,128 | ||||||
Premier Portfolio–Institutional Class(k) | 239,131,128 | 239,131,128 | ||||||
Total Money Market Funds (Cost $478,262,256) | 478,262,256 | |||||||
TOTAL INVESTMENTS–99.76% (Cost $9,543,120,595) | 10,575,688,447 | |||||||
OTHER ASSETS LESS LIABILITIES–0.24% | 25,892,345 | |||||||
NET ASSETS–100.00% | $ | 10,601,580,792 | ||||||
Investment Abbreviations:
ADR | – American Depositary Receipt | |
Conv. | – Convertible | |
Ctfs. | – Certificates | |
Deb. | – Debentures | |
ETF | – Exchange-Traded Fund | |
Gtd. | – Guaranteed | |
Jr. | – Junior | |
Pfd. | – Preferred | |
RB | – Revenue Bonds | |
REIT | – Real Estate Investment Trust | |
Sec. | – Secured | |
SPDR | – Standard & Poor’s Depositary Receipt | |
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, 2012 was $493,540,041, which represented 4.66% of the Fund’s Net Assets. | |
(d) | Security has an irrevocable call by the issuer or mandatory put by the holder. Maturity date reflects such call or put. | |
(e) | Exchangeable for a basket of four common stocks and one ordinary share. | |
(f) | Perpetual bond with no specified maturity date. | |
(g) | Defaulted security. Currently, the issuer is partially or fully in default with respect to interest payments. The value of this security at August 31, 2012 represented less than 1% of the Fund’s Net Assets. | |
(h) | Security traded on a discount basis. The interest rate shown represents the discount rate at the time of purchase by the Fund. | |
(i) | 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. | |
(j) | Interest or dividend rate is redetermined periodically. Rate shown is the rate in effect on August 31, 2012. | |
(k) | 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 Equity and Income Fund
Statement of Assets and Liabilities
August 31, 2012
Assets: | ||||
Investments, at value (Cost $9,064,858,339) | $ | 10,097,426,191 | ||
Investments in affiliated money market funds, at value and cost | 478,262,256 | |||
Total investments, at value (Cost $9,543,120,595) | 10,575,688,447 | |||
Foreign currencies, at value (Cost $226,065) | 230,579 | |||
Receivable for: | ||||
Investments sold | 30,405,181 | |||
Fund shares sold | 5,949,261 | |||
Dividends and interest | 46,611,603 | |||
Principal paydowns | 378 | |||
Investment for trustee deferred compensation and retirement plans | 235,430 | |||
Other assets | 155,797 | |||
Total assets | 10,659,276,676 | |||
Liabilities: | ||||
Payable for: | ||||
Investments purchased | 26,831,254 | |||
Fund shares reacquired | 16,084,784 | |||
Foreign currency contracts outstanding | 3,652,500 | |||
Variation margin | 698,814 | |||
Accrued fees to affiliates | 8,887,298 | |||
Accrued other operating expenses | 566,405 | |||
Trustee deferred compensation and retirement plans | 974,829 | |||
Total liabilities | 57,695,884 | |||
Net assets applicable to shares outstanding | $ | 10,601,580,792 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 9,689,876,177 | ||
Undistributed net investment income | 53,000,204 | |||
Undistributed net realized gain (loss) | (169,116,132 | ) | ||
Unrealized appreciation | 1,027,820,543 | |||
$ | 10,601,580,792 | |||
Net Assets: | ||||
Class A | $ | 7,878,694,240 | ||
Class B | $ | 739,630,569 | ||
Class C | $ | 1,157,324,834 | ||
Class R | $ | 176,939,636 | ||
Class Y | $ | 410,599,995 | ||
Institutional Class | $ | 238,391,518 | ||
Shares outstanding, $0.01 par value per share, with an unlimited number of shares authorized: | ||||
Class A | 871,047,768 | |||
Class B | 83,419,959 | |||
Class C | 129,913,496 | |||
Class R | 19,485,446 | |||
Class Y | 45,377,565 | |||
Institutional Class | 26,332,582 | |||
Class A: | ||||
Net asset value per share | $ | 9.05 | ||
Maximum offering price per share | ||||
(Net asset value of $9.05 divided by 94.50%) | $ | 9.58 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 8.87 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 8.91 | ||
Class R: | ||||
Net asset value and offering price per share | $ | 9.08 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 9.05 | ||
Institutional Class: | ||||
Net asset value and offering price per share | $ | 9.05 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
19 Invesco Equity and Income Fund
Statement of Operations
For the year ended August 31, 2012
Investment income: | ||||
Dividends (net of foreign withholding taxes of $1,789,895) | $ | 190,149,378 | ||
Dividends from affiliated money market funds | 499,558 | |||
Interest | 113,095,350 | |||
Total investment income | 303,744,286 | |||
Expenses: | ||||
Advisory fees | 37,687,528 | |||
Administrative services fees | 824,740 | |||
Custodian fees | 183,590 | |||
Distribution fees: | ||||
Class A | 19,560,872 | |||
Class B | 8,711,883 | |||
Class C | 11,605,534 | |||
Class R | 919,807 | |||
Transfer agent fees — A, B, C, R and Y | 18,709,976 | |||
Transfer agent fees — Institutional | 142,453 | |||
Trustees’ and officers’ fees and benefits | 619,058 | |||
Other | 814,889 | |||
Total expenses | 99,780,330 | |||
Less: Fees waived and expense offset arrangement(s) | (5,159,385 | ) | ||
Net expenses | 94,620,945 | |||
Net investment income | 209,123,341 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain (loss) from: | ||||
Investment securities (includes net gains from securities sold to affiliates of $2,049,290) | 95,254,494 | |||
Foreign currencies | (334,880 | ) | ||
Foreign currency contracts | 28,606,270 | |||
Futures contracts | (18,373,914 | ) | ||
Option contracts written | 918,158 | |||
106,070,128 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | 931,600,476 | |||
Foreign currencies | 2,301 | |||
Foreign currency contracts | (3,746,945 | ) | ||
Futures contracts | 6,880,898 | |||
934,736,730 | ||||
Net realized and unrealized gain | 1,040,806,858 | |||
Net increase in net assets resulting from operations | $ | 1,249,930,199 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
20 Invesco Equity and Income Fund
Statement of Changes in Net Assets
For the years ended August 31, 2012 and 2011
2012 | 2011 | |||||||
Operations: | ||||||||
Net investment income | $ | 209,123,341 | $ | 194,686,900 | ||||
Net realized gain | 106,070,128 | 710,295,404 | ||||||
Change in net unrealized appreciation | 934,736,730 | 221,667,945 | ||||||
Net increase in net assets resulting from operations | 1,249,930,199 | 1,126,650,249 | ||||||
Distributions to shareholders from net investment income: | ||||||||
Class A | (152,150,003 | ) | (150,003,794 | ) | ||||
Class B | (16,509,929 | ) | (22,043,921 | ) | ||||
Class C | (14,510,005 | ) | (14,081,775 | ) | ||||
Class R | (3,178,686 | ) | (3,025,566 | ) | ||||
Class Y | (8,610,039 | ) | (9,905,470 | ) | ||||
Institutional Class | (4,674,921 | ) | (1,974,595 | ) | ||||
Total distributions from net investment income | (199,633,583 | ) | (201,035,121 | ) | ||||
Share transactions–net: | ||||||||
Class A | (802,662,360 | ) | (294,013,394 | ) | ||||
Class B | (358,776,295 | ) | (393,976,120 | ) | ||||
Class C | (175,219,330 | ) | (98,154,582 | ) | ||||
Class R | (23,670,724 | ) | (4,687,717 | ) | ||||
Class Y | (47,889,519 | ) | (22,575,978 | ) | ||||
Institutional Class | 59,177,309 | 87,888,812 | ||||||
Net increase (decrease) in net assets resulting from share transactions | (1,349,040,919 | ) | (725,518,979 | ) | ||||
Net increase (decrease) in net assets | (298,744,303 | ) | 200,096,149 | |||||
Net assets: | ||||||||
Beginning of year | 10,900,325,095 | 10,700,228,946 | ||||||
End of year (includes undistributed net investment income of $53,000,204 and $37,039,105, respectively) | $ | 10,601,580,792 | $ | 10,900,325,095 | ||||
Notes to Financial Statements
August 31, 2012
NOTE 1—Significant Accounting Policies
Invesco Equity and Income Fund, formerly 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.
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.
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 to Class A shares. 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 to Class A shares. 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 the conversion date will be subject to a CDSC.
21 Invesco Equity and 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. | |
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. 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. | ||
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 economic 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 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. |
22 Invesco Equity and Income 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 are declared and paid quarterly and are recorded on the ex-dividend date. Distributions from net realized capital gain, if any, are generally paid annually and recorded on the 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 June 1, 2010, incremental transfer agency fees which were unique to each class of shares 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 the 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. | 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 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. |
23 Invesco Equity and Income Fund
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. | 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 $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).
Effective July 1, 2012, the Adviser has contractually agreed, through at least June 30, 2013, 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, Class Y and Institutional Class shares to 1.50%, 2.25%, 2.25%, 1.75%, 1.25% and 1.25% of average daily net assets, respectively. Prior to July 1, 2012, 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 expense reimbursement (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% 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 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, including litigation expenses; 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 Invesco mutually agree to amend or continue the fee waiver agreement, it will terminate on June 30, 2013. 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, 2013, 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, 2012, the Adviser waived advisory fees of $541,931.
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, 2012, expenses incurred under the agreement are shown in the Statement of Operations as Administrative services fees.
24 Invesco Equity and Income Fund
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, 2012, 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.
IDI had contractually agreed to limit Rule 12b-1 fees to 0.38% of Class B average daily net assets through June 30, 2012.
12b-1 fees before fee waivers are detailed in the Statement of Operations as Distribution fees. For the year ended August 31, 2012, 12b-1 fees incurred for Class B shares were $4,112,230 after fee waivers of $4,599,653.
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, 2012, IDI advised the Fund that IDI retained $1,331,423 in front-end sales commissions from the sale of Class A shares and $15,138, $817,636 and $29,556 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, 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, 2012. 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.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 7,061,113,045 | $ | 104,768,812 | $ | — | $ | 7,165,881,857 | ||||||||
U.S. Treasury Securities | — | 925,193,228 | — | 925,193,228 | ||||||||||||
U.S. Government Sponsored Securities | — | 131,402,799 | — | 131,402,799 | ||||||||||||
Corporate Debt Securities | — | 2,311,599,651 | 0 | 2,311,599,651 | ||||||||||||
Asset-Backed Securities | — | 5,662,586 | — | 5,662,586 | ||||||||||||
Municipal Obligations | — | 13,170,843 | — | 13,170,843 | ||||||||||||
Foreign Government Debt Securities | — | 22,777,483 | — | 22,777,483 | ||||||||||||
$ | 7,061,113,045 | $ | 3,514,575,402 | $ | 0 | $ | 10,575,688,447 | |||||||||
Foreign Currency Contracts* | — | (3,652,500 | ) | — | (3,652,500 | ) | ||||||||||
Futures* | (1,099,323 | ) | — | — | (1,099,323 | ) | ||||||||||
Total Investments | $ | 7,060,013,722 | $ | 3,510,922,902 | $ | 0 | $ | 10,570,936,624 | ||||||||
* | Unrealized appreciation (depreciation). |
25 Invesco Equity and Income Fund
NOTE 4—Derivative Investments
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, 2012:
Value | ||||||||
Risk Exposure/Derivative Type | Assets | Liabilities | ||||||
Currency risk | ||||||||
Foreign currency contracts(a) | $ | — | $ | (3,652,500 | ) | |||
Interest rate risk | ||||||||
Futures contracts(b) | $ | 103,393 | $ | (1,202,716 | ) | |||
(a) | Values are disclosed on the Statement of Assets and Liabilities under Foreign currency contracts outstanding. | |
(b) | 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, 2012
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 | ||||||||||||
Futures* | Contracts* | Options* | ||||||||||
Realized Gain (Loss) | ||||||||||||
Currency risk | $ | — | $ | 28,606,270 | $ | — | ||||||
Equity risk | — | — | 918,158 | |||||||||
Interest rate risk | (18,373,914 | ) | — | — | ||||||||
Change in Unrealized Appreciation (Depreciation) | ||||||||||||
Currency risk | $ | — | $ | (3,746,945 | ) | $ | — | |||||
Interest rate risk | 6,880,898 | — | — | |||||||||
Total | $ | (11,493,016 | ) | $ | 24,859,325 | $ | 918,158 | |||||
* | The average notional value of futures, foreign currency contracts and options outstanding during the period was $450,527,116, $283,406,052 and $11,707,000, respectively. |
Open Futures Contracts | ||||||||||||||||
Unrealized | ||||||||||||||||
Number of | Expiration | Notional | Appreciation | |||||||||||||
Contracts | Month | Value | (Depreciation) | |||||||||||||
Long Contracts | ||||||||||||||||
U.S. Treasury 2 Year Notes | 609 | December-2012 | $ | 134,332,078 | $ | 103,393 | ||||||||||
Short Contracts | ||||||||||||||||
U.S. Treasury 5 Year Notes | 1,044 | December-2012 | $ | (130,149,282 | ) | $ | (385,538 | ) | ||||||||
U.S. Treasury 10 year Notes | 762 | December-2012 | (101,893,687 | ) | (817,178 | ) | ||||||||||
Subtotal | $ | (232,042,969 | ) | $ | (1,202,716 | ) | ||||||||||
Total | $ | (1,099,323 | ) | |||||||||||||
Open Foreign Currency Contracts | ||||||||||||||||||||||||
Unrealized | ||||||||||||||||||||||||
Settlement | Contract to | Notional | Appreciation | |||||||||||||||||||||
Date | Counterparty | Deliver | Receive | Value | (Depreciation) | |||||||||||||||||||
09/20/12 | Bank of New York | CHF | 20,232,472 | USD | 20,692,254 | $ | 21,203,478 | $ | (511,224 | ) | ||||||||||||||
09/20/12 | Bank of New York | EUR | 57,964,319 | USD | 71,159,316 | 72,935,536 | (1,776,220 | ) | ||||||||||||||||
09/20/12 | State Street | GBP | 65,891,679 | USD | 103,245,672 | 104,610,728 | (1,365,056 | ) | ||||||||||||||||
Total open foreign currency contracts | $ | (3,652,500 | ) | |||||||||||||||||||||
Currency Abbreviations:
CHF | – Swiss Franc | |
EUR | – Euro | |
GBP | – British Pound Sterling | |
USD | – U.S. Dollar |
26 Invesco Equity and Income Fund
Transactions During the Period | ||||||||
Call Option Contracts | ||||||||
Number of | Premiums | |||||||
Contracts | Received | |||||||
Beginning of period | — | $ | — | |||||
Written | 11,707 | 918,158 | ||||||
Expired | (11,707 | ) | (918,158 | ) | ||||
End of period | — | $ | — | |||||
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, 2012, the Fund engaged in securities purchases of $767,612 and securities sales of $6,618,839, which resulted in net realized gains of $2,049,290.
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, 2012, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $17,801.
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.
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. Such balances, if any at period end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. 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, 2012 and 2011:
2012 | 2011 | |||||||
Ordinary income | $ | 199,633,583 | $ | 201,035,121 | ||||
27 Invesco Equity and Income Fund
Tax Components of Net Assets at Period-End:
2012 | ||||
Undistributed ordinary income | $ | 81,521,213 | ||
Net unrealized appreciation — investments | 991,724,413 | |||
Net unrealized appreciation — other investments | 4,514 | |||
Temporary book/tax differences | (940,014 | ) | ||
Post-October deferrals | (62,823,408 | ) | ||
Capital loss carryforward | (97,782,103 | ) | ||
Shares of beneficial interest | 9,689,876,177 | |||
Total net assets | $ | 10,601,580,792 | ||
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, book to tax accretion and amortization differences, straddle loss deferral and convertible preferred securities.
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 Regulated Investment Company Modernization Act of 2010 (the “Act”) eliminated the eight-year carryover period for capital losses that arise in taxable years beginning after its enactment date of December 22, 2010. Consequently, these capital losses can be carried forward for an unlimited period. However, capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Additionally, post-enactment capital loss carryovers will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. 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 $161,883,436 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, 2012, which expires as follows:
Capital Loss Carryforward* | ||||||||||||
Expiration | Short-Term | Long-Term | Total | |||||||||
August 31, 2016 | $ | 87,690,005 | $ | — | $ | 87,690,005 | ||||||
August 31, 2017 | 10,092,098 | — | 10,092,098 | |||||||||
$ | 97,782,103 | $ | — | $ | 97,782,103 | |||||||
* | 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 Balanced Fund and Invesco Basic Balanced 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 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, 2012 was $2,056,472,628 and $3,591,853,958, respectively. During the same period, purchases and sales of U.S. Treasury obligations were $107,301,299 and $23,865,609, 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 | $ | 1,238,096,268 | ||
Aggregate unrealized (depreciation) of investment securities | (246,371,855 | ) | ||
Net unrealized appreciation of investment securities | $ | 991,724,413 | ||
Cost of investments for tax purposes is $9,583,964,034. |
NOTE 11—Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of bond premium and fair fund distributions, on August 31, 2012, undistributed net investment income was increased by $6,471,341, undistributed net realized gain (loss) was decreased by $6,477,873 and shares of beneficial interest was increased by $6,532. This reclassification had no effect on the net assets of the Fund.
28 Invesco Equity and Income Fund
NOTE 12—Share Information
Summary of Share Activity | ||||||||||||||||
Years ended August 31, | ||||||||||||||||
2012(a) | 2011 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Class A | 76,632,228 | $ | 653,647,850 | 98,031,251 | $ | 841,524,407 | ||||||||||
Class B | 1,051,815 | 8,808,659 | 4,314,780 | 35,442,243 | ||||||||||||
Class C | 4,887,236 | 41,102,265 | 8,570,105 | 73,027,813 | ||||||||||||
Class R | 5,932,415 | 50,391,223 | 6,592,227 | 57,106,122 | ||||||||||||
Class Y | 14,695,711 | 126,331,806 | 21,595,593 | 186,789,017 | ||||||||||||
Institutional Class | 12,294,259 | 102,222,163 | 12,398,629 | 103,169,510 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Class A | 16,520,442 | 139,372,643 | 16,308,100 | 136,884,446 | ||||||||||||
Class B | 1,873,608 | 15,474,345 | 2,490,833 | 20,476,183 | ||||||||||||
Class C | 1,539,047 | 12,778,414 | 1,497,465 | 12,382,375 | ||||||||||||
Class R | 375,128 | 3,178,004 | 358,603 | 3,023,225 | ||||||||||||
Class Y | 968,129 | 8,164,860 | 1,136,447 | 9,551,241 | ||||||||||||
Institutional Class | 552,439 | 4,674,451 | 233,353 | 1,974,351 | ||||||||||||
Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||
Class A | 24,192,716 | 206,655,020 | 29,939,971 | 258,765,594 | ||||||||||||
Class B | (24,426,071 | ) | (206,655,020 | ) | (30,510,407 | ) | (258,765,594 | ) | ||||||||
Issued in connection with acquisitions:(b) | ||||||||||||||||
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 | (211,560,965 | ) | (1,802,337,873 | ) | (247,798,564 | ) | (2,120,105,508 | ) | ||||||||
Class B | (21,248,100 | ) | (176,404,279 | ) | (30,002,075 | ) | (251,349,014 | ) | ||||||||
Class C | (27,306,094 | ) | (229,100,009 | ) | (34,522,121 | ) | (290,502,266 | ) | ||||||||
Class R | (8,960,324 | ) | (77,239,951 | ) | (8,375,268 | ) | (72,139,936 | ) | ||||||||
Class Y | (21,766,458 | ) | (182,386,185 | ) | (26,462,868 | ) | (221,332,211 | ) | ||||||||
Institutional Class | (5,547,204 | ) | (47,719,305 | ) | (2,060,952 | ) | (17,485,158 | ) | ||||||||
Net increase (decrease) in share activity | (159,300,043 | ) | $ | (1,349,040,919 | ) | (90,956,399 | ) | $ | (725,518,979 | ) | ||||||
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 29% 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 Fund 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 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 shares 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. |
29 Invesco 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) | 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 | (000s omitted) | absorbed | absorbed | net assets | turnover(b) | |||||||||||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/12 | $ | 8.19 | $ | 0.17 | $ | 0.85 | $ | 1.02 | $ | (0.16 | ) | $ | — | $ | (0.16 | ) | $ | 9.05 | 12.67 | %(c) | $ | 7,878,694 | 0.80 | %(d) | 0.81 | %(d) | 2.05 | %(d) | 21 | % | ||||||||||||||||||||||||||
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 | 0.81 | 1.74 | 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 | (e) | 0.78 | (e) | 1.89 | (e) | 24 | ||||||||||||||||||||||||||||||||||
Year ended 12/31/09 | 6.45 | 0.15 | 1.34 | 1.49 | (0.15 | ) | — | (0.15 | ) | 7.79 | 23.51 | (f) | 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 | )(f) | 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 | (f) | 13,332,525 | 0.76 | 0.76 | 2.32 | 35 | ||||||||||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/12 | 8.04 | 0.15 | 0.83 | 0.98 | (0.15 | ) | — | (0.15 | ) | 8.87 | 12.36 | (c) | 739,631 | 1.02 | (d) | 1.56 | (d) | 1.83 | (d) | 21 | ||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 7.39 | 0.14 | 0.65 | 0.79 | (0.14 | ) | — | (0.14 | ) | 8.04 | 10.69 | (c)(g) | 1,014,527 | 0.84 | (g) | 0.98 | (g) | 1.71 | (g) | 22 | ||||||||||||||||||||||||||||||||||||
Eight months ended 08/31/10 | 7.64 | 0.09 | (0.27 | ) | (0.18 | ) | (0.07 | ) | — | (0.07 | ) | 7.39 | (2.40 | )(c)(g) | 1,278,734 | 0.91 | (e)(g) | 0.91 | (e)(g) | 1.76 | (e)(g) | 24 | ||||||||||||||||||||||||||||||||||
Year ended 12/31/09 | 6.33 | 0.14 | 1.32 | 1.46 | (0.15 | ) | — | (0.15 | ) | 7.64 | 23.48 | (h)(i) | 1,594,135 | 0.82 | (i) | 0.82 | (i) | 2.16 | (i) | 78 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/08 | 8.68 | 0.20 | (2.32 | ) | (2.12 | ) | (0.22 | ) | (0.01 | ) | (0.23 | ) | 6.33 | (24.78 | )(h)(i) | 1,693,758 | 0.79 | (i) | 0.79 | (i) | 2.59 | (i) | 56 | |||||||||||||||||||||||||||||||||
Year ended 12/31/07 | 8.97 | 0.17 | 0.08 | 0.25 | (0.18 | ) | (0.36 | ) | (0.54 | ) | 8.68 | 2.71 | (h)(i) | 2,978,302 | 1.25 | (i) | 1.25 | (i) | 1.83 | (i) | 35 | |||||||||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/12 | 8.07 | 0.11 | 0.83 | 0.94 | (0.10 | ) | — | (0.10 | ) | 8.91 | 11.77 | (c)(j) | 1,157,325 | 1.54 | (d)(j) | 1.54 | (d)(j) | 1.31 | (d)(j) | 21 | ||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 7.42 | 0.09 | 0.65 | 0.74 | (0.09 | ) | — | (0.09 | ) | 8.07 | 9.95 | (c)(j) | 1,216,936 | 1.54 | (j) | 1.54 | (j) | 1.01 | (j) | 22 | ||||||||||||||||||||||||||||||||||||
Eight months ended 08/31/10 | 7.68 | 0.06 | (0.27 | ) | (0.21 | ) | (0.05 | ) | — | (0.05 | ) | 7.42 | (2.81 | )(c)(j) | 1,211,089 | 1.52 | (e)(j) | 1.52 | (e)(j) | 1.15 | (e)(j) | 24 | ||||||||||||||||||||||||||||||||||
Year ended 12/31/09 | 6.36 | 0.09 | 1.33 | 1.42 | (0.10 | ) | — | (0.10 | ) | 7.68 | 22.63 | (i)(k) | 1,375,516 | 1.56 | (i) | 1.56 | (i) | 1.40 | (i) | 78 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/08 | 8.72 | 0.14 | (2.32 | ) | (2.18 | ) | (0.17 | ) | (0.01 | ) | (0.18 | ) | 6.36 | (25.33 | )(i)(k) | 1,340,367 | 1.50 | (i) | 1.50 | (i) | 1.88 | (i) | 56 | |||||||||||||||||||||||||||||||||
Year ended 12/31/07 | 9.01 | 0.14 | 0.08 | 0.22 | (0.15 | ) | (0.36 | ) | (0.51 | ) | 8.72 | 2.41 | (k) | 2,334,402 | 1.51 | 1.51 | 1.57 | 35 | ||||||||||||||||||||||||||||||||||||||
Class R | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/12 | 8.23 | 0.15 | 0.85 | 1.00 | (0.15 | ) | — | (0.15 | ) | 9.08 | 12.23 | (c) | 176,940 | 1.05 | (d) | 1.06 | (d) | 1.80 | (d) | 21 | ||||||||||||||||||||||||||||||||||||
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 | 1.06 | 1.49 | 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 | (e) | 1.03 | (e) | 1.64 | (e) | 24 | ||||||||||||||||||||||||||||||||||
Year ended 12/31/09 | 6.48 | 0.13 | 1.35 | 1.48 | (0.13 | ) | — | (0.13 | ) | 7.83 | 23.25 | (l) | 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 | )(l) | 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 | (l) | 192,906 | 1.01 | 1.01 | 2.07 | 35 | ||||||||||||||||||||||||||||||||||||||
Class Y(m) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/12 | 8.20 | 0.20 | 0.84 | 1.04 | (0.19 | ) | — | (0.19 | ) | 9.05 | 12.83 | (c) | 410,600 | 0.55 | (d) | 0.56 | (d) | 2.30 | (d) | 21 | ||||||||||||||||||||||||||||||||||||
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 | 0.56 | 1.99 | 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 | (e) | 0.53 | (e) | 2.15 | (e) | 24 | ||||||||||||||||||||||||||||||||||
Year ended 12/31/09 | 6.45 | 0.16 | 1.35 | 1.51 | (0.17 | ) | — | (0.17 | ) | 7.79 | 23.82 | (n) | 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 | )(n) | 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 | (n) | 392,848 | 0.51 | 0.51 | 2.57 | 35 | ||||||||||||||||||||||||||||||||||||||
Institutional Class | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/12 | 8.20 | 0.21 | 0.84 | 1.05 | (0.20 | ) | — | (0.20 | ) | 9.05 | 12.96 | (c) | 238,392 | 0.44 | (d) | 0.44 | (d) | 2.41 | (d) | 21 | ||||||||||||||||||||||||||||||||||||
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 | 0.39 | 2.16 | 22 | |||||||||||||||||||||||||||||||||||||||
Eight months ended 08/31/10(o) | 7.59 | 0.03 | (0.04 | ) | (0.01 | ) | (0.04 | ) | — | (0.04 | ) | 7.54 | (0.13 | )(c) | 63,598 | 0.45 | (e) | 0.45 | (e) | 1.79 | (e) | 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 $7,830,613, $871,188, $1,175,435, $183,961, $389,959 and $209,565 for Class A, Class B, Class C, Class R, Class Y and Institutional Class shares, respectively. | |
(e) | Annualized. | |
(f) | 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. | |
(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 0.28% and 0.38% for the year ended August 31, 2011 and eight months ended August 31, 2010, respectively. | |
(h) | 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. | |
(i) | 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%. | |
(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 0.99%, 0.97% and 0.99% for the years ended August 31, 2012, August 31, 2011 and the eight months ended August 31, 2010, respectively. | |
(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) | 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 on Fund shares. | |
(m) | On June 1, 2010, the Fund’s former Class I shares were reorganized into Class Y shares. | |
(n) | 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. | |
(o) | Commencement date of June 1, 2010. |
NOTE 14—Subsequent Event
Effective September 24, 2012, Institutional Class shares were renamed Class R5 shares and the Fund began offering Class R6 shares.
30 Invesco 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 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 Equity and Income Fund, (formerly known as 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, 2012, 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 two years in the period 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, 2012 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. 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, 2012
Houston, Texas
31 Invesco 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 01, 2012 through August 31, 2012.
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.
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 | (03/01/12) | (08/31/12)1 | Period2,3 | (08/31/12) | Period2,4 | Ratio2 | ||||||||||||||||||||||||
A | $ | 1,000.00 | $ | 1,037.50 | $ | 4.05 | $ | 1,021.17 | $ | 4.01 | 0.79 | % | ||||||||||||||||||
B | 1,000.00 | 1,035.00 | 5.73 | 1,019.51 | 5.69 | 1.12 | ||||||||||||||||||||||||
C | 1,000.00 | 1,033.00 | 7.77 | 1,017.50 | 7.71 | 1.52 | ||||||||||||||||||||||||
R | 1,000.00 | 1,034.90 | 5.32 | 1,019.91 | 5.28 | 1.04 | ||||||||||||||||||||||||
Y | 1,000.00 | 1,037.60 | 2.77 | 1,022.42 | 2.75 | 0.54 | ||||||||||||||||||||||||
Institutional | 1,000.00 | 1,038.00 | 2.43 | 1,022.75 | 2.42 | 0.48 | ||||||||||||||||||||||||
1 | The actual ending account value is based on the actual total return of the Fund for the period March 1, 2012 through August 31, 2012, 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 184/366 to reflect the most recent fiscal half year. The Fund’s adviser had contractually agreed to waive 0.38% of Rule 12b-1 plan fees on Class B through June 30, 2012. The annualized expense ratio restated as if this agreement had not been in effect throughout the entire most recent fiscal half year is 1.54%. |
3 | The actual expenses paid restates as if the changes discussed above had been in effect throughout the entire most recent fiscal half year is $7.88. |
4 | The hypothetical expenses paid restated as if the changes discussed above had been in effect throughout the entire most recent fiscal half year is $7.81. |
32 Invesco Equity and Income Fund
Approval of Investment Advisory and Sub-Advisory Contracts
(Formerly Known as Invesco Van Kampen Equity and Income Fund)
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 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 19-20, 2012, 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, 2012. 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 primarily 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, 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 and on what terms 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. In addition to meetings with Invesco Advisers and fund 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 independent legal 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 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 previously approved by a different board that, at the time, was responsible for overseeing Morgan Stanley and Van Kampen funds, which have become Invesco Funds following the acquisition of the retail mutual fund business of Morgan Stanley. 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 or factor 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 20, 2012, 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 Sub-Committees 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 prior relationship and 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 consistent 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 consistent 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 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
33 Invesco Equity and Income Fund
universe for the one year period, the fourth 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, three and five year periods. Invesco Advisers noted that the Fund has less fixed income exposure that its peers and employs a traditional value approach while competitors typically have a core/growth bias. Invesco Advisers confirmed that performance of the Fund has been consistent with its investment process and the market environment. 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 strategies. The Board also noted that the Fund’s effective fee rate was above the rate of one asset allocation fund advised by Invesco Advisers because Invesco Advisers does not charge a fee to the asset allocation fund, but does charge fees to the underlying funds in which the asset allocation fund invests.
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 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 and were assisted in their review by a report from the Senior Officer. 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. The Board noted that Invesco Advisers proposes sharing economies of scale in administration expenses by lowering per class administrative fees.
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 for the year ended December 31, 2011. 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 Invesco Funds and the Fund. The Board did not deem the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund to be excessive given the nature, quality and extent of the services provided to the Invesco Funds. The Board received and accepted information from Invesco Advisers demonstrating that 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.
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 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 also considered periodic reports from the Chief Compliance Officer of the Invesco Funds demonstrating that these arrangements are consistent with regulatory requirements. The Board did not deem the soft dollar arrangements to be inappropriate.
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.
The Board also considered use of an affiliated broker to execute certain trades for the Fund and that such trades are executed in compliance with rules under the Investment Company Act of 1940, as amended.
34 Invesco 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, 2012:
Federal and State Income Tax | ||||
Qualified Dividend Income* | 60.48% | |||
Corporate Dividends Received Deduction* | 53.30% | |||
U.S. Treasury Obligations* | 6.99% |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Fund’s fiscal year. |
35 Invesco 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 1000, 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 | Other Directorship(s) | |||||||
Name, Year of Birth and | Trustee and/or | Principal Occupation(s) | Funds in | Held by Trustee During | ||||
Position(s) Held with the Trust | Officer Since | During Past 5 Years | Fund Complex Overseen by Trustee | Past 5 Years | ||||
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 | 129 | 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. | 129 | None | ||||
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. | ||||||||
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 certain funds in the Fund Complex | 147 | Director of the Mutual Fund Directors Forum, a nonprofit membership organization for investment directors; Chairman and Director of the Abraham Lincoln Presidential Library Foundation; and Director of the Stevenson Center for Democracy | ||||
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 is considered an “interested person” (within the meaning of Section 2(a)(19) of the 1940 Act) of certain Funds in the Invesco Fund Complex by reason of he and his firm currently providing legal services as legal counsel to such Funds in the Invesco Fund Complex. |
T-1 Invesco Equity and Income Fund
Trustees and Officers—(continued)
Number of | Other Directorship(s) | |||||||
Name, Year of Birth and | Trustee and/or | Principal Occupation(s) | Funds in | Held by Trustee During | ||||
Position(s) Held with the Trust | Officer Since | During Past 5 Years | Fund Complex Overseen by Trustee | Past 5 Years | ||||
Independent Trustees | ||||||||
Bruce L. Crockett — 1944 Trustee and Chair | 2003 | Chairman, Crockett Technologies 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) | 129 | ACE Limited (insurance company); and Investment Company Institute | ||||
David C. Arch — 1945 Trustee | 2010 | Retired. Chairman and Chief Executive Officer of Blistex Inc., a consumer health care products manufacturer | 147 | Member of the Heartland Alliance Advisory Board, a nonprofit organization serving human needs based in Chicago. Board member of the Illinois Manufacturers’ Association. Member of the Board of Visitors, Institute for the Humanities, University of Michigan | ||||
Frank S. Bayley — 1939 Trustee | 2003 | Retired Formerly: Director, Badgley Funds, Inc. (registered investment company) (2 portfolios) and Partner, law firm of Baker & McKenzie | 129 | 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 | 129 | Chairman, Board of Governors, Western Golf Association, Chairman-elect, Evans Scholars Foundation and Director, Denver Film Society | ||||
Rodney F. Dammeyer — 1940 Trustee | 2010 | Chairman of CAC, LLC, a private company offering capital investment and management advisory services Formerly: Prior to January 2004, Director of TeleTech Holdings Inc.; Prior to 2002, Director of Arris Group, Inc.; Prior to 2001, Managing Partner at Equity Group Corporate Investments. Prior to 1995, Vice Chairman of Anixter International. Prior to 1985, experience includes Senior Vice President and Chief Financial Officer of Household International, Inc, Executive Vice President and Chief Financial Officer of Northwest Industries, Inc. and Partner of Arthur Andersen & Co. | 147 | 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) 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) | 129 | Director of Nature’s Sunshine Products, Inc. | ||||
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) Formerly: Chief Executive Officer, Texana Timber LP (sustainable forestry company) and member of the U.S. House of Representatives | 129 | Insperity (formerly known as Administaff) | ||||
Carl Frischling — 1937 Trustee | 2003 | Partner, law firm of Kramer Levin Naftalis and Frankel LLP | 129 | Director, Reich & Tang Funds (6 portfolios) | ||||
Prema Mathai-Davis — 1950 Trustee | 2003 | Retired Formerly: Chief Executive Officer, YWCA of the U.S.A. | 129 | None | ||||
Larry Soll — 1942 Trustee | 1997 | Retired Formerly, Chairman, Chief Executive Officer and President, Synergen Corp. (a biotechnology company) | 129 | None | ||||
T-2 Invesco Equity and Income Fund
Trustees and Officers—(continued)
Number of | Other Directorship(s) | |||||||
Name, Year of Birth and | Trustee and/or | Principal Occupation(s) | Funds in | Held by Trustee | ||||
Position(s) Held with the Trust | Officer Since | During Past 5 Years | Fund Complex Overseen by Trustee | During Past 5 Years | ||||
Independent Trustees—(continued) | ||||||||
Hugo F. Sonnenschein — 1940 Trustee | 2010 | Distinguished Service Professor and President Emeritus of the University of Chicago and the Adam Smith Distinguished Service Professor in the Department of Economics at the University of Chicago. Prior to July 2000, President of the University of Chicago | 147 | 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 | 129 | None | ||||
Other Officers | ||||||||
Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer, The 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 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) | N/A | N/A | ||||
Lisa O. Brinkley — 1959 Vice President | 2004 | Global Assurance Officer, Invesco Ltd. and Vice President, The Invesco Funds Formerly: Chief Compliance Officer, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.), Invesco Investment Services, Inc.(formerly known as Invesco Aim Investment Services, 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 | ||||
T-3 Invesco Equity and Income Fund
Trustees and Officers—(continued)
Number of | Other Directorship(s) | |||||||
Name, Year of Birth and | Trustee and/or | Principal Occupation(s) | Funds in | Held by Trustee | ||||
Position(s) Held with the Trust | Officer Since | During Past 5 Years | Fund Complex Overseen by Trustee | During Past 5 Years | ||||
Other Officers—(continued) | ||||||||
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., INVESCO Global Asset Management Limited, Invesco Management Company Limited and INVESCO Management S.A.; 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) 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) | 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); and 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 Formerly: Vice President, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc. | N/A | N/A | ||||
Yinka Akinsola — 1977 Anti-Money Laundering Compliance Officer | 2011 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.), Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.), Invesco Management Group, Inc., The Invesco Funds, Invesco Van Kampen Closed-End Funds, Van Kampen Exchange Corp., Van Kampen Funds Inc., PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, and PowerShares Actively Managed Exchange-Traded Fund Trust Formerly: Regulatory Analyst III, Financial Industry Regulatory Authority (FINRA). | N/A | N/A | ||||
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; Vice President, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) and Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.) Formerly: Senior Vice President, Van Kampen Investments Inc.; Senior Vice President and Chief Compliance Officer, Invesco Advisers, Inc. and Invesco Aim Capital Management, Inc.; Chief Compliance Officer, INVESCO Private Capital Investments, Inc. (holding company), Invesco Private Capital, Inc. (registered investment adviser), Invesco Global Asset Management (N.A.), Inc., Invesco Senior Secured Management, Inc. (registered investment adviser) and Van Kampen Investor Services Inc., 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 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��1000 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 1000 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 1000 Houston, TX 77046-1173 | Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
T-4 Invesco Equity and Income Fund
![(EDELIVER GRAPHIC)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8703213.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 shown below.
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/0000950123-12-013037/h87055h8703214.gif)
Information regarding how the Fund voted proxies related to its portfolio securities during the 12 months ended June 30, 2012, 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 US 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.
SEC file numbers: 811-09913 and 333-36074 | VK-EQI-AR-1 | Invesco Distributors, Inc. |
![]() |
Annual Report to Shareholders | August 31, 2012 |
Invesco Growth and Income Fund
Effective September 24, 2012, after the close of the reporting period, Invesco Van Kampen Growth and Income Fund was renamed Invesco 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 | |
11 | Financial Statements | |
13 | Notes to Financial Statements | |
21 | 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/0000950123-12-013037/h87055h8704602.jpg)
Philip Taylor
Dear Shareholders:
This report contains information about your Fund, including a discussion from your portfolio managers about how they managed your Fund – and why it performed as it did – during the reporting period. This report also includes your Fund’s long-term performance and a complete list of your Fund’s investments as of the close of the reporting period. I hope you find this information helpful.
For much of the reporting period, investors’ attention was focused on Europe, where eurozone governments struggled to reduce debt levels, strengthen their banks and stimulate their economies. European leaders disagreed whether the wiser path to restoring the Continent’s economic well-being was more stimulus or greater austerity. In the US, economic data were mixed. Economic growth, while positive, was relatively modest. Corporate earnings, which have grown strongly in recent years, have begun to slow. And job creation has been less robust than hoped. Later in this report, your Fund’s portfolio managers discuss how economic conditions and market trends affected your Fund’s performance.
Economic conditions are always subject to sudden and unexpected change. That’s why you may find it helpful to work with a trusted, experienced financial adviser who understands your unique financial goals, needs and risk tolerances. Financial advisers can provide valuable insight and information, particularly when markets are turbulent, and they can recommend investments appropriate for specific investment goals, such as a child’s college education or your retirement. On a regular basis, a financial adviser also can determine whether your existing investments are still appropriate, given your changing needs, goals and circumstances.
Timely insight and information from many of Invesco’s investment professionals is available at our website, invesco.com/us. We offer in-depth articles, video clips and audio commentaries from many of our portfolio managers and other investment professionals on a wide range of topics of interest to investors: recent economic and market developments; retirement planning; legislative updates from Washington, DC; and general investor education. At invesco.com/us, you also can access information about your Invesco account at any time.
What we mean by Intentional Investing
Intentional InvestingSM is the science and art of investing with purpose, prudence and diligence – and it’s how Invesco’s investment professionals manage your money every day.
This highly disciplined process begins when specialized teams of investment professionals clearly define an investment objective and then establish specific investment strategies to try to achieve that objective. While our investment teams closely monitor economic and market conditions – and issues specific to individual holdings that could affect their value – they maintain a long-term investment perspective. Intentional Investing is also:
n | How we manage and mitigate risk – by embedding risk controls and processes into every aspect of our business; | ||
n | How we create products – by offering a diverse combination of investment strategies and vehicles designed to meet your needs; and | ||
n | How we connect with you, our investors – by communicating clearly, by delivering expert insights from our portfolio managers and other investment professionals, and by providing a website full of tools and articles to help you stay informed. |
As a company, Invesco believes in putting investors first, and that’s why investment management is all we do. Our sole focus on managing your money allows your financial adviser to build a truly diversified investment portfolio of Invesco funds, whatever your investment needs and goals may be – and allows him or her to find appropriate Invesco funds when your circumstances change. Of course, neither Intentional Investing nor diversification can guarantee a profit or protect against loss.
Have a question?
If you have questions about your account, please contact an Invesco client services representative at 800 959 4246. If you have an Invesco-related question or comment, feel free 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/0000950123-12-013037/h87055h8704603.gif)
Philip Taylor
Senior Managing Director, Invesco Ltd.
Senior Managing Director, Invesco Ltd.
2 Invesco Growth and Income Fund
![(PHOTO OF BRUCE CROCKETT)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8704604.jpg)
Bruce Crockett
Dear Fellow Shareholders:
One of our most important responsibilities as independent Trustees of the Invesco Funds is our annual review of the funds’ advisory and sub-advisory contracts with Invesco. This annual review is required by the Investment Company Act of 1940 and focuses on the nature and quality of the services Invesco has provided as adviser to the Invesco Funds and the reasonableness of the fees that it charges for those services.
In our roles as Trustees, we spend months reviewing thousands of pages of detailed information that we request from Invesco in connection with our annual review. We focus on the quality and costs of the services to be provided by Invesco and its affiliates. Some of the most important things we look at are fund performance, expenses and fees. All of the Trustees have substantial personal investments in the Invesco Funds complex. We’re fund shareholders just like you.
We also use information from many independent sources during the review process, including materials provided by the independent Senior Officer of the Invesco Funds, who reports directly to the independent Trustees. We also meet in private sessions with independent legal counsel and review performance and fee data on the Invesco Funds prepared by Lipper Inc., an independent, third-party firm widely recognized as a leader in its field.
I’m pleased to report that the Invesco Funds Board determined in June that renewing the investment advisory agreement and the sub-advisory contracts with Invesco would serve the best interests of each fund and its shareholders. For more detailed information about our assessment and conclusions with respect to each of the Invesco Funds, visit invesco.com/us, click on the “About Us” section and go to “Legal Information.” Information on the recent investment advisory renewal process can be found by clicking the last item under “Corporate Governance.”
In much the same way we review your fund’s advisory contract each year, it’s a good idea for you to review your own investment plan with your financial adviser on a regular basis. Perhaps you need to reassess your original asset allocation because different investments may grow at varying paces, or perhaps you’re going through a significant life change. Regardless of your situation, a financial adviser can provide guidance and experience to help you reach your financial goals.
As always, please contact me at bruce@brucecrockett.com with any questions or concerns you may have. On behalf of the 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/0000950123-12-013037/h87055h8704605.gif)
Bruce L. Crockett
Independent Chair
Invesco Funds Board of Trustees
Independent Chair
Invesco Funds Board of Trustees
3 Invesco Growth and Income Fund
Management’s Discussion of Fund Performance
Performance summary
For the fiscal year ended August 31, 2012, Invesco Growth and Income Fund underperformed the Russell 1000 Value Index, the Fund’s style-specific benchmark. As the Fund uses a bottom-up stock selection approach, stock selection in various sectors was the primary reason the Fund underperformed its style-specific benchmark.
Your Fund’s long-term performance appears later in this report.
Fund vs. Indexes
Total returns, 8/31/11 to 8/31/12, 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 | 15.33 | % | ||
Class B Shares | 15.37 | |||
Class C Shares | 14.53 | |||
Class R Shares | 15.03 | |||
Class Y Shares | 15.60 | |||
Institutional Class Shares | 15.80 | |||
S&P 500 Index▼ (Broad Market Index) | 18.00 | |||
Russell 1000 Value Index■ (Style-Specific Index) | 17.30 | |||
Lipper Large-Cap Value Funds Index♦ (Peer Group Index) | 14.22 |
Source(s): ▼Invesco, S&P-Dow Jones via FactSet Research Systems Inc.; ■Invesco, Russell via FactSet Research Systems Inc.; ♦Lipper Inc. |
How we invest
We call our investment philosophy “value with a catalyst.” We believe undervalued companies that 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 prerequisite for 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
As the reporting period began, reports on employment and the economy were mixed at best, and sovereign debt issues abroad weighed heavily on investors. Equity indexes sold off precipitously as the US struggled very publicly to raise the nation’s debt ceiling. As a result, Standard & Poor’s announced the first-ever downgrade to long-term US government debt. Uncertainty created by the downgrade combined with the continuing eurozone debt-crisis saga to reignite global recession fears through October.
As those negative headlines faded during the fall of 2011, signs of muted growth remained. US equity markets rebounded with a nearly uninterrupted rally throughout the winter and into the spring of 2012. In late March, markets paused, and while company earnings still offered more positive surprises than disappointments, confidence began to wane in the absence of new growth drivers. By May, the market went into steady decline as investors grew concerned about the real possibility of a Greek exit from the European Union and the potential collapse of the euro. Economic data and earnings in the US began to show signs of deceleration amid contagion from both European and Asian weakness.
Toward the end of the reporting period, yet another European commitment to a lasting resolution to the economic crisis was coupled with an announcement that funds may be injected directly into large financial institutions. This announcement, along with a ruling by the US Supreme Court upholding the Affordable Care Act, provided some near-term clarity and resulted in risk taking that led the markets modestly higher as the reporting period ended.
Portfolio Composition
By sector
Financials | 21.1 | % | ||
Health Care | 12.9 | |||
Consumer Staples | 12.3 | |||
Consumer Discretionary | 10.8 | |||
Energy | 9.4 | |||
Information Technology | 9.0 | |||
Industrials | 8.8 | |||
Telecommunication Services | 3.1 | |||
Utilities | 2.8 | |||
Materials | 1.0 | |||
Money Market Funds Plus Other Assets Less Liabilities | 8.8 |
Top 10 Equity Holdings*
1. | General Electric Co. | 4.4 | % | |||||
2. | JPMorgan Chase & Co. | 4.4 | ||||||
3. | Microsoft Corp. | 2.5 | ||||||
4. | Marsh & McLennan Cos., Inc. | 2.5 | ||||||
5. | eBay Inc. | 2.3 | ||||||
6. | Tyco International Ltd. | 2.3 | ||||||
7. | Pfizer Inc. | 2.2 | ||||||
8. | Vodafone Group PLC-ADR | 2.1 | ||||||
9. | PepsiCo, Inc. | 2.1 | ||||||
10. | Viacom Inc.-Class B | 2.1 |
Total Net Assets | $7.0 billion | |||
Total Number of Holdings* | 74 |
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 Growth and Income Fund
All sectors of the Russell 1000 Value Index, the Fund’s style-specific benchmark, posted positive returns during the reporting period, with many sectors posting double-digit returns. The only exceptions were the energy and materials sectors, which posted positive single-digit performance.
Strong stock selection within the industrials sector was the largest relative contributor to Fund performance versus the Russell 1000 Value Index. General Electric and Ingersoll-Rand were two top contributors within the sector, benefiting from late-cycle business. GE’s order growth increased on the industrial side due to demand for infrastructure upgrades. Ingersoll-Rand purchased heating and air conditioning company Trane in late 2007, and heating, ventilation and air conditioning upgrades in commercial and residential real estate have been a big boost to the company’s earnings.
Also, strong stock selection within the consumer discretionary sector provided a boost to relative performance. Specifically, media stocks Comcast, Time Warner and Time Warner Cable were top contributors, as effective capital deployment through stock buybacks and/or dividend increases was reflected in improved financials toward the end of the reporting period.
Strong stock selection in the materials sector was another driver of relative performance versus the style-specific benchmark. Notably, paint and glass company PPG Industries was a top contributor within this sector, as the company saw increased demand from residential home improvement and commercial real estate.
Stock selection within the information technology, financials and health care sectors, along with an underweight position in the utilities sector versus the benchmark, also contributed to relative performance.
The largest detractor from Fund performance during the reporting period was stock selection in the consumer staples sector. Avon Products was a clear detractor within this sector because the stock, which was not held in the Russell 1000 Value Index, performed poorly for the reporting period. The stock price experienced double-digit losses, as Avon announced in December 2011 that it would be searching for a replacement chief executive officer in 2012. Also, toward the end of the period, investors were disappointed that Avon rejected an acquisition offer from Coty (not a Fund holding). We continued to review Avon to ensure this holding met our fundamental and valuation criteria as a holding in the Fund.
Stock selection in the energy sector also negatively affected the Fund’s relative performance. More specifically, holdings in the exploration and production and oil and gas equipment service industries were the largest detractors, as the price of oil declined during the reporting period. Notably, Hess, Anadarko Petroleum, Baker Hughes and Schlumberger performed poorly during the year, with their stock prices producing double-digit losses. We sold our positions in Hess and Schlumberger during the reporting period.
Finally, stock selection and an underweight in telecommunication stocks versus the style-specific benchmark also hurt relative performance. Telecommunication services was the best-performing sector within the Russell 1000 Value Index. Not owning AT&T, which performed very well during the reporting period, was the main driver of underperformance versus the style-specific benchmark in this sector.
We used currency-forward contracts during the reporting period for the purpose of hedging currency exposure of non-US-based companies held in the Fund. Derivatives were used for the purpose of hedging, not for speculative purposes or leverage. The use of currency-forward contracts had a slight positive impact on the Fund’s performance relative to the Russell 1000 Value Index for the reporting period.
Equity markets experienced continued volatility during the reporting period. We believe that market volatility, coupled with the market correction that began in the third quarter of 2011 and continued into the second quarter of 2012, created opportunities to invest in companies with attractive valuations and strong fundamentals. We believe that ultimately those valuations and fundamentals will be reflected in those companies’ stock prices.
Thank you for your investment in Invesco 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/0000950123-12-013037/h87055h8704606.jpg)
Thomas Bastian
Chartered Financial Analyst, portfolio manager, is lead manager of Invesco Growth and Income Fund. He joined Invesco in 2010. Mr. Bastian earned a BA in accounting from St. John’s University and an MBA in finance from the University of Michigan.
Chartered Financial Analyst, portfolio manager, is lead manager of Invesco Growth and Income Fund. He joined Invesco in 2010. Mr. Bastian earned a BA in accounting from St. John’s University and an MBA in finance from the University of Michigan.
![(PHOTO OF MARK LASKIN)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8704607.jpg)
Mark Laskin
Chartered Financial Analyst, portfolio manager, is manager of Invesco Growth and Income Fund. He joined Invesco in 2010. Mr. Laskin earned a BA in history from Swarthmore College. He also earned an MBA from the Wharton School and an MA from the Joseph H. Lauder Institute of Management and International Studies, both of the University of Pennsylvania.
Chartered Financial Analyst, portfolio manager, is manager of Invesco Growth and Income Fund. He joined Invesco in 2010. Mr. Laskin earned a BA in history from Swarthmore College. He also earned an MBA from the Wharton School and an MA from the Joseph H. Lauder Institute of Management and International Studies, both of the University of Pennsylvania.
![(PHOTO OF MARY JAYNE MALY)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8704608.jpg)
Mary Jayne Maly
Chartered Financial Analyst, portfolio manager, is manager of Invesco Growth and Income Fund. She joined Invesco in 2010. Ms. Maly earned a BA from the University of Pittsburgh and an MBA from the Thunderbird School of Global Management.
Chartered Financial Analyst, portfolio manager, is manager of Invesco Growth and Income Fund. She joined Invesco in 2010. Ms. Maly earned a BA from the University of Pittsburgh and an MBA from the Thunderbird School of Global Management.
![(PHOTO OF SERGIO MARCHELI)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8704609.jpg)
Sergio Marcheli
Portfolio manager, is manager of Invesco Growth and Income Fund. He joined Invesco in 2010. Mr. Marcheli earned a BBA from the University of Houston and an MBA from the University of St. Thomas.
Portfolio manager, is manager of Invesco Growth and Income Fund. He joined Invesco in 2010. Mr. Marcheli earned a BBA from the University of Houston and an MBA from the University of St. Thomas.
![(PHOTO OF JAMES ROEDER)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8704610.jpg)
James Roeder
Chartered Financial Analyst, portfolio manager, is manager of Invesco Growth and Income Fund. He joined Invesco in 2010. Mr. Roeder earned a BS in accounting from Clemson University and an MBA in economics and finance from the University of Chicago Booth School of Business.
Chartered Financial Analyst, portfolio manager, is manager of Invesco Growth and Income Fund. He joined Invesco in 2010. Mr. Roeder earned a BS in accounting from Clemson University and an MBA in economics and finance from the University of Chicago Booth School of Business.
5 Invesco Growth and Income Fund
Your Fund’s Long-Term Performance
Results of a $10,000 Investment – Oldest Share Class(es)
Fund and index data from 8/31/02
![(LINE GRAPH)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8704611.gif)
1 Sources: Invesco, Russell via FactSet Research Systems Inc.
2 Sources: Invesco, S&P-Dow Jones via FactSet Research Systems Inc.
3 Source: Lipper Inc.
2 Sources: Invesco, S&P-Dow Jones via FactSet Research Systems Inc.
3 Source: 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. 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
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 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 Growth and Income Fund
Average Annual Total Returns
As of 8/31/12, including maximum applicable sales charges
Class A Shares | ||||||||
Inception (8/1/46) | 9.20 | % | ||||||
10 | Years | 6.00 | ||||||
5 | Years | -0.70 | ||||||
1 | Year | 8.98 | ||||||
Class B Shares | ||||||||
Inception (8/2/93) | 8.72 | % | ||||||
10 | Years | 6.31 | ||||||
5 | Years | 0.06 | ||||||
1 | Year | 10.37 | ||||||
Class C Shares | ||||||||
Inception (8/2/93) | 8.27 | % | ||||||
10 | Years | 5.83 | ||||||
5 | Years | -0.30 | ||||||
1 | Year | 13.53 | ||||||
Class R Shares | ||||||||
Inception (10/1/02) | 7.27 | % | ||||||
5 | Years | 0.19 | ||||||
1 | Year | 15.03 | ||||||
Class Y Shares | ||||||||
Inception (10/19/04) | 5.53 | % | ||||||
5 | Years | 0.68 | ||||||
1 | Year | 15.60 | ||||||
Institutional Class Shares | ||||||||
10 | Years | 6.70 | % | |||||
5 | Years | 0.63 | ||||||
1 | Year | 15.80 |
Average Annual Total Returns
As of 6/30/12, the most recent calendar quarter-end, including maximum applicable sales charges
Class A Shares | ||||||||
Inception (8/1/46) | 9.17 | % | ||||||
10 | Years | 4.79 | ||||||
5 | Years | -2.05 | ||||||
1 | Year | -4.91 | ||||||
Class B Shares | ||||||||
Inception (8/2/93) | 8.62 | % | ||||||
10 | Years | 5.08 | ||||||
5 | Years | -1.31 | ||||||
1 | Year | -4.26 | ||||||
Class C Shares | ||||||||
Inception (8/2/93) | 8.17 | % | ||||||
10 | Years | 4.63 | ||||||
5 | Years | -1.66 | ||||||
1 | Year | -1.06 | ||||||
Class R Shares | ||||||||
Inception (10/1/02) | 7.05 | % | ||||||
5 | Years | -1.18 | ||||||
1 | Year | 0.41 | ||||||
Class Y Shares | ||||||||
Inception (10/19/04) | 5.21 | % | ||||||
5 | Years | -0.69 | ||||||
1 | Year | 0.91 | ||||||
Institutional Class Shares | ||||||||
10 | Years | 5.48 | % | |||||
5 | Years | -0.76 | ||||||
1 | Year | 1.05 |
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 (renamed Invesco 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 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 0.84%, 0.84%, 1.58%, 1.09%, 0.59% and 0.40%, 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.
7 Invesco Growth and Income Fund
Invesco Growth and Income Fund’s investment objective is to seek income and long-term growth of capital.
n | Unless otherwise stated, information presented in this report is as of August 31, 2012, 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 for new or additional investments. Existing shareholders of Class B shares may continue to reinvest dividends and capital gains distributions in Class B shares and exchange their Class B shares for Class B shares of other funds. 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 | Derivatives risk. 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 | Foreign risk. 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 | Forward-currency contract risk. The use of forward contracts involves the risk of mismatching the Fund’s objectives under a forward contract with the value of securities denominated in a particular currency. Furthermore, such |
transactions reduce or preclude the opportunity for gain if the value of the currency should move in the direction opposite to the position taken. There is an additional risk to the effect that currency contracts create exposure to currencies in which the Fund’s securities are not denominated. Unanticipated changes in currency prices may result in poorer overall performance for the Fund than if it had not entered into such contracts. | ||
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 | Investing in REITs risk. 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 | 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 credit-worthiness 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 | 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 | Value investing style risk. 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 US 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. |
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 | ACGIX | |||
Class B Shares | ACGJX | |||
Class C Shares | ACGKX | |||
Class R Shares | ACGLX | |||
Class Y Shares | ACGMX | |||
Institutional Class Shares | ACGQX |
8 Invesco Growth and Income Fund
Schedule of Investments(a)
August 31, 2012
Shares | Value | |||||||
| ||||||||
Common Stocks & Other Equity Interests–91.20% | ||||||||
Agricultural Products–1.07% | ||||||||
Archer-Daniels-Midland Co. | 2,807,722 | $ | 75,106,563 | |||||
Asset Management & Custody Banks–1.72% | ||||||||
Northern Trust Corp. | 1,274,066 | 59,167,625 | ||||||
State Street Corp. | 1,474,580 | 61,342,528 | ||||||
120,510,153 | ||||||||
Biotechnology–0.38% | ||||||||
Amgen Inc. | 320,505 | 26,896,780 | ||||||
Cable & Satellite–3.98% | ||||||||
Comcast Corp.–Class A | 4,253,462 | 142,618,581 | ||||||
Time Warner Cable Inc. | 1,526,911 | 135,620,235 | ||||||
278,238,816 | ||||||||
Communications Equipment–0.49% | ||||||||
Juniper Networks, Inc.(b) | 1,952,602 | 34,053,379 | ||||||
Data Processing & Outsourced Services–0.92% | ||||||||
Western Union Co. (The) | 3,646,196 | 64,209,512 | ||||||
Department Stores–0.82% | ||||||||
Kohl’s Corp. | 1,106,306 | 57,749,173 | ||||||
Diversified Banks–2.63% | ||||||||
Comerica Inc. | 1,618,661 | 49,709,080 | ||||||
U.S. Bancorp | 1,265,454 | 42,278,818 | ||||||
Wells Fargo & Co. | 2,701,736 | 91,940,076 | ||||||
183,927,974 | ||||||||
Diversified Chemicals–1.04% | ||||||||
PPG Industries, Inc. | 659,034 | 72,506,921 | ||||||
Diversified Support Services–0.78% | ||||||||
Cintas Corp. | 1,345,169 | 54,371,731 | ||||||
Drug Retail–0.63% | ||||||||
Walgreen Co. | 1,223,731 | 43,760,621 | ||||||
Electric Utilities–2.77% | ||||||||
Edison International | 1,240,307 | 54,313,044 | ||||||
Entergy Corp. | 578,323 | 39,372,230 | ||||||
FirstEnergy Corp. | 1,181,513 | 51,632,118 | ||||||
Pinnacle West Capital Corp. | 947,636 | 48,680,061 | ||||||
193,997,453 | ||||||||
Food Distributors–1.13% | ||||||||
Sysco Corp. | 2,618,940 | 79,353,882 | ||||||
Health Care Equipment–1.89% | ||||||||
Medtronic, Inc. | 3,256,238 | 132,398,637 | ||||||
Home Improvement Retail–1.37% | ||||||||
Home Depot, Inc. (The) | 1,687,026 | 95,738,725 | ||||||
Hotels, Resorts & Cruise Lines–1.03% | ||||||||
Carnival Corp. | 2,073,117 | 71,895,698 | ||||||
Household Products–2.48% | ||||||||
Energizer Holdings, Inc. | 604,083 | 41,621,319 | ||||||
Procter & Gamble Co. (The) | 1,965,635 | 132,071,015 | ||||||
173,692,334 | ||||||||
Industrial Conglomerates–6.70% | ||||||||
General Electric Co. | 14,986,385 | 310,368,033 | ||||||
Tyco International Ltd. | 2,803,509 | 158,061,838 | ||||||
468,429,871 | ||||||||
Industrial Machinery–1.30% | ||||||||
Ingersoll-Rand PLC | 1,951,769 | 91,264,718 | ||||||
Insurance Brokers–3.96% | ||||||||
Aon PLC | 1,154,443 | 59,984,858 | ||||||
Marsh & McLennan Cos., Inc. | 5,074,630 | 173,400,107 | ||||||
Willis Group Holdings PLC | 1,161,608 | 43,351,211 | ||||||
276,736,176 | ||||||||
Integrated Oil & Gas–3.82% | ||||||||
Chevron Corp. | 1,237,394 | 138,786,111 | ||||||
Exxon Mobil Corp. | 1,079,641 | 94,252,659 | ||||||
Occidental Petroleum Corp. | 399,557 | 33,966,341 | ||||||
267,005,111 | ||||||||
Integrated Telecommunication Services–0.95% | ||||||||
Verizon Communications Inc. | 1,549,130 | 66,519,642 | ||||||
Internet Software & Services–2.27% | ||||||||
eBay Inc.(b) | 3,349,719 | 159,011,161 | ||||||
Investment Banking & Brokerage–1.40% | ||||||||
Charles Schwab Corp. (The) | 5,333,956 | 71,955,066 | ||||||
Morgan Stanley | 1,713,390 | 25,700,850 | ||||||
97,655,916 | ||||||||
Investment Companies–Exchange Traded Funds–0.41% | ||||||||
SPDR S&P Homebuilders ETF | 1,228,800 | 28,987,392 | ||||||
IT Consulting & Other Services–1.09% | ||||||||
Amdocs Ltd.(b) | 2,370,023 | 76,409,541 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
9 Invesco Growth and Income Fund
Shares | Value | |||||||
Managed Health Care–2.94% | ||||||||
Cigna Corp. | 1,183,795 | $ | 54,182,297 | |||||
UnitedHealth Group Inc. | 1,975,655 | 107,278,067 | ||||||
WellPoint, Inc. | 738,420 | 44,209,205 | ||||||
205,669,569 | ||||||||
Movies & Entertainment–3.61% | ||||||||
Time Warner Inc. | 2,563,391 | 106,508,896 | ||||||
Viacom Inc.–Class B | 2,915,947 | 145,826,509 | ||||||
252,335,405 | ||||||||
Oil & Gas Equipment & Services–1.25% | ||||||||
Baker Hughes Inc. | 1,114,912 | 50,839,987 | ||||||
Halliburton Co. | 1,117,000 | 36,592,920 | ||||||
87,432,907 | ||||||||
Oil & Gas Exploration & Production–3.31% | ||||||||
Anadarko Petroleum Corp. | 1,884,798 | 130,559,957 | ||||||
ConocoPhillips | 728,420 | 41,366,972 | ||||||
Devon Energy Corp. | 904,892 | 52,329,904 | ||||||
WPX Energy Inc.(b) | 477,731 | 7,452,604 | ||||||
231,709,437 | ||||||||
Oil & Gas Storage & Transportation–1.00% | ||||||||
Williams Cos., Inc. (The) | 2,170,535 | 70,043,164 | ||||||
Other Diversified Financial Services–6.35% | ||||||||
Citigroup Inc. | 4,524,495 | 134,422,746 | ||||||
JPMorgan Chase & Co. | 8,343,447 | 309,875,622 | ||||||
444,298,368 | ||||||||
Packaged Foods & Meats–2.50% | ||||||||
Kraft Foods Inc.–Class A | 1,722,554 | 71,537,668 | ||||||
Unilever N.V.–New York Shares (Netherlands) | 2,964,390 | 103,101,484 | ||||||
174,639,152 | ||||||||
Personal Products–1.67% | ||||||||
Avon Products, Inc. | 7,550,239 | 116,651,193 | ||||||
Pharmaceuticals–7.66% | ||||||||
Bristol-Myers Squibb Co. | 3,473,603 | 114,663,635 | ||||||
Eli Lilly & Co. | 1,166,827 | 52,402,201 | ||||||
Hospira, Inc.(b) | 598,839 | 20,109,014 | ||||||
Merck & Co., Inc. | 3,382,763 | 145,627,947 | ||||||
Novartis AG (Switzerland) | 698,789 | 41,180,598 | ||||||
Novartis AG–ADR (Switzerland) | 121,832 | 7,189,306 | ||||||
Pfizer Inc. | 6,470,658 | 154,389,900 | ||||||
535,562,601 | ||||||||
Property & Casualty Insurance–0.80% | ||||||||
Chubb Corp. (The) | 761,527 | 56,269,230 | ||||||
Regional Banks–3.90% | ||||||||
BB&T Corp. | 2,334,456 | 73,628,742 | ||||||
Fifth Third Bancorp | 4,009,793 | 60,708,266 | ||||||
PNC Financial Services Group, Inc. | 2,224,822 | 138,294,936 | ||||||
272,631,944 | ||||||||
Semiconductor Equipment–0.86% | ||||||||
Applied Materials, Inc. | 5,126,645 | 59,930,480 | ||||||
Semiconductors–0.88% | ||||||||
Intel Corp. | 2,494,218 | 61,931,433 | ||||||
Soft Drinks–2.82% | ||||||||
Coca-Cola Co. (The) | 1,320,914 | 49,402,184 | ||||||
PepsiCo, Inc. | 2,039,100 | 147,692,013 | ||||||
197,094,197 | ||||||||
Systems Software–2.50% | ||||||||
Microsoft Corp. | 5,664,761 | 174,587,934 | ||||||
Wireless Telecommunication Services–2.12% | ||||||||
Vodafone Group PLC–ADR (United Kingdom) | 5,134,304 | 148,484,072 | ||||||
Total Common Stocks & Other Equity Interests (Cost $5,546,571,877) | 6,379,698,966 | |||||||
Money Market Funds–8.68% | ||||||||
Liquid Assets Portfolio–Institutional Class(c) | 303,795,305 | 303,795,305 | ||||||
Premier Portfolio–Institutional Class(c) | 303,795,305 | 303,795,305 | ||||||
Total Money Market Funds (Cost $607,590,610) | 607,590,610 | |||||||
TOTAL INVESTMENTS–99.88% (Cost $6,154,162,487) | 6,987,289,576 | |||||||
OTHER ASSETS LESS LIABILITIES–0.12% | 8,045,691 | |||||||
NET ASSETS–100.00% | $ | 6,995,335,267 | ||||||
Investment Abbreviations:
ADR | – American Depositary Receipt | |
ETF | – Exchange-Traded Fund |
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.
10 Invesco Growth and Income Fund
Statement of Assets and Liabilities
August 31, 2012
Assets: | ||||
Investments, at value (Cost $5,546,571,877) | $ | 6,379,698,966 | ||
Investments in affiliated money market funds, at value and cost | 607,590,610 | |||
Total investments, at value (Cost $6,154,162,487) | 6,987,289,576 | |||
Receivable for: | ||||
Investments sold | 30,953,161 | |||
Fund shares sold | 5,035,925 | |||
Dividends | 16,637,504 | |||
Fund expenses absorbed | 9,690 | |||
Investment for trustee deferred compensation and retirement plans | 47,551 | |||
Other assets | 64,315 | |||
Total assets | 7,040,037,722 | |||
Liabilities: | ||||
Payable for: | ||||
Investments purchased | 25,992,970 | |||
Fund shares reacquired | 9,285,735 | |||
Foreign currency contracts outstanding | 3,621,146 | |||
Accrued fees to affiliates | 5,238,785 | |||
Accrued other operating expenses | 184,752 | |||
Trustee deferred compensation and retirement plans | 379,067 | |||
Total liabilities | 44,702,455 | |||
Net assets applicable to shares outstanding | $ | 6,995,335,267 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 6,375,786,409 | ||
Undistributed net investment income | 39,825,760 | |||
Undistributed net realized gain (loss) | (249,782,845 | ) | ||
Unrealized appreciation | 829,505,943 | |||
$ | 6,995,335,267 | |||
Net Assets: | ||||
Class A | $ | 4,266,134,501 | ||
Class B | $ | 124,930,499 | ||
Class C | $ | 254,678,937 | ||
Class R | $ | 147,659,333 | ||
Class Y | $ | 1,504,586,052 | ||
Institutional Class | $ | 697,345,945 | ||
Shares outstanding, $0.01 par value per share, with an unlimited number of shares authorized: | ||||
Class A | 208,256,766 | |||
Class B | 6,141,205 | |||
Class C | 12,551,720 | |||
Class R | 7,206,125 | |||
Class Y | 73,388,185 | |||
Institutional Class | 33,974,812 | |||
Class A: | ||||
Net asset value per share | $ | 20.48 | ||
Maximum offering price per share | ||||
(Net asset value of $20.48 divided by 94.50%) | $ | 21.67 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 20.34 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 20.29 | ||
Class R: | ||||
Net asset value and offering price per share | $ | 20.49 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 20.50 | ||
Institutional Class: | ||||
Net asset value and offering price per share | $ | 20.53 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
11 Invesco Growth and Income Fund
Statement of Operations
For the year ended August 31, 2012
Investment income: | ||||
Dividends (net of foreign withholding taxes of $1,676,752) | $ | 171,233,576 | ||
Dividends from affiliated money market funds | 633,588 | |||
Total investment income | 171,867,164 | |||
Expenses: | ||||
Advisory fees | 24,517,228 | |||
Administrative services fees | 702,698 | |||
Custodian fees | 141,442 | |||
Distribution fees: | ||||
Class A | 10,649,163 | |||
Class B | 341,167 | |||
Class C | 2,468,341 | |||
Class R | 781,692 | |||
Transfer agent fees — A, B, C, R and Y | 13,104,450 | |||
Transfer agent fees — Institutional | 405,692 | |||
Trustees’ and officers’ fees and benefits | 393,757 | |||
Other | 928,878 | |||
Total expenses | 54,434,508 | |||
Less: Fees waived and expense offset arrangement(s) | (679,204 | ) | ||
Net expenses | 53,755,304 | |||
Net investment income | 118,111,860 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain (loss) from: | ||||
Investment securities (includes net gains from securities sold to affiliates of $2,222,626) | 90,072,230 | |||
Foreign currencies | (242,794 | ) | ||
Foreign currency contracts | 27,901,979 | |||
Option contracts written | 774,634 | |||
118,506,049 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | 762,734,282 | |||
Foreign currency contracts | (3,733,395 | ) | ||
759,000,887 | ||||
Net realized and unrealized gain | 877,506,936 | |||
Net increase in net assets resulting from operations | $ | 995,618,796 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
12 Invesco Growth and Income Fund
Statement of Changes in Net Assets
For the years ended August 31, 2012 and 2011
2012 | 2011 | |||||||
Operations: | ||||||||
Net investment income | $ | 118,111,860 | $ | 89,477,094 | ||||
Net realized gain | 118,506,049 | 390,544,941 | ||||||
Change in net unrealized appreciation | 759,000,887 | 329,001,327 | ||||||
Net increase in net assets resulting from operations | 995,618,796 | 809,023,362 | ||||||
Distributions to shareholders from net investment income: | ||||||||
Class A | (59,605,705 | ) | (49,752,247 | ) | ||||
Class B | (2,152,331 | ) | (2,289,778 | ) | ||||
Class C | (1,777,886 | ) | (994,066 | ) | ||||
Class R | (1,802,136 | ) | (1,231,024 | ) | ||||
Class Y | (25,675,865 | ) | (20,659,588 | ) | ||||
Institutional Class | (8,285,467 | ) | (2,010,774 | ) | ||||
Total distributions from net investment income | (99,299,390 | ) | (76,937,477 | ) | ||||
Share transactions–net: | ||||||||
Class A | (444,348,164 | ) | (497,901,045 | ) | ||||
Class B | (67,147,189 | ) | (91,521,932 | ) | ||||
Class C | (36,595,581 | ) | (44,889,378 | ) | ||||
Class R | (19,883,547 | ) | 11,454,379 | |||||
Class Y | (243,908,937 | ) | 198,824,176 | |||||
Institutional Class | 329,867,182 | 279,255,628 | ||||||
Net increase (decrease) in net assets resulting from share transactions | (482,016,236 | ) | (144,778,172 | ) | ||||
Net increase in net assets | 414,303,170 | 587,307,713 | ||||||
Net assets: | ||||||||
Beginning of year | 6,581,032,097 | 5,993,724,384 | ||||||
End of year (includes undistributed net investment income of $39,825,760 and $20,820,280, respectively) | $ | 6,995,335,267 | $ | 6,581,032,097 | ||||
Notes to Financial Statements
August 31, 2012
NOTE 1—Significant Accounting Policies
Invesco Growth and Income Fund, formerly 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 to seek 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 to Class A shares. 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 to Class A shares. 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 the conversion date will be subject to a CDSC.
13 Invesco Growth and 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. | |
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. 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 economic 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 |
14 Invesco Growth and 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 the ex-dividend date. Distributions from net realized capital gain, if any, are generally paid annually and recorded on the 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 June 1, 2010, incremental transfer agency fees which were unique to each class of shares 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 the 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. | |
K. | 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. |
15 Invesco 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. (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 July 1, 2012, the Adviser has contractually agreed, through at least June 30, 2013, 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, Class Y and Institutional Class shares to 2.00%, 2.75%, 2.75%, 2.25%, 1.75% and 1.75% of average daily net assets, respectively. Prior to July 1, 2012, 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 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, 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 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, including litigation expenses; 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 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, 2013, 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, 2012, the Adviser waived advisory fees of $673,495.
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, 2012, 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, 2012, 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, Class B, Class C 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, 2012, 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, 2012, IDI advised the Fund that IDI retained $299,826 in front-end sales commissions from the sale of Class A shares and $2,107, $125,158 and $10,034 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, IIS and/or IDI.
16 Invesco 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, 2012. 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.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 6,987,289,576 | $ | — | $ | — | $ | 6,987,289,576 | ||||||||
Foreign Currency Contracts* | — | (3,621,146 | ) | — | (3,621,146 | ) | ||||||||||
Total Investments | $ | 6,987,289,576 | $ | (3,621,146 | ) | $ | — | $ | 6,983,668,430 | |||||||
* | Unrealized appreciation (depreciation). |
NOTE 4—Derivative Investments
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, 2012:
Value | ||||||||
Risk Exposure/Derivative Type | Assets | Liabilities | ||||||
Currency risk | ||||||||
Foreign currency contracts(a) | $ | — | $ | (3,621,146 | ) | |||
(a) | Values are disclosed on the Statement of Assets and Liabilities under Foreign currency contracts outstanding. |
Effect of Derivative Instruments for the year ended August 31, 2012
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 | ||||||||
Option | Foreign Currency | |||||||
Contracts | Contracts* | |||||||
Realized Gain | ||||||||
Currency risk | $ | — | $ | 27,901,979 | ||||
Equity risk | 774,634 | — | ||||||
Change in Unrealized Appreciation (Depreciation) | ||||||||
Currency risk | $ | — | $ | (3,733,395 | ) | |||
Total | $ | 774,634 | $ | 24,168,584 | ||||
* | The average notional value of foreign currency contracts and options outstanding during the period was $274,271,737 and $9,877,000, respectively. |
17 Invesco Growth and Income Fund
Open Foreign Currency Contracts | ||||||||||||||||||||||||
Unrealized | ||||||||||||||||||||||||
Settlement | Contract to | Notional | Appreciation | |||||||||||||||||||||
Date | Counterparty | Deliver | Receive | Value | (Depreciation) | |||||||||||||||||||
09/20/2012 | Bank of New York | CHF | 19,737,171 | USD | 20,185,699 | $ | 20,684,408 | $ | (498,709 | ) | ||||||||||||||
09/20/2012 | Bank of New York | EUR | 56,808,998 | USD | 69,740,998 | 71,481,815 | (1,740,817 | ) | ||||||||||||||||
09/20/2012 | State Street | GBP | 66,691,203 | USD | 104,498,446 | 105,880,066 | (1,381,620 | ) | ||||||||||||||||
198,046,289 | $ | (3,621,146 | ) | |||||||||||||||||||||
Currency Abbreviations:
CHF | – Swiss Franc | |
EUR | – Euro | |
GBP | – British Pound Sterling | |
USD | – U.S. Dollar |
Transactions During the Period | ||||||||
Call Option Contracts | ||||||||
Number of | Premiums | |||||||
Contracts | Received | |||||||
Beginning of period | — | $ | — | |||||
Written | 9,877 | 774,634 | ||||||
Expired | (9,877 | ) | (774,634 | ) | ||||
End of period | — | $ | — | |||||
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, 2012, the Fund engaged in securities purchases of $757,894 and securities sales of $6,514,583, which resulted in net realized gains of $2,222,626.
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, 2012, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $5,709.
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.
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. Such balances, if any at period end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. 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.
18 Invesco Growth and Income Fund
NOTE 9—Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Years Ended August 31, 2012 and 2011:
2012 | 2011 | |||||||
Ordinary income | $ | 99,299,390 | $ | 76,937,477 | ||||
Tax Components of Net Assets at Period-End:
2012 | ||||
Undistributed ordinary income | $ | 38,832,231 | ||
Net unrealized appreciation — investments | 827,414,400 | |||
Net unrealized appreciation (depreciation) — other investments | 1,366,250 | |||
Temporary book/tax differences | (372,721 | ) | ||
Post-October deferrals | (45,389,760 | ) | ||
Capital loss carryforward | (202,301,542 | ) | ||
Shares of beneficial interest | 6,375,786,409 | |||
Total net assets | $ | 6,995,335,267 | ||
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 Regulated Investment Company Modernization Act of 2010 (the “Act”) eliminated the eight-year carryover period for capital losses that arise in taxable years beginning after its enactment date of December 22, 2010. Consequently, these capital losses can be carried forward for an unlimited period. However, capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Additionally, post-enactment capital loss carryovers will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. 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 $154,774,475 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, 2012, which expires as follows:
Capital Loss Carryforward* | ||||||||||||
Expiration | Short-Term | Long-Term | Total | |||||||||
August 31, 2016 | $ | 7,384,165 | $ | — | $ | 7,384,165 | ||||||
August 31, 2017 | 194,917,377 | — | 194,917,377 | |||||||||
$ | 202,301,542 | $ | — | $ | 202,301,542 | |||||||
* | 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 are 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 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, 2012 was $1,612,362,184 and $2,294,642,557, 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 | $ | 998,907,458 | ||
Aggregate unrealized (depreciation) of investment securities | (171,493,058 | ) | ||
Net unrealized appreciation of investment securities | $ | 827,414,400 | ||
Cost of investments for tax purposes is $6,159,875,176. |
NOTE 11—Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of foreign currency transactions, litigation settlements and proxy costs, on August 31, 2012, undistributed net investment income was increased by $193,010, undistributed net realized gain (loss) was increased by $22,251 and shares of beneficial interest was decreased by $215,261. This reclassification had no effect on the net assets of the Fund.
19 Invesco Growth and Income Fund
NOTE 12—Share Information
Summary of Share Activity | ||||||||||||||||
Year ended August 31, | ||||||||||||||||
2012(a) | 2011 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Class A | 39,465,171 | $ | 726,104,891 | 36,245,786 | $ | 693,700,987 | ||||||||||
Class B | 85,550 | 1,608,658 | 438,546 | 8,100,844 | ||||||||||||
Class C | 780,206 | 14,906,715 | 1,063,972 | 20,372,767 | ||||||||||||
Class R | 2,320,089 | 43,705,629 | 2,659,405 | 51,394,097 | ||||||||||||
Class Y | 23,801,882 | 455,243,761 | 35,839,552 | 683,384,836 | ||||||||||||
Institutional Class | 21,780,068 | 422,884,733 | 17,685,144 | 338,759,065 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Class A | 2,974,507 | 56,098,194 | 2,499,969 | 46,491,378 | ||||||||||||
Class B | 107,992 | 2,014,736 | 115,560 | 2,128,328 | ||||||||||||
Class C | 85,105 | 1,588,011 | 48,175 | 883,466 | ||||||||||||
Class R | 95,400 | 1,800,651 | 65,955 | 1,229,378 | ||||||||||||
Class Y | 1,308,768 | 24,683,678 | 1,043,596 | 19,488,200 | ||||||||||||
Institutional Class | 432,771 | 8,285,259 | 105,285 | 2,010,645 | ||||||||||||
Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||
Class A | 2,221,123 | 41,945,772 | 3,922,878 | 76,286,897 | ||||||||||||
Class B | (2,219,631 | ) | (41,945,772 | ) | (3,952,448 | ) | (76,286,897 | ) | ||||||||
Issued in connection with acquisitions:(b) | ||||||||||||||||
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 | (66,777,435 | ) | (1,268,497,021 | ) | (71,652,843 | ) | (1,369,224,649 | ) | ||||||||
Class B | (1,513,340 | ) | (28,824,811 | ) | (2,608,096 | ) | (49,185,681 | ) | ||||||||
Class C | (2,806,866 | ) | (53,090,307 | ) | (3,720,137 | ) | (70,008,892 | ) | ||||||||
Class R | (3,393,141 | ) | (65,389,827 | ) | (2,146,765 | ) | (41,169,096 | ) | ||||||||
Class Y | (37,428,967 | ) | (723,836,376 | ) | (29,884,311 | ) | (578,160,553 | ) | ||||||||
Institutional Class | (5,265,183 | ) | (101,302,810 | ) | (3,366,863 | ) | (61,514,082 | ) | ||||||||
Net increase (decrease) in share activity | (23,945,931 | ) | $ | (482,016,236 | ) | (7,883,456 | ) | $ | (144,778,172 | ) | ||||||
(a) | There is an entity that is a record owner of more than 5% of the outstanding shares of the Fund and owns 26% 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 Fund has no knowledge as to whether all or any portion of the shares owned of record by this entity are also owned beneficially. | |
(b) | As of the opening of business on May 23, 2011, the Fund acquired all the net asset 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 acquisition was accomplished by a tax-free exchange of 7,714,184 shares of the Fund for 3,780,748 shares outstanding of Invesco Fundamental 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 after the acquisition were $7,574,680,845. |
20 Invesco 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 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||||||||||
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 08/31/12 | $ | 18.01 | $ | 0.32 | $ | 2.42 | $ | 2.74 | $ | (0.27 | ) | $ | — | $ | (0.27 | ) | $ | 20.48 | 15.33 | %(c) | $ | 4,266,135 | 0.83 | %(d) | 0.84 | %(d) | 1.66 | %(d) | 25 | % | ||||||||||||||||||||||||||
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 | 0.84 | 1.23 | 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 | (e) | 0.74 | (e) | 1.36 | (e) | 23 | ||||||||||||||||||||||||||||||||||
Year ended 11/30/09 | 13.87 | 0.23 | 3.34 | 3.57 | (0.25 | ) | — | (0.25 | ) | 17.19 | 26.24 | (f) | 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 | )(f) | 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 | (f) | 7,793,361 | 0.77 | 0.77 | 1.58 | 26 | ||||||||||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/12 | 17.88 | 0.31 | 2.41 | 2.72 | (0.26 | ) | — | (0.26 | ) | 20.34 | 15.37 | (c)(g) | 124,930 | 0.81 | (d)(g) | 0.82 | (d)(g) | 1.68 | (d)(g) | 25 | ||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 15.93 | 0.23 | 1.90 | 2.13 | (0.18 | ) | — | (0.18 | ) | 17.88 | 13.36 | (c)(g) | 173,129 | 0.83 | (g) | 0.84 | (g) | 1.23 | (g) | 23 | ||||||||||||||||||||||||||||||||||||
Nine months ended 08/31/10 | 17.05 | 0.16 | (1.12 | ) | (0.96 | ) | (0.16 | ) | — | (0.16 | ) | 15.93 | (5.69 | )(c)(g) | 231,193 | 0.89 | (e)(g) | 0.89 | (e)(g) | 1.21 | (e)(g) | 23 | ||||||||||||||||||||||||||||||||||
Year ended 11/30/09 | 13.76 | 0.22 | 3.32 | 3.54 | (0.25 | ) | — | (0.25 | ) | 17.05 | 26.32 | (h)(i) | 320,577 | 0.89 | (i) | 0.89 | (i) | 1.59 | (i) | 51 | ||||||||||||||||||||||||||||||||||||
Year ended 11/30/08 | 22.57 | 0.32 | (7.81 | ) | (7.49 | ) | (0.37 | ) | (0.95 | ) | (1.32 | ) | 13.76 | (35.09 | )(h)(i) | 365,277 | 0.84 | (i) | 0.84 | (i) | 1.72 | (i) | 42 | |||||||||||||||||||||||||||||||||
Year ended 11/30/07 | 22.47 | 0.34 | 1.20 | 1.54 | (0.36 | ) | (1.08 | ) | (1.44 | ) | 22.57 | 7.18 | (h)(i) | 777,590 | 0.85 | (i) | 0.85 | (i) | 1.50 | (i) | 26 | |||||||||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/12 | 17.84 | 0.18 | 2.40 | 2.58 | (0.13 | ) | — | (0.13 | ) | 20.29 | 14.53 | (c)(j) | 254,679 | 1.55 | (d)(j) | 1.56 | (d)(j) | 0.94 | (d)(j) | 25 | ||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 15.91 | 0.09 | 1.90 | 1.99 | (0.06 | ) | — | (0.06 | ) | 17.84 | 12.52 | (c)(j) | 258,606 | 1.57 | (j) | 1.58 | (j) | 0.49 | (j) | 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 | (e) | 1.49 | (e) | 0.61 | (e) | 23 | ||||||||||||||||||||||||||||||||||
Year ended 11/30/09 | 13.74 | 0.12 | 3.32 | 3.44 | (0.15 | ) | — | (0.15 | ) | 17.03 | 25.36 | (i)(k) | 316,283 | 1.62 | (i) | 1.62 | (i) | 0.84 | (i) | 51 | ||||||||||||||||||||||||||||||||||||
Year ended 11/30/08 | 22.53 | 0.20 | (7.81 | ) | (7.61 | ) | (0.23 | ) | (0.95 | ) | (1.18 | ) | 13.74 | (35.54 | )(i)(k) | 301,306 | 1.51 | (i) | 1.51 | (i) | 1.06 | (i) | 42 | |||||||||||||||||||||||||||||||||
Year ended 11/30/07 | 22.43 | 0.20 | 1.21 | 1.41 | (0.23 | ) | (1.08 | ) | (1.31 | ) | 22.53 | 6.53 | (i)(k) | 591,037 | 1.48 | (i) | 1.48 | (i) | 0.87 | (i) | 26 | |||||||||||||||||||||||||||||||||||
Class R | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/12 | 18.02 | 0.27 | 2.42 | 2.69 | (0.22 | ) | — | (0.22 | ) | 20.49 | 15.03 | (c) | 147,659 | 1.08 | (d) | 1.09 | (d) | 1.41 | (d) | 25 | ||||||||||||||||||||||||||||||||||||
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 | 1.09 | 0.98 | 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 | (e) | 0.99 | (e) | 1.11 | (e) | 23 | ||||||||||||||||||||||||||||||||||
Year ended 11/30/09 | 13.87 | 0.18 | 3.35 | 3.53 | (0.21 | ) | — | (0.21 | ) | 17.19 | 26.00 | (l) | 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 | )(l) | 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 | (l) | 140,227 | 1.02 | 1.02 | 1.33 | 26 | ||||||||||||||||||||||||||||||||||||||
Class Y | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/12 | 18.03 | 0.36 | 2.42 | 2.78 | (0.31 | ) | — | (0.31 | ) | 20.50 | 15.60 | (c) | 1,504,586 | 0.58 | (d) | 0.59 | (d) | 1.91 | (d) | 25 | ||||||||||||||||||||||||||||||||||||
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 | 0.59 | 1.48 | 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 | (e) | 0.49 | (e) | 1.61 | (e) | 23 | ||||||||||||||||||||||||||||||||||
Year ended 11/30/09 | 13.88 | 0.26 | 3.35 | 3.61 | (0.28 | ) | — | (0.28 | ) | 17.21 | 26.60 | (m) | 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 | )(m) | 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 | (m) | 1,185,286 | 0.52 | 0.52 | 1.83 | 26 | ||||||||||||||||||||||||||||||||||||||
Institutional Class | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/12 | 18.05 | 0.39 | 2.43 | 2.82 | (0.34 | ) | — | (0.34 | ) | 20.53 | 15.80 | (c) | 697,346 | 0.46 | (d) | 0.47 | (d) | 2.03 | (d) | 25 | ||||||||||||||||||||||||||||||||||||
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 | 0.40 | 1.67 | 23 | |||||||||||||||||||||||||||||||||||||||
Nine months ended 08/31/10(n) | 16.48 | 0.05 | (0.39 | ) | (0.34 | ) | (0.06 | ) | — | (0.06 | ) | 16.08 | (2.05 | )(c) | 41,861 | 0.45 | (e) | 0.45 | (e) | 1.31 | (e) | 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. | |
(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 $4,263,076, $147,339, $253,985, $156,338, $1,576,489 and $500,553 for Class A, Class B, Class C, Class R, Class Y and Institutional Class, respectively. | |
(e) | Annualized. | |
(f) | 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. | |
(g) | 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 0.23%, 0.25% and 0.40% for the years ended August 31, 2012 and 2011 and nine months ended August 31, 2010, respectively. | |
(h) | 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. | |
(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 fees of less than 1%. | |
(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 0.97% and 0.99% for the years ended August 31, 2012 and 2011, respectively. | |
(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) | 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 on Fund shares. | |
(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. | |
(n) | Commencement date of June 1, 2010. |
21 Invesco Growth and Income Fund
NOTE 14—Subsequent Event
Effective September 24, 2012, Institutional Class shares were renamed Class R5 shares and the Fund began offering Class R6 shares.
22 Invesco 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 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 Growth and Income Fund, (formerly known as 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, 2012, 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 two years in the period 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, 2012 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. 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 23, 2012
Houston, Texas
23 Invesco 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, 2012 through August 31, 2012.
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 | (03/01/12) | (08/31/12)1 | Period2 | (08/31/12) | Period2 | Ratio | ||||||||||||||||||||||||
A | $ | 1,000.00 | $ | 1,039.30 | $ | 4.20 | $ | 1,021.01 | $ | 4.17 | 0.82 | % | ||||||||||||||||||
B | 1,000.00 | 1,039.60 | 4.20 | 1,021.01 | 4.17 | 0.82 | ||||||||||||||||||||||||
C | 1,000.00 | 1,035.50 | 8.03 | 1,017.24 | 7.96 | 1.57 | ||||||||||||||||||||||||
R | 1,000.00 | 1,038.60 | 5.48 | 1,019.76 | 5.43 | 1.07 | ||||||||||||||||||||||||
Y | 1,000.00 | 1,041.10 | 2.92 | 1,022.27 | 2.90 | 0.57 | ||||||||||||||||||||||||
Institutional | 1,000.00 | 1,041.70 | 2.41 | 1,022.77 | 2.39 | 0.47 | ||||||||||||||||||||||||
1 | The actual ending account value is based on the actual total return of the Fund for the period March 1, 2012 through August 31, 2012, 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 184/366 to reflect the most recent fiscal half year. |
24 Invesco Growth and Income Fund
Approval of Investment Advisory and Sub-Advisory Contracts (Formerly Known as Invesco Van Kampen Growth and Income Fund) |
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 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 19-20, 2012, 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, 2012. 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 primarily 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, 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 and on what terms 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. In addition to meetings with Invesco Advisers and fund 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 independent legal 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 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 previously approved by a different board that, at the time, was responsible for overseeing Morgan Stanley and Van Kampen funds, which have become Invesco Funds following the acquisition of the retail mutual fund business of Morgan Stanley. 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 or factor 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 20, 2012, 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 Sub-Committees 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 prior relationship and 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 consistent 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 consistent 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 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
25 Invesco Growth and Income Fund
performance of Class A shares of the Fund was in the third quintile of the performance universe for the one and three year periods and the first 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 and five year periods and below the performance of the Index for the three year period. 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.
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 tended to be more comparable, reflecting a more comparable scope of services. 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 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 and were assisted in their review by a report from the Senior Officer. 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. The Board noted that Invesco Advisers proposes sharing economies of scale in administration expenses by lowering per class administrative fees.
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 for the year ended December 31, 2011. 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 Invesco Funds and the Fund. The Board did not deem the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund to be excessive given the nature, quality and extent of the services provided to the Invesco Funds. The Board received and accepted information from Invesco Advisers demonstrating that 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.
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 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 also considered periodic reports from the Chief Compliance Officer of the Invesco Funds demonstrating that these arrangements are consistent with regulatory requirements. The Board did not deem the soft dollar arrangements to be inappropriate.
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.
The Board also considered use of an affiliated broker to execute certain trades for the Fund and that such trades are executed in compliance with rules under the Investment Company Act of 1940, as amended.
26 Invesco 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, 2012:
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 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 1000, 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 | Other Directorship(s) | |||||||
Name, Year of Birth and | Trustee and/or | Principal Occupation(s) | Funds in | Held by Trustee During | ||||
Position(s) Held with the Trust | Officer Since | During Past 5 Years | Fund Complex Overseen by Trustee | Past 5 Years | ||||
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 | 129 | 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. | 129 | None | ||||
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. | ||||||||
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 certain funds in the Fund Complex | 147 | Director of the Mutual Fund Directors Forum, a nonprofit membership organization for investment directors; Chairman and Director of the Abraham Lincoln Presidential Library Foundation; and Director of the Stevenson Center for Democracy | ||||
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 is considered an “interested person” (within the meaning of Section 2(a)(19) of the 1940 Act) of certain Funds in the Invesco Fund Complex by reason of he and his firm currently providing legal services as legal counsel to such Funds in the Invesco Fund Complex. |
T-1 Invesco Growth and Income Fund
Trustees and Officers—(continued)
Number of | Other Directorship(s) | |||||||
Name, Year of Birth and | Trustee and/or | Principal Occupation(s) | Funds in | Held by Trustee During | ||||
Position(s) Held with the Trust | Officer Since | During Past 5 Years | Fund Complex Overseen by Trustee | Past 5 Years | ||||
Independent Trustees | ||||||||
Bruce L. Crockett — 1944 Trustee and Chair | 2003 | Chairman, Crockett Technologies 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) | 129 | ACE Limited (insurance company); and Investment Company Institute | ||||
David C. Arch — 1945 Trustee | 2010 | Retired. Chairman and Chief Executive Officer of Blistex Inc., a consumer health care products manufacturer | 147 | Member of the Heartland Alliance Advisory Board, a nonprofit organization serving human needs based in Chicago. Board member of the Illinois Manufacturers’ Association. Member of the Board of Visitors, Institute for the Humanities, University of Michigan | ||||
Frank S. Bayley — 1939 Trustee | 2003 | Retired Formerly: Director, Badgley Funds, Inc. (registered investment company) (2 portfolios) and Partner, law firm of Baker & McKenzie | 129 | 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 | 129 | Chairman, Board of Governors, Western Golf Association, Chairman-elect, Evans Scholars Foundation and Director, Denver Film Society | ||||
Rodney F. Dammeyer — 1940 Trustee | 2010 | Chairman of CAC, LLC, a private company offering capital investment and management advisory services Formerly: Prior to January 2004, Director of TeleTech Holdings Inc.; Prior to 2002, Director of Arris Group, Inc.; Prior to 2001, Managing Partner at Equity Group Corporate Investments. Prior to 1995, Vice Chairman of Anixter International. Prior to 1985, experience includes Senior Vice President and Chief Financial Officer of Household International, Inc, Executive Vice President and Chief Financial Officer of Northwest Industries, Inc. and Partner of Arthur Andersen & Co. | 147 | 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) 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) | 129 | Director of Nature’s Sunshine Products, Inc. | ||||
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) Formerly: Chief Executive Officer, Texana Timber LP (sustainable forestry company) and member of the U.S. House of Representatives | 129 | Insperity (formerly known as Administaff) | ||||
Carl Frischling — 1937 Trustee | 2003 | Partner, law firm of Kramer Levin Naftalis and Frankel LLP | 129 | Director, Reich & Tang Funds (6 portfolios) | ||||
Prema Mathai-Davis — 1950 Trustee | 2003 | Retired Formerly: Chief Executive Officer, YWCA of the U.S.A. | 129 | None | ||||
Larry Soll — 1942 Trustee | 1997 | Retired Formerly, Chairman, Chief Executive Officer and President, Synergen Corp. (a biotechnology company) | 129 | None | ||||
T-2 Invesco Growth and Income Fund
Trustees and Officers—(continued)
Number of | Other Directorship(s) | |||||||
Name, Year of Birth and | Trustee and/or | Principal Occupation(s) | Funds in | Held by Trustee | ||||
Position(s) Held with the Trust | Officer Since | During Past 5 Years | Fund Complex Overseen by Trustee | During Past 5 Years | ||||
Independent Trustees—(continued) | ||||||||
Hugo F. Sonnenschein — 1940 Trustee | 2010 | Distinguished Service Professor and President Emeritus of the University of Chicago and the Adam Smith Distinguished Service Professor in the Department of Economics at the University of Chicago. Prior to July 2000, President of the University of Chicago | 147 | 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 | 129 | None | ||||
Other Officers | ||||||||
Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer, The 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 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) | N/A | N/A | ||||
Lisa O. Brinkley — 1959 Vice President | 2004 | Global Assurance Officer, Invesco Ltd. and Vice President, The Invesco Funds Formerly: Chief Compliance Officer, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.), Invesco Investment Services, Inc.(formerly known as Invesco Aim Investment Services, 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 | ||||
T-3 Invesco Growth and Income Fund
Trustees and Officers—(continued)
�� | Number of | Other Directorship(s) | ||||||
Name, Year of Birth and | Trustee and/or | Principal Occupation(s) | Funds in | Held by Trustee | ||||
Position(s) Held with the Trust | Officer Since | During Past 5 Years | Fund Complex Overseen by Trustee | During Past 5 Years | ||||
Other Officers—(continued) | ||||||||
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., INVESCO Global Asset Management Limited, Invesco Management Company Limited and INVESCO Management S.A.; 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) 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) | 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); and 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 Formerly: Vice President, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc. | N/A | N/A | ||||
Yinka Akinsola — 1977 Anti-Money Laundering Compliance Officer | 2011 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.), Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.), Invesco Management Group, Inc., The Invesco Funds, Invesco Van Kampen Closed-End Funds, Van Kampen Exchange Corp., Van Kampen Funds Inc., PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, and PowerShares Actively Managed Exchange-Traded Fund Trust Formerly: Regulatory Analyst III, Financial Industry Regulatory Authority (FINRA). | N/A | N/A | ||||
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; Vice President, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) and Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.) Formerly: Senior Vice President, Van Kampen Investments Inc.; Senior Vice President and Chief Compliance Officer, Invesco Advisers, Inc. and Invesco Aim Capital Management, Inc.; Chief Compliance Officer, INVESCO Private Capital Investments, Inc. (holding company), Invesco Private Capital, Inc. (registered investment adviser), Invesco Global Asset Management (N.A.), Inc., Invesco Senior Secured Management, Inc. (registered investment adviser) and Van Kampen Investor Services Inc., 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 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 1000 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 1000 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 1000 Houston, TX 77046-1173 | Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
T-4 Invesco Growth and Income Fund
![(IMAGE)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8704612.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 shown below.
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, 2012, 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 US 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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SEC file numbers: 811-09913 and 333-36074 | VK-GRI-AR-1 | Invesco Distributors, Inc. |
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Annual Report to Shareholders August 31, 2012
Invesco Pennsylvania Tax Free Income Fund
Effective September 24, 2012, after the close of the reporting period,
Invesco Van Kampen Pennsylvania Tax Free Income Fund was renamed
Invesco Pennsylvania Tax Free Income Fund.
Invesco Van Kampen Pennsylvania Tax Free Income Fund was renamed
Invesco Pennsylvania Tax Free Income Fund.
Nasdaq:
A: VKMPX § B: VKPAX § C: VKPCX § Y: VKPYX
A: VKMPX § B: VKPAX § C: VKPCX § 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 | |
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/0000950123-12-013037/h87055h8704902.jpg)
Philip Taylor
Dear Shareholders:
This report contains information about your Fund, including a discussion from your portfolio managers about how they managed your Fund – and why it performed as it did – during the reporting period. This report also includes your Fund’s long-term performance and a complete list of your Fund’s investments as of the close of the reporting period. I hope you find this information helpful.
For much of the reporting period, investors’ attention was focused on Europe, where eurozone governments struggled to reduce debt levels, strengthen their banks and stimulate their economies. European leaders disagreed whether the wiser path to restoring the Continent’s economic well-being was more stimulus or greater austerity. In the US, economic data were mixed. Economic growth, while positive, was relatively modest. Corporate earnings, which have grown strongly in recent years, have begun to slow. And job creation has been less robust than hoped. Later in this report, your Fund’s portfolio managers discuss how economic conditions and market trends affected your Fund’s performance.
Economic conditions are always subject to sudden and unexpected change. That’s why you may find it helpful to work with a trusted, experienced financial adviser who understands your unique financial goals, needs and risk tolerances. Financial advisers can provide valuable insight and information, particularly when markets are turbulent, and they can recommend investments appropriate for specific investment goals, such as a child’s college education or your retirement. On a regular basis, a financial adviser also can determine whether your existing investments are still appropriate, given your changing needs, goals and circumstances.
Timely insight and information from many of Invesco’s investment professionals is available at our website, invesco.com/us. We offer in-depth articles, video clips and audio commentaries from many of our portfolio managers and other investment professionals on a wide range of topics of interest to investors: recent economic and market developments; retirement planning; legislative updates from Washington, DC; and general investor education. At invesco.com/us, you also can access information about your Invesco account at any time.
What we mean by Intentional Investing
Intentional InvestingSM is the science and art of investing with purpose, prudence and diligence – and it’s how Invesco’s investment professionals manage your money every day.
This highly disciplined process begins when specialized teams of investment professionals clearly define an investment objective and then establish specific investment strategies to try to achieve that objective. While our investment teams closely monitor economic and market conditions – and issues specific to individual holdings that could affect their value – they maintain a long-term investment perspective. Intentional Investing is also:
n | How we manage and mitigate risk – by embedding risk controls and processes into every aspect of our business; | ||
n | How we create products – by offering a diverse combination of investment strategies and vehicles designed to meet your needs; and | ||
n | How we connect with you, our investors – by communicating clearly, by delivering expert insights from our portfolio managers and other investment professionals, and by providing a website full of tools and articles to help you stay informed. |
As a company, Invesco believes in putting investors first, and that’s why investment management is all we do. Our sole focus on managing your money allows your financial adviser to build a truly diversified investment portfolio of Invesco funds, whatever your investment needs and goals may be – and allows him or her to find appropriate Invesco funds when your circumstances change. Of course, neither Intentional Investing nor diversification can guarantee a profit or protect against loss.
Have a question?
If you have questions about your account, please contact an Invesco client services representative at 800 959 4246. If you have an Invesco-related question or comment, feel free 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/0000950123-12-013037/h87055h8704903.gif)
Philip Taylor
Senior Managing Director, Invesco Ltd.
![-s- Philip Taylor](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8704903.gif)
Philip Taylor
Senior Managing Director, Invesco Ltd.
2 | Invesco Pennsylvania Tax Free Income Fund |
![(PHOTO OF BRUCE CROCKETT)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8704904.jpg)
Bruce Crockett
Dear Fellow Shareholders:
One of our most important responsibilities as independent Trustees of the Invesco Funds is our annual review of the funds’ advisory and sub-advisory contracts with Invesco. This annual review is required by the Investment Company Act of 1940 and focuses on the nature and quality of the services Invesco has provided as adviser to the Invesco Funds and the reasonableness of the fees that it charges for those services.
In our roles as Trustees, we spend months reviewing thousands of pages of detailed information that we request from Invesco in connection with our annual review. We focus on the quality and costs of the services to be provided by Invesco and its affiliates. Some of the most important things we look at are fund performance, expenses and fees. All of the Trustees have substantial personal investments in the Invesco Funds complex. We’re fund shareholders just like you.
We also use information from many independent sources during the review process, including materials provided by the independent Senior Officer of the Invesco Funds, who reports directly to the independent Trustees. We also meet in private sessions with independent legal counsel and review performance and fee data on the Invesco Funds prepared by Lipper Inc., an independent, third-party firm widely recognized as a leader in its field.
I’m pleased to report that the Invesco Funds Board determined in June that renewing the investment advisory agreement and the sub-advisory contracts with Invesco would serve the best interests of each fund and its shareholders. For more detailed information about our assessment and conclusions with respect to each of the Invesco Funds, visit invesco.com/us, click on the “About Us” section and go to “Legal Information.” Information on the recent investment advisory renewal process can be found by clicking the last item under “Corporate Governance.”
In much the same way we review your fund’s advisory contract each year, it’s a good idea for you to review your own investment plan with your financial adviser on a regular basis. Perhaps you need to reassess your original asset allocation because different investments may grow at varying paces, or perhaps you’re going through a significant life change. Regardless of your situation, a financial adviser can provide guidance and experience to help you reach your financial goals.
As always, please contact me at bruce@brucecrockett.com with any questions or concerns you may have. On behalf of the 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/0000950123-12-013037/h87055h8704905.gif)
Bruce L. Crockett
Independent Chair
Invesco Funds Board of Trustees
![-s- Bruce L. Crockett](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8704905.gif)
Bruce L. Crockett
Independent Chair
Invesco Funds Board of Trustees
3 | Invesco Pennsylvania Tax Free Income Fund |
Management’s Discussion of Fund Performance
Performance summary
Invesco Pennsylvania Tax Free Income Fund posted positive returns for the fiscal year ended August 31, 2012. The Fund at net asset value outperformed its broad market benchmark, the Barclays Municipal Bond Index, and its style-specific benchmark, the Barclays Pennsylvania Municipal Index. The Fund’s significant overweight exposure to longer dated securities was a main contributor to relative performance versus the Barclays Pennsylvania Municipal Index for the reporting period.
Your Fund’s long-term performance appears later in this report.
Fund vs. Indexes
Total returns, 8/31/11 to 8/31/12, 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 | 12.04 | % | ||
Class B Shares | 12.22 | |||
Class C Shares | 11.19 | |||
Class Y Shares | 12.37 | |||
Barclays Municipal Bond Index▼(Broad Market Index) | 8.78 | |||
Barclays Pennsylvania Municipal Index§ (Style-Specific Index) | 9.01 |
Source(s): ▼Lipper Inc.; §Barclays 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 investment in a varied portfolio of medium and lower grade municipal securities.
Though we seek to invest primarily in medium grade and lower grade securities, at times conditions in the Pennsylvania municipal market may be such that we elect to invest in higher grade securities. Generally, and depending on market conditions, higher grade municipal securities may better protect NAV against declines, but may produce lower yields than lower rated municipal securities, since yields on higher grade securities
are usually lower than yields on medium grade or lower grade securities. As a result, we may not invest in the highest-yielding Pennsylvania municipal securities permitted by our investment policies if we determine that they may subject the Fund to undue risk.
The Fund’s investment in medium grade and lower grade securities involves special risks as compared to investing in higher grade securities. Lower grade securities are commonly referred to as junk bonds. We do not purchase securities that are in default or rated in categories lower than B- by Standard & Poor’s or B3 by Moody’s Investors Service, Inc. or unrated securities of comparable quality.† 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.
Portfolio Composition
By security type
Revenue Bonds | 91.6 | % | ||
General Obligation Bonds | 6.1 | |||
Pre-refunded Bonds | 2.3 |
Total Net Assets | $151.9 million | |||
Total Number of Holdings | 129 |
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. | Pennsylvania (State of) Turnpike Commission | 4.7 | % | |||||
2. | Philadelphia (City of) | 3.8 | ||||||
3. | Puerto Rico Sales Tax Financing Corp. | 3.6 | ||||||
4. | Delaware Valley Regional Financial Authority | 3.5 | ||||||
5. | Pennsylvania (State of) | |||||||
Higher Educational Facilities Authority | 3.4 | |||||||
6. | Susquehanna Area Regional | |||||||
Airport Authority | 3.2 | |||||||
7. | Philadelphia (City of) Municipal Authority | 2.9 | ||||||
8. | Puerto Rico (Commonwealth of) Electric Power Authority | 2.5 | ||||||
9. | Westmoreland (County of) | |||||||
Industrial Development Authority | 2.3 | |||||||
10. | Allegheny (County of) Higher Education Building Authority | 1.8 |
We actively manage the Fund’s portfolio and adjust its average maturity based on our 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
As the reporting period began, reports on employment and the economy were mixed at best, and sovereign debt issues abroad weighed heavily on investors. Equity indexes sold off precipitously as the US struggled very publicly to raise the nation’s debt ceiling. As a result, Standard & Poor’s announced the first-ever downgrade to long-term US government debt. Uncertainty created by the downgrade combined with the continuing eurozone debt crisis to reignite global recession fears through October.
As those negative headlines faded during the fall of 2011, signs of muted growth remained. US equity markets rebounded with a nearly uninterrupted rally throughout the winter and into the spring of 2012. In late March, markets paused, and while company earnings still offered more positive surprises than disappointments, confidence began to wane in the absence of new growth drivers. By May, the market went into steady decline as investors grew concerned about the real possibility of a Greek exit from the European Union and the potential collapse of the euro. Economic data and earnings in the US began to show signs of deceleration amid contagion from both European and Asian weakness.
Toward the end of the reporting period, yet another European commitment to a lasting resolution to the economic crisis was coupled with an announcement that funds may be injected directly into large financial institutions. This announcement, along with a ruling by the US Supreme Court upholding the Affordable Care Act, provided some near-term clarity and resulted in risk taking that led the markets modestly higher as the reporting period ended.
4 | Invesco Pennsylvania Tax Free Income Fund |
Historically, the state of Pennsylvania has had a record of good financial management and balanced budgets. However, with the slowdown in the economy, the state has faced significant challenges. While Pennsylvania has experienced a slower-than-expected recovery from the previous recession, it has had some pockets of job creation. The state plans to issue more debt than it retires in the coming years to help stimulate additional growth. We will continue to monitor the financial metrics to ensure debt burdens do not expand at a rapid pace; at the close of the reporting period, the state’s debt profile was lower than those of many other states. Like most other states, Pennsylvania’s growing unfunded pension liabilities are a concern and funding costs are consuming a larger part of the budget. The state has responded with budget cuts and over the past two years has grown its general fund balance. State gross domestic product was stagnant during fiscal year 2010 but grew in fiscal year 2011.
During the 12 months covered by this report, municipal bond mutual funds experienced almost $51 billion in net inflows.1 Municipal credit fundamentals continued to strengthen, and as 2011 came to a close, most of the uncertainty from a handful of troubled municipal credits was largely in the rearview mirror. In line with the drop exhibited in previous years, 2011 defaults were muted and lower than 2010’s.
As we approached the end of the reporting period, news spread that a handful of municipalities were experiencing financial difficulties. While these stories made headlines, the actual effect of these bankruptcy filings was isolated and 2012 default trends continued their decline from 2011 levels. It is also important to note that we saw a substantial decline in the number of defaults in the pipeline, with fewer first-time missed payments by municipal issuers signaling that municipalities have made the necessary adjustments to their financial situations.
During the reporting period, lower rated tax-exempt bonds experienced greater price appreciation than their higher rated counterparts. Strong security selection among unrated bonds was a main contributor to Fund performance for the reporting period. Overweight exposure to – and favorable security selection in – lower rated bonds also contributed to Fund returns.
In terms of yield curve positioning, our exposure to longer dated debt securities was a main contributor to positive Fund performance relative to the Barclays Pennsylvania Municipal Index. The Fund’s exposure to the 15- to 20-year part of
the yield curve and the long end (20+ years) of the yield curve added to relative returns as municipal yields approached all-time lows during the reporting period.2 Some of our yield curve and duration positioning was obtained through the use of tender option bonds. Tender option bonds are instruments that have an inverse relationship to a referenced interest rate. Tender option bonds can be a more efficient way to manage duration, yield curve exposure and credit exposure. Also, they potentially can enhance yield.
At the sector level, our overweight exposure to special tax, education and hospital bonds contributed to returns for the reporting period. Our relative underweight exposure to state government obligation bonds detracted from returns.
During the reporting period, leverage made a positive contribution to the performance of the Fund. The Fund achieved a leveraged position through the use of tender option bonds. The Fund uses leverage because we believe that, over time, leveraging provides opportunities for additional income and total return for shareholders. However, use of leverage also can expose shareholders to additional volatility. For more information about the Fund’s use of leverage, see the Notes to Financial Statements later in this report.
Thank you for investing in Invesco Pennsylvania Tax Free Income Fund and for sharing our long-term investment horizon.
† | 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; or moodys.com and select “Rating Methodologies” under Research and Ratings on the homepage. |
1 | Source: Morningstar |
2 | Source: Bond Buyer |
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/0000950123-12-013037/h87055h8704906.jpg)
Thomas Byron
Portfolio manager, is manager of Invesco Pennsylvania Tax Free Income Fund. He joined Invesco in 2010. Mr. Byron earned a BS in finance from Marquette University and an MBA in finance from DePaul University.
![(PHOTO OF ROBERT STRYKER)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8704907.jpg)
Robert Stryker
Chartered Financial Analyst, portfolio manager, is manager of Invesco Pennsylvania Tax Free Income Fund. He joined Invesco in 2010. Mr. Stryker earned a BS in finance from the University of Illinois at Chicago.
![(PHOTO OF JULIUS WILLIAMS)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8704908.jpg)
Julius Williams
Portfolio manager, is manager of Invesco Pennsylvania Tax Free Income Fund. He joined Invesco in 2010. Mr. Williams earned a BA 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/0000950123-12-013037/h87055h8704909.jpg)
Robert Wimmel
Portfolio manager, is manager of Invesco Pennsylvania Tax Free Income Fund. He joined Invesco in 2010. Mr. Wimmel earned a BA in anthropology from the University of Cincinnati and an MA in economics from the University of Illinois at Chicago.
5 | Invesco Pennsylvania Tax Free Income Fund |
Your Fund’s Long-Term Performance
Results of a $10,000 Investment – Oldest Share Class(es)
Fund and index data from 8/31/02*
Fund and index data from 8/31/02*
![(GRAPH)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8704910.gif)
1 | Source: Barclays via FactSet Research Systems Inc. | |
2 | Source: Lipper Inc. |
* | During the reporting period, Invesco changed its policy regarding growth of $10,000 charts. For funds older than 10 years, we previously showed performance since inception. Going forward, we will show performance for the most recent 10 years, since this more accurately reflects the experience of the typical shareholder. As a result, charts now may include benchmarks that did not appear previously, because the funds’ inception predated the benchmarks’ inception. Also, all charts will now be presented using a linear format. |
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.
continued from page 8
n | State-specific risk. 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. |
About indexes used in this report
n | The Barclays Municipal Bond Index is an unmanaged index considered representative of the tax-exempt bond market. |
n | The Barclays Pennsylvania Municipal Index is an unmanaged index considered representative of Pennsylvania investment-grade municipal bonds. |
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. |
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). |
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. |
6 | Invesco Pennsylvania Tax Free Income Fund |
Average Annual Total Returns
As of 8/31/12, including maximum applicable sales charges
After Taxes | |||||||||||||||
on Distributions | |||||||||||||||
Before | After Taxes on | and Sale of | |||||||||||||
Taxes | Distributions | Fund Shares | |||||||||||||
Class A Shares | |||||||||||||||
Inception (5/1/87) | 6.01 | % | 6.00 | % | 5.96 | % | |||||||||
10 | Years | 3.79 | 3.77 | 3.82 | |||||||||||
5 | Years | 4.22 | 4.21 | 4.22 | |||||||||||
1 | Year | 6.72 | 6.72 | 5.81 | |||||||||||
Class B Shares | |||||||||||||||
Inception (5/3/93) | 4.47 | % | 4.46 | % | 4.46 | % | |||||||||
10 | Years | 3.77 | 3.75 | 3.75 | |||||||||||
5 | Years | 4.68 | 4.67 | 4.58 | |||||||||||
1 | Year | 7.22 | 7.22 | 6.21 | |||||||||||
Class C Shares | |||||||||||||||
Inception (8/13/93) | 3.90 | % | 3.89 | % | 3.90 | % | |||||||||
10 | Years | 3.56 | 3.54 | 3.54 | |||||||||||
5 | Years | 4.47 | 4.46 | 4.34 | |||||||||||
1 | Year | 10.19 | 10.19 | 7.86 | |||||||||||
Class Y Shares | |||||||||||||||
10 | Years | 4.37 | % | 4.35 | % | 4.34 | % | ||||||||
5 | Years | 5.39 | 5.38 | 5.25 | |||||||||||
1 | Year | 12.37 | 12.37 | 9.65 |
Average Annual Total Returns
As of 6/30/12, the most recent calendar quarter-end, including maximum applicable sales charges
After Taxes | |||||||||||||||
on Distributions | |||||||||||||||
Before | After Taxes on | and Sale of | |||||||||||||
Taxes | Distributions | Fund Shares | |||||||||||||
Class A Shares | |||||||||||||||
Inception (5/1/87) | 5.97 | % | 5.95 | % | 5.92 | % | |||||||||
10 | Years | 3.83 | 3.81 | 3.86 | |||||||||||
5 | Years | 3.37 | 3.36 | 3.48 | |||||||||||
1 | Year | 7.07 | 7.07 | 6.06 | |||||||||||
Class B Shares | |||||||||||||||
Inception (5/3/93) | 4.40 | % | 4.39 | % | 4.40 | % | |||||||||
10 | Years | 3.79 | 3.77 | 3.78 | |||||||||||
5 | Years | 3.77 | 3.76 | 3.79 | |||||||||||
1 | Year | 7.56 | 7.56 | 6.45 | |||||||||||
Class C Shares | |||||||||||||||
Inception (8/13/93) | 3.83 | % | 3.82 | % | 3.84 | % | |||||||||
10 | Years | 3.58 | 3.56 | 3.56 | |||||||||||
5 | Years | 3.59 | 3.59 | 3.59 | |||||||||||
1 | Year | 10.52 | 10.52 | 8.10 | |||||||||||
Class Y Shares | |||||||||||||||
10 | Years | 4.40 | % | 4.37 | % | 4.38 | % | ||||||||
5 | Years | 4.50 | 4.49 | 4.47 | |||||||||||
1 | Year | 12.71 | 12.71 | 9.89 |
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 (renamed Invesco 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 1.02%, 1.02%, 1.77% and 0.77%, 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 Pennsylvania Tax Free Income Fund |
Invesco 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 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, 2012, 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 for new or additional investments. Existing shareholders of Class B shares may continue to reinvest dividends and capital gains distributions in Class B shares and exchange their Class B shares for Class B shares of other funds. 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 | Alternative minimum tax risk. The Fund may invest up to 20% of its total assets in securities subject to the federal alternative minimum tax. Since some investors may have to pay tax on a Fund distribution of this income, the Fund may not be a suitable investment for them. | |
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 | Credit risk. Credit risk refers to an issuer’s ability to make timely payments of interest and principal. The credit quality of non-investment 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 | Derivatives risk. 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 | 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. The interest rates on these treasury futures generally move in the reverse direction of market interest rates. If market interest rates fall, the interest rate on the obligations will increase and if market interest rates increase, the interest rate on the obligations will fall. | |
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 | Inverse floating rate municipal obligations risk. 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. The interest rates on these obligations generally move in the reverse direction of market interest rates. If market interest rates fall, the interest rate on the obligations will increase and if market interest rates increase, the interest rate on the obligations will fall. | ||
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 | 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. There could be changes in applicable tax laws or tax treatments that adversely affect the current federal or state tax status of municipal securities. |
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 Pennsylvania Tax Free Income Fund |
Schedule of Investments
August 31, 2012
Principal | ||||||||||||||||
Interest | Maturity | Amount | ||||||||||||||
Rate | Date | (000) | Value | |||||||||||||
Municipal Obligations–100.75% | ||||||||||||||||
Pennsylvania–88.82% | ||||||||||||||||
Allegheny (County of) Higher Education Building Authority (Chatham University); Series 2012 A, University RB | 5.00 | % | 09/01/35 | $ | 1,000 | $ | 1,070,261 | |||||||||
Allegheny (County of) Higher Education Building Authority (Duquesne University); | ||||||||||||||||
Series 1998, Ref. University RB (INS–AMBAC)(a) | 5.50 | % | 03/01/20 | 1,750 | 2,013,865 | |||||||||||
Series 2011 A, University RB | 5.50 | % | 03/01/31 | 550 | 633,985 | |||||||||||
Allegheny (County of) Higher Education Building Authority (Robert Morris University); Series 2008 A, University RB | 6.00 | % | 10/15/38 | 1,000 | 1,062,940 | |||||||||||
Allegheny (County of) Hospital Development Authority (Ohio Valley General Hospital); Series 2005 A, RB | 5.00 | % | 04/01/25 | 1,600 | 1,586,672 | |||||||||||
Allegheny (County of) Hospital Development Authority (University of Pittsburgh Medical Center); Series 2009, RB | 5.63 | % | 08/15/39 | 1,250 | 1,409,825 | |||||||||||
Allegheny (County of) Industrial Development Authority (AFCO Cargo PIT, LLC); Series 1999, Cargo Facilities Lease RB(b) | 6.63 | % | 09/01/24 | 885 | 809,403 | |||||||||||
Allegheny (County of) Industrial Development Authority (Residential Resources, Inc.); Series 2006, Lease RB | 5.10 | % | 09/01/26 | 980 | 981,754 | |||||||||||
Allegheny (County of) Redevelopment Authority (Pittsburgh Mills); Series 2004, Tax Allocation RB | 5.60 | % | 07/01/23 | 1,220 | 1,258,881 | |||||||||||
Allegheny (County of) Residential Finance Authority; Series 2006 TT, Single Family Mortgage RB (CEP–GNMA)(b) | 5.00 | % | 05/01/35 | 1,095 | 1,135,154 | |||||||||||
Allegheny (County of); Series 2008 C 61, Unlimited Tax GO Bonds (INS–AGC)(a) | 5.00 | % | 12/01/33 | 500 | 551,040 | |||||||||||
Allegheny Valley Joint School District; Series 2004 A, Unlimited Tax GO Bonds (INS–NATL)(a) | 5.00 | % | 11/01/28 | 1,500 | 1,569,015 | |||||||||||
Beaver (County of) Industrial Development Authority (FirstEnergy Generation); Series 2008 A, Ref. RB | 2.15 | % | 03/01/17 | 700 | 703,416 | |||||||||||
Beaver (County of); Series 2009, Unlimited Tax GO Notes (INS–AGM)(a) | 5.55 | % | 11/15/31 | 1,390 | 1,556,661 | |||||||||||
Berks (County of) Industrial Development Authority (One Douglassville); Series 2007 A, Ref. RB(b) | 6.13 | % | 11/01/34 | 470 | 472,223 | |||||||||||
Berks (County of) Municipal Authority (Albright College); Series 2004, RB | 5.50 | % | 10/01/18 | 1,895 | 1,917,058 | |||||||||||
Berks (County of) Municipal Authority (Reading Hospital Medical Center); Series 2012 A, RB | 5.00 | % | 11/01/40 | 1,000 | 1,102,660 | |||||||||||
Bethlehem Area School District; Series 2010, Unlimited Tax GO Bonds (INS–AGM)(a) | 5.25 | % | 01/15/26 | 1,000 | 1,149,500 | |||||||||||
Bucks (County of) Industrial Development Authority (Ann’s Choice, Inc. Facility); | ||||||||||||||||
Series 2005 A, Retirement Community RB | 6.13 | % | 01/01/25 | 1,500 | 1,520,910 | |||||||||||
Series 2005 A, Retirement Community RB | 5.90 | % | 01/01/27 | 1,000 | 1,000,670 | |||||||||||
Bucks (County of) Industrial Development Authority (Lutheran Community Telford Center); Series 2007, RB | 5.75 | % | 01/01/37 | 2,000 | 2,021,180 | |||||||||||
Central Bradford Progress Authority (Guthrie Healthcare System); Series 2011, RB | 5.38 | % | 12/01/41 | 1,100 | 1,249,149 | |||||||||||
Centre (County of) Hospital Authority (Mt. Nittany Medical Center); Series 2009, RB (INS–AGC)(a) | 6.13 | % | 11/15/39 | 1,000 | 1,054,230 | |||||||||||
Chartiers Valley Industrial & Commercial Development Authority (Asbury Health Center); | ||||||||||||||||
Series 2006, Ref. First Mortgage RB | 5.25 | % | 12/01/15 | 500 | 527,495 | |||||||||||
Series 2006, Ref. First Mortgage RB | 5.75 | % | 12/01/22 | 900 | 946,386 | |||||||||||
Clairton (City of) Municipal Authority; Series 2012 B, RB | 5.00 | % | 12/01/42 | 1,000 | 1,022,150 | |||||||||||
Cumberland (County of) Municipal Authority (Asbury Pennsylvania Obligated Group); Series 2010, RB | 6.00 | % | 01/01/40 | 870 | 921,695 | |||||||||||
Cumberland (County of) Municipal Authority (Association of Independent Colleges & Universities of Pennsylvania Financing Program-Dickinson College); Series 2009, RB | 5.00 | % | 11/01/39 | 750 | 837,090 | |||||||||||
Cumberland (County of) Municipal Authority (Diakon Lutheran Ministries); Series 2007, RB | 5.00 | % | 01/01/36 | 1,000 | 1,026,160 | |||||||||||
Cumberland (County of) Municipal Authority (Messiah Village); Series 2008 A, RB | 5.63 | % | 07/01/28 | 1,000 | 1,084,280 | |||||||||||
Dauphin (County of) General Authority (Pinnacle Health System); Series 2009 A, Health System RB | 6.00 | % | 06/01/36 | 2,215 | 2,506,095 | |||||||||||
Dauphin (County of) General Authority (Riverfront Office); Series 1998, Office & Parking RB | 6.00 | % | 01/01/25 | 1,105 | 1,106,702 | |||||||||||
Delaware (County of) Authority (Cabrini College); Series 1999, College RB (INS–Radian)(a) | 5.75 | % | 07/01/23 | 220 | 220,246 | |||||||||||
Delaware (County of) Authority (Neumann College); Series 2008, College RB | 6.25 | % | 10/01/38 | 200 | 216,668 | |||||||||||
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 | 1,561,110 | |||||||||||
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 | 2,503,925 | |||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
9 Invesco Pennsylvania Tax Free Income Fund
Principal | ||||||||||||||||
Interest | Maturity | Amount | ||||||||||||||
Rate | Date | (000) | Value | |||||||||||||
Pennsylvania–(continued) | ||||||||||||||||
Delaware River Port Authority; Series 2010 D, RB | 5.00 | % | 01/01/40 | $ | 1,000 | $ | 1,100,650 | |||||||||
Delaware Valley Regional Financial Authority; | ||||||||||||||||
Series 2002, RB | 5.75 | % | 07/01/17 | 3,535 | 4,128,527 | |||||||||||
Series 2002, RB | 5.75 | % | 07/01/32 | 1,000 | 1,248,230 | |||||||||||
Erie (City of) Higher Education Building Authority (Mercyhurst College); | ||||||||||||||||
Series 2004 B, Ref. College RB | 5.00 | % | 03/15/23 | 1,000 | 1,026,550 | |||||||||||
Series 2008, College RB | 5.50 | % | 03/15/38 | 500 | 537,515 | |||||||||||
Franklin (County of) Industrial Development Authority (Chambersburg Hospital); Series 2010, RB | 5.38 | % | 07/01/42 | 1,000 | 1,082,890 | |||||||||||
Geisinger Authority; | ||||||||||||||||
Series 2005 A, VRD Health System RB(c) | 0.14 | % | 05/15/35 | 1,000 | 1,000,000 | |||||||||||
Series 2011 A 1, Health System RB | 5.13 | % | 06/01/41 | 500 | 561,360 | |||||||||||
Greensburg Salem School District; Series 2002, Ref. Unlimited Tax GO Bonds(d)(e) | 5.38 | % | 09/15/12 | 1,415 | 1,417,858 | |||||||||||
Lancaster (County of) Hospital Authority (Brethren Village); Series 2008 A, RB | 6.50 | % | 07/01/40 | 350 | 375,680 | |||||||||||
Lancaster (County of) Hospital Authority (Lancaster General Hospital); Series 2012, Health System RB | 5.00 | % | 07/01/42 | 1,000 | 1,095,560 | |||||||||||
Lancaster (County of) Hospital Authority (St. Anne’s Home for the Aged, Inc.); Series 1999, Health Center RB | 6.60 | % | 04/01/24 | 1,000 | 1,001,350 | |||||||||||
Lehigh (County of) General Purpose Authority (KidsPeace Obligated Group); Series 1998, RB | 6.00 | % | 11/01/23 | 1,760 | 862,400 | |||||||||||
Lehigh (County of) General Purpose Authority (St. Luke’s Bethlehem); Series 2003, Hospital RB(d)(e) | 5.25 | % | 08/15/13 | 980 | 1,027,128 | |||||||||||
Lehigh (County of) Industrial Development Authority (Lifepath, Inc.); Series 1998, Health Facility RB | 6.30 | % | 06/01/28 | 1,085 | 1,055,347 | |||||||||||
Lycoming (County of) Authority (Pennsylvania College of Technology); Series 2011, RB | 5.00 | % | 07/01/30 | 750 | 839,348 | |||||||||||
Lycoming (County of) Authority (Susquehanna Health System); Series 2009 A, Heath System RB | 5.75 | % | 07/01/39 | 1,250 | 1,375,275 | |||||||||||
Monroe (County of) Hospital Authority (Pocono Medical Center); | ||||||||||||||||
Series 2003, RB(d)(e) | 6.00 | % | 01/01/14 | 1,000 | 1,076,140 | |||||||||||
Series 2007, RB | 5.13 | % | 01/01/37 | 1,500 | 1,555,260 | |||||||||||
Montgomery (County of) Higher Education & Health Authority (Abington Memorial Hospital Obligated Group); Series 2012, RB | 5.00 | % | 06/01/31 | 1,000 | 1,130,450 | |||||||||||
Montgomery (County of) Industrial Development Authority (ACTS Retirement-Life Communities, Inc.); | ||||||||||||||||
Series 2012, Ref. RB | 5.00 | % | 11/15/28 | 900 | 976,653 | |||||||||||
Series 2009 A-1, RB | 6.25 | % | 11/15/29 | 1,000 | 1,160,270 | |||||||||||
Montgomery (County of) Industrial Development Authority (Philadelphia Presbytery Homes, Inc.); Series 2010, RB | 6.63 | % | 12/01/30 | 1,500 | 1,684,530 | |||||||||||
Montgomery (County of) Industrial Development Authority (Whitemarsh Community); Series 2008, Mortgage RB | 7.00 | % | 02/01/36 | 500 | 533,730 | |||||||||||
Montgomery (County of) Industrial Development Authority (Whitemarsh Continuing Care); Series 2005, Mortgage RB | 6.13 | % | 02/01/28 | 1,100 | 1,121,769 | |||||||||||
Northampton (County of) General Purpose Authority (Lehigh University); Series 2009, Higher Education RB | 5.50 | % | 11/15/33 | 1,000 | 1,155,050 | |||||||||||
Northampton (County of) General Purpose Authority (St. Luke’s Hospital); | ||||||||||||||||
Series 2008 A, Hospital RB | 5.50 | % | 08/15/35 | 1,000 | 1,067,040 | |||||||||||
Series 2010 C, Hospital RB(d)(f) | 4.50 | % | 08/15/16 | 1,000 | 1,092,940 | |||||||||||
Pennsylvania (State of) Economic Development Financing Agency (Forum Place); Series 2012, Governmental Lease RB | 5.00 | % | 03/01/34 | 500 | 561,245 | |||||||||||
Pennsylvania (State of) Economic Development Financing Authority (Allegheny Energy Supply Co.); Series 2009, RB | 7.00 | % | 07/15/39 | 1,830 | 2,191,315 | |||||||||||
Pennsylvania (State of) Economic Development Financing Authority (Philadelphia Biosolids Facility); Series 2009, Sewage Sludge Disposal RB | 6.25 | % | 01/01/32 | 1,000 | 1,146,160 | |||||||||||
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 | 1,372,332 | |||||||||||
Pennsylvania (State of) Higher Educational Facilities Authority (Edinboro University Foundation); Series 2010, RB | 6.00 | % | 07/01/43 | 500 | 563,785 | |||||||||||
Pennsylvania (State of) Higher Educational Facilities Authority (La Salle University); Series 2012, RB | 5.00 | % | 05/01/42 | 700 | 754,628 | |||||||||||
Pennsylvania (State of) Higher Educational Facilities Authority (St. Joseph’s University); | ||||||||||||||||
Series 2010 A, RB | 5.00 | % | 11/01/34 | 500 | 555,290 | |||||||||||
Series 2010 A, RB | 5.00 | % | 11/01/40 | 500 | 551,170 | |||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
10 Invesco Pennsylvania Tax Free Income Fund
Principal | ||||||||||||||||
Interest | Maturity | Amount | ||||||||||||||
Rate | Date | (000) | Value | |||||||||||||
Pennsylvania–(continued) | ||||||||||||||||
Pennsylvania (State of) Higher Educational Facilities Authority (Thomas Jefferson University); | ||||||||||||||||
Series 2002, RB | 5.50 | % | 01/01/19 | $ | 355 | $ | 359,856 | |||||||||
Series 2002, RB | 5.38 | % | 01/01/25 | 645 | 652,095 | |||||||||||
Pennsylvania (State of) Higher Educational Facilities Authority (Trustees of the University of Pennsylvania); Series 2005 C, RB(g) | 5.00 | % | 07/15/38 | 4,700 | 5,132,212 | |||||||||||
Pennsylvania (State of) Higher Educational Facilities Authority (University of Pennsylvania Health System); Series 2012 A, RB | 5.00 | % | 08/15/42 | 320 | 355,360 | |||||||||||
Pennsylvania (State of) Higher Educational Facilities Authority (University Properties, Inc.); Series 2010, Student Housing RB | 5.00 | % | 07/01/42 | 1,000 | 1,041,420 | |||||||||||
Pennsylvania (State of) Turnpike Commission; | ||||||||||||||||
Series 2008 B-1, Sub. RB | 5.50 | % | 06/01/33 | 1,000 | 1,117,360 | |||||||||||
Series 2009 C, Sub. Conv. CAB RB (INS–AGM)(a)(h) | 0.00 | % | 06/01/33 | 2,000 | 2,073,420 | |||||||||||
Series 2009 E, Sub. Conv. CAB RB(h) | 0.00 | % | 12/01/38 | 1,435 | 1,353,105 | |||||||||||
Series 2010 A 1, Motor License Fund Special RB | 5.00 | % | 12/01/38 | 500 | 554,215 | |||||||||||
Series 2010 A-2, Motor License Fund Special Conv. CAB RB(h) | 0.00 | % | 12/01/34 | 1,000 | 960,280 | |||||||||||
Series 2010 B 2, Conv. CAB RB(h) | 0.00 | % | 12/01/30 | 625 | 599,819 | |||||||||||
Series 2010 B 2, Conv. CAB RB(h) | 0.00 | % | 12/01/35 | 500 | 470,105 | |||||||||||
Philadelphia (City of) Hospitals & Higher Education Facilities Authority (Children’s Hospital of Philadelphia); Series 2011, RB | 5.00 | % | 07/01/41 | 570 | 631,942 | |||||||||||
Philadelphia (City of) Hospitals & Higher Education Facilities Authority (Jefferson Health System); Series 2010 B, RB | 5.00 | % | 05/15/40 | 1,500 | 1,643,835 | |||||||||||
Philadelphia (City of) Industrial Development Authority (Independence Charter School); Series 2007 A, RB | 5.50 | % | 09/15/37 | 1,235 | 1,200,642 | |||||||||||
Philadelphia (City of) Industrial Development Authority (MaST Charter School); Series 2010, RB | 6.00 | % | 08/01/35 | 700 | 789,866 | |||||||||||
Philadelphia (City of) Industrial Development Authority (NewCourtland Elder Services); Series 2003, VRD RB (LOC–PNC Bank, N.A.)(c)(i) | 0.18 | % | 03/01/27 | 335 | 335,000 | |||||||||||
Philadelphia (City of) Industrial Development Authority (New Foundations Charter School); Series 2012, RB | 6.63 | % | 12/15/41 | 750 | 817,515 | |||||||||||
Philadelphia (City of) Industrial Development Authority (Please Touch Museum); Series 2006, RB | 5.25 | % | 09/01/31 | 1,250 | 1,172,838 | |||||||||||
Philadelphia (City of) Industrial Development Authority; Series 1990, Commercial Development RB(b) | 7.75 | % | 12/01/17 | 2,505 | 2,509,033 | |||||||||||
Philadelphia (City of) Municipal Authority (Municipal Services Building Lease); Series 1990, CAB RB (INS–AGM)(a)(h) | 0.00 | % | 03/15/13 | 4,400 | 4,385,040 | |||||||||||
Philadelphia (City of); | ||||||||||||||||
Ninth Series 2010, Gas Works RB | 5.25 | % | 08/01/40 | 1,500 | 1,606,650 | |||||||||||
Series 2005 A, Airport RB (INS–NATL)(a)(b) | 5.00 | % | 06/15/25 | 1,000 | 1,039,390 | |||||||||||
Series 2009 A, Ref. Unlimited Tax GO Bonds (INS–AGC)(a) | 5.50 | % | 08/01/24 | 1,000 | 1,159,960 | |||||||||||
Series 2010 C, Water & Wastewater RB (INS–AGM)(a) | 5.00 | % | 08/01/35 | 1,250 | 1,409,488 | |||||||||||
Series 2011, Unlimited Tax GO Bonds | 6.00 | % | 08/01/36 | 500 | 590,120 | |||||||||||
Philadelphia School District; Series 2008 E, Limited Tax GO Bonds (INS–BHAC)(a) | 5.13 | % | 09/01/23 | 1,500 | 1,717,950 | |||||||||||
Philidelphia (City of) Industrial Development Authority (Discovery Charter School); Series 2012, RB | 6.25 | % | 04/01/42 | 1,000 | 1,095,800 | |||||||||||
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 | 1,129,080 | |||||||||||
Radnor Township School District; Series 2005 B, Unlimited Tax GO Bonds (INS–AGM)(a) | 5.00 | % | 02/15/35 | 1,000 | 1,093,970 | |||||||||||
State Public School Building Authority (Harrisburg School District); Series 2009 A, RB (INS–AGC)(a) | 5.00 | % | 11/15/33 | 1,000 | 1,098,630 | |||||||||||
Susquehanna Area Regional Airport Authority; | ||||||||||||||||
Series 2003 A, Airport System RB (INS–AMBAC)(a)(b) | 5.50 | % | 01/01/19 | 2,500 | 2,508,875 | |||||||||||
Series 2003 D, Sub. Airport System RB | 5.38 | % | 01/01/18 | 2,340 | 2,350,670 | |||||||||||
Union (County of) Hospital Authority (Evangelical Community Hospital); Series 2011, Ref. & Improvement RB | 7.00 | % | 08/01/41 | 1,000 | 1,195,310 | |||||||||||
Washington (County of) Industrial Development Authority (Washington Jefferson College); Series 2010, College RB | 5.25 | % | 11/01/30 | 500 | 561,045 | |||||||||||
Washington (County of) Redevelopment Authority (Victory Centre Tanger Outlet Development); Series 2006 A, Tax Allocation RB(f) | 5.45 | % | 07/01/35 | 1,430 | 1,466,479 | |||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
11 Invesco Pennsylvania Tax Free Income Fund
Principal | ||||||||||||||||
Interest | Maturity | Amount | ||||||||||||||
Rate | Date | (000) | Value | |||||||||||||
Pennsylvania–(continued) | ||||||||||||||||
Westmoreland (County of) Industrial Development Authority (Redstone Presbyterian Senior Care Obligated Group); | ||||||||||||||||
Series 2005 A, Retirement Community RB | 5.75 | % | 01/01/26 | $ | 2,500 | $ | 2,576,450 | |||||||||
Series 2005 A, Retirement Community RB | 5.88 | % | 01/01/32 | 900 | 921,753 | |||||||||||
Wilkes-Barre (City of) Finance Authority (University of Scranton); Series 2010, RB | 5.00 | % | 11/01/40 | 850 | 942,081 | |||||||||||
134,914,538 | ||||||||||||||||
Puerto Rico–7.60% | ||||||||||||||||
Puerto Rico (Commonwealth of) Aqueduct & Sewer Authority; Series 2008 A, Sr. Lien RB | 6.00 | % | 07/01/38 | 1,000 | 1,065,840 | |||||||||||
Puerto Rico (Commonwealth of) Electric Power Authority; | ||||||||||||||||
Series 2008 WW, RB | 5.50 | % | 07/01/21 | 1,000 | 1,108,550 | |||||||||||
Series 2008 WW, RB | 5.25 | % | 07/01/33 | 1,500 | 1,578,675 | |||||||||||
Series 2010 XX, RB | 5.75 | % | 07/01/36 | 1,000 | 1,096,550 | |||||||||||
Puerto Rico (Commonwealth of) Industrial Tourist Educational, Medical & Environmental Control Facilities Financing Authority (Ana G. Mendez University System); Series 2012, Ref. RB | 5.13 | % | 04/01/32 | 500 | 509,265 | |||||||||||
Puerto Rico (Commonwealth of) Infrastructure Financing Authority; Series 2005 C, Ref. Special Tax RB (INS–AMBAC)(a) | 5.50 | % | 07/01/27 | 600 | 675,858 | |||||||||||
Puerto Rico Sales Tax Financing Corp.; | ||||||||||||||||
First Subseries 2010, Conv. CAB RB(h) | 0.00 | % | 08/01/33 | 1,065 | 915,314 | |||||||||||
First Subseries 2010 A, CAB RB(h) | 0.00 | % | 08/01/34 | 3,500 | 1,055,495 | |||||||||||
First Subseries 2010 A, CAB RB(h) | 0.00 | % | 08/01/35 | 5,000 | 1,405,800 | |||||||||||
First Subseries 2010 A, RB | 5.38 | % | 08/01/39 | 470 | 503,163 | |||||||||||
Series 2011 C, RB | 5.00 | % | 08/01/40 | 1,500 | 1,626,150 | |||||||||||
11,540,660 | ||||||||||||||||
Guam–2.46% | ||||||||||||||||
Guam (Territory of) (Section 30); Series 2009 A, Limited Obligation RB | 5.75 | % | 12/01/34 | 1,250 | 1,405,225 | |||||||||||
Guam (Territory of) Power Authority; Series 2010 A, RB | 5.50 | % | 10/01/40 | 410 | 429,163 | |||||||||||
Guam (Territory of) Waterworks Authority; Series 2010, Water & Wastewater System RB | 5.63 | % | 07/01/40 | 1,000 | 1,027,430 | |||||||||||
Guam (Territory of); Series 2011 A, Business Privilege Tax RB | 5.13 | % | 01/01/42 | 785 | 873,548 | |||||||||||
3,735,366 | ||||||||||||||||
Virgin Islands–1.87% | ||||||||||||||||
Virgin Islands (Government of) Public Finance Authority (Matching Fund Loan Note–Diageo); Series 2009 A, Sub. RB | 6.63 | % | 10/01/29 | 750 | 883,523 | |||||||||||
Virgin Islands (Government of) Public Finance Authority (Matching Fund Loan Note); Series 2010 A, Sr. Lien RB | 5.00 | % | 10/01/29 | 500 | 546,320 | |||||||||||
Virgin Islands (Government of) Water & Power Authority; Series 2007 A, Electric System RB | 5.00 | % | 07/01/25 | 1,335 | 1,409,893 | |||||||||||
2,839,736 | ||||||||||||||||
TOTAL INVESTMENTS(j)–100.75% (Cost $141,979,242) | 153,030,300 | |||||||||||||||
FLOATING RATE NOTE OBLIGATIONS–(2.06%) | ||||||||||||||||
Note with an interest rate of 0.18% at 08/31/12 and contractual maturity of collateral of 07/15/38 (See Note 1L)(k) | (3,135,000 | ) | ||||||||||||||
OTHER ASSETS LESS LIABILITIES–1.31% | 1,999,236 | |||||||||||||||
NET ASSETS–100.00% | $ | 151,894,536 | ||||||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
12 Invesco Pennsylvania Tax Free Income Fund
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 Enhancement Provider | |
GNMA | – Government National Mortgage Association | |
GO | – General Obligation | |
INS | – Insurer | |
LOC | – Letter of Credit | |
NATL | – National Public Finance Guarantee Corp. | |
PCR | – Pollution Control Revenue Bonds | |
Radian | – Radian Asset Assurance, Inc. | |
RB | – Revenue Bonds | |
Ref. | – Refunding | |
Sr. | – Senior | |
Sub. | – Subordinated | |
VRD | – Variable Rate Demand |
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) | 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, 2012. | |
(d) | Security has an irrevocable call by the issuer or mandatory put by the holder. Maturity date reflects such call or put. | |
(e) | Advance refunded; secured by an escrow fund of U.S. Government obligations or other highly rated collateral. | |
(f) | Interest or dividend rate is redetermined periodically. Rate shown is the rate in effect on August 31, 2012. | |
(g) | Underlying security related to Dealer Trusts entered into by the Trust. See Note 1L. | |
(h) | Zero coupon bond issued at a discount. | |
(i) | Principal and interest payments are fully enhanced by a letter of credit from the bank listed or a predecessor bank, branch or subsidiary. | |
(j) | 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. | 8.4 | % | ||
American Municipal Bond Assurance Corp. | 5.0 | |||
(k) | Floating rate note obligations related to securities held. The interest rates shown reflect the rates in effect at August 31, 2012. At August 31, 2012, the Fund’s investments with a value of $5,132,212 are held by Dealer Trusts and serve as collateral for the $3,135,000 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.
13 Invesco Pennsylvania Tax Free Income Fund
Statement of Assets and Liabilities
August 31, 2012
Assets: | ||||
Investments, at value (Cost $141,979,242) | $ | 153,030,300 | ||
Cash | 412,253 | |||
Receivable for: | ||||
Investments sold | 1,050,000 | |||
Fund shares sold | 64,896 | |||
Interest | 1,697,924 | |||
Investment for trustee deferred compensation and retirement plans | 8,612 | |||
Other assets | 503 | |||
Total assets | 156,264,488 | |||
Liabilities: | ||||
Floating rate note obligations | 3,135,000 | |||
Payable for: | ||||
Investments purchased | 746,991 | |||
Fund shares reacquired | 152,669 | |||
Dividends | 199,839 | |||
Accrued fees to affiliates | 60,944 | |||
Accrued other operating expenses | 58,750 | |||
Trustee deferred compensation and retirement plans | 15,759 | |||
Total liabilities | 4,369,952 | |||
Net assets applicable to shares outstanding | $ | 151,894,536 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 147,583,968 | ||
Undistributed net investment income | 368,687 | |||
Undistributed net realized gain (loss) | (7,109,177 | ) | ||
Unrealized appreciation | 11,051,058 | |||
$ | 151,894,536 | |||
Net Assets: | ||||
Class A | $ | 137,146,388 | ||
Class B | $ | 2,430,439 | ||
Class C | $ | 11,020,207 | ||
Class Y | $ | 1,297,502 | ||
Shares outstanding, $0.01 par value per share, with an unlimited number of shares authorized: | ||||
Class A | 8,041,414 | |||
Class B | 142,203 | |||
Class C | 645,186 | |||
Class Y | 76,031 | |||
Class A: | ||||
Net asset value per share | $ | 17.05 | ||
Maximum offering price per share (Net asset value of $17.05 divided by 95.25%) | $ | 17.90 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 17.09 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 17.08 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 17.06 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
14 Invesco Pennsylvania Tax Free Income Fund
Statement of Operations
For the year ended August 31, 2012
Investment income: | ||||
Interest | $ | 7,598,499 | ||
Expenses: | ||||
Advisory fees | 883,424 | |||
Administrative services fees | 50,000 | |||
Custodian fees | 5,998 | |||
Distribution fees: | ||||
Class A | 333,477 | |||
Class B | 2,118 | |||
Class C | 103,275 | |||
Interest, facilities and maintenance fees | 24,364 | |||
Transfer agent fees | 83,312 | |||
Trustees’ and officers’ fees and benefits | 28,100 | |||
Other | 76,342 | |||
Total expenses | 1,590,410 | |||
Less: Expense offset arrangement(s) | (192 | ) | ||
Net expenses | 1,590,218 | |||
Net investment income | 6,008,281 | |||
Net realized gain from investment securities | 165,985 | |||
Change in net unrealized appreciation of investment securities | 10,524,187 | |||
Net realized and unrealized gain | 10,690,172 | |||
Net increase in net assets resulting from operations | $ | 16,698,453 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
15 Invesco Pennsylvania Tax Free Income Fund
Statement of Changes in Net Assets
For the years ended August 31, 2012 and 2011
August 31, | August 31, | |||||||
2012 | 2011 | |||||||
Operations: | ||||||||
Net investment income | $ | 6,008,281 | $ | 6,469,917 | ||||
Net realized gain (loss) | 165,985 | (204,374 | ) | |||||
Change in net unrealized appreciation (depreciation) | 10,524,187 | (4,601,295 | ) | |||||
Net increase in net assets resulting from operations | 16,698,453 | 1,664,248 | ||||||
Distributions to shareholders from net investment income: | ||||||||
Class A | (5,457,376 | ) | (5,718,833 | ) | ||||
Class B | (112,050 | ) | (145,393 | ) | ||||
Class C | (345,706 | ) | (361,071 | ) | ||||
Class Y | (22,316 | ) | (7,449 | ) | ||||
Total distributions from net investment income | (5,937,448 | ) | (6,232,746 | ) | ||||
Share transactions–net: | ||||||||
Class A | (2,966,173 | ) | (6,996,668 | ) | ||||
Class B | (836,452 | ) | (1,483,029 | ) | ||||
Class C | 593,058 | (1,051,715 | ) | |||||
Class Y | 1,088,270 | 16,165 | ||||||
Net increase (decrease) in net assets resulting from share transactions | (2,121,297 | ) | (9,515,247 | ) | ||||
Net increase (decrease) in net assets | 8,639,708 | (14,083,745 | ) | |||||
Net assets: | ||||||||
Beginning of year | 143,254,828 | 157,338,573 | ||||||
End of year (includes undistributed net investment income of $368,687 and $305,487, respectively) | $ | 151,894,536 | $ | 143,254,828 | ||||
Notes to Financial Statements
August 31, 2012
NOTE 1—Significant Accounting Policies
Invesco Pennsylvania Tax Free Income Fund, formerly Invesco Van Kampen Pennsylvania 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 to Class A shares. 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 to Class A shares. 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. | |
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 |
16 Invesco Pennsylvania Tax Free Income Fund
trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, individual trading characteristics and other market data. 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 the 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. Prior to June 1, 2010, incremental transfer agent fees which were unique to each class of shares were charged to the operations of such class. | |
G. | Interest, Facilities and Maintenance Fees — Interest, Facilities and Maintenance Fees include interest and related borrowing costs such as commitment fees, rating and bank agent 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 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 the 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 |
17 Invesco Pennsylvania Tax Free Income Fund
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 interests 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% | ||
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).
18 Invesco Pennsylvania Tax Free Income Fund
Effective July 1, 2012, the Adviser has contractually agreed, through at least June 30, 2013, 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 and Class Y shares to 1.50%, 2.25%, 2.25% and 1.25% of average daily net assets, respectively. Prior to July 1, 2012, 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 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 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, including litigation expenses; 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 Invesco mutually agree to amend or continue the fee waiver agreement, it will terminate on June 30, 2013. 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, 2012, 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, 2012, 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, 2012, 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, 2012, IDI advised the Fund that IDI retained $15,847 in front-end sales commissions from the sale of Class A shares and $2, $2,894 and $46 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, 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, 2012. 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.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Municipal Obligations | $ | — | $ | 153,030,300 | $ | — | $ | 153,030,300 | ||||||||
19 Invesco 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, 2012, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $192.
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.
NOTE 6—Cash Balances and Borrowings
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company (“SSB”), the custodian bank. Such balances, if any at period end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. 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, 2012 were $3,135,000 and 0.78%, respectively.
NOTE 7—Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Years Ended August 31, 2012 and 2011:
2012 | 2011 | |||||||
Ordinary income | $ | — | $ | 1,272 | ||||
Tax-exempt income | 5,937,448 | 6,231,474 | ||||||
Total distributions | $ | 5,937,448 | $ | 6,232,746 | ||||
Tax Components of Net Assets at Period-End:
2012 | ||||
Undistributed ordinary income | $ | 172,814 | ||
Net unrealized appreciation — investments | 11,191,316 | |||
Temporary book/tax differences | (14,610 | ) | ||
Capital loss carryforward | (7,038,952 | ) | ||
Shares of beneficial interest | 147,583,968 | |||
Total net assets | $ | 151,894,536 | ||
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 tender option bond and market discount.
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 Regulated Investment Company Modernization Act of 2010 (the “Act”) eliminated the eight-year carryover period for capital losses that arise in taxable years beginning after its enactment date of December 22, 2010. Consequently, these capital losses can be carried forward for an unlimited period. However, capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Additionally, post-enactment capital loss carryovers will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. 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.
20 Invesco Pennsylvania Tax Free Income Fund
The Fund utilized $15,838 of capital loss carryforward in the current period to offset net realized capital gain for income tax purposes.
The Fund has a capital loss carryforward as of August 31, 2012, which expires as follows:
Capital Loss Carryforward* | ||||||||||||
Expiration | Short-Term | Long-Term | Total | |||||||||
August 31, 2016 | $ | 17,429 | $ | — | $ | 17,429 | ||||||
August 31, 2017 | 5,935,990 | — | 5,935,990 | |||||||||
August 31, 2018 | 1,085,533 | — | 1,085,533 | |||||||||
$ | 7,038,952 | $ | $ | 7,038,952 | ||||||||
* | 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, 2012 was $16,711,675 and $20,991,324, 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 | $ | 12,314,800 | ||
Aggregate unrealized (depreciation) of investment securities | (1,123,484 | ) | ||
Net unrealized appreciation of investment securities | $ | 11,191,316 | ||
Cost of investments for tax purposes is $141,838,984. |
NOTE 9—Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of bond amortization, on August 31, 2012, undistributed net investment income was decreased by $7,633 shares of beneficial interest was increased by $1,950 and undistributed net realized gain (loss) was increased by $5,683. This reclassification had no effect on the net assets of the Fund.
NOTE 10—Share Information
Summary of Share Activity | ||||||||||||||||
Years ended August 31, | ||||||||||||||||
2012(a) | 2011 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Class A | 367,448 | $ | 6,090,660 | 328,452 | $ | 5,195,467 | ||||||||||
Class B | 4,343 | 70,764 | 7,253 | 112,271 | ||||||||||||
Class C | 56,273 | 928,944 | 85,450 | 1,346,149 | ||||||||||||
Class Y | 64,277 | 1,080,787 | 3,213 | 49,072 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Class A | 199,465 | 3,302,287 | 226,447 | 3,533,901 | ||||||||||||
Class B | 3,625 | 60,091 | 5,309 | 82,803 | ||||||||||||
Class C | 13,417 | 222,487 | 15,348 | 240,054 | ||||||||||||
Class Y | 733 | 12,371 | 106 | 1,660 | ||||||||||||
Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||
Class A | 31,384 | 516,897 | 61,948 | 965,762 | ||||||||||||
Class B | (32,316 | ) | (516,897 | ) | (62,106 | ) | (965,762 | ) | ||||||||
Reacquired: | ||||||||||||||||
Class A | (779,352 | ) | (12,876,017 | ) | (1,074,556 | ) | (16,691,798 | ) | ||||||||
Class B | (26,501 | ) | (450,410 | ) | (45,831 | ) | (712,341 | ) | ||||||||
Class C | (33,582 | ) | (558,373 | ) | (171,056 | ) | (2,637,918 | ) | ||||||||
Class Y | (289 | ) | (4,888 | ) | (2,268 | ) | (34,567 | ) | ||||||||
Net increase (decrease) in share activity | (131,075 | ) | $ | (2,121,297 | ) | (622,291 | ) | $ | (9,515,247 | ) | ||||||
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 44% 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 Fund 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 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: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratio of | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
expenses | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratio of | to average | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net gains | expenses | net assets | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
(losses) | to average | (excluding | Ratio of net | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset | on securities | Dividends | Distributions | net assets | interest, | investment | ||||||||||||||||||||||||||||||||||||||||||||||||||
value, | Net | (both | Total from | from net | from net | Net asset | Net assets, | with fee waivers | facilities and | income | ||||||||||||||||||||||||||||||||||||||||||||||
beginning | investment | realized and | investment | investment | realized | Total | value, end | Total | end of period | and/or 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 08/31/12 | $ | 15.85 | $ | 0.68 | $ | 1.19 | $ | 1.87 | $ | (0.67 | ) | $ | — | $ | (0.67 | ) | $ | 17.05 | 12.04 | %(d) | $ | 137,146 | 1.03 | %(e) | 1.01 | %(e) | 4.13 | %(e) | 11 | % | ||||||||||||||||||||||||||
Year ended 08/31/11 | 16.29 | 0.70 | (0.47 | ) | 0.23 | (0.67 | ) | — | (0.67 | ) | 15.85 | 1.58 | (d) | 130,344 | 1.02 | 1.00 | 4.47 | 13 | ||||||||||||||||||||||||||||||||||||||
Period ended 08/31/10 | 15.93 | 0.66 | 0.38 | 1.04 | (0.68 | ) | — | (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 | ) | — | (0.74 | ) | 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 | |||||||||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/12 | 15.86 | 0.71 | 1.19 | 1.90 | (0.67 | ) | — | (0.67 | ) | 17.09 | 12.22 | (d) | 2,430 | 0.86 | (e) | 0.84 | (e) | 4.30 | (e) | 11 | ||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 16.23 | 0.70 | (0.45 | ) | 0.25 | (0.62 | ) | — | (0.62 | ) | 15.86 | 1.68 | (d)(h) | 3,062 | 1.02 | (h) | 1.00 | (h) | 4.47 | (h) | 13 | |||||||||||||||||||||||||||||||||||
Period ended 08/31/10 | 15.89 | 0.59 | 0.38 | 0.97 | (0.63 | ) | — | (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 | ) | — | (0.69 | ) | 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 | |||||||||||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/12 | 15.88 | 0.56 | 1.19 | 1.75 | (0.55 | ) | — | (0.55 | ) | 17.08 | 11.19 | (d) | 11,020 | 1.78 | (e) | 1.76 | (e) | 3.38 | (e) | 11 | ||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 16.31 | 0.58 | (0.45 | ) | 0.13 | (0.56 | ) | — | (0.56 | ) | 15.88 | 0.89 | (d) | 9,670 | 1.77 | 1.75 | 3.72 | 13 | ||||||||||||||||||||||||||||||||||||||
Period ended 08/31/10 | 15.95 | 0.55 | 0.38 | 0.93 | (0.57 | ) | — | (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 | ) | — | (0.63 | ) | 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 | |||||||||||||||||||||||||||||||||||||
Class Y | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/12 | 15.86 | 0.73 | 1.18 | 1.91 | (0.71 | ) | — | (0.71 | ) | 17.06 | 12.31 | (d) | 1,298 | 0.78 | (e) | 0.76 | (e) | 4.38 | (e) | 11 | ||||||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 16.30 | 0.74 | (0.47 | ) | 0.27 | (0.71 | ) | — | (0.71 | ) | 15.86 | 1.84 | (d) | 179 | 0.77 | 0.75 | 4.72 | 13 | ||||||||||||||||||||||||||||||||||||||
Period ended 08/31/10(l) | 15.94 | 0.19 | 0.36 | 0.55 | (0.19 | ) | — | (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, 2010 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 based on average daily net assets (000’s omitted) of $133,604, $2,736, $10,368 and $529 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. |
NOTE 12—Subsequent Event
Effective September 24, 2012, the maximum sales charge imposed on Class A shares changed from 4.75% to 4.25%.
22 Invesco 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 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 Pennsylvania Tax Free Income Fund, (formerly 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, 2012, 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 two years in the period 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, 2012 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. 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 23, 2012
Houston, Texas
23 Invesco 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, 2012 through August 31, 2012.
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 | (03/01/12) | (08/31/12)1 | Period2 | (08/31/12) | Period2 | Ratio | ||||||||||||||||||||||||
A | $ | 1,000.00 | $ | 1,045.90 | $ | 5.30 | $ | 1,019.96 | $ | 5.23 | 1.03 | % | ||||||||||||||||||
B | 1,000.00 | 1,045.90 | 5.35 | 1,019.91 | 5.28 | 1.04 | ||||||||||||||||||||||||
C | 1,000.00 | 1,042.00 | 9.14 | 1,016.19 | 9.02 | 1.78 | ||||||||||||||||||||||||
Y | 1,000.00 | 1,047.80 | 4.02 | 1,021.22 | 3.96 | 0.78 | ||||||||||||||||||||||||
1 | The actual ending account value is based on the actual total return of the Fund for the period March 1, 2012 through August 31, 2012, 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 184/366 to reflect the most recent fiscal half year. |
24 Invesco Pennsylvania Tax Free Income Fund
Approval of Investment Advisory and Sub-Advisory Contracts (Formerly Known as Invesco Van Kampen Pennsylvania Tax Free Income Fund) |
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 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 19-20, 2012, 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, 2012. 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 primarily 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, 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 and on what terms 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. In addition to meetings with Invesco Advisers and fund 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 independent legal 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 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 previously approved by a different board that, at the time, was responsible for overseeing Morgan Stanley and Van Kampen funds, which have become Invesco Funds following the acquisition of the retail mutual fund business of Morgan Stanley. 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 or factor 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 20, 2012, 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 Sub-Committees 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 prior relationship and 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 consistent 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 consistent with the terms of the Fund’s sub-advisory contracts.
25 Invesco Pennsylvania Tax Free 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 Pennsylvania Municipal Debt Funds Index. The Board noted that performance of Class A shares of the Fund was in the third quintile of its performance universe for the one year period, the first 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 below the performance of the Index for the one and five year periods and above the Index for the three year period. 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 its 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 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 and were assisted in their review by a report from the Senior Officer. 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. The Board noted that Invesco Advisers proposes sharing economies of scale in administration expenses by lowering per class administrative fees.
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 for the year ended December 31, 2011. 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 Invesco Funds and the Fund. The Board did not deem the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund to be excessive given the nature, quality and extent of the services provided to the Invesco Funds. The Board received and accepted information from Invesco Advisers demonstrating that 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.
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 Invesco Advisers proposes sharing economies of scale in administration expenses by lowering per class administrative fees.
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 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, 2012:
Federal and State Income Tax | ||||
Qualified Dividend Income* | 0% | |||
Corporate Dividends Received Deduction* | 0% | |||
Tax-Exempt Interest Dividends* | 100% |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Fund’s fiscal year. |
27 Invesco 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 1000, 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 | Other Directorship(s) | |||||||
Name, Year of Birth and | Trustee and/or | Principal Occupation(s) | Funds in | Held by Trustee During | ||||
Position(s) Held with the Trust | Officer Since | During Past 5 Years | Fund Complex Overseen by Trustee | Past 5 Years | ||||
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 | 129 | 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. | 129 | None | ||||
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. | ||||||||
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 certain funds in the Fund Complex | 147 | Director of the Mutual Fund Directors Forum, a nonprofit membership organization for investment directors; Chairman and Director of the Abraham Lincoln Presidential Library Foundation; and Director of the Stevenson Center for Democracy | ||||
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 is considered an “interested person” (within the meaning of Section 2(a)(19) of the 1940 Act) of certain Funds in the Invesco Fund Complex by reason of he and his firm currently providing legal services as legal counsel to such Funds in the Invesco Fund Complex. |
T-1 Invesco Pennsylvania Tax Free Income Fund
Trustees and Officers—(continued)
Number of | Other Directorship(s) | |||||||
Name, Year of Birth and | Trustee and/or | Principal Occupation(s) | Funds in | Held by Trustee During | ||||
Position(s) Held with the Trust | Officer Since | During Past 5 Years | Fund Complex Overseen by Trustee | Past 5 Years | ||||
Independent Trustees | ||||||||
Bruce L. Crockett — 1944 Trustee and Chair | 2003 | Chairman, Crockett Technologies 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) | 129 | ACE Limited (insurance company); and Investment Company Institute | ||||
David C. Arch — 1945 Trustee | 2010 | Retired. Chairman and Chief Executive Officer of Blistex Inc., a consumer health care products manufacturer | 147 | Member of the Heartland Alliance Advisory Board, a nonprofit organization serving human needs based in Chicago. Board member of the Illinois Manufacturers’ Association. Member of the Board of Visitors, Institute for the Humanities, University of Michigan | ||||
Frank S. Bayley — 1939 Trustee | 2003 | Retired Formerly: Director, Badgley Funds, Inc. (registered investment company) (2 portfolios) and Partner, law firm of Baker & McKenzie | 129 | 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 | 129 | Chairman, Board of Governors, Western Golf Association, Chairman-elect, Evans Scholars Foundation and Director, Denver Film Society | ||||
Rodney F. Dammeyer — 1940 Trustee | 2010 | Chairman of CAC, LLC, a private company offering capital investment and management advisory services Formerly: Prior to January 2004, Director of TeleTech Holdings Inc.; Prior to 2002, Director of Arris Group, Inc.; Prior to 2001, Managing Partner at Equity Group Corporate Investments. Prior to 1995, Vice Chairman of Anixter International. Prior to 1985, experience includes Senior Vice President and Chief Financial Officer of Household International, Inc, Executive Vice President and Chief Financial Officer of Northwest Industries, Inc. and Partner of Arthur Andersen & Co. | 147 | 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) 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) | 129 | Director of Nature’s Sunshine Products, Inc. | ||||
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) Formerly: Chief Executive Officer, Texana Timber LP (sustainable forestry company) and member of the U.S. House of Representatives | 129 | Insperity (formerly known as Administaff) | ||||
Carl Frischling — 1937 Trustee | 2003 | Partner, law firm of Kramer Levin Naftalis and Frankel LLP | 129 | Director, Reich & Tang Funds (6 portfolios) | ||||
Prema Mathai-Davis — 1950 Trustee | 2003 | Retired Formerly: Chief Executive Officer, YWCA of the U.S.A. | 129 | None | ||||
Larry Soll — 1942 Trustee | 1997 | Retired Formerly, Chairman, Chief Executive Officer and President, Synergen Corp. (a biotechnology company) | 129 | None | ||||
T-2 Invesco Pennsylvania Tax Free Income Fund
Trustees and Officers—(continued)
Number of | Other Directorship(s) | |||||||
Name, Year of Birth and | Trustee and/or | Principal Occupation(s) | Funds in | Held by Trustee | ||||
Position(s) Held with the Trust | Officer Since | During Past 5 Years | Fund Complex Overseen by Trustee | During Past 5 Years | ||||
Independent Trustees—(continued) | ||||||||
Hugo F. Sonnenschein — 1940 Trustee | 2010 | Distinguished Service Professor and President Emeritus of the University of Chicago and the Adam Smith Distinguished Service Professor in the Department of Economics at the University of Chicago. Prior to July 2000, President of the University of Chicago | 147 | 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 | 129 | None | ||||
Other Officers | ||||||||
Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer, The 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 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) | N/A | N/A | ||||
Lisa O. Brinkley — 1959 Vice President | 2004 | Global Assurance Officer, Invesco Ltd. and Vice President, The Invesco Funds Formerly: Chief Compliance Officer, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.), Invesco Investment Services, Inc.(formerly known as Invesco Aim Investment Services, 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 | ||||
T-3 Invesco Pennsylvania Tax Free Income Fund
Trustees and Officers—(continued)
Number of | Other Directorship(s) | |||||||
Name, Year of Birth and | Trustee and/or | Principal Occupation(s) | Funds in | Held by Trustee | ||||
Position(s) Held with the Trust | Officer Since | During Past 5 Years | Fund Complex Overseen by Trustee | During Past 5 Years | ||||
Other Officers—(continued) | ||||||||
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., INVESCO Global Asset Management Limited, Invesco Management Company Limited and INVESCO Management S.A.; 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) 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) | 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); and 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 Formerly: Vice President, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc. | N/A | N/A | ||||
Yinka Akinsola — 1977 Anti-Money Laundering Compliance Officer | 2011 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.), Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.), Invesco Management Group, Inc., The Invesco Funds, Invesco Van Kampen Closed-End Funds, Van Kampen Exchange Corp., Van Kampen Funds Inc., PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, and PowerShares Actively Managed Exchange-Traded Fund Trust Formerly: Regulatory Analyst III, Financial Industry Regulatory Authority (FINRA). | N/A | N/A | ||||
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; Vice President, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) and Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.) Formerly: Senior Vice President, Van Kampen Investments Inc.; Senior Vice President and Chief Compliance Officer, Invesco Advisers, Inc. and Invesco Aim Capital Management, Inc.; Chief Compliance Officer, INVESCO Private Capital Investments, Inc. (holding company), Invesco Private Capital, Inc. (registered investment adviser), Invesco Global Asset Management (N.A.), Inc., Invesco Senior Secured Management, Inc. (registered investment adviser) and Van Kampen Investor Services Inc., 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 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 1000 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 1000 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 1000 Houston, TX 77046-1173 | Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
T-4 Invesco Pennsylvania Tax Free Income Fund
![(IMAGE)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8704911.gif)
Go Paperless with eDelivery Visit invesco.com/edelivery to receive quarterly statements, tax forms, fund reports and prospectuses with a service that’s all about eeees: — environmentally friendly. Go green by reducing the num- — efficient. Stop waiting for regular mail. Your documents ber of trees used to produce paper. will be sent via email as soon as they’re available. — economical. Help reduce your fund’s printing and delivery — easy. Download, save and print fi les using your home expenses and put more capital back in your fund’s returns. computer with a few clicks of your mouse. This service is provided by Invesco Investment Services, Inc. |
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 shown below.
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, 2012, 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 US 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 LOGO)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8704912.gif)
SEC file numbers: 811-09913 and 333-36074 | VK-PTFI-AR-1 | Invesco Distributors, Inc. |
![]() |
Annual Report to Shareholders | August 31, 2012 |
Invesco Small Cap Discovery Fund
Effective September 24, 2012, after the close of the reporting period, Invesco Van Kampen Small Cap Growth Fund was renamed Invesco Small Cap Discovery Fund.
Nasdaq:
A: VASCX ■ B: VBSCX ■ C: VCSCX ■ Y: VISCX
A: VASCX ■ B: VBSCX ■ C: VCSCX ■ Y: VISCX
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 | |
20 | Financial Highlights | |
21 | Auditor’s Report | |
22 | Fund Expenses | |
23 | Approval of Investment Advisory and Sub-Advisory Agreements | |
25 | Tax Information | |
T-1 | Trustees and Officers |
Letters to Shareholders
![(PHOTO OF PHILIP TAYLOR)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8705102.jpg)
Philip Taylor
Dear Shareholders:
This report contains information about your Fund, including a discussion from your portfolio managers about how they managed your Fund – and why it performed as it did – during the reporting period. This report also includes your Fund’s long-term performance and a complete list of your Fund’s investments as of the close of the reporting period. I hope you find this information helpful.
For much of the reporting period, investors’ attention was focused on Europe, where eurozone governments struggled to reduce debt levels, strengthen their banks and stimulate their economies. European leaders disagreed whether the wiser path to restoring the Continent’s economic well-being was more stimulus or greater austerity. In the US, economic data were mixed. Economic growth, while positive, was relatively modest. Corporate earnings, which have grown strongly in recent years, have begun to slow. And job creation has been less robust than hoped. Later in this report, your Fund’s portfolio managers discuss how economic conditions and market trends affected your Fund’s performance.
Economic conditions are always subject to sudden and unexpected change. That’s why you may find it helpful to work with a trusted, experienced financial adviser who understands your unique financial goals, needs and risk tolerances. Financial advisers can provide valuable insight and information, particularly when markets are turbulent, and they can recommend investments appropriate for specific investment goals, such as a child’s college education or your retirement. On a regular basis, a financial adviser also can determine whether your existing investments are still appropriate, given your changing needs, goals and circumstances.
Timely insight and information from many of Invesco’s investment professionals is available at our website, invesco.com/us. We offer in-depth articles, video clips and audio commentaries from many of our portfolio managers and other investment professionals on a wide range of topics of interest to investors: recent economic and market developments; retirement planning; legislative updates from Washington, DC; and general investor education. At invesco.com/us, you also can access information about your Invesco account at any time.
What we mean by Intentional Investing
Intentional InvestingSM is the science and art of investing with purpose, prudence and diligence – and it’s how Invesco’s investment professionals manage your money every day.
This highly disciplined process begins when specialized teams of investment professionals clearly define an investment objective and then establish specific investment strategies to try to achieve that objective. While our investment teams closely monitor economic and market conditions – and issues specific to individual holdings that could affect their value – they maintain a long-term investment perspective. Intentional Investing is also:
n | How we manage and mitigate risk – by embedding risk controls and processes into every aspect of our business; | ||
n | How we create products – by offering a diverse combination of investment strategies and vehicles designed to meet your needs; and | ||
n | How we connect with you, our investors – by communicating clearly, by delivering expert insights from our portfolio managers and other investment professionals, and by providing a website full of tools and articles to help you stay informed. |
As a company, Invesco believes in putting investors first, and that’s why investment management is all we do. Our sole focus on managing your money allows your financial adviser to build a truly diversified investment portfolio of Invesco funds, whatever your investment needs and goals may be – and allows him or her to find appropriate Invesco funds when your circumstances change. Of course, neither Intentional Investing nor diversification can guarantee a profit or protect against loss.
Have a question?
If you have questions about your account, please contact an Invesco client services representative at 800 959 4246. If you have an Invesco-related question or comment, feel free 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/0000950123-12-013037/h87055h8705103.gif)
Philip Taylor
Senior Managing Director, Invesco Ltd.
Senior Managing Director, Invesco Ltd.
2 Invesco Small Cap Discovery Fund
![(PHOTO OF BRUCE CROCKETT)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8705104.jpg)
Bruce Crockett
Dear Fellow Shareholders:
One of our most important responsibilities as independent Trustees of the Invesco Funds is our annual review of the funds’ advisory and sub-advisory contracts with Invesco. This annual review is required by the Investment Company Act of 1940 and focuses on the nature and quality of the services Invesco has provided as adviser to the Invesco Funds and the reasonableness of the fees that it charges for those services.
In our roles as Trustees, we spend months reviewing thousands of pages of detailed information that we request from Invesco in connection with our annual review. We focus on the quality and costs of the services to be provided by Invesco and its affiliates. Some of the most important things we look at are fund performance, expenses and fees. All of the Trustees have substantial personal investments in the Invesco Funds complex. We’re fund shareholders just like you.
We also use information from many independent sources during the review process, including materials provided by the independent Senior Officer of the Invesco Funds, who reports directly to the independent Trustees. We also meet in private sessions with independent legal counsel and review performance and fee data on the Invesco Funds prepared by Lipper Inc., an independent, third-party firm widely recognized as a leader in its field.
I’m pleased to report that the Invesco Funds Board determined in June that renewing the investment advisory agreement and the sub-advisory contracts with Invesco would serve the best interests of each fund and its shareholders. For more detailed information about our assessment and conclusions with respect to each of the Invesco Funds, visit invesco.com/us, click on the “About Us” section and go to “Legal Information.” Information on the recent investment advisory renewal process can be found by clicking the last item under “Corporate Governance.”
In much the same way we review your fund’s advisory contract each year, it’s a good idea for you to review your own investment plan with your financial adviser on a regular basis. Perhaps you need to reassess your original asset allocation because different investments may grow at varying paces, or perhaps you’re going through a significant life change. Regardless of your situation, a financial adviser can provide guidance and experience to help you reach your financial goals.
As always, please contact me at bruce@brucecrockett.com with any questions or concerns you may have. On behalf of the 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/0000950123-12-013037/h87055h8705105.gif)
Bruce L. Crockett
Independent Chair
Independent Chair
Invesco Funds Board of Trustees
3 Invesco Small Cap Discovery Fund
Management’s Discussion of Fund Performance
Performance summary
For the fiscal year ended August 31, 2012, Invesco Small Cap Discovery Fund (formerly Invesco Van Kampen Small Cap Growth Fund), at net asset value (NAV), had positive returns and outperformed the Fund’s style-specific benchmark, the Russell 2000 Growth Index. Outperformance was driven primarily by stock selection in several sectors, including consumer discretionary, information technology (IT) and consumer staples.
Your Fund’s long-term performance appears later in this report.
Fund vs. Indexes
Total returns, 8/31/11 to 8/31/12, 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 | 14.33 | % | ||
Class B Shares | 14.40 | |||
Class C Shares | 13.55 | |||
Class Y Shares | 14.60 | |||
S&P 500 Index▼ (Broad Market Index) | 18.00 | |||
Russell 2000 Growth Index■ (Style-Specific Index) | 12.72 | |||
Lipper Small-Cap Growth Funds Index♦ (Peer Group Index) | 12.78 | |||
Source(s): ▼Invesco, S&P-Dow Jones via FactSet Research Systems Inc.; ■Invesco, Russell via FactSet Research Systems Inc.; ♦Lipper Inc. |
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 becomes unfavorable or a higher conviction investment idea arises with better risk/reward. |
Market conditions and your Fund
As the reporting period began, reports on employment and the economy were mixed at best, and sovereign debt issues abroad weighed heavily on investors. Equity indexes sold off precipitously as the US struggled very publicly to raise the nation’s debt ceiling. As a result, Standard & Poor’s announced the first-ever downgrade to long-term US government debt. Uncertainty created by the downgrade combined with the continuing eurozone debt-crisis saga to reignite global recession fears through October.
As those negative headlines faded during the fall of 2011, signs of muted growth remained. US equity markets rebounded with a nearly uninterrupted rally throughout the winter and into the spring of 2012. In late March, markets paused, and while company earnings still offered more positive surprises than disappointments, confidence began to wane in the absence of new growth drivers. By May, the market went into steady decline as investors grew concerned about the real possibility of a Greek exit from the European Union and the potential collapse of the euro. Economic data and earnings in the US began to show signs of deceleration amid contagion from both European and Asian weakness.
Toward the end of the reporting period, yet another European commitment to a lasting resolution to the economic crisis was coupled with an announcement that funds may be injected directly into large financial institutions. This announcement, along with a ruling by the US Supreme Court upholding the Affordable Care Act, provided some near-term clarity and resulted in risk taking that led the markets modestly higher as the reporting period ended.
Portfolio Composition
By sector
Information Technology | 24.8 | % | ||
Health Care | 18.8 | |||
Industrials | 16.8 | |||
Consumer Discretionary | 14.2 | |||
Energy | 6.3 | |||
Financials | 5.3 | |||
Materials | 4.0 | |||
Consumer Staples | 2.9 | |||
Telecommunication Services | 0.5 | |||
Money Market Funds Plus Other Assets Less Liabilities | 6.4 |
Top 10 Equity Holdings*
1. | Cubist Pharmaceuticals, Inc. | 1.2 | % | |||||
2. | Hanesbrands, Inc. | 1.2 | ||||||
3. | Cytec Industries Inc. | 1.1 | ||||||
4. | Sirona Dental Systems, Inc. | 1.1 | ||||||
5. | Teradyne, Inc. | 1.1 | ||||||
6. | PulteGroup Inc. | 1.1 | ||||||
7. | Regal-Beloit Corp. | 1.1 | ||||||
8. | TRW Automotive Holdings Corp. | 1.1 | ||||||
9. | MEDNAX, Inc. | 1.1 | ||||||
10. | Cooper Tire & Rubber Co. | 1.0 |
Total Net Assets | $875.7 million | |||
Total Number of Holdings* | 135 |
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 Small Cap Discovery Fund
During the reporting period, the Fund at NAV had double-digit positive returns and outperformed the Russell 2000 Growth Index due primarily to positive stock selection in all major market sectors. The Fund outperformed the index by the widest margins in the consumer discretionary, IT and consumer staples sectors. Some of this outperformance was offset by an underweight allocation to the relatively strong performing health care sector.
The consumer discretionary sector was the leading contributor to Fund performance, driven primarily by strong stock selection. The largest individual stock contributor was homebuilder Pulte Group. The stock benefited from increasing strength in the homebuilding market and successful execution of a detailed management plan to turn the business around and enhance profitability. Jarden is a diversified consumer product company that also contributed to Fund performance.
Strong stock selection also drove the Fund’s outperformance in the IT sector. One of the leading contributors for the Fund was SolarWinds, a provider of powerful and affordable IT management software. The company benefited primarily from increased revenue driven by its innovative web-based delivery model. Additional technology contributors included Cirrus Logic, a chip developer for audio and energy markets worldwide, and NETGEAR, a networking product developer.
With the market’s bipolar ‘risk on/risk off’ mentality over the past several years, investors have placed a premium on companies with stable business models and consistent dividend payments, many of which are classified as consumer staples. Stock selection in the consumer staples sector was beneficial to Fund performance and the leading contributor in the sector was B&G Foods. One of the only areas of significant growth in this stable sector was in natural and organic foods, which have benefited from an increasingly health-conscious and educated consumer. Hain Celestial Group and Annie’s are two natural food companies that also contributed to Fund performance. Diamond Foods is a nut and snack company that also should have benefited from healthier eating trends; however, some highly publicized accounting issues arose and negatively affected the stock. We sold our position during the reporting period as a result of the uncertain impact these issues would have on the company’s future earnings.
During the reporting period, the strongest performing sector for the Russell 2000 Growth Index was health care. Despite positive health care stock selection, the Fund underperformed in the sector due to a modest underweight position, especially in the biotechnology industry. Our largest health care detractor was Examworks Group, a provider of independent medical examinations. We sold our position due to management’s lack of execution, and the company’s loss of market share.
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. We thank you for your commitment to Invesco Small Cap Discovery 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/0000950123-12-013037/h87055h8705106.jpg)
Matthew Hart
Chartered Financial Analyst, portfolio manager, is lead manager of Invesco Small Cap Discovery Fund. He joined Invesco in 2010. Mr. Hart earned a BBA from Southern Methodist University.
Chartered Financial Analyst, portfolio manager, is lead manager of Invesco Small Cap Discovery Fund. He joined Invesco in 2010. Mr. Hart earned a BBA from Southern Methodist University.
![(PHOTO OF JUSTIN SPEER)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8705107.jpg)
Justin Speer
Portfolio manager, is manager of Invesco Small Cap Discovery Fund. He joined Invesco in 2010. Mr. Speer earned a BS with an emphasis in finance and accounting from Texas Christian University.
Portfolio manager, is manager of Invesco Small Cap Discovery Fund. He joined Invesco in 2010. Mr. Speer earned a BS with an emphasis in finance and accounting from Texas Christian University.
5 Invesco Small Cap Discovery Fund
Your Fund’s Long-Term Performance
Results of a $10,000 Investment – Oldest Share Class(es)
Fund and index data from 8/31/02*
![(LINE GRAPH)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8705108.gif)
1 | Sources: Invesco, Russell via FactSet Research Systems Inc. | |
2 | Source: Lipper Inc. | |
3 | Sources: Invesco, S&P-Dow Jones via FactSet Research Systems Inc. | |
* | During the reporting period, Invesco changed its policy regarding growth of $10,000 charts. For funds older than 10 years, we previously showed performance since inception. Going forward, we will show performance for the most recent 10 years, since this more accurately reflects the experience of the typical shareholder. As a result, charts now may include benchmarks that did not appear previously, because the funds’ inception predated the benchmarks’ inception. Also, all charts will now be presented using a linear format. |
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.
6 Invesco Small Cap Discovery Fund
Average Annual Total Returns
As of 8/31/12, including maximum applicable
sales charges
sales charges
Class A Shares | ||||||||
Inception (11/27/00) | 1.65 | % | ||||||
10 | Years | 9.22 | ||||||
5 | Years | 0.71 | ||||||
1 | Year | 8.08 | ||||||
Class B Shares | ||||||||
Inception (11/27/00) | 1.64 | % | ||||||
10 | Years | 9.28 | ||||||
5 | Years | 1.26 | ||||||
1 | Year | 9.40 | ||||||
Class C Shares | ||||||||
Inception (11/27/00) | 1.39 | % | ||||||
10 | Years | 9.04 | ||||||
5 | Years | 1.12 | ||||||
1 | Year | 12.55 | ||||||
Class Y Shares | ||||||||
Inception (2/2/06) | 4.13 | % | ||||||
5 | Years | 2.12 | ||||||
1 | Year | 14.60 |
Average Annual Total Returns
As of 6/30/12, the most recent calendar quarter-end, including maximum applicable sales charges
Class A Shares | ||||||||
Inception (11/27/00) | 1.23 | % | ||||||
10 | Years | 7.53 | ||||||
5 | Years | -0.25 | ||||||
1 | Year | -11.89 | ||||||
Class B Shares | ||||||||
Inception (11/27/00) | 1.22 | % | ||||||
10 | Years | 7.60 | ||||||
5 | Years | 0.25 | ||||||
1 | Year | -10.91 | ||||||
Class C Shares | ||||||||
Inception (11/27/00) | 0.98 | % | ||||||
10 | Years | 7.34 | ||||||
5 | Years | 0.15 | ||||||
1 | Year | -8.26 | ||||||
Class Y Shares | ||||||||
Inception (2/2/06) | 3.40 | % | ||||||
5 | Years | 1.15 | ||||||
1 | Year | -6.55 |
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 (renamed Invesco Small Cap Discovery 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 1.42%, 1.44%, 2.10% and 1.17%, 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.
7 Invesco Small Cap Discovery Fund
Invesco Small Cap Discovery Fund’s investment objective is to seek capital appreciation.
n | Unless otherwise stated, information presented in this report is as of August 31, 2012, 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 for new or additional investments. Existing shareholders of Class B shares may continue to reinvest dividends and capital gains distributions in Class B shares and exchange their Class B shares for Class B shares of other funds. 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 | 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 | Foreign risk. 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 | Forward currency contracts risk. The use of forward contracts involves the risk of mismatching the Fund’s objectives under a forward contract with the value of securities denominated in a particular currency. Furthermore, such transactions reduce or preclude the opportunity for gain if the value of the currency should move in the direction opposite to the position taken. There is an additional risk to the effect that currency contracts create exposure to currencies in which the Fund’s securities are not denominated. |
Unanticipated changes in currency prices may result in poorer overall performance for the Fund than if it had not entered into such contracts. | ||
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 | 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 | 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 | REITs risk. 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 | Small cap companies risk. 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. |
About indexes used in this report
n | The S&P 500® Index is an unmanaged index considered representative of the US 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 | 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. | |
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). |
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. |
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 Small Cap Discovery Fund
Schedule of Investments(a)
August 31, 2012
Shares | Value | |||||||
Common Stocks & Other Equity Interests–93.64% | ||||||||
Aerospace & Defense–0.85% | ||||||||
Esterline Technologies Corp.(b) | 124,527 | $ | 7,446,715 | |||||
Air Freight & Logistics–0.11% | ||||||||
UTi Worldwide, Inc. | 71,433 | 980,775 | ||||||
Airlines–0.80% | ||||||||
Spirit Airlines Inc.(b) | 360,326 | 7,044,373 | ||||||
Alternative Carriers–0.52% | ||||||||
tw telecom inc.(b) | 182,124 | 4,580,419 | ||||||
Apparel Retail–1.48% | ||||||||
DSW Inc.–Class A | 93,850 | 6,055,202 | ||||||
Genesco Inc.(b) | 97,189 | 6,866,403 | ||||||
12,921,605 | ||||||||
Apparel, Accessories & Luxury Goods–2.01% | ||||||||
Hanesbrands, Inc.(b) | 327,767 | 10,629,484 | ||||||
Oxford Industries, Inc. | 19,383 | 1,056,955 | ||||||
Under Armour, Inc.–Class A(b) | 102,058 | 5,940,796 | ||||||
17,627,235 | ||||||||
Application Software–6.25% | ||||||||
ACI Worldwide, Inc.(b) | 198,463 | 8,609,325 | ||||||
Aspen Technology, Inc.(b) | 353,162 | 8,610,090 | ||||||
Bottomline Technologies, Inc.(b) | 250,668 | 5,624,990 | ||||||
Cadence Design Systems, Inc.(b) | 515,837 | 6,809,048 | ||||||
Compuware Corp.(b) | 566,451 | 5,664,510 | ||||||
Informatica Corp.(b) | 134,001 | 4,368,433 | ||||||
MicroStrategy Inc.–Class A(b) | 60,191 | 7,554,572 | ||||||
SolarWinds, Inc.(b) | 136,692 | 7,501,657 | ||||||
54,742,625 | ||||||||
Asset Management & Custody Banks–0.86% | ||||||||
Affiliated Managers Group, Inc.(b) | 64,157 | 7,546,146 | ||||||
Auto Parts & Equipment–1.06% | ||||||||
TRW Automotive Holdings Corp.(b) | 213,239 | 9,320,677 | ||||||
Automotive Retail–0.88% | ||||||||
Group 1 Automotive, Inc. | 140,732 | 7,741,667 | ||||||
Biotechnology–5.88% | ||||||||
Amarin Corp. PLC–ADR (Ireland)(b) | 371,242 | 5,082,303 | ||||||
BioMarin Pharmaceutical Inc.(b) | 221,062 | 8,254,455 | ||||||
Cepheid, Inc.(b) | 150,417 | 5,676,738 | ||||||
Cubist Pharmaceuticals, Inc.(b) | 235,309 | 10,871,276 | ||||||
Incyte Corp.(b) | 307,148 | 6,146,031 | ||||||
Medivation Inc.(b) | 69,153 | 7,251,384 | ||||||
Onyx Pharmaceuticals, Inc.(b) | 114,458 | 8,231,819 | ||||||
51,514,006 | ||||||||
Building Products–1.40% | ||||||||
Fortune Brands Home & Security, Inc.(b) | 203,053 | 5,177,851 | ||||||
Owens Corning Inc.(b) | 211,888 | 7,068,584 | ||||||
12,246,435 | ||||||||
Commodity Chemicals–0.75% | ||||||||
Koppers Holdings, Inc. | 61,254 | 1,985,242 | ||||||
Methanex Corp. (Canada) | 154,435 | 4,603,707 | ||||||
6,588,949 | ||||||||
Communications Equipment–1.74% | ||||||||
Ciena Corp.(b) | 260,445 | 3,560,283 | ||||||
Finisar Corp.(b) | 155,295 | 2,133,753 | ||||||
NETGEAR, Inc.(b) | 157,268 | 5,751,291 | ||||||
Palo Alto Networks, Inc.(b) | 16,716 | 1,076,176 | ||||||
Procera Networks, Inc.(b) | 127,619 | 2,704,247 | ||||||
15,225,750 | ||||||||
Construction & Engineering–1.02% | ||||||||
MasTec Inc.(b) | 491,513 | 8,965,197 | ||||||
Data Processing & Outsourced Services–2.95% | ||||||||
Cardtronics, Inc.(b) | 296,719 | 8,382,312 | ||||||
Heartland Payment Systems, Inc. | 246,729 | 7,495,627 | ||||||
Jack Henry & Associates, Inc. | 184,172 | 6,806,997 | ||||||
VeriFone Systems, Inc.(b) | 89,270 | 3,101,240 | ||||||
25,786,176 | ||||||||
Electrical Components & Equipment–2.37% | ||||||||
Belden Inc. | 219,885 | 7,504,675 | ||||||
Polypore International, Inc.(b) | 121,220 | 3,929,952 | ||||||
Regal-Beloit Corp. | 137,300 | 9,344,638 | ||||||
20,779,265 | ||||||||
Electronic Equipment & Instruments–0.76% | ||||||||
Cognex Corp. | 184,910 | 6,673,402 | ||||||
Electronic Manufacturing Services–0.65% | ||||||||
IPG Photonics Corp.(b) | 92,448 | 5,684,628 | ||||||
Environmental & Facilities Services–1.66% | ||||||||
Progressive Waste Solutions Ltd. (Canada) | 380,071 | 7,536,808 | ||||||
Waste Connections, Inc. | 240,683 | 6,967,773 | ||||||
14,504,581 | ||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
9 Invesco Small Cap Discovery Fund
Shares | Value | |||||||
Fertilizers & Agricultural Chemicals–0.51% | ||||||||
Intrepid Potash, Inc.(b) | 200,514 | $ | 4,497,529 | |||||
Footwear–0.89% | ||||||||
Steven Madden, Ltd.(b) | 181,125 | 7,773,885 | ||||||
Health Care Distributors–0.67% | ||||||||
PSS World Medical, Inc.(b) | 271,006 | 5,851,020 | ||||||
Health Care Equipment–5.19% | ||||||||
DexCom Inc.(b) | 471,585 | 6,272,080 | ||||||
HeartWare International Inc.(b) | 64,454 | 5,773,145 | ||||||
Insulet Corp.(b) | 270,679 | 5,676,139 | ||||||
Masimo Corp.(b) | 188,432 | 4,160,579 | ||||||
Sirona Dental Systems, Inc.(b) | 182,345 | 9,689,813 | ||||||
Thoratec Corp.(b) | 179,363 | 6,078,612 | ||||||
Volcano Corp.(b) | 276,439 | 7,817,695 | ||||||
45,468,063 | ||||||||
Health Care Facilities–1.36% | ||||||||
Acadia Healthcare Co., Inc.(b) | 410,488 | 7,873,160 | ||||||
Health Management Associates Inc.–Class A(b) | 523,256 | 4,008,141 | ||||||
11,881,301 | ||||||||
Health Care Services–2.72% | ||||||||
HMS Holdings Corp.(b) | 199,699 | 6,881,628 | ||||||
MEDNAX, Inc.(b) | 134,270 | 9,302,226 | ||||||
Team Health Holdings, Inc.(b) | 266,059 | 7,595,984 | ||||||
23,779,838 | ||||||||
Health Care Supplies–1.21% | ||||||||
Align Technology, Inc.(b) | 187,619 | 6,369,665 | ||||||
Endologix, Inc.(b) | 354,628 | 4,244,897 | ||||||
10,614,562 | ||||||||
Health Care Technology–0.52% | ||||||||
MedAssets, Inc.(b) | 267,586 | 4,567,693 | ||||||
Homebuilding–1.07% | ||||||||
PulteGroup Inc.(b) | 684,657 | 9,366,108 | ||||||
Homefurnishing Retail–0.58% | ||||||||
Mattress Firm Holding Corp.(b) | 157,058 | 5,055,697 | ||||||
Housewares & Specialties–0.85% | ||||||||
Jarden Corp. | 153,654 | 7,426,098 | ||||||
Industrial Machinery–3.46% | ||||||||
Actuant Corp.–Class A | 153,219 | 4,308,518 | ||||||
EnPro Industries, Inc.(b) | 198,797 | 7,462,839 | ||||||
IDEX Corp. | 129,999 | 5,181,760 | ||||||
Thermon Group Holdings Inc.(b) | 151,201 | 3,456,455 | ||||||
TriMas Corp.(b) | 374,924 | 8,060,866 | ||||||
Woodward Inc. | 52,905 | 1,847,972 | ||||||
30,318,410 | ||||||||
Internet Software & Services–2.70% | ||||||||
Active Network, Inc. (The)(b) | 381,394 | 4,294,496 | ||||||
j2 Global, Inc. | 150,824 | 4,444,783 | ||||||
LogMeIn, Inc.(b) | 159,073 | 3,496,425 | ||||||
NIC Inc. | 404,640 | 5,838,955 | ||||||
Web.com Group Inc.(b) | 335,026 | 5,578,183 | ||||||
23,652,842 | ||||||||
Investment Banking & Brokerage–0.65% | ||||||||
Stifel Financial Corp.(b) | 174,773 | 5,711,582 | ||||||
Investment Companies–Exchange Traded Funds–0.73% | ||||||||
iShares Russell 2000 Growth Index Fund | 68,400 | 6,360,516 | ||||||
IT Consulting & Other Services–0.78% | ||||||||
MAXIMUS, Inc. | 124,960 | 6,796,574 | ||||||
Leisure Products–0.65% | ||||||||
Polaris Industries Inc. | 75,904 | 5,707,222 | ||||||
Managed Health Care–0.67% | ||||||||
Centene Corp.(b) | 143,554 | 5,829,728 | ||||||
Marine–0.49% | ||||||||
Kirby Corp.(b) | 80,756 | 4,251,803 | ||||||
Metal & Glass Containers–0.85% | ||||||||
Greif Inc.–Class A | 167,173 | 7,439,198 | ||||||
Movies & Entertainment–1.38% | ||||||||
Cinemark Holdings, Inc. | 302,464 | 7,083,707 | ||||||
Lions Gate Entertainment Corp.(b) | 335,466 | 4,958,187 | ||||||
12,041,894 | ||||||||
Office Services & Supplies–1.62% | ||||||||
Interface, Inc. | 411,038 | 5,643,552 | ||||||
Steelcase Inc.–Class A | 880,100 | 8,536,970 | ||||||
14,180,522 | ||||||||
Oil & Gas Drilling–0.87% | ||||||||
Atwood Oceanics, Inc.(b) | 163,665 | 7,574,416 | ||||||
Oil & Gas Equipment & Services–1.42% | ||||||||
Dresser-Rand Group, Inc.(b) | 115,075 | 5,825,096 | ||||||
Oil States International, Inc.(b) | 84,124 | 6,581,862 | ||||||
12,406,958 | ||||||||
Oil & Gas Exploration & Production–4.02% | ||||||||
Berry Petroleum Co.–Class A | 148,833 | 5,483,008 | ||||||
Carrizo Oil & Gas, Inc.(b) | 176,747 | 4,461,094 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
10 Invesco Small Cap Discovery Fund
Shares | Value | |||||||
Oil & Gas Exploration & Production–(continued) | ||||||||
Gulfport Energy Corp.(b) | 219,440 | $ | 5,771,272 | |||||
Kodiak Oil & Gas Corp.(b) | 752,786 | 6,729,907 | ||||||
Oasis Petroleum Inc.(b) | 244,114 | 7,159,864 | ||||||
Rosetta Resources, Inc.(b) | 131,027 | 5,626,299 | ||||||
35,231,444 | ||||||||
Packaged Foods & Meats–1.98% | ||||||||
Annie’s, Inc.(b) | 22,394 | 930,471 | ||||||
B&G Foods Inc. | 250,641 | 7,336,262 | ||||||
Hain Celestial Group, Inc. (The)(b) | 131,349 | 9,061,767 | ||||||
17,328,500 | ||||||||
Personal Products–0.87% | ||||||||
Elizabeth Arden, Inc.(b) | 164,558 | 7,658,529 | ||||||
Pharmaceuticals–0.59% | ||||||||
Medicis Pharmaceutical Corp.–Class A | 164,678 | 5,197,238 | ||||||
Regional Banks–2.15% | ||||||||
BBCN Bancorp, Inc.(b) | 378,893 | 4,743,741 | ||||||
Signature Bank(b) | 111,691 | 7,218,589 | ||||||
SVB Financial Group(b) | 118,865 | 6,892,981 | ||||||
18,855,311 | ||||||||
Research & Consulting Services–0.69% | ||||||||
Acacia Research(b) | 230,549 | 6,072,661 | ||||||
Restaurants–1.00% | ||||||||
Bravo Brio Restaurant Group Inc.(b) | 277,902 | 4,493,675 | ||||||
Ignite Restaurant Group, Inc.(b) | 287,303 | 4,303,799 | ||||||
8,797,474 | ||||||||
Semiconductor Equipment–2.05% | ||||||||
Cymer, Inc.(b) | 93,110 | 5,279,337 | ||||||
Nanometrics Inc.(b) | 198,023 | 3,015,890 | ||||||
Teradyne, Inc.(b) | 616,440 | 9,628,793 | ||||||
17,924,020 | ||||||||
Semiconductors–4.65% | ||||||||
Cirrus Logic, Inc.(b) | 188,973 | 7,874,505 | ||||||
Lattice Semiconductor Corp.(b) | 1,797,572 | 6,992,555 | ||||||
Microsemi Corp.(b) | 374,012 | 7,446,579 | ||||||
Peregrine Semiconductor Corp.(b) | 236,361 | 3,758,140 | ||||||
Semtech Corp.(b) | 307,236 | 7,533,426 | ||||||
Volterra Semiconductor Corp.(b) | 296,630 | 7,068,693 | ||||||
40,673,898 | ||||||||
Specialty Chemicals–1.88% | ||||||||
Cytec Industries Inc. | 142,177 | 9,734,859 | ||||||
OMNOVA Solutions Inc.(b) | 14,521 | 113,119 | ||||||
PolyOne Corp. | 96,427 | 1,521,618 | ||||||
Rockwood Holdings Inc. | 107,470 | 5,087,630 | ||||||
16,457,226 | ||||||||
Specialty Stores–1.35% | ||||||||
Tractor Supply Co. | 78,439 | 7,489,356 | ||||||
Vitamin Shoppe, Inc.(b) | 80,977 | 4,341,177 | ||||||
11,830,533 | ||||||||
Systems Software–3.21% | ||||||||
Allot Communications Ltd. (Israel)(b) | 123,039 | 3,250,690 | ||||||
Ariba Inc.(b) | 152,686 | 6,823,537 | ||||||
CommVault Systems, Inc.(b) | 128,689 | 6,488,500 | ||||||
Fortinet Inc.(b) | 263,092 | 6,974,569 | ||||||
MICROS Systems, Inc.(b) | 89,823 | 4,550,433 | ||||||
28,087,729 | ||||||||
Tires & Rubber–1.04% | ||||||||
Cooper Tire & Rubber Co. | 457,095 | 9,137,329 | ||||||
Trading Companies & Distributors–1.51% | ||||||||
United Rentals, Inc.(b) | 149,818 | 4,840,620 | ||||||
WESCO International, Inc.(b) | 145,080 | 8,382,722 | ||||||
13,223,342 | ||||||||
Trucking–0.81% | ||||||||
Werner Enterprises, Inc. | 317,675 | 7,068,269 | ||||||
Total Common Stocks & Other Equity Interests (Cost $666,488,586) | 820,017,588 | |||||||
Money Market Funds–6.51% | ||||||||
Liquid Assets Portfolio–Institutional Class(c) | 28,504,662 | 28,504,662 | ||||||
Premier Portfolio–Institutional Class(c) | 28,504,661 | 28,504,661 | ||||||
Total Money Market Funds (Cost $57,009,323) | 57,009,323 | |||||||
TOTAL INVESTMENTS–100.15% (Cost $723,497,909) | 877,026,911 | |||||||
OTHER ASSETS LESS LIABILITIES–(0.15)% | (1,347,080 | ) | ||||||
NET ASSETS–100.00% | $ | 875,679,831 | ||||||
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) | 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 Small Cap Discovery Fund
Statement of Assets and Liabilities
August 31, 2012
Assets: | ||||
Investments, at value (Cost $666,488,586) | $ | 820,017,588 | ||
Investments in affiliated money market funds, at value and cost | 57,009,323 | |||
Total investments, at value (Cost $723,497,909) | 877,026,911 | |||
Receivable for: | ||||
Investments sold | 3,337,451 | |||
Fund shares sold | 681,927 | |||
Dividends | 279,593 | |||
Investment for trustee deferred compensation and retirement plans | 14,607 | |||
Other assets | 13,580 | |||
Total assets | 881,354,069 | |||
Liabilities: | ||||
Payable for: | ||||
Investments purchased | 2,488,308 | |||
Fund shares reacquired | 1,965,287 | |||
Accrued fees to affiliates | 1,023,445 | |||
Accrued other operating expenses | 127,461 | |||
Trustee deferred compensation and retirement plans | 69,737 | |||
Total liabilities | 5,674,238 | |||
Net assets applicable to shares outstanding | $ | 875,679,831 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 665,602,451 | ||
Undistributed net investment income (loss) | (5,015,678 | ) | ||
Undistributed net realized gain | 61,564,056 | |||
Unrealized appreciation | 153,529,002 | |||
$ | 875,679,831 | |||
Net Assets: | ||||
Class A | $ | 607,073,046 | ||
Class B | $ | 13,754,181 | ||
Class C | $ | 48,486,050 | ||
Class Y | $ | 206,366,554 | ||
Shares outstanding, $0.01 par value per share, with an unlimited number of shares authorized: | ||||
Class A | 55,942,725 | |||
Class B | 1,363,349 | |||
Class C | 4,936,556 | |||
Class Y | 18,652,869 | |||
Class A: | ||||
Net asset value per share | $ | 10.85 | ||
Maximum offering price per share | ||||
(Net asset value of $10.85 divided by 94.50%) | $ | 11.48 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 10.09 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 9.82 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 11.06 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
12 Invesco Small Cap Discovery Fund
Statement of Operations
For the year ended August 31, 2012
Investment income: | ||||
Dividends (net of foreign withholding taxes of $32,787) | $ | 5,082,714 | ||
Dividends from affiliated money market funds (includes securities lending income of $733,333) | 823,143 | |||
Total investment income | 5,905,857 | |||
Expenses: | ||||
Advisory fees | 7,904,663 | |||
Administrative services fees | 262,541 | |||
Custodian fees | 33,127 | |||
Distribution fees: | ||||
Class A | 1,860,805 | |||
Class B | 37,511 | |||
Class C | 488,926 | |||
Transfer agent fees | 3,357,001 | |||
Trustees’ and officers’ fees and benefits | 81,861 | |||
Other | 417,862 | |||
Total expenses | 14,444,297 | |||
Less: Fees waived and expense offset arrangement(s) | (547,378 | ) | ||
Net expenses | 13,896,919 | |||
Net investment income (loss) | (7,991,062 | ) | ||
Realized and unrealized gain from: | ||||
Net realized gain from investment securities (includes net gains (losses) from securities sold to affiliates of $(335,016)) | 69,161,444 | |||
Change in net unrealized appreciation of investment securities | 87,063,026 | |||
Net realized and unrealized gain | 156,224,470 | |||
Net increase in net assets resulting from operations | $ | 148,233,408 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
13 Invesco Small Cap Discovery Fund
Statement of Changes in Net Assets
For the years ended August 31, 2012 and 2011
2012 | 2011 | |||||||
Operations: | ||||||||
Net investment income (loss) | $ | (7,991,062 | ) | $ | (12,418,666 | ) | ||
Net realized gain | 69,161,444 | 156,490,689 | ||||||
Change in net unrealized appreciation | 87,063,026 | 61,326,821 | ||||||
Net increase in net assets resulting from operations | 148,233,408 | 205,398,844 | ||||||
Distributions to shareholders from net realized gains: | ||||||||
Class A | (81,968,055 | ) | — | |||||
Class B | (1,718,916 | ) | — | |||||
Class C | (5,413,962 | ) | — | |||||
Class Y | (21,572,101 | ) | — | |||||
Total distributions from net realized gains | (110,673,034 | ) | — | |||||
Share transactions–net: | ||||||||
Class A | (242,910,836 | ) | (15,344,006 | ) | ||||
Class B | (3,476,255 | ) | (6,818,997 | ) | ||||
Class C | (3,443,087 | ) | (13,825,956 | ) | ||||
Class Y | (34,627,450 | ) | (10,814,267 | ) | ||||
Net increase (decrease) in net assets resulting from share transactions | (284,457,628 | ) | (46,803,226 | ) | ||||
Net increase (decrease) in net assets | (246,897,254 | ) | 158,595,618 | |||||
Net assets: | ||||||||
Beginning of year | 1,122,577,085 | 963,981,467 | ||||||
End of year (includes undistributed net investment income (loss) of $(5,015,678) and $(16,503), respectively) | $ | 875,679,831 | $ | 1,122,577,085 | ||||
Notes to Financial Statements
August 31, 2012
NOTE 1—Significant Accounting Policies
Invesco Small Cap Discovery Fund, formerly 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 to seek 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 to Class A shares. 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 to Class A shares. 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 the 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. |
14 Invesco Small Cap Discovery 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. 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 economic 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 declared and paid annually and recorded on the 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 |
15 Invesco Small Cap Discovery Fund
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 June 1, 2010, incremental transfer agency fees which were unique to each class of shares 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 the 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 had a 2% redemption fee that was retained by the Fund to offset transaction costs and other expenses associated with short-term redemptions and exchanges. The fee, subject to certain exceptions, was imposed on certain redemptions or exchanges of shares within 31 days of purchase. The redemption fee was recorded as an increase in shareholder capital and was allocated among the share classes based on the relative net assets of each class. Effective January 1, 2012, the Fund eliminated the 2% redemption fee 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 affiliated money market funds 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. |
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).
Effective July 1, 2012, the Adviser has contractually agreed, through at least June 30, 2013, 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 and Class Y shares to 2.00%, 2.75%, 2.75% and 1.75% of average daily net assets, respectively. Prior to July 1, 2012, 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 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% 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 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 non-routine items, including litigation expenses; and (5) expenses that the
16 Invesco Small Cap Discovery Fund
Fund has incurred but did not 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, 2013.
Further, the Adviser has contractually agreed, through at least June 30, 2013, 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, 2012, the Adviser waived advisory fees of $545,956.
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, 2012, 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, 2012, 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, 2012, 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, 2012, IDI advised the Fund that IDI retained $50,983 in front-end sales commissions from the sale of Class A shares and $248, $15,193 and $2,196 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, 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, 2012. 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.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 877,026,911 | $ | — | $ | — | $ | 877,026,911 | ||||||||
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. Pursuant to these procedures, for the year ended August 31, 2012, the Fund engaged in securities sales of $5,495,868, which resulted in net realized gains (losses) of $(335,016).
17 Invesco Small Cap Discovery Fund
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, 2012, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $1,422.
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.
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. Such balances, if any at period end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. 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, 2012 and 2011:
2012 | 2011 | |||||||
Ordinary income | $ | 38,183,752 | $ | — | ||||
Long-term capital gain | 72,489,282 | — | ||||||
Total distributions | $ | 110,673,034 | $ | — | ||||
Tax Components of Net Assets at Period-End:
2012 | ||||
Undistributed long-term gain | $ | 64,888,670 | ||
Net unrealized appreciation — investments | 150,172,069 | |||
Temporary book/tax differences | (67,788 | ) | ||
Late-Year ordinary loss deferral | (4,915,571 | ) | ||
Shares of beneficial interest | 665,602,451 | |||
Total net assets | $ | 875,679,831 | ||
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 the treatment of passive foreign investment companies.
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 Regulated Investment Company Modernization Act of 2010 (the “Act”) eliminated the eight-year carryover period for capital losses that arise in taxable years beginning after its enactment date of December 22, 2010. Consequently, these capital losses can be carried forward for an unlimited period. However, capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Additionally, post-enactment capital loss carryovers will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. 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 does not have a capital loss carryforward at period-end.
18 Invesco Small Cap Discovery 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, 2012 was $744,915,153 and $1,121,329,056, 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 | $ | 171,866,733 | ||
Aggregate unrealized (depreciation) of investment securities | (21,694,664 | ) | ||
Net unrealized appreciation of investment securities | $ | 150,172,069 | ||
Cost of investments for tax purposes is $726,854,842. |
NOTE 10—Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of net operating losses, on August 31, 2012, undistributed net investment income (loss) was increased by $2,991,887 and undistributed net realized gain was decreased by $2,991,887. This reclassification had no effect on the net assets of the Fund.
NOTE 11—Share Information
Summary of Share Activity | ||||||||||||||||
Years ended August 31, | ||||||||||||||||
2012(a) | 2011 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Class A | 16,280,879 | $ | 168,906,300 | 27,335,662 | $ | 305,615,460 | ||||||||||
Class B | 46,729 | 457,333 | 121,453 | 1,227,517 | ||||||||||||
Class C | 430,727 | 4,106,013 | 732,345 | 7,621,915 | ||||||||||||
Class Y | 3,911,388 | 41,480,313 | 9,655,115 | 109,865,214 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Class A | 8,188,781 | 79,758,723 | — | — | ||||||||||||
Class B | 175,506 | 1,588,333 | — | — | ||||||||||||
Class C | 584,164 | 5,175,695 | — | — | ||||||||||||
Class Y | 2,008,021 | 19,899,485 | — | — | ||||||||||||
Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||
Class A | 244,402 | 2,557,325 | 280,405 | 3,196,083 | ||||||||||||
Class B | (258,474 | ) | (2,557,325 | ) | (299,369 | ) | (3,196,083 | ) | ||||||||
Reacquired:(b) | ||||||||||||||||
Class A | (46,520,534 | ) | (494,133,184 | ) | (29,021,472 | ) | (324,155,549 | ) | ||||||||
Class B | (309,907 | ) | (2,964,596 | ) | (464,581 | ) | (4,850,431 | ) | ||||||||
Class C | (1,344,251 | ) | (12,724,795 | ) | (2,092,933 | ) | (21,447,871 | ) | ||||||||
Class Y | (9,048,357 | ) | (96,007,248 | ) | (10,441,601 | ) | (120,679,481 | ) | ||||||||
Net increase (decrease) in share activity | (25,610,926 | ) | $ | (284,457,628 | ) | (4,194,976 | ) | $ | (46,803,226 | ) | ||||||
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 29% 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 Fund 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 $12,135 and $34,933 allocated among the classes based on relative net assets of each class for the years ended August 31, 2012 and 2011, respectively. |
19 Invesco Small Cap Discovery 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 | Distributions | net assets | assets without | investment | ||||||||||||||||||||||||||||||||||||||||||
value, | investment | (both | Total from | from net | Net asset | Net assets, | with fee waivers | fee waivers | income (loss) | |||||||||||||||||||||||||||||||||||||||
beginning | income | realized and | investment | realized | value, end | Total | end of period | and/or expenses | and/or expenses | to average | Portfolio | |||||||||||||||||||||||||||||||||||||
of period | (loss)(a) | unrealized) | operations | gains | of period(b) | return | (000s omitted) | absorbed | absorbed | net assets | turnover(c) | |||||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/12 | $ | 10.56 | $ | (0.08 | ) | $ | 1.47 | $ | 1.39 | $ | (1.10 | ) | $ | 10.85 | 14.33 | %(d) | $ | 607,073 | 1.38 | %(e) | 1.43 | %(e) | (0.80 | )%(e) | 78 | % | ||||||||||||||||||||||
Year ended 08/31/11 | 8.74 | (0.11 | ) | 1.93 | 1.82 | — | 10.56 | 20.82 | (d) | 820,988 | 1.38 | 1.42 | (1.01 | ) | 114 | |||||||||||||||||||||||||||||||||
Five months ended 08/31/10 | 9.62 | (0.04 | ) | (0.84 | ) | (0.88 | ) | — | 8.74 | (9.15 | )(d) | 691,456 | 1.34 | (f) | 1.34 | (f) | (1.04 | )(f) | 63 | |||||||||||||||||||||||||||||
Year ended 03/31/10 | 6.93 | (0.09 | ) | 2.78 | 2.69 | — | 9.62 | 38.82 | (g) | 748,998 | 1.39 | 1.39 | (1.04 | ) | 234 | |||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 10.15 | (0.09 | ) | (3.13 | ) | (3.22 | ) | — | 6.93 | (31.72 | )(g) | 402,611 | 1.40 | 1.40 | (1.00 | ) | 219 | |||||||||||||||||||||||||||||||
Year ended 03/31/08 | 10.70 | (0.10 | ) | 0.29 | 0.19 | (0.74 | ) | 10.15 | 0.79 | (g) | 317,560 | 1.38 | 1.38 | (0.92 | ) | 194 | ||||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/12 | 9.89 | (0.08 | ) | 1.38 | 1.30 | (1.10 | ) | 10.09 | 14.40 | (d)(h) | 13,754 | 1.38 | (e)(h) | 1.43 | (e)(h) | (0.80 | )(e)(h) | 78 | ||||||||||||||||||||||||||||||
Year ended 08/31/11 | 8.18 | (0.11 | ) | 1.82 | 1.71 | — | 9.89 | 20.90 | (d)(h) | 16,910 | 1.40 | (h) | 1.44 | (h) | (1.03 | )(h) | 114 | |||||||||||||||||||||||||||||||
Five months ended 08/31/10 | 9.03 | (0.05 | ) | (0.80 | ) | (0.85 | ) | — | 8.18 | (9.41 | )(d)(h) | 19,249 | 1.63 | (f)(h) | 1.63 | (f)(h) | (1.33 | )(f)(h) | 63 | |||||||||||||||||||||||||||||
Year ended 03/31/10 | 6.51 | (0.09 | ) | 2.61 | 2.52 | — | 9.03 | 38.71 | (i)(j) | 23,169 | 1.53 | (j) | 1.53 | (j) | (1.19 | )(j) | 234 | |||||||||||||||||||||||||||||||
Year ended 03/31/09 | 9.59 | (0.14 | ) | (2.94 | ) | (3.08 | ) | — | 6.51 | (32.12 | )(i)(j) | 22,044 | 2.04 | (j) | 2.04 | (j) | (1.65 | )(j) | 219 | |||||||||||||||||||||||||||||
Year ended 03/31/08 | 10.22 | (0.18 | ) | 0.29 | 0.11 | (0.74 | ) | 9.59 | 0.03 | (i) | 42,722 | 2.14 | 2.14 | (1.68 | ) | 194 | ||||||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/12 | 9.73 | (0.15 | ) | 1.34 | 1.19 | (1.10 | ) | 9.82 | 13.43 | (d) | 48,486 | 2.13 | (e) | 2.18 | (e) | (1.55 | )(e) | 78 | ||||||||||||||||||||||||||||||
Year ended 08/31/11 | 8.10 | (0.17 | ) | 1.80 | 1.63 | — | 9.73 | 20.12 | (d)(k) | 51,212 | 2.06 | (k) | 2.10 | (k) | (1.69 | )(k) | 114 | |||||||||||||||||||||||||||||||
Five months ended 08/31/10 | 8.95 | (0.07 | ) | (0.78 | ) | (0.85 | ) | — | 8.10 | (9.50 | )(d) | 53,673 | 2.09 | (f) | 2.09 | (f) | (1.79 | )(f) | 63 | |||||||||||||||||||||||||||||
Year ended 03/31/10 | 6.50 | (0.14 | ) | 2.59 | 2.45 | — | 8.95 | 37.69 | (l) | 62,523 | 2.14 | 2.14 | (1.79 | ) | 234 | |||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 9.58 | (0.14 | ) | (2.94 | ) | (3.08 | ) | — | 6.50 | (32.15 | )(l) | 39,064 | 2.14 | 2.14 | (1.75 | ) | 219 | |||||||||||||||||||||||||||||||
Year ended 03/31/08 | 10.21 | (0.18 | ) | 0.29 | 0.11 | (0.74 | ) | 9.58 | 0.03 | (l) | 42,395 | 2.14 | 2.14 | (1.67 | ) | 194 | ||||||||||||||||||||||||||||||||
Class Y(m) | ||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/12 | 10.72 | (0.06 | ) | 1.50 | 1.44 | (1.10 | ) | 11.06 | 14.60 | (d) | 206,367 | 1.13 | (e) | 1.18 | (e) | (0.55 | )(e) | 78 | ||||||||||||||||||||||||||||||
Year ended 08/31/11 | 8.84 | (0.09 | ) | 1.97 | 1.88 | — | 10.72 | 21.27 | (d) | 233,467 | 1.13 | 1.17 | (0.76 | ) | 114 | |||||||||||||||||||||||||||||||||
Five months ended 08/31/10 | 9.73 | (0.03 | ) | (0.86 | ) | (0.89 | ) | — | 8.84 | (9.15 | )(d) | 199,603 | 1.09 | (f) | 1.09 | (f) | (0.80 | )(f) | 63 | |||||||||||||||||||||||||||||
Year ended 03/31/10 | 6.99 | (0.06 | ) | 2.80 | 2.74 | — | 9.73 | 39.20 | (n) | 267,593 | 1.14 | 1.14 | (0.76 | ) | 234 | |||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 10.20 | (0.07 | ) | (3.14 | ) | (3.21 | ) | — | 6.99 | (31.47 | )(n) | 91,594 | 1.15 | 1.15 | (0.75 | ) | 219 | |||||||||||||||||||||||||||||||
Year ended 03/31/08 | 10.74 | (0.07 | ) | 0.27 | 0.20 | (0.74 | ) | 10.20 | 0.88 | (n) | 81,038 | 1.14 | 1.14 | (0.63 | ) | 194 | ||||||||||||||||||||||||||||||||
(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) | 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 based on average daily net assets (000’s) of $744,322, $15,242, $48,916 and $213,615 for Class A, Class B, Class C and Class Y, respectively. | |
(f) | Annualized. | |
(g) | 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. | |
(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%, 0.27% and 0.54% for the years ended August 31, 2012, August 31, 2011 and the five months 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) | 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. | |
(l) | 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. | |
(m) | On June 1, 2010, the Fund’s former Class I shares were reorganized into Class Y shares. | |
(n) | 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. |
NOTE 13—Subsequent Event
Effective September 24, 2012, the Fund began offering Class R5 and Class R6 shares.
20 Invesco Small Cap Discovery 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 Small Cap Discovery 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 Small Cap Discovery Fund, (formerly known as 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, 2012, 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 two years in the period 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, 2012 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. 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 23, 2012
Houston, Texas
21 Invesco Small Cap Discovery 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, 2012 through August 31, 2012.
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 | (03/01/12) | (08/31/12)1 | Period2 | (08/31/12) | Period2 | Ratio | ||||||||||||||||||||||||
A | $ | 1,000.00 | $ | 1,003.70 | $ | 7.00 | $ | 1,018.15 | $ | 7.05 | 1.39 | % | ||||||||||||||||||
B | 1,000.00 | 1,004.00 | 6.98 | 1,018.17 | 7.03 | 1.39 | ||||||||||||||||||||||||
C | 1,000.00 | 1,000.00 | 10.73 | 1,014.40 | 10.81 | 2.14 | ||||||||||||||||||||||||
Y | 1,000.00 | 1,005.50 | 5.75 | 1,019.41 | 5.79 | 1.14 | ||||||||||||||||||||||||
1 | The actual ending account value is based on the actual total return of the Fund for the period March 1, 2012 through August 31, 2012, 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 184/366 to reflect the most recent fiscal half year. |
22 Invesco Small Cap Discovery Fund
Approval of Investment Advisory and Sub-Advisory Contracts
(Formerly Known as Invesco Van Kampen Small Cap Growth Fund)
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 Small Cap Discovery 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 19-20, 2012, 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, 2012. 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 primarily 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, 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 and on what terms 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. In addition to meetings with Invesco Advisers and fund 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 independent legal 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 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 previously approved by a different board that, at the time, was responsible for overseeing Morgan Stanley and Van Kampen funds, which have become Invesco Funds following the acquisition of the retail mutual fund business of Morgan Stanley. 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 or factor 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 20, 2012, 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 Sub-Committees 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 prior relationship and 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 consistent 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 consistent with the terms of the Fund’s sub-advisory contracts.
23 Invesco Small Cap Discovery 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 third quintile of the performance universe for the one and five year periods and the fifth quintile for the three 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 and five year periods and below the performance of the Index for the three year period. Invesco Advisers advised the Board that the Fund had performed as expected in the low quality market. 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 also noted that Invesco Advisers sub-advises one mutual fund 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 fund 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 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 and were assisted in their review by a report from the Senior Officer. 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. The Board noted that Invesco Advisers proposes sharing economies of scale in administration expenses by lowering per class administrative fees.
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 for the year ended December 31, 2011. 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 Invesco Funds and the Fund. The Board did not deem the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund to be excessive given the nature, quality and extent of the services provided to the Invesco Funds. The Board received and accepted information from Invesco Advisers demonstrating that 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.
24 Invesco Small Cap Discovery 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, 2012:
Federal and State Income Tax | ||||
Long-Term Capital Gain Dividends | $ | 72,489,282 | ||
Qualified Dividend Income* | 10.99% | |||
Corporate Dividends Received Deduction* | 10.32% |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Fund’s fiscal year. |
25 Invesco Small Cap Discovery 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 1000, 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 | Other Directorship(s) | |||||||
Name, Year of Birth and | Trustee and/or | Principal Occupation(s) | Funds in | Held by Trustee During | ||||
Position(s) Held with the Trust | Officer Since | During Past 5 Years | Fund Complex Overseen by Trustee | Past 5 Years | ||||
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 | 129 | 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. | 129 | None | ||||
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. | ||||||||
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 certain funds in the Fund Complex | 147 | Director of the Mutual Fund Directors Forum, a nonprofit membership organization for investment directors; Chairman and Director of the Abraham Lincoln Presidential Library Foundation; and Director of the Stevenson Center for Democracy | ||||
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 is considered an “interested person” (within the meaning of Section 2(a)(19) of the 1940 Act) of certain Funds in the Invesco Fund Complex by reason of he and his firm currently providing legal services as legal counsel to such Funds in the Invesco Fund Complex. |
T-1 Invesco Small Cap Discovery Fund
Trustees and Officers—(continued)
Number of | Other Directorship(s) | |||||||
Name, Year of Birth and | Trustee and/or | Principal Occupation(s) | Funds in | Held by Trustee During | ||||
Position(s) Held with the Trust | Officer Since | During Past 5 Years | Fund Complex Overseen by Trustee | Past 5 Years | ||||
Independent Trustees | ||||||||
Bruce L. Crockett — 1944 Trustee and Chair | 2003 | Chairman, Crockett Technologies 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) | 129 | ACE Limited (insurance company); and Investment Company Institute | ||||
David C. Arch — 1945 Trustee | 2010 | Retired. Chairman and Chief Executive Officer of Blistex Inc., a consumer health care products manufacturer | 147 | Member of the Heartland Alliance Advisory Board, a nonprofit organization serving human needs based in Chicago. Board member of the Illinois Manufacturers’ Association. Member of the Board of Visitors, Institute for the Humanities, University of Michigan | ||||
Frank S. Bayley — 1939 Trustee | 2003 | Retired Formerly: Director, Badgley Funds, Inc. (registered investment company) (2 portfolios) and Partner, law firm of Baker & McKenzie | 129 | 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 | 129 | Chairman, Board of Governors, Western Golf Association, Chairman-elect, Evans Scholars Foundation and Director, Denver Film Society | ||||
Rodney F. Dammeyer — 1940 Trustee | 2010 | Chairman of CAC, LLC, a private company offering capital investment and management advisory services Formerly: Prior to January 2004, Director of TeleTech Holdings Inc.; Prior to 2002, Director of Arris Group, Inc.; Prior to 2001, Managing Partner at Equity Group Corporate Investments. Prior to 1995, Vice Chairman of Anixter International. Prior to 1985, experience includes Senior Vice President and Chief Financial Officer of Household International, Inc, Executive Vice President and Chief Financial Officer of Northwest Industries, Inc. and Partner of Arthur Andersen & Co. | 147 | 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) 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) | 129 | Director of Nature’s Sunshine Products, Inc. | ||||
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) Formerly: Chief Executive Officer, Texana Timber LP (sustainable forestry company) and member of the U.S. House of Representatives | 129 | Insperity (formerly known as Administaff) | ||||
Carl Frischling — 1937 Trustee | 2003 | Partner, law firm of Kramer Levin Naftalis and Frankel LLP | 129 | Director, Reich & Tang Funds (6 portfolios) | ||||
Prema Mathai-Davis — 1950 Trustee | 2003 | Retired Formerly: Chief Executive Officer, YWCA of the U.S.A. | 129 | None | ||||
Larry Soll — 1942 Trustee | 1997 | Retired Formerly, Chairman, Chief Executive Officer and President, Synergen Corp. (a biotechnology company) | 129 | None | ||||
T-2 Invesco Small Cap Discovery Fund
Trustees and Officers—(continued)
Number of | Other Directorship(s) | |||||||
Name, Year of Birth and | Trustee and/or | Principal Occupation(s) | Funds in | Held by Trustee | ||||
Position(s) Held with the Trust | Officer Since | During Past 5 Years | Fund Complex Overseen by Trustee | During Past 5 Years | ||||
Independent Trustees—(continued) | ||||||||
Hugo F. Sonnenschein — 1940 Trustee | 2010 | Distinguished Service Professor and President Emeritus of the University of Chicago and the Adam Smith Distinguished Service Professor in the Department of Economics at the University of Chicago. Prior to July 2000, President of the University of Chicago | 147 | 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 | 129 | None | ||||
Other Officers | ||||||||
Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer, The 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 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) | N/A | N/A | ||||
Lisa O. Brinkley — 1959 Vice President | 2004 | Global Assurance Officer, Invesco Ltd. and Vice President, The Invesco Funds Formerly: Chief Compliance Officer, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.), Invesco Investment Services, Inc.(formerly known as Invesco Aim Investment Services, 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 | ||||
T-3 Invesco Small Cap Discovery Fund
Trustees and Officers—(continued)
Number of | Other Directorship(s) | |||||||
Name, Year of Birth and | Trustee and/or | Principal Occupation(s) | Funds in | Held by Trustee | ||||
Position(s) Held with the Trust | Officer Since | During Past 5 Years | Fund Complex Overseen by Trustee | During Past 5 Years | ||||
Other Officers—(continued) | ||||||||
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., INVESCO Global Asset Management Limited, Invesco Management Company Limited and INVESCO Management S.A.; 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) 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) | 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); and 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 Formerly: Vice President, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc. | N/A | N/A | ||||
Yinka Akinsola — 1977 Anti-Money Laundering Compliance Officer | 2011 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.), Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.), Invesco Management Group, Inc., The Invesco Funds, Invesco Van Kampen Closed-End Funds, Van Kampen Exchange Corp., Van Kampen Funds Inc., PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, and PowerShares Actively Managed Exchange-Traded Fund Trust Formerly: Regulatory Analyst III, Financial Industry Regulatory Authority (FINRA). | N/A | N/A | ||||
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; Vice President, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) and Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.) Formerly: Senior Vice President, Van Kampen Investments Inc.; Senior Vice President and Chief Compliance Officer, Invesco Advisers, Inc. and Invesco Aim Capital Management, Inc.; Chief Compliance Officer, INVESCO Private Capital Investments, Inc. (holding company), Invesco Private Capital, Inc. (registered investment adviser), Invesco Global Asset Management (N.A.), Inc., Invesco Senior Secured Management, Inc. (registered investment adviser) and Van Kampen Investor Services Inc., 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 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 1000 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 1000 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 1000 Houston, TX 77046-1173 | Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
T-4 Invesco Small Cap Discovery Fund
![(IMAGE)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8705109.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 shown below.
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, 2012, 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 US 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 LOGO)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8705110.gif)
SEC file numbers: 811-09913 and 333-36074 | VK-SCD-AR-1 | Invesco Distributors, Inc. |
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Annual Report to Shareholders | August 31, 2012 |
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 | |
26 | Financial Highlights | |
27 | Auditor’s Report | |
28 | Fund Expenses | |
29 | Approval of Investment Advisory and Sub-Advisory Agreements | |
31 | Tax Information | |
T-1 | Trustees and Officers |
Letters to Shareholders
![(PHOTO OF PHILIP TAYLOR)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8703102.jpg)
Philip Taylor
Dear Shareholders:
This report contains information about your Fund, including a discussion from your portfolio managers about how they managed your Fund – and why it performed as it did – during the reporting period. This report also includes your Fund’s long-term performance and a complete list of your Fund’s investments as of the close of the reporting period. I hope you find this information helpful.
For much of the reporting period, investors’ attention was focused on Europe, where eurozone governments struggled to reduce debt levels, strengthen their banks and stimulate their economies. European leaders disagreed whether the wiser path to restoring the Continent’s economic well-being was more stimulus or greater austerity. In the US, economic data were mixed. Economic growth, while positive, was relatively modest. Corporate earnings, which have grown strongly in recent years, have begun to slow. And job creation has been less robust than hoped. Later in this report, your Fund’s portfolio managers discuss how economic conditions and market trends affected your Fund’s performance.
Economic conditions are always subject to sudden and unexpected change. That’s why you may find it helpful to work with a trusted, experienced financial adviser who understands your unique financial goals, needs and risk tolerances. Financial advisers can provide valuable insight and information, particularly when markets are turbulent, and they can recommend investments appropriate for specific investment goals, such as a child’s college education or your retirement. On a regular basis, a financial adviser also can determine whether your existing investments are still appropriate, given your changing needs, goals and circumstances.
Timely insight and information from many of Invesco’s investment professionals is available at our website, invesco.com/us. We offer in-depth articles, video clips and audio commentaries from many of our portfolio managers and other investment professionals on a wide range of topics of interest to investors: recent economic and market developments; retirement planning; legislative updates from Washington, DC; and general investor education. At invesco.com/us, you also can access information about your Invesco account at any time.
What we mean by Intentional Investing
Intentional InvestingSM is the science and art of investing with purpose, prudence and diligence – and it’s how Invesco’s investment professionals manage your money every day.
This highly disciplined process begins when specialized teams of investment professionals clearly define an investment objective and then establish specific investment strategies to try to achieve that objective. While our investment teams closely monitor economic and market conditions – and issues specific to individual holdings that could affect their value – they maintain a long-term investment perspective. Intentional Investing is also:
n | How we manage and mitigate risk – by embedding risk controls and processes into every aspect of our business; | ||
n | How we create products – by offering a diverse combination of investment strategies and vehicles designed to meet your needs; and | ||
n | How we connect with you, our investors – by communicating clearly, by delivering expert insights from our portfolio managers and other investment professionals, and by providing a website full of tools and articles to help you stay informed. |
As a company, Invesco believes in putting investors first, and that’s why investment management is all we do. Our sole focus on managing your money allows your financial adviser to build a truly diversified investment portfolio of Invesco funds, whatever your investment needs and goals may be – and allows him or her to find appropriate Invesco funds when your circumstances change. Of course, neither Intentional Investing nor diversification can guarantee a profit or protect against loss.
Have a question?
If you have questions about your account, please contact an Invesco client services representative at 800 959 4246. If you have an Invesco-related question or comment, feel free 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/0000950123-12-013037/h87055h8703103.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/0000950123-12-013037/h87055h8703104.jpg)
Bruce Crockett
Dear Fellow Shareholders:
One of our most important responsibilities as independent Trustees of the Invesco Funds is our annual review of the funds’ advisory and sub-advisory contracts with Invesco. This annual review is required by the Investment Company Act of 1940 and focuses on the nature and quality of the services Invesco has provided as adviser to the Invesco Funds and the reasonableness of the fees that it charges for those services.
In our roles as Trustees, we spend months reviewing thousands of pages of detailed information that we request from Invesco in connection with our annual review. We focus on the quality and costs of the services to be provided by Invesco and its affiliates. Some of the most important things we look at are fund performance, expenses and fees. All of the Trustees have substantial personal investments in the Invesco Funds complex. We’re fund shareholders just like you.
We also use information from many independent sources during the review process, including materials provided by the independent Senior Officer of the Invesco Funds, who reports directly to the independent Trustees. We also meet in private sessions with independent legal counsel and review performance and fee data on the Invesco Funds prepared by Lipper Inc., an independent, third-party firm widely recognized as a leader in its field.
I’m pleased to report that the Invesco Funds Board determined in June that renewing the investment advisory agreement and the sub-advisory contracts with Invesco would serve the best interests of each fund and its shareholders. For more detailed information about our assessment and conclusions with respect to each of the Invesco Funds, visit invesco.com/us, click on the “About Us” section and go to “Legal Information.” Information on the recent investment advisory renewal process can be found by clicking the last item under “Corporate Governance.”
In much the same way we review your fund’s advisory contract each year, it’s a good idea for you to review your own investment plan with your financial adviser on a regular basis. Perhaps you need to reassess your original asset allocation because different investments may grow at varying paces, or perhaps you’re going through a significant life change. Regardless of your situation, a financial adviser can provide guidance and experience to help you reach your financial goals.
As always, please contact me at bruce@brucecrockett.com with any questions or concerns you may have. On behalf of the 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/0000950123-12-013037/h87055h8703105.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
Invesco California Tax-Free Income Fund, at net asset value (NAV), posted positive returns for the fiscal year ended August 31, 2012. The Fund at NAV outperformed its broad market/style-specific benchmark, the Barclays California Municipal Index. The Fund’s overweight allocation to, and strong security selection in, the middle to long end of the municipal yield curve were the main contributors to its relative performance versus the Barclays California Municipal Index for the reporting period.
Your Fund’s long-term performance appears later in this report.
Fund vs. Indexes
Total returns, 8/31/11 to 8/31/12, 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 | 12.82 | % | ||
Class B Shares | 12.83 | |||
Class C Shares | 12.28 | |||
Class Y Shares | 13.14 | |||
Barclays California Municipal Index▼ (Broad Market/Style-Specific Index) | 9.96 | |||
Lipper California Municipal Debt Funds Index■ (Peer Group Index) | 12.52 |
Source(s): ▼Barclays via FactSet Research Systems Inc.; ■Lipper Inc. |
How we invest
The Fund normally invests at least 80% of its assets in securities that pay interest exempt from federal and California state income tax. 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. | |
n | Municipal commercial paper – within the highest grade by Moody’s, S&P or Fitch. |
We may also invest in unrated securities that we judge to be of comparable quality to the securities described above. Additionally, we may invest up to 5% 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 tax, consistent with the preservation of capital. In selecting securities for purchase and sale, we use our research capabilities to identify and monitor investment opportunities. In conducting research and analysis, we consider a number of factors, including general market and economic conditions and credit and interest rate risk.
Portfolio Composition
By security type, based on Total Investments
Revenue Bonds | 78.5 | % | ||
General Obligation Bonds | 16.9 | |||
Pre-refunded Bonds | 3.1 | |||
Other | 1.5 |
Total Net Assets | $432.7 million | |||
Total Number of Holdings* | 217 |
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.
Top 10 Fixed Income Issuers
1. | California (State of) | 4.9 | % | |||||
2. | Long Beach (City of) Financing Authority | 4.4 | ||||||
3. | Bay Area Toll Authority | 4.1 | ||||||
4. | Los Angeles (City of) Department of Water & Power | 3.4 | ||||||
5. | Southern California Metropolitan Water District | 2.7 | ||||||
6. | Puerto Rico Sales Tax Financing Corp. | 2.3 | ||||||
7. | Los Angeles (City of) | 2.3 | ||||||
8. | San Francisco (City & County of) Airport Commission | 2.2 | ||||||
9. | Regents of the University of California | 2.0 | ||||||
10. | California (State of) Statewide Communities Development Authority | 1.2 |
We typically sell portfolio securities 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 that we evaluate include individual issuer analysis, sector weightings, geographic distribution and quality spreads.
Market conditions and your Fund
As the reporting period began, reports on employment and the economy were mixed at best, and sovereign debt issues abroad weighed heavily on investors. Equity indexes sold off precipitously as the US struggled very publicly to raise the nation’s debt ceiling. As a result, Standard & Poor’s announced the first-ever downgrade to long-term US government debt. Uncertainty created by the downgrade combined with the continuing eurozone debt-crisis saga to reignite global recession fears through October.
As those negative headlines faded during the fall of 2011, signs of muted growth remained. US equity markets rebounded with a nearly uninterrupted rally throughout the winter and into the spring of 2012. In late March, markets paused, and while company earnings still offered more positive surprises than disappointments, confidence began to wane in the absence of new growth drivers. By May, the market went into steady decline as investors grew concerned about the real possibility of a Greek exit from the European Union and the potential collapse of the euro. Economic data and earnings in the US began to show signs of deceleration amid contagion from both European and Asian weakness.
Toward the end of the reporting period, yet another European commitment to a lasting resolution to the economic crisis was coupled with an announcement that funds may be injected directly into large financial institutions. This announcement, along with a ruling by the US Supreme Court upholding the Affordable Care Act, provided some near-term clarity and resulted in risk taking that led the markets modestly higher as the reporting period ended.
California benefits from a large, diverse economy, high wealth levels, a moderate debt burden and a well-funded pension system. California’s financial condition is volatile relative to other states, with revenues sensitive to both gross domestic product and equity market valuations.
4 | Invesco California Tax-Free Income Fund |
This stems from the high percentage of state revenues that are collected from California’s highest income earners via personal income taxes. The state’s budget and revenue-raising flexibility is limited due to legislative restrictions. While economic activity slowly recovers, depressed housing values, structural uncertainties and high unemployment remain challenges.
During the 12 months covered by this report, municipal bond mutual funds experienced almost $51 billion in net inflows.1 Municipal credit fundamentals continued to strengthen, and as 2011 came to a close, most of the uncertainty from a handful of troubled municipal credits was largely in the rearview mirror. In line with the drop exhibited in previous years, 2011 defaults were muted and lower than 2010’s.
As we approached the end of the reporting period, news spread that a handful of municipalities were experiencing financial difficulties. While these stories made headlines, the actual effect of these bankruptcy filings was isolated and 2012 default trends continued their decline from 2011 levels. It is also important to note that we have seen a substantial decline in the number of defaults in the pipeline, with fewer first time missed payments by municipal issuers signaling that municipalities have made the necessary adjustments to their financial situations.
During the reporting period, lower rated tax-exempt bonds experienced greater price appreciation than their higher rated counterparts. Strong security selection among unrated bonds was a main contributor to Fund performance for the reporting period. Overweight exposure to – and favorable security selection in – lower rated bonds also contributed to Fund returns.
The Fund’s exposure to the 15- to 20-year part of the yield curve and the long end (20+ years) of the yield curve added to relative returns as municipal yields approached all-time lows during the reporting period.2 We obtained some of our yield curve and duration positioning through the use of tender option bonds. Tender option bonds are instruments that have an inverse relationship to a referenced interest rate. Tender option bonds can be a more efficient way to manage duration, yield curve exposure and credit exposure. Also, they potentially can enhance yield.
At the sector level, our overweight exposure to special tax, education and hospital bonds contributed to returns for the reporting period. Our relative underweight exposure to state government obligation bonds detracted from returns.
During the reporting period, leverage made a positive contribution to the performance of the Fund. The Fund achieved a leveraged position through the use of tender option bonds. The Fund uses leverage because we believe that, over time, leveraging provides opportunities for additional income and total return for shareholders. However, use of leverage also can expose shareholders to additional volatility. For more information about the Fund’s use of leverage, see the Notes to Financial Statements later in this report.
Thank you for investing in Invesco California Tax-Free Income Fund and for sharing our long-term investment horizon.
1 Source: Morningstar
2 Source: Bond Buyer
2 Source: Bond Buyer
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/0000950123-12-013037/h87055h8703106.jpg)
Thomas Byron
Portfolio manager, is manager of Invesco California Tax-Free Income Fund. He joined Invesco in 2010. Mr. Byron earned a BS in finance from Marquette University and an MBA in finance from DePaul University.
Portfolio manager, is manager of Invesco California Tax-Free Income Fund. He joined Invesco in 2010. Mr. Byron earned a BS in finance from Marquette University and an MBA in finance from DePaul University.
![(PHOTO OF ROBERT STRYKER)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8703107.jpg)
Robert Stryker
Chartered Financial Analyst, portfolio manager, is manager of Invesco California Tax-Free Income Fund. He joined Invesco in 2010. Mr. Stryker earned a BS in finance from the University of Illinois at Chicago.
Chartered Financial Analyst, portfolio manager, is manager of Invesco California Tax-Free Income Fund. He joined Invesco in 2010. Mr. Stryker earned a BS in finance from the University of Illinois at Chicago.
![(PHOTO OF JULIUS WILLIAMS)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8703108.jpg)
Julius Williams
Portfolio manager, is manager of Invesco California Tax-Free Income Fund. He joined Invesco in 2010. Mr. Williams earned a BA in economics and sociology and a Master of Education degree in educational psychology from the University of Virginia.
Portfolio manager, is manager of Invesco California Tax-Free Income Fund. He joined Invesco in 2010. Mr. Williams earned a BA 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/0000950123-12-013037/h87055h8703109.jpg)
Robert Wimmel
Portfolio manager, is manager of Invesco California Tax-Free Income Fund. He joined Invesco in 2010. Mr. Wimmel earned a BA in anthropology from the University of Cincinnati and an MA in economics from the University of Illinois at Chicago.
Portfolio manager, is manager of Invesco California Tax-Free Income Fund. He joined Invesco in 2010. Mr. Wimmel earned a BA in anthropology from the University of Cincinnati and an MA in economics from the University of Illinois at Chicago.
5 | Invesco California Tax-Free Income Fund |
Your Fund’s Long-Term Performance
Results of a $10,000 Investment – Oldest Share Class(es)
Fund and index data from 8/31/02
![(LINE GRAPH)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8703110.gif)
1 Source: Barclays via FactSet Research Systems Inc.
2 Source: Lipper Inc.
2 Source: 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.
continued from page 8
n | State-specific risk. 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 California Municipal Index is an unmanaged index considered representative 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 | 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. | |
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). |
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. |
6 | Invesco California Tax-Free Income Fund |
Average Annual Total Returns
As of 8/31/12, including maximum applicable sales charges
After Taxes | ||||||||||||||||
on Distributions | ||||||||||||||||
After Taxes | and Sale of | |||||||||||||||
Before Taxes | on Distributions | Fund Shares | ||||||||||||||
Class A Shares | ||||||||||||||||
Inception (7/28/97) | 4.44 | % | 4.35 | % | 4.38 | % | ||||||||||
10 | Years | 4.09 | 4.00 | 4.06 | ||||||||||||
5 | Years | 4.57 | 4.55 | 4.50 | ||||||||||||
1 | Year | 7.42 | 7.42 | 6.32 | ||||||||||||
Class B Shares | ||||||||||||||||
Inception (7/11/84) | 6.49 | % | 6.38 | % | 6.35 | % | ||||||||||
10 | Years | 4.62 | 4.54 | 4.55 | ||||||||||||
5 | Years | 5.29 | 5.27 | 5.14 | ||||||||||||
1 | Year | 7.83 | 7.83 | 6.66 | ||||||||||||
Class C Shares | ||||||||||||||||
Inception (7/28/97) | 4.27 | % | 4.18 | % | 4.19 | % | ||||||||||
10 | Years | 4.05 | 3.97 | 3.98 | ||||||||||||
5 | Years | 5.08 | 5.06 | 4.90 | ||||||||||||
1 | Year | 11.28 | 11.28 | 8.71 | ||||||||||||
Class Y Shares | ||||||||||||||||
Inception (7/28/97) | 5.04 | % | 4.95 | % | 4.96 | % | ||||||||||
10 | Years | 4.84 | 4.75 | 4.76 | ||||||||||||
5 | Years | 5.87 | 5.85 | 5.68 | ||||||||||||
1 | Year | 13.14 | 13.14 | 10.20 |
Average Annual Total Returns
As of 6/30/12, the most recent calendar quarter-end, including maximum applicable sales charges
After Taxes | ||||||||||||||||
on Distributions | ||||||||||||||||
After Taxes | and Sale of | |||||||||||||||
Before Taxes | on Distributions | Fund Shares | ||||||||||||||
Class A Shares | ||||||||||||||||
Inception (7/28/97) | 4.33 | % | 4.24 | % | 4.29 | % | ||||||||||
10 | Years | 4.13 | 4.04 | 4.11 | ||||||||||||
5 | Years | 4.01 | 3.99 | 4.03 | ||||||||||||
1 | Year | 8.42 | 8.42 | 7.02 | ||||||||||||
Class B Shares | ||||||||||||||||
Inception (7/11/84) | 6.45 | % | 6.33 | % | 6.31 | % | ||||||||||
10 | Years | 4.67 | 4.58 | 4.60 | ||||||||||||
5 | Years | 4.71 | 4.69 | 4.65 | ||||||||||||
1 | Year | 8.83 | 8.83 | 7.36 | ||||||||||||
Class C Shares | ||||||||||||||||
Inception (7/28/97) | 4.17 | % | 4.08 | % | 4.10 | % | ||||||||||
10 | Years | 4.10 | 4.02 | 4.04 | ||||||||||||
5 | Years | 4.52 | 4.50 | 4.41 | ||||||||||||
1 | Year | 12.27 | 12.27 | 9.40 | ||||||||||||
Class Y Shares | ||||||||||||||||
Inception (7/28/97) | 4.94 | % | 4.85 | % | 4.87 | % | ||||||||||
10 | Years | 4.89 | 4.80 | 4.81 | ||||||||||||
5 | Years | 5.30 | 5.28 | 5.19 | ||||||||||||
1 | Year | 14.13 | 14.13 | 10.91 |
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 0.90%, 0.90%, 1.40% and 0.65%, 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 |
Invesco California Tax-Free Income Fund’s investment objective is to provide a high level of current income exempt from federal and California income tax, consistent with the preservation of capital.
n | Unless otherwise stated, information presented in this report is as of August 31, 2012, 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 for new or additional investments. Existing shareholders of Class B shares may continue to reinvest dividends and capital gains distributions in Class B shares and exchange their Class B shares for Class B shares of other funds. 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 | Alternative minimum tax risk. The Fund may invest up to 20% of its total assets in securities subject to the federal alternative minimum tax. Since some investors may have to pay tax on a Fund distribution of this income, the Fund may not be a suitable investment for them. | |
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 | 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. The interest rates on treasury futures generally move in the reverse direction of market interest rates. If market interest rates fall, the interest rate on the obligations will increase and if |
market interest rates increase, the interest rate on the obligations will fall. | ||
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 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 | Inverse floating rate municipal obligations risk. 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. The interest rates on these obligations generally move in the reverse direction of market interest rates. If market interest rates fall, the interest rate on the obligations will increase and if market interest rates increase, the interest rate on the obligations will fall. |
n | Lease obligations risk. 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 | 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. 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 | Private activity bonds risk. 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. |
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, 2012
Principal | ||||||||||||||||
Interest | Maturity | Amount | ||||||||||||||
Rate | Date | (000) | Value | |||||||||||||
Municipal Obligations–104.57% | ||||||||||||||||
California–97.26% | ||||||||||||||||
ABAG Finance Authority for Non-profit Corps. (Jewish Home of San Francisco); Series 2005, VRD RB (LOC–Wells Fargo Bank N.A.)(a)(b) | 0.15 | % | 11/15/35 | $ | 4,460 | $ | 4,460,000 | |||||||||
ABAG Finance Authority for Non-profit Corps. (Sharp Healthcare); Series 2012 A, RB | 5.00 | % | 08/01/28 | 900 | 1,012,473 | |||||||||||
Adelanto (City of) Public Utility Authority (Utility System); Series 2009 A, Ref. RB | 6.75 | % | 07/01/39 | 1,500 | 1,649,325 | |||||||||||
Alameda (County of) Joint Powers Authority (Juvenile Justice Refunding); Series 2008 A, Lease RB (INS–AGM)(c) | 5.00 | % | 12/01/25 | 750 | 831,090 | |||||||||||
Alhambra (City of) (Atherton Baptist Homes); Series 2010 A, RB | 7.63 | % | 01/01/40 | 1,575 | 1,749,998 | |||||||||||
Alhambra Unified School District (Election of 1999); Series 1999 A, Unlimited Tax CAB GO Bonds (INS–AGM)(c)(d) | 0.00 | % | 09/01/20 | 1,925 | 1,489,488 | |||||||||||
Anaheim (City of) Public Financing Authority (Anaheim Public Improvements); Series 1997 C, Sub. Lease RB (INS–AGM)(c) | 6.00 | % | 09/01/16 | 4,000 | 4,619,480 | |||||||||||
Anaheim (City of) Public Financing Authority (Electric System Distribution Facilities); Series 2011 A, RB | 5.38 | % | 10/01/36 | 2,500 | 2,941,125 | |||||||||||
Antelope Valley Healthcare District; Series 1997 A, Ref. RB (INS–AGM)(c) | 5.20 | % | 01/01/20 | 3,000 | 3,008,040 | |||||||||||
Arcadia Unified School District (Election of 2006); Series 2007 A, Unlimited Tax GO Bonds (INS–AGM)(c) | 5.00 | % | 08/01/37 | 1,500 | 1,611,945 | |||||||||||
Bakersfield (City of); Series 2007 A, Wastewater RB (INS–AGM)(c) | 5.00 | % | 09/15/32 | 2,215 | 2,411,515 | |||||||||||
Bay Area Governments Association (California Capital); Series 2001 A, Lease RB (INS–AMBAC)(c) | 5.25 | % | 07/01/17 | 1,430 | 1,465,421 | |||||||||||
Bay Area Governments Association (West Sacramento); Series 2004 A, Lease RB (INS–SGI)(c) | 5.00 | % | 09/01/29 | 2,735 | 2,815,983 | |||||||||||
Bay Area Toll Authority (San Francisco Bay Area); | ||||||||||||||||
Series 2008 F-1, Toll Bridge RB(e) | 5.00 | % | 04/01/39 | 1,250 | 1,408,763 | |||||||||||
Series 2008 F-1, Toll Bridge RB | 5.00 | % | 04/01/39 | 2,500 | 2,817,525 | |||||||||||
Series 2009 F-1, Toll Bridge RB(e) | 5.25 | % | 04/01/26 | 4,685 | 5,680,890 | |||||||||||
Series 2009 F-1, Toll Bridge RB(e) | 5.25 | % | 04/01/29 | 5,205 | 6,279,156 | |||||||||||
Series 2009 F-1, Toll Bridge RB(e) | 5.13 | % | 04/01/39 | 1,500 | 1,681,485 | |||||||||||
Beverly Hills Unified School District (Election of 2008); | ||||||||||||||||
Series 2009, Unlimited Tax CAB GO Bonds(d) | 0.00 | % | 08/01/26 | 1,465 | 865,830 | |||||||||||
Series 2009, Unlimited Tax CAB GO Bonds(d) | 0.00 | % | 08/01/32 | 3,045 | 1,337,151 | |||||||||||
Bonita Unified School District (Election of 2004); Series 2004 A, Unlimited Tax GO Bonds(f)(g) | 5.00 | % | 08/01/14 | 1,000 | 1,090,500 | |||||||||||
Brea Olinda Unified School District; Series 2002 A, Ref. COP (INS–AGM)(c) | 5.50 | % | 08/01/18 | 1,850 | 1,857,326 | |||||||||||
California (State of) Department of Water Resources (Central Valley); Series 2003 Y, Water System RB (INS–NATL)(c) | 5.00 | % | 12/01/25 | 5,000 | 5,162,550 | |||||||||||
California (State of) Educational Facilities Authority (California College of the Arts); Series 2005, RB | 5.00 | % | 06/01/35 | 2,000 | 2,022,360 | |||||||||||
California (State of) Educational Facilities Authority (Chapman University); Series 2011, RB | 5.00 | % | 04/01/31 | 1,250 | 1,401,225 | |||||||||||
California (State of) Educational Facilities Authority (Claremont McKenna College); Series 2007, RB(e) | 5.00 | % | 01/01/38 | 2,100 | 2,293,053 | |||||||||||
California (State of) Educational Facilities Authority (Pitzer College); | ||||||||||||||||
Series 2005 A, RB | 5.00 | % | 04/01/35 | 2,000 | 2,074,680 | |||||||||||
Series 2009, RB | 6.00 | % | 04/01/40 | 2,000 | 2,361,820 | |||||||||||
California (State of) Educational Facilities Authority (University of Southern California); Series 2009 B, RB(e) | 5.25 | % | 10/01/39 | 1,800 | 2,111,184 | |||||||||||
California (State of) Health Facilities Financing Authority (Adventist Health System West); Series 2009 A, RB | 5.75 | % | 09/01/39 | 500 | 571,480 | |||||||||||
California (State of) Health Facilities Financing Authority (Catholic Healthcare West); | ||||||||||||||||
Series 2009 A, RB | 6.00 | % | 07/01/39 | 500 | 590,505 | |||||||||||
Series 2011 A, RB | 5.25 | % | 03/01/41 | 2,500 | 2,781,375 | |||||||||||
California (State of) Health Facilities Financing Authority (Children’s Hospital Los Angeles); Series 2010, RB (INS–AGM)(c) | 5.25 | % | 07/01/38 | 2,950 | 3,159,863 | |||||||||||
California (State of) Health Facilities Financing Authority (Kaiser Permanente); Series 2006 A, RB | 5.25 | % | 04/01/39 | 2,000 | 2,130,380 | |||||||||||
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(f)(g) | 6.50 | % | 10/01/18 | $ | 20 | $ | 26,455 | |||||||||
Series 2008, RB | 6.50 | % | 10/01/38 | 980 | 1,167,298 | |||||||||||
California (State of) Health Facilities Financing Authority (Scripps Health); Series 2010 A, RB | 5.00 | % | 11/15/36 | 4,000 | 4,388,360 | |||||||||||
California (State of) Health Facilities Financing Authority (Stanford Hospital); Series 2008 A-2, Ref. RB | 5.25 | % | 11/15/40 | 2,000 | 2,282,600 | |||||||||||
California (State of) Health Facilities Financing Authority (Sutter Health); Series 2011 B, RB | 5.50 | % | 08/15/26 | 1,000 | 1,179,550 | |||||||||||
California (State of) Municipal Finance Authority (American Heritage Education Foundation); Series 2006 A, Education RB | 5.25 | % | 06/01/26 | 1,000 | 975,070 | |||||||||||
California (State of) Municipal Finance Authority (Caritas); Series 2012 A, Mobile Home Park RB | 5.50 | % | 08/15/47 | 1,500 | 1,578,660 | |||||||||||
California (State of) Municipal Finance Authority (Community Hospitals of Central California Obligated Group); | ||||||||||||||||
Series 2007, COP | 5.00 | % | 02/01/20 | 2,055 | 2,202,405 | |||||||||||
Series 2007, COP | 5.25 | % | 02/01/37 | 500 | 516,165 | |||||||||||
California (State of) Municipal Finance Authority (Eisenhower Medical Center); | ||||||||||||||||
Series 2010 A, RB | 5.50 | % | 07/01/30 | 1,000 | 1,065,680 | |||||||||||
Series 2010 A, RB | 5.75 | % | 07/01/40 | 1,500 | 1,614,840 | |||||||||||
California (State of) Municipal Finance Authority (Emerson College); Series 2011, RB | 5.75 | % | 01/01/33 | 1,315 | 1,541,351 | |||||||||||
California (State of) Municipal Finance Authority (University of La Verne); Series 2010 A, RB | 6.13 | % | 06/01/30 | 1,000 | 1,133,210 | |||||||||||
California (State of) Pollution Control Financing Authority (Waste Management Inc.); Series 2002 A, Ref. Solid Waste Disposal RB(h) | 5.00 | % | 01/01/22 | 2,000 | 2,192,320 | |||||||||||
California (State of) Public Works Board (Various Capital); Series 2011 A, Lease RB | 5.13 | % | 10/01/31 | 2,000 | 2,223,820 | |||||||||||
California (State of) Statewide Communities Development Authority (Adventist Health System/West); Series 2005 A, Health Facility RB | 5.00 | % | 03/01/30 | 5,000 | 5,182,300 | |||||||||||
California (State of) Statewide Communities Development Authority (Alliance for College-Ready Public Schools); Series 2012, School Facility RB | 6.10 | % | 07/01/32 | 820 | 869,881 | |||||||||||
California (State of) Statewide Communities Development Authority (American Baptist Homes of the West); Series 2010, RB | 6.25 | % | 10/01/39 | 2,000 | 2,175,440 | |||||||||||
California (State of) Statewide Communities Development Authority (California Baptist University); Series 2007 A, RB | 5.40 | % | 11/01/27 | 1,785 | 1,884,603 | |||||||||||
California (State of) Statewide Communities Development Authority (Cottage Health System Obligated Group); Series 2010, RB | 5.25 | % | 11/01/30 | 1,675 | 1,907,724 | |||||||||||
California (State of) Statewide Communities Development Authority (Methodist Hospital); Series 2009, RB (INS–FHA)(c) | 6.75 | % | 02/01/38 | 500 | 611,245 | |||||||||||
California (State of) Statewide Communities Development Authority (Southern California Presbyterian Homes); | ||||||||||||||||
Series 2009, Senior Living RB | 6.25 | % | 11/15/19 | 2,000 | 2,191,940 | |||||||||||
Series 2009, Senior Living RB | 7.25 | % | 11/15/41 | 500 | 570,400 | |||||||||||
California (State of) Statewide Communities Development Authority (University of California–Irvine East Campus Apartments); Series 2012, Ref. Student Housing RB | 5.38 | % | 05/15/38 | 2,000 | 2,138,140 | |||||||||||
California (State of); | ||||||||||||||||
Series 1992, Unlimited Tax GO Bonds (INS–FGIC)(c) | 6.25 | % | 09/01/12 | 310 | 310,000 | |||||||||||
Series 2009, Various Purpose Unlimited Tax GO Bonds | 5.75 | % | 04/01/31 | 5,000 | 5,905,750 | |||||||||||
Series 2009, Various Purpose Unlimited Tax GO Bonds | 6.00 | % | 11/01/35 | 1,750 | 2,120,755 | |||||||||||
Series 2009, Various Purpose Unlimited Tax GO Bonds | 6.00 | % | 04/01/38 | 1,250 | 1,474,525 | |||||||||||
Series 2010, Unlimited Tax GO Bonds | 5.25 | % | 11/01/40 | 3,000 | 3,398,430 | |||||||||||
Series 2011, Various Purpose Unlimited Tax GO Bonds | 5.00 | % | 09/01/32 | 2,450 | 2,760,856 | |||||||||||
Series 2011, Various Purpose Unlimited Tax GO Bonds | 5.00 | % | 10/01/41 | 2,500 | 2,747,700 | |||||||||||
Series 2012, Ref. Unlimited Tax GO Bonds | 5.25 | % | 02/01/30 | 2,000 | 2,331,900 | |||||||||||
California Infrastructure & Economic Development Bank (Broad Museum); Series 2011 A, RB | 5.00 | % | 06/01/21 | 3,000 | 3,776,100 | |||||||||||
California Special Districts Association Finance Corp. (Special Districts Finance Program); Series 1997 DD, COP (INS–AGM)(c) | 5.63 | % | 01/01/27 | 1,050 | 1,051,711 | |||||||||||
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) | ||||||||||||||||
California State University; Series 2009 A, Systemwide RB (INS–AGC)(c) | 5.25 | % | 11/01/38 | $ | 1,000 | $ | 1,129,520 | |||||||||
Chino Basin Regional Financing Authority (Inland Empire Utilities Agency); Series 2008 A, RB (INS–AMBAC)(c) | 5.00 | % | 11/01/33 | 725 | 783,609 | |||||||||||
Clovis Unified School District (Election of 2004); Series 2004 A, Unlimited Tax CAB GO Bonds (INS–NATL)(c)(d) | 0.00 | % | 08/01/29 | 735 | 333,021 | |||||||||||
Corona-Norco Unified School District (Election of 2006); | ||||||||||||||||
Series 2009, Unlimited Tax CAB GO Bonds (INS–AGC)(c)(d) | 0.00 | % | 08/01/24 | 1,000 | 620,290 | |||||||||||
Series 2009, Unlimited Tax CAB GO Bonds (INS–AGC)(c)(d) | 0.00 | % | 08/01/25 | 1,000 | 588,870 | |||||||||||
Series 2009, Unlimited Tax CAB GO Bonds (INS–AGC)(c)(d) | 0.00 | % | 08/01/26 | 1,525 | 844,179 | |||||||||||
Desert Community College District (Election of 2004); Series 2007 C, Unlimited Tax GO Bonds (INS–AGM)(c) | 5.00 | % | 08/01/37 | 2,500 | 2,706,125 | |||||||||||
Duarte (City of) (City of Hope National Medical Center); Series 1999 A, COP | 5.25 | % | 04/01/19 | 2,500 | 2,505,625 | |||||||||||
East Bay Municipal Utility District; Series 2010 A, Ref. Sub. Water System RB | 5.00 | % | 06/01/36 | 2,000 | 2,331,060 | |||||||||||
Eden (Township of) Healthcare District; Series 2010, COP | 6.13 | % | 06/01/34 | 1,000 | 1,103,530 | |||||||||||
El Dorado (County of) Irrigation District; Series 2009 A, COP (INS–AGC)(c) | 5.75 | % | 08/01/39 | 1,000 | 1,084,710 | |||||||||||
El Monte Union High School District (Election of 2008); Series 2009 A, Unlimited Tax GO Bonds (INS–AGC)(c) | 5.50 | % | 06/01/34 | 1,000 | 1,148,720 | |||||||||||
El Segundo Unified School District (Election of 2008); Series 2009 A, Unlimited Tax CAB GO Bonds(d) | 0.00 | % | 08/01/33 | 4,430 | 1,572,030 | |||||||||||
Fairfield (City of) Community Facilities District No. 3 (North Cordelia General Improvements); Series 2008, Special Tax RB | 6.00 | % | 09/01/32 | 1,800 | 1,977,768 | |||||||||||
Fontana (City of) Public Financing Authority (North Fontana Redevelopment); Series 2003 A, Tax Allocation RB (INS–AMBAC)(c) | 5.38 | % | 09/01/25 | 1,500 | 1,502,640 | |||||||||||
Fontana (City of) Redevelopment Agency (Downtown Redevelopment); Series 2000, Ref. Tax Allocation RB (INS–NATL)(c) | 5.00 | % | 09/01/21 | 1,480 | 1,480,814 | |||||||||||
Foothill-Eastern Transportation Corridor Agency; Series 1999, Ref. Toll Road RB (INS–NATL)(c) | 5.13 | % | 01/15/19 | 4,000 | 4,006,400 | |||||||||||
Gilroy Unified School District (Election of 2008); | ||||||||||||||||
Series 2009 A, Unlimited Tax CAB GO Bonds (INS–AGC)(c)(d) | 0.00 | % | 08/01/29 | 5,350 | 2,372,511 | |||||||||||
Series 2009 A, Unlimited Tax CAB GO Bonds (INS–AGC)(c)(d) | 0.00 | % | 08/01/31 | 3,650 | 1,448,721 | |||||||||||
Glendora (City of) Public Finance Authority; Series 2003 A, Project No. One Tax Allocation RB (INS–NATL)(c) | 5.00 | % | 09/01/24 | 2,425 | 2,450,244 | |||||||||||
Grossmont Union High School District (Election of 2004); Series 2006, Unlimited Tax CAB GO Bonds (INS–NATL)(c)(d) | 0.00 | % | 08/01/24 | 6,750 | 4,148,010 | |||||||||||
Hanford Joint Union High School District (Election of 1998); Series 2004 C, Unlimited Tax GO Bonds (INS–NATL)(c) | 5.70 | % | 08/01/28 | 2,230 | 2,371,360 | |||||||||||
Hawaiian Gardens (City of) Redevelopment Agency; Series 2006 A, Project No. One Tax Allocation RB (INS–AMBAC)(c) | 5.00 | % | 12/01/25 | 2,275 | 2,311,354 | |||||||||||
Inglewood (City of) Redevelopment Agency (Merged Redevelopment); Series 1998 A, Ref. Tax Allocation RB (INS–AMBAC)(c) | 5.25 | % | 05/01/23 | 1,000 | 1,110,370 | |||||||||||
Irvine (City of) (Reassessment District No. 12-1); Series 2012, Limited Obligation Improvement Bonds | 4.00 | % | 09/02/22 | 2,150 | 2,308,627 | |||||||||||
Irvine Unified School District (Community Facilities District No. 06-1- Portola Springs); Series 2010, Special Tax RB | 6.70 | % | 09/01/35 | 515 | 591,163 | |||||||||||
Kern (County of) (Capital Improvments); Series 2009 A, COP (INS–AGC)(c) | 5.75 | % | 08/01/35 | 1,000 | 1,132,880 | |||||||||||
Kern (County of) Water Agency Improvement District No. 4; Series 2008 A, COP (INS–AGC)(c) | 5.00 | % | 05/01/28 | 1,700 | 1,899,852 | |||||||||||
Lodi (City of); Series 2007 A, Wastewater System Revenue COP (INS–AGM)(c) | 5.00 | % | 10/01/37 | 1,000 | 1,076,260 | |||||||||||
Long Beach (City of) Bond Finance Authority (Aquarium of the Pacific); Series 2012, Ref. RB | 5.00 | % | 11/01/29 | 2,000 | 2,308,880 | |||||||||||
Long Beach (City of) Financing Authority; Series 1992, RB (INS–AMBAC)(c) | 6.00 | % | 11/01/17 | 17,620 | 18,903,088 | |||||||||||
Long Beach (City of); Series 2010 A, Sr. Airport RB | 5.00 | % | 06/01/40 | 2,500 | 2,717,975 | |||||||||||
Los Angeles (City of) (FHA Insured Mortgage Loans–Section 8 Assisted); Series 1997 A, Ref. Mortgage RB (INS–NATL)(c) | 6.10 | % | 07/01/25 | 490 | 491,083 | |||||||||||
Los Angeles (City of) Department of Airports (Los Angeles International Airport); | ||||||||||||||||
Series 2010 A, Sr. RB | 5.00 | % | 05/15/35 | 2,500 | 2,829,650 | |||||||||||
Series 2010 B, Sub. RB | 5.00 | % | 05/15/40 | 1,000 | 1,113,710 | |||||||||||
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) | ||||||||||||||||
Los Angeles (City of) Department of Water & Power; | ||||||||||||||||
Series 2004 C, Water System RB(f)(g) | 5.00 | % | 07/01/14 | $ | 1,000 | $ | 1,086,150 | |||||||||
Series 2011 A, Power System RB(e) | 5.00 | % | 07/01/22 | 1,800 | 2,243,448 | |||||||||||
Series 2011 A, Water System RB | 5.25 | % | 07/01/39 | 1,500 | 1,752,570 | |||||||||||
Series 2012 A, Water System RB | 5.00 | % | 07/01/43 | 2,000 | 2,317,120 | |||||||||||
Series 2012 B, Waterworks RB | 5.00 | % | 07/01/37 | 2,000 | 2,331,880 | |||||||||||
Subseries 2006 A-1, Water System RB (INS–AMBAC)(c) | 5.00 | % | 07/01/36 | 1,485 | 1,684,421 | |||||||||||
Subseries 2007 A-1, Power System RB (INS–AMBAC)(c) | 5.00 | % | 07/01/37 | 1,000 | 1,125,440 | |||||||||||
Subseries 2008 A-1, Power System RB | 5.25 | % | 07/01/38 | 2,000 | 2,336,940 | |||||||||||
Los Angeles (City of); | ||||||||||||||||
Series 2003 B, Ref. Wastewater System RB (INS–AGM)(c) | 5.00 | % | 06/01/22 | 5,000 | 5,169,100 | |||||||||||
Series 2012 B, Ref. Sub. Wastewater System RB | 5.00 | % | 06/01/32 | 4,000 | 4,710,640 | |||||||||||
Los Angeles (County of) Metropolitan Transportation Authority; Series 2005 A, Proposition A First Tier Sr. Sales Tax RB (INS–AMBAC)(c) | 5.00 | % | 07/01/35 | 1,000 | 1,100,670 | |||||||||||
Los Angeles Community College District (Election of 2003); Series 2008 F-1, Unlimited Tax GO Bonds(e) | 5.00 | % | 08/01/33 | 2,000 | 2,287,560 | |||||||||||
Los Angeles County Schools Regionalized Business Services Corp. (Los Angeles County Schools Pooled Financing Program); Series 1999 A, CAB COP (INS–AMBAC)(c)(d) | 0.00 | % | 08/01/24 | 1,265 | 697,142 | |||||||||||
Los Angeles Unified School District (Election of 2004); | ||||||||||||||||
Series 2007 H, Unlimited Tax GO Bonds (INS–AGM)(c) | 5.00 | % | 07/01/32 | 1,000 | 1,123,980 | |||||||||||
Series 2009-I, Unlimited Tax GO Bonds (INS–AGC)(c) | 5.00 | % | 01/01/34 | 3,000 | 3,388,860 | |||||||||||
Madera (County of) (Valley Children’s Hospital); Series 1995, COP (INS–NATL)(c) | 6.50 | % | 03/15/15 | 4,780 | 5,091,847 | |||||||||||
Marin (County of) Water District Financing Authority; Series 2012 A, Sub. Lien RB | 5.00 | % | 07/01/44 | 3,000 | 3,456,480 | |||||||||||
Menifee Union School District (Election of 2008); Series 2009 C, Unlimited Tax CAB GO Bonds (INS–AGC)(c)(d) | 0.00 | % | 08/01/35 | 940 | 286,973 | |||||||||||
Monrovia (City of) Financing Authority (Hillside Wilderness Preserve); Series 2002, Lease RB (INS–AMBAC)(c) | 5.00 | % | 12/01/20 | 1,105 | 1,134,990 | |||||||||||
Montclair (City of) Redevelopment Agency (Montclair Redevelopment Project No. V); Series 2001, Ref. Tax Allocation RB (INS–NATL)(c) | 5.00 | % | 10/01/20 | 1,670 | 1,673,256 | |||||||||||
Montebello Unified School District (Election of 2004); Series 2009 A-1, Unlimited Tax GO Bonds (INS–AGC)(c) | 5.25 | % | 08/01/34 | 1,000 | 1,114,120 | |||||||||||
Moorpark Unified School District (Election of 2008); Series 2009 A, Unlimited Tax CAB GO Bonds (INS–AGC)(c)(d) | 0.00 | % | 08/01/31 | 840 | 323,106 | |||||||||||
Morongo Band of Mission Indians (The) (Enterprise Casino); Series 2008 B, RB(i) | 6.50 | % | 03/01/28 | 1,000 | 1,069,130 | |||||||||||
Mountain View (City of) Shoreline Regional Park Community; Series 2001 A, Tax Allocation RB (INS–NATL)(c) | 5.25 | % | 08/01/16 | 1,570 | 1,573,941 | |||||||||||
National City (City of) Community Development Commission (National City Redevelopment); Series 2011, Tax Allocation RB | 7.00 | % | 08/01/32 | 1,500 | 1,873,635 | |||||||||||
Norco (City of) Financing Authority; Series 2009, Ref. Enterprise RB (INS–AGM)(c) | 5.63 | % | 10/01/34 | 1,000 | 1,142,030 | |||||||||||
Oakland (Port of); | ||||||||||||||||
Series 2002 L, RB(f)(g)(h) | 5.00 | % | 11/01/12 | 110 | 110,870 | |||||||||||
Series 2002 L, RB (INS–NATL)(c)(h) | 5.00 | % | 11/01/21 | 890 | 894,877 | |||||||||||
Oceanside (City of); Series 2003 A, Ref. COP (INS–AMBAC)(c) | 5.20 | % | 04/01/23 | 1,300 | 1,317,927 | |||||||||||
Palomar Pomerado Health; Series 2009, COP | 6.75 | % | 11/01/39 | 2,000 | 2,250,100 | |||||||||||
Panama-Buena Vista Union School District (School Construction); Series 2006, COP (INS–NATL)(c) | 5.00 | % | 09/01/30 | 1,045 | 1,108,442 | |||||||||||
Paramount Unified School District (Election of 2006); Series 2007, Unlimited Tax GO Bonds (INS–AGM)(c) | 5.25 | % | 08/01/30 | 1,600 | 1,765,008 | |||||||||||
Patterson Joint Unified School District (Election of 2008); | ||||||||||||||||
Series 2009 B, Unlimited Tax CAB GO Bonds (INS–AGM)(c)(d) | 0.00 | % | 08/01/45 | 6,715 | 1,109,587 | |||||||||||
Series 2009 B, Unlimited Tax CAB GO Bonds (INS–AGM)(c)(d) | 0.00 | % | 08/01/46 | 7,050 | 1,141,818 | |||||||||||
Pittsburg Unified School District (Election of 2006); Series 2009 B, Unlimited Tax GO Bonds (INS–AGM)(c) | 5.50 | % | 08/01/31 | 1,000 | 1,150,670 | |||||||||||
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) | ||||||||||||||||
Pomona (City of) Public Financing Authority (Merged Redevelopment); | ||||||||||||||||
Series 2001 AD, Tax Allocation RB (INS–NATL)(c) | 5.00 | % | 02/01/15 | $ | 2,020 | $ | 2,023,818 | |||||||||
Series 2001 AD, Tax Allocation RB (INS–NATL)(c) | 5.00 | % | 02/01/16 | 1,110 | 1,111,854 | |||||||||||
Series 2007 AW, Sub. RB | 5.13 | % | 02/01/33 | 1,000 | 984,410 | |||||||||||
Port Hueneme (City of) (Capital Improvement Program); Series 1992, Ref. COP (INS–NATL)(c) | 6.00 | % | 04/01/19 | 1,360 | 1,546,347 | |||||||||||
Poway Unified School District (Election of 2008–School Facilities Improvement District No. 2007-1); Series 2009 A, Unlimited Tax CAB GO Bonds(d) | 0.00 | % | 08/01/32 | 6,460 | 2,518,948 | |||||||||||
Rancho Cucamonga (City of) Redevelopment Agency (Rancho Redevelopment Housing Set Aside) Series 2007 A, Tax Allocation RB (INS–NATL)(c) | 5.00 | % | 09/01/34 | 1,000 | 1,014,120 | |||||||||||
Rancho Cucamonga (City of) Redevelopment Agency (Rancho Redevelopment); Series 2001, Tax Allocation RB (INS–NATL)(c) | 5.38 | % | 09/01/25 | 3,000 | 3,002,190 | |||||||||||
Rancho Mirage (City of) Joint Powers Financing Authority (Eisenhower Medical Center); Series 1997 B, COP (INS–NATL)(c) | 4.88 | % | 07/01/22 | 1,000 | 1,023,480 | |||||||||||
Redding (City of) Redevelopment Agency (Canby-Hilltop-Cypress Redevelopment); Series 2003 A, Tax Allocation RB (INS–NATL)(c) | 5.00 | % | 09/01/23 | 1,400 | 1,415,680 | |||||||||||
Regents of the University of California; | ||||||||||||||||
Series 2009 E, Medical Center Pooled RB | 5.50 | % | 05/15/27 | 2,500 | 2,908,875 | |||||||||||
Series 2009 O, General RB(e) | 5.75 | % | 05/15/23 | 705 | 877,069 | |||||||||||
Series 2009 O, General RB(e) | 5.75 | % | 05/15/25 | 1,050 | 1,302,231 | |||||||||||
Series 2009 Q, General RB(e)(j) | 5.00 | % | 05/15/34 | 920 | 1,058,478 | |||||||||||
Series 2012 G, Limited Project RB | 5.00 | % | 05/15/37 | 2,000 | 2,313,580 | |||||||||||
Riverside (City of); | ||||||||||||||||
Series 2008 B, Water RB (INS–AGM)(c) | 5.00 | % | 10/01/33 | 1,000 | 1,114,850 | |||||||||||
Series 2008 D, Electric RB (INS–AGM)(c) | 5.00 | % | 10/01/28 | 500 | 561,870 | |||||||||||
Series 2008 D, Electric RB (INS–AGM)(c) | 5.00 | % | 10/01/38 | 1,800 | 1,954,440 | |||||||||||
Riverside (County of) Transportation Commission; Series 2010 A, Limited Sales Tax RB | 5.00 | % | 06/01/32 | 1,500 | 1,696,590 | |||||||||||
Sacramento (City of) Municipal Utility District; Series 2011 X, Ref. Electric RB | 5.00 | % | 08/15/27 | 2,150 | 2,557,016 | |||||||||||
Sacramento (County of) Sanitation Districts Financing Authority (Sacramento Regional County Sanitation District); | ||||||||||||||||
Series 2006, RB (INS–NATL)(c) | 5.00 | % | 12/01/29 | 2,000 | 2,258,500 | |||||||||||
Series 2011 A, Ref. RB | 5.00 | % | 12/01/26 | 1,500 | 1,818,405 | |||||||||||
Sacramento (County of); | ||||||||||||||||
Series 2008 A, Sr. Airport System RB (INS–AGM)(c) | 5.00 | % | 07/01/32 | 1,000 | 1,102,040 | |||||||||||
Series 2008 A, Sr. Airport System RB (INS–AGM)(c) | 5.00 | % | 07/01/41 | 1,015 | 1,102,747 | |||||||||||
Series 2010, Sr. Airport System RB | 5.00 | % | 07/01/40 | 2,200 | 2,412,432 | |||||||||||
San Buenaventura (City of) (Community Memorial Health System); Series 2011, RB | 7.50 | % | 12/01/41 | 2,000 | 2,429,400 | |||||||||||
San Diego (City of) Public Facilities Financing Authority (Southcrest & Central Imperial Redevelopment); Series 2007 B, Pooled Financing Tax Allocation RB (INS–Radian)(c) | 5.25 | % | 10/01/27 | 2,535 | 2,597,285 | |||||||||||
San Diego (City of) Public Facilities Financing Authority; Subseries 2012 A, Ref. Water RB | 5.00 | % | 08/01/32 | 2,215 | 2,595,626 | |||||||||||
San Diego Community College District (Election of 2002); Series 2009, Unlimited Tax GO Bonds(e) | 5.25 | % | 08/01/33 | 1,500 | 1,795,110 | |||||||||||
San Diego Community College District (Election of 2006); Series 2011, Unlimited Tax GO Bonds | 5.00 | % | 08/01/31 | 2,500 | 2,932,350 | |||||||||||
San Francisco (City & County of) Airport Commission (San Francisco International Airport); | ||||||||||||||||
Series 2009 E, Second Series RB | 6.00 | % | 05/01/39 | 1,000 | 1,182,990 | |||||||||||
Series 2011 C, Ref. Second Series RB(h) | 5.00 | % | 05/01/23 | 5,000 | 5,790,650 | |||||||||||
Series 2011 G, Second Series RB | 5.25 | % | 05/01/28 | 2,000 | 2,365,380 | |||||||||||
San Francisco (City & County of) Public Utilities Commission (Water System Improvement Program); Subseries 2011 A, Water RB | 5.00 | % | 11/01/36 | 4,000 | 4,610,840 | |||||||||||
San Francisco (City & County of) Public Utilities Commission; Series 2012, Water RB | 5.00 | % | 11/01/33 | 3,000 | 3,529,050 | |||||||||||
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 Francisco (City & County of) Redevelopment Financing Authority (Mission Bay North Redevelopment); Series 2011 C, Tax Allocation RB | 6.75 | % | 08/01/41 | $ | 1,000 | $ | 1,170,590 | |||||||||
San Francisco (City & County of) Redevelopment Financing Authority (Mission Bay South Redevelopment); Series 2011 D, Tax Allocation RB | 7.00 | % | 08/01/33 | 500 | 578,030 | |||||||||||
San Jose Evergreen Community College District (Election of 2004); Series 2008 B, Unlimited Tax CAB GO Bonds (INS–AGM)(c)(d) | 0.00 | % | 09/01/31 | 3,110 | 1,275,846 | |||||||||||
San Leandro (City of) (Joint Project Area Financing); Series 2001, COP (INS–NATL)(c) | 5.10 | % | 12/01/26 | 1,000 | 1,003,690 | |||||||||||
San Luis Obispo (County of) Financing Authority (Lopez Dam Improvement); Series 2011 A, Ref. RB (INS–AGM)(c) | 5.00 | % | 08/01/30 | 1,500 | 1,703,610 | |||||||||||
Santa Clara (County of) Financing Authority (Multiple Facilities); Series 2008 L, Ref. Lease RB | 5.25 | % | 05/15/36 | 3,000 | 3,345,570 | |||||||||||
Santaluz Community Facilities District No. 2 (Improvement Area No. 1); | ||||||||||||||||
Series 2011 A, Ref. Special Tax RB(g) | 5.00 | % | 09/01/28 | 830 | 888,656 | |||||||||||
Series 2011 A, Ref. Special Tax RB(g) | 5.00 | % | 09/01/29 | 715 | 767,202 | |||||||||||
Series 2011 A, Ref. Special Tax RB(g) | 5.10 | % | 09/01/30 | 465 | 499,884 | |||||||||||
Shafter (City of) Community Development Agency (Shafter Community Development Project Area No. 1); Series 2006 A, Ref. Tax Allocation RB (INS–AGM)(c) | 5.00 | % | 11/01/36 | 1,460 | 1,506,676 | |||||||||||
Sierra View Local Health Care District; Series 2007, RB | 5.25 | % | 07/01/32 | 1,500 | 1,560,510 | |||||||||||
Simi Valley Unified School District (Election of 2004); | ||||||||||||||||
Series 2007 C, Unlimited Tax CAB GO Bonds (INS–AGM)(c)(d) | 0.00 | % | 08/01/28 | 3,480 | 1,677,673 | |||||||||||
Series 2007 C, Unlimited Tax CAB GO Bonds (INS–AGM)(c)(d) | 0.00 | % | 08/01/30 | 2,765 | 1,191,549 | |||||||||||
Sonoma-Marin Area Rail Transit District; Series 2012 A, Measure Q Sales Tax RB | 5.00 | % | 03/01/29 | 2,000 | 2,371,220 | |||||||||||
South Gate (City of) Public Financing Authority (South Gate Redevelopment Project No. 1); Series 2002, Tax Allocation RB (INS–SGI)(c) | 5.75 | % | 09/01/22 | 1,000 | 1,028,340 | |||||||||||
Southern California Metropolitan Water District; | ||||||||||||||||
Series 2005 A, RB (INS–AGM)(c) | 5.00 | % | 07/01/35 | 1,520 | 1,675,253 | |||||||||||
Series 2009 B, Ref. RB(e) | 5.00 | % | 07/01/27 | 8,585 | 10,161,893 | |||||||||||
Southern California Public Power Authority (Mead-Adelanto); Series 1994 A, RB (INS–AMBAC)(c)(k) | 9.36 | % | 07/01/15 | 3,500 | 4,133,570 | |||||||||||
Southern California Public Power Authority (Mead-Phoenix); Series 1994 A, RB (INS–AMBAC)(c)(k) | 9.36 | % | 07/01/15 | 2,500 | 2,954,600 | |||||||||||
Southern California Public Power Authority (Milford Wind Corridor Phase II); | ||||||||||||||||
Series 2011-1, RB(e) | 5.25 | % | 07/01/29 | 2,100 | 2,522,835 | |||||||||||
Series 2011-1, RB(e) | 5.25 | % | 07/01/31 | 2,100 | 2,493,750 | |||||||||||
Temecula (City of) Redevelopment Agency (Temecula Redevelopment Project No. 1); Series 2002, Tax Allocation RB (INS–NATL)(c) | 5.13 | % | 08/01/27 | 2,150 | 2,151,634 | |||||||||||
Tustin (City of) Public Financing Authority; Series 2011 A, Water RB | 5.00 | % | 04/01/41 | 1,000 | 1,129,730 | |||||||||||
Tustin Unified School District (School Facilities Improvement District No. 2002-1- Election of 2002); Series 2008 C, Unlimited Tax GO Bonds (INS–AGM)(c) | 5.00 | % | 06/01/28 | 750 | 846,173 | |||||||||||
Twin Rivers Unified School District (School Facility Bridge Funding Program); Series 2007, COP (INS–AGM)(c)(f)(l) | 3.50 | % | 05/31/13 | 1,000 | 1,001,230 | |||||||||||
Twin Rivers Unified School District; Series 2009, Unlimited Tax CAB GO BAN(d) | 0.00 | % | 04/01/14 | 1,700 | 1,663,773 | |||||||||||
Val Verde Unified School District; Series 2009 A, Ref. COP (INS–AGC)(c) | 5.13 | % | 03/01/36 | 1,475 | 1,596,776 | |||||||||||
Vernon (City of); Series 2009 A, Electric System RB | 5.13 | % | 08/01/21 | 2,000 | 2,224,020 | |||||||||||
Walnut (City of) Energy Center Authority; Series 2010 A, Ref. RB | 5.00 | % | 01/01/35 | 3,000 | 3,283,620 | |||||||||||
West Contra Costa Unified School District; Series 2005, Unlimited Tax CAB GO Bonds (INS–NATL)(c)(d) | 0.00 | % | 08/01/25 | 2,500 | 1,359,550 | |||||||||||
Western Riverside (County of) Water & Wastewater Financing Authority (Eastern Municipal Water District Improvement); Series 2009, RB (INS–AGC)(c) | 5.63 | % | 09/01/39 | 1,000 | 1,137,240 | |||||||||||
Yosemite Community College District (Election of 2004); Series 2008 C, Unlimited Tax CAB GO Bonds (INS–AGM)(c)(d) | 0.00 | % | 08/01/24 | 4,685 | 2,906,059 | |||||||||||
420,810,948 | ||||||||||||||||
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 | |||||||||||||
Guam–0.81% | ||||||||||||||||
Guam (Territory of) (Section 30); | ||||||||||||||||
Series 2009 A, Limited Obligation RB | 5.38 | % | 12/01/24 | $ | 1,000 | $ | 1,110,640 | |||||||||
Series 2009 A, Limited Obligation RB | 5.63 | % | 12/01/29 | 660 | 742,112 | |||||||||||
Guam (Territory of); Series 2011 A, Business Privilege Tax RB | 5.13 | % | 01/01/42 | 1,500 | 1,669,200 | |||||||||||
3,521,952 | ||||||||||||||||
Puerto Rico–5.63% | ||||||||||||||||
Puerto Rico (Commonwealth of) Aqueduct & Sewer Authority; | ||||||||||||||||
Series 2012 A, Sr. Lien RB | 5.13 | % | 07/01/37 | 2,500 | 2,507,475 | |||||||||||
Series 2012 A, Sr. Lien RB | 5.25 | % | 07/01/42 | 1,000 | 1,006,420 | |||||||||||
Puerto Rico (Commonwealth of) Electric Power Authority; | ||||||||||||||||
Series 2007 TT, RB | 5.00 | % | 07/01/37 | 2,000 | 2,039,840 | |||||||||||
Series 2010 AAA, RB | 5.25 | % | 07/01/29 | 2,000 | 2,154,740 | |||||||||||
Puerto Rico (Commonwealth of) Industrial Tourist Educational, Medical & Environmental Control Facilities Financing Authority (Ana G. Mendez University System); Series 2012, Ref. RB | 5.38 | % | 04/01/42 | 2,000 | 2,039,680 | |||||||||||
Puerto Rico (Commonwealth of) Public Buildings Authority; Series 2002 D, Conv. CAB RB(d)(f)(g) | 0.00 | % | 07/01/17 | 3,680 | 4,459,461 | |||||||||||
Puerto Rico Sales Tax Financing Corp.; | ||||||||||||||||
First Subseries 2010 C, RB | 5.00 | % | 08/01/35 | 1,500 | 1,591,995 | |||||||||||
First Subseries 2011 A-1, RB | 5.00 | % | 08/01/43 | 3,000 | 3,152,940 | |||||||||||
Series 2011 C, RB | 5.00 | % | 08/01/40 | 5,000 | 5,420,500 | |||||||||||
24,373,051 | ||||||||||||||||
Virgin Islands–0.87% | ||||||||||||||||
Virgin Islands (Government of) Public Finance Authority (Matching Fund Loan Note–Diageo); Series 2009 A, Sub. RB | 6.63 | % | 10/01/29 | 1,675 | 1,973,200 | |||||||||||
Virgin Islands (Government of) Public Finance Authority (Matching Fund Loan Note); Series 2010 A, Sr. Lien RB | 5.00 | % | 10/01/25 | 1,600 | 1,772,640 | |||||||||||
3,745,840 | ||||||||||||||||
TOTAL INVESTMENTS(m)–104.57% (Cost $409,560,218) | 452,451,791 | |||||||||||||||
FLOATING RATE NOTE OBLIGATIONS–(5.69)% | ||||||||||||||||
Notes With interest rates ranging from 0.15% to 0.24% at 8/31/12 and contractual maturities of collateral ranging from 07/01/22 to 10/01/39 (See Note 1K)(n) | (24,615,000 | ) | ||||||||||||||
OTHER ASSETS LESS LIABILITIES–1.12% | 4,836,384 | |||||||||||||||
NET ASSETS–100.00% | $ | 432,673,175 | ||||||||||||||
Investment Abbreviations:
AGC | – Assured Guaranty Corp. | |
AGM | – Assured Guaranty Municipal Corp. | |
AMBAC | – American Municipal Bond Assurance Corp. | |
BAN | – Bond Anticipation Notes | |
CAB | – Capital Appreciation Bonds | |
Conv. | – Convertible | |
COP | – Certificates of Participation | |
FGIC | – Financial Guaranty Insurance Co. | |
FHA | – Federal Housing Administration | |
GO | – General Obligation | |
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. | |
Sr. | – Senior | |
Sub. | – Subordinated | |
VRD | – Variable Rate Demand |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
15 Invesco California Tax-Free Income Fund
Notes to Schedule of Investments:
(a) | 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, 2012. | |
(b) | Principal and interest payments are fully enhanced by a letter of credit from the bank listed or a predecessor bank, branch or subsidiary. | |
(c) | Principal and/or interest payments are secured by the bond insurance company listed. | |
(d) | Zero coupon bond issued at a discount. | |
(e) | Underlying security related to Dealer Trusts entered into by the Fund. See Note 1K. | |
(f) | Security has an irrevocable call by the issuer or mandatory put by the holder. Maturity date reflects such call or put. | |
(g) | Advance refunded; secured by an escrow fund of U.S. Government obligations or other highly rated collateral. | |
(h) | Security subject to the alternative minimum tax. | |
(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, 2012 represented 0.25% 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 value of $7,088,170 which represents 1.64% of the Fund’s Net Assets. | |
(l) | Interest or dividend rate is redetermined periodically. Rate shown is the rate in effect on August 31, 2012. | |
(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. | 12.4 | % | ||
National Public Finance Guarantee Corp. | 10.8 | |||
American Municipal Bond Assurance Corp. | 8.9 | |||
(n) | Floating rate note obligations related to securities held. The interest rates shown reflect the rates in effect at August 31, 2012. At August 31, 2012, the Fund’s investments with a value of $44,196,905 are held by Dealer Trusts and serve as collateral for the $24,615,000 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, 2012
Assets: | ||||
Investments, at value (Cost $409,560,218) | $ | 452,451,791 | ||
Receivable for: | ||||
Investments sold | 1,840,000 | |||
Fund shares sold | 285,593 | |||
Interest | 5,419,166 | |||
Investment for trustee deferred compensation and retirement plans | 12,103 | |||
Other assets | 8,515 | |||
Total assets | 460,017,168 | |||
Liabilities: | ||||
Floating rate note obligations | 24,615,000 | |||
Payable for: | ||||
Investments purchased | 663,666 | |||
Fund shares reacquired | 555,124 | |||
Amount due custodian | 525,327 | |||
Dividends | 662,998 | |||
Accrued fees to affiliates | 173,566 | |||
Accrued other operating expenses | 54,404 | |||
Trustee deferred compensation and retirement plans | 93,908 | |||
Total liabilities | 27,343,993 | |||
Net assets applicable to shares outstanding | $ | 432,673,175 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 419,429,915 | ||
Undistributed net investment income | 1,077,451 | |||
Undistributed net realized gain (loss) | (30,725,764 | ) | ||
Unrealized appreciation | 42,891,573 | |||
$ | 432,673,175 | |||
Net Assets: | ||||
Class A | $ | 163,047,369 | ||
Class B | $ | 217,489,367 | ||
Class C | $ | 27,394,222 | ||
Class Y | $ | 24,742,217 | ||
Shares outstanding, $0.01 par value per share, with an unlimited number of shares authorized: | ||||
Class A | 13,278,583 | |||
Class B | 17,586,830 | |||
Class C | 2,216,788 | |||
Class Y | 2,007,364 | |||
Class A: | ||||
Net asset value per share | $ | 12.28 | ||
Maximum offering price per share (Net asset value of $12.28 divided by 95.25%) | $ | 12.89 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 12.37 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 12.36 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 12.33 | ||
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, 2012
Investment income: | ||||
Interest | $ | 21,704,836 | ||
Expenses: | ||||
Advisory fees | 2,007,542 | |||
Administrative services fees | 125,700 | |||
Custodian fees | 6,580 | |||
Distribution fees: | ||||
Class A | 368,484 | |||
Class B | 552,642 | |||
Class C | 190,246 | |||
Interest, facilities and maintenance fees | 226,938 | |||
Transfer agent fees | 180,717 | |||
Trustees’ and officers’ fees and benefits | 49,065 | |||
Other | 96,500 | |||
Total expenses | 3,804,414 | |||
Less: Expense offset arrangement(s) | (156 | ) | ||
Net expenses | 3,804,258 | |||
Net investment income | 17,900,578 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain (loss) from investment securities | (930,630 | ) | ||
Change in net unrealized appreciation of investment securities | 32,828,385 | |||
Net realized and unrealized gain | 31,897,755 | |||
Net increase in net assets resulting from operations | $ | 49,798,333 | ||
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 years ended August 31, 2012 and 2011
2012 | 2011 | |||||||
Operations: | ||||||||
Net investment income | $ | 17,900,578 | $ | 14,877,980 | ||||
Net realized gain (loss) | (930,630 | ) | (6,917,277 | ) | ||||
Change in net unrealized appreciation (depreciation) | 32,828,385 | (2,277,744 | ) | |||||
Net increase in net assets resulting from operations | 49,798,333 | 5,682,959 | ||||||
Distributions to shareholders from net investment income: | ||||||||
Class A | (6,564,668 | ) | (2,485,113 | ) | ||||
Class B | (9,274,169 | ) | (10,580,607 | ) | ||||
Class C | (935,612 | ) | (701,576 | ) | ||||
Class Y | (1,087,150 | ) | (1,184,834 | ) | ||||
Total distributions from net investment income | (17,861,599 | ) | (14,952,130 | ) | ||||
Share transactions–net: | ||||||||
Class A | 3,515,850 | 121,086,985 | ||||||
Class B | (20,479,447 | ) | (24,979,384 | ) | ||||
Class C | 3,695,906 | 4,897,332 | ||||||
Class Y | (1,352,895 | ) | (1,665,056 | ) | ||||
Net increase (decrease) in net assets resulting from share transactions | (14,620,586 | ) | 99,339,877 | |||||
Net increase in net assets | 17,316,148 | 90,070,706 | ||||||
Net assets: | ||||||||
Beginning of year | 415,357,027 | 325,286,321 | ||||||
End of year (includes undistributed net investment income of $1,077,451 and $1,267,924, respectively) | $ | 432,673,175 | $ | 415,357,027 | ||||
Notes to Financial Statements
August 31, 2012
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) (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 a high 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 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 to Class A shares. 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 to Class A shares. 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. | |
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. Securities |
19 Invesco California Tax-Free Income Fund
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, 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 the 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 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 the 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. | 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. | 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 interests 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 | .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).
Effective July 1, 2012, the Adviser has contractually agreed, through June 30, 2013, 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 1.50%, 2.00%, 2.00% and 1.25% of average daily net assets, respectively. Prior to July 1, 2012, the Adviser had contractually agreed 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
21 Invesco California Tax-Free Income Fund
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, facilities and maintenance fees; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; 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 Invesco mutually agree to amend or continue the fee waiver agreement, it will terminate on June 30, 2013. 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, 2012, 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, 2012, 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, 2012, 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, 2012, IDI advised the Fund that IDI retained $27,434 in front-end sales commissions from the sale of Class A shares and $4,744, $16,150 and $342 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, 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, 2012. 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.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Municipal Obligations | $ | — | $ | 452,451,791 | $ | — | $ | 452,451,791 | ||||||||
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. Pursuant to these procedures, for the year ended August 31, 2012, the Fund engaged in securities purchases of $1,000,075.
22 Invesco California Tax-Free Income Fund
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, 2012, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $156.
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.
NOTE 7—Cash Balances
The Trust is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Trust 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, 2012 were $23,188,846 and 0.98%, respectively.
NOTE 8—Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Years Ended August 31, 2012 and 2011:
2012 | 2011 | |||||||
Ordinary income | $ | 17,861,599 | $ | 14,952,130 | ||||
Tax Components of Net Assets at Period-End:
2012 | ||||
Undistributed ordinary income | $ | 805,743 | ||
Net unrealized appreciation — investments | 43,065,535 | |||
Temporary book/tax differences | (92,338 | ) | ||
Capital loss carryforward | (30,535,680 | ) | ||
Shares of beneficial interest | 419,429,915 | |||
Total net assets | $ | 432,673,175 | ||
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 TOBS and market discount.
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 Regulated Investment Company Modernization Act of 2010 (the “Act”) eliminated the eight-year carryover period for capital losses that arise in taxable years beginning after its enactment date of December 22, 2010. Consequently, these capital losses can be carried forward for an unlimited period. However, capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Additionally, post-enactment capital loss carryovers will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. 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.
23 Invesco California Tax-Free Income Fund
The Fund has a capital loss carryforward as of August 31, 2012, which expires as follows:
Capital Loss Carryforward* | ||||||||||||
Expiration | Short-Term | Long-Term | Total | |||||||||
August 31, 2015 | $ | 803,874 | $ | — | $ | 803,874 | ||||||
August 31, 2016 | 4,399,730 | — | 4,399,730 | |||||||||
August 31, 2017 | 9,460,903 | — | 9,460,903 | |||||||||
August 31, 2018 | 6,678,871 | — | 6,678,871 | |||||||||
August 31, 2019 | 1,906,728 | — | 1,906,728 | |||||||||
Not subject to expiration | 417,225 | 6,868,349 | 7,285,574 | |||||||||
$ | 23,667,331 | $ | 6,868,349 | $ | 30,535,680 | |||||||
* | 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. |
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, 2012 was $78,009,459 and $90,706,156, 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 | $ | 43,101,414 | ||
Aggregate unrealized (depreciation) of investment securities | (35,879 | ) | ||
Net unrealized appreciation of investment securities | $ | 43,065,535 | ||
Cost of investments for tax purposes is $409,386,256. |
NOTE 10—Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of bond amortization and taxable income, on August 31, 2012, undistributed net investment income was decreased by $229,452, undistributed net realized gain (loss) was increased by $21,569 and shares of beneficial interest was increased by $207,883. This reclassification had no effect on the net assets of the Fund.
24 Invesco California Tax-Free Income Fund
NOTE 11—Share Information
Summary of Share Activity | ||||||||||||||||
For the years ended August 31, | ||||||||||||||||
2012(a) | 2011 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Class A | 1,639,489 | $ | 21,137,398 | 432,719 | $ | 4,969,152 | ||||||||||
Class B | 22,625 | 315,968 | 59,636 | 658,621 | ||||||||||||
Class C | 1,218,195 | 14,630,674 | 165,169 | 1,907,834 | ||||||||||||
Class Y | 217,431 | 2,652,455 | 24,439 | 277,898 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Class A | 338,136 | 4,039,533 | 128,377 | 1,432,340 | ||||||||||||
Class B | 388,933 | 4,693,892 | 484,791 | 5,409,350 | ||||||||||||
Class C | 42,402 | 511,702 | 34,194 | 381,591 | ||||||||||||
Class Y | 42,726 | 513,795 | 52,335 | 582,229 | ||||||||||||
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 | (1,827,423 | ) | (21,661,081 | ) | (946,367 | ) | (10,585,942 | ) | ||||||||
Class B | (2,128,577 | ) | (25,489,307 | ) | (3,121,803 | ) | (34,680,261 | ) | ||||||||
Class C | (953,703 | ) | (11,446,470 | ) | (498,429 | ) | (5,490,560 | ) | ||||||||
Class Y | (378,170 | ) | (4,519,145 | ) | (341,225 | ) | (3,782,207 | ) | ||||||||
Net increase (decrease) in share activity | (1,377,936 | ) | $ | (14,620,586 | ) | 8,936,619 | $ | 99,339,877 | ||||||||
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 63% 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 Fund 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 $413,388,747. |
25 Invesco California Tax-Free Income Fund
NOTE 12—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Supplemental | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ratio of | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
expenses | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratio of | Ratio of | to average net | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net gains | expenses | expenses | assets | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(losses) on | to average | to average net | (excluding | Ratio of net | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset | securities | Dividends | Distributions | net assets | assets without | interest, | investment | |||||||||||||||||||||||||||||||||||||||||||||||||||||
value, | Net | (both | Total from | from net | from net | Net asset | Net assets, | with fee waivers | fee waivers | facilities and | income to | |||||||||||||||||||||||||||||||||||||||||||||||||
beginning | investment | realized and | investment | investment | realized | Total | value, end | Total | end of period | and/or expenses | and/or expenses | maintenance | 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 08/31/12 | $ | 11.34 | $ | 0.50 | (d) | $ | 0.94 | $ | 1.44 | $ | (0.50 | ) | $ | — | $ | (0.50 | ) | $ | 12.28 | 12.91 | % | $ | 163,047 | 0.87 | %(e) | 0.87 | %(e) | 0.82 | %(e) | 4.21 | %(e) | 18 | % | |||||||||||||||||||||||||||
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 | 0.90 | 0.85 | 4.66 | 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 | |||||||||||||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/12 | 11.42 | 0.50 | (d) | 0.95 | 1.45 | (0.50 | ) | — | (0.50 | ) | 12.37 | 12.93 | (g) | 217,489 | 0.88 | (e)(g) | 0.88 | (e)(g) | 0.83 | (e)(g) | 4.20 | (e)(g) | 18 | |||||||||||||||||||||||||||||||||||||
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 | (g) | 0.89 | (g) | 0.84 | (g) | 4.67 | (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 | |||||||||||||||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/12 | 11.41 | 0.44 | (d) | 0.95 | 1.39 | (0.44 | ) | — | (0.44 | ) | 12.36 | 12.37 | 27,394 | 1.38 | (e) | 1.38 | (e) | 1.33 | (e) | 3.70 | (e) | 18 | ||||||||||||||||||||||||||||||||||||||
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 | 1.40 | 1.35 | 4.16 | 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 | |||||||||||||||||||||||||||||||||||||||||
Class Y | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/12 | 11.38 | 0.53 | (d) | 0.95 | 1.48 | (0.53 | ) | — | (0.53 | ) | 12.33 | 13.24 | 24,742 | 0.63 | (e) | 0.63 | (e) | 0.58 | (e) | 4.45 | (e) | 18 | ||||||||||||||||||||||||||||||||||||||
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 | 0.65 | 0.60 | 4.91 | 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 | |||||||||||||||||||||||||||||||||||||||||
(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 Income Fund into the Fund. | |
(d) | Calculated using average shares outstanding. | |
(e) | Ratios are based on average daily net assets (000’s omitted) of $156,248, $221,057, $25,366 and $24,466 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 (loss) to average net assets reflect actual 12b-1 fees of 0.25% and 0.25% for the years ended August 31, 2012 and 2011, respectively. |
NOTE 13—Subsequent Event
Effective September 24, 2012, the maximum sales charge for Class A shares changed from 4.75% to 4.25%.
26 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, 2012, 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 two years in the period 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, 2012 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. 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 23, 2012
Houston, Texas
27 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, 2012 through August 31, 2012.
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 | (03/01/12) | (08/31/12)1 | Period2 | (08/31/12) | Period2 | Ratio | ||||||||||||||||||||||||
Class A | $ | 1,000.00 | $ | 1,038.00 | $ | 4.53 | $ | 1,020.69 | $ | 4.49 | 0.88 | % | ||||||||||||||||||
Class B | 1,000.00 | 1,038.60 | 4.66 | 1,020.56 | 4.62 | 0.91 | ||||||||||||||||||||||||
Class C | 1,000.00 | 1,035.20 | 7.21 | 1,018.05 | 7.15 | 1.41 | ||||||||||||||||||||||||
Class Y | 1,000.00 | 1,040.00 | 3.38 | 1,021.82 | 3.35 | 0.66 | ||||||||||||||||||||||||
1 | The actual ending account value is based on the actual total return of the Fund for the period March 1, 2012 through August 31, 2012, 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 184/366 to reflect the most recent fiscal half year. |
28 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 19-20, 2012, 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, 2012. 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 primarily 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, 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 and on what terms 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. In addition to meetings with Invesco Advisers and fund 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 independent legal 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 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 previously approved by a different board that, at the time, was responsible for overseeing Morgan Stanley and Van Kampen funds, which have become Invesco Funds following the acquisition of the retail mutual fund business of Morgan Stanley. 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 or factor 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 20, 2012, 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 Sub-Committees 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 prior relationship and 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 consistent 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 consistent 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 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 second quintile of its performance universe for the one year period and the third 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
29 Invesco California Tax-Free Income Fund
Fund was above the performance of the Index for the one year period and below the Index for the three and five year periods. 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 its 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 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 and were assisted in their review by a report from the Senior Officer. 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. The Board noted that Invesco Advisers proposes sharing economies of scale in administration expenses by lowering per class administrative fees.
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 for the year ended December 31, 2011. 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 Invesco Funds and the Fund. The Board did not deem the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund to be excessive given the nature, quality and extent of the services provided to the Invesco Funds. The Board received and accepted information from Invesco Advisers demonstrating that 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.
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. Invesco Advisers noted that the Fund does not execute brokerage transactions through “soft dollar” arrangements to any significant degree.
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.
30 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, 2012:
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. |
31 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 1000, 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 | Other Directorship(s) | |||||||
Name, Year of Birth and | Trustee and/or | Principal Occupation(s) | Funds in | Held by Trustee During | ||||
Position(s) Held with the Trust | Officer Since | During Past 5 Years | Fund Complex Overseen by Trustee | Past 5 Years | ||||
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 | 129 | 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. | 129 | None | ||||
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. | ||||||||
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 certain funds in the Fund Complex | 147 | Director of the Mutual Fund Directors Forum, a nonprofit membership organization for investment directors; Chairman and Director of the Abraham Lincoln Presidential Library Foundation; and Director of the Stevenson Center for Democracy | ||||
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 is considered an “interested person” (within the meaning of Section 2(a)(19) of the 1940 Act) of certain Funds in the Invesco Fund Complex by reason of he and his firm currently providing legal services as legal counsel to such Funds in the Invesco Fund Complex. |
T-1 Invesco California Tax-Free Income Fund
Trustees and Officers—(continued)
Number of | Other Directorship(s) | |||||||
Name, Year of Birth and | Trustee and/or | Principal Occupation(s) | Funds in | Held by Trustee During | ||||
Position(s) Held with the Trust | Officer Since | During Past 5 Years | Fund Complex Overseen by Trustee | Past 5 Years | ||||
Independent Trustees | ||||||||
Bruce L. Crockett — 1944 Trustee and Chair | 2003 | Chairman, Crockett Technologies 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) | 129 | ACE Limited (insurance company); and Investment Company Institute | ||||
David C. Arch — 1945 Trustee | 2010 | Retired. Chairman and Chief Executive Officer of Blistex Inc., a consumer health care products manufacturer | 147 | Member of the Heartland Alliance Advisory Board, a nonprofit organization serving human needs based in Chicago. Board member of the Illinois Manufacturers’ Association. Member of the Board of Visitors, Institute for the Humanities, University of Michigan | ||||
Frank S. Bayley — 1939 Trustee | 2003 | Retired Formerly: Director, Badgley Funds, Inc. (registered investment company) (2 portfolios) and Partner, law firm of Baker & McKenzie | 129 | 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 | 129 | Chairman, Board of Governors, Western Golf Association, Chairman-elect, Evans Scholars Foundation and Director, Denver Film Society | ||||
Rodney F. Dammeyer — 1940 Trustee | 2010 | Chairman of CAC, LLC, a private company offering capital investment and management advisory services Formerly: Prior to January 2004, Director of TeleTech Holdings Inc.; Prior to 2002, Director of Arris Group, Inc.; Prior to 2001, Managing Partner at Equity Group Corporate Investments. Prior to 1995, Vice Chairman of Anixter International. Prior to 1985, experience includes Senior Vice President and Chief Financial Officer of Household International, Inc, Executive Vice President and Chief Financial Officer of Northwest Industries, Inc. and Partner of Arthur Andersen & Co. | 147 | 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) 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) | 129 | Director of Nature’s Sunshine Products, Inc. | ||||
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) Formerly: Chief Executive Officer, Texana Timber LP (sustainable forestry company) and member of the U.S. House of Representatives | 129 | Insperity (formerly known as Administaff) | ||||
Carl Frischling — 1937 Trustee | 2003 | Partner, law firm of Kramer Levin Naftalis and Frankel LLP | 129 | Director, Reich & Tang Funds (6 portfolios) | ||||
Prema Mathai-Davis — 1950 Trustee | 2003 | Retired Formerly: Chief Executive Officer, YWCA of the U.S.A. | 129 | None | ||||
Larry Soll — 1942 Trustee | 1997 | Retired Formerly, Chairman, Chief Executive Officer and President, Synergen Corp. (a biotechnology company) | 129 | None | ||||
T-2 Invesco California Tax-Free Income Fund
Trustees and Officers—(continued)
Number of | Other Directorship(s) | |||||||
Name, Year of Birth and | Trustee and/or | Principal Occupation(s) | Funds in | Held by Trustee | ||||
Position(s) Held with the Trust | Officer Since | During Past 5 Years | Fund Complex Overseen by Trustee | During Past 5 Years | ||||
Independent Trustees—(continued) | ||||||||
Hugo F. Sonnenschein — 1940 Trustee | 2010 | Distinguished Service Professor and President Emeritus of the University of Chicago and the Adam Smith Distinguished Service Professor in the Department of Economics at the University of Chicago. Prior to July 2000, President of the University of Chicago | 147 | 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 | 129 | None | ||||
Other Officers | ||||||||
Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer, The 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 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) | N/A | N/A | ||||
Lisa O. Brinkley — 1959 Vice President | 2004 | Global Assurance Officer, Invesco Ltd. and Vice President, The Invesco Funds Formerly: Chief Compliance Officer, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.), Invesco Investment Services, Inc.(formerly known as Invesco Aim Investment Services, 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 | ||||
T-3 Invesco California Tax-Free Income Fund
Trustees and Officers—(continued)
Number of | Other Directorship(s) | |||||||
Name, Year of Birth and | Trustee and/or | Principal Occupation(s) | Funds in | Held by Trustee | ||||
Position(s) Held with the Trust | Officer Since | During Past 5 Years | Fund Complex Overseen by Trustee | During Past 5 Years | ||||
Other Officers—(continued) | ||||||||
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., INVESCO Global Asset Management Limited, Invesco Management Company Limited and INVESCO Management S.A.; 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) 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) | 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); and 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 Formerly: Vice President, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc. | N/A | N/A | ||||
Yinka Akinsola — 1977 Anti-Money Laundering Compliance Officer | 2011 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.), Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.), Invesco Management Group, Inc., The Invesco Funds, Invesco Van Kampen Closed-End Funds, Van Kampen Exchange Corp., Van Kampen Funds Inc., PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, and PowerShares Actively Managed Exchange-Traded Fund Trust Formerly: Regulatory Analyst III, Financial Industry Regulatory Authority (FINRA). | N/A | N/A | ||||
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; Vice President, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) and Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.) Formerly: Senior Vice President, Van Kampen Investments Inc.; Senior Vice President and Chief Compliance Officer, Invesco Advisers, Inc. and Invesco Aim Capital Management, Inc.; Chief Compliance Officer, INVESCO Private Capital Investments, Inc. (holding company), Invesco Private Capital, Inc. (registered investment adviser), Invesco Global Asset Management (N.A.), Inc., Invesco Senior Secured Management, Inc. (registered investment adviser) and Van Kampen Investor Services Inc., 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 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 1000 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 1000 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 1000 Houston, TX 77046-1173 | Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
T-4 Invesco California Tax-Free Income Fund
![(IMAGE)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8703111.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 shown below.
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, 2012, 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 US 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.
![(IMAGE)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8703112.gif)
SEC file numbers: 811-09913 and 333-36074 | MS-CTFI-AR-1 | Invesco Distributors, Inc. |
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Annual Report to Shareholders | August 31, 2012 |
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 | |
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
![(PHOTO OF PHILIP TAYLOR)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8704502.jpg)
Philip Taylor
Dear Shareholders:
This report contains information about your Fund, including a discussion from your portfolio managers about how they managed your Fund – and why it performed as it did – during the reporting period. This report also includes your Fund’s long-term performance and a complete list of your Fund’s investments as of the close of the reporting period. I hope you find this information helpful.
For much of the reporting period, investors’ attention was focused on Europe, where eurozone governments struggled to reduce debt levels, strengthen their banks and stimulate their economies. European leaders disagreed whether the wiser path to restoring the Continent’s economic well-being was more stimulus or greater austerity. In the US, economic data were mixed. Economic growth, while positive, was relatively modest. Corporate earnings, which have grown strongly in recent years, have begun to slow. And job creation has been less robust than hoped. Later in this report, your Fund’s portfolio managers discuss how economic conditions and market trends affected your Fund’s performance.
Economic conditions are always subject to sudden and unexpected change. That’s why you may find it helpful to work with a trusted, experienced financial adviser who understands your unique financial goals, needs and risk tolerances. Financial advisers can provide valuable insight and information, particularly when markets are turbulent, and they can recommend investments appropriate for specific investment goals, such as a child’s college education or your retirement. On a regular basis, a financial adviser also can determine whether your existing investments are still appropriate, given your changing needs, goals and circumstances.
Timely insight and information from many of Invesco’s investment professionals is available at our website, invesco.com/us. We offer in-depth articles, video clips and audio commentaries from many of our portfolio managers and other investment professionals on a wide range of topics of interest to investors: recent economic and market developments; retirement planning; legislative updates from Washington, DC; and general investor education. At invesco.com/us, you also can access information about your Invesco account at any time.
What we mean by Intentional Investing
Intentional InvestingSM is the science and art of investing with purpose, prudence and diligence – and it’s how Invesco’s investment professionals manage your money every day.
This highly disciplined process begins when specialized teams of investment professionals clearly define an investment objective and then establish specific investment strategies to try to achieve that objective. While our investment teams closely monitor economic and market conditions – and issues specific to individual holdings that could affect their value – they maintain a long-term investment perspective. Intentional Investing is also:
n | How we manage and mitigate risk – by embedding risk controls and processes into every aspect of our business; |
n | How we create products – by offering a diverse combination of investment strategies and vehicles designed to meet your needs; and |
n | How we connect with you, our investors – by communicating clearly, by delivering expert insights from our portfolio managers and other investment professionals, and by providing a website full of tools and articles to help you stay informed. |
As a company, Invesco believes in putting investors first, and that’s why investment management is all we do. Our sole focus on managing your money allows your financial adviser to build a truly diversified investment portfolio of Invesco funds, whatever your investment needs and goals may be – and allows him or her to find appropriate Invesco funds when your circumstances change. Of course, neither Intentional Investing nor diversification can guarantee a profit or protect against loss.
Have a question?
If you have questions about your account, please contact an Invesco client services representative at 800 959 4246. If you have an Invesco-related question or comment, feel free 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/0000950123-12-013037/h87055h8704503.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/0000950123-12-013037/h87055h8704504.jpg)
Bruce Crockett
Dear Fellow Shareholders:
One of our most important responsibilities as independent Trustees of the Invesco Funds is our annual review of the funds’ advisory and sub-advisory contracts with Invesco. This annual review is required by the Investment Company Act of 1940 and focuses on the nature and quality of the services Invesco has provided as adviser to the Invesco Funds and the reasonableness of the fees that it charges for those services.
In our roles as Trustees, we spend months reviewing thousands of pages of detailed information that we request from Invesco in connection with our annual review. We focus on the quality and costs of the services to be provided by Invesco and its affiliates. Some of the most important things we look at are fund performance, expenses and fees. All of the Trustees have substantial personal investments in the Invesco Funds complex. We’re fund shareholders just like you.
We also use information from many independent sources during the review process, including materials provided by the independent Senior Officer of the Invesco Funds, who reports directly to the independent Trustees. We also meet in private sessions with independent legal counsel and review performance and fee data on the Invesco Funds prepared by Lipper Inc., an independent, third-party firm widely recognized as a leader in its field.
I’m pleased to report that the Invesco Funds Board determined in June that renewing the investment advisory agreement and the sub-advisory contracts with Invesco would serve the best interests of each fund and its shareholders. For more detailed information about our assessment and conclusions with respect to each of the Invesco Funds, visit invesco.com/us, click on the “About Us” section and go to “Legal Information.” Information on the recent investment advisory renewal process can be found by clicking the last item under “Corporate Governance.”
In much the same way we review your fund’s advisory contract each year, it’s a good idea for you to review your own investment plan with your financial adviser on a regular basis. Perhaps you need to reassess your original asset allocation because different investments may grow at varying paces, or perhaps you’re going through a significant life change. Regardless of your situation, a financial adviser can provide guidance and experience to help you reach your financial goals.
As always, please contact me at bruce@brucecrockett.com with any questions or concerns you may have. On behalf of the 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/0000950123-12-013037/h87055h8704505.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 fiscal year ended August 31, 2012, 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 consumer discretionary 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, 8/31/11 to 8/31/12, 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 | 13.66 | % | ||
Class B Shares | 12.82 | |||
Class C Shares | 12.80 | |||
Class R Shares | 13.36 | |||
Class Y Shares | 13.94 | |||
S&P 500 Index▼ (Broad Market Index) | 18.00 | |||
S&P 500 Equal Weight Index▼ (Style-Specific Index) | 14.22 | |||
Lipper Multi-Cap Core Funds Index§ (Peer Group Index) | 12.40 | |||
Source(s): ▼Invesco, S&P-Dow Jones via FactSet Research Systems Inc.; §Lipper Inc. |
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
As the reporting period began, reports on employment and the economy were mixed at best, and sovereign debt issues abroad weighed heavily on investors. Equity indexes sold off precipitously as the US struggled very publicly to raise the nation’s debt ceiling. As a result, Standard & Poor’s announced the first-ever downgrade to long-term US government debt. Uncertainty created by the downgrade combined with the continuing eurozone debt-crisis saga to reignite global recession fears through October.
As those negative headlines faded during the fall of 2011, signs of muted growth remained. US equity markets
rebounded with a nearly uninterrupted rally throughout the winter and into the spring of 2012. In late March, markets paused, and while company earnings still offered more positive surprises than disappointments, confidence began to wane in the absence of new growth drivers. By May, the market went into steady decline as investors grew concerned about the real possibility of a Greek exit from the European Union and the potential collapse of the euro. Economic data and earnings in the US began to show signs of deceleration amid contagion from both European and Asian weakness.
Toward the end of the reporting period, yet another European commitment to a lasting resolution to the economic crisis was coupled with an announcement that funds may be injected directly into large financial institutions. This announcement, along with a ruling by the US Supreme Court upholding the Affordable Care Act, provided some near-term clarity and resulted in risk taking that led the markets modestly higher as the reporting period ended.
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, except for the energy sector, posted positive returns for the reporting period. Sectors that contributed most to overall Fund performance were the consumer discretionary, financials, information technology (IT) and industrials sectors. The energy sector contributed the least to the Fund’s overall positive performance.
The consumer discretionary sector delivered the strongest performance during the fiscal year. Three of the top contributors to Fund performance, PulteGroup, Lennar and Gap, were in the consumer discretionary sector. PulteGroup, a leading US homebuilder, experienced a sharp jump in new orders
Portfolio Composition
By sector
Consumer Discretionary | 16.0 | % | ||
Financials | 15.9 | |||
Information Technology | 13.8 | |||
Industrials | 11.7 | |||
Health Care | 10.1 | |||
Energy | 9.4 | |||
Consumer Staples | 8.0 | |||
Materials | 6.0 | |||
Utilities | 5.8 | |||
Telecommunication Services | 1.9 | |||
Money Market Funds | ||||
Plus Other Assets Less Liabilities | 1.4 |
Top 10 Equity Holdings*
1. | Tesoro Corp. | 0.3 | % | |||||
2. | Constellation Brands, Inc. – Class A | 0.3 | ||||||
3. | Sprint Nextel Corp. | 0.3 | ||||||
4. | MetroPCS Communications, Inc. | 0.3 | ||||||
5. | First Solar, Inc. | 0.3 | ||||||
6. | PulteGroup Inc. | 0.3 | ||||||
7. | Valero Energy Corp. | 0.3 | ||||||
8. | Marathon Petroleum Corp. | 0.3 | ||||||
9. | Gap, Inc. (The) | 0.3 | ||||||
10. | Urban Outfitters, Inc. | 0.3 |
Total Net Assets | $1.2 billion | |||
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 |
as the company benefited from stabilization in the housing recovery during the reporting period.
Also contributing to the Fund’s positive performance was materials company Sherwin-Williams. During the fiscal year, Sherwin-Williams and Choice Hotels (not a Fund holding) announced their preferred supply agreement. Under the agreement, Sherwin-Williams’ portfolio of paints and coatings will be used in all Choice Hotels brands.
During the reporting period, the energy sector delivered negative performance and detracted from the overall positive performance of the Fund. Several coal producing companies, including Peabody Energy and Alpha Natural Resources, generated negative returns during the fiscal year.
Also detracting from Fund performance was Cliffs Natural Resources. The international mining and natural resources company is an iron ore producer and a producer of metallurgical coal. During the reporting period, Cliffs Natural Resources completed its acquisition of Consolidated Thompson Iron Mining Limited (not a Fund holding).
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.
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.
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/0000950123-12-013037/h87055h8704506.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 BS and an MS in finance from Boston College and an MBA from Bentley College.
![(PHOTO OF GLEN MURPHY)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8704507.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 BBA from the University of Massachusetts Amherst and an MS in finance from Boston College.
![(PHOTO OF FRANCIS ORLANDO)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8704508.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 BBA from Merrimack College and an MBA from Boston University.
![(PHOTO OF DANIEL TSAI)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8704509.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 BS in mechanical engineering from National Taiwan University, an MS in mechanical engineering from the University of Michigan and an MS in computer science from Wayne State University.
![(PHOTO OF ANNE UNFLAT)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8704510.jpg)
Anne Unflat
Portfolio manager, is manager of Invesco Equally-Weighted S&P 500 Fund. She joined Invesco in 1998. Ms. Unflat earned a BA in economics from Queens College and an MBA 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(es)
Fund and index data from 8/31/02*
![(PERFORMANCE GRAPH)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8704511.gif)
1 | Sources: Invesco, S&P-Dow Jones via FactSet Research Systems Inc. | |
2 | Source: Lipper Inc. | |
* | During the reporting period, Invesco changed its policy regarding growth of $10,000 charts. For funds older than 10 years, we previously showed performance since inception. Going forward, we will show performance for the most recent 10 years, since this more accurately reflects the experience of the typical shareholder. As a result, charts now may include benchmarks that did not appear previously, because the funds’ inception predated the benchmarks’ inception. Also, all charts will now be presented using a linear format. |
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.
6 | Invesco Equally-Weighted S&P 500 Fund |
Average Annual Total Returns | ||||||||
As of 8/31/12, including maximum applicable sales charges | ||||||||
Class A Shares | ||||||||
Inception (7/28/97) | 6.44 | % | ||||||
10 | Years | 7.62 | ||||||
5 | Years | 1.23 | ||||||
1 | Year | 7.41 | ||||||
Class B Shares | ||||||||
Inception (12/1/87) | 10.39 | % | ||||||
10 | Years | 7.58 | ||||||
5 | Years | 1.32 | ||||||
1 | Year | 7.82 | ||||||
Class C Shares | ||||||||
Inception (7/28/97) | 6.05 | % | ||||||
10 | Years | 7.43 | ||||||
5 | Years | 1.62 | ||||||
1 | Year | 11.80 | ||||||
Class R Shares | ||||||||
Inception (3/31/08) | 5.27 | % | ||||||
1 | Year | 13.36 | ||||||
Class Y Shares | ||||||||
Inception (7/28/97) | 7.09 | % | ||||||
10 | Years | 8.49 | ||||||
5 | Years | 2.64 | ||||||
1 | Year | 13.94 |
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.
Average Annual Total Returns | ||||||||
As of 6/30/12, the most recent calendar quarter-end, including maximum applicable sales charges | ||||||||
Class A Shares | ||||||||
Inception (7/28/97) | 6.29 | % | ||||||
10 | Years | 6.31 | ||||||
5 | Years | -0.28 | ||||||
1 | Year | -6.03 | ||||||
Class B Shares | ||||||||
Inception (12/1/87) | 10.33 | % | ||||||
10 | Years | 6.27 | ||||||
5 | Years | -0.20 | ||||||
1 | Year | -6.21 | ||||||
Class C Shares | ||||||||
Inception (7/28/97) | 5.91 | % | ||||||
10 | Years | 6.13 | ||||||
5 | Years | 0.11 | ||||||
1 | Year | -2.29 | ||||||
Class R Shares | ||||||||
Inception (3/31/08) | 4.73 | % | ||||||
1 | Year | -0.83 | ||||||
Class Y Shares | ||||||||
Inception (7/28/97) | 6.95 | % | ||||||
10 | Years | 7.18 | ||||||
5 | Years | 1.10 | ||||||
1 | Year | -0.30 |
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 0.56%, 1.31%, 1.31%, 0.81% and 0.31%, 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, 2012, 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 for new or additional investments. Existing shareholders of Class B shares may continue to reinvest dividends and capital gains distributions in Class B shares and exchange their Class B shares for Class B shares of other funds. 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 risk. 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 risk. 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. | |
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 | 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 | Depositary receipts risk. Depositary receipts involve many of the same risks as those associated with direct investment in foreign securities. In addition, the underlying issuers of certain depositary receipts, particularly unsponsored or unregistered depositary receipts, are under no obligations to distribute shareholder communications to the holders of such receipts or to pass through to them any voting rights with respect to the deposited securities. |
About indexes used in this report
n | The S&P 500® Index is an unmanaged index considered representative of the US 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 multicap 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 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, 2012
Shares | Value | |||||||
Common Stocks & Other Equity Interests–98.61% | ||||||||
Advertising–0.38% | ||||||||
Interpublic Group of Cos., Inc. (The) | 201,162 | $ | 2,140,364 | |||||
Omnicom Group Inc. | 45,372 | 2,330,759 | ||||||
4,471,123 | ||||||||
Aerospace & Defense–2.16% | ||||||||
Boeing Co. (The) | 31,177 | 2,226,038 | ||||||
General Dynamics Corp. | 34,039 | 2,229,895 | ||||||
Honeywell International Inc. | 38,945 | 2,276,335 | ||||||
L-3 Communications Holdings, Inc. | 32,656 | 2,293,757 | ||||||
Lockheed Martin Corp. | 26,180 | 2,386,045 | ||||||
Northrop Grumman Corp. | 36,482 | 2,440,281 | ||||||
Precision Castparts Corp. | 13,297 | 2,141,881 | ||||||
Raytheon Co. | 42,276 | 2,389,440 | ||||||
Rockwell Collins, Inc. | 43,343 | 2,118,172 | ||||||
Textron Inc. | 89,700 | 2,396,784 | ||||||
United Technologies Corp. | 28,881 | 2,306,148 | ||||||
25,204,776 | ||||||||
Agricultural Products–0.16% | ||||||||
Archer-Daniels-Midland Co. | 68,464 | 1,831,412 | ||||||
Air Freight & Logistics–0.72% | ||||||||
C.H. Robinson Worldwide, Inc. | 37,647 | 2,131,197 | ||||||
Expeditors International of Washington, Inc. | 55,401 | 2,028,231 | ||||||
FedEx Corp. | 24,900 | 2,181,987 | ||||||
United Parcel Service, Inc.–Class B | 28,455 | 2,100,263 | ||||||
8,441,678 | ||||||||
Airlines–0.18% | ||||||||
Southwest Airlines Co. | 240,685 | 2,151,724 | ||||||
Aluminum–0.19% | ||||||||
Alcoa Inc. | 255,940 | 2,190,846 | ||||||
Apparel Retail–1.34% | ||||||||
Abercrombie & Fitch Co.–Class A | 67,804 | 2,440,266 | ||||||
Gap, Inc. (The) | 83,102 | 2,976,713 | ||||||
Limited Brands, Inc. | 50,948 | 2,476,073 | ||||||
Ross Stores, Inc. | 33,807 | 2,339,106 | ||||||
TJX Cos., Inc. (The) | 52,595 | 2,408,325 | ||||||
Urban Outfitters, Inc.(b) | 78,892 | 2,961,606 | ||||||
15,602,089 | ||||||||
Apparel, Accessories & Luxury Goods–0.79% | ||||||||
Coach, Inc. | 34,071 | 1,980,547 | ||||||
Fossil, Inc.(b) | 28,635 | 2,432,543 | ||||||
Ralph Lauren Corp. | 15,033 | 2,384,985 | ||||||
VF Corp. | 15,611 | 2,383,488 | ||||||
9,181,563 | ||||||||
Application Software–0.94% | ||||||||
Adobe Systems Inc.(b) | 68,897 | 2,154,409 | ||||||
Autodesk, Inc.(b) | 66,522 | 2,065,508 | ||||||
Citrix Systems, Inc.(b) | 28,274 | 2,196,607 | ||||||
Intuit Inc. | 38,255 | 2,239,448 | ||||||
Salesforce.com, Inc.(b) | 15,975 | 2,319,251 | ||||||
10,975,223 | ||||||||
Asset Management & Custody Banks–1.96% | ||||||||
Ameriprise Financial, Inc. | 44,933 | 2,467,271 | ||||||
Bank of New York Mellon Corp. (The) | 106,370 | 2,397,580 | ||||||
BlackRock, Inc. | 12,538 | 2,211,327 | ||||||
Federated Investors, Inc.–Class B | 108,487 | 2,302,094 | ||||||
Franklin Resources, Inc. | 20,171 | 2,368,076 | ||||||
Invesco Ltd.(c) | 95,556 | 2,262,766 | ||||||
Legg Mason, Inc. | 85,180 | 2,093,724 | ||||||
Northern Trust Corp. | 50,395 | 2,340,344 | ||||||
State Street Corp. | 51,722 | 2,151,635 | ||||||
T. Rowe Price Group Inc. | 37,084 | 2,278,441 | ||||||
22,873,258 | ||||||||
Auto Parts & Equipment–0.36% | ||||||||
BorgWarner, Inc.(b) | 32,005 | 2,201,304 | ||||||
Johnson Controls, Inc. | 74,018 | 2,014,030 | ||||||
4,215,334 | ||||||||
Automobile Manufacturers–0.16% | ||||||||
Ford Motor Co. | 204,560 | 1,910,590 | ||||||
Automotive Retail–0.74% | ||||||||
AutoNation, Inc.(b) | 58,586 | 2,355,157 | ||||||
AutoZone, Inc.(b) | 5,652 | 2,043,989 | ||||||
CarMax, Inc.(b) | 77,463 | 2,369,593 | ||||||
O’Reilly Automotive, Inc.(b) | 22,230 | 1,888,439 | ||||||
8,657,178 | ||||||||
Biotechnology–1.07% | ||||||||
Alexion Pharmaceuticals, Inc.(b) | 23,591 | 2,529,191 | ||||||
Amgen Inc. | 31,661 | 2,656,991 | ||||||
Biogen Idec Inc.(b) | 16,331 | 2,393,961 | ||||||
Celgene Corp.(b) | 33,526 | 2,415,213 | ||||||
Gilead Sciences, Inc.(b) | 43,928 | 2,534,207 | ||||||
12,529,563 | ||||||||
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 | |||||||
Brewers–0.21% | ||||||||
Molson Coors Brewing Co.–Class B | 55,941 | $ | 2,491,612 | |||||
Broadcasting–0.61% | ||||||||
CBS Corp.–Class B | 67,636 | 2,457,892 | ||||||
Discovery Communications, Inc.–Class A(b) | 42,740 | 2,343,862 | ||||||
Scripps Networks Interactive–Class A | 38,648 | 2,284,097 | ||||||
7,085,851 | ||||||||
Building Products–0.20% | ||||||||
Masco Corp. | 161,526 | 2,287,208 | ||||||
Cable & Satellite–0.89% | ||||||||
Cablevision Systems Corp.–Class A | 188,797 | 2,822,515 | ||||||
Comcast Corp.–Class A | 72,038 | 2,415,434 | ||||||
DIRECTV(b) | 49,446 | 2,575,642 | ||||||
Time Warner Cable Inc. | 28,665 | 2,546,026 | ||||||
10,359,617 | ||||||||
Casinos & Gaming–0.35% | ||||||||
International Game Technology | 157,558 | 1,936,388 | ||||||
Wynn Resorts Ltd. | 20,924 | 2,158,729 | ||||||
4,095,117 | ||||||||
Coal & Consumable Fuels–0.48% | ||||||||
Alpha Natural Resources, Inc.(b) | 233,970 | 1,389,782 | ||||||
CONSOL Energy Inc. | 77,189 | 2,331,108 | ||||||
Peabody Energy Corp. | 89,847 | 1,943,390 | ||||||
5,664,280 | ||||||||
Commercial Printing–0.19% | ||||||||
R. R. Donnelley & Sons Co. | 202,282 | 2,221,056 | ||||||
Communications Equipment–1.37% | ||||||||
Cisco Systems, Inc. | 130,341 | 2,486,906 | ||||||
F5 Networks, Inc.(b) | 21,294 | 2,075,952 | ||||||
Harris Corp. | 53,367 | 2,509,850 | ||||||
JDS Uniphase Corp.(b) | 207,282 | 2,319,486 | ||||||
Juniper Networks, Inc.(b) | 129,106 | 2,251,609 | ||||||
Motorola Solutions, Inc. | 44,868 | 2,138,409 | ||||||
QUALCOMM, Inc. | 37,109 | 2,280,719 | ||||||
16,062,931 | ||||||||
Computer & Electronics Retail–0.35% | ||||||||
Best Buy Co., Inc. | 109,139 | 1,936,126 | ||||||
GameStop Corp.–Class A | 114,587 | 2,186,320 | ||||||
4,122,446 | ||||||||
Computer Hardware–0.52% | ||||||||
Apple Inc. | 3,757 | 2,499,307 | ||||||
Dell Inc. | 179,918 | 1,905,331 | ||||||
Hewlett-Packard Co. | 97,741 | 1,649,868 | ||||||
6,054,506 | ||||||||
Computer Storage & Peripherals–1.29% | ||||||||
EMC Corp.(b) | 88,498 | 2,326,612 | ||||||
Lexmark International, Inc.–Class A | 84,421 | 1,832,780 | ||||||
NetApp, Inc.(b) | 71,895 | 2,481,815 | ||||||
SanDisk Corp.(b) | 61,546 | 2,536,926 | ||||||
Seagate Technology PLC | 91,271 | 2,921,585 | ||||||
Western Digital Corp.(b) | 69,823 | 2,919,998 | ||||||
15,019,716 | ||||||||
Construction & Engineering–0.60% | ||||||||
Fluor Corp. | 44,933 | 2,314,049 | ||||||
Jacobs Engineering Group, Inc.(b) | 59,840 | 2,366,074 | ||||||
Quanta Services, Inc.(b) | 96,743 | 2,321,832 | ||||||
7,001,955 | ||||||||
Construction & Farm Machinery & Heavy Trucks–0.92% | ||||||||
Caterpillar Inc. | 24,892 | 2,124,034 | ||||||
Cummins Inc. | 22,526 | 2,187,500 | ||||||
Deere & Co. | 29,344 | 2,204,028 | ||||||
Joy Global Inc. | 37,518 | 2,002,711 | ||||||
PACCAR Inc. | 56,462 | 2,253,398 | ||||||
10,771,671 | ||||||||
Construction Materials–0.21% | ||||||||
Vulcan Materials Co. | 63,704 | 2,479,360 | ||||||
Consumer Electronics–0.21% | ||||||||
Harman International Industries, Inc. | 54,392 | 2,503,664 | ||||||
Consumer Finance–0.82% | ||||||||
American Express Co. | 39,036 | 2,275,799 | ||||||
Capital One Financial Corp. | 41,464 | 2,343,960 | ||||||
Discover Financial Services | 66,441 | 2,573,260 | ||||||
SLM Corp. | 150,076 | 2,363,697 | ||||||
9,556,716 | ||||||||
Data Processing & Outsourced Services–1.79% | ||||||||
Automatic Data Processing, Inc. | 40,621 | 2,359,268 | ||||||
Computer Sciences Corp. | 83,388 | 2,685,927 | ||||||
Fidelity National Information Services, Inc. | 67,323 | 2,120,675 | ||||||
Fiserv, Inc.(b) | 31,556 | 2,250,258 | ||||||
MasterCard, Inc.–Class A | 5,234 | 2,213,459 | ||||||
Paychex, Inc. | 70,319 | 2,338,810 | ||||||
Total System Services, Inc. | 92,989 | 2,155,485 | ||||||
Visa Inc.–Class A | 18,704 | 2,398,788 | ||||||
Western Union Co. (The) | 134,605 | 2,370,394 | ||||||
20,893,064 | ||||||||
Department Stores–1.02% | ||||||||
JC Penney Co., Inc. | 86,600 | 2,258,528 | ||||||
Kohl’s Corp. | 48,371 | 2,524,966 | ||||||
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 | |||||||
Department Stores–(continued) | ||||||||
Macy’s, Inc. | 58,602 | $ | 2,362,247 | |||||
Nordstrom, Inc. | 44,712 | 2,585,695 | ||||||
Sears Holdings Corp.(b) | 41,710 | 2,200,202 | ||||||
11,931,638 | ||||||||
Distillers & Vintners–0.70% | ||||||||
Beam Inc. | 35,601 | 2,077,674 | ||||||
Brown-Forman Corp.–Class B | 36,668 | 2,350,419 | ||||||
Constellation Brands, Inc.–Class A(b) | 113,869 | 3,750,845 | ||||||
8,178,938 | ||||||||
Distributors–0.19% | ||||||||
Genuine Parts Co. | 35,398 | 2,235,738 | ||||||
Diversified Banks–0.60% | ||||||||
Comerica Inc. | 73,943 | 2,270,790 | ||||||
U.S. Bancorp | 72,444 | 2,420,354 | ||||||
Wells Fargo & Co. | 69,379 | 2,360,967 | ||||||
7,052,111 | ||||||||
Diversified Chemicals–0.97% | ||||||||
Dow Chemical Co. (The) | 67,910 | 1,990,442 | ||||||
E. I. du Pont de Nemours and Co. | 44,052 | 2,191,587 | ||||||
Eastman Chemical Co. | 45,695 | 2,525,106 | ||||||
FMC Corp. | 41,991 | 2,280,951 | ||||||
PPG Industries, Inc. | 21,031 | 2,313,831 | ||||||
11,301,917 | ||||||||
Diversified Metals & Mining–0.40% | ||||||||
Freeport-McMoRan Copper & Gold Inc. | 64,457 | 2,327,542 | ||||||
Titanium Metals Corp. | 191,449 | 2,343,336 | ||||||
4,670,878 | ||||||||
Diversified REIT’s–0.18% | ||||||||
Vornado Realty Trust | 26,386 | 2,141,752 | ||||||
Diversified Support Services–0.39% | ||||||||
Cintas Corp. | 59,939 | 2,422,735 | ||||||
Iron Mountain Inc. | 66,644 | 2,185,923 | ||||||
4,608,658 | ||||||||
Drug Retail–0.40% | ||||||||
CVS Caremark Corp. | 48,576 | 2,212,637 | ||||||
Walgreen Co. | 69,980 | 2,502,485 | ||||||
4,715,122 | ||||||||
Education Services–0.27% | ||||||||
Apollo Group, Inc.–Class A(b) | 62,338 | 1,673,775 | ||||||
DeVry, Inc. | 75,037 | 1,448,965 | ||||||
3,122,740 | ||||||||
Electric Utilities–2.40% | ||||||||
American Electric Power Co., Inc. | 54,899 | 2,360,108 | ||||||
Duke Energy Corp. | 31,397 | 2,033,898 | ||||||
Edison International | 47,363 | 2,074,026 | ||||||
Entergy Corp. | 32,899 | 2,239,764 | ||||||
Exelon Corp. | 58,289 | 2,125,800 | ||||||
FirstEnergy Corp. | 45,562 | 1,991,059 | ||||||
NextEra Energy, Inc. | 32,574 | 2,192,556 | ||||||
Northeast Utilities | 58,320 | 2,196,914 | ||||||
Pepco Holdings, Inc. | 112,809 | 2,178,342 | ||||||
Pinnacle West Capital Corp. | 42,698 | 2,193,396 | ||||||
PPL Corp. | 78,213 | 2,293,987 | ||||||
Southern Co. (The) | 46,023 | 2,086,223 | ||||||
Xcel Energy, Inc. | 76,700 | 2,139,163 | ||||||
28,105,236 | ||||||||
Electrical Components & Equipment–0.78% | ||||||||
Cooper Industries PLC | 31,451 | 2,300,641 | ||||||
Emerson Electric Co. | 46,703 | 2,368,776 | ||||||
Rockwell Automation, Inc. | 31,208 | 2,248,849 | ||||||
Roper Industries, Inc. | 21,770 | 2,237,738 | ||||||
9,156,004 | ||||||||
Electronic Components–0.38% | ||||||||
Amphenol Corp.–Class A | 39,747 | 2,419,400 | ||||||
Corning Inc. | 166,078 | 1,991,275 | ||||||
4,410,675 | ||||||||
Electronic Equipment & Instruments–0.17% | ||||||||
FLIR Systems, Inc. | 103,101 | 2,041,400 | ||||||
Electronic Manufacturing Services–0.63% | ||||||||
Jabil Circuit, Inc. | 114,167 | 2,600,724 | ||||||
Molex Inc. | 89,810 | 2,384,456 | ||||||
TE Connectivity Ltd. (Switzerland) | 67,136 | 2,361,173 | ||||||
7,346,353 | ||||||||
Environmental & Facilities Services–0.59% | ||||||||
Republic Services, Inc. | 82,944 | 2,293,401 | ||||||
Stericycle, Inc.(b) | 24,909 | 2,279,672 | ||||||
Waste Management, Inc. | 67,136 | 2,321,563 | ||||||
6,894,636 | ||||||||
Fertilizers & Agricultural Chemicals–0.65% | ||||||||
CF Industries Holdings, Inc. | 12,787 | 2,647,037 | ||||||
Monsanto Co. | 27,462 | 2,392,215 | ||||||
Mosaic Co. (The) | 44,970 | 2,604,212 | ||||||
7,643,464 | ||||||||
Food Distributors–0.20% | ||||||||
Sysco Corp. | 75,714 | 2,294,134 | ||||||
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 | |||||||
Food Retail–0.55% | ||||||||
Kroger Co. (The) | 101,094 | $ | 2,252,374 | |||||
Safeway Inc. | 119,681 | 1,873,008 | ||||||
Whole Foods Market, Inc. | 23,980 | 2,320,065 | ||||||
6,445,447 | ||||||||
Footwear–0.17% | ||||||||
NIKE, Inc.–Class B | 20,071 | 1,954,113 | ||||||
Gas Utilities–0.40% | ||||||||
AGL Resources Inc. | 57,158 | 2,266,314 | ||||||
ONEOK, Inc. | 52,824 | 2,352,253 | ||||||
4,618,567 | ||||||||
General Merchandise Stores–0.69% | ||||||||
Big Lots, Inc.(b) | 56,536 | 1,720,956 | ||||||
Dollar Tree, Inc.(b) | 40,865 | 1,968,467 | ||||||
Family Dollar Stores, Inc. | 31,338 | 1,994,350 | ||||||
Target Corp. | 36,833 | 2,360,627 | ||||||
8,044,400 | ||||||||
Gold–0.19% | ||||||||
Newmont Mining Corp. | 43,369 | 2,197,941 | ||||||
Health Care Distributors–0.75% | ||||||||
AmerisourceBergen Corp. | 58,839 | 2,266,478 | ||||||
Cardinal Health, Inc. | 52,043 | 2,058,301 | ||||||
McKesson Corp. | 24,661 | 2,148,220 | ||||||
Patterson Cos. Inc. | 65,700 | 2,231,829 | ||||||
8,704,828 | ||||||||
Health Care Equipment–2.51% | ||||||||
Baxter International Inc. | 43,078 | 2,527,817 | ||||||
Becton, Dickinson and Co. | 29,764 | 2,261,469 | ||||||
Boston Scientific Corp.(b) | 381,893 | 2,062,222 | ||||||
C.R. Bard, Inc. | 21,890 | 2,147,628 | ||||||
CareFusion Corp.(b) | 88,750 | 2,331,462 | ||||||
Covidien PLC | 41,718 | 2,338,294 | ||||||
Edwards Lifesciences Corp.(b) | 24,714 | 2,523,547 | ||||||
Intuitive Surgical, Inc.(b) | 4,062 | 1,997,651 | ||||||
Medtronic, Inc. | 58,414 | 2,375,113 | ||||||
St. Jude Medical, Inc. | 55,955 | 2,112,861 | ||||||
Stryker Corp. | 42,498 | 2,263,443 | ||||||
Varian Medical Systems, Inc.(b) | 36,666 | 2,155,594 | ||||||
Zimmer Holdings, Inc. | 35,770 | 2,209,871 | ||||||
29,306,972 | ||||||||
Health Care Facilities–0.21% | ||||||||
Tenet Healthcare Corp.(b) | 465,942 | 2,418,239 | ||||||
Health Care Services–0.83% | ||||||||
DaVita, Inc.(b) | 25,473 | 2,477,759 | ||||||
Express Scripts Holding Co.(b) | 40,996 | 2,567,169 | ||||||
Laboratory Corp. of America Holdings(b) | 25,447 | 2,238,064 | ||||||
Quest Diagnostics Inc. | 39,339 | 2,378,829 | ||||||
9,661,821 | ||||||||
Health Care Supplies–0.18% | ||||||||
DENTSPLY International Inc. | 58,602 | 2,125,495 | ||||||
Health Care Technology–0.17% | ||||||||
Cerner Corp.(b) | 27,619 | 2,020,054 | ||||||
Home Entertainment Software–0.18% | ||||||||
Electronic Arts Inc.(b) | 161,885 | 2,157,927 | ||||||
Home Furnishings–0.21% | ||||||||
Leggett & Platt, Inc. | 104,635 | 2,484,035 | ||||||
Home Improvement Retail–0.39% | ||||||||
Home Depot, Inc. (The) | 41,654 | 2,363,865 | ||||||
Lowe’s Cos., Inc. | 78,101 | 2,224,316 | ||||||
4,588,181 | ||||||||
Homebuilding–0.73% | ||||||||
D.R. Horton, Inc. | 136,544 | 2,592,970 | ||||||
Lennar Corp.–Class A | 82,132 | 2,663,541 | ||||||
PulteGroup Inc.(b) | 242,829 | 3,321,901 | ||||||
8,578,412 | ||||||||
Homefurnishing Retail–0.18% | ||||||||
Bed Bath & Beyond Inc.(b) | 30,794 | 2,068,433 | ||||||
Hotels, Resorts & Cruise Lines–0.77% | ||||||||
Carnival Corp. | 66,018 | 2,289,504 | ||||||
Marriott International Inc.–Class A | 57,687 | 2,173,646 | ||||||
Starwood Hotels & Resorts Worldwide, Inc. | 41,862 | 2,307,852 | ||||||
Wyndham Worldwide Corp. | 42,984 | 2,241,186 | ||||||
9,012,188 | ||||||||
Household Appliances–0.23% | ||||||||
Whirlpool Corp. | 35,846 | 2,704,939 | ||||||
Household Products–0.78% | ||||||||
Clorox Co. (The) | 30,361 | 2,208,763 | ||||||
Colgate-Palmolive Co. | 21,768 | 2,314,156 | ||||||
Kimberly-Clark Corp. | 26,854 | 2,244,995 | ||||||
Procter & Gamble Co. (The) | 34,749 | 2,334,785 | ||||||
9,102,699 | ||||||||
Housewares & Specialties–0.19% | ||||||||
Newell Rubbermaid Inc. | 121,211 | 2,173,313 | ||||||
Human Resource & Employment Services–0.17% | ||||||||
Robert Half International, Inc. | 77,107 | 2,027,914 | ||||||
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 | |||||||
Hypermarkets & Super Centers–0.40% | ||||||||
Costco Wholesale Corp. | 24,572 | $ | 2,404,861 | |||||
Wal-Mart Stores, Inc. | 31,963 | 2,320,514 | ||||||
4,725,375 | ||||||||
Independent Power Producers & Energy Traders–0.42% | ||||||||
AES Corp. (The) | 173,753 | 1,979,047 | ||||||
NRG Energy, Inc. | 136,886 | 2,921,147 | ||||||
4,900,194 | ||||||||
Industrial Conglomerates–0.79% | ||||||||
3M Co. | 25,355 | 2,347,873 | ||||||
Danaher Corp. | 42,333 | 2,267,779 | ||||||
General Electric Co. | 113,572 | 2,352,076 | ||||||
Tyco International Ltd. | 40,765 | 2,298,331 | ||||||
9,266,059 | ||||||||
Industrial Gases–0.56% | ||||||||
Air Products & Chemicals, Inc. | 27,387 | 2,261,618 | ||||||
Airgas, Inc. | 25,314 | 2,102,834 | ||||||
Praxair, Inc. | 20,588 | 2,172,034 | ||||||
6,536,486 | ||||||||
Industrial Machinery–1.98% | ||||||||
Dover Corp. | 38,471 | 2,224,008 | ||||||
Eaton Corp. | 52,875 | 2,364,570 | ||||||
Flowserve Corp. | 20,745 | 2,648,307 | ||||||
Illinois Tool Works Inc. | 38,931 | 2,308,219 | ||||||
Ingersoll-Rand PLC | 53,459 | 2,499,743 | ||||||
Pall Corp. | 41,159 | 2,284,736 | ||||||
Parker Hannifin Corp. | 26,831 | 2,145,943 | ||||||
Snap-on Inc. | 34,799 | 2,415,747 | ||||||
Stanley Black & Decker Inc. | 33,718 | 2,217,970 | ||||||
Xylem, Inc. | 84,128 | 2,043,469 | ||||||
23,152,712 | ||||||||
Industrial REIT’s–0.20% | ||||||||
Prologis, Inc. | 68,421 | 2,337,946 | ||||||
Insurance Brokers–0.41% | ||||||||
Aon PLC | 46,614 | 2,422,063 | ||||||
Marsh & McLennan Cos., Inc. | 68,186 | 2,329,916 | ||||||
4,751,979 | ||||||||
Integrated Oil & Gas–1.02% | ||||||||
Chevron Corp. | 21,623 | 2,425,236 | ||||||
Exxon Mobil Corp. | 26,973 | 2,354,743 | ||||||
Hess Corp. | 48,761 | 2,463,893 | ||||||
Murphy Oil Corp. | 47,611 | 2,443,873 | ||||||
Occidental Petroleum Corp. | 25,638 | 2,179,486 | ||||||
11,867,231 | ||||||||
Integrated Telecommunication Services–1.04% | ||||||||
AT&T Inc. | 63,114 | 2,312,497 | ||||||
CenturyLink Inc. | 58,258 | 2,461,983 | ||||||
Frontier Communications Corp. | 632,061 | 2,920,122 | ||||||
Verizon Communications Inc. | 51,380 | 2,206,257 | ||||||
Windstream Corp. | 232,970 | 2,299,414 | ||||||
12,200,273 | ||||||||
Internet Retail–0.90% | ||||||||
Amazon.com, Inc.(b) | 9,980 | 2,477,335 | ||||||
Expedia, Inc. | 45,571 | 2,340,527 | ||||||
Netflix Inc.(b) | 33,220 | 1,983,898 | ||||||
Priceline.com Inc.(b) | 3,384 | 2,045,865 | ||||||
TripAdvisor Inc.(b) | 50,688 | 1,695,007 | ||||||
10,542,632 | ||||||||
Internet Software & Services–1.07% | ||||||||
Akamai Technologies, Inc.(b) | 72,396 | 2,715,574 | ||||||
eBay Inc.(b) | 53,120 | 2,521,607 | ||||||
Google Inc.–Class A(b) | 3,756 | 2,573,198 | ||||||
VeriSign, Inc.(b) | 54,775 | 2,611,672 | ||||||
Yahoo! Inc.(b) | 139,336 | 2,041,272 | ||||||
12,463,323 | ||||||||
Investment Banking & Brokerage–0.81% | ||||||||
Charles Schwab Corp. (The) | 177,285 | 2,391,575 | ||||||
E*TRADE Financial Corp.(b) | 266,252 | 2,281,779 | ||||||
Goldman Sachs Group, Inc. (The) | 23,064 | 2,438,326 | ||||||
Morgan Stanley | 159,051 | 2,385,765 | ||||||
9,497,445 | ||||||||
IT Consulting & Other Services–0.99% | ||||||||
Accenture PLC–Class A | 37,255 | 2,294,908 | ||||||
Cognizant Technology Solutions Corp.–Class A(b) | 37,052 | 2,381,703 | ||||||
International Business Machines Corp. | 11,174 | 2,177,254 | ||||||
SAIC, Inc. | 189,288 | 2,311,206 | ||||||
Teradata Corp.(b) | 31,758 | 2,425,676 | ||||||
11,590,747 | ||||||||
Leisure Products–0.41% | ||||||||
Hasbro, Inc. | 63,205 | 2,370,820 | ||||||
Mattel, Inc. | 68,810 | 2,417,983 | ||||||
4,788,803 | ||||||||
Life & Health Insurance–1.44% | ||||||||
Aflac, Inc. | 53,656 | 2,477,834 | ||||||
Lincoln National Corp. | 103,937 | 2,413,417 | ||||||
MetLife, Inc. | 73,297 | 2,501,627 | ||||||
Principal Financial Group, Inc. | 87,892 | 2,411,757 | ||||||
Prudential Financial, Inc. | 45,457 | 2,477,861 | ||||||
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 | |||||||
Life & Health Insurance–(continued) | ||||||||
Torchmark Corp. | 45,907 | $ | 2,349,520 | |||||
Unum Group | 110,187 | 2,149,748 | ||||||
16,781,764 | ||||||||
Life Sciences Tools & Services–0.98% | ||||||||
Agilent Technologies, Inc. | 55,065 | 2,046,215 | ||||||
Life Technologies Corp.(b) | 52,117 | 2,486,502 | ||||||
PerkinElmer, Inc. | 83,805 | 2,287,877 | ||||||
Thermo Fisher Scientific, Inc. | 42,866 | 2,458,365 | ||||||
Waters Corp.(b) | 27,679 | 2,219,579 | ||||||
11,498,538 | ||||||||
Managed Health Care–1.10% | ||||||||
Aetna Inc. | 50,430 | 1,937,016 | ||||||
Cigna Corp. | 48,598 | 2,224,330 | ||||||
Coventry Health Care, Inc. | 67,198 | 2,797,453 | ||||||
Humana Inc. | 27,459 | 1,924,327 | ||||||
UnitedHealth Group Inc. | 37,595 | 2,041,409 | ||||||
WellPoint, Inc. | 31,570 | 1,890,096 | ||||||
12,814,631 | ||||||||
Metal & Glass Containers–0.36% | ||||||||
Ball Corp. | 52,991 | 2,234,630 | ||||||
Owens-Illinois, Inc.(b) | 112,518 | 1,966,815 | ||||||
4,201,445 | ||||||||
Motorcycle Manufacturers–0.16% | ||||||||
Harley-Davidson, Inc. | 44,813 | 1,880,353 | ||||||
Movies & Entertainment–0.84% | ||||||||
News Corp.–Class A | 112,170 | 2,623,656 | ||||||
Time Warner Inc. | 61,896 | 2,571,779 | ||||||
Viacom Inc.–Class B | 45,772 | 2,289,058 | ||||||
Walt Disney Co. (The) | 47,158 | 2,332,906 | ||||||
9,817,399 | ||||||||
Multi-Line Insurance–0.97% | ||||||||
American International Group, Inc.(b) | 71,541 | 2,456,002 | ||||||
Assurant, Inc. | 64,191 | 2,262,733 | ||||||
Genworth Financial Inc.–Class A(b) | 405,317 | 2,144,127 | ||||||
Hartford Financial Services Group, Inc. (The) | 127,001 | 2,277,128 | ||||||
Loews Corp. | 54,692 | 2,223,230 | ||||||
11,363,220 | ||||||||
Multi-Sector Holdings–0.19% | ||||||||
Leucadia National Corp. | 105,038 | 2,245,712 | ||||||
Multi-Utilities–2.57% | ||||||||
Ameren Corp. | 65,581 | 2,145,810 | ||||||
CenterPoint Energy, Inc. | 106,892 | 2,179,528 | ||||||
CMS Energy Corp. | 92,555 | 2,135,244 | ||||||
Consolidated Edison, Inc. | 35,034 | 2,123,761 | ||||||
Dominion Resources, Inc. | 40,965 | 2,149,843 | ||||||
DTE Energy Co. | 37,602 | 2,195,957 | ||||||
Integrys Energy Group, Inc. | 39,303 | 2,121,969 | ||||||
NiSource Inc. | 86,360 | 2,102,002 | ||||||
PG&E Corp. | 48,361 | 2,099,351 | ||||||
Public Service Enterprise Group Inc. | 68,292 | 2,162,125 | ||||||
SCANA Corp. | 46,405 | 2,197,741 | ||||||
Sempra Energy | 32,677 | 2,163,218 | ||||||
TECO Energy, Inc. | 122,920 | 2,133,891 | ||||||
Wisconsin Energy Corp. | 56,492 | 2,144,436 | ||||||
30,054,876 | ||||||||
Office Electronics–0.18% | ||||||||
Xerox Corp. | 282,828 | 2,084,442 | ||||||
Office REIT’s–0.20% | ||||||||
Boston Properties, Inc. | 20,727 | 2,324,118 | ||||||
Office Services & Supplies–0.38% | ||||||||
Avery Dennison Corp. | 76,998 | 2,404,648 | ||||||
Pitney Bowes Inc. | 152,703 | 2,040,112 | ||||||
4,444,760 | ||||||||
Oil & Gas Drilling–1.22% | ||||||||
Diamond Offshore Drilling, Inc. | 36,282 | 2,431,619 | ||||||
Ensco PLC–Class A (United Kingdom) | 38,983 | 2,236,455 | ||||||
Helmerich & Payne, Inc. | 47,311 | 2,159,274 | ||||||
Nabors Industries Ltd.(b) | 163,096 | 2,408,928 | ||||||
Noble Corp.(b) | 68,400 | 2,608,776 | ||||||
Rowan Cos. PLC–Class A(b) | 69,600 | 2,448,528 | ||||||
14,293,580 | ||||||||
Oil & Gas Equipment & Services–1.30% | ||||||||
Baker Hughes Inc. | 55,556 | 2,533,353 | ||||||
Cameron International Corp.(b) | 47,435 | 2,595,169 | ||||||
FMC Technologies, Inc.(b) | 53,616 | 2,511,373 | ||||||
Halliburton Co. | 77,989 | 2,554,920 | ||||||
National Oilwell Varco Inc. | 32,746 | 2,580,385 | ||||||
Schlumberger Ltd. | 33,786 | 2,445,431 | ||||||
15,220,631 | ||||||||
Oil & Gas Exploration & Production–3.47% | ||||||||
Anadarko Petroleum Corp. | 34,156 | 2,365,986 | ||||||
Apache Corp. | 26,281 | 2,253,596 | ||||||
Cabot Oil & Gas Corp. | 66,098 | 2,737,118 | ||||||
Chesapeake Energy Corp. | 118,768 | 2,298,161 | ||||||
ConocoPhillips | 40,403 | 2,294,486 | ||||||
Denbury Resources Inc.(b) | 145,373 | 2,251,828 | ||||||
Devon Energy Corp. | 37,141 | 2,147,864 | ||||||
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 Exploration & Production–(continued) | ||||||||
EOG Resources, Inc. | 23,227 | $ | 2,515,484 | |||||
EQT Corp. | 47,240 | 2,549,070 | ||||||
Marathon Oil Corp. | 87,119 | 2,423,651 | ||||||
Newfield Exploration Co.(b) | 74,677 | 2,436,711 | ||||||
Noble Energy, Inc. | 25,689 | 2,258,063 | ||||||
Pioneer Natural Resources Co. | 23,126 | 2,251,547 | ||||||
QEP Resources Inc. | 82,944 | 2,379,663 | ||||||
Range Resources Corp. | 38,525 | 2,511,445 | ||||||
Southwestern Energy Co.(b) | 80,494 | 2,505,778 | ||||||
WPX Energy Inc.(b) | 155,535 | 2,426,346 | ||||||
40,606,797 | ||||||||
Oil & Gas Refining & Marketing–1.30% | ||||||||
Marathon Petroleum Corp. | 58,367 | 3,020,492 | ||||||
Phillips 66 | 67,888 | 2,851,296 | ||||||
Sunoco, Inc. | 46,644 | 2,201,131 | ||||||
Tesoro Corp. | 97,261 | 3,865,152 | ||||||
Valero Energy Corp. | 102,520 | 3,204,775 | ||||||
15,142,846 | ||||||||
Oil & Gas Storage & Transportation–0.61% | ||||||||
Kinder Morgan Inc. | 69,159 | 2,473,817 | ||||||
Spectra Energy Corp. | 78,410 | 2,215,867 | ||||||
Williams Cos., Inc. (The) | 74,245 | 2,395,886 | ||||||
7,085,570 | ||||||||
Other Diversified Financial Services–0.60% | ||||||||
Bank of America Corp. | 288,441 | 2,304,644 | ||||||
Citigroup Inc. | 78,523 | 2,332,918 | ||||||
JPMorgan Chase & Co. | 64,744 | 2,404,592 | ||||||
7,042,154 | ||||||||
Packaged Foods & Meats–2.48% | ||||||||
Campbell Soup Co. | 68,745 | 2,415,699 | ||||||
ConAgra Foods, Inc. | 86,738 | 2,177,991 | ||||||
Dean Foods Co.(b) | 136,117 | 2,235,041 | ||||||
General Mills, Inc. | 57,083 | 2,245,074 | ||||||
H.J. Heinz Co. | 40,689 | 2,267,191 | ||||||
Hershey Co. (The) | 32,271 | 2,317,703 | ||||||
Hormel Foods Corp. | 73,272 | 2,104,372 | ||||||
JM Smucker Co. (The) | 28,786 | 2,445,947 | ||||||
Kellogg Co. | 44,840 | 2,271,146 | ||||||
Kraft Foods Inc.–Class A | 57,024 | 2,368,207 | ||||||
McCormick & Co., Inc. | 39,078 | 2,400,952 | ||||||
Mead Johnson Nutrition Co. | 26,771 | 1,963,118 | ||||||
Tyson Foods, Inc.–Class A | 114,467 | 1,792,553 | ||||||
29,004,994 | ||||||||
Paper Packaging–0.35% | ||||||||
Bemis Co., Inc. | 68,701 | 2,078,892 | ||||||
Sealed Air Corp. | 139,514 | 1,990,865 | ||||||
4,069,757 | ||||||||
Paper Products–0.41% | ||||||||
International Paper Co.(d) | 74,499 | 2,574,685 | ||||||
MeadWestvaco Corp. | 77,906 | 2,240,577 | ||||||
4,815,262 | ||||||||
Personal Products–0.38% | ||||||||
Avon Products, Inc. | 137,231 | 2,120,219 | ||||||
Estee Lauder Cos. Inc. (The)–Class A | 39,639 | 2,376,358 | ||||||
4,496,577 | ||||||||
Pharmaceuticals–2.35% | ||||||||
Abbott Laboratories | 35,238 | 2,309,498 | ||||||
Allergan, Inc. | 23,836 | 2,052,995 | ||||||
Bristol-Myers Squibb Co. | 63,444 | 2,094,286 | ||||||
Eli Lilly & Co. | 52,506 | 2,358,044 | ||||||
Forest Laboratories, Inc.(b) | 61,098 | 2,119,490 | ||||||
Hospira, Inc.(b) | 66,501 | 2,233,104 | ||||||
Johnson & Johnson | 34,623 | 2,334,629 | ||||||
Merck & Co., Inc. | 56,697 | 2,440,806 | ||||||
Mylan Inc.(b) | 101,188 | 2,385,001 | ||||||
Perrigo Co. | 20,532 | 2,257,904 | ||||||
Pfizer Inc. | 98,491 | 2,349,995 | ||||||
Watson Pharmaceuticals, Inc.(b) | 30,759 | 2,502,245 | ||||||
27,437,997 | ||||||||
Property & Casualty Insurance–1.55% | ||||||||
ACE Ltd. | 29,932 | 2,206,887 | ||||||
Allstate Corp. (The) | 63,555 | 2,369,331 | ||||||
Berkshire Hathaway Inc.–Class B(b) | 26,801 | 2,260,396 | ||||||
Chubb Corp. (The) | 30,480 | 2,252,167 | ||||||
Cincinnati Financial Corp. | 59,400 | 2,296,404 | ||||||
Progressive Corp. (The) | 99,571 | 1,944,622 | ||||||
Travelers Cos., Inc. (The) | 35,091 | 2,271,791 | ||||||
XL Group PLC | 106,944 | 2,472,545 | ||||||
18,074,143 | ||||||||
Publishing–0.62% | ||||||||
Gannett Co., Inc. | 171,431 | 2,616,037 | ||||||
McGraw-Hill Cos., Inc. (The) | 50,105 | 2,565,376 | ||||||
Washington Post Co. (The)–Class B | 5,988 | 2,110,770 | ||||||
7,292,183 | ||||||||
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 | |||||||
Railroads–0.61% | ||||||||
CSX Corp. | 103,444 | $ | 2,323,352 | |||||
Norfolk Southern Corp. | 32,820 | 2,378,137 | ||||||
Union Pacific Corp. | 19,708 | 2,393,340 | ||||||
7,094,829 | ||||||||
Real Estate Services–0.20% | ||||||||
CBRE Group, Inc.–Class A(b) | 134,274 | 2,324,283 | ||||||
Regional Banks–2.06% | ||||||||
BB&T Corp. | 75,166 | 2,370,736 | ||||||
Fifth Third Bancorp | 168,647 | 2,553,316 | ||||||
First Horizon National Corp. | 273,945 | 2,454,547 | ||||||
Huntington Bancshares Inc. | 350,017 | 2,310,112 | ||||||
KeyCorp | 299,534 | 2,525,072 | ||||||
M&T Bank Corp. | 27,280 | 2,370,632 | ||||||
PNC Financial Services Group, Inc. | 36,740 | 2,283,758 | ||||||
Regions Financial Corp. | 354,570 | 2,467,807 | ||||||
SunTrust Banks, Inc. | 98,314 | 2,474,563 | ||||||
Zions Bancorp. | 118,510 | 2,281,318 | ||||||
24,091,861 | ||||||||
Research & Consulting Services–0.41% | ||||||||
Dun & Bradstreet Corp. (The) | 32,555 | 2,635,327 | ||||||
Equifax Inc. | 46,544 | 2,130,785 | ||||||
4,766,112 | ||||||||
Residential REIT’s–0.55% | ||||||||
Apartment Investment & Management Co.–Class A | 80,257 | 2,125,205 | ||||||
AvalonBay Communities, Inc. | 15,392 | 2,178,276 | ||||||
Equity Residential | 35,227 | 2,127,711 | ||||||
6,431,192 | ||||||||
Restaurants–0.87% | ||||||||
Chipotle Mexican Grill, Inc.(b) | 5,353 | 1,545,090 | ||||||
Darden Restaurants, Inc. | 43,594 | 2,264,709 | ||||||
McDonald’s Corp. | 24,849 | 2,223,737 | ||||||
Starbucks Corp. | 40,689 | 2,018,581 | ||||||
Yum! Brands, Inc. | 33,760 | 2,151,187 | ||||||
10,203,304 | ||||||||
Retail REIT’s–0.40% | ||||||||
Kimco Realty Corp. | 118,189 | 2,401,600 | ||||||
Simon Property Group, Inc. | 14,478 | 2,297,659 | ||||||
4,699,259 | ||||||||
Semiconductor Equipment–0.78% | ||||||||
Applied Materials, Inc. | 202,658 | 2,369,072 | ||||||
KLA-Tencor Corp. | 46,072 | 2,363,954 | ||||||
Lam Research Corp.(b) | 57,963 | 1,978,277 | ||||||
Teradyne, Inc.(b) | 151,641 | 2,368,633 | ||||||
9,079,936 | ||||||||
Semiconductors–2.61% | ||||||||
Advanced Micro Devices, Inc.(b) | 368,970 | 1,372,568 | ||||||
Altera Corp. | 65,111 | 2,430,594 | ||||||
Analog Devices, Inc. | 58,776 | 2,335,758 | ||||||
Broadcom Corp.–Class A(b) | 64,022 | 2,274,702 | ||||||
First Solar, Inc.(b) | 170,360 | 3,405,496 | ||||||
Intel Corp.(d) | 82,567 | 2,050,139 | ||||||
Linear Technology Corp. | 73,125 | 2,414,953 | ||||||
LSI Corp.(b) | 330,396 | 2,573,785 | ||||||
Microchip Technology Inc. | 68,122 | 2,367,239 | ||||||
Micron Technology, Inc.(b) | 370,852 | 2,302,991 | ||||||
NVIDIA Corp.(b) | 179,918 | 2,524,250 | ||||||
Texas Instruments Inc. | 76,458 | 2,220,340 | ||||||
Xilinx, Inc. | 66,400 | 2,251,624 | ||||||
30,524,439 | ||||||||
Soft Drinks–0.93% | ||||||||
Coca-Cola Co. (The) | 57,963 | 2,167,816 | ||||||
Coca-Cola Enterprises, Inc. | 80,942 | 2,390,217 | ||||||
Dr. Pepper Snapple Group, Inc. | 51,139 | 2,291,539 | ||||||
Monster Beverage Corp.(b) | 29,195 | 1,720,461 | ||||||
PepsiCo, Inc. | 31,921 | 2,312,038 | ||||||
10,882,071 | ||||||||
Specialized Consumer Services–0.20% | ||||||||
H&R Block, Inc. | 141,139 | 2,337,262 | ||||||
Specialized Finance–0.97% | ||||||||
CME Group Inc. | 40,150 | 2,204,235 | ||||||
IntercontinentalExchange Inc.(b) | 17,050 | 2,330,735 | ||||||
Moody’s Corp. | 60,071 | 2,378,811 | ||||||
NASDAQ OMX Group, Inc. (The) | 98,580 | 2,254,525 | ||||||
NYSE Euronext | 88,642 | 2,220,482 | ||||||
11,388,788 | ||||||||
Specialized REIT’s–1.62% | ||||||||
American Tower Corp. | 32,889 | 2,315,386 | ||||||
HCP, Inc. | 52,280 | 2,397,561 | ||||||
Health Care REIT, Inc. | 38,966 | 2,277,173 | ||||||
Host Hotels & Resorts Inc. | 142,151 | 2,174,910 | ||||||
Plum Creek Timber Co., Inc. | 58,367 | 2,388,961 | ||||||
Public Storage | 15,720 | 2,288,203 | ||||||
Ventas, Inc. | 37,408 | 2,449,850 | ||||||
Weyerhaeuser Co. | 106,630 | 2,656,153 | ||||||
18,948,197 | ||||||||
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 | |||||||
Specialty Chemicals–0.77% | ||||||||
Ecolab Inc. | 32,770 | $ | 2,098,263 | |||||
International Flavors & Fragrances Inc. | 38,600 | 2,336,072 | ||||||
Sherwin-Williams Co. (The) | 16,592 | 2,373,984 | ||||||
Sigma-Aldrich Corp. | 30,842 | 2,190,707 | ||||||
8,999,026 | ||||||||
Specialty Stores–0.37% | ||||||||
Staples, Inc. | 169,565 | 1,851,650 | ||||||
Tiffany & Co. | 39,445 | 2,443,618 | ||||||
4,295,268 | ||||||||
Steel–0.70% | ||||||||
Allegheny Technologies, Inc. | 71,966 | 2,133,072 | ||||||
Cliffs Natural Resources Inc. | 44,712 | 1,602,478 | ||||||
Nucor Corp. | 58,586 | 2,205,763 | ||||||
United States Steel Corp. | 113,988 | 2,217,067 | ||||||
8,158,380 | ||||||||
Systems Software–1.19% | ||||||||
BMC Software, Inc.(b) | 49,899 | 2,065,819 | ||||||
CA, Inc. | 85,614 | 2,228,532 | ||||||
Microsoft Corp. | 73,544 | 2,266,626 | ||||||
Oracle Corp. | 80,286 | 2,541,052 | ||||||
Red Hat, Inc.(b) | 39,106 | 2,191,500 | ||||||
Symantec Corp.(b) | 149,664 | 2,668,509 | ||||||
13,962,038 | ||||||||
Thrifts & Mortgage Finance–0.41% | ||||||||
Hudson City Bancorp, Inc. | 361,028 | 2,595,791 | ||||||
People’s United Financial Inc. | 186,217 | 2,229,018 | ||||||
4,824,809 | ||||||||
Tires & Rubber–0.22% | ||||||||
Goodyear Tire & Rubber Co. (The)(b) | 207,875 | 2,536,075 | ||||||
Tobacco–0.79% | ||||||||
Altria Group, Inc. | 66,259 | 2,250,156 | ||||||
Lorillard, Inc. | 17,705 | 2,222,154 | ||||||
Philip Morris International Inc. | 25,968 | 2,318,942 | ||||||
Reynolds American Inc. | 53,017 | 2,444,084 | ||||||
9,235,336 | ||||||||
Trading Companies & Distributors–0.40% | ||||||||
Fastenal Co. | 54,149 | 2,333,280 | ||||||
W.W. Grainger, Inc. | 11,477 | 2,363,803 | ||||||
4,697,083 | ||||||||
Trucking–0.17% | ||||||||
Ryder System, Inc. | 50,829 | 2,033,668 | ||||||
Wireless Telecommunication Services–0.81% | ||||||||
Crown Castle International Corp.(b) | 39,015 | 2,475,892 | ||||||
MetroPCS Communications, Inc.(b) | 354,570 | 3,449,966 | ||||||
Sprint Nextel Corp.(b) | 731,749 | 3,548,983 | ||||||
9,474,841 | ||||||||
Total Common Stocks & Other Equity Interests (Cost $631,627,538) | 1,152,857,450 | |||||||
Money Market Funds–1.39% | ||||||||
Liquid Assets Portfolio–Institutional Class(e) | 8,102,917 | 8,102,917 | ||||||
Premier Portfolio–Institutional Class(e) | 8,102,917 | 8,102,917 | ||||||
Total Money Market Funds (Cost $16,205,834) | 16,205,834 | |||||||
TOTAL INVESTMENTS–100.00% (Cost $647,833,372) | 1,169,063,284 | |||||||
OTHER ASSETS LESS LIABILITIES–0.00% | (22,654 | ) | ||||||
NET ASSETS–100.00% | $ | 1,169,040,630 | ||||||
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 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.
17 Invesco Equally-Weighted S&P 500 Fund
Statement of Assets and Liabilities
August 31, 2012
Assets: | ||||
Investments, at value (Cost $629,962,506) | $ | 1,150,594,684 | ||
Investments in affiliates (Cost $17,870,866) | 18,468,600 | |||
Total investments, at value (Cost $647,833,372) | 1,169,063,284 | |||
Receivable for: | ||||
Variation margin | 105,806 | |||
Fund shares sold | 574,940 | |||
Dividends | 2,325,592 | |||
Investment for trustee deferred compensation and retirement plans | 12,886 | |||
Other assets | 46,048 | |||
Total assets | 1,172,128,556 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares reacquired | 1,843,364 | |||
Accrued fees to affiliates | 986,575 | |||
Accrued other operating expenses | 128,457 | |||
Trustee deferred compensation and retirement plans | 129,530 | |||
Total liabilities | 3,087,926 | |||
Net assets applicable to shares outstanding | $ | 1,169,040,630 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 646,279,525 | ||
Undistributed net investment income | 9,153,063 | |||
Undistributed net realized gain (loss) | (7,777,837 | ) | ||
Unrealized appreciation | 521,385,879 | |||
$ | 1,169,040,630 | |||
Net Assets: | ||||
Class A | $ | 730,648,326 | ||
Class B | $ | 42,131,152 | ||
Class C | $ | 77,691,345 | ||
Class R | $ | 8,924,386 | ||
Class Y | $ | 309,645,421 | ||
Shares outstanding, $0.01 par value per share, with an unlimited number of shares authorized: | ||||
Class A | 21,875,113 | |||
Class B | 1,263,588 | |||
Class C | 2,403,098 | |||
Class R | 267,957 | |||
Class Y | 9,203,455 | |||
Class A: | ||||
Net asset value per share | $ | 33.40 | ||
Maximum offering price per share (Net asset value of $33.40 divided by 94.50%) | $ | 35.34 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 33.34 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 32.33 | ||
Class R: | ||||
Net asset value and offering price per share | $ | 33.31 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 33.64 | ||
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 Operations
For the year ended August 31, 2012
Investment income: | ||||
Dividends (net of foreign withholding taxes of $4,934) | $ | 20,506,020 | ||
Dividends from affiliates | 73,293 | |||
Total investment income | 20,579,313 | |||
Expenses: | ||||
Advisory fees | 1,276,202 | |||
Administrative services fees | 281,218 | |||
Custodian fees | 57,455 | |||
Distribution fees: | ||||
Class A | 1,708,771 | |||
Class B | 596,966 | |||
Class C | 732,638 | |||
Class R | 22,107 | |||
Transfer agent fees | 1,477,833 | |||
Trustees’ and officers’ fees and benefits | 83,137 | |||
Other | 554,948 | |||
Total expenses | 6,791,275 | |||
Less: Fees waived and expense offset arrangement(s) | (17,728 | ) | ||
Net expenses | 6,773,547 | |||
Net investment income | 13,805,766 | |||
Realized and unrealized gain from: | ||||
Net realized gain from: | ||||
Investment securities | 48,075,246 | |||
Futures contracts | 3,072,327 | |||
51,147,573 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | 71,842,552 | |||
Futures contracts | (515,930 | ) | ||
71,326,622 | ||||
Net realized and unrealized gain | 122,474,195 | |||
Net increase in net assets resulting from operations | $ | 136,279,961 | ||
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 Changes in Net Assets
For the years ended August 31, 2012 and 2011
2012 | 2011 | |||||||
Operations: | ||||||||
Net investment income | $ | 13,805,766 | $ | 12,202,732 | ||||
Net realized gain | 51,147,573 | 74,515,602 | ||||||
Change in net unrealized appreciation | 71,326,622 | 88,290,896 | ||||||
Net increase in net assets resulting from operations | 136,279,961 | 175,009,230 | ||||||
Distributions to shareholders from net investment income: | ||||||||
Class A | (11,216,679 | ) | (8,801,770 | ) | ||||
Class B | (345,338 | ) | (420,658 | ) | ||||
Class C | (365,417 | ) | (250,401 | ) | ||||
Class R | (19,599 | ) | (1,842 | ) | ||||
Class Y | (4,510,536 | ) | (2,834,438 | ) | ||||
Total distributions from net investment income | (16,457,569 | ) | (12,309,109 | ) | ||||
Share transactions–net: | ||||||||
Class A | 15,259,422 | (18,582,780 | ) | |||||
Class B | (42,838,095 | ) | (55,334,686 | ) | ||||
Class C | 1,457,548 | 1,679,975 | ||||||
Class R | 7,253,744 | 995,638 | ||||||
Class Y | 103,884,907 | (6,087,350 | ) | |||||
Net increase (decrease) in net assets resulting from share transactions | 85,017,526 | (77,329,203 | ) | |||||
Net increase in net assets | 204,839,918 | 85,370,918 | ||||||
Net assets: | ||||||||
Beginning of year | 964,200,712 | 878,829,794 | ||||||
End of year (includes undistributed net investment income of $9,153,063 and $11,837,067, respectively) | $ | 1,169,040,630 | $ | 964,200,712 | ||||
Notes to Financial Statements
August 31, 2012
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 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 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. | |
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 |
20 Invesco Equally-Weighted S&P 500 Fund
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. 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 economic 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 declared and paid annually and recorded on the 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 Equally-Weighted S&P 500 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 the 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).
Effective July 1, 2012, the Adviser has contractually agreed, through June 30, 2013, 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, Class R and Class Y shares to 2.00%, 2.75%, 2.75%, 2.25% and 1.75% of average daily net assets, respectively. Prior to July 1, 2012, the Adviser has contractually agreed 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, 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 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, including litigation expenses; 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 Invesco mutually agree to amend or continue the fee waiver agreement, it will terminate on June 30, 2013.
22 Invesco Equally-Weighted S&P 500 Fund
Further, the Adviser has contractually agreed, through at least June 30, 2013, 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, 2012, the Adviser waived advisory fees of $17,123.
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, 2012, 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, 2012, 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, 2012, 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, 2012, IDI advised the Fund that IDI retained $54,899 in front-end sales commissions from the sale of Class A shares and $27, $22,963 and $4,341 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, 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, 2012. 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.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 1,169,063,284 | $ | — | $ | — | $ | 1,169,063,284 | ||||||||
Futures* | 155,967 | — | — | 155,967 | ||||||||||||
Total Investments | $ | 1,169,219,251 | $ | — | $ | — | $ | 1,169,219,251 | ||||||||
* | Unrealized appreciation. |
23 Invesco Equally-Weighted S&P 500 Fund
NOTE 4—Derivative Investments
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, 2012:
Value | ||||||||
Risk Exposure/Derivative Type | Assets | Liabilities | ||||||
Equity risk | ||||||||
Futures contracts(a) | $ | 208,939 | $ | (52,972 | ) | |||
(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, 2012
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 | ||||
Equity risk | $ | 3,072,327 | ||
Change in Unrealized Appreciation (Depreciation) | ||||
Equity risk | $ | (515,930 | ) | |
Total | $ | 2,556,397 | ||
* | The average notional value of futures outstanding during the period was $12,954,690. |
Open Futures Contracts | ||||||||||||||||
Number of | Expiration | Notional | Unrealized | |||||||||||||
Long Contracts | Contracts | Month | Value | Appreciation | ||||||||||||
E-Mini S&P 500 | 264 | September-2012 | $ | 18,547,320 | $ | 155,967 | ||||||||||
NOTE 5—Investments in Affiliates
Change in | ||||||||||||||||||||||||||||
Value | Purchases | Proceeds | Unrealized | Realized | Value | Dividend | ||||||||||||||||||||||
08/31/11 | at Cost | from Sales | Appreciation | Gain (Loss) | 08/31/12 | Income | ||||||||||||||||||||||
Invesco, Ltd. | $ | 1,615,707 | $ | 599,133 | $ | (536,059 | ) | $ | 624,749 | $ | (40,764 | ) | $ | 2,262,766 | $ | 57,295 | ||||||||||||
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, 2012, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $605.
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.
24 Invesco Equally-Weighted S&P 500 Fund
NOTE 8—Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Years Ended August 31, 2012 and 2011:
2012 | 2011 | |||||||
Ordinary income | $ | 16,457,569 | $ | 12,309,109 | ||||
Tax Components of Net Assets at Period-End:
2012 | ||||
Undistributed ordinary income | $ | 9,114,336 | ||
Undistributed long-term gain | 27,111,511 | |||
Net unrealized appreciation — investments | 486,663,069 | |||
Temporary book/tax differences | (127,811 | ) | ||
Shares of beneficial interest | 646,279,525 | |||
Total net assets | $ | 1,169,040,630 | ||
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 Regulated Investment Company Modernization Act of 2010 (the “Act”) eliminated the eight-year carryover period for capital losses that arise in taxable years beginning after its enactment date of December 22, 2010. Consequently, these capital losses can be carried forward for an unlimited period. However, capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Additionally, post-enactment capital loss carryovers will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. 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 $23,943,880 of capital loss carryforward in the current period to offset net realized capital gain for federal income tax purposes. The Fund does not have a capital loss carryforward at period-end.
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, 2012 was $359,704,737 and $281,171,876, 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 | $ | 509,424,787 | ||
Aggregate unrealized (depreciation) of investment securities | (22,761,718 | ) | ||
Net unrealized appreciation of investment securities | $ | 486,663,069 | ||
Cost of investments for tax purposes is $682,400,215. |
NOTE 10—Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of real estate investment trusts distributions, on August 31, 2012, undistributed net investment income was decreased by $32,201 and undistributed net realized gain (loss) was increased by $32,201. This reclassification had no effect on the net assets of the Fund.
25 Invesco Equally-Weighted S&P 500 Fund
NOTE 11—Share Information
Summary of Share Activity | ||||||||||||||||
Years ended August 31, | ||||||||||||||||
2012(a) | 2011 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Class A | 3,958,683 | $ | 123,974,664 | 3,133,592 | $ | 98,814,686 | ||||||||||
Class B | 39,680 | 1,248,979 | 127,382 | 3,844,372 | ||||||||||||
Class C | 525,225 | 16,022,658 | 634,600 | 19,144,631 | ||||||||||||
Class R | 247,288 | 7,832,303 | 35,762 | 1,125,853 | ||||||||||||
Class Y | 4,809,146 | 151,977,766 | 2,142,366 | 68,697,799 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Class A | 326,598 | 9,824,076 | 257,336 | 7,789,564 | ||||||||||||
Class B | 10,380 | 313,479 | 12,636 | 382,126 | ||||||||||||
Class C | 11,417 | 334,292 | 7,811 | 229,099 | ||||||||||||
Class R | 648 | 19,471 | 52 | 1,575 | ||||||||||||
Class Y | 133,786 | 4,047,035 | 83,013 | 2,528,575 | ||||||||||||
Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||
Class A | 1,024,779 | 32,654,725 | 1,120,505 | 34,961,343 | ||||||||||||
Class B | (1,025,555 | ) | (32,654,725 | ) | (1,126,176 | ) | (34,961,343 | ) | ||||||||
Reacquired: | ||||||||||||||||
Class A | (4,830,637 | ) | (151,194,043 | ) | (5,164,472 | ) | (160,148,373 | ) | ||||||||
Class B | (376,796 | ) | (11,745,828 | ) | (804,551 | ) | (24,599,841 | ) | ||||||||
Class C | (486,834 | ) | (14,899,402 | ) | (586,530 | ) | (17,693,755 | ) | ||||||||
Class R | (19,491 | ) | (598,030 | ) | (4,437 | ) | (131,790 | ) | ||||||||
Class Y | (1,648,309 | ) | (52,139,894 | ) | (2,424,226 | ) | (77,313,724 | ) | ||||||||
Net increase (decrease) in share activity | 2,700,008 | $ | 85,017,526 | (2,555,337 | ) | $ | (77,329,203 | ) | ||||||||
(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. |
26 Invesco Equally-Weighted S&P 500 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 08/31/12 | $ | 29.89 | $ | 0.42 | $ | 3.61 | $ | 4.03 | $ | (0.52 | ) | $ | — | $ | (0.52 | ) | $ | 33.40 | 13.66 | % | $ | 730,648 | 0.60 | %(d) | 0.60 | %(d) | 1.34 | %(d) | 27 | % | ||||||||||||||||||||||||||
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 | 0.56 | 1.26 | 22 | ||||||||||||||||||||||||||||||||||||||||
Two months ended 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 | |||||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/12 | 29.70 | 0.18 | 3.61 | 3.79 | (0.15 | ) | — | (0.15 | ) | 33.34 | 12.82 | 42,131 | 1.35 | (d) | 1.35 | (d) | 0.59 | (d) | 27 | |||||||||||||||||||||||||||||||||||||
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 | 1.31 | 0.51 | 22 | ||||||||||||||||||||||||||||||||||||||||
Two months ended 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 | (f) | 1.39 | (f) | 0.42 | (f) | 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 | |||||||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/12 | 28.81 | 0.18 | 3.49 | 3.67 | (0.15 | ) | — | (0.15 | ) | 32.33 | 12.80 | 77,691 | 1.35 | (d) | 1.35 | (d) | 0.59 | (d) | 27 | |||||||||||||||||||||||||||||||||||||
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 | 1.31 | 0.51 | 22 | ||||||||||||||||||||||||||||||||||||||||
Two months ended 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 | |||||||||||||||||||||||||||||||||
Class R | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/12 | 29.77 | 0.35 | 3.59 | 3.94 | (0.40 | ) | — | (0.40 | ) | 33.31 | 13.36 | 8,924 | 0.85 | (d) | 0.85 | (d) | 1.09 | (d) | 27 | |||||||||||||||||||||||||||||||||||||
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 | 0.81 | 1.01 | 22 | ||||||||||||||||||||||||||||||||||||||||
Two months ended 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 08/31/12 | 30.13 | 0.50 | 3.63 | 4.13 | (0.62 | ) | — | (0.62 | ) | 33.64 | 13.94 | 309,645 | 0.35 | (d) | 0.35 | (d) | 1.59 | (d) | 27 | |||||||||||||||||||||||||||||||||||||
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 | 0.31 | 1.51 | 22 | ||||||||||||||||||||||||||||||||||||||||
Two months ended 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 | |||||||||||||||||||||||||||||||||
(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 and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns. | |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. | |
(d) | Ratios are annualized and based on average daily net assets (000’s omitted) of $690,566, $59,697, $73,293, $4,421 and $235,525 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. |
NOTE 13—Subsequent Event
Effective September 24, 2012, the Fund began offering Class R6 Shares.
27 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, 2012, the results of its operations for the year then ended, the changes in its net assets for the two years then ended and the financial highlights for each of the two years in the period 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, 2012 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 23, 2012
Houston, Texas
28 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, 2012 through August 31, 2012.
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 | (03/01/12) | (08/31/12)1 | Period2 | (08/31/12) | Period2 | Ratio | ||||||||||||||||||||||||
A | $ | 1,000.00 | $ | 1,011.80 | $ | 3.08 | $ | 1,022.07 | $ | 3.10 | 0.61 | % | ||||||||||||||||||
B | 1,000.00 | 1,007.90 | 6.86 | 1,018.30 | 6.90 | 1.36 | ||||||||||||||||||||||||
C | 1,000.00 | 1,008.10 | 6.86 | 1,018.30 | 6.90 | 1.36 | ||||||||||||||||||||||||
R | 1,000.00 | 1,012.90 | 1.82 | 1,023.33 | 1.83 | 0.36 | ||||||||||||||||||||||||
Y | 1,000.00 | 1,010.60 | 4.35 | 1,020.81 | 4.37 | 0.86 | ||||||||||||||||||||||||
1 | The actual ending account value is based on the actual total return of the Fund for the period March 1, 2012 through August 31, 2012, 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 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 19-20, 2012, 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, 2012. 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 primarily 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, 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 and on what terms 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. In addition to meetings with Invesco Advisers and fund 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 independent legal 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 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 previously approved by a different board that, at the time, was responsible for overseeing Morgan Stanley and Van Kampen funds, which have become Invesco Funds following the acquisition of the retail mutual fund business of Morgan Stanley. 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 or factor 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 20, 2012, 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 Sub-Committees 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 prior relationship and 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 consistent 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 consistent with the terms of the Fund’s sub-advisory contracts.
30 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 second 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 above the performance of the Index for the one, three and five year periods. 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 with comparable investment strategies.
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 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 and were assisted in their review by a report from the Senior Officer. 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. The Board noted that Invesco Advisers proposes sharing economies of scale in administration expenses by lowering per class administrative fees.
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 for the year ended December 31, 2011. 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 Invesco Funds. The Board noted that Invesco Advisers and its subsidiaries did not make a profit from managing the Fund as a result of expenses. The Board received and accepted information from Invesco Advisers demonstrating that 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.
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 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 also considered periodic reports from the Chief Compliance Officer of the Invesco Funds demonstrating that these arrangements are consistent with regulatory requirements. The Board did not deem the soft dollar arrangements to be inappropriate.
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.
The Board also considered use of an affiliated broker to execute certain trades for the Fund and that such trades are executed in compliance with rules under the Investment Company Act of 1940, as amended.
31 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, 2012:
Federal and State Income Tax | ||||
Qualified Dividend Income* | 100.00% | |||
Corporate Dividends Received Deduction* | 100.00% |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Fund’s fiscal year. |
32 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 1000, 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 | Other Directorship(s) | |||||||
Name, Year of Birth and | Trustee and/or | Principal Occupation(s) | Funds in | Held by Trustee During | ||||
Position(s) Held with the Trust | Officer Since | During Past 5 Years | Fund Complex Overseen by Trustee | Past 5 Years | ||||
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 | 129 | 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. | 129 | None | ||||
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. | ||||||||
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 certain funds in the Fund Complex | 147 | Director of the Mutual Fund Directors Forum, a nonprofit membership organization for investment directors; Chairman and Director of the Abraham Lincoln Presidential Library Foundation; and Director of the Stevenson Center for Democracy | ||||
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 is considered an “interested person” (within the meaning of Section 2(a)(19) of the 1940 Act) of certain Funds in the Invesco Fund Complex by reason of he and his firm currently providing legal services as legal counsel to such Funds in the Invesco Fund Complex. |
T-1 Invesco Equally-Weighted S&P 500 Fund
Trustees and Officers—(continued)
Number of | Other Directorship(s) | |||||||
Name, Year of Birth and | Trustee and/or | Principal Occupation(s) | Funds in | Held by Trustee During | ||||
Position(s) Held with the Trust | Officer Since | During Past 5 Years | Fund Complex Overseen by Trustee | Past 5 Years | ||||
Independent Trustees | ||||||||
Bruce L. Crockett — 1944 Trustee and Chair | 2003 | Chairman, Crockett Technologies 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) | 129 | ACE Limited (insurance company); and Investment Company Institute | ||||
David C. Arch — 1945 Trustee | 2010 | Retired. Chairman and Chief Executive Officer of Blistex Inc., a consumer health care products manufacturer | 147 | Member of the Heartland Alliance Advisory Board, a nonprofit organization serving human needs based in Chicago. Board member of the Illinois Manufacturers’ Association. Member of the Board of Visitors, Institute for the Humanities, University of Michigan | ||||
Frank S. Bayley — 1939 Trustee | 2003 | Retired Formerly: Director, Badgley Funds, Inc. (registered investment company) (2 portfolios) and Partner, law firm of Baker & McKenzie | 129 | 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 | 129 | Chairman, Board of Governors, Western Golf Association, Chairman-elect, Evans Scholars Foundation and Director, Denver Film Society | ||||
Rodney F. Dammeyer — 1940 Trustee | 2010 | Chairman of CAC, LLC, a private company offering capital investment and management advisory services Formerly: Prior to January 2004, Director of TeleTech Holdings Inc.; Prior to 2002, Director of Arris Group, Inc.; Prior to 2001, Managing Partner at Equity Group Corporate Investments. Prior to 1995, Vice Chairman of Anixter International. Prior to 1985, experience includes Senior Vice President and Chief Financial Officer of Household International, Inc, Executive Vice President and Chief Financial Officer of Northwest Industries, Inc. and Partner of Arthur Andersen & Co. | 147 | 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) 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) | 129 | Director of Nature’s Sunshine Products, Inc. | ||||
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) Formerly: Chief Executive Officer, Texana Timber LP (sustainable forestry company) and member of the U.S. House of Representatives | 129 | Insperity (formerly known as Administaff) | ||||
Carl Frischling — 1937 Trustee | 2003 | Partner, law firm of Kramer Levin Naftalis and Frankel LLP | 129 | Director, Reich & Tang Funds (6 portfolios) | ||||
Prema Mathai-Davis — 1950 Trustee | 2003 | Retired Formerly: Chief Executive Officer, YWCA of the U.S.A. | 129 | None | ||||
Larry Soll — 1942 Trustee | 1997 | Retired Formerly, Chairman, Chief Executive Officer and President, Synergen Corp. (a biotechnology company) | 129 | None | ||||
T-2 Invesco Equally-Weighted S&P 500 Fund
Trustees and Officers—(continued)
Number of | Other Directorship(s) | |||||||
Name, Year of Birth and | Trustee and/or | Principal Occupation(s) | Funds in | Held by Trustee | ||||
Position(s) Held with the Trust | Officer Since | During Past 5 Years | Fund Complex Overseen by Trustee | During Past 5 Years | ||||
Independent Trustees—(continued) | ||||||||
Hugo F. Sonnenschein — 1940 Trustee | 2010 | Distinguished Service Professor and President Emeritus of the University of Chicago and the Adam Smith Distinguished Service Professor in the Department of Economics at the University of Chicago. Prior to July 2000, President of the University of Chicago | 147 | 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 | 129 | None | ||||
Other Officers | ||||||||
Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer, The 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 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) | N/A | N/A | ||||
Lisa O. Brinkley — 1959 Vice President | 2004 | Global Assurance Officer, Invesco Ltd. and Vice President, The Invesco Funds Formerly: Chief Compliance Officer, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.), Invesco Investment Services, Inc.(formerly known as Invesco Aim Investment Services, 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 | ||||
T-3 Invesco Equally-Weighted S&P 500 Fund
Trustees and Officers—(continued)
Number of | Other Directorship(s) | |||||||
Name, Year of Birth and | Trustee and/or | Principal Occupation(s) | Funds in | Held by Trustee | ||||
Position(s) Held with the Trust | Officer Since | During Past 5 Years | Fund Complex Overseen by Trustee | During Past 5 Years | ||||
Other Officers—(continued) | ||||||||
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., INVESCO Global Asset Management Limited, Invesco Management Company Limited and INVESCO Management S.A.; 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) 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) | 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); and 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 Formerly: Vice President, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc. | N/A | N/A | ||||
Yinka Akinsola — 1977 Anti-Money Laundering Compliance Officer | 2011 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.), Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.), Invesco Management Group, Inc., The Invesco Funds, Invesco Van Kampen Closed-End Funds, Van Kampen Exchange Corp., Van Kampen Funds Inc., PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, and PowerShares Actively Managed Exchange-Traded Fund Trust Formerly: Regulatory Analyst III, Financial Industry Regulatory Authority (FINRA). | N/A | N/A | ||||
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; Vice President, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) and Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.) Formerly: Senior Vice President, Van Kampen Investments Inc.; Senior Vice President and Chief Compliance Officer, Invesco Advisers, Inc. and Invesco Aim Capital Management, Inc.; Chief Compliance Officer, INVESCO Private Capital Investments, Inc. (holding company), Invesco Private Capital, Inc. (registered investment adviser), Invesco Global Asset Management (N.A.), Inc., Invesco Senior Secured Management, Inc. (registered investment adviser) and Van Kampen Investor Services Inc., 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 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 1000 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 1000 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 1000 Houston, TX 77046-1173 | Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
T-4 Invesco Equally-Weighted S&P 500 Fund
![(GRAPHIC)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8704512.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 house-hold, 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 shown below.
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/0000950123-12-013037/h87055h8704513.gif)
Information regarding how the Fund voted proxies related to its portfolio securities during the 12 months ended June 30, 2012, 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 US 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.
SEC file numbers: 811-09913 and 333-36074 | MS-EWSP-AR-1 | Invesco Distributors, Inc. |
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Annual Report to Shareholders | August 31, 2012 |
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
![(PHOTO OF PHILIP TAYLOR)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8703802.jpg)
Philip Taylor
Dear Shareholders:
This report contains information about your Fund, including a discussion from your portfolio managers about how they managed your Fund – and why it performed as it did – during the reporting period. This report also includes your Fund’s long-term performance and a complete list of your Fund’s investments as of the close of the reporting period. I hope you find this information helpful.
For much of the reporting period, investors’ attention was focused on Europe, where eurozone governments struggled to reduce debt levels, strengthen their banks and stimulate their economies. European leaders disagreed whether the wiser path to restoring the Continent’s economic well-being was more stimulus or greater austerity. In the US, economic data were mixed. Economic growth, while positive, was relatively modest. Corporate earnings, which have grown strongly in recent years, have begun to slow. And job creation has been less robust than hoped. Later in this report, your Fund’s portfolio managers discuss how economic conditions and market trends affected your Fund’s performance.
Economic conditions are always subject to sudden and unexpected change. That’s why you may find it helpful to work with a trusted, experienced financial adviser who understands your unique financial goals, needs and risk tolerances. Financial advisers can provide valuable insight and information, particularly when markets are turbulent, and they can recommend investments appropriate for specific investment goals, such as a child’s college education or your retirement. On a regular basis, a financial adviser also can determine whether your existing investments are still appropriate, given your changing needs, goals and circumstances.
Timely insight and information from many of Invesco’s investment professionals is available at our website, invesco.com/us. We offer in-depth articles, video clips and audio commentaries from many of our portfolio managers and other investment professionals on a wide range of topics of interest to investors: recent economic and market developments; retirement planning; legislative updates from Washington, DC; and general investor education. At invesco.com/us, you also can access information about your Invesco account at any time.
What we mean by Intentional Investing
Intentional InvestingSM is the science and art of investing with purpose, prudence and diligence – and it’s how Invesco’s investment professionals manage your money every day.
This highly disciplined process begins when specialized teams of investment professionals clearly define an investment objective and then establish specific investment strategies to try to achieve that objective. While our investment teams closely monitor economic and market conditions – and issues specific to individual holdings that could affect their value – they maintain a long-term investment perspective. Intentional Investing is also:
n | How we manage and mitigate risk – by embedding risk controls and processes into every aspect of our business; | ||
n | How we create products – by offering a diverse combination of investment strategies and vehicles designed to meet your needs; and | ||
n | How we connect with you, our investors – by communicating clearly, by delivering expert insights from our portfolio managers and other investment professionals, and by providing a website full of tools and articles to help you stay informed. |
As a company, Invesco believes in putting investors first, and that’s why investment management is all we do. Our sole focus on managing your money allows your financial adviser to build a truly diversified investment portfolio of Invesco funds, whatever your investment needs and goals may be – and allows him or her to find appropriate Invesco funds when your circumstances change. Of course, neither Intentional Investing nor diversification can guarantee a profit or protect against loss.
Have a question?
If you have questions about your account, please contact an Invesco client services representative at 800 959 4246. If you have an Invesco-related question or comment, feel free 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/0000950123-12-013037/h87055h8703803.gif)
Philip Taylor
Senior Managing Director, Invesco Ltd.
Senior Managing Director, Invesco Ltd.
2 Invesco S&P 500 Index Fund
![(PHOTO OF BRUCE CROCKETT)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8703804.jpg)
Bruce Crockett
Dear Fellow Shareholders:
One of our most important responsibilities as independent Trustees of the Invesco Funds is our annual review of the funds’ advisory and sub-advisory contracts with Invesco. This annual review is required by the Investment Company Act of 1940 and focuses on the nature and quality of the services Invesco has provided as adviser to the Invesco Funds and the reasonableness of the fees that it charges for those services.
In our roles as Trustees, we spend months reviewing thousands of pages of detailed information that we request from Invesco in connection with our annual review. We focus on the quality and costs of the services to be provided by Invesco and its affiliates. Some of the most important things we look at are fund performance, expenses and fees. All of the Trustees have substantial personal investments in the Invesco Funds complex. We’re fund shareholders just like you.
We also use information from many independent sources during the review process, including materials provided by the independent Senior Officer of the Invesco Funds, who reports directly to the independent Trustees. We also meet in private sessions with independent legal counsel and review performance and fee data on the Invesco Funds prepared by Lipper Inc., an independent, third-party firm widely recognized as a leader in its field.
I’m pleased to report that the Invesco Funds Board determined in June that renewing the investment advisory agreement and the sub-advisory contracts with Invesco would serve the best interests of each fund and its shareholders. For more detailed information about our assessment and conclusions with respect to each of the Invesco Funds, visit invesco.com/us, click on the “About Us” section and go to “Legal Information.” Information on the recent investment advisory renewal process can be found by clicking the last item under “Corporate Governance.”
In much the same way we review your fund’s advisory contract each year, it’s a good idea for you to review your own investment plan with your financial adviser on a regular basis. Perhaps you need to reassess your original asset allocation because different investments may grow at varying paces, or perhaps you’re going through a significant life change. Regardless of your situation, a financial adviser can provide guidance and experience to help you reach your financial goals.
As always, please contact me at bruce@brucecrockett.com with any questions or concerns you may have. On behalf of the 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/0000950123-12-013037/h87055h8703805.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 fiscal year ended August 31, 2012, Invesco S&P 500 Index Fund under performed 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, financials, 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, 8/31/11 to 8/31/12, 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 | 17.26 | % | ||
Class B Shares | 16.47 | |||
Class C Shares | 16.50 | |||
Class Y Shares | 17.64 | |||
S&P 500 Index▼ (Broad Market/Style-Specific Index) | 18.00 | |||
Lipper S&P 500 Objective Funds Index§ (Peer Group Index) | 17.70 |
Source(s): ▼ Invesco, S&P-Dow Jones via FactSet Research Systems Inc.; §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 US. 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
As the reporting period began, reports on employment and the economy were mixed at best, and sovereign debt issues abroad weighed heavily on investors. Equity indexes sold off precipitously as the US struggled very publicly to raise the nation’s debt ceiling. As a result, Standard & Poor’s announced the first-ever downgrade to long-term US government debt. Uncertainty created by the down-grade combined with the continuing eurozone debt-crisis saga to reignite global recession fears through October.
As those negative headlines faded during the fall of 2011, signs of muted growth remained. US equity markets rebounded with a nearly uninterrupted rally throughout the winter and into the spring of 2012. In late March, markets paused, and while company earnings still offered more positive surprises than disappointments, confidence began to wane in the absence of new growth drivers. By
May, the market went into steady decline as investors grew concerned about the real possibility of a Greek exit from the European Union and the potential collapse of the euro. Economic data and earnings in the US began to show signs of deceleration amid contagion from both European and Asian weakness.
Toward the end of the reporting period, yet another European commitment to a lasting resolution to the economic crisis was coupled with an announcement that funds may be injected directly into large financial institutions. This announcement, along with a ruling by the US Supreme Court upholding the Affordable Care Act, provided some near-term clarity and resulted in risk taking that led the markets modestly higher as the reporting period ended.
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 posted positive returns for the fiscal year. Sectors that contributed most to overall Fund performance were the consumer discretionary, consumer staples, financials, health care and IT sectors. The materials and utilities sectors were the primary detractors at the sector level.
Among individual stocks, Apple was the largest contributor during the reporting period. As part of a consortium, Apple acquired Nortel Network’s (not a Fund holding) patent portfolio. Also, in February 2012, the company acquired app search engine Chomp (not a Fund holding). In addition, AT&T contributed positively to the Fund’s performance. At the end of the reporting period, AT&T announced the repurchase of up to 300 million shares, this represents approximately 5% of the company’s outstanding shares.1 This repurchase announcement is in addition to the 300 million share
Portfolio Composition
By sector
Information Technology | 20.0 | % | ||
Financials | 14.1 | |||
Health Care | 11.6 | |||
Energy | 11.1 | |||
Consumer Discretionary | 11.0 | |||
Consumer Staples | 11.0 | |||
Industrials | 9.9 | |||
Utilities | 3.5 | |||
Materials | 3.4 | |||
Telecommunication Services | 3.2 | |||
Money Market Funds Plus Other Assets Less Liabilities | 1.2 |
Top 10 Equity Holdings*
1. | Apple Inc. | 4.8 | ||||||
2. | Exxon Mobil Corp. | 3.2 | ||||||
3. | Microsoft Corp. | 1.8 | ||||||
4. | International Business Machines Corp. | 1.8 | ||||||
5. | Chevron Corp. | 1.7 | ||||||
6. | General Electric Co. | 1.7 | ||||||
7. | AT&T Inc. | 1.7 | ||||||
8. | Johnson & Johnson | 1.4 | ||||||
9. | Procter & Gamble Co. (The) | 1.4 | ||||||
10. | Wells Fargo & Co. | 1.4 |
Total Net Assets | $524.0 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
repurchase authorization approved by the Board of Directors in December 2010.1
Holdings in the financials sector were also strong performers during the fiscal year. A top contributor in this sector included Wells Fargo.
At the ending of the reporting period, Hewlett-Packard generated an $8.9 billion quarterly loss as the recent trend of lackluster personal computer sales continued. In addition, the company was affected by a huge write-down linked to its $13.9 billion purchase of Electronic Data Systems (not a Fund holding). Hewlett-Packard slightly reduced its full-year earnings outlook to the low end of its previous range due to a faltering PC market as well as tough economic conditions in both Europe and China. The company is undergoing a multi-year restructuring aimed at focusing the sprawling corporation on enterprise services. This recently announced plan calls for reducing its employee base by 8 percent.1
Detracting from Fund performance were several energy sector companies, including Chesapeake Energy and Halliburton.
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.
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.
1 | Source: 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/0000950123-12-013037/h87055h8703806.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 BS and an MS in finance from Boston College and an MBA from Bentley College.
Chartered Financial Analyst, portfolio manager, is manager of Invesco S&P 500 Index Fund. He joined Invesco in 2000. Mr.
Munchak earned a BS and an MS in finance from Boston College and an MBA from Bentley College.
![(PHOTO OF GLEN MURPHY)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8703807.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 BBA from the University of Massachusetts Amherst and an MS in finance from Boston College.
Chartered Financial Analyst, portfolio manager, is manager of Invesco S&P 500 Index Fund. He joined Invesco in 1995.
Mr. Murphy earned a BBA from the University of Massachusetts Amherst and an MS in finance from Boston College.
![(PHOTO OF FRANCIS ORLANDO)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8703808.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 BBA from Merrimack College and an MBA from Boston University.
Chartered Financial Analyst, portfolio manager, is manager of Invesco S&P 500 Index Fund. He joined Invesco in 1987. Mr.
Orlando earned a BBA from Merrimack College and an MBA from Boston University.
![(PHOTO OF DANIEL TSAI)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8703809.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 BS in mechanical engineering from National Taiwan University, an MS in mechanical engineering from the University of Michigan and an MS in computer science from Wayne State University.
Chartered Financial Analyst, portfolio manager, is manager of Invesco S&P 500 Index Fund. He joined Invesco in 2000. Mr. Tsai earned a BS in mechanical engineering from National Taiwan University, an MS in mechanical engineering from the University of Michigan and an MS in computer science from Wayne State University.
![(PHOTO OF ANNE UNFLAT)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8703810.jpg)
Anne Unflat
Portfolio manager, is manager of Invesco S&P 500 Index Fund. She joined Invesco in 1998. Ms. Unflat earned a BA in economics from Queens College and an MBA in finance from St. John’s University.
Portfolio manager, is manager of Invesco S&P 500 Index Fund. She joined Invesco in 1998. Ms. Unflat earned a BA in economics from Queens College and an MBA 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 Class(es)
Fund and index data from 8/31/02*
![(LINE GRAPH)](https://capedge.com/proxy/N-CSR/0000950123-12-013037/h87055h8703811.gif)
1 | Sources: Invesco, S&P-Dow Jones via FactSet Research Systems Inc. | |
2 | Source: Lipper Inc. |
* | During the reporting period, Invesco changed its policy regarding growth of $10,000 charts. For funds older than 10 years, we previously showed performance since inception. Going forward, we will show performance for the most recent 10 years, since this more accurately reflects the experience of the typical shareholder. As a result, charts now may include benchmarks that did not appear previously, because the funds’ inception predated the benchmarks’ inception. Also, all charts will now be presented using a linear format. |
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.
6 | Invesco S&P 500 Index Fund |
Average Annual Total Returns
As of 8/31/12, including maximum applicable sales charges
Class A Shares | ||||||||
Inception (9/26/97) | 3.56 | % | ||||||
10 | Years | 5.34 | ||||||
5 | Years | -0.30 | ||||||
1 | Year | 10.82 | ||||||
Class B Shares | ||||||||
Inception (9/26/97) | 3.53 | % | ||||||
10 | Years | 5.30 | ||||||
5 | Years | -0.30 | ||||||
1 | Year | 11.47 | ||||||
Class C Shares | ||||||||
Inception (9/26/97) | 3.18 | % | ||||||
10 | Years | 5.17 | ||||||
5 | Years | 0.10 | ||||||
1 | Year | 15.50 | ||||||
Class Y Shares | ||||||||
Inception (9/26/97) | 4.21 | % | ||||||
10 | Years | 6.21 | ||||||
5 | Years | 1.10 | ||||||
1 | Year | 17.64 | ||||||
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
Average Annual Total Returns
As of 6/30/12, the most recent calendar quarter-end, including maximum applicable sales charges
Class A Shares | ||||||||
Inception (9/26/97) | 3.36 | % | ||||||
10 | Years | 4.20 | ||||||
5 | Years | -1.33 | ||||||
1 | Year | -0.94 | ||||||
Class B Shares | ||||||||
Inception (9/26/97) | 3.33 | % | ||||||
10 | Years | 4.16 | ||||||
5 | Years | -1.33 | ||||||
1 | Year | -0.96 | ||||||
Class C Shares | ||||||||
Inception (9/26/97) | 2.98 | % | ||||||
10 | Years | 4.01 | ||||||
5 | Years | -0.94 | ||||||
1 | Year | 3.02 | ||||||
Class Y Shares | ||||||||
Inception (9/26/97) | 4.00 | % | ||||||
10 | Years | 5.04 | ||||||
5 | Years | 0.05 | ||||||
1 | Year | 5.12 | ||||||
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%, 1.27% 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.
continued from page 8
Other information
n | There turns 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 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 (S&P 500 Index).
n | Unless otherwise stated, information presented in this report is as of August 31, 2012,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 for new or additional investments. | |
Existing shareholders of Class B shares may continue to reinvest dividends and capital gains distributions in Class B shares and exchange their Class B shares for Class B shares of other funds. 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. 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 | 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 | 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 | 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 | 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. | |
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. | ||
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. | ||
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 | 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 | SPDRs risk. SPDRs (Standard & Poor’s Depositary Receipts) have many of the |
same risks as direct investments in common stocks. The market value of SPDRs is expected to rise and fall as the S&P 500 Index rises and falls. If the Fund invests in SPDRs, it would, in addition to its own expenses, indirectly bear its ratable share of the SPDR’s expenses. | ||
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 | US government obligations risk. Obligations issued by US 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 S&P 500 Index® is an unmanaged index considered representative of the US 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 can not 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 | 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, 2012
Shares | Value | |||||||
Common Stocks & Other Equity Interests–98.82% | ||||||||
Advertising–0.15% | ||||||||
Interpublic Group of Cos., Inc. (The) | 18,041 | $ | 191,956 | |||||
Omnicom Group Inc. | 11,082 | 569,283 | ||||||
761,239 | ||||||||
Aerospace & Defense–2.33% | ||||||||
Boeing Co. (The) | 30,502 | 2,177,843 | ||||||
General Dynamics Corp. | 14,684 | 961,949 | ||||||
Honeywell International Inc. | 31,729 | 1,854,560 | ||||||
L-3 Communications Holdings, Inc. | 3,955 | 277,799 | ||||||
Lockheed Martin Corp. | 10,827 | 986,773 | ||||||
Northrop Grumman Corp. | 10,241 | 685,020 | ||||||
Precision Castparts Corp. | 5,900 | 950,372 | ||||||
Raytheon Co. | 13,573 | 767,146 | ||||||
Rockwell Collins, Inc. | 5,856 | 286,183 | ||||||
Textron Inc. | 11,462 | 306,265 | ||||||
United Technologies Corp. | 37,112 | 2,963,393 | ||||||
12,217,303 | ||||||||
Agricultural Products–0.14% | ||||||||
Archer-Daniels-Midland Co. | 26,815 | 717,301 | ||||||
Air Freight & Logistics–0.90% | ||||||||
C.H. Robinson Worldwide, Inc. | 6,661 | 377,079 | ||||||
Expeditors International of Washington, Inc. | 8,692 | 318,214 | ||||||
FedEx Corp. | 12,842 | 1,125,345 | ||||||
United Parcel Service, Inc.–Class B | 39,072 | 2,883,904 | ||||||
4,704,542 | ||||||||
Airlines–0.05% | ||||||||
Southwest Airlines Co. | 31,261 | 279,473 | ||||||
Aluminum–0.07% | ||||||||
Alcoa Inc. | 43,437 | 371,821 | ||||||
Apparel Retail–0.62% | ||||||||
Abercrombie & Fitch Co.–Class A | 3,389 | 121,970 | ||||||
Gap, Inc. (The) | 13,511 | 483,964 | ||||||
Limited Brands, Inc. | 9,823 | 477,398 | ||||||
Ross Stores, Inc. | 9,164 | 634,057 | ||||||
TJX Cos., Inc. (The) | 30,173 | 1,381,622 | ||||||
Urban Outfitters, Inc.(b) | 4,586 | 172,158 | ||||||
3,271,169 | ||||||||
Apparel, Accessories & Luxury Goods–0.35% | ||||||||
Coach, Inc. | 11,695 | 679,830 | ||||||
Fossil, Inc.(b) | 2,077 | 176,441 | ||||||
Ralph Lauren Corp. | 2,629 | 417,091 | ||||||
VF Corp. | 3,531 | 539,113 | ||||||
1,812,475 | ||||||||
Application Software–0.58% | ||||||||
Adobe Systems Inc.(b) | 20,202 | 631,717 | ||||||
Autodesk, Inc.(b) | 9,338 | 289,945 | ||||||
Citrix Systems, Inc.(b) | 7,605 | 590,832 | ||||||
Intuit Inc. | 11,958 | 700,021 | ||||||
Salesforce.com, Inc.(b) | 5,617 | 815,476 | ||||||
3,027,991 | ||||||||
Asset Management & Custody Banks–1.09% | ||||||||
Ameriprise Financial, Inc. | 8,879 | 487,546 | ||||||
Bank of New York Mellon Corp. (The) | 48,569 | 1,094,745 | ||||||
BlackRock, Inc. | 5,243 | 924,708 | ||||||
Federated Investors, Inc.–Class B | 3,784 | 80,296 | ||||||
Franklin Resources, Inc. | 5,741 | 673,993 | ||||||
Invesco Ltd.(c) | 18,251 | 432,184 | ||||||
Legg Mason, Inc. | 5,098 | 125,309 | ||||||
Northern Trust Corp. | 9,783 | 454,323 | ||||||
State Street Corp. | 19,895 | 827,632 | ||||||
T. Rowe Price Group Inc. | 10,387 | 638,177 | ||||||
5,738,913 | ||||||||
Auto Parts & Equipment–0.21% | ||||||||
BorgWarner, Inc.(b) | 4,697 | 323,060 | ||||||
Johnson Controls, Inc. | 27,698 | 753,662 | ||||||
1,076,722 | ||||||||
Automobile Manufacturers–0.28% | ||||||||
Ford Motor Co. | 155,410 | 1,451,529 | ||||||
Automotive Retail–0.23% | ||||||||
AutoNation, Inc.(b) | 1,665 | 66,933 | ||||||
AutoZone, Inc.(b) | 1,094 | 395,634 | ||||||
CarMax, Inc.(b) | 9,289 | 284,151 | ||||||
O’Reilly Automotive, Inc.(b) | 5,161 | 438,427 | ||||||
1,185,145 | ||||||||
Biotechnology–1.52% | ||||||||
Alexion Pharmaceuticals, Inc.(b) | 7,788 | 834,951 | ||||||
Amgen Inc. | 31,669 | 2,657,663 | ||||||
Biogen Idec Inc.(b) | 9,738 | 1,427,493 | ||||||
Celgene Corp.(b) | 17,937 | 1,292,182 | ||||||
Gilead Sciences, Inc.(b) | 30,839 | 1,779,102 | ||||||
7,991,391 | ||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
9 Invesco S&P 500 Index Fund
Shares | Value | |||||||
Brewers–0.05% | ||||||||
Molson Coors Brewing Co.–Class B | 6,437 | $ | 286,704 | |||||
Broadcasting–0.33% | ||||||||
CBS Corp.–Class B | 26,392 | 959,085 | ||||||
Discovery Communications, Inc.–Class A(b) | 10,370 | 568,691 | ||||||
Scripps Networks Interactive–Class A | 3,806 | 224,935 | ||||||
1,752,711 | ||||||||
Building Products–0.04% | ||||||||
Masco Corp. | 14,541 | 205,901 | ||||||
Cable & Satellite–1.21% | ||||||||
Cablevision Systems Corp.–Class A | 8,682 | 129,796 | ||||||
Comcast Corp.–Class A | 109,793 | 3,681,359 | ||||||
DIRECTV(b) | 26,672 | 1,389,344 | ||||||
Time Warner Cable Inc. | 12,724 | 1,130,146 | ||||||
6,330,645 | ||||||||
Casinos & Gaming–0.09% | ||||||||
International Game Technology | 11,994 | 147,406 | ||||||
Wynn Resorts Ltd. | 3,275 | 337,882 | ||||||
485,288 | ||||||||
Coal & Consumable Fuels–0.11% | ||||||||
Alpha Natural Resources, Inc.(b) | 9,018 | 53,567 | ||||||
CONSOL Energy Inc. | 9,308 | 281,102 | ||||||
Peabody Energy Corp. | 11,059 | 239,206 | ||||||
573,875 | ||||||||
Commercial Printing–0.02% | ||||||||
R. R. Donnelley & Sons Co. | 7,303 | 80,187 | ||||||
Communications Equipment–1.91% | ||||||||
Cisco Systems, Inc. | 218,143 | 4,162,168 | ||||||
F5 Networks, Inc.(b) | 3,238 | 315,673 | ||||||
Harris Corp. | 4,616 | 217,090 | ||||||
JDS Uniphase Corp.(b) | 9,423 | 105,443 | ||||||
Juniper Networks, Inc.(b) | 21,563 | 376,059 | ||||||
Motorola Solutions, Inc. | 11,860 | 565,248 | ||||||
QUALCOMM, Inc. | 69,808 | 4,290,400 | ||||||
10,032,081 | ||||||||
Computer & Electronics Retail–0.06% | ||||||||
Best Buy Co., Inc. | 11,283 | 200,160 | ||||||
GameStop Corp.–Class A | 5,351 | 102,097 | ||||||
302,257 | ||||||||
Computer Hardware–5.22% | ||||||||
Apple Inc. | 38,077 | 25,330,343 | ||||||
Dell Inc. | 60,539 | 641,108 | ||||||
Hewlett-Packard Co. | 80,520 | 1,359,178 | ||||||
27,330,629 | ||||||||
Computer Storage & Peripherals–0.79% | ||||||||
EMC Corp.(b) | 85,504 | 2,247,900 | ||||||
Lexmark International, Inc.–Class A | 2,859 | 62,069 | ||||||
NetApp, Inc.(b) | 14,777 | 510,102 | ||||||
SanDisk Corp.(b) | 9,922 | 408,985 | ||||||
Seagate Technology PLC | 15,411 | 493,306 | ||||||
Western Digital Corp.(b) | 9,488 | 396,788 | ||||||
4,119,150 | ||||||||
Construction & Engineering–0.15% | ||||||||
Fluor Corp. | 6,901 | 355,401 | ||||||
Jacobs Engineering Group, Inc.(b) | 5,266 | 208,218 | ||||||
Quanta Services, Inc.(b) | 8,664 | 207,936 | ||||||
771,555 | ||||||||
Construction & Farm Machinery & Heavy Trucks–0.96% | ||||||||
Caterpillar Inc. | 26,563 | 2,266,621 | ||||||
Cummins Inc. | 7,867 | 763,964 | ||||||
Deere & Co. | 16,196 | 1,216,482 | ||||||
Joy Global Inc. | 4,337 | 231,509 | ||||||
PACCAR Inc. | 14,524 | 579,653 | ||||||
5,058,229 | ||||||||
Construction Materials–0.04% | ||||||||
Vulcan Materials Co. | 5,297 | 206,159 | ||||||
Consumer Electronics–0.02% | ||||||||
Harman International Industries, Inc. | 2,857 | 131,508 | ||||||
Consumer Finance–0.93% | ||||||||
American Express Co. | 40,774 | 2,377,124 | ||||||
Capital One Financial Corp. | 23,631 | 1,335,860 | ||||||
Discover Financial Services | 21,594 | 836,336 | ||||||
SLM Corp. | 19,861 | 312,811 | ||||||
4,862,131 | ||||||||
Data Processing & Outsourced Services–1.44% | ||||||||
Automatic Data Processing, Inc. | 19,915 | 1,156,663 | ||||||
Computer Sciences Corp. | 6,356 | 204,727 | ||||||
Fidelity National Information Services, Inc. | 9,707 | 305,771 | ||||||
Fiserv, Inc.(b) | 5,580 | 397,910 | ||||||
MasterCard, Inc.–Class A | 4,322 | 1,827,774 | ||||||
Paychex, Inc. | 13,121 | 436,404 | ||||||
Total System Services, Inc. | 6,580 | 152,524 | ||||||
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) | ||||||||
Visa Inc.–Class A | 20,276 | $ | 2,600,397 | |||||
Western Union Co. (The) | 24,959 | 439,528 | ||||||
7,521,698 | ||||||||
Department Stores–0.34% | ||||||||
JC Penney Co., Inc. | 5,914 | 154,237 | ||||||
Kohl’s Corp. | 9,748 | 508,846 | ||||||
Macy’s, Inc. | 16,823 | 678,135 | ||||||
Nordstrom, Inc. | 6,552 | 378,902 | ||||||
Sears Holdings Corp.(b) | 1,593 | 84,031 | ||||||
1,804,151 | ||||||||
Distillers & Vintners–0.18% | ||||||||
Beam Inc. | 6,407 | 373,913 | ||||||
Brown-Forman Corp.–Class B | 6,064 | 388,702 | ||||||
Constellation Brands, Inc.–Class A(b) | 6,198 | 204,162 | ||||||
966,777 | ||||||||
Distributors–0.08% | ||||||||
Genuine Parts Co. | 6,384 | 403,213 | ||||||
Diversified Banks–1.94% | ||||||||
Comerica Inc. | 8,000 | 245,680 | ||||||
U.S. Bancorp | 77,134 | 2,577,047 | ||||||
Wells Fargo & Co. | 216,393 | 7,363,854 | ||||||
10,186,581 | ||||||||
Diversified Chemicals–0.89% | ||||||||
Dow Chemical Co. (The) | 48,677 | 1,426,723 | ||||||
E. I. du Pont de Nemours and Co. | 38,157 | 1,898,311 | ||||||
Eastman Chemical Co. | 6,217 | 343,551 | ||||||
FMC Corp. | 5,632 | 305,930 | ||||||
PPG Industries, Inc. | 6,228 | 685,205 | ||||||
4,659,720 | ||||||||
Diversified Metals & Mining–0.27% | ||||||||
Freeport-McMoRan Copper & Gold Inc. | 38,649 | 1,395,615 | ||||||
Titanium Metals Corp. | 3,382 | 41,396 | ||||||
1,437,011 | ||||||||
Diversified REIT’s–0.12% | ||||||||
Vornado Realty Trust | 7,586 | 615,756 | ||||||
Diversified Support Services–0.08% | ||||||||
Cintas Corp. | 4,520 | 182,699 | ||||||
Iron Mountain Inc. | 6,984 | 229,075 | ||||||
411,774 | ||||||||
Drug Retail–0.69% | ||||||||
CVS Caremark Corp. | 52,184 | 2,376,981 | ||||||
Walgreen Co. | 35,132 | 1,256,321 | ||||||
3,633,302 | ||||||||
Education Services–0.03% | ||||||||
Apollo Group, Inc.–Class A(b) | 4,108 | 110,300 | ||||||
DeVry, Inc. | 2,421 | 46,749 | ||||||
157,049 | ||||||||
Electric Utilities–2.04% | ||||||||
American Electric Power Co., Inc. | 19,721 | 847,806 | ||||||
Duke Energy Corp. | 28,661 | 1,856,660 | ||||||
Edison International | 13,255 | 580,436 | ||||||
Entergy Corp. | 7,239 | 492,831 | ||||||
Exelon Corp. | 34,711 | 1,265,910 | ||||||
FirstEnergy Corp. | 17,030 | 744,211 | ||||||
NextEra Energy, Inc. | 16,983 | 1,143,126 | ||||||
Northeast Utilities | 12,734 | 479,690 | ||||||
Pepco Holdings, Inc. | 9,329 | 180,143 | ||||||
Pinnacle West Capital Corp. | 4,478 | 230,035 | ||||||
PPL Corp. | 23,618 | 692,716 | ||||||
Southern Co. (The) | 35,374 | 1,603,503 | ||||||
Xcel Energy, Inc. | 19,828 | 553,003 | ||||||
10,670,070 | ||||||||
Electrical Components & Equipment–0.54% | ||||||||
Cooper Industries PLC | 6,497 | 475,256 | ||||||
Emerson Electric Co. | 29,873 | 1,515,159 | ||||||
Rockwell Automation, Inc. | 5,833 | 420,326 | ||||||
Roper Industries, Inc. | 3,936 | 404,581 | ||||||
2,815,322 | ||||||||
Electronic Components–0.22% | ||||||||
Amphenol Corp.–Class A | 6,594 | 401,377 | ||||||
Corning Inc. | 61,799 | 740,970 | ||||||
1,142,347 | ||||||||
Electronic Equipment & Instruments–0.02% | ||||||||
FLIR Systems, Inc. | 6,314 | 125,017 | ||||||
Electronic Manufacturing Services–0.18% | ||||||||
Jabil Circuit, Inc. | 7,357 | 167,593 | ||||||
Molex Inc. | 5,626 | 149,370 | ||||||
TE Connectivity Ltd. (Switzerland) | 17,411 | 612,345 | ||||||
929,308 | ||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
11 Invesco S&P 500 Index Fund
Shares | Value | |||||||
Environmental & Facilities Services–0.25% | ||||||||
Republic Services, Inc. | 12,793 | $ | 353,727 | |||||
Stericycle, Inc.(b) | 3,495 | 319,862 | ||||||
Waste Management, Inc. | 18,840 | 651,487 | ||||||
1,325,076 | ||||||||
Fertilizers & Agricultural Chemicals–0.60% | ||||||||
CF Industries Holdings, Inc. | 2,683 | 555,408 | ||||||
Monsanto Co. | 21,721 | 1,892,116 | ||||||
Mosaic Co. (The) | 12,106 | 701,059 | ||||||
3,148,583 | ||||||||
Food Distributors–0.14% | ||||||||
Sysco Corp. | 23,852 | 722,716 | ||||||
Food Retail–0.25% | ||||||||
Kroger Co. (The) | 22,843 | 508,942 | ||||||
Safeway Inc. | 9,753 | 152,634 | ||||||
Whole Foods Market, Inc. | 6,616 | 640,098 | ||||||
1,301,674 | ||||||||
Footwear–0.28% | ||||||||
NIKE, Inc.–Class B | 14,932 | 1,453,780 | ||||||
Gas Utilities–0.11% | ||||||||
AGL Resources Inc. | 4,799 | 190,281 | ||||||
ONEOK, Inc. | 8,510 | 378,950 | ||||||
569,231 | ||||||||
General Merchandise Stores–0.49% | ||||||||
Big Lots, Inc.(b) | 2,587 | 78,748 | ||||||
Dollar Tree, Inc.(b) | 9,406 | 453,087 | ||||||
Family Dollar Stores, Inc. | 4,727 | 300,827 | ||||||
Target Corp. | 26,924 | 1,725,559 | ||||||
2,558,221 | ||||||||
Gold–0.19% | ||||||||
Newmont Mining Corp. | 20,178 | 1,022,621 | ||||||
Health Care Distributors–0.36% | ||||||||
AmerisourceBergen Corp. | 10,200 | 392,904 | ||||||
Cardinal Health, Inc. | 14,070 | 556,469 | ||||||
McKesson Corp. | 9,567 | 833,381 | ||||||
Patterson Cos. Inc. | 3,564 | 121,069 | ||||||
1,903,823 | ||||||||
Health Care Equipment–1.68% | ||||||||
Baxter International Inc. | 22,420 | 1,315,606 | ||||||
Becton, Dickinson and Co. | 8,224 | 624,860 | ||||||
Boston Scientific Corp.(b) | 58,203 | 314,296 | ||||||
C.R. Bard, Inc. | 3,429 | 336,419 | ||||||
CareFusion Corp.(b) | 9,012 | 236,745 | ||||||
Covidien PLC | 19,638 | 1,100,710 | ||||||
Edwards Lifesciences Corp.(b) | 4,666 | 476,445 | ||||||
Intuitive Surgical, Inc.(b) | 1,610 | 791,782 | ||||||
Medtronic, Inc. | 42,374 | 1,722,927 | ||||||
St. Jude Medical, Inc. | 12,779 | 482,535 | ||||||
Stryker Corp. | 13,175 | 701,701 | ||||||
Varian Medical Systems, Inc.(b) | 4,579 | 269,199 | ||||||
Zimmer Holdings, Inc. | 7,199 | 444,754 | ||||||
8,817,979 | ||||||||
Health Care Facilities–0.02% | ||||||||
Tenet Healthcare Corp.(b) | 16,850 | 87,451 | ||||||
Health Care Services–0.60% | ||||||||
DaVita, Inc.(b) | 3,840 | 373,517 | ||||||
Express Scripts Holding Co.(b) | 32,800 | 2,053,936 | ||||||
Laboratory Corp. of America Holdings(b) | 3,944 | 346,875 | ||||||
Quest Diagnostics Inc. | 6,490 | 392,450 | ||||||
3,166,778 | ||||||||
Health Care Supplies–0.04% | ||||||||
DENTSPLY International Inc. | 5,798 | 210,293 | ||||||
Health Care Technology–0.08% | ||||||||
Cerner Corp.(b) | 5,971 | 436,719 | ||||||
Home Entertainment Software–0.03% | ||||||||
Electronic Arts Inc.(b) | 12,943 | 172,530 | ||||||
Home Furnishings–0.03% | ||||||||
Leggett & Platt, Inc. | 5,739 | 136,244 | ||||||
Home Improvement Retail–0.94% | ||||||||
Home Depot, Inc. (The) | 62,331 | 3,537,284 | ||||||
Lowe’s Cos., Inc. | 47,917 | 1,364,676 | ||||||
4,901,960 | ||||||||
Homebuilding–0.12% | ||||||||
D.R. Horton, Inc. | 11,408 | 216,638 | ||||||
Lennar Corp.–Class A | 6,626 | 214,881 | ||||||
PulteGroup Inc.(b) | 13,747 | 188,059 | ||||||
619,578 | ||||||||
Homefurnishing Retail–0.12% | ||||||||
Bed Bath & Beyond Inc.(b) | 9,448 | 634,622 | ||||||
Hotels, Resorts & Cruise Lines–0.34% | ||||||||
Carnival Corp. | 18,452 | 639,915 | ||||||
Marriott International Inc.–Class A | 10,747 | 404,947 | ||||||
Starwood Hotels & Resorts Worldwide, Inc. | 8,036 | 443,025 | ||||||
Wyndham Worldwide Corp. | 5,982 | 311,901 | ||||||
1,799,788 | ||||||||
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 Appliances–0.05% | ||||||||
Whirlpool Corp. | 3,162 | $ | 238,605 | |||||
Household Products–2.15% | ||||||||
Clorox Co. (The) | 5,320 | 387,030 | ||||||
Colgate-Palmolive Co. | 19,433 | 2,065,922 | ||||||
Kimberly-Clark Corp. | 15,967 | 1,334,841 | ||||||
Procter & Gamble Co. (The) | 111,583 | 7,497,262 | ||||||
11,285,055 | ||||||||
Housewares & Specialties–0.04% | ||||||||
Newell Rubbermaid Inc. | 11,804 | 211,646 | ||||||
Human Resource & Employment Services–0.03% | ||||||||
Robert Half International, Inc. | 5,784 | 152,119 | ||||||
Hypermarkets & Super Centers–1.30% | ||||||||
Costco Wholesale Corp. | 17,605 | 1,723,001 | ||||||
Wal-Mart Stores, Inc. | 70,269 | 5,101,530 | ||||||
6,824,531 | ||||||||
Independent Power Producers & Energy Traders–0.09% | ||||||||
AES Corp. (The) | 26,252 | 299,010 | ||||||
NRG Energy, Inc. | 9,232 | 197,011 | ||||||
496,021 | ||||||||
Industrial Conglomerates–2.65% | ||||||||
3M Co. | 28,255 | 2,616,413 | ||||||
Danaher Corp. | 23,413 | 1,254,234 | ||||||
General Electric Co.(d) | 431,463 | 8,935,599 | ||||||
Tyco International Ltd. | 18,848 | 1,062,650 | ||||||
13,868,896 | ||||||||
Industrial Gases–0.43% | ||||||||
Air Products & Chemicals, Inc. | 8,632 | 712,831 | ||||||
Airgas, Inc. | 2,853 | 236,999 | ||||||
Praxair, Inc. | 12,131 | 1,279,820 | ||||||
2,229,650 | ||||||||
Industrial Machinery–0.88% | ||||||||
Dover Corp. | 7,527 | 435,136 | ||||||
Eaton Corp. | 13,751 | 614,945 | ||||||
Flowserve Corp. | 2,216 | 282,894 | ||||||
Illinois Tool Works Inc. | 19,438 | 1,152,479 | ||||||
Ingersoll-Rand PLC | 12,164 | 568,789 | ||||||
Pall Corp. | 4,698 | 260,786 | ||||||
Parker Hannifin Corp. | 6,185 | 494,676 | ||||||
Snap-on Inc. | 2,325 | 161,401 | ||||||
Stanley Black & Decker Inc. | 6,931 | 455,921 | ||||||
Xylem, Inc. | 7,571 | 183,900 | ||||||
4,610,927 | ||||||||
Industrial REIT’s–0.12% | ||||||||
Prologis, Inc. | 18,747 | 640,585 | ||||||
Insurance Brokers–0.28% | ||||||||
Aon PLC | 13,292 | 690,652 | ||||||
Marsh & McLennan Cos., Inc. | 22,217 | 759,155 | ||||||
1,449,807 | ||||||||
Integrated Oil & Gas–5.63% | ||||||||
Chevron Corp. | 80,351 | 9,012,168 | ||||||
Exxon Mobil Corp. | 190,422 | 16,623,841 | ||||||
Hess Corp. | 12,380 | 625,562 | ||||||
Murphy Oil Corp. | 7,946 | 407,868 | ||||||
Occidental Petroleum Corp. | 33,028 | 2,807,710 | ||||||
29,477,149 | ||||||||
Integrated Telecommunication Services–2.90% | ||||||||
AT&T Inc. | 238,753 | 8,747,910 | ||||||
CenturyLink Inc. | 25,297 | 1,069,051 | ||||||
Frontier Communications Corp. | 40,658 | 187,840 | ||||||
Verizon Communications Inc. | 115,692 | 4,967,815 | ||||||
Windstream Corp. | 23,958 | 236,465 | ||||||
15,209,081 | ||||||||
Internet Retail–1.02% | ||||||||
Amazon.com, Inc.(b) | 14,676 | 3,643,024 | ||||||
Expedia, Inc. | 3,704 | 190,237 | ||||||
Netflix Inc.(b) | 2,216 | 132,340 | ||||||
Priceline.com Inc.(b) | 2,027 | 1,225,463 | ||||||
TripAdvisor Inc.(b) | 3,925 | 131,252 | ||||||
5,322,316 | ||||||||
Internet Software & Services–2.03% | ||||||||
Akamai Technologies, Inc.(b) | 7,288 | 273,373 | ||||||
eBay Inc.(b) | 46,796 | 2,221,406 | ||||||
Google Inc.–Class A(b) | 10,355 | 7,094,107 | ||||||
VeriSign, Inc.(b) | 6,438 | 306,964 | ||||||
Yahoo! Inc.(b) | 49,627 | 727,035 | ||||||
10,622,885 | ||||||||
Investment Banking & Brokerage–0.71% | ||||||||
Charles Schwab Corp. (The) | 44,063 | 594,410 | ||||||
E*TRADE Financial Corp.(b) | 10,308 | 88,339 | ||||||
Goldman Sachs Group, Inc. (The) | 20,029 | 2,117,466 | ||||||
Morgan Stanley | 62,015 | 930,225 | ||||||
3,730,440 | ||||||||
IT Consulting & Other Services–2.33% | ||||||||
Accenture PLC–Class A | 26,242 | 1,616,507 | ||||||
Cognizant Technology Solutions Corp.–Class A(b) | 12,399 | 797,008 | ||||||
International Business Machines Corp. | 46,971 | 9,152,299 | ||||||
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) | ||||||||
SAIC, Inc. | 11,228 | $ | 137,094 | |||||
Teradata Corp.(b) | 6,862 | 524,120 | ||||||
12,227,028 | ||||||||
Leisure Products–0.13% | ||||||||
Hasbro, Inc. | 4,729 | 177,385 | ||||||
Mattel, Inc. | 13,868 | 487,321 | ||||||
664,706 | ||||||||
Life & Health Insurance–0.85% | ||||||||
Aflac, Inc. | 19,042 | 879,359 | ||||||
Lincoln National Corp. | 11,621 | 269,840 | ||||||
MetLife, Inc. | 43,247 | 1,476,020 | ||||||
Principal Financial Group, Inc. | 12,221 | 335,344 | ||||||
Prudential Financial, Inc. | 19,098 | 1,041,032 | ||||||
Torchmark Corp. | 4,028 | 206,153 | ||||||
Unum Group | 11,639 | 227,077 | ||||||
4,434,825 | ||||||||
Life Sciences Tools & Services–0.41% | ||||||||
Agilent Technologies, Inc. | 14,149 | 525,777 | ||||||
Life Technologies Corp.(b) | 7,307 | 348,617 | ||||||
PerkinElmer, Inc. | 4,632 | 126,454 | ||||||
Thermo Fisher Scientific, Inc. | 14,956 | 857,726 | ||||||
Waters Corp.(b) | 3,650 | 292,693 | ||||||
2,151,267 | ||||||||
Managed Health Care–0.93% | ||||||||
Aetna Inc. | 14,146 | 543,348 | ||||||
Cigna Corp. | 11,740 | 537,340 | ||||||
Coventry Health Care, Inc. | 5,788 | 240,954 | ||||||
Humana Inc. | 6,624 | 464,210 | ||||||
UnitedHealth Group Inc. | 42,246 | 2,293,958 | ||||||
WellPoint, Inc. | 13,471 | 806,509 | ||||||
4,886,319 | ||||||||
Metal & Glass Containers–0.07% | ||||||||
Ball Corp. | 6,399 | 269,846 | ||||||
Owens-Illinois, Inc.(b) | 6,739 | 117,798 | ||||||
387,644 | ||||||||
Motorcycle Manufacturers–0.08% | ||||||||
Harley-Davidson, Inc. | 9,408 | 394,760 | ||||||
Movies & Entertainment–1.58% | ||||||||
News Corp.–Class A | 85,792 | 2,006,675 | ||||||
Time Warner Inc. | 39,089 | 1,624,148 | ||||||
Viacom Inc.–Class B | 21,493 | 1,074,865 | ||||||
Walt Disney Co. (The) | 72,784 | 3,600,624 | ||||||
8,306,312 | ||||||||
Multi-Line Insurance–0.40% | ||||||||
American International Group, Inc.(b) | 29,869 | 1,025,403 | ||||||
Assurant, Inc. | 3,474 | 122,459 | ||||||
Genworth Financial Inc.–Class A(b) | 20,014 | 105,874 | ||||||
Hartford Financial Services Group, Inc. | 17,952 | 321,879 | ||||||
Loews Corp. | 12,423 | 504,995 | ||||||
2,080,610 | ||||||||
Multi-Sector Holdings–0.03% | ||||||||
Leucadia National Corp. | 8,020 | 171,468 | ||||||
Multi-Utilities–1.24% | ||||||||
Ameren Corp. | 9,845 | 322,128 | ||||||
CenterPoint Energy, Inc. | 17,399 | 354,766 | ||||||
CMS Energy Corp. | 10,590 | 244,311 | ||||||
Consolidated Edison, Inc. | 11,905 | 721,681 | ||||||
Dominion Resources, Inc. | 23,271 | 1,221,262 | ||||||
DTE Energy Co. | 6,943 | 405,471 | ||||||
Integrys Energy Group, Inc. | 3,136 | 169,313 | ||||||
NiSource Inc. | 11,568 | 281,565 | ||||||
PG&E Corp. | 17,197 | 746,522 | ||||||
Public Service Enterprise Group Inc. | 20,600 | 652,196 | ||||||
SCANA Corp. | 4,707 | 222,924 | ||||||
Sempra Energy | 9,761 | 646,178 | ||||||
TECO Energy, Inc. | 8,745 | 151,813 | ||||||
Wisconsin Energy Corp. | 9,346 | 354,774 | ||||||
6,494,904 | ||||||||
Office Electronics–0.08% | ||||||||
Xerox Corp. | 54,882 | 404,480 | ||||||
Office REIT’s–0.13% | ||||||||
Boston Properties, Inc. | 6,078 | 681,526 | ||||||
Office Services & Supplies–0.05% | ||||||||
Avery Dennison Corp. | 4,248 | 132,665 | ||||||
Pitney Bowes Inc. | 8,189 | 109,405 | ||||||
242,070 | ||||||||
Oil & Gas Drilling–0.32% | ||||||||
Diamond Offshore Drilling, Inc. | 2,857 | 191,476 | ||||||
Ensco PLC–Class A (United Kingdom) | 9,407 | 539,680 | ||||||
Helmerich & Payne, Inc. | 4,367 | 199,310 | ||||||
Nabors Industries Ltd.(b) | 11,821 | 174,596 | ||||||
Noble Corp.(b) | 10,236 | 390,401 | ||||||
Rowan Cos. PLC–Class A(b) | 5,106 | 179,629 | ||||||
1,675,092 | ||||||||
Oil & Gas Equipment & Services–1.59% | ||||||||
Baker Hughes Inc. | 17,855 | 814,188 | ||||||
Cameron International Corp.(b) | 9,990 | 546,553 | ||||||
FMC Technologies, Inc.(b) | 9,699 | 454,301 | ||||||
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 Equipment & Services–(continued) | ||||||||
Halliburton Co. | 37,586 | $ | 1,231,317 | |||||
National Oilwell Varco Inc. | 17,355 | 1,367,574 | ||||||
Schlumberger Ltd. | 54,304 | 3,930,524 | ||||||
8,344,457 | ||||||||
Oil & Gas Exploration & Production–2.40% | ||||||||
Anadarko Petroleum Corp. | 20,342 | 1,409,090 | ||||||
Apache Corp. | 15,915 | 1,364,711 | ||||||
Cabot Oil & Gas Corp. | 8,500 | 351,985 | ||||||
Chesapeake Energy Corp. | 26,971 | 521,889 | ||||||
ConocoPhillips | 51,494 | 2,924,344 | ||||||
Denbury Resources Inc.(b) | 15,898 | 246,260 | ||||||
Devon Energy Corp. | 16,464 | 952,113 | ||||||
EOG Resources, Inc. | 10,929 | 1,183,611 | ||||||
EQT Corp. | 6,120 | 330,235 | ||||||
Marathon Oil Corp. | 28,722 | 799,046 | ||||||
Newfield Exploration Co.(b) | 5,536 | 180,640 | ||||||
Noble Energy, Inc. | 7,239 | 636,308 | ||||||
Pioneer Natural Resources Co. | 4,996 | 486,411 | ||||||
QEP Resources Inc. | 7,275 | 208,720 | ||||||
Range Resources Corp. | 6,560 | 427,646 | ||||||
Southwestern Energy Co.(b) | 14,176 | 441,299 | ||||||
WPX Energy Inc.(b) | 8,140 | 126,984 | ||||||
12,591,292 | ||||||||
Oil & Gas Refining & Marketing–0.56% | ||||||||
Marathon Petroleum Corp. | 13,874 | 717,980 | ||||||
Phillips 66 | 25,461 | 1,069,362 | ||||||
Sunoco, Inc. | 4,312 | 203,483 | ||||||
Tesoro Corp. | 5,699 | 226,478 | ||||||
Valero Energy Corp. | 22,513 | 703,756 | ||||||
2,921,059 | ||||||||
Oil & Gas Storage & Transportation–0.46% | ||||||||
Kinder Morgan Inc. | 23,081 | 825,607 | ||||||
Spectra Energy Corp. | 26,579 | 751,123 | ||||||
Williams Cos., Inc. (The) | 25,477 | 822,143 | ||||||
2,398,873 | ||||||||
Other Diversified Financial Services–2.44% | ||||||||
Bank of America Corp. | 438,849 | 3,506,404 | ||||||
Citigroup Inc. | 119,403 | 3,547,463 | ||||||
JPMorgan Chase & Co. | 155,015 | 5,757,257 | ||||||
12,811,124 | ||||||||
Packaged Foods & Meats–1.56% | ||||||||
Campbell Soup Co. | 7,205 | 253,184 | ||||||
ConAgra Foods, Inc. | 16,913 | 424,685 | ||||||
Dean Foods Co.(b) | 7,551 | 123,987 | ||||||
General Mills, Inc. | 26,358 | 1,036,660 | ||||||
H.J. Heinz Co. | 13,012 | 725,029 | ||||||
Hershey Co. (The) | 6,166 | 442,842 | ||||||
Hormel Foods Corp. | 5,627 | 161,607 | ||||||
JM Smucker Co. (The) | 4,646 | 394,771 | ||||||
Kellogg Co. | 10,001 | 506,551 | ||||||
Kraft Foods Inc.–Class A | 72,199 | 2,998,424 | ||||||
McCormick & Co., Inc. | 5,407 | 332,206 | ||||||
Mead Johnson Nutrition Co. | 8,347 | 612,086 | ||||||
Tyson Foods, Inc.–Class A | 11,747 | 183,958 | ||||||
8,195,990 | ||||||||
Paper Packaging–0.05% | ||||||||
Bemis Co., Inc. | 4,156 | 125,760 | ||||||
Sealed Air Corp. | 7,873 | 112,348 | ||||||
238,108 | ||||||||
Paper Products–0.16% | ||||||||
International Paper Co. | 17,798 | 615,099 | ||||||
MeadWestvaco Corp. | 7,008 | 201,550 | ||||||
816,649 | ||||||||
Personal Products–0.16% | ||||||||
Avon Products, Inc. | 17,583 | 271,658 | ||||||
Estee Lauder Cos. Inc. (The)–Class A | 9,216 | 552,499 | ||||||
824,157 | ||||||||
Pharmaceuticals–6.00% | ||||||||
Abbott Laboratories | 64,071 | 4,199,213 | ||||||
Allergan, Inc. | 12,522 | 1,078,520 | ||||||
Bristol-Myers Squibb Co. | 68,782 | 2,270,494 | ||||||
Eli Lilly & Co. | 41,583 | 1,867,493 | ||||||
Forest Laboratories, Inc.(b) | 10,783 | 374,062 | ||||||
Hospira, Inc.(b) | 6,752 | 226,732 | ||||||
Johnson & Johnson | 111,838 | 7,541,236 | ||||||
Merck & Co., Inc. | 123,858 | 5,332,087 | ||||||
Mylan Inc.(b) | 17,454 | 411,391 | ||||||
Perrigo Co. | 3,804 | 418,326 | ||||||
Pfizer Inc. | 304,932 | 7,275,677 | ||||||
Watson Pharmaceuticals, Inc.(b) | 5,199 | 422,939 | ||||||
31,418,170 | ||||||||
Property & Casualty Insurance–2.04% | ||||||||
ACE Ltd. | 13,791 | 1,016,811 | ||||||
Allstate Corp. (The) | 20,008 | 745,898 | ||||||
Berkshire Hathaway Inc.–Class B(b) | 71,612 | 6,039,756 | ||||||
Chubb Corp. (The) | 10,992 | 812,199 | ||||||
Cincinnati Financial Corp. | 6,639 | 256,664 | ||||||
Progressive Corp. (The) | 24,827 | 484,871 | ||||||
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) | ||||||||
Travelers Cos., Inc. (The) | 15,841 | $ | 1,025,546 | |||||
XL Group PLC | 12,692 | 293,439 | ||||||
10,675,184 | ||||||||
Publishing–0.15% | ||||||||
Gannett Co., Inc. | 9,611 | 146,664 | ||||||
McGraw-Hill Cos., Inc. (The) | 11,389 | 583,117 | ||||||
Washington Post Co. (The)–Class B | 194 | 68,385 | ||||||
798,166 | ||||||||
Railroads–0.81% | ||||||||
CSX Corp. | 42,316 | 950,417 | ||||||
Norfolk Southern Corp. | 13,265 | 961,182 | ||||||
Union Pacific Corp. | 19,391 | 2,354,843 | ||||||
4,266,442 | ||||||||
Real Estate Services–0.04% | ||||||||
CBRE Group, Inc.–Class A(b) | 13,343 | 230,967 | ||||||
Regional Banks–0.95% | ||||||||
BB&T Corp. | 28,450 | 897,313 | ||||||
Fifth Third Bancorp | 37,466 | 567,235 | ||||||
First Horizon National Corp. | 10,277 | 92,082 | ||||||
Huntington Bancshares Inc. | 35,211 | 232,393 | ||||||
KeyCorp | 38,813 | 327,194 | ||||||
M&T Bank Corp. | 5,181 | 450,229 | ||||||
PNC Financial Services Group, Inc. | 21,532 | 1,338,429 | ||||||
Regions Financial Corp. | 57,517 | 400,318 | ||||||
SunTrust Banks, Inc. | 21,914 | 551,575 | ||||||
Zions Bancorp. | 7,548 | 145,299 | ||||||
5,002,067 | ||||||||
Research & Consulting Services–0.07% | ||||||||
Dun & Bradstreet Corp. (The) | 1,934 | 156,557 | ||||||
Equifax Inc. | 4,855 | 222,262 | ||||||
378,819 | ||||||||
Residential REIT’s–0.27% | ||||||||
Apartment Investment & Management Co.–Class A | 5,755 | 152,392 | ||||||
AvalonBay Communities, Inc. | 3,898 | 551,645 | ||||||
Equity Residential | 12,206 | 737,243 | ||||||
1,441,280 | ||||||||
Restaurants–1.35% | ||||||||
Chipotle Mexican Grill, Inc.(b) | 1,281 | 369,748 | ||||||
Darden Restaurants, Inc. | 5,264 | 273,465 | ||||||
McDonald’s Corp. | 41,383 | 3,703,364 | ||||||
Starbucks Corp. | 30,887 | 1,532,304 | ||||||
Yum! Brands, Inc. | 18,754 | 1,195,005 | ||||||
7,073,886 | ||||||||
Retail REIT’s–0.44% | ||||||||
Kimco Realty Corp. | 16,570 | 336,702 | ||||||
Simon Property Group, Inc. | 12,342 | 1,958,676 | ||||||
2,295,378 | ||||||||
Semiconductor Equipment–0.26% | ||||||||
Applied Materials, Inc. | 52,193 | 610,136 | ||||||
KLA-Tencor Corp. | 6,834 | 350,653 | ||||||
Lam Research Corp.(b) | 8,173 | 278,944 | ||||||
Teradyne, Inc.(b) | 7,629 | 119,165 | ||||||
1,358,898 | ||||||||
Semiconductors–1.91% | ||||||||
Advanced Micro Devices, Inc.(b) | 23,989 | 89,239 | ||||||
Altera Corp. | 13,113 | 489,508 | ||||||
Analog Devices, Inc. | 12,107 | 481,132 | ||||||
Broadcom Corp.–Class A(b) | 20,193 | 717,457 | ||||||
First Solar, Inc.(b) | 2,385 | 47,676 | ||||||
Intel Corp. | 204,873 | 5,086,997 | ||||||
Linear Technology Corp. | 9,374 | 309,576 | ||||||
LSI Corp.(b) | 23,166 | 180,463 | ||||||
Microchip Technology Inc. | 7,873 | 273,587 | ||||||
Micron Technology, Inc.(b) | 40,299 | 250,257 | ||||||
NVIDIA Corp.(b) | 25,198 | 353,528 | ||||||
Texas Instruments Inc. | 46,599 | 1,353,235 | ||||||
Xilinx, Inc. | 10,738 | 364,126 | ||||||
9,996,781 | ||||||||
Soft Drinks–2.40% | ||||||||
Coca-Cola Co. (The) | 183,732 | 6,871,577 | ||||||
Coca-Cola Enterprises, Inc. | 12,210 | 360,561 | ||||||
Dr. Pepper Snapple Group, Inc. | 8,592 | 385,008 | ||||||
Monster Beverage Corp.(b) | 6,195 | 365,071 | ||||||
PepsiCo, Inc. | 63,687 | 4,612,849 | ||||||
12,595,066 | ||||||||
Specialized Consumer Services–0.04% | ||||||||
H&R Block, Inc. | 11,174 | 185,041 | ||||||
Specialized Finance–0.35% | ||||||||
CME Group Inc. | 13,615 | 747,463 | ||||||
IntercontinentalExchange Inc.(b) | 2,975 | 406,682 | ||||||
Moody’s Corp. | 8,041 | 318,424 | ||||||
NASDAQ OMX Group, Inc. (The) | 5,016 | 114,716 | ||||||
NYSE Euronext | 10,331 | 258,792 | ||||||
1,846,077 | ||||||||
Specialized REIT’s–1.01% | ||||||||
American Tower Corp. | 16,067 | 1,131,117 | ||||||
HCP, Inc. | 17,082 | 783,380 | ||||||
Health Care REIT, Inc. | 8,681 | 507,318 | ||||||
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 REIT’s–(continued) | ||||||||
Host Hotels & Resorts Inc. | 29,254 | $ | 447,586 | |||||
Plum Creek Timber Co., Inc. | 6,615 | 270,752 | ||||||
Public Storage | 5,825 | 847,887 | ||||||
Ventas, Inc. | 11,742 | 768,984 | ||||||
Weyerhaeuser Co. | 21,885 | 545,155 | ||||||
5,302,179 | ||||||||
Specialty Chemicals–0.35% | ||||||||
Ecolab Inc. | 11,898 | 761,829 | ||||||
International Flavors & Fragrances Inc. | 3,347 | 202,560 | ||||||
Sherwin-Williams Co. (The) | 3,490 | 499,349 | ||||||
Sigma-Aldrich Corp. | 4,948 | 351,457 | ||||||
1,815,195 | ||||||||
Specialty Stores–0.12% | ||||||||
Staples, Inc. | 28,064 | 306,459 | ||||||
Tiffany & Co. | 5,203 | 322,326 | ||||||
628,785 | ||||||||
Steel–0.18% | ||||||||
Allegheny Technologies, Inc. | 4,403 | 130,505 | ||||||
Cliffs Natural Resources Inc. | 5,821 | 208,625 | ||||||
Nucor Corp. | 12,889 | 485,271 | ||||||
United States Steel Corp. | 5,878 | 114,327 | ||||||
938,728 | ||||||||
Systems Software–3.05% | ||||||||
BMC Software, Inc.(b) | 6,596 | 273,074 | ||||||
CA, Inc. | 14,410 | 375,092 | ||||||
Microsoft Corp. | 304,469 | 9,383,735 | ||||||
Oracle Corp. | 158,025 | 5,001,491 | ||||||
Red Hat, Inc.(b) | 7,816 | 438,009 | ||||||
Symantec Corp.(b) | 29,350 | 523,311 | ||||||
15,994,712 | ||||||||
Thrifts & Mortgage Finance–0.06% | ||||||||
Hudson City Bancorp, Inc. | 21,505 | 154,621 | ||||||
People’s United Financial Inc. | 14,493 | 173,481 | ||||||
328,102 | ||||||||
Tires & Rubber–0.02% | ||||||||
Goodyear Tire & Rubber Co. (The)(b) | 9,924 | 121,073 | ||||||
Tobacco–1.97% | ||||||||
Altria Group, Inc. | 82,862 | 2,813,993 | ||||||
Lorillard, Inc. | 5,314 | 666,960 | ||||||
Philip Morris International Inc. | 69,453 | 6,202,153 | ||||||
Reynolds American Inc. | 13,498 | 622,258 | ||||||
10,305,364 | ||||||||
Trading Companies & Distributors–0.20% | ||||||||
Fastenal Co. | 12,003 | 517,209 | ||||||
W.W. Grainger, Inc. | 2,472 | 509,133 | ||||||
1,026,342 | ||||||||
Trucking–0.02% | ||||||||
Ryder System, Inc. | 2,089 | 83,581 | ||||||
Wireless Telecommunication Services–0.26% | ||||||||
Crown Castle International Corp.(b) | 10,489 | 665,632 | ||||||
MetroPCS Communications, Inc.(b) | 11,935 | 116,128 | ||||||
Sprint Nextel Corp.(b) | 122,119 | 592,277 | ||||||
1,374,037 | ||||||||
Total Common Stocks & Other Equity Interests (Cost $343,266,282) | 517,799,540 | |||||||
Money Market Funds–1.12% | ||||||||
Liquid Assets Portfolio–Institutional Class(e) | 2,936,681 | 2,936,681 | ||||||
Premier Portfolio–Institutional Class(e) | 2,936,680 | 2,936,680 | ||||||
Total Money Market Funds (Cost $5,873,361) | 5,873,361 | |||||||
TOTAL INVESTMENTS–99.94% (Cost $349,139,643) | 523,672,901 | |||||||
OTHER ASSETS LESS LIABILITIES–0.06% | 324,569 | |||||||
NET ASSETS–100.00% | $ | 523,997,470 | ||||||
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, 2012
Assets: | ||||
Investments, at value (Cost $342,842,268) | $ | 517,367,356 | ||
Investments in affiliates, at value (Cost $6,297,375) | 6,305,545 | |||
Total investments, at value (Cost $349,139,643) | 523,672,901 | |||
Receivable for: | ||||
Variation margin | 40,811 | |||
Fund shares sold | 443,705 | |||
Dividends | 1,252,849 | |||
Investment for trustee deferred compensation and retirement plans | 9,785 | |||
Other assets | 27,786 | |||
Total assets | 525,447,837 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares reacquired | 712,202 | |||
Accrued fees to affiliates | 622,298 | |||
Accrued other operating expenses | 80,976 | |||
Trustee deferred compensation and retirement plans | 34,891 | |||
Total liabilities | 1,450,367 | |||
Net assets applicable to shares outstanding | $ | 523,997,470 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 429,730,836 | ||
Undistributed net investment income | 6,283,512 | |||
Undistributed net realized gain (loss) | (86,684,864 | ) | ||
Unrealized appreciation | 174,667,986 | |||
$ | 523,997,470 | |||
Net Assets: | ||||
Class A | $ | 410,771,574 | ||
Class B | $ | 19,911,514 | ||
Class C | $ | 78,796,743 | ||
Class Y | $ | 14,517,639 | ||
Shares outstanding, $0.01 par value per share, with an unlimited number of shares authorized: | ||||
Class A | 26,909,439 | |||
Class B | 1,331,317 | |||
Class C | 5,328,054 | |||
Class Y | 940,857 | |||
Class A: | ||||
Net asset value per share | $ | 15.26 | ||
Maximum offering price per share (Net asset value of $15.26 divided by 94.50%) | $ | 16.15 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 14.96 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 14.79 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 15.43 | ||
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, 2012
Investment income: | ||||
Dividends (net of foreign withholding taxes of $1,280) | $ | 11,011,365 | ||
Dividends from affiliates | 16,360 | |||
Total investment income | 11,027,725 | |||
Expenses: | ||||
Advisory fees | 602,752 | |||
Administrative services fees | 142,987 | |||
Custodian fees | 45,633 | |||
Distribution fees: | ||||
Class A | 954,197 | |||
Class B | 288,061 | |||
Class C | 718,807 | |||
Transfer agent fees | 920,543 | |||
Trustees’ and officers’ fees and benefits | 48,071 | |||
Other | 346,576 | |||
Total expenses | 4,067,627 | |||
Less: Fees waived and expense offset arrangement(s) | (101,983 | ) | ||
Net expenses | 3,965,644 | |||
Net investment income | 7,062,081 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain (loss) from: | ||||
Investment securities | (1,096,094 | ) | ||
Futures contracts | 1,056,526 | |||
(39,568 | ) | |||
Change in net unrealized appreciation of: | ||||
Investment securities | 71,918,270 | |||
Futures contracts | 65,424 | |||
71,983,694 | ||||
Net realized and unrealized gain | 71,944,126 | |||
Net increase in net assets resulting from operations | $ | 79,006,207 | ||
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, 2012 and 2011
2012 | 2011 | |||||||
Operations: | ||||||||
Net investment income | $ | 7,062,081 | $ | 6,814,993 | ||||
Net realized gain (loss) | (39,568 | ) | (24,408,669 | ) | ||||
Change in net unrealized appreciation | 71,983,694 | 106,353,853 | ||||||
Net increase in net assets resulting from operations | 79,006,207 | 88,760,177 | ||||||
Distributions to shareholders from net investment income: | ||||||||
Class A | (6,590,989 | ) | (4,314,633 | ) | ||||
Class B | (193,068 | ) | (343,807 | ) | ||||
Class C | (511,460 | ) | (411,023 | ) | ||||
Class Y | (356,716 | ) | (330,849 | ) | ||||
Total distributions from net investment income | (7,652,233 | ) | (5,400,312 | ) | ||||
Share transactions–net: | ||||||||
Class A | (13,332,452 | ) | (22,350,952 | ) | ||||
Class B | (22,284,272 | ) | (37,810,809 | ) | ||||
Class C | (331,841 | ) | (9,480,958 | ) | ||||
Class Y | (4,421,941 | ) | (10,489,324 | ) | ||||
Net increase (decrease) in net assets resulting from share transactions | (40,370,506 | ) | (80,132,043 | ) | ||||
Net increase in net assets | 30,983,468 | 3,227,822 | ||||||
Net assets: | ||||||||
Beginning of year | 493,014,002 | 489,786,180 | ||||||
End of year (includes undistributed net investment income of $6,283,512 and $6,743,781, respectively) | $ | 523,997,470 | $ | 493,014,002 | ||||
Notes to Financial Statements
August 31, 2012
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 (S&P 500 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 to Class A shares. 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 to Class A shares. 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. 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 economic 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 declared and paid annually and recorded on the 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 |
21 Invesco S&P 500 Index Fund
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 the 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).
Effective July 1, 2012, the Adviser has contractually agreed, through June 30, 2013, 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 2.00%, 2.75%, 2.75% and 1.75% of average daily net assets, respectively. Prior to July 1, 2012, the Adviser has contractually agreed 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 0.65%, 1.40%, 1.40% and 0.40% 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, facilities and maintenance fees; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; 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 Invesco mutually agree to amend or continue the fee waiver agreement, it will terminate on June 30, 2013.
22 Invesco S&P 500 Index Fund
Further, the Adviser has contractually agreed, through at least June 30, 2013, 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, 2012, the Adviser waived advisory fees of $101,615.
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, 2012, 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, 2012, 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 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, 2012, 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, 2012, IDI advised the Fund that IDI retained $25,239 in front-end sales commissions from the sale of Class A shares and $4, $19,422 and $4,418 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, 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, 2012. 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.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 523,672,901 | $ | — | $ | — | $ | 523,672,901 | ||||||||
Futures* | 134,728 | — | — | 134,728 | ||||||||||||
Total Investments | $ | 523,807,629 | $ | — | $ | — | $ | 523,807,629 | ||||||||
* | Unrealized appreciation. |
23 Invesco S&P 500 Index Fund
NOTE 4—Investments in Affiliates
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, 2012.
Change in | ||||||||||||||||||||||||||||
Value | Purchases | Proceeds | Unrealized | Realized | Value | Dividend | ||||||||||||||||||||||
08/31/11 | at Cost | from Sales | Appreciation | Gain (Loss) | 08/31/12 | Income | ||||||||||||||||||||||
Invesco Ltd. | $371,380 | $4,913 | $(46,630 | ) | $114,611 | $(12,090 | ) | $432,184 | $11,037 | |||||||||||||||||||
NOTE 5—Derivative Investments
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, 2012:
Value | ||||||||
Risk Exposure/Derivative Type | Assets | Liabilities | ||||||
Equity risk | ||||||||
Futures contracts(a) | $ | 134,728 | $ | — | ||||
(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, 2012
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 | $ | 1,056,526 | ||
Change in Unrealized Appreciation | ||||
Equity risk | $ | 65,424 | ||
Total | $ | 1,121,950 | ||
* | The average notional value of futures outstanding during the period was $4,855,545. |
Open Futures Contracts | ||||||||||||||||
Number of | Expiration | Notional | Unrealized | |||||||||||||
Long Contracts | Contracts | Month | Value | Appreciation | ||||||||||||
E-Mini S&P 500 | 101 | September-2012 | $ | 7,095,755 | $ | 134,728 | ||||||||||
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, 2012, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $368.
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.
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. Such balances, if any at period end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. 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.
24 Invesco S&P 500 Index Fund
NOTE 9—Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Years Ended August 31, 2012 and 2011:
2012 | 2011 | |||||||
Ordinary income | $ | 7,652,233 | $ | 5,400,312 | ||||
Tax Components of Net Assets at Period-End:
2012 | ||||
Undistributed ordinary income | $ | 6,282,809 | ||
Net unrealized appreciation — investments | 148,081,072 | |||
Temporary book/tax differences | (33,586 | ) | ||
Capital loss carryforward | (60,063,661 | ) | ||
Shares of beneficial interest | 429,730,836 | |||
Total net assets | $ | 523,997,470 | ||
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 Regulated Investment Company Modernization Act of 2010 (the “Act”) eliminated the eight-year carryover period for capital losses that arise in taxable years beginning after its enactment date of December 22, 2010. Consequently, these capital losses can be carried forward for an unlimited period. However, capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Additionally, post-enactment capital loss carryovers will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. 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, 2012, which expires as follows:
Capital Loss Carryforward* | ||||||||||||
Expiration | Short-Term | Long-Term | Total | |||||||||
August 31, 2017 | $ | 12,322,416 | $ | — | $ | 12,322,416 | ||||||
August 31, 2018 | 19,847,353 | — | 19,847,353 | |||||||||
August 31, 2019 | 10,267,726 | — | 10,267,726 | |||||||||
Not subject to expiration | — | 17,626,166 | 17,626,166 | |||||||||
$ | 42,437,495 | $ | 17,626,166 | $ | 60,063,661 | |||||||
* | 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, 2012 was $16,842,524 and $58,156,088, 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 | $ | 181,600,059 | ||
Aggregate unrealized (depreciation) of investment securities | (33,518,987 | ) | ||
Net unrealized appreciation of investment securities | $ | 148,081,072 | ||
Cost of investments for tax purposes is $375,591,829. |
NOTE 11—Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of expired capital loss carryforward and fair funds settlements, on August 31, 2012, undistributed net investment income was increased by $129,883, undistributed net realized gain was increased by $20,164,890 and shares of beneficial interest was decreased by $20,294,773. This reclassification had no effect on the net assets of the Trust.
25 Invesco S&P 500 Index Fund
NOTE 12—Share Information
Summary of Share Activity | ||||||||||||||||
For the years ended August 31, | ||||||||||||||||
2012(a) | 2011 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Class A | 2,763,738 | $ | 39,469,371 | 3,081,251 | $ | 42,089,867 | ||||||||||
Class B | 72,106 | 1,005,514 | 126,134 | 1,618,298 | ||||||||||||
Class C | 750,901 | 10,524,251 | 396,254 | 5,177,490 | ||||||||||||
Class Y | 636,341 | 9,308,878 | 363,427 | 5,144,798 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Class A | 445,622 | 5,998,079 | 296,064 | 3,952,452 | ||||||||||||
Class B | 12,814 | 169,909 | 23,301 | 305,005 | ||||||||||||
Class C | 34,865 | 457,088 | 28,427 | 368,126 | ||||||||||||
Class Y | 26,089 | 354,294 | 24,456 | 329,428 | ||||||||||||
Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||
Class A | 1,243,061 | 17,748,051 | 1,898,796 | 25,882,392 | ||||||||||||
Class B | (1,267,736 | ) | (17,748,051 | ) | (1,942,798 | ) | (25,882,392 | ) | ||||||||
Reacquired: | ||||||||||||||||
Class A | (5,446,685 | ) | (76,547,953 | ) | (6,906,032 | ) | (94,275,663 | ) | ||||||||
Class B | (415,442 | ) | (5,711,644 | ) | (1,051,427 | ) | (13,851,720 | ) | ||||||||
Class C | (831,615 | ) | (11,313,180 | ) | (1,143,111 | ) | (15,026,574 | ) | ||||||||
Class Y | (977,353 | ) | (14,085,113 | ) | (1,149,798 | ) | (15,963,550 | ) | ||||||||
Net increase (decrease) in share activity | (2,953,294 | ) | $ | (40,370,506 | ) | (5,955,056 | ) | $ | (80,132,043 | ) | ||||||
(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. |
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 08/31/12 | $ | 13.25 | $ | 0.22 | $ | 2.03 | $ | 2.25 | $ | (0.24 | ) | $ | 15.26 | 17.26 | % | $ | 410,772 | 0.65 | %(f) | 0.67 | %(f) | 1.55 | %(f) | 3 | % | |||||||||||||||||||||||
Year ended 08/31/11 | 11.36 | 0.19 | 1.85 | 2.04 | (0.15 | ) | 13.25 | 17.94 | 369,597 | 0.61 | 0.61 | 1.42 | 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 | |||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/12 | 12.92 | 0.11 | 2.01 | 2.12 | (0.08 | ) | 14.96 | 16.47 | 19,912 | 1.40 | (f) | 1.42 | (f) | 0.80 | (f) | 3 | ||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 11.10 | 0.09 | 1.80 | 1.89 | (0.07 | ) | 12.92 | 17.02 | 37,840 | 1.36 | 1.36 | 0.67 | 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 | |||||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/12 | 12.79 | 0.11 | 1.99 | 2.10 | (0.10 | ) | 14.79 | 16.50 | 78,797 | 1.40 | (f) | 1.42 | (f) | 0.80 | (f) | 3 | ||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 10.99 | 0.10 | 1.77 | 1.87 | (0.07 | ) | 12.79 | 17.01 | (i) | 68,753 | 1.27 | (i) | 1.27 | (i) | 0.76 | (i) | 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 | (j) | 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 | (j) | 10 | |||||||||||||||||||||||||||||||
Class Y | ||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 08/31/12 | 13.40 | 0.26 | 2.06 | 2.32 | (0.29 | ) | 15.43 | 17.64 | 14,518 | 0.40 | (f) | 0.42 | (f) | 1.80 | (f) | 3 | ||||||||||||||||||||||||||||||||
Year ended 08/31/11 | 11.48 | 0.23 | 1.86 | 2.09 | (0.17 | ) | 13.40 | 18.21 | 16,824 | 0.36 | 0.36 | 1.67 | 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 | |||||||||||||||||||||||||||||||
(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. Not annualized for periods less than one year, if applicable. | |
(c) | Net assets, end of period, for the years ended August 31, 2009 through August 31, 2008 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% and 0.00% for the years ended 2009 and 2008, respectively. The rebate was less than 0.005% for the years ended 2009 and 2008. | |
(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) of $385,217, 28,806, 71,894 and 16,377 for Class A, Class B, Class C and Class Y shares, respectively. | |
(g) | Ratio of net investment income (loss) to average net assets without fee waivers and/or expense reimbursements was 1.96% and 1.43%, respectively, for the year ended August 31, 2009 through August 31, 2008, respectively. | |
(h) | Ratio of net investment income (loss) to average net assets without fee waivers and/or expense reimbursements was 1.21% and 0.68%, respectively, for the year ended August 31, 2009 through August 31, 2008, respectively. | |
(i) | 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. | |
(j) | Ratio of net investment income (loss) to average net assets without fee waivers and/or expense reimbursements was 1.21% and 0.69%, respectively, for the year ended August 31, 2009 through August 31, 2008, respectively. | |
(k) | Ratio of net investment income (loss) to average net assets without fee waivers and/or expense reimbursements was 2.21% and 1.68%, respectively, for the year ended August 31, 2009 through August 31, 2008, 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, 2012, 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 three 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, 2012 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 23, 2012
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, 2012 through August 31, 2012.
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 | (03/01/12) | (08/31/12)1 | Period2 | (08/31/12) | Period2 | Ratio | ||||||||||||||||||||||||
Class A | $ | 1,000.00 | $ | 1,038.10 | $ | 3.33 | $ | 1,021.87 | $ | 3.30 | 0.65 | % | ||||||||||||||||||
Class B | 1,000.00 | 1,035.30 | 7.16 | 1,018.10 | 7.10 | 1.40 | ||||||||||||||||||||||||
Class C | 1,000.00 | 1,035.00 | 7.16 | 1,018.10 | 7.10 | 1.40 | ||||||||||||||||||||||||
Class Y | 1,000.00 | 1,039.80 | 2.05 | 1,023.13 | 2.03 | 0.40 | ||||||||||||||||||||||||
1 | The actual ending account value is based on the actual total return of the Fund for the period March 1, 2012 through August 31, 2012, 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 184/366 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 19-20, 2012, 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, 2012. 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 primarily 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, 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 and on what terms 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. In addition to meetings with Invesco Advisers and fund 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 independent legal 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 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 previously approved by a different board that, at the time, was responsible for overseeing Morgan Stanley and Van Kampen funds, which have become Invesco Funds following the acquisition of the retail mutual fund business of Morgan Stanley. 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 or factor 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 20, 2012, 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 Sub-Committees 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 prior relationship and 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 consistent 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 consistent 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 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 Objective Funds Index. The Board noted that
30 Invesco S&P 500 Index Fund
performance of Class A shares of the Fund was in the fourth quintile of the performance universe for the one year period and the third 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. 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 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 and were assisted in their review by a report from the Senior Officer. 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. The Board noted that Invesco Advisers proposes sharing economies of scale in administration expenses by lowering per class administrative fees.
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 for the year ended December 31, 2011. 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 Invesco Funds. The Board noted that Invesco Advisers and its subsidiaries did not make a profit from managing the Fund as a result of fee and expense waivers. The Board received and accepted information from Invesco Advisers demonstrating that 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.
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 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 also considered periodic reports from the Chief Compliance Officer of the Invesco Funds demonstrating that these arrangements are consistent with regulatory requirements. The Board did not deem the soft dollar arrangements to be inappropriate.
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.
The Board also considered use of an affiliated broker to execute certain trades for the Fund and that such trades are executed in compliance with rules under the Investment Company Act of 1940, as amended.
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, 2012:
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 1000, 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 | Other Directorship(s) | |||||||
Name, Year of Birth and | Trustee and/or | Principal Occupation(s) | Funds in | Held by Trustee During | ||||
Position(s) Held with the Trust | Officer Since | During Past 5 Years | Fund Complex Overseen by Trustee | Past 5 Years | ||||
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 | 129 | 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. | 129 | None | ||||
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. | ||||||||
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 certain funds in the Fund Complex | 147 | Director of the Mutual Fund Directors Forum, a nonprofit membership organization for investment directors; Chairman and Director of the Abraham Lincoln Presidential Library Foundation; and Director of the Stevenson Center for Democracy | ||||
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 is considered an “interested person” (within the meaning of Section 2(a)(19) of the 1940 Act) of certain Funds in the Invesco Fund Complex by reason of he and his firm currently providing legal services as legal counsel to such Funds in the Invesco Fund Complex. |
T-1 Invesco S&P 500 Index Fund
Trustees and Officers—(continued)
Number of | Other Directorship(s) | |||||||
Name, Year of Birth and | Trustee and/or | Principal Occupation(s) | Funds in | Held by Trustee During | ||||
Position(s) Held with the Trust | Officer Since | During Past 5 Years | Fund Complex Overseen by Trustee | Past 5 Years | ||||
Independent Trustees | ||||||||
Bruce L. Crockett — 1944 Trustee and Chair | 2003 | Chairman, Crockett Technologies 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) | 129 | ACE Limited (insurance company); and Investment Company Institute | ||||
David C. Arch — 1945 Trustee | 2010 | Retired. Chairman and Chief Executive Officer of Blistex Inc., a consumer health care products manufacturer | 147 | Member of the Heartland Alliance Advisory Board, a nonprofit organization serving human needs based in Chicago. Board member of the Illinois Manufacturers’ Association. Member of the Board of Visitors, Institute for the Humanities, University of Michigan | ||||
Frank S. Bayley — 1939 Trustee | 2003 | Retired Formerly: Director, Badgley Funds, Inc. (registered investment company) (2 portfolios) and Partner, law firm of Baker & McKenzie | 129 | 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 | 129 | Chairman, Board of Governors, Western Golf Association, Chairman-elect, Evans Scholars Foundation and Director, Denver Film Society | ||||
Rodney F. Dammeyer — 1940 Trustee | 2010 | Chairman of CAC, LLC, a private company offering capital investment and management advisory services Formerly: Prior to January 2004, Director of TeleTech Holdings Inc.; Prior to 2002, Director of Arris Group, Inc.; Prior to 2001, Managing Partner at Equity Group Corporate Investments. Prior to 1995, Vice Chairman of Anixter International. Prior to 1985, experience includes Senior Vice President and Chief Financial Officer of Household International, Inc, Executive Vice President and Chief Financial Officer of Northwest Industries, Inc. and Partner of Arthur Andersen & Co. | 147 | 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) 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) | 129 | Director of Nature’s Sunshine Products, Inc. | ||||
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) Formerly: Chief Executive Officer, Texana Timber LP (sustainable forestry company) and member of the U.S. House of Representatives | 129 | Insperity (formerly known as Administaff) | ||||
Carl Frischling — 1937 Trustee | 2003 | Partner, law firm of Kramer Levin Naftalis and Frankel LLP | 129 | Director, Reich & Tang Funds (6 portfolios) | ||||
Prema Mathai-Davis — 1950 Trustee | 2003 | Retired Formerly: Chief Executive Officer, YWCA of the U.S.A. | 129 | None | ||||
Larry Soll — 1942 Trustee | 1997 | Retired Formerly, Chairman, Chief Executive Officer and President, Synergen Corp. (a biotechnology company) | 129 | None | ||||
T-2 Invesco S&P 500 Index Fund
Trustees and Officers—(continued)
Number of | Other Directorship(s) | |||||||
Name, Year of Birth and | Trustee and/or | Principal Occupation(s) | Funds in | Held by Trustee | ||||
Position(s) Held with the Trust | Officer Since | During Past 5 Years | Fund Complex Overseen by Trustee | During Past 5 Years | ||||
Independent Trustees—(continued) | ||||||||
Hugo F. Sonnenschein — 1940 Trustee | 2010 | Distinguished Service Professor and President Emeritus of the University of Chicago and the Adam Smith Distinguished Service Professor in the Department of Economics at the University of Chicago. Prior to July 2000, President of the University of Chicago | 147 | 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 | 129 | None | ||||
Other Officers | ||||||||
Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer, The 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 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) | N/A | N/A | ||||
Lisa O. Brinkley — 1959 Vice President | 2004 | Global Assurance Officer, Invesco Ltd. and Vice President, The Invesco Funds Formerly: Chief Compliance Officer, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.), Invesco Investment Services, Inc.(formerly known as Invesco Aim Investment Services, 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 | ||||
T-3 Invesco S&P 500 Index Fund
Trustees and Officers—(continued)
Number of | Other Directorship(s) | |||||||
Name, Year of Birth and | Trustee and/or | Principal Occupation(s) | Funds in | Held by Trustee | ||||
Position(s) Held with the Trust | Officer Since | During Past 5 Years | Fund Complex Overseen by Trustee | During Past 5 Years | ||||
Other Officers—(continued) | ||||||||
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., INVESCO Global Asset Management Limited, Invesco Management Company Limited and INVESCO Management S.A.; 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) 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) | 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); and 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 Formerly: Vice President, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc. | N/A | N/A | ||||
Yinka Akinsola — 1977 Anti-Money Laundering Compliance Officer | 2011 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.), Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.), Invesco Management Group, Inc., The Invesco Funds, Invesco Van Kampen Closed-End Funds, Van Kampen Exchange Corp., Van Kampen Funds Inc., PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, and PowerShares Actively Managed Exchange-Traded Fund Trust Formerly: Regulatory Analyst III, Financial Industry Regulatory Authority (FINRA). | N/A | N/A | ||||
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; Vice President, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) and Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.) Formerly: Senior Vice President, Van Kampen Investments Inc.; Senior Vice President and Chief Compliance Officer, Invesco Advisers, Inc. and Invesco Aim Capital Management, Inc.; Chief Compliance Officer, INVESCO Private Capital Investments, Inc. (holding company), Invesco Private Capital, Inc. (registered investment adviser), Invesco Global Asset Management (N.A.), Inc., Invesco Senior Secured Management, Inc. (registered investment adviser) and Van Kampen Investor Services Inc., 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 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 1000 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 1000 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 1000 Houston, TX 77046-1173 | Custodian State Street Bank and Trust Company 225 Franklin Street 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 shown below.
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, 2012, 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 US 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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SEC file numbers: 811-09913 and 333-36074 | 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 | Provided for fiscal | |||||||||||||||
Fees Billed for | year end 2012 | Fees Billed for | year end 2011 | |||||||||||||
Services Rendered to | Pursuant to Waiver of | Services Rendered to | Pursuant to Waiver of | |||||||||||||
the Registrant for | Pre-Approval | the Registrant for | Pre-Approval | |||||||||||||
fiscal year end 2012 | Requirement(1) | fiscal year end 2011 | Requirement(1) | |||||||||||||
Audit Fees | $ | 404,100 | N/A | $ | 421,750 | N/A | ||||||||||
Audit-Related Fees(2) | $ | 0 | 0 | % | $ | 25,500 | 0 | % | ||||||||
Tax Fees(3) | $ | 104,700 | 0 | % | $ | 194,500 | 0 | % | ||||||||
All Other Fees | $ | 0 | 0 | % | $ | 0 | 0 | % | ||||||||
Total Fees | $ | 508,800 | 0 | % | $ | 641,750 | 0 | % |
PWC billed the Registrant aggregate non-audit fees of $104,700 for the fiscal year ended 2012, and $220,000 for the fiscal year ended 2011, 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, 2012 includes fees billed for reviewing tax returns and consultation services. Tax fees for the fiscal year end August 31, 2011 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 | |||||||||||||
2012 That Were | Provided for fiscal year | 2011 That Were | Provided for fiscal year | |||||||||||||
Required | end 2012 Pursuant to | Required | end 2011 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 2012, and $0 for the fiscal year ended 2011, 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 August 13, 2012, 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 August 13, 2012, 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 | |||
Principal Executive Officer | ||||
Date: | November 8, 2012 |
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 | |||
Principal Executive Officer | ||||
Date: | November 8, 2012 | |||
By: | /s/ Sheri Morris | |||
Principal Financial Officer | ||||
Date: | November 8, 2012 |
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. |