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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 811-03826
AIM Sector Funds (Invesco Sector Funds)
11 Greenway Plaza, Suite 100 Houston, Texas 77046
(Address of principal executive offices) (Zip code)
Philip A. Taylor 11 Greenway Plaza, Suite 100 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: 4/30
Date of reporting period: 4/30/10
Item 1. Reports to Stockholders.
| Annual Report to Shareholders April 30, 2010 |
| Invesco Energy Fund |
| Effective April 30, 2010, AIM Energy Fund was renamed Invesco Energy Fund. |
| 2 Letters to Shareholders |
| 4 Performance Summary |
| 4 Management Discussion |
| 6 Long-Term Fund Performance |
| 8 Supplemental Information |
| 9 Schedule of Investments |
| 13 Financial Statements |
| 15 Notes to Financial Statements |
| 23 Financial Highlights |
| 24 Auditor’s Report |
| 25 Fund Expenses |
| 27 Tax Information |
| T-1 Trustees and Officers |
Letters to Shareholders
Dear Shareholders:
In the 13 months covered by this report, the U.S. economy improved dramatically from where it stood in early 2009. In the third quarter of 2009, the economy ended its year-long contraction and began growing again. Major U.S. stock market indexes rose sharply in anticipation of economic improvement; despite occasional volatility, they continued rising as evidence mounted that the recovery was genuine. Over the last year, global equity indexes also rallied strongly from their early 2009 lows.
While economic improvement was undeniable, unemployment remained high by historical standards, and unfortunately it appeared unlikely that the jobless rate would decline significantly anytime soon. Stubbornly high unemployment continued to cast a pall over the nation’s economic outlook.
Timely communication
Unpredictable and volatile markets, together with economic uncertainty, caused many of you to seek information relative to your investments. Some of you contacted your financial advisers to ask questions and obtain guidance. Others visited our website, invesco.com, where we offer timely market commentary, investor education information and sector updates. In particular, I recommend the Investment Perspectives articles featured on our home page; they are written by Invesco’s investment professionals and cover a wide range of topics that are updated regularly.
Also on our website, you’ll find a commentary from me that discusses the name change we made on April 30 — from Invesco Aim to Invesco. Some of the changes related to this event include all AIM funds being renamed Invesco funds. (It’s important to note that the funds’ investment strategies and objectives have not changed.) You’ll notice on this report the Invesco logo has replaced the previous Invesco Aim logo. And our new Web address is now invesco.com. These changes are the latest steps in the rebranding process we began two years ago, when we added Invesco in front of Aim. For more information about the change, please read the shareholder Q&A on the account balance page at invesco.com.
At invesco.com you can also access your Fund’s latest quarterly commentary. Simply click on Mutual Funds inside the Financial Products box. Then, in the Fund Information box, click on Quarterly Commentary and select your Fund.
Timely information like that available on our website — together with the advice and guidance of a trusted financial adviser — can be especially useful in uncertain times. Market volatility and economic uncertainty are two factors that can prompt investors to abandon their long-term saving and investment plans. A financial adviser can show you just how costly that could be over the long term — and can explain that saving more and investing more regularly is a time-tested way to build a solid portfolio. He or she can help you identify appropriate investments, given your individual risk tolerance, time horizon and investment goals.
Taking our business forward
Invesco’s acquisition of Morgan Stanley’s retail asset management business, including Van Kampen Investments, was completed on June 1, 2010. Our two companies have similar investment philosophies and cultures, as well as complementary investment expertise. I believe this combination represents the next step in our company’s evolution — and will allow us to better serve you through:
| • | Greater efficiencies and cost savings | ||
| • | A broader range of investment options | ||
| • | A continued commitment to investment excellence, with complementary portfolio management expertise |
While market conditions change from time to time, our commitment to putting our clients first, helping you achieve your financial goals and providing excellent customer service will not.
If you have questions about your account, please contact one of our client services representatives at 800 959 4246. If you have a question or comment for me, please email me at phil@invesco.com.
Thank you for investing with us.
Sincerely,
Philip Taylor
Senior Managing Director, Invesco
Senior Managing Director, Invesco
2 Invesco Energy Fund
Dear Fellow Shareholders:
By all accounts, last year was a challenging year for all of us. Although the economy and financial markets whipsawed, the final months of the decade concluded with many of us feeling somewhat more optimistic about 2010 as we began to see the markets and economy evidence the first green shoots of recovery.
Perhaps the most valuable takeaway from last year is the manner in which it underscored the importance of adopting the long-term, appropriately diversified investment strategy I’ve mentioned in my previous letters. If anything, last year was the litmus test for this approach.
Please be assured that your Board continues to oversee the Invesco Funds with a strong sense of responsibility for your savings and a deep appreciation for your trust. We have already begun the annual review and management contract renewal process and will continue to seek to manage costs and reward performance in ways that put your interests first. (It might also interest you to know that the Board currently has five committees — Compliance, Audit, Governance, Investments, and Valuation Distribution and Proxy Voting — whose members exercise oversight to maintain the Invesco Funds’ “Investor First” orientation.)
To that end, some of you may have seen that Invesco is assuming the management of the Van Kampen family of mutual funds as well as Morgan Stanley’s retail funds. We view this addition as an excellent opportunity to provide you, our shareholders, access to an even broader range of well-diversified mutual funds under the Invesco umbrella. I’ll keep you updated on the work we’re doing to deliver the value of this acquisition to our shareholders in my upcoming letters.
As always, you are welcome to contact me at bruce@brucecrockett.com with any questions or concerns you may have. We look forward to representing you and serving you in the coming year.
Sincerely,
Bruce L. Crockett
Independent Chair
Invesco Funds Board of Trustees
Independent Chair
Invesco Funds Board of Trustees
3 Invesco Energy Fund
Management’s Discussion of Fund Performance
Performance summary
During the 13 months ended April 30, 2010, the U.S. economy showed signs of improvement, causing major stock market indexes to rise sharply. Invesco Energy Fund underperformed its broad market index, the S&P 500 Index, as energy stocks in general lagged the broad market. At net asset value, however, all share classes of the Fund outperformed the Fund’s style-specific index, the Dow Jones U.S. Oil & Gas Index, largely due to the index’s heavy weighting in integrated oil and gas stocks, which generally lagged other energy sub-sectors during the reporting period.
Your Fund’s long-term performance appears later in this report.
Fund vs. Indexes
Total returns, 3/31/09 to 4/30/10, 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 | 46.01 | % | ||
| Class B Shares | 44.89 | |||
| Class C Shares | 44.94 | |||
| Class Y Shares | 46.37 | |||
| Investor Class Shares | 46.03 | |||
| Institutional Class Shares | 46.66 | |||
S&P 500 Index▼(Broad Market Index) | 47.26 | |||
Dow Jones U.S. Oil & Gas Index▼(Style-Specific Index) | 34.32 | |||
Lipper Natural Resource Funds Index▼(Peer Group Index) | 49.09 |
| ▼ | Lipper Inc. |
How we invest
Your Fund invests in companies involved in the exploration, production, service, drilling, transportation, refining and marketing of oil, natural gas and other forms of energy. We seek to own firms that have the potential to increase unit output through exploration, development or innovation. We believe companies with rising production volumes that can also control costs may earn superior rates of return, enabling them to grow earnings independent of oil and natural gas prices.
We combine bottom-up fundamental analysis with top-down macroeconomic industry analysis in our stock selection process. We focus on companies that have the following characteristics:
| • | Cash flow and free cash flow | |
| • | Sustainable growth potential in revenues and earnings | |
| • | High returns on capital | |
| • | Cost control | |
| • | Low relative price-to-earnings (P/E) ratios within their sub-sector with greater-than-expected growth opportunities | |
| • | Rising volume profiles |
Typically, we hold 40-50 stocks. This limited number of positions allows us to know our companies, their managements, their business structures and how their products and services fit into the energy value chain — the process that moves oil and natural gas from the ground to the consumer.
Fund data as of 4/30/10
Portfolio Composition
By sector
| Energy | 94.9 | % | ||
| Utilities | 2.5 | |||
| Materials | 0.9 | |||
| Industrials | 0.7 | |||
Money Market Funds | ||||
Plus Other Assets Less Liabilities | 1.0 | |||
| Total Net Assets | $1.6 billion | |||
| Total Number of Holdings* | 50 | |||
Top 10 Equity Holdings*
| 1. Occidental Petroleum Corp. | 5.5 | % | ||
| 2. Halliburton Co. | 5.1 | |||
| 3. Apache Corp. | 4.0 | |||
| 4. Schlumberger Ltd. | 3.8 | |||
| 5. Anadarko Petroleum Corp. | 3.6 | |||
| 6. Oceaneering International, Inc. | 3.3 | |||
| 7. Baker Hughes Inc. | 3.2 | |||
| 8. Weatherford International Ltd. | 3.2 | |||
| 9. Exxon Mobil Corp. | 3.0 | |||
| 10. Southwestern Energy Co. | 2.9 |
The Fund’s holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
| * | Excluding money market fund holdings. |
We may sell or reduce our position in a stock when:
| • | A security reaches its price target. | |
| • | A change in fundamentals occurs — either company specific or industry wide. | |
| • | A change in management occurs. | |
| • | A more attractive investment opportunity is identified. |
Market conditions and your Fund
The U.S. economy provided signs of improvement during the period, offering indications that the economy has transitioned from a contraction phase into an expansionary phase. Nevertheless, the pace of recovery remained modest and the transition from government stimulus-induced growth to a private economic recovery was uncertain. The U.S. Federal Reserve’s (the Fed) federal funds target rate remained quite low, in a range of between zero and 0.25%.1 Real gross domestic product (GDP) registered positive growth during the reporting period with quarterly growth, on an annualized basis, of 2.2%, 5.6% and 3.0% for the third and fourth quarter of 2009, and the first quarter 2010, respectively.2 Inflation, measured by the seasonally adjusted Consumer Price Index, remained relatively benign. While labor markets improved as layoffs moderated, new hiring remained quite weak. Unemployment, after climbing steadily throughout 2009, fell slightly during the first quarter of 2010 and remained at a rate of 9.9% nationwide as of April 2010.3
Against this backdrop, all stock market sectors delivered double-digit gains for the reporting period.4 Telecommunication services, utilities and health care — traditionally more defensive sectors — were among the laggard sectors of the S&P 500 Index.4 The financials, consumer discretionary, industrials and information technology sectors were favored and delivered the greatest returns during the reporting period.4 Despite delivering strong performance, the energy sector lagged the broad market as measured by the S&P 500 Index for the reporting period.4
Crude oil prices, as measured by West Texas Intermediate Crude, generally rose during the reporting period to close at $86 a barrel.5 Although prices more than doubled since the low reached in February 2009, prices were still significantly lower than the $147 a barrel all-time high reached during the summer of 2008.5
4 Invesco Energy Fund
Organization of Petroleum Exporting Countries (OPEC) production curtailments, stronger than expected non-Organization for Economic Co-operation and Development (OECD) demand, and a weak U.S. dollar were the primary factors in the rise in crude prices.
Despite ending the reporting period essentially unchanged, natural gas prices — as measured at Henry Hub — were quite volatile during the fiscal year. U.S. natural gas fundamentals remained challenged as emerging shale plays continued to offer substantial productivity improvements over prior gas wells, and as demand remained relatively weak given economic weakness.
All energy sub-sectors contributed positively to Fund performance during the reporting period. The Fund’s utilities holdings, although minor, detracted from performance, however. Fund performance benefited most from holdings in:
| • | oil and gas exploration and production | |
| • | oil and gas equipment and services |
The Fund’s benchmark-relative underweight exposure to integrated oil and gas, a sub-sector which is generally more defensive and less leveraged to commodity prices, helped the Fund’s performance relative to the Dow Jones U.S. Oil & Gas Index.
Top contributors to Fund performance included diversified oilfield service providers Halliburton and Weatherford International. Halliburton is a global oilfield services provider headquartered in Houston. We believe the company is undervalued relative to its peers and inexpensive based on several measures, including relative and historical cash flow and earnings multiples. Weatherford International also offers a wide array of services which help boost oil and natural gas production, but has less diverse product mix than Halliburton.
On the other hand, FMC Technologies was among the top detractors from Fund performance during the reporting period.
We continue to believe the energy sector offers the potential for long-term appreciation for the following reasons:
| • | Oil supplies remain constrained, and global consumption should continue to expand. | |
| • | The world is likely to derive most of its energy from hydrocarbons for the foreseeable future, as alternatives remain largely uneconomical. | |
| • | Global development and industrialization, driven by fast-growing nations such as India and China, is likely to continue, resulting in a growing need for coal, crude oil and natural gas. | |
| • | Virtually all new sources of crude oil supply merely replaces that which is being lost to depletion. |
As always, we would like to caution investors against making investment decisions based on short-term performance. We recommend that you consult a financial adviser to discuss your individual financial program.
Thank you for your continued investment in Invesco Energy Fund.
| 1 | U.S. Federal Reserve | |
| 2 | Bureau of Economic Analysis | |
| 3 | Bureau of Labor Statistics | |
| 4 | Lipper Inc. | |
| 5 | Bloomberg, L.P. |
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 index disclosures later in this report.
Andrew Lees
Portfolio manager, is lead manager of Invesco Energy Fund. He began his investment career in 1994 and joined Invesco in 2005. Mr. Lees earned a B.A. in economics from the University of Western Ontario and an M.B.A. with concentrations in finance and accounting from McGill University.
Tyler Dann II
Chartered Financial Analyst, portfolio manager, is manager of Invesco Energy Fund. He joined Invesco in 2004. He serves on the board of directors of the National Association of Petroleum Investment Analysts and is a member of the CFA Society of San Francisco. Mr. Dann earned an A.B. from Princeton University.
Assisted by the Energy Team
Fund data as of 3/31/10
Portfolio Composition
By sector
| Energy | 93.0 | % | ||
| Utilities | 2.3 | |||
| Materials | 1.0 | |||
| Industrials | 0.6 | |||
Money Market Funds | ||||
Plus Other Assets Less Liabilities | 3.1 | |||
| Total Net Assets | $1.6 billion | |||
| Total Number of Holdings* | 48 | |||
Top 10 Equity Holdings*
| 1. Occidental Petroleum Corp. | 5.2 | % | ||
| 2. Halliburton Co. | 4.5 | |||
| 3. Anadarko Petroleum Corp. | 3.8 | |||
| 4. Apache Corp. | 3.6 | |||
| 5. Cameron International Corp. | 3.4 | |||
| 6. Schlumberger Ltd. | 3.4 | |||
| 7. Oceaneering International, Inc. | 3.2 | |||
| 8. Transocean Ltd. | 3.1 | |||
| 9. Baker Hughes Inc. | 3.1 | |||
| 10. Southwestern Energy Co. | 3.0 |
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. |
5 Invesco Energy Fund
Your Fund’s Long-Term Performance
Results of a $10,000 Investment — Oldest Share Class without Sales Charges since Inception
Fund data from 1/19/84, index data from 1/31/84
| 1 | Lipper Inc. |
Results of a $10,000 Investment — Oldest Share Class with Sales Charges since Inception
Index data from 1/31/00, Fund data from 2/14/00
| 1 | Lipper Inc. |
Past performance cannot guarantee comparable future results.
The performance data shown in the first chart above is that of the Fund’s Investor class shares. The performance of the Fund’s other share classes will differ primarily due to different sales charge structures and class expenses and may be greater than or less than the performance of the Fund’s Investor Class shares. The data shown in this chart includes reinvested distributions, Fund expenses and management fees. Index results include reinvested dividends.
The performance data shown in the second chart above is that of the Fund’s Class C shares. The performance of the Fund’s other share classes will differ primarily due to different sales charge structures and class expenses and may be greater than or less than the performance of the Fund’s Class C shares. The data shown in the second chart above includes reinvested distributions, Fund expenses and management fees. Index results include reinvested dividends, but they do not reflect sales charges.
Performance of the peer group reflects fund expenses and management fees; performance of a market index does not. Performance shown in the charts and table does not reflect deduction of taxes a shareholder would pay on Fund distributions or sale of Fund shares.
Both charts above are logarithmic charts, which present the fluctuations in the value of the Fund’s share class and its indexes. We believe that a logarithmic chart is more effective than other types of charts in illustrating changes in value during the early years shown in the chart. The vertical axis, the one that indicates the dollar value of an investment, is constructed with each segment representing a percent change in the value of the investment. In both charts, each segment represents a doubling, or 100% change, in the value of the investment.
6 Invesco Energy Fund
Average Annual Total Returns
As of 4/30/10, including maximum applicable sales charges
Class A Shares | ||||
| Inception (3/28/02) | 13.28 | % | ||
| 5 Years | 11.57 | |||
| 1 Year | 28.53 | |||
Class B Shares | ||||
| Inception (3/28/02) | 13.26 | % | ||
| 5 Years | 11.74 | |||
| 1 Year | 30.00 | |||
Class C Shares | ||||
| Inception (2/14/00) | 14.34 | % | ||
| 10 Years | 12.42 | |||
| 5 Years | 12.00 | |||
| 1 Year | 34.00 | |||
Class Y Shares | ||||
| 10 Years | 13.27 | % | ||
| 5 Years | 12.93 | |||
| 1 Year | 36.34 | |||
Investor Class Shares | ||||
| Inception (1/19/84) | 10.24 | % | ||
| 10 Years | 13.22 | |||
| 5 Years | 12.84 | |||
| 1 Year | 35.98 | |||
Institutional Class Shares | ||||
| Inception (1/31/06) | 3.55 | % | ||
| 1 Year | 36.58 |
Average Annual Total Returns
As of 3/31/10, the most recent calendar quarter-end including maximum applicable sales charges
Class A Shares | ||||
| Inception (3/28/02) | 13.17 | % | ||
| 5 Years | 9.56 | |||
| 1 Year | 39.78 | |||
Class B Shares | ||||
| Inception (3/28/02) | 13.15 | % | ||
| 5 Years | 9.72 | |||
| 1 Year | 41.81 | |||
Class C Shares | ||||
| Inception (2/14/00) | 14.26 | % | ||
| 10 Years | 12.29 | |||
| 5 Years | 9.98 | |||
| 1 Year | 45.85 | |||
Class Y Shares | ||||
| 10 Years | 13.12 | % | ||
| 5 Years | 10.90 | |||
| 1 Year | 48.29 | |||
Investor Class Shares | ||||
| Inception (1/19/84) | 10.20 | % | ||
| 10 Years | 13.08 | |||
| 5 Years | 10.81 | |||
| 1 Year | 47.96 | |||
Institutional Class Shares | ||||
| Inception (1/31/06) | 3.17 | % | ||
| 1 Year | 48.57 |
Class Y shares incepted on October 3, 2008. Performance shown prior to that date is that of Investor Class shares and includes the 12b-1 fees applicable to Investor Class shares. Investor Class shares 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 Y, Investor Class and Institutional Class shares was 1.17%, 1.92%, 1.92%, 0.92%, 1.17% and 0.71%, respectively. 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, Investor Class and Institutional Class shares was 1.18%, 1.93%, 1.93%, 0.93%, 1.18% and 0.72%, 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, 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 on Class B and Class C shares, performance would have been lower.
New Fiscal Year-End
Since our last report to you, the Fund’s fiscal year-end was changed from March 31 to April 30.
7 Investor Energy Fund
Invesco Energy Fund’s investment objective is capital growth.
| • | Unless otherwise stated, information presented in this report is as of April 30, 2010, and is based on total net assets. | |
| • | Unless otherwise noted, all data provided by Invesco. | |
| • | To access your Fund’s reports/prospectus visit invesco.com/fundreports. |
About share classes
| • | Effective September 30, 2003, for qualified plans only, those previously established are eligible to purchase Class B shares of any Invesco fund. Please see the prospectus for more information. | |
| • | All Investor Class shares are closed to new investors. Contact your financial adviser about purchasing our other share classes. | |
| • | 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
| • | The businesses in which the Fund invests may be adversely affected by foreign government, federal or state regulations on energy production, distribution and sale. Short-term fluctuations in commodity prices may influence Fund returns and increase price fluctuations of the Fund’s shares. | |
| • | Prices of equity securities change in response to many factors, including the historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity. | |
| • | Foreign securities have additional risks, including exchange rate changes, political and economic upheaval, relative lack of information, relatively low market liquidity, and the potential lack of strict financial and accounting controls and standards. | |
| • | Since a large percentage of the Fund’s assets may be invested in securities of a limited number of companies, each investment has a greater effect on the Fund’s overall performance, and any change in the value of those securities could significantly affect the value of your investment in the Fund. | |
| • | There is no guarantee that the investment techniques and risk analysis used by the Fund’s portfolio managers will produce the desired results. | |
| • | The prices of securities held by the Fund may decline in response to market 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. |
About indexes used in this report
| • | The SAP 500® Index is an unmanaged index considered representative of the U.S. stock market. | |
| • | The Dow Jones U.S. Oil & Gas Index is an unmanaged index considered representative of the U.S. energy market. | |
| • | The Lapper Natural Resource Funds Index is an unmanaged index considered representative of natural resource funds tracked by Lipper. | |
| • | 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. | |
| • | 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 reflects fund expenses; performance of a market index does not. |
Other information
| • | The Chartered Financial Analyst® (CFA®) designation is globally recognized and attests to a charterholder’s success in a rigorous and comprehensive study program in the field of investment management and research analysis. | |
| • | 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. | |
| • | 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.
Fund Nasdaq Symbols | ||||
| Class A Shares | IENAX | |||
| Class B Shares | IENBX | |||
| Class C Shares | IEFCX | |||
| Class Y Shares | IENYX | |||
| Investor Class Shares | FSTEX | |||
| Institutional Class Shares | IENIX | |||
| NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
8 Invesco Energy Fund
Schedule of Investments(a)
April 30, 2010
| Shares | Value | |||||||
| Common Stocks & Other Equity Interests–99.03% | ||||||||
| Coal & Consumable Fuels–6.06% | ||||||||
| Arch Coal, Inc. | 1,309,000 | $ | 35,343,000 | |||||
| Massey Energy Co. | 619,000 | 22,673,970 | ||||||
| Peabody Energy Corp. | 835,000 | 39,011,200 | ||||||
| 97,028,170 | ||||||||
| Construction & Engineering–0.71% | ||||||||
| Fluor Corp. | 215,000 | 11,360,600 | ||||||
| Diversified Metals & Mining–0.93% | ||||||||
| Walter Energy, Inc. | 183,000 | 14,788,230 | ||||||
| Gas Utilities–1.91% | ||||||||
| EQT Corp. | 704,000 | 30,616,960 | ||||||
| Independent Power Producers & Energy Traders–0.54% | ||||||||
| Ormat Technologies Inc. | 273,000 | 8,697,780 | ||||||
| Integrated Oil & Gas–17.80% | ||||||||
| BG Group PLC (United Kingdom) | 529,000 | 8,880,236 | ||||||
| Chevron Corp. | 409,459 | 33,346,341 | ||||||
| ConocoPhillips | 422,851 | 25,028,551 | ||||||
| Exxon Mobil Corp. | 703,000 | 47,698,550 | ||||||
| Occidental Petroleum Corp. | 989,000 | 87,684,740 | ||||||
| Royal Dutch Shell PLC (United Kingdom) | 638,403 | 19,996,477 | ||||||
| Suncor Energy Inc. (Canada) | 1,051,000 | 35,912,670 | ||||||
| Total S.A.–ADR (France) | 484,000 | 26,319,920 | ||||||
| 284,867,485 | ||||||||
| Oil & Gas Drilling–8.63% | ||||||||
| Ensco PLC–ADR (United Kingdom) | 949,000 | 44,773,820 | ||||||
| Helmerich & Payne, Inc. | 1,136,000 | 46,144,320 | ||||||
Nabors Industries Ltd.(b) | 518,000 | 11,173,260 | ||||||
Pride International, Inc.(b) | 257,265 | 7,802,848 | ||||||
Transocean Ltd.(b) | 389,138 | 28,193,048 | ||||||
| 138,087,296 | ||||||||
| Oil & Gas Equipment & Services–29.67% | ||||||||
| Baker Hughes Inc. | 1,045,000 | 51,999,200 | ||||||
Cameron International Corp.(b) | 421,064 | 16,615,185 | ||||||
| Core Laboratories N.V. (Netherlands) | 94,000 | 14,089,660 | ||||||
Dresser-Rand Group, Inc.(b) | 518,000 | 18,275,040 | ||||||
Dril-Quip, Inc.(b) | 206,000 | 11,933,580 | ||||||
FMC Technologies, Inc.(b) | 587,377 | 39,759,549 | ||||||
| Halliburton Co. | 2,672,520 | 81,912,738 | ||||||
| National-Oilwell Varco Inc. | 816,000 | 35,928,480 | ||||||
Oceaneering International, Inc.(b) | 809,000 | 52,989,500 | ||||||
| Schlumberger Ltd. | 860,000 | 61,421,200 | ||||||
| Smith International, Inc. | 811,622 | 38,763,067 | ||||||
Weatherford International Ltd.(b) | 2,821,000 | 51,088,310 | ||||||
| 474,775,509 | ||||||||
| Oil & Gas Exploration & Production–30.14% | ||||||||
| Anadarko Petroleum Corp. | 918,000 | 57,062,880 | ||||||
| Apache Corp. | 626,000 | 63,701,760 | ||||||
| Cabot Oil & Gas Corp. | 491,000 | 17,739,830 | ||||||
| Canadian Natural Resources Ltd. (Canada) | 221,000 | 17,008,365 | ||||||
Comstock Resources, Inc.(b) | 352,000 | 11,285,120 | ||||||
Continental Resources, Inc.(b) | 803,000 | 39,475,480 | ||||||
| Devon Energy Corp. | 228,000 | 15,351,240 | ||||||
| EOG Resources, Inc. | 348,000 | 39,017,760 | ||||||
Forest Oil Corp.(b) | 468,000 | 13,712,400 | ||||||
Newfield Exploration Co.(b) | 540,000 | 31,422,600 | ||||||
| Noble Energy, Inc. | 334,000 | 25,517,600 | ||||||
| Range Resources Corp. | 849,000 | 40,548,240 | ||||||
Southwestern Energy Co.(b) | 1,172,000 | 46,504,960 | ||||||
| Talisman Energy Inc. (Canada) | 1,377,000 | 23,464,080 | ||||||
Ultra Petroleum Corp.(b) | 655,000 | 31,289,350 | ||||||
| XTO Energy, Inc. | 193,000 | 9,171,360 | ||||||
| 482,273,025 | ||||||||
| Oil & Gas Refining & Marketing–1.02% | ||||||||
| Valero Energy Corp. | 783,000 | 16,278,570 | ||||||
| Oil & Gas Storage & Transportation–1.62% | ||||||||
| Williams Cos., Inc. (The) | 1,099,000 | 25,947,390 | ||||||
| Total Common Stocks & Other Equity Interests (Cost $1,297,719,771) | 1,584,721,015 | |||||||
| Money Market Funds–2.56% | ||||||||
Liquid Assets Portfolio–Institutional Class(c) | 20,453,911 | 20,453,911 | ||||||
Premier Portfolio–Institutional Class(c) | 20,453,911 | 20,453,911 | ||||||
| Total Money Market Funds (Cost $40,907,822) | 40,907,822 | |||||||
| TOTAL INVESTMENTS–101.59% (Cost $1,338,627,593) | 1,625,628,837 | |||||||
| OTHER ASSETS LESS LIABILITIES–(1.59)% | (25,459,560 | ) | ||||||
| NET ASSETS–100.00% | $ | 1,600,169,277 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
9 Invesco Energy Fund
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.
10 Invesco Energy Fund
Schedule of Investments(a)
March 31, 2010
| Shares | Value | |||||||
| Common Stocks & Other Equity Interests–96.94% | ||||||||
| Coal & Consumable Fuels–6.26% | ||||||||
| Arch Coal, Inc. | 1,279,000 | $ | 29,225,150 | |||||
| Massey Energy Co. | 605,000 | 31,635,450 | ||||||
| Peabody Energy Corp. | 816,000 | 37,291,200 | ||||||
| 98,151,800 | ||||||||
| Construction & Engineering–0.62% | ||||||||
| Fluor Corp. | 210,000 | 9,767,100 | ||||||
| Diversified Metals & Mining–1.05% | ||||||||
| Walter Energy, Inc. | 179,000 | 16,516,330 | ||||||
| Gas Utilities–1.80% | ||||||||
| EQT Corp. | 688,000 | 28,208,000 | ||||||
| Independent Power Producers & Energy Traders–0.48% | ||||||||
Ormat Technologies Inc.(b) | 267,000 | 7,513,380 | ||||||
| Integrated Oil & Gas–18.04% | ||||||||
| BG Group PLC (United Kingdom) | 516,000 | 8,915,707 | ||||||
| BP PLC–ADR (United Kingdom) | 537,000 | 30,646,590 | ||||||
| Chevron Corp. | 360,000 | 27,298,800 | ||||||
| ConocoPhillips | 293,000 | 14,992,810 | ||||||
| Exxon Mobil Corp. | 687,000 | 46,015,260 | ||||||
| Occidental Petroleum Corp. | 966,000 | 81,665,640 | ||||||
| Petroleo Brasileiro S.A.–ADR (Brazil) | 280,000 | 12,457,200 | ||||||
| Suncor Energy Inc. (Canada) | 1,027,000 | 33,418,580 | ||||||
| Total S.A.–ADR (France) | 473,000 | 27,443,460 | ||||||
| 282,854,047 | ||||||||
| Oil & Gas Drilling–11.55% | ||||||||
| Ensco PLC–ADR (United Kingdom) | 927,000 | 41,511,060 | ||||||
| Helmerich & Payne, Inc. | 1,110,000 | 42,268,800 | ||||||
Nabors Industries Ltd.(c) | 506,000 | 9,932,780 | ||||||
Noble Corp.(c) | 921,000 | 38,516,220 | ||||||
Transocean Ltd.(c) | 566,000 | 48,891,080 | ||||||
| 181,119,940 | ||||||||
| Oil & Gas Equipment & Services–27.29% | ||||||||
| Baker Hughes Inc. | 1,021,000 | 47,823,640 | ||||||
Cameron International Corp.(c) | 1,248,000 | 53,489,280 | ||||||
| Core Laboratories N.V. (Netherlands) | 92,000 | 12,033,600 | ||||||
Dresser-Rand Group, Inc.(c) | 506,000 | 15,898,520 | ||||||
Dril-Quip, Inc.(c) | 202,000 | 12,289,680 | ||||||
| Halliburton Co. | 2,363,000 | 71,197,190 | ||||||
| National-Oilwell Varco Inc. | 1,084,000 | 43,988,720 | ||||||
Oceaneering International, Inc.(c) | 791,000 | 50,220,590 | ||||||
| Schlumberger Ltd. | 840,000 | 53,306,400 | ||||||
| Smith International, Inc. | 558,000 | 23,893,560 | ||||||
Weatherford International Ltd.(c) | 2,756,000 | 43,710,160 | ||||||
| 427,851,340 | ||||||||
| Oil & Gas Exploration & Production–27.31% | ||||||||
| Anadarko Petroleum Corp. | 822,000 | 59,866,260 | ||||||
| Apache Corp. | 558,000 | 56,637,000 | ||||||
| Cabot Oil & Gas Corp. | 480,000 | 17,664,000 | ||||||
| Canadian Natural Resources Ltd. (Canada) | 216,000 | 15,996,849 | ||||||
Continental Resources, Inc.(c) | 785,000 | 33,401,750 | ||||||
| Devon Energy Corp. | 223,000 | 14,367,890 | ||||||
| EOG Resources, Inc. | 340,000 | 31,599,600 | ||||||
Newfield Exploration Co.(c) | 528,000 | 27,482,400 | ||||||
| Noble Energy, Inc. | 327,000 | 23,871,000 | ||||||
| Range Resources Corp. | 830,000 | 38,902,100 | ||||||
Southwestern Energy Co.(c) | 1,145,000 | 46,624,400 | ||||||
| Talisman Energy Inc. (Canada) | 1,345,000 | 22,945,700 | ||||||
Ultra Petroleum Corp.(c) | 640,000 | 29,843,200 | ||||||
| XTO Energy, Inc. | 189,000 | 8,917,020 | ||||||
| 428,119,169 | ||||||||
| Oil & Gas Refining & Marketing–0.96% | ||||||||
| Valero Energy Corp. | 765,000 | 15,070,500 | ||||||
| Oil & Gas Storage & Transportation–1.58% | ||||||||
| Williams Cos., Inc. (The) | 1,074,000 | 24,809,400 | ||||||
| Total Common Stocks & Other Equity Interests (Cost $1,273,451,193) | 1,519,981,006 | |||||||
| Money Market Funds–3.13% | ||||||||
Liquid Assets Portfolio–Institutional Class(d) | 24,521,213 | 24,521,213 | ||||||
Premier Portfolio–Institutional Class(d) | 24,521,213 | 24,521,213 | ||||||
| Total Money Market Funds (Cost $49,042,426) | 49,042,426 | |||||||
| TOTAL INVESTMENTS (excluding investments purchased with cash collateral from securities on loan)–100.07% (Cost $1,322,493,619) | 1,569,023,432 | |||||||
| Investments Purchased with Cash Collateral from Securities on Loan | ||||||||
| Money Market Funds–0.05% | ||||||||
Liquid Assets Portfolio–Institutional Class (Cost $809,400)(d)(e) | 809,400 | 809,400 | ||||||
| TOTAL INVESTMENTS–100.12% (Cost $1,323,303,019) | 1,569,832,832 | |||||||
| OTHER ASSETS LESS LIABILITIES–(0.12)% | (1,958,477 | ) | ||||||
| NET ASSETS–100.00% | $ | 1,567,874,355 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
11 Invesco Energy Fund
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) | All or a portion of this security was out on loan at March 31, 2010. | |
| (c) | Non-income producing security. | |
| (d) | The money market fund and the Fund are affiliated by having the same investment adviser. | |
| (e) | The security has been segregated to satisfy the commitment to return the cash collateral received in securities lending transactions upon the borrower’s return of the securities loaned. See Note 1J. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
12 Invesco Energy Fund
Statement of Assets and Liabilities
April 30, 2010 and March 31, 2010
| April 30, | March 31, | |||||||
| 2010 | 2010 | |||||||
| Assets: | ||||||||
| Investments, at value (Cost $1,297,719,771 and $1,273,451,193, respectively)* | $ | 1,584,721,015 | $ | 1,519,981,006 | ||||
| Investments in affiliated money market funds, at value and cost | 40,907,822 | 49,851,826 | ||||||
| Total investments, at value (Cost $1,338,627,593 and $1,323,303,019, respectively) | 1,625,628,837 | 1,569,832,832 | ||||||
| Receivables for: | ||||||||
| Investments sold | 79,138,789 | — | ||||||
| Fund shares sold | 3,872,955 | 5,161,483 | ||||||
| Dividends | 170,650 | 623,884 | ||||||
| Investment for trustee deferred compensation and retirement plans | 36,841 | 36,753 | ||||||
| Other assets | 58,788 | 48,458 | ||||||
| Total assets | 1,708,906,860 | 1,575,703,410 | ||||||
| Liabilities: | ||||||||
| Payables for: | ||||||||
| Investments purchased | 104,560,785 | 2,412,166 | ||||||
| Fund shares reacquired | 2,653,290 | 3,140,668 | ||||||
| Amount due custodian | — | 15,341 | ||||||
| Collateral upon return of securities loaned | — | 809,400 | ||||||
| Accrued fees to affiliates | 1,203,325 | 1,149,737 | ||||||
| Accrued operating expenses | 179,208 | 164,759 | ||||||
| Trustee deferred compensation and retirement plans | 140,975 | 136,984 | ||||||
| Total liabilities | 108,737,583 | 7,829,055 | ||||||
| Net assets applicable to shares outstanding | $ | 1,600,169,277 | $ | 1,567,874,355 | ||||
| Net assets consist of: | ||||||||
| Shares of beneficial interest | $ | 1,529,331,548 | $ | 1,527,062,177 | ||||
| Undistributed net investment income | 1,019,422 | 895,243 | ||||||
| Undistributed net realized gain (loss) | (217,213,055 | ) | (206,612,878 | ) | ||||
| Undistributed appreciation | 287,031,362 | 246,529,813 | ||||||
| $ | 1,600,169,277 | $ | 1,567,874,355 | |||||
| Net Assets: | ||||||||
| Class A | $ | 742,986,907 | $ | 725,469,878 | ||||
| Class B | $ | 109,770,681 | $ | 108,879,672 | ||||
| Class C | $ | 207,451,204 | $ | 205,002,802 | ||||
| Class Y | $ | 48,290,786 | $ | 47,084,469 | ||||
| Investor Class | $ | 484,002,496 | $ | 475,026,485 | ||||
| Institutional Class | $ | 7,667,203 | $ | 6,411,049 | ||||
| Shares outstanding, $0.01 par value per share, unlimited number of shares authorized: | ||||||||
| Class A | 20,645,190 | 20,525,830 | ||||||
| Class B | 3,300,952 | 3,331,784 | ||||||
| Class C | 6,394,042 | 6,429,775 | ||||||
| Class Y | 1,342,958 | 1,333,548 | ||||||
| Investor Class | 13,496,547 | 13,487,669 | ||||||
| Institutional Class | 209,490 | 178,416 | ||||||
| Class A: | ||||||||
| Net asset value per share | $ | 35.99 | $ | 35.34 | ||||
| Maximum offering price per share | ||||||||
| (Net asset value of $35.99 divided by 94.50%) | ||||||||
| (Net asset value of $35.34 divided by 94.50%) | $ | 38.08 | $ | 37.40 | ||||
| Class B: | ||||||||
| Net asset value and offering price per share | $ | 33.25 | $ | 32.68 | ||||
| Class C: | ||||||||
| Net asset value and offering price per share | $ | 32.44 | $ | 31.88 | ||||
| Class Y: | ||||||||
| Net asset value and offering price per share | $ | 35.96 | $ | 35.31 | ||||
| Investor Class: | ||||||||
| Net asset value and offering price per share | $ | 35.86 | $ | 35.22 | ||||
| Institutional Class: | ||||||||
| Net asset value and offering price per share | $ | 36.60 | $ | 35.93 | ||||
| * | At March 31, 2010, securities with an aggregate value of $793,212 were on loan to brokers. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
13 Invesco Energy Fund
Statement of Operations
For the period April 1, 2010 through April 30, 2010 and the year ended March 30, 2010
| One month ended | Year ended | |||||||
| April 30, | March 31, | |||||||
| 2010 | 2010 | |||||||
| Investment income: | ||||||||
| Dividends (net of foreign withholding taxes of $1,692 and $941,336, respectively) | $ | 209,656 | $ | 19,500,158 | ||||
| Dividends from affiliated money market funds (includes securities lending income of $2,101 and $168,091, respectively) | 5,805 | 339,659 | ||||||
| Total investment income | 215,461 | 19,839,817 | ||||||
| Expenses: | ||||||||
| Advisory fees | 826,648 | 8,857,916 | ||||||
| Administrative services fees | 33,937 | 376,513 | ||||||
| Custodian fees | 468 | 55,284 | ||||||
| Distribution fees: | ||||||||
| Class A | 155,691 | 1,634,280 | ||||||
| Class B | 93,229 | 1,043,088 | ||||||
| Class C | 175,958 | 1,819,256 | ||||||
| Investor Class | 101,841 | 1,118,619 | ||||||
| Transfer agent fees — A, B, C, Y and Investor | 327,146 | 3,371,283 | ||||||
| Transfer agent fees — Institutional | 643 | 2,304 | ||||||
| Trustees’ and officers’ fees and benefits | 9,774 | 61,523 | ||||||
| Other | 26,298 | 457,717 | ||||||
| Total expenses | 1,751,633 | 18,797,783 | ||||||
| Less: Fees waived, expenses reimbursed and expense offset arrangement(s) | (7,103 | ) | (108,920 | ) | ||||
| Net expenses | 1,744,530 | 18,688,863 | ||||||
| Net investment income (loss) | (1,529,069 | ) | 1,150,954 | |||||
| Realized and unrealized gain (loss) from: | ||||||||
| Net realized gain (loss) from: | ||||||||
| Investment securities | (10,600,178 | ) | (91,870,909 | ) | ||||
| Foreign currencies | (926 | ) | (128,439 | ) | ||||
| (10,601,104 | ) | (91,999,348 | ) | |||||
| Change in net unrealized appreciation of: | ||||||||
| Investment securities | 40,471,431 | 576,969,050 | ||||||
| Foreign currencies | 30,118 | — | ||||||
| 40,501,549 | 576,969,050 | |||||||
| Net realized and unrealized gain | 29,900,445 | 484,969,702 | ||||||
| Net increase in net assets resulting from operations | $ | 28,371,376 | $ | 486,120,656 | ||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
14 Invesco Energy Fund
Statement of Changes in Net Assets
For the period April 1, 2010 through April 30, 2010 and the years ended March 31, 2010 and 2009
| One month ended | Year ended | Year ended | ||||||||||
| April 30, | March 31, | March 31, | ||||||||||
| 2010 | 2010 | 2009 | ||||||||||
| Operations: | ||||||||||||
| Net investment income (loss) | $ | (1,529,069 | ) | $ | 1,150,954 | $ | 817,868 | |||||
| Net realized gain (loss) | (10,601,104 | ) | (91,999,348 | ) | (113,798,555 | ) | ||||||
| Change in net unrealized appreciation (depreciation) | 40,501,549 | 576,969,050 | (753,545,845 | ) | ||||||||
| Net increase (decrease) in net assets resulting from operations | 28,371,376 | 486,120,656 | (866,526,532 | ) | ||||||||
| Distributions to shareholders from net investment income: | ||||||||||||
| Class A | — | (471,373 | ) | — | ||||||||
| Class Y | — | (68,506 | ) | — | ||||||||
| Investor Class | — | (316,411 | ) | — | ||||||||
| Institutional Class | — | (18,150 | ) | — | ||||||||
| Total distributions from net investment income | — | (874,440 | ) | — | ||||||||
| Distributions to shareholders from net realized gains: | ||||||||||||
| Class A | — | — | (7,219,093 | ) | ||||||||
| Class B | — | — | (1,429,499 | ) | ||||||||
| Class C | — | — | (2,088,406 | ) | ||||||||
| Class Y | — | — | (31,895 | ) | ||||||||
| Investor Class | — | — | (5,580,498 | ) | ||||||||
| Institutional Class | — | — | (50,596 | ) | ||||||||
| Total distributions from net realized gains | — | — | (16,399,987 | ) | ||||||||
| Share transactions-net: | ||||||||||||
| Class A | 4,375,505 | 48,938,107 | (6,569,055 | ) | ||||||||
| Class B | (1,048,003 | ) | (5,406,885 | ) | (19,581,568 | ) | ||||||
| Class C | (1,228,722 | ) | 23,386,251 | (3,460,678 | ) | |||||||
| Class Y | 346,552 | 31,405,042 | 9,345,797 | |||||||||
| Investor Class | 319,346 | (18,916,995 | ) | (37,993,135 | ) | |||||||
| Institutional Class | 1,158,868 | 1,697,195 | 4,195,770 | |||||||||
| Net increase (decrease) in net assets resulting from share transactions | 3,923,546 | 81,102,715 | (54,062,869 | ) | ||||||||
| Net increase (decrease) in net assets | 32,294,922 | 566,348,931 | (936,989,388 | ) | ||||||||
| Net assets: | ||||||||||||
| Beginning of year | 1,567,874,355 | 1,001,525,424 | 1,938,514,812 | |||||||||
| End of year (includes undistributed net investment income of $1,019,422, $895,243 and $747,168, respectively) | $ | 1,600,169,277 | $ | 1,567,874,355 | $ | 1,001,525,424 | ||||||
Notes to Financial Statements
April 30, 2010
NOTE 1—Significant Accounting Policies
Invesco Energy Fund, formerly AIM Energy Fund, (the “Fund”) is a series portfolio of AIM Sector Funds (Invesco Sector Funds), formerly AIM Sector Funds, (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 six 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.
15 Invesco Energy Fund
On April 30, 2010, the Fund’s fiscal year-end changed from March 31 to April 30.
The Fund’s investment objective is capital growth.
The Fund currently consists of six different classes of shares: Class A, Class B, Class C, 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 B shares and Class C shares are sold with a CDSC. Class Y, Investor Class and Institutional Class shares are sold at net asset value. Generally, Class B shares will automatically convert to Class A shares on or the about month-end which is at least eight years after the date of purchase.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
| A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. | |
| A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”). | ||
| Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded. | ||
| Debt obligations (including convertible bonds) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations, including commercial paper, having 60 days or less to maturity are recorded at amortized cost which approximates value. Debt securities are subject to interest rate and credit risks. In addition, all debt securities involve some risk of default with respect to interest and/or principal payments. | ||
| Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economical upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards. | ||
| Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including Corporate Loans. | ||
| Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value. | ||
| Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments. | ||
| B. | Securities Transactions and Investment Income — Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded on the accrual basis from settlement date. Dividend income 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 realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the realized and unrealized net 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 |
16 Invesco Energy Fund
| the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser. | ||
| The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class. | ||
| C. | Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. | |
| D. | Distributions — Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to treat a portion of the proceeds from redemptions as distributions for federal income tax purposes. | |
| E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. | |
| The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period. | ||
| F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund 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 requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. | |
| H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements, that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. | |
| I. | Other Risks — The Fund’s investments are concentrated in a comparatively narrow segment of the economy. Consequently, the Fund may tend to be more volatile than other mutual funds, and the value of the Fund’s investments may tend to rise and fall more rapidly. | |
| The businesses in which the Fund invests may be adversely affected by foreign government, federal or state regulations on energy production, distribution and sale. Short-term fluctuations in commodity prices may influence Fund returns and increase price fluctuations of the Fund’s shares. | ||
| J. | Securities Lending — The Fund may lend portfolio securities having a market value up to one-third of the Fund’s total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily by the securities lending provider. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its sponsored agencies. Cash collateral received in connection with these loans is invested in short-term money market instruments or affiliated money market funds and is shown as such on the Schedule of Investments. It is the Fund’s policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. Upon the failure of the borrower to return the securities, collateral may be liquidated and the securities may be purchased on the open market to replace the loaned securities. The Fund could experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to any loss on the collateral invested. Dividends received on cash collateral investments for securities lending transactions, which are net of compensation to counterparties, is included in Dividends from affiliates on the Statement of Operations. The aggregate value of securities out on loan is shown as a footnote on the Statement of Assets and Liabilities, if any. | |
| K. | Foreign Currency Translations — Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of |
17 Invesco Energy Fund
| 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 — A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The Funds may enter into a foreign currency contract to attempt to minimize the risk to the Funds from adverse changes in the relationship between currencies. The Funds may also enter into a foreign currency contract 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. Fluctuations in the value of these contracts are recorded as unrealized appreciation (depreciation) until the contracts are closed. When these contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains and losses on these contracts are included in the Statement of Operations. The Funds could be exposed to risk, which may be in excess of the amount reflected in the Statement of Assets and Liabilities, if counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably. |
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 Net Assets | Rate | |||
| First $350 million | 0 | .75% | ||
| Next $350 million | 0 | .65% | ||
| Next $1.3 billion | 0 | .55% | ||
| Next $2 billion | 0 | .45% | ||
| Next $2 billion | 0 | .40% | ||
| Next $2 billion | 0 | .375% | ||
| Over $8 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 Trimark Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide discretionary investment management services to the Fund based on the percentage of assets allocated to such Sub-Adviser(s).
On December 31, 2009, Invesco Aim Advisers, Inc., Invesco Aim Capital Management, Inc., Invesco Aim Private Asset Management, Inc. and Invesco Global Asset Management (N.A.), Inc. merged into Invesco Institutional (N.A.), Inc. and the consolidated adviser firm was renamed Invesco Advisers, Inc.
The Adviser has contractually agreed, through at least June 30, 2010, 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, Investor Class and Institutional Class shares to 2.00%, 2.75%, 2.75%, 1.75%, 2.00% and 1.75%, 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 waivers to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary items or non-routine items; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. The Board of Trustees or Invesco may terminate the fee waiver arrangement at any time. For the period April 1, 2010 to April 30, 2010 and year ended March 31, 2010, 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, 2010, 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 period April 1, 2010 to April 30, 2010 and the year ended March 31, 2010, the Adviser waived advisory fees of $5,339 and $76,891, respectively.
At the request of the Trustees of the Trust, Invesco Ltd. agreed to reimburse expenses incurred by the Fund in connection with market timing matters in the Invesco Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement are included in the Statement of Operations. For the period April 1, 2010 to April 30, 2010 and the year ended March 31, 2010, Invesco Ltd. reimbursed expenses of the Fund in the amount of $0 and $2,934, 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 period April 1, 2010 to April 30, 2010 and the year ended March 31, 2010, 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 period April 1, 2010 to April 30, 2010 and the year ended March 31, 2010, expenses incurred under the agreement are shown in the Statement of Operations as transfer agent fees.
18 Invesco Energy Fund
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, 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 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 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 period April 1, 2010 to April 30, 2010 and the year ended March 31, 2010, expenses incurred under the Plan 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 period April 1, 2010 to April 30, 2010, IDI advised the Fund that IDI retained $23,625 in front-end sales commissions from the sale of Class A shares and $5,000, $22,032 and $1,794 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders. During the year ended March 31, 2010, IDI advised the Fund that IDI retained $319,602 in front-end sales commissions from the sale of Class A shares and $9,116, $203,491 and $44,663 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of Invesco, IIS and/or IDI.
NOTE 3—Supplemental Information
Generally Accepted Accounting Principles (“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 risks, discount risks, 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 April 30, 2010 and March 31, 2010. 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 period April 1, 2010 to April 30, 2010, there were no significant transfers between investment levels.
| April 30, 2010 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Equity Securities | $ | 1,596,752,124 | $ | 28,876,713 | $ | — | $ | 1,625,628,837 | ||||||||
| March 31, 2010 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Equity Securities | $ | 1,560,917,125 | $ | 8,915,707 | $ | — | $ | 1,569,832,832 | ||||||||
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 period April 1, 2010 to April 30, 2010 and year ended March 31, 2010, the Fund engaged in securities purchases of $0 and $7,796,141, respectively.
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 period April 1, 2010 to April 30, 2010 and the year ended March 31, 2010, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $1,764 and $29,095, respectively.
19 Invesco Energy Fund
NOTE 6—Trustees’ and Officers’ Fees and Benefits
“Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and “Trustees’ and Officers’ Fees and Benefits” also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. “Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
During the period April 1, 2010 to April 30, 2010 and the year ended March 31, 2010, the Fund paid legal fees of $0 and $4,614, respectively, for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 7—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with The State Street Bank and Trust Company, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (ii) 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 Period April 1, 2010 to April 30, 2010 and the Years Ended March 31, 2010 and 2009:
| April 30, 2010 | March 31, 2010 | March 31, 2009 | ||||||||||
| Ordinary income | $ | — | $ | 874,440 | $ | 14,915 | ||||||
| Long-term capital gain | — | — | 16,385,072 | |||||||||
| Total distributions | $ | — | $ | 874,440 | $ | 16,399,987 | ||||||
Tax Components of Net Assets at Period-End:
As of April 30, 2010 and March 31, 2010, the components of net assets on a tax basis were as follows:
| April 30, 2010 | March 31, 2010 | |||||||
| Undistributed ordinary income | $ | 1,155,720 | $ | 1,155,720 | ||||
| Net unrealized appreciation — investments | 279,784,225 | 243,604,427 | ||||||
| Net unrealized appreciation — other investments | 30,118 | — | ||||||
| Temporary book/tax differences | (136,299 | ) | (132,039 | ) | ||||
| Post-October deferrals | — | (22,991,078 | ) | |||||
| Capital loss carryforward | (209,996,035 | ) | (180,824,852 | ) | ||||
| Shares of beneficial interest | 1,529,331,548 | 1,527,062,177 | ||||||
| Total net assets | $ | 1,600,169,277 | $ | 1,567,874,355 | ||||
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund’s net unrealized appreciation difference is attributable primarily to wash sales.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund’s temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund has a capital loss carryforward as of April 30, 2010 and March 31, 2010 which expires as follows:
| Capital Loss | ||||||||
| Carryforward* | ||||||||
| Expiration | April 30, 2010 | March 31, 2010 | ||||||
| April 30, 2016 | $ | 13,164,171 | $ | 13,164,171 | ||||
| April 30, 2017 | 167,660,681 | 167,660,681 | ||||||
| April 30, 2018 | 29,171,183 | — | ||||||
| Total capital loss carryforward | $ | 209,996,035 | $ | 180,824,852 | ||||
| * | Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. |
20 Invesco Energy 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 period April 1, 2010 to April 30, 2010 was $175,835,457 and $140,966,700 and the year ended March 31, 2010 was $812,564,713 and $670,212,426, 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 | ||||||||
| April 30, 2010 | March 31, 2010 | |||||||
| Aggregate unrealized appreciation of investment securities | $ | 295,329,697 | $ | 270,191,874 | ||||
| Aggregate unrealized (depreciation) of investment securities | (15,545,472 | ) | (26,587,447 | ) | ||||
| Net unrealized appreciation of investment securities | $ | 279,784,225 | $ | 243,604,427 | ||||
| Cost of investments for tax purposes | $ | 1,345,844,612 | $ | 1,326,228,405 | ||||
NOTE 10—Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of net operating losses, on April 30, 2010, undistributed net investment income (loss) was increased by $1,653,248, undistributed net realized gain (loss) was increased by $927 and shares of beneficial interest decreased by $1,654,175. This reclassification had no effect on the net assets of the Fund.
Primarily as a result of differing book/tax treatment of foreign currency transactions, on March 31, 2010, undistributed net investment income was decreased by $128,439, undistributed net realized gain (loss) was increased by $128,439. This reclassification had no effect on the net assets of the Fund.
21 Invesco Energy Fund
NOTE 11—Share Information
| Summary of Share Activity | ||||||||||||||||||||||||
| One month ended | Year ended March 31, | |||||||||||||||||||||||
| April 30, 2010(a) | 2010(a) | 2009 | ||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||
| Sold: | ||||||||||||||||||||||||
| Class A | 552,138 | $ | 20,354,005 | 8,327,780 | $ | 267,638,803 | 10,398,527 | $ | 382,101,561 | |||||||||||||||
| Class B | 53,858 | 1,831,629 | 803,280 | 23,897,492 | 1,269,221 | 45,942,470 | ||||||||||||||||||
| Class C | 166,402 | 5,515,665 | 2,235,710 | 65,084,582 | 2,572,358 | 84,211,834 | ||||||||||||||||||
Class Y(b) | 62,387 | 2,294,781 | 1,390,407 | 45,500,983 | 403,637 | 10,086,132 | ||||||||||||||||||
| Investor Class | 289,815 | 10,617,907 | 3,710,094 | 120,348,496 | 6,023,554 | 241,173,477 | ||||||||||||||||||
| Institutional Class | 44,412 | 1,651,654 | 183,375 | 6,361,877 | 188,427 | 8,951,224 | ||||||||||||||||||
| Issued as reinvestment of dividends: | ||||||||||||||||||||||||
| Class A | — | — | 13,291 | 442,945 | 285,778 | 6,898,558 | ||||||||||||||||||
| Class B | — | — | — | — | 58,006 | 1,306,286 | ||||||||||||||||||
| Class C | — | — | — | — | 91,070 | 2,000,845 | ||||||||||||||||||
| Class Y | — | — | 1,466 | 48,766 | 1,297 | 31,212 | ||||||||||||||||||
| Investor Class | — | — | 9,299 | 308,815 | 226,831 | 5,455,427 | ||||||||||||||||||
| Institutional Class | — | — | 524 | 17,731 | 2,059 | 50,466 | ||||||||||||||||||
| Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||||||||||
| Class A | 32,533 | 1,194,598 | 274,993 | 8,868,445 | 391,494 | 14,947,875 | ||||||||||||||||||
| Class B | (35,208 | ) | (1,194,598 | ) | (296,494 | ) | (8,868,445 | ) | (418,552 | ) | (14,947,875 | ) | ||||||||||||
| Reacquired: | ||||||||||||||||||||||||
Class A(b) | (465,311 | ) | (17,173,098 | ) | (7,042,337 | ) | (228,012,086 | ) | (11,596,146 | ) | (410,517,049 | ) | ||||||||||||
| Class B | (49,482 | ) | (1,685,034 | ) | (683,544 | ) | (20,435,932 | ) | (1,595,886 | ) | (51,882,449 | ) | ||||||||||||
| Class C | (202,135 | ) | (6,744,387 | ) | (1,430,084 | ) | (41,698,331 | ) | (2,827,045 | ) | (89,673,357 | ) | ||||||||||||
| Class Y | (52,977 | ) | (1,948,229 | ) | (431,095 | ) | (14,144,707 | ) | (32,164 | ) | (771,547 | ) | ||||||||||||
Investor Class(b) | (280,937 | ) | (10,298,561 | ) | (4,329,750 | ) | (139,574,306 | ) | (7,789,962 | ) | (284,622,039 | ) | ||||||||||||
| Institutional Class | (13,338 | ) | (492,786 | ) | (145,947 | ) | (4,682,413 | ) | (100,663 | ) | (4,805,920 | ) | ||||||||||||
| Net increase (decrease) in share activity | 102,157 | $ | 3,923,546 | 2,590,968 | $ | 81,102,715 | (2,448,159 | ) | $ | (54,062,869 | ) | |||||||||||||
| (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% and 24% of the outstanding shares of the Fund for the one month ended April 30, 2010 and the year ended March 31, 2010, respectively. IDI has an agreement with these entities to sell Fund shares. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. | |
| (b) | Effective upon the commencement date of Class Y shares, October 3, 2008, the following shares were converted from Class A and Investor Class shares into Class Y shares of the Fund: |
| Class | Shares | Amount | ||||||
| Class Y | 73,065 | $ | 2,274,502 | |||||
| Class A | (47,663 | ) | (1,489,020 | ) | ||||
| Investor Class | (25,232 | ) | (785,482 | ) | ||||
22 Invesco Energy 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(b) | (000s omitted) | absorbed | absorbed | net assets | turnover(c) | |||||||||||||||||||||||||||||||||||||||||||
| Class A | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| One month ended 04/30/10 | $ | 35.34 | $ | (0.03 | ) | $ | 0.68 | $ | 0.65 | $ | — | $ | — | $ | — | $ | 35.99 | 1.84 | % | $ | 742,987 | 1.16 | %(d) | 1.16 | %(d) | (1.00 | )%(d) | 9 | % | |||||||||||||||||||||||||||
| Year ended 03/31/10 | 23.91 | 0.07 | 11.38 | 11.45 | (0.02 | ) | — | (0.02 | ) | 35.34 | 47.91 | 725,470 | 1.17 | (e) | 1.18 | (e) | 0.22 | (e) | 49 | |||||||||||||||||||||||||||||||||||||
| Year ended 03/31/09 | 43.71 | 0.07 | (19.47 | ) | (19.40 | ) | — | (0.40 | ) | (0.40 | ) | 23.91 | (44.39 | ) | 453,133 | 1.16 | 1.17 | 0.20 | 61 | |||||||||||||||||||||||||||||||||||||
| Year ended 03/31/08 | 41.02 | 0.00 | 13.10 | 13.10 | — | (10.41 | ) | (10.41 | ) | 43.71 | 32.35 | 851,105 | 1.11 | 1.12 | 0.01 | 64 | ||||||||||||||||||||||||||||||||||||||||
| Year ended 03/31/07 | 43.17 | (0.04 | ) | 4.44 | 4.40 | — | (6.55 | ) | (6.55 | ) | 41.02 | 10.48 | 538,155 | 1.17 | 1.17 | (0.08 | ) | 52 | ||||||||||||||||||||||||||||||||||||||
| Year ended 03/31/06 | 32.86 | (0.06 | ) | 12.73 | 12.67 | — | (2.36 | ) | (2.36 | ) | 43.17 | 38.90 | 525,619 | 1.19 | 1.19 | (0.16 | ) | 72 | ||||||||||||||||||||||||||||||||||||||
| Class B | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| One month ended 04/30/10 | 32.68 | (0.05 | ) | 0.62 | 0.57 | — | — | — | 33.25 | 1.75 | 109,771 | 1.91 | (d) | 1.91 | (d) | (1.75 | )(d) | 9 | ||||||||||||||||||||||||||||||||||||||
| Year ended 03/31/10 | 22.26 | (0.16 | ) | 10.58 | 10.42 | — | — | — | 32.68 | 46.81 | 108,880 | 1.92 | (e) | 1.93 | (e) | (0.53 | )(e) | 49 | ||||||||||||||||||||||||||||||||||||||
| Year ended 03/31/09 | 41.04 | (0.19 | ) | (18.19 | ) | (18.38 | ) | — | (0.40 | ) | (0.40 | ) | 22.26 | (44.79 | ) | 78,085 | 1.91 | 1.92 | (0.55 | ) | 61 | |||||||||||||||||||||||||||||||||||
| Year ended 03/31/08 | 39.28 | (0.32 | ) | 12.49 | 12.17 | — | (10.41 | ) | (10.41 | ) | 41.04 | 31.35 | 172,190 | 1.86 | 1.87 | (0.74 | ) | 64 | ||||||||||||||||||||||||||||||||||||||
| Year ended 03/31/07 | 41.90 | (0.34 | ) | 4.27 | 3.93 | — | (6.55 | ) | (6.55 | ) | 39.28 | 9.64 | 136,404 | 1.92 | 1.92 | (0.83 | ) | 52 | ||||||||||||||||||||||||||||||||||||||
| Year ended 03/31/06 | 32.17 | (0.35 | ) | 12.44 | 12.09 | — | (2.36 | ) | (2.36 | ) | 41.90 | 37.92 | 147,270 | 1.93 | 1.93 | (0.90 | ) | 72 | ||||||||||||||||||||||||||||||||||||||
| Class C | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| One month ended 04/30/10 | 31.88 | (0.05 | ) | 0.61 | 0.56 | — | — | — | 32.44 | 1.76 | 207,451 | 1.91 | (d) | 1.91 | (d) | (1.75 | )(d) | 9 | ||||||||||||||||||||||||||||||||||||||
| Year ended 03/31/10 | 21.71 | (0.16 | ) | 10.33 | 10.17 | — | — | — | 31.88 | 46.85 | 205,003 | 1.92 | (e) | 1.93 | (e) | (0.53 | )(e) | 49 | ||||||||||||||||||||||||||||||||||||||
| Year ended 03/31/09 | 40.06 | (0.19 | ) | (17.76 | ) | (17.95 | ) | — | (0.40 | ) | (0.40 | ) | 21.71 | (44.82 | ) | 122,123 | 1.91 | 1.92 | (0.55 | ) | 61 | |||||||||||||||||||||||||||||||||||
| Year ended 03/31/08 | 38.53 | (0.32 | ) | 12.26 | 11.94 | — | (10.41 | ) | (10.41 | ) | 40.06 | 31.37 | 231,832 | 1.86 | 1.87 | (0.74 | ) | 64 | ||||||||||||||||||||||||||||||||||||||
| Year ended 03/31/07 | 41.22 | (0.34 | ) | 4.20 | 3.86 | — | (6.55 | ) | (6.55 | ) | 38.53 | 9.63 | 156,394 | 1.92 | 1.92 | (0.83 | ) | 52 | ||||||||||||||||||||||||||||||||||||||
| Year ended 03/31/06 | 31.68 | (0.35 | ) | 12.25 | 11.90 | — | (2.36 | ) | (2.36 | ) | 41.22 | 37.91 | 171,500 | 1.93 | 1.93 | (0.90 | ) | 72 | ||||||||||||||||||||||||||||||||||||||
| Class Y | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| One month ended 04/30/10 | 35.31 | (0.02 | ) | 0.67 | 0.65 | — | — | — | 35.96 | 1.84 | 48,291 | 0.91 | (d) | 0.91 | (d) | (0.75 | )(d) | 9 | ||||||||||||||||||||||||||||||||||||||
| Year ended 03/31/10 | 23.86 | 0.16 | 11.36 | 11.52 | (0.07 | ) | — | (0.07 | ) | 35.31 | 48.29 | 47,084 | 0.92 | (e) | 0.93 | (e) | 0.47 | (e) | 49 | |||||||||||||||||||||||||||||||||||||
| Year ended 03/31/09(f) | 31.13 | 0.04 | (6.91 | ) | (6.87 | ) | — | (0.40 | ) | (0.40 | ) | 23.86 | (22.08 | ) | 8,894 | 1.04 | (g) | 1.05 | (g) | 0.32 | (g) | 61 | ||||||||||||||||||||||||||||||||||
| Investor Class | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| One month ended 04/30/10 | 35.22 | (0.03 | ) | 0.67 | 0.64 | — | — | — | 35.86 | 1.82 | 484,002 | 1.16 | (d) | 1.16 | (d) | (1.00 | )(d) | 9 | ||||||||||||||||||||||||||||||||||||||
| Year ended 03/31/10 | 23.82 | 0.07 | 11.35 | 11.42 | (0.02 | ) | — | (0.02 | ) | 35.22 | 47.96 | 475,026 | 1.17 | (e) | 1.18 | (e) | 0.22 | (e) | 49 | |||||||||||||||||||||||||||||||||||||
| Year ended 03/31/09 | 43.56 | 0.07 | (19.41 | ) | (19.34 | ) | — | (0.40 | ) | (0.40 | ) | 23.82 | (44.40 | ) | 335,874 | 1.16 | 1.17 | 0.20 | 61 | |||||||||||||||||||||||||||||||||||||
| Year ended 03/31/08 | 40.91 | 0.00 | 13.06 | 13.06 | — | (10.41 | ) | (10.41 | ) | 43.56 | 32.34 | 681,147 | 1.11 | 1.12 | 0.01 | 64 | ||||||||||||||||||||||||||||||||||||||||
| n Year ended 03/31/07 | 43.07 | (0.04 | ) | 4.43 | 4.39 | — | (6.55 | ) | (6.55 | ) | 40.91 | 10.48 | 491,847 | 1.17 | 1.17 | (0.08 | ) | 52 | ||||||||||||||||||||||||||||||||||||||
| Year ended 03/31/06 | 32.78 | (0.06 | ) | 12.71 | 12.65 | — | (2.36 | ) | (2.36 | ) | 43.07 | 38.94 | 568,579 | 1.18 | 1.18 | (0.15 | ) | 72 | ||||||||||||||||||||||||||||||||||||||
| Institutional Class | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| One month ended 04/30/10 | 35.93 | (0.02 | ) | 0.69 | 0.67 | — | — | — | 36.60 | 1.87 | 7,667 | 0.77 | (d) | 0.77 | (d) | (0.61 | )(d) | 9 | ||||||||||||||||||||||||||||||||||||||
| Year ended 03/31/10 | 24.32 | 0.21 | 11.59 | 11.80 | (0.19 | ) | — | (0.19 | ) | 35.93 | 48.57 | 6,411 | 0.74 | (e) | 0.75 | (e) | 0.65 | (e) | 49 | |||||||||||||||||||||||||||||||||||||
| Year ended 03/31/09 | 44.23 | 0.24 | (19.75 | ) | (19.51 | ) | — | (0.40 | ) | (0.40 | ) | 24.32 | (44.11 | ) | 3,416 | 0.70 | 0.71 | 0.66 | 61 | |||||||||||||||||||||||||||||||||||||
| Year ended 03/31/08 | 41.25 | 0.20 | 13.19 | 13.39 | — | (10.41 | ) | (10.41 | ) | 44.23 | 32.90 | 2,240 | 0.68 | 0.69 | 0.44 | 64 | ||||||||||||||||||||||||||||||||||||||||
| Year ended 03/31/07 | 43.20 | 0.16 | 4.44 | 4.60 | — | (6.55 | ) | (6.55 | ) | 41.25 | 10.95 | 101 | 0.72 | 0.72 | 0.37 | 52 | ||||||||||||||||||||||||||||||||||||||||
| Year ended 03/31/06(f) | 46.46 | 0.02 | (3.28 | ) | (3.26 | ) | — | — | — | 43.20 | (7.02 | ) | 67 | 0.80 | (g) | 0.80 | (g) | 0.23 | (g) | 72 | ||||||||||||||||||||||||||||||||||||
| (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 annualized and based on average daily net assets (000’s omitted) of $757,698, $113,428, $214,082, $49,103, $495,626 and $7,800 for Class A, Class B, Class C, Class Y, Investor Class and Institutional Class shares, respectively. | |
| (e) | Ratios are based on average daily net assets (000’s omitted) of $653,712, $104,309, $181,926, $28,613, $447,448 and $3,614 Class A, Class B, Class C, Class Y, Investor Class and Institutional Class shares, respectively. | |
| (f) | Commencement date of Class Y and Institutional Class shares was October 3, 2008 and January 31, 2006, respectively. | |
| (g) | Annualized. |
23 Invesco Energy Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Sector Funds (Invesco Sector Funds)
and Shareholders of Invesco Energy 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 Energy Fund (formerly known as AIM Energy Fund; one of the funds constituting AIM Sector Funds (Invesco Sector Funds), hereafter referred to as the “Fund”) at April 30, 2010 and at March 31, 2010, the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at April 30, 2010 and at March 31, 2010 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
June 4, 2010
Houston, Texas
24 Invesco Energy 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 November 1, 2009 through April 30, 2010.
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 | (11/01/09) | (04/30/10)1 | Period2 | (04/30/10) | Period2 | Ratio | ||||||||||||||||||||||||
| A | $ | 1,000.00 | $ | 1,077.60 | $ | 6.03 | $ | 1,018.99 | $ | 5.86 | 1.17 | % | ||||||||||||||||||
| B | 1,000.00 | 1,073.60 | 9.87 | 1,015.27 | 9.59 | 1.92 | ||||||||||||||||||||||||
| C | 1,000.00 | 1,073.50 | 9.87 | 1,015.27 | 9.59 | 1.92 | ||||||||||||||||||||||||
| Y | 1,000.00 | 1,079.20 | 4.74 | 1,020.23 | 4.61 | 0.92 | ||||||||||||||||||||||||
| Investor | 1,000.00 | 1,077.60 | 6.03 | 1,018.99 | 5.86 | 1.17 | ||||||||||||||||||||||||
| Institutional | 1,000.00 | 1,080.10 | 4.07 | 1,020.88 | 3.96 | 0.79 | ||||||||||||||||||||||||
| 1 | The actual ending account value is based on the actual total return of the Fund for the period November 1, 2009 through April 30, 2010, 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 181/365 to reflect the most recent fiscal half year. |
25 Invesco Energy 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 October 1, 2009 through March 31, 2010.
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 | (10/01/09) | (03/31/10)1 | Period2 | (03/31/10) | Period2 | Ratio | ||||||||||||||||||||||||
| A | $ | 1,000.00 | $ | 1,048.80 | $ | 5.87 | $ | 1,019.20 | $ | 5.79 | 1.15 | % | ||||||||||||||||||
| B | 1,000.00 | 1,045.10 | 9.69 | 1,015.46 | 9.55 | 1.90 | ||||||||||||||||||||||||
| C | 1,000.00 | 1,044.90 | 9.69 | 1,015.46 | 9.55 | 1.90 | ||||||||||||||||||||||||
| Y | 1,000.00 | 1,050.50 | 4.60 | 1,020.44 | 4.53 | 0.90 | ||||||||||||||||||||||||
| Investor | 1,000.00 | 1,049.00 | 5.87 | 1,019.20 | 5.79 | 1.15 | ||||||||||||||||||||||||
| Institutional | 1,000.00 | 1,051.00 | 3.89 | 1,021.14 | 3.83 | 0.76 | ||||||||||||||||||||||||
| 1 | The actual ending account value is based on the actual total return of the Fund for the period October 1, 2009 through March 31, 2010, 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 182/365 to reflect the most recent fiscal half year. |
26 Invesco Energy 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:
Federal and State Income Tax | April 30, 2010 | March 31, 2010 | ||||||
| Qualified Dividend Income* | 0% | 100% | ||||||
| Corporate Dividends Received Deduction* | 0% | 100% | ||||||
| * | The above percentages are based on ordinary income dividends paid to shareholders during the Fund’s fiscal year. |
27 Invesco Energy Fund
Trustees and Officers
The address of each trustee and officer of AIM Sector Funds (Invesco Sector Funds) (the “Trust”), is 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. Each trustee oversees 197 portfolios in the Invesco Funds complex. 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.
| Trustee | Other | |||||||
| and/ or | Directorship(s) | |||||||
| Name, Year of Birth and | Officer | Held by | ||||||
| Position(s) Held with the Trust | Since | Principal Occupation(s) During Past 5 Years | Trustee | |||||
Interested Persons | ||||||||
Martin L. Flanagan1 — 1960 Trustee | 2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Trustee, The AIM Family of Funds®; Board of Governors, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business 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 and Vice Chairman, Investment Company Institute | None | |||||
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, Chief Executive Officer and President, 1371 Preferred Inc. (holding company); Director, Chairman, Chief Executive Officer and President, Invesco Management Group Inc. (formerly known as Invesco Aim Management Group, Inc.) (financial services holding company); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent) and AIM GP Canada Inc. (general partner for limited partnerships); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.) (registered transfer agent) and INVESCO Distributors, Inc. (registered broker dealer); Director, President and Chairman, INVESCO Inc. (holding company) and Invesco Canada Holdings Inc. (holding company); Chief Executive Officer, AIM Trimark Corporate Class Inc. (corporate mutual fund company) and AIM Trimark Canada Fund Inc. (corporate mutual fund company); Director and Chief Executive Officer, Invesco Trimark Ltd./Invesco Trimark Ltèe (registered investment adviser and registered transfer agent) and Invesco Trimark Dealer Inc. (registered broker dealer); Trustee, President and Principal Executive Officer, The AIM Family of Funds® (other than AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust); Trustee and Executive Vice President, The AIM Family of Funds® (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust only) Formerly: 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 Capital Management, Inc. ) (formerly, 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 AIM Family of 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. | None | |||||
Independent Trustees | ||||||||
| Bruce L. Crockett — 1944 Trustee and Chair | 2003 | Chairman, Crockett Technology Associates (technology consulting company) Formerly: Director, Captaris (unified messaging provider) | ACE Limited (insurance company); and Investment Company Institute | |||||
| Bob R. Baker — 1936 Trustee | 1983 | Retired | None | |||||
| Frank S. Bayley — 1939 Trustee | 2003 | Retired Formerly: Director, Badgley Funds, Inc. (registered investment company) (2 portfolios) | None | |||||
| James T. Bunch — 1942 Trustee | 2000 | Founder, Green, Manning & Bunch Ltd. (investment banking firm) Formerly: Executive Committee, United States Golf Association | Vice Chairman, Board of Governors, Western Golf Association/Evans Scholars Foundation and Director, Denver Film Society | |||||
| 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 | Board 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) | Administaff | |||||
| Carl Frischling — 1937 Trustee | 2003 | Partner, law firm of Kramer Levin Naftalis and Frankel LLP | Director, Reich & Tang Funds (16 portfolios) | |||||
| Prema Mathai-Davis — 1950 Trustee | 2003 | Retired | None | |||||
| Lewis F. Pennock — 1942 Trustee | 2003 | Partner, law firm of Pennock & Cooper | None | |||||
| Larry Soll — 1942 Trustee | 1997 | Retired | None | |||||
| Raymond Stickel, Jr. — 1944 Trustee | 2005 | Retired Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios) | None | |||||
| 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. |
T-1
Trustees and Officers — (continued)
| Trustee | Other | |||||||
| and/ or | Directorship(s) | |||||||
| Name, Year of Birth and | Officer | Held by | ||||||
| Position(s) Held with the Trust | Since | Principal Occupation(s) During Past 5 Years | Trustee | |||||
Other Officers | ||||||||
| Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer of The AIM Family of Funds® | 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.), 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 INVESCO Distributors, Inc.; Director and Vice President, INVESCO Funds Group, Inc.; Senior Vice President, Chief Legal Officer and Secretary, The AIM Family of Funds®; and Manager, Invesco PowerShares Capital Management LLC Formerly: Director, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco Advisers, Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco Capital Management (formerly known as 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 | |||||
| Lisa O. Brinkley — 1959 Vice President | 2004 | Global Compliance Director, Invesco Ltd.; Chief Compliance Officer, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) and Invesco Investment Services, Inc.(formerly known as Invesco Aim Investment Services, Inc.); and Vice President, The AIM Family of Funds® Formerly: Senior Vice President, Invesco Management Group, Inc. (formerly known as Invesco Aim Management Group, Inc.); Senior Vice President and Chief Compliance Officer, Invesco Advisers, Inc. and The AIM Family of Funds®; Vice President and Chief Compliance Officer, Invesco Capital Management, Inc. (formerly known as Invesco Aim Capital Management, Inc.) and Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.); Vice President, Invesco Investment Services (formerly known as Invesco Aim Investment Services, Inc.) and Fund Management Company | N/A | |||||
| Kevin M. Carome — 1956 Vice President | 2003 | General Counsel, Secretary and Senior Managing Director, Invesco Ltd.; Director, Invesco Holding Company Limited and INVESCO Funds Group, Inc.; Director and Executive Vice President, IVZ, Inc., Invesco Group Services, Inc., Invesco North American Holdings, Inc. and Invesco Investments (Bermuda) Ltd.; Director and Secretary, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Vice President, The AIM Family of Funds®; and Trustee, 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: Senior Managing Director and Secretary, Invesco North American Holdings, Inc.; Vice President and Secretary, IVZ, Inc. and Invesco Group Services, Inc.; Senior Managing Director and Secretary, Invesco Holding Company Limited; Director, Senior Vice President, Secretary and General Counsel, Invesco Management Group Inc. (formerly known as Invesco Aim Management Group, Inc.) and Invesco Advisers, Inc.; Senior Vice President, Invesco Distributors, Inc.; Director, General Counsel and Vice President, Fund Management Company; Vice President, Invesco Capital Management Inc. (formerly known as Invesco Aim Capital Management, Inc.) and Invesco Investment Services, Inc.; Senior Vice President, Chief Legal Officer and Secretary, The AIM Family of Funds®; Director and Vice President, INVESCO Distributors, Inc.; and Chief Executive Officer and President, INVESCO Funds Group, Inc. | N/A | |||||
| Sheri Morris — 1964 Vice President, Treasurer and Principal Financial Officer | 2003 | Vice President, Treasurer and Principal Financial Officer, The AIM Family of Funds®; and Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser) Formerly: Vice President, Invesco Advisers, Inc., Invesco Capital Management, Inc. (formerly known as Invesco Aim Capital Management, Inc.) and Invesco Private Asset Management Inc. (formerly known as Invesco Aim Private Asset Management, Inc.); Assistant Vice President and Assistant Treasurer, The AIM Family of Funds® and Assistant Vice President, Invesco Advisers, Inc., Invesco Capital Management, Inc. (formerly known as Invesco Aim Capital Management, Inc. and Invesco Private Asset Management Inc. (formerly known as Invesco Aim Private Asset Management, Inc.) | N/A | |||||
| Karen Dunn Kelley — 1960 Vice President | 2003 | Head of Invesco’s World Wide Fixed Income and Cash Management Group; Senior Vice President, 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.); Senior Vice President, Invesco Management Group, Inc. (formerly known as Invesco Aim Management Group, Inc.); and Director, Invesco Mortgage Capital Inc.; Vice President, The AIM Family of 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 AIM Family of Funds® (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust only) Formerly: 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 Capital Management, Inc. (formerly known as 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 Capital Management, Inc. (formerly known as Invesco Aim Capital Management, Inc.); Director of Cash Management, Senior Vice President, and Vice President, Invesco Advisers, Inc. and The AIM Family of Funds® (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Tax-Free Investments Trust only) | N/A | |||||
| Lance A. Rejsek — 1967 Anti-Money Laundering Compliance Officer | 2005 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.), Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.), The AIM Family of Funds®, PowerShares Exchange-Traded Fund Trust, PowerShares Exchang-Traded Trust II, PowerShares India Exchange-Traded Fund Trust and PowerShares Actively Managed Exchange-Traded Fund Trust. Formerly: Anti-Money Laundering Compliance Officer, Fund Management Company, Invesco Advisers, Inc., Invesco Capital Management, Inc. (formerly known as Invesco Aim Capital Management, Inc. and Invesco Private Asset Management, Inc. (formerly known as Invesco Aim Private Asset Management, Inc.) | N/A | |||||
T-2
Trustees and Officers — (continued)
| Trustee | Other | |||||||
| and/ or | Directorship(s) | |||||||
| Name, Year of Birth and | Officer | Held by | ||||||
| Position(s) Held with the Trust | Since | Principal Occupation(s) During Past 5 Years | Trustee | |||||
| Todd L. Spillane — 1958 Chief Compliance Officer | 2006 | Senior Vice President, Invesco Management Group Inc. (formerly known as Invesco Aim Management Group, Inc.); 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 AIM Family of Funds®, PowerShares Exchange-Traded Fund Trust, PowerShares Exchang-Traded Trust II, PowerShares India Exchange-Traded Fund Trust and PowerShares Actively Managed Exchange-Traded Fund Trust, INVESCO Private Capital Investments, Inc. (holding company), Invesco Private Capital, Inc. (registered investment adviser) and Invesco Senior Secured Management, Inc. (registered investment adviser); 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 and Chief Compliance Officer, Invesco Advisers, Inc. and Invesco Capital Management, Inc. (formerly known as Invesco Aim Capital Management, Inc.); Chief Compliance Officer, Invesco Global Asset Management (N.A.), Inc.; Vice President, Invesco Capital Management, Inc. (formerly known as Invesco Aim Capital Management, Inc.) and Fund Management Company | 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 | Investment Adviser | Distributor | Auditors | |||
| 11 Greenway Plaza, Suite 2500 Houston, TX 77046-1173 | Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 | Invesco Distributors, Inc. 11 Greenway Plaza, Suite 2500 Houston, TX 77046-1173 | PricewaterhouseCoopers LLP 1201 Louisiana Street, Suite 2900 Houston, TX 77002-5678 | |||
Counsel to the Fund | Counsel to the Independent Trustees | Transfer Agent | Custodian | |||
| Stradley Ronon Stevens & Young, LLP 2600 One Commerce Square Philadelphia, PA 19103 | Kramer, Levin, Naftalis & Frankel LLP 1177 Avenue of the Americas New York, NY 10036-2714 | Invesco Investment Services, Inc. P.O. Box 4739 Houston, TX 77210-4739 | State Street Bank and Trust Company 225 Franklin Boston, MA 02110-2801 |
T-3
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 number of trees used to produce paper. | |
| • | economical. Help reduce your fund’s printing and delivery expenses and put more capital back in your fund’s returns. | |
| • | efficient. Stop waiting for regular mail. Your documents will be sent via email as soon as they’re available. | |
| • | easy. Download, save and print files using your home computer with a few clicks of your mouse. |
This service is provided by Invesco Investment Services, Inc.
Invesco Privacy Policy
You share personal and financial information with us that is necessary for your transactions and your account records. We take very seriously the obligation to keep that information confidential and private.
Invesco collects nonpublic personal information about you from account applications or other forms you complete and from your transactions with us or our affiliates. We do not disclose information about you or our former customers to service providers or other third parties except to the extent necessary to service your account and in other limited circumstances as permitted by law. For example, we use this information to facilitate the delivery of transaction confirmations, financial reports, prospectuses and tax forms.
Even within Invesco, only people involved in the servicing of your accounts and compliance monitoring have access to your information. To ensure the highest level of confidentiality and security, Invesco maintains physical, electronic and procedural safeguards that meet or exceed federal standards. Special measures, such as data encryption and authentication, apply to your communications with us on our website. More detail is available to you at invesco.com/privacy.
Important Notice Regarding Delivery of Security Holder Documents
To reduce Fund expenses, only one copy of most shareholder documents may be mailed to shareholders with multiple accounts at the same address (Householding). Mailing of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact Invesco Investment Services, Inc. at 800 959 4246 or contact your financial institution. We will begin sending you individual copies for each account within 30 days after receiving your request.
Fund holdings and proxy voting information
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is available at invesco.com/completeqtrholdings. Shareholders can also look up the Fund’s Forms N-Q on the SEC website at sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-03826 and 002-85905.
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, 2009, is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov.
If used after July 20, 2010, this report must be accompanied by a Quarterly Performance Review for the most recent quarter-end.
Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the U.S. distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
On April 30, 2010, Invesco Aim Distributors, Inc. became Invesco Distributors, Inc., Invesco Aim investment Services, Inc. became Invesco Investment Services, Inc., and AIM funds became Invesco funds. In addition, invescoaim.com became invesco.com.
l-ENE-AR-l Invesco Distributors, Inc.
| Annual Report to Shareholders |
| April 30, 2010 |
| Invesco Financial Services Fund |
| Effective April 30, 2010, AIM Financial Services Fund |
| was renamed Invesco Financial Services Fund. |
| 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 |
| 24 Tax Information |
| T-1 Trustees and Officers |
Letters to Shareholders
Dear Shareholders:
In the 13 months covered by this report, the U.S. economy improved dramatically from where it stood in early 2009. In the third quarter of 2009, the economy ended its year-long contraction and began growing again. Major U.S. stock market indexes rose sharply in anticipation of economic improvement; despite occasional volatility, they continued rising as evidence mounted that the recovery was genuine. Over the last year, global equity indexes also rallied strongly from their early 2009 lows.
While economic improvement was undeniable, unemployment remained high by historical standards, and unfortunately it appeared unlikely that the jobless rate would decline significantly anytime soon. Stubbornly high unemployment continued to cast a pall over the nation’s economic outlook.
Timely communication
Unpredictable and volatile markets, together with economic uncertainty, caused many of you to seek information relative to your investments. Some of you contacted your financial advisers to ask questions and obtain guidance. Others visited our website, invesco.com, where we offer timely market commentary, investor education information and sector updates. In particular, I recommend the Investment Perspectives articles featured on our home page; they are written by Invesco’s investment professionals and cover a wide range of topics that are updated regularly.
Also on our website, you’ll find a commentary from me that discusses the name change we made on April 30 — from Invesco Aim to Invesco. Some of the changes related to this event include all AIM funds being renamed Invesco funds. (It’s important to note that the funds’ investment strategies and objectives have not changed.) You’ll notice on this report the Invesco logo has replaced the previous Invesco Aim logo. And our new Web address is now invesco.com. These changes are the latest steps in the rebranding process we began two years ago, when we added Invesco in front of Aim. For more information about the change, please read the shareholder Q&A on the account balance page at invesco.com.
At invesco.com you can also access your Fund’s latest quarterly commentary. Simply click on Mutual Funds inside the Financial Products box. Then, in the Fund Information box, click on Quarterly Commentary and select your Fund.
Timely information like that available on our website — together with the advice and guidance of a trusted financial adviser — can be especially useful in uncertain times. Market volatility and economic uncertainty are two factors that can prompt investors to abandon their long-term saving and investment plans. A financial adviser can show you just how costly that could be over the long term — and can explain that saving more and investing more regularly is a time-tested way to build a solid portfolio. He or she can help you identify appropriate investments, given your individual risk tolerance, time horizon and investment goals.
Taking our business forward
Invesco’s acquisition of Morgan Stanley’s retail asset management business, including Van Kampen Investments, was completed on June 1, 2010. Our two companies have similar investment philosophies and cultures, as well as complementary investment expertise. I believe this combination represents the next step in our company’s evolution — and will allow us to better serve you through:
| • | Greater efficiencies and cost savings | ||
| • | A broader range of investment options | ||
| • | A continued commitment to investment excellence, with complementary portfolio management expertise |
While market conditions change from time to time, our commitment to putting our clients first, helping you achieve your financial goals and providing excellent customer service will not.
If you have questions about your account, please contact one of our client services representatives at 800 959 4246. If you have a question or comment for me, please email me at phil@invesco.com.
Thank you for investing with us.
Sincerely,
Philip Taylor
Senior Managing Director, Invesco
2 Invesco Financial Services Fund
Dear Fellow Shareholders:
By all accounts, last year was a challenging year for all of us. Although the economy and financial markets whipsawed, the final months of the decade concluded with many of us feeling somewhat more optimistic about 2010 as we began to see the markets and economy evidence the first green shoots of recovery.
Perhaps the most valuable takeaway from last year is the manner in which it underscored the importance of adopting the long-term, appropriately diversified investment strategy I’ve mentioned in my previous letters. If anything, last year was the litmus test for this approach.
Please be assured that your Board continues to oversee the Invesco Funds with a strong sense of responsibility for your savings and a deep appreciation for your trust. We have already begun the annual review and management contract renewal process and will continue to seek to manage costs and reward performance in ways that put your interests first. (It might also interest you to know that the Board currently has five committees — Compliance, Audit, Governance, Investments, and Valuation Distribution and Proxy Voting — whose members exercise oversight to maintain the Invesco Funds’ “Investor First” orientation.)
To that end, some of you may have seen that Invesco is assuming the management of the Van Kampen family of mutual funds as well as Morgan Stanley’s retail funds. We view this addition as an excellent opportunity to provide you, our shareholders, access to an even broader range of well-diversified mutual funds under the Invesco umbrella. I’ll keep you updated on the work we’re doing to deliver the value of this acquisition to our shareholders in my upcoming letters.
As always, you are welcome to contact me at bruce@brucecrockett.com with any questions or concerns you may have. We look forward to representing you and serving you in the coming year.
Sincerely,
Bruce L. Crockett
Independent Chair
Invesco Funds Board of Trustees
Independent Chair
Invesco Funds Board of Trustees
3 Invesco Financial Services Fund
Management’s Discussion of Fund Performance
Performance summary
For the 13 months ended April 30, 2010, all share classes of Invesco Financial Services Fund, at net asset value, outperformed the S&P 500 Index, the S&P Financials Index and the Lipper Financial Services Funds Index.
While many individual holdings in various financial industries contributed to the Fund’s performance, the underlying reason for our outperformance was the Fund’s offensive position, which drove performance as the sector recovered from lows reached early in 2009.
Your Fund’s long-term performance appears later in this report.
Fund vs. Indexes
Total returns, 3/31/09 to 4/30/10, 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 | 84.90 | % | ||
| Class B Shares | 83.75 | |||
| Class C Shares | 83.71 | |||
| Class Y Shares | 85.59 | |||
| Investor Class Shares | 84.75 | |||
S&P 500 Index▼ (Broad Market Index) | 47.26 | |||
S&P 500 Financials Index▼ (Style-Specific Index) | 76.91 | |||
Lipper Financial Services Funds Index▼ (Peer Group Index) | 67.34 | |||
▼Lipper Inc. |
How we invest
We seek to create wealth for our shareholders by maintaining a long-term investment horizon and investing in two primary opportunities we believe have historically resulted in superior investment returns within the financials sector:
| • | Financial companies trading at a significant discount to our estimate of intrinsic value because of excessive short-term investor pessimism. Estimated intrinsic value is a measure based primarily on the estimated future cash flows generated by the businesses. |
| • | Reasonably valued financial companies that demonstrate superior capital discipline by returning excess capital to shareholders in the form of dividends and share repurchases. |
We maintain a proprietary database of intrinsic value estimates and screen financial companies for those we deem to be of acceptable quality. Purchase candidates are subject to exhaustive fundamental analysis. We focus on the drivers of estimated intrinsic value such as normalized earnings power, marginal returns on economic equity (which adjusts for distortions present in accounting numbers) and sustainable growth. Additionally, we strive to understand a company’s ability and willingness to grow capital returned to shareholders in the future. Finally, we focus on quality, including competitive position, management and financial strength.
In constructing a portfolio, we attempt to mitigate risk in multiple ways, including by diversifying holdings across industries and businesses that react in different ways to changes in interest rates and economic cycles.
We will sell a stock for four primary reasons: a more attractive investment opportunity arises; a stock is trading significantly above our estimate of its intrinsic value; deterioration in capital adequacy or earnings threatens a return-of-capital program; or a change in business fundamentals is inadequately reflected in undervaluation.
We believe a portfolio of undervalued and capital-disciplined quality financial companies that profitably grow cash flows over time provides the best opportunity for superior long-term investment results.
Market conditions and your Fund
The U.S. economy provided signs of improvement during the period, offering indications that the economy has transitioned from a contraction phase into an expansionary phase. Nevertheless, the pace of recovery remained modest and the transition from government stimulus-induced growth to a private economic recovery was uncertain. The U.S. Federal Reserve’s (the Fed) federal funds target rate remained quite low, in a range of between zero and 0.25%.1 Real gross domestic product (GDP) registered positive growth during the reporting period with quarterly growth, on an annualized basis, of 2.2%, 5.6% and 3.0% for the third and fourth quarter of 2009, and the first quarter 2010, respectively.2 Inflation, measured by the seasonally adjusted Consumer Price Index, remained relatively benign. While labor markets improved as layoffs moderated, new hiring remained quite weak. Unemployment, after climbing steadily throughout 2009, fell slightly during the first quarter of 2010 and stood at a rate of 9.9% nationwide as of April 2010.3
The financials sector led the market during the reporting period rising by more than 75%.4 While the extreme strains caused by the 2008-2009 financial crisis abated, concerns about economic resilience and the impact of pending financial services reform remained. Consequently, valuations in the sector remained at appealing levels in our opinion.
In this environment, all share classes of the Fund posted gains and, at net asset value, outperformed the Fund’s broad market index, style-specific index and peer group index for the reporting period. The Fund’s outperformance can be attributed to an offensive posture
Fund data as of 4/30/10
Portfolio Composition
By sector
| Financials | 83.9 | % | ||
| Information Technology | 7.3 | |||
| Health Care | 3.2 | |||
| Consumer Discretionary | 1.5 | |||
Money Market Fund | ||||
Plus Other Assets Less Liabilities | 4.1 | |||
| Total Net Assets | $218.5 million | |||
| Total Number of Holdings* | 34 | |||
Top 10 Equity Holdings*
| 1. Capital One Financial Corp. | 6.8 | % | ||
| 2. JPMorgan Chase & Co. | 6.0 | |||
| 3. Bank of America Corp. | 5.3 | |||
| 4. American Express Co. | 5.3 | |||
| 5. Fifth Third Bancorp | 5.2 | |||
| 6. XL Capital Ltd.-Class A | 4.6 | |||
| 7. Zions Bancorp | 4.4 | |||
| 8. State Street Corp. | 4.2 | |||
| 9. SLM Corp. | 4.1 | |||
| 10. Moody’s Corp. | 3.8 |
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 Financial Services Fund
during the reporting period, as the Fund was positioned to benefit from an abating of the financial crisis.
The largest contributors to Fund performance were Capital One Financial, American Express and XL Capital. Both Capital One Financial and American Express, after declining in early 2009 ahead of the bank stress tests and amid concerns over credit card losses, rebounded during the reporting period, posting gains in excess of 200%. Investor concerns about the credit card business continued to linger, resulting in undervaluation, in our opinion, despite the sizable rebounds. After declining significantly in 2008 and early 2009 due to capital and credit-related issues, specialty insurance provider XL Capital’s stock also rebounded as investor concerns abated from what, in retrospect, were excessively pessimistic views. We continued to believe the company was undervalued despite the stock’s significant rebound.
The only stock in the portfolio to decline over the reporting period was CIT Group. CIT is a commercial finance company that, in late 2008, became a bank holding company and received Troubled Asset Relief Program (TARP) support. As a result, we believed that CIT had ample capital and liquidity to weather the financial crisis. During the third quarter of 2009, we sold CIT at a significant loss after it became apparent that CIT would need, but lacked, further government support.
We believe many stressed financial companies have now raised enough capital to handle credit losses that are widely expected to be severe. Economies around the world continue to show signs of stabilization or recovery. Financial stocks have rebounded dramatically from their extremely depressed levels in March 2009. Despite strong stock performance in the sector, we continue to see opportunities, given historically low valuation levels and unusually wide valuation differences within the sector. While regulatory and political developments will grab headlines in 2010, and some changes will prove important, we believe the path and robustness of economic recovery will ultimately determine the financials sector’s future performance.
Markets experienced a strong recovery during the reporting period, and all of the Fund’s share classes, at net asset value, outperformed the Fund’s indexes. Regardless of the macroeconomic environment, we remain focused on identifying financial companies that we believe are undervalued and that exhibit capital discipline.
As always, we would like to caution investors against making investment decisions based on short-term performance. We recommend that you consult a financial adviser to discuss your individual financial program.
Thank you for your investment in Invesco Financial Services Fund and for sharing our long-term investment horizon.
1 U.S. Federal Reserve
2 Bureau of Economic Analysis
3 Bureau of Labor Statistics
4 Lipper Inc.
The views and opinions expressed in management’s discussion of Fund performance are those of Invesco Advisers, Inc. These views and opinions are subject to change at any time based on factors such as market and economic conditions. These views and opinions may not be relied upon as investment advice or recommendations, or as an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but Invesco Advisers, Inc. makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
See important Fund and index disclosures later in this report.
Michael Simon
Chartered Financial Analyst, senior portfolio manager, is lead manager of Invesco Financial Services Fund. He started his investment career in 1989 and joined Invesco in 2001. Mr. Simon earned a B.B.A. in finance from Texas Christian University and an M.B.A. with high honors from the Graduate School of Business at the University of Chicago.
Meggan Walsh
Chartered Financial Analyst, senior portfolio manager, is manager of Invesco Financial Services Fund. She began her investment career in 1987 and joined Invesco in 1991. Ms. Walsh earned a B.S. in finance from the University of Maryland and an M.B.A. from Loyola University Maryland.
Assisted by the Financial Services Team
Fund data as of 3/31/10
Portfolio Composition
By sector
| Financials | 85.2 | % | ||
| Information Technology | 7.1 | |||
| Health Care | 3.6 | |||
| Consumer Discretionary | 1.5 | |||
Money Market Funds | ||||
Plus Other Assets Less Liabilities | 2.6 | |||
| Total Net Assets | $211.2 million | |||
| Total Number of Holdings* | 36 | |||
Top 10 Equity Holdings*
| 1. Capital One Financial Corp. | 6.7 | % | ||
| 2. JPMorgan Chase & Co. | 6.5 | |||
| 3. Bank of America Corp. | 5.5 | |||
| 4. XL Capital Ltd.-Class A | 5.0 | |||
| 5. Fifth Third Bancorp | 4.9 | |||
| 6. American Express Co. | 4.9 | |||
| 7. Moody’s Corp. | 4.7 | |||
| 8. SLM Corp. | 4.3 | |||
| 9. UnitedHealth Group Inc. | 3.6 | |||
| 10. Zions Bancorp | 3.5 |
The Fund’s holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
| * | Excluding money market fund holdings. |
5 Invesco Financial Services Fund
Your Fund’s Long-Term Performance
Results of a $10,000 Investment — Oldest Share Class without Sales Charges since Inception
Index data from 5/31/86, Fund data from 6/2/86
| 1 | Lipper Inc. |
Results of a $10,000 Investment — Oldest Share Class with Sales Charges since Inception
Index data from 1/31/00, Fund data from 2/14/00
| 1 | Lipper Inc. |
Past performance cannot guarantee comparable future results.
The performance data shown in the first chart above is that of the Fund’s Investor class shares. The performance of the Fund’s other share classes will differ primarily due to different sales charge structures and class expenses and may be greater than or less than the performance of the Fund’s Investor Class shares. The data shown in this chart includes reinvested distributions, Fund expenses and management fees. Index results include reinvested dividends.
The performance data shown in the second chart above is that of the Fund’s Class C shares. The performance of the Fund’s other share classes will differ primarily due to different sales charge structures and class expenses and may be greater than or less than the performance of the Fund’s Class C shares. The data shown in the second chart above includes reinvested distributions, Fund expenses and management fees. Index results include reinvested dividends, but they do not reflect sales charges.
Performance of the peer group reflects fund expenses and management fees; performance of a market index does not. Performance shown in the charts and table does not reflect deduction of taxes a shareholder would pay on Fund distributions or sale of Fund shares.
Both charts above are logarithmic charts, which present the fluctuations in the value of the Fund’s share class and its indexes. We believe that a logarithmic chart is more effective than other types of charts in illustrating changes in value during the early years shown in the chart. The vertical axis, the one that indicates the dollar value of an investment, is constructed with each segment representing a percent change in the value of the investment. In both charts, each segment represents a doubling, or 100% change, in the value of the investment.
6 Invesco Financial Services Fund
Average Annual Total Returns
As of 4/30/10, including maximum applicable sales charges
Class A Shares | ||||
| Inception (3/28/02) | -6.47 | % | ||
| 5 Years | -11.35 | |||
| 1 Year | 50.85 | |||
Class B Shares | ||||
| Inception (3/28/02) | -6.42 | % | ||
| 5 Years | -11.21 | |||
| 1 Year | 53.89 | |||
Class C Shares | ||||
| Inception (2/14/00) | -2.71 | % | ||
| 10 Years | 3.77 | |||
| 5 Years | -11.02 | |||
| 1 Year | 57.66 | |||
Class Y Shares | ||||
| 10 Years | 2.98 | % | ||
| 5 Years | -10.26 | |||
| 1 Year | 60.35 | |||
Investor Class Shares | ||||
| Inception (6/2/86) | 8.23 | % | ||
| 10 Years | 3.02 | |||
| 5 Years | -10.35 | |||
| 1 Year | 59.85 |
Average Annual Total Returns
As of 3/31/10, the most recent calendar quarter-end including maximum applicable sales charges
Class A Shares | ||||
| Inception (3/28/02) | -6.81 | % | ||
| 5 Years | -11.87 | |||
| 1 Year | 79.41 | |||
Class B Shares | ||||
| Inception (3/28/02) | -6.76 | % | ||
| 5 Years | -11.74 | |||
| 1 Year | 83.59 | |||
Class C Shares | ||||
| Inception (2/14/00) | -2.96 | % | ||
| 10 Years | 4.32 | |||
| 5 Years | -11.54 | |||
| 1 Year | 87.60 | |||
Class Y Shares | ||||
| 10 Years | 3.54 | % | ||
| 5 Years | -10.80 | |||
| 1 Year | 90.47 | |||
Investor Class Shares | ||||
| Inception (6/2/86) | 8.15 | % | ||
| 10 Years | 3.57 | |||
| 5 Years | -10.87 | |||
| 1 Year | 89.74 |
Class Y shares incepted on October 3, 2008. Performance shown prior to that date is that of Investor Class shares and includes the 12b-1 fees applicable to Investor Class shares. Investor Class shares 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 Y and Investor Class shares was 1.65%, 2.40%, 2.40%, 1.40% and 1.65%, respectively. 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 Investor Class shares was 1.66%, 2.41%, 2.41%, 1.41% and 1.66%, 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 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 Investor 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 on Class A and Class B shares, performance would have been lower.
New Fiscal Year-End
Since our last report to you, the Fund’s fiscal year-end was changed from March 31 to April 30.
7 Invesco Financial Services Fund
Invesco Financial Services Fund’s investment objective is capital growth.
| • | Unless otherwise stated, information presented in this report is as of April 30, 2010, and is based on total net assets. | |
| • | Unless otherwise noted, all data provided by Invesco. | |
| • | To access your Fund’s reports/prospectus visit invesco.com/fundreports. |
About share classes
| • | Effective September 30, 2003, for qualified plans only, those previously established are eligible to purchase Class B shares of any Invesco fund. Please see the prospectus for more information. | |
| • | Class Y shares are available to only certain investors. Please see the prospectus for more information. | |
| • | All Investor Class shares are closed to new investors. Contact your financial adviser about purchasing our other share classes. |
Principal risks of investing in the Fund
| • | Prices of equity securities change in response to many factors, including the historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity. | |
| • | The financial services sector is subject to extensive government regulation, which may change frequently. The profitability of businesses in this sector depends heavily on the availability and cost of money and may fluctuate significantly in response to changes to interest rates and general economic conditions. | |
| • | Foreign securities have additional risks, including exchange rate changes, political and economic upheaval, relative lack of information, relatively low market liquidity, and the potential lack of strict financial and accounting controls and standards. | |
| • | Since a large percentage of the Fund’s assets may be invested in securities of a limited number of companies, each investment has a greater effect on the Fund’s overall performance, and any change in the value of those securities could significantly affect the value of your investment in the Fund. | |
| • | There is no guarantee that the investment techniques and risk analysis used by the Fund’s portfolio managers will produce the desired results. | |
| • | The prices of securities held by the Fund may decline in response to market risks. | |
| • | Nondiversification increases the risk that the value of the Fund’s shares may vary more widely, and the Fund may be subject to greater investment and credit risk than if it invested more broadly. | |
| • | 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. |
About indexes used in this report
| • | The S&P 500® Index is an unmanaged index considered representative of the U.S. stock market. | |
| • | The S&P 500 Financials Index is an unmanaged index considered representative of the financial market. | |
| • | The Lipper Financial Services Funds Index is an unmanaged index considered representative of financial services funds tracked by Lipper. | |
| • | 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. | |
| • | 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 reflects fund expenses; performance of a market index does not. |
Other information
| • | The Chartered Financial Analyst® (CFA®) designation is globally recognized and attests to a charterholder’s success in a rigorous and comprehensive study program in the field of investment management and research analysis. | |
| • | 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. | |
| • | 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.
Fund Nasdaq Symbols
| Class A Shares | IFSAX | |
| Class B Shares | IFSBX | |
| Class C Shares | IFSCX | |
| Class Y Shares | IFSYX | |
| Investor Class Shares | FSFSX |
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
8 Invesco Financial Services Fund
Schedule of Investments(a)
April 30, 2010
| Shares | Value | |||||||
| Common Stocks–95.94% | ||||||||
| Asset Management & Custody Banks–10.33% | ||||||||
| Federated Investors, Inc.–Class B | 221,746 | $ | 5,348,514 | |||||
| Legg Mason, Inc. | 253,276 | 8,026,316 | ||||||
| State Street Corp. | 211,614 | 9,205,209 | ||||||
| 22,580,039 | ||||||||
| Consumer Finance–16.18% | ||||||||
| American Express Co. | 250,811 | 11,567,403 | ||||||
| Capital One Financial Corp. | 344,075 | 14,936,296 | ||||||
SLM Corp.(b) | 723,804 | 8,859,361 | ||||||
| 35,363,060 | ||||||||
| Data Processing & Outsourced Services–7.31% | ||||||||
Alliance Data Systems Corp.(b) | 80,312 | 6,028,219 | ||||||
| Automatic Data Processing, Inc. | 106,137 | 4,602,100 | ||||||
| Heartland Payment Systems, Inc. | 167,288 | 3,074,754 | ||||||
| Western Union Co. | 124,529 | 2,272,654 | ||||||
| 15,977,727 | ||||||||
| Diversified Capital Markets–2.34% | ||||||||
UBS AG (Switzerland)(b) | 332,111 | 5,121,152 | ||||||
| Insurance Brokers–6.20% | ||||||||
| Marsh & McLennan Cos., Inc. | 290,134 | 7,027,045 | ||||||
National Financial Partners Corp.(b) | 185,789 | 2,859,293 | ||||||
| Willis Group Holdings PLC (Ireland) | 106,378 | 3,664,722 | ||||||
| 13,551,060 | ||||||||
| Investment Banking & Brokerage–5.33% | ||||||||
FBR Capital Markets Corp.(b) | 1,014,620 | 4,799,153 | ||||||
| Morgan Stanley | 226,416 | 6,842,291 | ||||||
| 11,641,444 | ||||||||
| Life & Health Insurance–2.34% | ||||||||
| Prudential Financial, Inc. | 25,727 | 1,635,208 | ||||||
| StanCorp Financial Group, Inc. | 77,140 | 3,468,215 | ||||||
| 5,103,423 | ||||||||
| Managed Health Care–3.21% | ||||||||
| UnitedHealth Group Inc. | 231,351 | 7,012,249 | ||||||
| Other Diversified Financial Services–14.54% | ||||||||
| Bank of America Corp. | 650,002 | 11,589,536 | ||||||
Citigroup Inc.(b) | 1,631,038 | 7,127,636 | ||||||
| JPMorgan Chase & Co. | 306,573 | 13,053,878 | ||||||
| 31,771,050 | ||||||||
| Property & Casualty Insurance–4.93% | ||||||||
| Allstate Corp. (The) | 23,704 | 774,410 | ||||||
| XL Capital Ltd.–Class A | 562,139 | 10,006,074 | ||||||
| 10,780,484 | ||||||||
| Regional Banks–15.36% | ||||||||
| Fifth Third Bancorp | 768,515 | 11,458,559 | ||||||
First Horizon National Corp.(b) | 33,889 | 479,529 | ||||||
| First Midwest Bancorp, Inc. | 89,813 | 1,365,157 | ||||||
| SunTrust Banks, Inc. | 268,598 | 7,950,501 | ||||||
| Wilmington Trust Corp. | 150,000 | 2,599,500 | ||||||
| Zions Bancorp. | 338,059 | 9,712,435 | ||||||
| 33,565,681 | ||||||||
| Reinsurance–1.29% | ||||||||
| Transatlantic Holdings, Inc. | 56,769 | 2,823,122 | ||||||
| Specialized Consumer Services–1.47% | ||||||||
| H&R Block, Inc. | 175,608 | 3,215,382 | ||||||
| Specialized Finance–3.76% | ||||||||
| Moody’s Corp. | 332,178 | 8,211,440 | ||||||
| Thrifts & Mortgage Finance–1.35% | ||||||||
Ocwen Financial Corp.(b) | 254,907 | 2,944,176 | ||||||
| Total Common Stocks (Cost $251,863,464) | 209,661,489 | |||||||
| Money Market Funds–4.02% | ||||||||
Liquid Assets Portfolio–Institutional Class(c) | 4,393,918 | 4,393,918 | ||||||
Premier Portfolio–Institutional Class(c) | 4,393,917 | 4,393,917 | ||||||
| Total Money Market Funds (Cost $8,787,835) | 8,787,835 | |||||||
| TOTAL INVESTMENTS–99.96% (Cost $260,651,299) | 218,449,324 | |||||||
| OTHER ASSETS LESS LIABILITIES–0.04% | 85,366 | |||||||
| NET ASSETS–100.00% | $ | 218,534,690 | ||||||
Investment Abbreviations:
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.
9 Invesco Financial Services Fund
Schedule of Investments(a)
March 31, 2010
| Shares | Value | |||||||
| Common Stocks–97.40% | ||||||||
| Asset Management & Custody Banks–10.44% | ||||||||
| Blackstone Group L.P. (The) | 154,057 | $ | 2,156,798 | |||||
| Federated Investors, Inc.–Class B | 221,746 | 5,849,659 | ||||||
| Legg Mason, Inc. | 253,276 | 7,261,423 | ||||||
| State Street Corp. | 150,484 | 6,792,848 | ||||||
| 22,060,728 | ||||||||
| Consumer Finance–15.94% | ||||||||
| American Express Co. | 250,811 | 10,348,462 | ||||||
| Capital One Financial Corp. | 344,075 | 14,248,146 | ||||||
SLM Corp.(b) | 723,804 | 9,062,026 | ||||||
| 33,658,634 | ||||||||
| Data Processing & Outsourced Services–7.14% | ||||||||
Alliance Data Systems Corp.(b) | 80,312 | 5,139,165 | ||||||
| Automatic Data Processing, Inc. | 106,137 | 4,719,912 | ||||||
| Heartland Payment Systems, Inc. | 167,288 | 3,111,557 | ||||||
| Western Union Co. | 124,529 | 2,112,012 | ||||||
| 15,082,646 | ||||||||
| Diversified Capital Markets–2.56% | ||||||||
UBS AG (Switzerland)(b) | 332,111 | 5,406,767 | ||||||
| Insurance Brokers–6.17% | ||||||||
| Marsh & McLennan Cos., Inc. | 290,134 | 7,085,072 | ||||||
National Financial Partners Corp.(b) | 185,789 | 2,619,625 | ||||||
| Willis Group Holdings PLC (Ireland) | 106,378 | 3,328,568 | ||||||
| 13,033,265 | ||||||||
| Investment Banking & Brokerage–5.33% | ||||||||
FBR Capital Markets Corp.(b) | 1,014,620 | 4,616,521 | ||||||
| Morgan Stanley | 226,416 | 6,631,725 | ||||||
| 11,248,246 | ||||||||
| Life & Health Insurance–2.99% | ||||||||
| Primerica, Inc. | 72,735 | 1,091,025 | ||||||
| Prudential Financial, Inc. | 25,727 | 1,556,484 | ||||||
| StanCorp Financial Group, Inc. | 77,140 | 3,674,178 | ||||||
| 6,321,687 | ||||||||
| Managed Health Care–3.58% | ||||||||
| UnitedHealth Group Inc. | 231,351 | 7,558,237 | ||||||
| Other Diversified Financial Services–15.12% | ||||||||
| Bank of America Corp. | 650,002 | 11,602,535 | ||||||
Citigroup Inc.(b) | 1,631,038 | 6,605,704 | ||||||
| JPMorgan Chase & Co. | 306,573 | 13,719,142 | ||||||
| 31,927,381 | ||||||||
| Property & Casualty Insurance–5.39% | ||||||||
| Allstate Corp. (The) | 23,704 | 765,876 | ||||||
| XL Capital Ltd.–Class A | 562,139 | 10,624,427 | ||||||
| 11,390,303 | ||||||||
| Regional Banks–13.82% | ||||||||
| Fifth Third Bancorp | 768,515 | 10,444,119 | ||||||
First Horizon National Corp.(b) | 33,889 | 476,146 | ||||||
| First Midwest Bancorp, Inc. | 89,813 | 1,216,966 | ||||||
| SunTrust Banks, Inc. | 268,598 | 7,195,741 | ||||||
| Wilmington Trust Corp. | 150,000 | 2,485,500 | ||||||
| Zions Bancorp. | 338,059 | 7,376,447 | ||||||
| 29,194,919 | ||||||||
| Reinsurance–1.42% | ||||||||
| Transatlantic Holdings, Inc. | 56,769 | 2,997,403 | ||||||
| Specialized Consumer Services–1.48% | ||||||||
| H&R Block, Inc. | 175,608 | 3,125,822 | ||||||
| Specialized Finance–4.68% | ||||||||
| Moody’s Corp. | 332,178 | 9,882,295 | ||||||
| Thrifts & Mortgage Finance–1.34% | ||||||||
Ocwen Financial Corp.(b) | 254,907 | 2,826,919 | ||||||
| Total Common Stocks (Cost $254,817,595) | 205,715,252 | |||||||
| Money Market Funds–3.24% | ||||||||
Liquid Assets Portfolio–Institutional Class(c) | 3,424,896 | 3,424,896 | ||||||
Premier Portfolio–Institutional Class(c) | 3,424,895 | 3,424,895 | ||||||
| Total Money Market Funds (Cost $6,849,791) | 6,849,791 | |||||||
| TOTAL INVESTMENTS–100.64% (Cost $261,667,386) | 212,565,043 | |||||||
| OTHER ASSETS LESS LIABILITIES–(0.64)% | (1,346,519 | ) | ||||||
| NET ASSETS–100.00% | $ | 211,218,524 | ||||||
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 Financial Services Fund
Statement of Assets and Liabilities
April 30, 2010 and March 31, 2010
| April 30, | March 31, | |||||||
| 2010 | 2010 | |||||||
| Assets: | ||||||||
| Investments, at value (Cost $251,863,464 and $254,817,595, respectively) | $ | 209,661,489 | $ | 205,715,252 | ||||
| Investments in affiliated money market funds, at value and cost | 8,787,835 | 6,849,791 | ||||||
| Total investments, at value (Cost $260,651,299 and $261,667,386, respectively) | 218,449,324 | 212,565,043 | ||||||
| Receivables for: | ||||||||
| Fund shares sold | 554,707 | 170,552 | ||||||
| Dividends | 116,600 | 159,192 | ||||||
| Investment for trustee deferred compensation and retirement plans | 69,998 | 71,468 | ||||||
| Other assets | 29,274 | 22,615 | ||||||
| Total assets | 219,219,903 | 212,988,870 | ||||||
| Liabilities: | ||||||||
| Payables for: | ||||||||
| Investments purchased | — | 1,091,025 | ||||||
| Fund shares reacquired | 248,036 | 263,537 | ||||||
| Accrued fees to affiliates | 225,321 | 221,496 | ||||||
| Accrued other operating expenses | 134,216 | 68,017 | ||||||
| Trustee deferred compensation and retirement plans | 77,640 | 126,271 | ||||||
| Total liabilities | 685,213 | 1,770,346 | ||||||
| Net assets applicable to shares outstanding | $ | 218,534,690 | $ | 211,218,524 | ||||
| Net assets consist of: | ||||||||
| Shares of beneficial interest | $ | 403,343,789 | $ | 401,349,505 | ||||
| Undistributed net investment income (loss) | (77,131 | ) | (78,024 | ) | ||||
| Undistributed net realized gain (loss) | (142,529,993 | ) | (140,950,614 | ) | ||||
| Unrealized appreciation (depreciation) | (42,201,975 | ) | (49,102,343 | ) | ||||
| $ | 218,534,690 | $ | 211,218,524 | |||||
| Net Assets: | ||||||||
| Class A | $ | 43,946,530 | $ | 41,401,752 | ||||
| Class B | $ | 6,990,456 | $ | 7,039,732 | ||||
| Class C | $ | 14,936,103 | $ | 14,123,027 | ||||
| Class Y | $ | 2,068,557 | $ | 1,966,510 | ||||
| Investor Class | $ | 150,593,044 | $ | 146,687,503 | ||||
| Shares outstanding, $0.01 par value per share, unlimited number of shares authorized: | ||||||||
| Class A | 5,204,924 | 5,023,792 | ||||||
| Class B | 829,502 | 855,200 | ||||||
| Class C | 1,843,732 | 1,785,022 | ||||||
| Class Y | 242,347 | 236,095 | ||||||
| Investor Class | 17,691,180 | 17,655,100 | ||||||
| Class A: | ||||||||
| Net asset value per share | $ | 8.44 | $ | 8.24 | ||||
| Maximum offering price per share (Net asset value of $8.44 divided by 94.50%) (Net asset value of $8.24 divided by 94.50%) | $ | 8.93 | $ | 8.72 | ||||
| Class B: | ||||||||
| Net asset value and offering price per share | $ | 8.43 | $ | 8.23 | ||||
| Class C: | ||||||||
| Net asset value and offering price per share | $ | 8.10 | $ | 7.91 | ||||
| Class Y: | ||||||||
| Net asset value and offering price per share | $ | 8.54 | $ | 8.33 | ||||
| Investor Class: | ||||||||
| Net asset value and offering price per share | $ | 8.51 | $ | 8.31 | ||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
11 Invesco Financial Services Fund
Statement of Operations
For the one month ended April 30, 2010 and the year ended March 31, 2010
| One month ended | Year ended | |||||||
| April 30, | March 31, | |||||||
| 2010 | 2010 | |||||||
| Investment income: | ||||||||
| Dividends | $ | 93,071 | $ | 2,465,940 | ||||
| Dividends from affiliated money market funds | 612 | 23,026 | ||||||
| Total investment income | 93,683 | 2,488,966 | ||||||
| Expenses: | ||||||||
| Advisory fees | 136,409 | 1,419,237 | ||||||
| Administrative services fees | 7,471 | 50,000 | ||||||
| Custodian fees | 961 | 10,028 | ||||||
| Distribution fees: | ||||||||
| Class A | 9,017 | 96,058 | ||||||
| Class B | 6,028 | 73,929 | ||||||
| Class C | 12,293 | 119,669 | ||||||
| Investor Class | 31,446 | 326,590 | ||||||
| Transfer agent fees | 77,389 | 1,033,182 | ||||||
| Trustees’ and officers’ fees and benefits | 2,992 | 24,363 | ||||||
| Professional services fees | 15,467 | — | ||||||
| Other | 7,852 | 188,629 | ||||||
| Total expenses | 307,325 | 3,341,685 | ||||||
| Less: Fees waived and expense offset arrangement(s) | (1,227 | ) | (20,915 | ) | ||||
| Net expenses | 306,098 | 3,320,770 | ||||||
| Net investment income (loss) | (212,415 | ) | (831,804 | ) | ||||
| Net realized gain (loss) from investment securities | (1,579,379 | ) | (23,870,773 | ) | ||||
| Change in net unrealized appreciation of investment securities | 6,900,368 | 132,497,532 | ||||||
| Net realized and unrealized gain | 5,320,989 | 108,626,759 | ||||||
| Net increase in net assets resulting from operations | $ | 5,108,574 | $ | 107,794,955 | ||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
12 Invesco Financial Services Fund
Statement of Changes in Net Assets
For the one month ended April 30, 2010 and the years ended March 31, 2010 and 2009
| One month ended | Year ended | Year ended | ||||||||||
| April 30, | March 31, | March 31, | ||||||||||
| 2010 | 2010 | 2009 | ||||||||||
| Operations: | ||||||||||||
| Net investment income (loss) | $ | (212,415 | ) | $ | (831,804 | ) | $ | 5,222,179 | ||||
| Net realized gain (loss) | (1,579,379 | ) | (23,870,773 | ) | (116,790,102 | ) | ||||||
| Change in net unrealized appreciation (depreciation) | 6,900,368 | 132,497,532 | (126,271,125 | ) | ||||||||
| Net increase (decrease) in net assets resulting from operations | 5,108,574 | 107,794,955 | (237,839,048 | ) | ||||||||
| Distributions to shareholders from net investment income: | ||||||||||||
| Class A | — | (1,054,355 | ) | (488,373 | ) | |||||||
| Class B | — | (143,295 | ) | (107,092 | ) | |||||||
| Class C | — | (270,305 | ) | (94,940 | ) | |||||||
| Class Y | — | (23,002 | ) | (5,176 | ) | |||||||
| Investor Class | — | (3,702,578 | ) | (2,146,172 | ) | |||||||
| Total distributions from net investment income | — | (5,193,535 | ) | (2,841,753 | ) | |||||||
| Distributions to shareholders from net realized gains: | ||||||||||||
| Class A | — | — | (3,967,466 | ) | ||||||||
| Class B | — | — | (1,236,068 | ) | ||||||||
| Class C | — | — | (1,095,804 | ) | ||||||||
| Class Y | — | — | (42,046 | ) | ||||||||
| Investor Class | — | — | (17,435,194 | ) | ||||||||
| Total distributions from net realized gains | — | — | (23,776,578 | ) | ||||||||
| Share transactions-net: | ||||||||||||
| Class A | 1,555,012 | (2,506,191 | ) | 22,229,179 | ||||||||
| Class B | (210,350 | ) | (2,873,511 | ) | 159,218 | |||||||
| Class C | 492,715 | 1,943,555 | 5,758,712 | |||||||||
| Class Y | 56,187 | 1,287,842 | 568,238 | |||||||||
| Investor Class | 314,028 | (10,374,643 | ) | 4,266,378 | ||||||||
| Net increase (decrease) in net assets resulting from share transactions | 2,207,592 | (12,522,948 | ) | 32,981,725 | ||||||||
| Net increase (decrease) in net assets | 7,316,166 | 90,078,472 | (231,475,654 | ) | ||||||||
| Net assets: | ||||||||||||
| Beginning of year | 211,218,524 | 121,140,052 | 352,615,706 | |||||||||
| End of year (includes undistributed net investment income (loss) of $(77,131), $(78,024) and 5,066,304, respectively) | $ | 218,534,690 | $ | 211,218,524 | $ | 121,140,052 | ||||||
Notes to Financial Statements
April 30, 2010
NOTE 1—Significant Accounting Policies
Invesco Financial Services Fund, formerly AIM Financial Services Fund, (the “Fund”) is a series portfolio of AIM Sector Funds (Invesco Sector Funds), formerly AIM Sector Funds, (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 six separate portfolios, each authorized to issue an unlimited number of shares of beneficial interest. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class.
On April 30, 2010, the Fund’s fiscal year-end changed from March 31 to April 30.
The Fund’s investment objective is capital growth.
13 Invesco Financial Services Fund
The Fund currently consists of five different classes of shares: Class A, Class B, Class C, Class Y and Investor 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 waiver shares may be subject to contingent deferred sales charges (“CDSC”). Class B shares and Class C shares are sold with a CDSC. Class Y and Investor Class shares are sold at net asset value. Generally, Class B shares will automatically convert to Class A shares on or about the month-end which is at least eight years after the date of purchase.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
| A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. | |
| A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”). | ||
| Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded. | ||
| Debt obligations (including convertible bonds) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations, including commercial paper, having 60 days or less to maturity are recorded at amortized cost which approximates value. Debt securities are subject to interest rate and credit risks. In addition, all debt securities involve some risk of default with respect to interest and/or principal payments. | ||
| Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economical upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards. | ||
| Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including Corporate Loans. | ||
| Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value. | ||
| Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments. | ||
| B. | Securities Transactions and Investment Income — Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded on the accrual basis from settlement date. Dividend income 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 realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the realized and unrealized net 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. |
14 Invesco Financial Services Fund
| The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class. | ||
| C. | Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. | |
| D. | Distributions — Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to treat a portion of the proceeds from redemptions as distributions for federal income tax purposes. | |
| E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. | |
| The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period. | ||
| F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. | |
| G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. | |
| H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements, that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. | |
| I. | Other Risks — The Fund’s investments are concentrated in a comparatively narrow segment of the economy. Consequently, the Fund may tend to be more volatile than other mutual funds, and the value of the Fund’s investments may tend to rise and fall more rapidly. | |
| The financial services sector is subject to extensive government regulation, which may change frequently. The profitability of businesses in this sector depends heavily on the availability and cost of money and may fluctuate significantly in response to changes to interest rates and general economic conditions. |
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 Net Assets | Rate | |||
| First $350 million | 0 | .75% | ||
| Next $350 million | 0 | .65% | ||
| Next $1.3 billion | 0 | .55% | ||
| Next $2 billion | 0 | .45% | ||
| Next $2 billion | 0 | .40% | ||
| Next $2 billion | 0 | .375% | ||
| Over $8 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 Trimark Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide discretionary investment management services to the Fund based on the percentage of assets allocated to such Sub-Adviser(s).
On December 31, 2009, Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc., Invesco Aim Private Asset Management, Inc. and Invesco Global Asset Management (N.A.), Inc. merged into Invesco Institutional (N.A.), Inc. and the consolidated adviser firm was renamed Invesco Advisers, Inc.
Effective July 1, 2009, Adviser has contractually agreed, through at least June 30, 2010, 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 Investor Class shares to 2.00%, 2.75%, 2.75%, 1.75% and 2.00%, 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 to
15 Invesco Financial Services Fund
exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (iv) extraordinary items or non-routine items; and (4) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. The Board of Trustees or Invesco may terminate the fee waiver arrangement at any time. The Adviser did not waive fees and/or reimburse expenses under this limitation for the one month ended April 30, 2010 and the year ended March 31, 2010.
Further, the Adviser has contractually agreed, through at least June 30, 2010, 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 period April 1, 2010 to April 30, 2010 and the year ended March 31, 2010, the Adviser waived advisory fees of $534 and 7,602, respectively.
At the request of the Trustees of the Trust, Invesco Ltd. agreed to reimburse expenses incurred by the Fund in connection with market timing matters in the Invesco Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement are included in the Statement of Operations. For the period April 1, 2010 to April 30, 2010 and the year ended March 31, 2010, Invesco Ltd. reimbursed expenses of the Fund in the amount of $0 and $1,116, 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 period April 1, 2010 to April 30, 2010 and the year ended March 31, 2010, 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 period April 1, 2010 to April 30, 2010 and the year ended March 31, 2010, 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 Investor 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 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 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 period April 1, 2010 to April 30, 2010 and the year ended March 31, 2010, 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 period April 1, 2010 to April 30, 2010, IDI advised the Fund that IDI retained $2,233 in front-end sales commissions from the sale of Class A shares and $0, $1,921 and $0 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders. During the year ended March 31, 2010, IDI advised the Fund that IDI retained $30,809 in front-end sales commissions from the sale of Class A shares and $794, $22,975 and $4,615 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of Invesco, IIS and/or IDI.
NOTE 3—Additional Valuation Information
Generally Accepted Accounting Principles (“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 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 April 30, 2010 and March 31, 2010. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
16 Invesco Financial Services Fund
During the period April 1, 2010 to April 30, 2010 there were no significant transfers between Investment levels.
| April 30, 2010 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Equity Securities | $ | 218,449,324 | $ | — | $ | — | $ | 218,449,324 | ||||||||
| March 31, 2010 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Equity Securities | $ | 212,565,043 | $ | — | $ | — | $ | 212,565,043 | ||||||||
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 period April 1, 2010 to April 30, 2010 and the year ended March 31, 2010, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $693 and $12,197, respectively.
NOTE 5—Trustees’ and Officers’ Fees and Benefits
“Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and “Trustees’ and Officers’ Fees and Benefits” also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. “Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
During the period April 1, 2010 to April 30, 2010 and the year ended March 31, 2010, the Fund paid legal fees of $0 and $2,500, respectively, for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 6—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with The State Street Bank and Trust Company, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 7—Distributions to Shareholders and Tax Components of Net Assets
Distributions to Shareholders Paid:
| April 30, 2010 | March 31, 2010 | March 31, 2009 | ||||||||||
| Ordinary income | — | $ | 5,193,535 | $ | 2,852,868 | |||||||
| Long-term capital gain | — | — | 23,765,463 | |||||||||
| Total distributions | — | $ | 5,193,535 | $ | 26,618,331 | |||||||
Tax Components of Net Assets at Period-End:
| April 30, 2010 | March 31, 2010 | |||||||
| Net unrealized appreciation (depreciation) — investments | $ | (42,656,459 | ) | $ | (49,556,826 | ) | ||
| Temporary book/tax differences | (103,806 | ) | (104,700 | ) | ||||
| Post-October deferrals | — | (14,131,186 | ) | |||||
| Capital loss carryforward | (142,048,834 | ) | (126,338,269 | ) | ||||
| Shares of beneficial interest | 403,343,789 | 401,349,505 | ||||||
| Total net assets | $ | 218,534,690 | $ | 211,218,524 | ||||
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 and the treatment of partnership 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.
17 Invesco Financial Services Fund
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund has a capital loss carryforward as of April 30, 2010 and March 31, 2010 which expires as follows:
| Capital Loss Carryforward* | ||||||||
| Expiration | April 30, 2010 | March 31, 2010 | ||||||
| April 30, 2016 | $ | 96,153,846 | $ | 96,153,846 | ||||
| April 30, 2017 | 30,184,423 | 30,184,423 | ||||||
| April 30, 2018 | 15,710,565 | — | ||||||
| Total capital loss carryforward | $ | 142,048,834 | $ | 126,338,269 | ||||
| * | 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 period April 1, 2010 to April 30, 2010 was $2,747,712 and $4,122,384 and the year ended March 31, 2010 was $34,274,218 and $47,777,328, 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 | ||||||||
| April 30, 2010 | March 31, 2010 | |||||||
| Aggregate unrealized appreciation of investment securities | $ | 20,280,956 | $ | 18,362,212 | ||||
| Aggregate unrealized (depreciation) of investment securities | (62,937,415 | ) | (67,919,038 | ) | ||||
| Net unrealized appreciation (depreciation) of investment securities | $ | (42,656,459 | ) | $ | (49,556,826 | ) | ||
| Cost of investments for tax purposes | $ | 261,105,783 | $ | 262,121,869 | ||||
NOTE 9—Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of net operating losses, on April 30, 2010, undistributed net investment income (loss) was increased by $213,308 and shares of beneficial interest decreased by $213,308. This reclassification had no effect on the net assets of the Fund.
Primarily as a result of differing book/tax treatment of net operating losses, on March 31, 2010, undistributed net investment income (loss) was increased by $881,011; undistributed net realized gain (loss) was decreased by $44,410 and shares of beneficial interest decreased by $836,601. This reclassification had no effect on the net assets of the Fund.
18 Invesco Financial Services Fund
NOTE 10—Share Information
| Summary of Share Activity | ||||||||||||||||||||||||
| One month ended | Year ended | Year ended | ||||||||||||||||||||||
| April 30, 2010(a) | March 31, 2010(a) | March 31, 2009 | ||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||
| Sold: | ||||||||||||||||||||||||
| Class A | 323,642 | $ | 2,787,096 | 2,991,551 | $ | 20,055,712 | 3,938,345 | $ | 38,542,783 | |||||||||||||||
| Class B | 23,742 | 204,556 | 290,259 | 1,895,468 | 660,762 | 6,947,393 | ||||||||||||||||||
| Class C | 103,958 | 862,689 | 949,740 | 6,150,601 | 1,084,835 | 10,073,182 | ||||||||||||||||||
Class Y(b) | 8,599 | 76,548 | 200,462 | 1,555,806 | 67,733 | 545,825 | ||||||||||||||||||
| Investor Class | 376,607 | 3,272,459 | 3,023,338 | 20,190,076 | 3,603,191 | 35,568,011 | ||||||||||||||||||
| Issued as reinvestment of dividends: | ||||||||||||||||||||||||
| Class A | — | — | 129,505 | 972,582 | 724,329 | 4,208,363 | ||||||||||||||||||
| Class B | — | — | 18,123 | 136,288 | 220,767 | 1,282,657 | ||||||||||||||||||
| Class C | — | — | 35,844 | 259,156 | 200,646 | 1,121,610 | ||||||||||||||||||
| Class Y | — | — | 2,827 | 21,426 | 7,756 | 45,375 | ||||||||||||||||||
| Investor Class | — | — | 473,202 | 3,582,138 | 3,238,461 | 18,944,918 | ||||||||||||||||||
| Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||||||||||
| Class A | 34,408 | 287,642 | 312,599 | 2,147,574 | 358,188 | 3,306,169 | ||||||||||||||||||
| Class B | (34,490 | ) | (287,642 | ) | (313,481 | ) | (2,147,574 | ) | (358,674 | ) | (3,306,169 | ) | ||||||||||||
| Reacquired: | ||||||||||||||||||||||||
Class A(b) | (176,918 | ) | (1,519,726 | ) | (3,620,778 | ) | (25,682,059 | ) | (2,619,421 | ) | (23,828,136 | ) | ||||||||||||
| Class B | (14,950 | ) | (127,264 | ) | (402,534 | ) | (2,757,693 | ) | (495,525 | ) | (4,764,663 | ) | ||||||||||||
| Class C | (45,248 | ) | (369,974 | ) | (666,409 | ) | (4,466,202 | ) | (604,184 | ) | (5,436,080 | ) | ||||||||||||
| Class Y | (2,347 | ) | (20,361 | ) | (39,041 | ) | (289,390 | ) | (3,642 | ) | (22,962 | ) | ||||||||||||
Investor Class(b) | (340,527 | ) | (2,958,431 | ) | (4,896,297 | ) | (34,146,857 | ) | (5,296,436 | ) | (50,246,551 | ) | ||||||||||||
| Net increase (decrease) in share activity | 256,476 | $ | 2,207,592 | (1,511,090 | ) | $ | (12,522,948 | ) | 4,727,131 | $ | 32,981,725 | |||||||||||||
| (a) | There is an entity that is a record owner of more than 5% of the outstanding shares of the Fund and owns 14% and 13% for year ended March 31, 2010 and the one month ended April 30, 2010, respectively, of the outstanding shares of the Fund. IDI has an agreement with this entity to sell Fund shares. The Fund, Invesco and/or Invesco affiliates may make payments to this entity, which is considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by this entity are also owned beneficially. | |
| (b) | Effective upon the commencement date of Class Y shares, October 3, 2008, the following shares were converted from Class A and Investor Class shares into Class Y shares of the Fund |
| Class | Shares | Amount | ||||||
| Class Y | 33,662 | $ | 385,767 | |||||
| Class A | (25,595 | ) | (291,276 | ) | ||||
| Investor Class | (8,245 | ) | (94,491 | ) | ||||
19 Invesco Financial Services Fund
NOTE 11—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 | on securities | Dividends | Distributions | net assets | assets without | investment | |||||||||||||||||||||||||||||||||||||||||||||||||
| value, | investment | (both | Total from | from net | from net | Net asset | Net assets, | with fee waivers | fee waivers | income (loss) | ||||||||||||||||||||||||||||||||||||||||||||||
| beginning | income | realized and | investment | investment | realized | Total | value, end | Total | end of period | and/or expenses | and/or expenses | to average | Portfolio | |||||||||||||||||||||||||||||||||||||||||||
| of period | (loss)(a) | unrealized) | operations | income | gains | Distributions | of period | Return(b) | (000s omitted) | absorbed | absorbed | net assets | turnover(c) | |||||||||||||||||||||||||||||||||||||||||||
| Class A | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Month ended 04/30/10 | $ | 8.24 | $ | (0.01 | ) | $ | 0.21 | $ | 0.20 | $ | — | $ | — | $ | — | $ | 8.44 | 2.43 | % | $ | 43,947 | 1.61 | %(d) | 1.61 | %(d) | (1.10 | )%(d) | 1 | % | |||||||||||||||||||||||||||
| Year ended 03/31/10 | 4.46 | (0.03 | ) | 4.02 | 3.99 | (0.21 | ) | — | (0.21 | ) | 8.24 | 89.87 | 41,402 | 1.69 | (e) | 1.69 | (e) | (0.37 | )(e) | 19 | ||||||||||||||||||||||||||||||||||||
| Year ended 03/31/09 | 15.72 | 0.22 | (10.29 | ) | (10.07 | ) | (0.13 | ) | (1.06 | ) | (1.19 | ) | 4.46 | (65.84 | ) | 23,242 | 1.64 | 1.65 | 2.25 | 38 | ||||||||||||||||||||||||||||||||||||
| Year ended 03/31/08 | 27.30 | 0.42 | (8.61 | ) | (8.19 | ) | (0.45 | ) | (2.94 | ) | (3.39 | ) | 15.72 | (31.76 | ) | 44,151 | 1.31 | 1.31 | 1.76 | 15 | ||||||||||||||||||||||||||||||||||||
| Year ended 03/31/07 | 28.22 | 0.38 | 2.32 | 2.70 | (0.39 | ) | (3.23 | ) | (3.62 | ) | 27.30 | 9.24 | 69,846 | 1.28 | 1.28 | 1.33 | 5 | |||||||||||||||||||||||||||||||||||||||
| Year ended 03/31/06 | 27.16 | 0.32 | 4.05 | 4.37 | (0.39 | ) | (2.92 | ) | (3.31 | ) | 28.22 | 16.36 | 71,297 | 1.32 | 1.32 | 1.12 | 3 | |||||||||||||||||||||||||||||||||||||||
| Class B | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Month ended 04/30/10 | 8.23 | (0.01 | ) | 0.21 | 0.20 | — | — | — | 8.43 | 2.43 | 6,990 | 2.36 | (d) | 2.36 | (d) | (1.85 | )(d) | 1 | ||||||||||||||||||||||||||||||||||||||
| Year ended 03/31/10 | 4.45 | (0.08 | ) | 4.01 | 3.93 | (0.15 | ) | — | (0.15 | ) | 8.23 | 88.59 | 7,040 | 2.44 | (e) | 2.44 | (e) | (1.12 | )(e) | 19 | ||||||||||||||||||||||||||||||||||||
| Year ended 03/31/09 | 15.72 | 0.15 | (10.27 | ) | (10.12 | ) | (0.09 | ) | (1.06 | ) | (1.15 | ) | 4.45 | (66.10 | ) | 5,624 | 2.39 | 2.40 | 1.50 | 38 | ||||||||||||||||||||||||||||||||||||
| Year ended 03/31/08 | 27.22 | 0.24 | (8.58 | ) | (8.34 | ) | (0.22 | ) | (2.94 | ) | (3.16 | ) | 15.72 | (32.32 | ) | 19,428 | 2.06 | 2.06 | 1.01 | 15 | ||||||||||||||||||||||||||||||||||||
| Year ended 03/31/07 | 28.15 | 0.16 | 2.30 | 2.46 | (0.16 | ) | (3.23 | ) | (3.39 | ) | 27.22 | 8.41 | 43,639 | 2.03 | 2.03 | 0.58 | 5 | |||||||||||||||||||||||||||||||||||||||
| Year ended 03/31/06 | 27.10 | 0.11 | 4.03 | 4.14 | (0.17 | ) | (2.92 | ) | (3.09 | ) | 28.15 | 15.51 | 52,773 | 2.04 | 2.04 | 0.40 | 3 | |||||||||||||||||||||||||||||||||||||||
| Class C | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Month ended 04/30/10 | 7.91 | (0.01 | ) | 0.20 | 0.19 | — | — | — | 8.10 | 2.40 | 14,936 | 2.36 | (d) | 2.36 | (d) | (1.85 | )(d) | 1 | ||||||||||||||||||||||||||||||||||||||
| Year ended 03/31/10 | 4.28 | (0.08 | ) | 3.86 | 3.78 | (0.15 | ) | — | (0.15 | ) | 7.91 | 88.60 | 14,123 | 2.44 | (e) | 2.44 | (e) | (1.12 | )(e) | 19 | ||||||||||||||||||||||||||||||||||||
| Year ended 03/31/09 | 15.23 | 0.14 | (9.94 | ) | (9.80 | ) | (0.09 | ) | (1.06 | ) | (1.15 | ) | 4.28 | (66.13 | ) | 6,281 | 2.39 | 2.40 | 1.50 | 38 | ||||||||||||||||||||||||||||||||||||
| Year ended 03/31/08 | 26.48 | 0.23 | (8.32 | ) | (8.09 | ) | (0.22 | ) | (2.94 | ) | (3.16 | ) | 15.23 | (32.28 | ) | 11,948 | 2.06 | 2.06 | 1.01 | 15 | ||||||||||||||||||||||||||||||||||||
| Year ended 03/31/07 | 27.47 | 0.16 | 2.24 | 2.40 | (0.16 | ) | (3.23 | ) | (3.39 | ) | 26.48 | 8.39 | 15,727 | 2.03 | 2.03 | 0.58 | 5 | |||||||||||||||||||||||||||||||||||||||
| Year ended 03/31/06 | 26.51 | 0.11 | 3.94 | 4.05 | (0.17 | ) | (2.92 | ) | (3.09 | ) | 27.47 | 15.51 | 18,872 | 2.04 | 2.04 | 0.40 | 3 | |||||||||||||||||||||||||||||||||||||||
| Class Y | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Month ended 04/30/10 | 8.33 | (0.01 | ) | 0.22 | 0.21 | — | — | — | 8.54 | 2.52 | 2,069 | 1.36 | (d) | 1.36 | (d) | (0.85 | )(d) | 1 | ||||||||||||||||||||||||||||||||||||||
| Year ended 03/31/10 | 4.50 | (0.01 | ) | 4.06 | 4.05 | (0.22 | ) | — | (0.22 | ) | 8.33 | 90.47 | 1,967 | 1.44 | (e) | 1.44 | (e) | (0.12 | )(e) | 19 | ||||||||||||||||||||||||||||||||||||
| Year ended 03/31/09(f) | 11.46 | 0.06 | (5.83 | ) | (5.77 | ) | (0.13 | ) | (1.06 | ) | (1.19 | ) | 4.50 | (52.77 | ) | 323 | 1.70 | (g) | 1.70 | (g) | 2.19 | (g) | 38 | |||||||||||||||||||||||||||||||||
| Investor Class | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Month ended 04/30/10 | 8.31 | (0.01 | ) | 0.21 | 0.20 | — | — | — | 8.51 | 2.41 | 150,593 | 1.61 | (d) | 1.61 | (d) | (1.10 | )(d) | 1 | ||||||||||||||||||||||||||||||||||||||
| Year ended 03/31/10 | 4.50 | (0.03 | ) | 4.05 | 4.02 | (0.21 | ) | — | (0.21 | ) | 8.31 | 89.74 | 146,688 | 1.69 | (e) | 1.69 | (e) | (0.37 | )(e) | 19 | ||||||||||||||||||||||||||||||||||||
| Year ended 03/31/09 | 15.82 | 0.23 | (10.36 | ) | (10.13 | ) | (0.13 | ) | (1.06 | ) | (1.19 | ) | 4.50 | (65.79 | ) | 85,669 | 1.64 | 1.65 | 2.25 | 38 | ||||||||||||||||||||||||||||||||||||
| Year ended 03/31/08 | 27.47 | 0.42 | (8.68 | ) | (8.26 | ) | (0.45 | ) | (2.94 | ) | (3.39 | ) | 15.82 | (31.83 | ) | 277,089 | 1.31 | 1.31 | 1.76 | 15 | ||||||||||||||||||||||||||||||||||||
| Year ended 03/31/07 | 28.37 | 0.38 | 2.34 | 2.72 | (0.39 | ) | (3.23 | ) | (3.62 | ) | 27.47 | 9.27 | 507,787 | 1.28 | 1.28 | 1.33 | 5 | |||||||||||||||||||||||||||||||||||||||
| Year ended 03/31/06 | 27.30 | 0.33 | 4.06 | 4.39 | (0.40 | ) | (2.92 | ) | (3.32 | ) | 28.37 | 16.36 | 563,294 | 1.30 | 1.30 | 1.14 | 3 | |||||||||||||||||||||||||||||||||||||||
| (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 annualized and based on average daily net assets (000’s omitted) of $43,882, $7,334, $14,957, $2,077 and $153,035 for Class A, Class B, Class C, Class Y and Investor Class shares, respectively. | |
| (e) | Ratios are based on average daily net assets (000’s omitted) of $38,423, $7,393, $11,967, $813 and $130,636 for Class A, Class B, Class C, Class Y and Investor Class shares, respectively. | |
| (f) | Commencement date of October 3, 2008. | |
| (g) | Annualized. |
20 Invesco Financial Services Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Sector Funds (Invesco Sector Funds)
and Shareholders of Invesco Financial Services 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 Financial Services Fund (formerly known as AIM Financial Services Fund; one of the funds constituting AIM Sector Funds (Invesco Sector Funds), hereafter referred to as the “Fund”) at April 30, 2010 and at March 31, 2010, the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at April 30, 2010 and at March 31, 2010 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
June 4, 2010
Houston, Texas
21 Invesco Financial Services 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 November 1, 2009 through April 30, 2010.
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 | (11/01/09) | (04/30/10)1 | Period2 | (04/30/10) | Period2 | Ratio | ||||||||||||||||||||||||
| Class A | $ | 1,000.00 | $ | 1,188.20 | $ | 8.63 | $ | 1,016.91 | $ | 7.95 | 1.59 | % | ||||||||||||||||||
| Class B | 1,000.00 | 1,184.00 | 12.67 | 1,013.19 | 11.68 | 2.34 | ||||||||||||||||||||||||
| Class C | 1,000.00 | 1,184.20 | 12.67 | 1,013.19 | 11.68 | 2.34 | ||||||||||||||||||||||||
| Class Y | 1,000.00 | 1,190.70 | 7.28 | 1,018.15 | 6.71 | 1.34 | ||||||||||||||||||||||||
| Investor | 1,000.00 | 1,188.00 | 8.63 | 1,016.91 | 7.95 | 1.59 | ||||||||||||||||||||||||
| 1 | The actual ending account value is based on the actual total return of the Fund for the period November 1, 2009 through April 30, 2010, 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 181/365 to reflect the most recent fiscal half year. |
22 Invesco Financial Services 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 October 1, 2009 through March 31, 2010.
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 | (10/01/09) | (03/31/10)1 | Period2 | (03/31/10) | Period2 | Ratio | ||||||||||||||||||||||||
| A | $ | 1,000.00 | $ | 1,107.00 | $ | 8.46 | $ | 1,016.90 | $ | 8.10 | 1.61 | % | ||||||||||||||||||
| B | 1,000.00 | 1,102.80 | 12.37 | 1,013.16 | 11.85 | 2.36 | ||||||||||||||||||||||||
| C | 1,000.00 | 1,102.70 | 12.37 | 1,013.16 | 11.85 | 2.36 | ||||||||||||||||||||||||
| Y | 1,000.00 | 1,108.80 | 7.15 | 1,018.15 | 6.84 | 1.36 | ||||||||||||||||||||||||
| Investor | 1,000.00 | 1,107.50 | 8.46 | 1,016.90 | 8.10 | 1.61 | ||||||||||||||||||||||||
| 1 | The actual ending account value is based on the actual total return of the Fund for the period October 1, 2009 through March 31, 2010, 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 181/365 to reflect the most recent fiscal half year. |
23 Invesco Financial Services 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:
Federal and State Income Tax | April 30, 2010 | March 31, 2010 | ||||||
| Qualified Dividend Income* | —% | 99.63% | ||||||
| Corporate Dividends Received Deduction* | —% | 99.63% | ||||||
| * | The above percentages are based on ordinary income dividends paid to shareholders during the Fund’s fiscal year |
24 Invesco Financial Services Fund
Trustees and Officers
The address of each trustee and officer of AIM Sector Funds (Invesco Sector Funds) (the “Trust”), is 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. Each trustee oversees 197 portfolios in the Invesco Funds complex. 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.
| Trustee | Other | |||||||
| and/ or | Directorship(s) | |||||||
| Name, Year of Birth and | Officer | Held by | ||||||
| Position(s) Held with the Trust | Since | Principal Occupation(s) During Past 5 Years | Trustee | |||||
Interested Persons | ||||||||
Martin L. Flanagan1 — 1960 Trustee | 2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Trustee, The AIM Family of Funds®; Board of Governors, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business 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 and Vice Chairman, Investment Company Institute | None | |||||
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, Chief Executive Officer and President, 1371 Preferred Inc. (holding company); Director, Chairman, Chief Executive Officer and President, Invesco Management Group Inc. (formerly known as Invesco Aim Management Group, Inc.) (financial services holding company); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent) and AIM GP Canada Inc. (general partner for limited partnerships); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.) (registered transfer agent) and INVESCO Distributors, Inc. (registered broker dealer); Director, President and Chairman, INVESCO Inc. (holding company) and Invesco Canada Holdings Inc. (holding company); Chief Executive Officer, AIM Trimark Corporate Class Inc. (corporate mutual fund company) and AIM Trimark Canada Fund Inc. (corporate mutual fund company); Director and Chief Executive Officer, Invesco Trimark Ltd./Invesco Trimark Ltèe (registered investment adviser and registered transfer agent) and Invesco Trimark Dealer Inc. (registered broker dealer); Trustee, President and Principal Executive Officer, The AIM Family of Funds® (other than AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust); Trustee and Executive Vice President, The AIM Family of Funds® (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust only) Formerly: 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 Capital Management, Inc. ) (formerly, 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 AIM Family of 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. | None | |||||
Independent Trustees | ||||||||
| Bruce L. Crockett — 1944 Trustee and Chair | 2003 | Chairman, Crockett Technology Associates (technology consulting company) Formerly: Director, Captaris (unified messaging provider) | ACE Limited (insurance company); and Investment Company Institute | |||||
| Bob R. Baker — 1936 Trustee | 1983 | Retired | None | |||||
| Frank S. Bayley — 1939 Trustee | 2003 | Retired Formerly: Director, Badgley Funds, Inc. (registered investment company) (2 portfolios) | None | |||||
| James T. Bunch — 1942 Trustee | 2000 | Founder, Green, Manning & Bunch Ltd. (investment banking firm) Formerly: Executive Committee, United States Golf Association | Vice Chairman, Board of Governors, Western Golf Association/Evans Scholars Foundation and Director, Denver Film Society | |||||
| 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 | Board 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) | Administaff | |||||
| Carl Frischling — 1937 Trustee | 2003 | Partner, law firm of Kramer Levin Naftalis and Frankel LLP | Director, Reich & Tang Funds (16 portfolios) | |||||
| Prema Mathai-Davis — 1950 Trustee | 2003 | Retired | None | |||||
| Lewis F. Pennock — 1942 Trustee | 2003 | Partner, law firm of Pennock & Cooper | None | |||||
| Larry Soll — 1942 Trustee | 1997 | Retired | None | |||||
| Raymond Stickel, Jr. — 1944 Trustee | 2005 | Retired Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios) | None | |||||
| 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. |
T-1
Trustees and Officers — (continued)
| Trustee | Other | |||||||
| and/ or | Directorship(s) | |||||||
| Name, Year of Birth and | Officer | Held by | ||||||
| Position(s) Held with the Trust | Since | Principal Occupation(s) During Past 5 Years | Trustee | |||||
Other Officers | ||||||||
| Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer of The AIM Family of Funds® | 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.), 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 INVESCO Distributors, Inc.; Director and Vice President, INVESCO Funds Group, Inc.; Senior Vice President, Chief Legal Officer and Secretary, The AIM Family of Funds®; and Manager, Invesco PowerShares Capital Management LLC Formerly: Director, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco Advisers, Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco Capital Management (formerly known as 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 | |||||
| Lisa O. Brinkley — 1959 Vice President | 2004 | Global Compliance Director, Invesco Ltd.; Chief Compliance Officer, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) and Invesco Investment Services, Inc.(formerly known as Invesco Aim Investment Services, Inc.); and Vice President, The AIM Family of Funds® Formerly: Senior Vice President, Invesco Management Group, Inc. (formerly known as Invesco Aim Management Group, Inc.); Senior Vice President and Chief Compliance Officer, Invesco Advisers, Inc. and The AIM Family of Funds®; Vice President and Chief Compliance Officer, Invesco Capital Management, Inc. (formerly known as Invesco Aim Capital Management, Inc.) and Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.); Vice President, Invesco Investment Services (formerly known as Invesco Aim Investment Services, Inc.) and Fund Management Company | N/A | |||||
| Kevin M. Carome — 1956 Vice President | 2003 | General Counsel, Secretary and Senior Managing Director, Invesco Ltd.; Director, Invesco Holding Company Limited and INVESCO Funds Group, Inc.; Director and Executive Vice President, IVZ, Inc., Invesco Group Services, Inc., Invesco North American Holdings, Inc. and Invesco Investments (Bermuda) Ltd.; Director and Secretary, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Vice President, The AIM Family of Funds®; and Trustee, 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: Senior Managing Director and Secretary, Invesco North American Holdings, Inc.; Vice President and Secretary, IVZ, Inc. and Invesco Group Services, Inc.; Senior Managing Director and Secretary, Invesco Holding Company Limited; Director, Senior Vice President, Secretary and General Counsel, Invesco Management Group Inc. (formerly known as Invesco Aim Management Group, Inc.) and Invesco Advisers, Inc.; Senior Vice President, Invesco Distributors, Inc.; Director, General Counsel and Vice President, Fund Management Company; Vice President, Invesco Capital Management Inc. (formerly known as Invesco Aim Capital Management, Inc.) and Invesco Investment Services, Inc.; Senior Vice President, Chief Legal Officer and Secretary, The AIM Family of Funds®; Director and Vice President, INVESCO Distributors, Inc.; and Chief Executive Officer and President, INVESCO Funds Group, Inc. | N/A | |||||
| Sheri Morris — 1964 Vice President, Treasurer and Principal Financial Officer | 2003 | Vice President, Treasurer and Principal Financial Officer, The AIM Family of Funds®; and Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser) Formerly: Vice President, Invesco Advisers, Inc., Invesco Capital Management, Inc. (formerly known as Invesco Aim Capital Management, Inc.) and Invesco Private Asset Management Inc. (formerly known as Invesco Aim Private Asset Management, Inc.); Assistant Vice President and Assistant Treasurer, The AIM Family of Funds® and Assistant Vice President, Invesco Advisers, Inc., Invesco Capital Management, Inc. (formerly known as Invesco Aim Capital Management, Inc. and Invesco Private Asset Management Inc. (formerly known as Invesco Aim Private Asset Management, Inc.) | N/A | |||||
| Karen Dunn Kelley — 1960 Vice President | 2003 | Head of Invesco’s World Wide Fixed Income and Cash Management Group; Senior Vice President, 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.); Senior Vice President, Invesco Management Group, Inc. (formerly known as Invesco Aim Management Group, Inc.); and Director, Invesco Mortgage Capital Inc.; Vice President, The AIM Family of 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 AIM Family of Funds® (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust only) Formerly: 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 Capital Management, Inc. (formerly known as 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 Capital Management, Inc. (formerly known as Invesco Aim Capital Management, Inc.); Director of Cash Management, Senior Vice President, and Vice President, Invesco Advisers, Inc. and The AIM Family of Funds® (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Tax-Free Investments Trust only) | N/A | |||||
| Lance A. Rejsek — 1967 Anti-Money Laundering Compliance Officer | 2005 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.), Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.), The AIM Family of Funds®, PowerShares Exchange-Traded Fund Trust, PowerShares Exchang-Traded Trust II, PowerShares India Exchange-Traded Fund Trust and PowerShares Actively Managed Exchange-Traded Fund Trust. Formerly: Anti-Money Laundering Compliance Officer, Fund Management Company, Invesco Advisers, Inc., Invesco Capital Management, Inc. (formerly known as Invesco Aim Capital Management, Inc. and Invesco Private Asset Management, Inc. (formerly known as Invesco Aim Private Asset Management, Inc.) | N/A | |||||
T-2
Trustees and Officers — (continued)
| Trustee | Other | |||||||
| and/ or | Directorship(s) | |||||||
| Name, Year of Birth and | Officer | Held by | ||||||
| Position(s) Held with the Trust | Since | Principal Occupation(s) During Past 5 Years | Trustee | |||||
| Todd L. Spillane — 1958 Chief Compliance Officer | 2006 | Senior Vice President, Invesco Management Group Inc. (formerly known as Invesco Aim Management Group, Inc.); 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 AIM Family of Funds®, PowerShares Exchange-Traded Fund Trust, PowerShares Exchang-Traded Trust II, PowerShares India Exchange-Traded Fund Trust and PowerShares Actively Managed Exchange-Traded Fund Trust, INVESCO Private Capital Investments, Inc. (holding company), Invesco Private Capital, Inc. (registered investment adviser) and Invesco Senior Secured Management, Inc. (registered investment adviser); 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 and Chief Compliance Officer, Invesco Advisers, Inc. and Invesco Capital Management, Inc. (formerly known as Invesco Aim Capital Management, Inc.); Chief Compliance Officer, Invesco Global Asset Management (N.A.), Inc.; Vice President, Invesco Capital Management, Inc. (formerly known as Invesco Aim Capital Management, Inc.) and Fund Management Company | 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 | Investment Adviser | Distributor | Auditors | |||
| 11 Greenway Plaza, Suite 2500 Houston, TX 77046-1173 | Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 | Invesco Distributors, Inc. 11 Greenway Plaza, Suite 2500 Houston, TX 77046-1173 | PricewaterhouseCoopers LLP 1201 Louisiana Street, Suite 2900 Houston, TX 77002-5678 | |||
Counsel to the Fund | Counsel to the Independent Trustees | Transfer Agent | Custodian | |||
| Stradley Ronon Stevens & Young, LLP 2600 One Commerce Square Philadelphia, PA 19103 | Kramer, Levin, Naftalis & Frankel LLP 1177 Avenue of the Americas New York, NY 10036-2714 | Invesco Investment Services, Inc. P.O. Box 4739 Houston, TX 77210-4739 | State Street Bank and Trust Company 225 Franklin Boston, MA 02110-2801 |
T-3
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 number of trees used to produce paper. | |
| • | economical. Help reduce your fund’s printing and delivery expenses and put more capital back in your fund’s returns. | |
| • | efficient. Stop waiting for regular mail. Your documents will be sent via email as soon as they’re available. | |
| • | easy. Download, save and print files using your home computer with a few clicks of your mouse. |
This service is provided by Invesco Investment Services, Inc.
Invesco Privacy Policy
You share personal and financial information with us that is necessary for your transactions and your account records. We take very seriously the obligation to keep that information confidential and private.
Invesco collects nonpublic personal information about you from account applications or other forms you complete and from your transactions with us or our affiliates. We do not disclose information about you or our former customers to service providers or other third parties except to the extent necessary to service your account and in other limited circumstances as permitted by law. For example, we use this information to facilitate the delivery of transaction confirmations, financial reports, prospectuses and tax forms.
Even within Invesco, only people involved in the servicing of your accounts and compliance monitoring have access to your information. To ensure the highest level of confidentiality and security, Invesco maintains physical, electronic and procedural safeguards that meet or exceed federal standards. Special measures, such as data encryption and authentication, apply to your communications with us on our website. More detail is available to you at invesco.com/privacy.
Important Notice Regarding Delivery of Security Holder Documents
To reduce Fund expenses, only one copy of most shareholder documents may be mailed to shareholders with multiple accounts at the same address (Householding). Mailing of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact Invesco Investment Services, Inc. at 800 959 4246 or contact your financial institution. We will begin sending you individual copies for each account within 30 days after receiving your request.
Fund holdings and proxy voting information
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is available at invesco.com/completeqtrholdings. Shareholders can also look up the Fund’s Forms N-Q on the SEC website at sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-03826 and 002-85905.
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, 2009, is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov.
If used after July 20, 2010, this report must be accompanied by a Quarterly Performance Review for the most recent quarter-end.
Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the U.S. distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
On April 30, 2010, Invesco Aim Distributors, Inc. became Invesco Distributors, Inc., Invesco Aim Investment Services, Inc. became Invesco Investment Services, Inc., and AIM funds became Invesco funds. In addition, invescoaim.com became invesco.com.
I-FSE-AR-1 Invesco Distributors, Inc.
| Annual Report to Shareholders April 30, 2010 Invesco Gold & Precious Metals Fund Effective April 30, 2010, AIM Gold & Precious Metals Fund was renamed Invesco Gold & Precious Metals Fund. |
| 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 25 Tax Information T-1 Trustees and Officers |
Letters to Shareholders
Dear Shareholders:
In the 13 months covered by this report, the U.S. economy improved dramatically from where it stood in early 2009. In the third quarter of 2009, the economy ended its year-long contraction and began growing again. Major U.S. stock market indexes rose sharply in anticipation of economic improvement; despite occasional volatility, they continued rising as evidence mounted that the recovery was genuine. Over the last year, global equity indexes also rallied strongly from their early 2009 lows.
While economic improvement was undeniable, unemployment remained high by historical standards, and unfortunately it appeared unlikely that the jobless rate would decline significantly anytime soon. Stubbornly high unemployment continued to cast a pall over the nation’s economic outlook.
Timely communication
Unpredictable and volatile markets, together with economic uncertainty, caused many of you to seek information relative to your investments. Some of you contacted your financial advisers to ask questions and obtain guidance. Others visited our website, invesco.com, where we offer timely market commentary, investor education information and sector updates. In particular, I recommend the Investment Perspectives articles featured on our home page; they are written by Invesco’s investment professionals and cover a wide range of topics that are updated regularly.
Also on our website, you’ll find a commentary from me that discusses the name change we made on April 30 — from Invesco Aim to Invesco. Some of the changes related to this event include all AIM funds being renamed Invesco funds. (It’s important to note that the funds’ investment strategies and objectives have not changed.) You’ll notice on this report the Invesco logo has replaced the previous Invesco Aim logo. And our new Web address is now invesco.com. These changes are the latest steps in the rebranding process we began two years ago, when we added Invesco in front of Aim. For more information about the change, please read the shareholder Q&A on the account balance page at invesco.com.
At invesco.com you can also access your Fund’s latest quarterly commentary. Simply click on Mutual Funds inside the Financial Products box. Then, in the Fund Information box, click on Quarterly Commentary and select your Fund.
Timely information like that available on our website — together with the advice and guidance of a trusted financial adviser — can be especially useful in uncertain times. Market volatility and economic uncertainty are two factors that can prompt investors to abandon their long-term saving and investment plans. A financial adviser can show you just how costly that could be over the long term — and can explain that saving more and investing more regularly is a time-tested way to build a solid portfolio. He or she can help you identify appropriate investments, given your individual risk tolerance, time horizon and investment goals.
Taking our business forward
Invesco’s acquisition of Morgan Stanley’s retail asset management business, including Van Kampen Investments, was completed on June 1, 2010. Our two companies have similar investment philosophies and cultures, as well as complementary investment expertise. I believe this combination represents the next step in our company’s evolution — and will allow us to better serve you through:
| • | Greater efficiencies and cost savings | ||
| • | A broader range of investment options | ||
| • | A continued commitment to investment excellence, with complementary portfolio management expertise |
While market conditions change from time to time, our commitment to putting our clients first, helping you achieve your financial goals and providing excellent customer service will not.
If you have questions about your account, please contact one of our client services representatives at 800 959 4246. If you have a question or comment for me, please email me at phil@invesco.com.
Thank you for investing with us.
Sincerely,
Philip Taylor
Senior Managing Director, Invesco
2 Invesco Gold & Precious Metals Fund
Dear Fellow Shareholders:
By all accounts, last year was a challenging year for all of us. Although the economy and financial markets whipsawed, the final months of the decade concluded with many of us feeling somewhat more optimistic about 2010 as we began to see the markets and economy evidence the first green shoots of recovery.
Perhaps the most valuable takeaway from last year is the manner in which it underscored the importance of adopting the long-term, appropriately diversified investment strategy I’ve mentioned in my previous letters. If anything, last year was the litmus test for this approach.
Please be assured that your Board continues to oversee the Invesco Funds with a strong sense of responsibility for your savings and a deep appreciation for your trust. We have already begun the annual review and management contract renewal process and will continue to seek to manage costs and reward performance in ways that put your interests first. (It might also interest you to know that the Board currently has five committees — Compliance, Audit, Governance, Investments, and Valuation Distribution and Proxy Voting — whose members exercise oversight to maintain the Invesco Funds’ “Investor First” orientation.)
To that end, some of you may have seen that Invesco is assuming the management of the Van Kampen family of mutual funds as well as Morgan Stanley’s retail funds. We view this addition as an excellent opportunity to provide you, our shareholders, access to an even broader range of well-diversified mutual funds under the Invesco umbrella. I’ll keep you updated on the work we’re doing to deliver the value of this acquisition to our shareholders in my upcoming letters.
As always, you are welcome to contact me at bruce@brucecrockett.com with any questions or concerns you may have. We look forward to representing you and serving you in the coming year.
Sincerely,
Bruce L. Crockett
Independent Chair
Invesco Funds Board of Trustees
3 Invesco Gold & Precious Metals Fund
Management’s Discussion of Fund Performance
Performance summary
During the 13 months ended April 30, 2010, the U.S. economy showed signs of improvement, causing major stock market indexes to rise sharply. Commodity prices and stocks of commodity companies generally rose during the reporting period. The Fund underperformed the broad market, as represented by the S&P 500 Index as economically sensitive sectors, including financials, consumer discretionary and industrials, were favored. However, all of the Fund’s share classes, at net asset value, outperformed the Fund’s style-specific index, the Philadelphia Gold & Silver Index, as a result of security selection, particularly within gold mining stocks.
Your Fund’s long-term performance appears later in this report.
Fund vs. Indexes
Total returns, 3/31/09 to 4/30/10, 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 | 44.23 | % | ||
| Class B Shares | 43.38 | |||
| Class C Shares | 43.28 | |||
| Class Y Shares | 44.70 | |||
| Investor Class Shares | 44.31 | |||
S&P500 Index▼ (Broad Market Index) | 47.26 | |||
Philadelphia Gold & Silver Index▼ (Price Only) (Style-Specific Index) | 30.21 | |||
Lipper Precious Metal Funds Index▼* (Peer Group Index) | 53.82 |
| ▼ | Lipper Inc. | |
| * | During the reporting period, Lipper changed the name of the Fund’s peer group index from the Lipper Gold Funds Index to the Lipper Precious Metals Funds Index. |
How we invest
We invest in companies involved in the discovery, mining, processing and exchange of gold and other precious metals. We select stocks based on our analysis of individual companies, focusing on companies we believe have the ability to:
| • | Increase production capacity at a low cost. | |
| • | Make major gold and precious metals discoveries on a global basis. | |
| • | Benefit from rising gold and precious metal prices. |
Typically, we hold 25-35 stocks of all market capitalizations. The portfolio includes “core companies,” which are major gold and precious metal firms with proven production reserves, as well as “emerging companies” — mid- to small-sized exploration companies we believe can make significant precious metal discoveries. In selecting core companies for the Fund, we focus on relative valuation including price-to-earnings (P/E), price-to-free cash flow (P/FCF), and price-to-net asset value (P/NAV) of assets. In selecting emerging companies for the Fund, we focus primarily on production growth profiles and underlying resources.
We may sell or reduce our position in a stock when:
| • | A security reaches its price target. | |
| • | A change in fundamentals occurs — either company specific or industry wide. | |
| • | A change in management occurs. | |
| • | A more attractive investment opportunity is identified. |
Market conditions and your Fund
The U.S. economy provided signs of improvement during the period, offering indications that the economy has transitioned from a contraction phase into an expansionary phase. Nevertheless, the pace of recovery remained modest and the transition from government stimulus-induced growth to a private economic recovery was uncertain. The U.S. Federal Reserve’s (the Fed) federal funds target rate remained quite low, in a range of between zero and 0.25%.1 Real gross domestic product (GDP) registered positive growth during the reporting period with quarterly growth, on an annualized basis, of 2.2%, 5.6% and 3.0% for the third and fourth quarter of 2009, and the first quarter 2010, respectively.2 Inflation, measured by the seasonally adjusted Consumer Price Index, remained relatively benign. While labor markets improved as layoffs moderated, new hiring remained quite weak. Unemployment, after climbing steadily throughout 2009, fell slightly during the first quarter of 2010 and remained at a rate of 9.9% nationwide as of April 2010.3
Against this backdrop, all stock market sectors delivered double-digit gains for the reporting period.4 Telecommunication services, utilities and health care — traditionally more defensive sectors — were among the laggard sectors of the S&P 500 Index.4 Financials, consumer discretionary and industrials stocks were favored and delivered the greatest returns during the reporting period.4
The U.S. Dollar Index, which tracks the value of the U.S. dollar against a basket of six major currencies, hit an all-time low in November 2009.5 As most commodities are denominated in dollars, a weak U.S. dollar tends to makes dollar-denominated commodities rise, resulting in improved dollar-denominated revenues. In addition, investors tend to view gold and gold equities as “stores of value” during periods of U.S. dollar weakness, rising inflation and geopolitical or economic uncertainty. The price of gold rose during the reporting period, reach-
Fund data as of 4/30/10
Portfolio Composition
By industry
By industry
| Gold | 63.5 | % | ||
| Precious Metals & Minerals | 18.6 | |||
| Diversified Metals and Mining | 10.3 | |||
| Investment Companies- Exchange Traded Funds | 3.7 | |||
| Coal & Consumable Fuels | 1.7 | |||
Money Market Funds | ||||
Plus Other Assets Less Liabilities | 2.2 | |||
| Total Net Assets | $488.7 million | |||
| Total Number of Holdings* | 34 | |||
Top 10 Equity Holdings*
| 1. | Silver Wheaton Corp. | 6.8 | % | |||||
| 2. | Goldcorp, Inc. | 6.2 | ||||||
| 3. | IAMGOLD Corp. | 6.1 | ||||||
| 4. | Eldorado Gold Corp. | 4.8 | ||||||
| 5. | Barrick Gold Corp. | 4.7 | ||||||
| 6. | Newmont Mining Corp. | 4.6 | ||||||
| 7. | Agnico-Eagle Mines Ltd. | 4.4 | ||||||
| 8. | Yamana Gold Inc. | 4.2 | ||||||
| 9. | Freeport-McMoRan Copper & Gold Inc. | 3.9 | ||||||
| 10. | Randgold Resources Ltd.-ADR | 3.9 |
The Fund’s holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
| * | Excluding money market fund holdings. |
4 Invesco Gold & Precious Metals Fund
ing a high of $1,215 per ounce in December 2009.5 At the close of the reporting period, the price of gold stood at $1,179 per ounce.5
The Fund’s gold mining stocks had the greatest positive impact on performance during the reporting period — on both absolute performance and performance relative to the Philadelphia Gold & Silver Index. Alternatively, our cash and gold bullion holdings, which the index lacks, detracted from the Fund’s relative performance given the strong equity market rally. As a reminder, our prospectus limits us to a 10% maximum investment in gold bullion, which we hold through gold bullion ETFs (exchange-traded funds) — a more liquid and less expense way to own the underlying metal.
The top contributor to Fund performance during the period was Silver Wheaton, a silver management company. Silver Wheaton does not hedge its silver production, thus providing the Fund exposure to changes in the price of silver. The company also boasts low operating costs with no ongoing capital expenditure or exploration requirements.
Rio Tinto, on the other hand, detracted from Fund performance during the reporting period. Rio Tinto operates as a top-tier global miner with a broadly diversified portfolio of metals and minerals. The stock suffered as a result of industry consolidation, first with Rio Tinto’s rejection of a takeover proposal from BHP Billiton and then following Rio Tinto’s acquisition of Alcan. We continued to believe in management’s ability to earn more than its cost of capital with relatively stable cash flows and held the stock at the close of the reporting period.
We continue to view gold as a potentially attractive investment, given signs that global demand for gold has begun to take excess supply out of the economy. Additionally, interest rates remain low, providing support for gold.
As always, we would like to caution investors against making investment decisions based on short-term performance. We recommend that you consult a financial adviser to discuss your individual financial program.
Thank you for your continued investment in Invesco Gold & Precious Metals Fund.
| 1 | U.S. Federal Reserve | |
| 2 | Bureau of Economic Analysis | |
| 3 | Bureau of Labor Statistics | |
| 4 | Lipper Inc. | |
| 5 | Bloomberg L.P. |
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 index disclosures later in this report.
Andrew Lees
Portfolio manager, is lead manager of Invesco Gold & Precious Metals Fund. He began his investment career in 1994 and joined Invesco in 2005. Mr. Lees earned a B.A. in economics from the University of Western Ontario and an M.B.A. with concentrations in finance and accounting from McGill University.
Assisted by the Gold & Precious Metals Team
Fund data as of 3/31/10
Portfolio Composition
By industry
By industry
| Gold | 59.4 | % | ||
| Precious Metals & Minerals | 17.7 | |||
| Diversified Metals & Mining | 13.4 | |||
| Investment Companies- Exchange Traded Funds | 3.9 | |||
| Coal & Consumable Fuels | 2.1 | |||
Money Market Funds | ||||
Plus Other Assets Less Liabilities | 3.5 | |||
| Total Net Assets | $443.2 million | |||
| Total Number of Holdings* | 33 | |||
Top 10 Equity Holdings*
| 1. | Silver Wheaton Corp. | 6.1 | % | |||||
| 2. | Goldcorp, Inc. | 5.9 | ||||||
| 3. | Freeport-McMoRan Copper & Gold Inc. | 5.6 | ||||||
| 4. | IAMGOLD Corp. | 5.0 | ||||||
| 5. | Newmont Mining Corp. | 4.6 | ||||||
| 6. | Agnico-Eagle Mines Ltd. | 4.3 | ||||||
| 7. | Yamana Gold Inc. | 4.2 | ||||||
| 8. | Eldorado Gold Corp. | 4.2 | ||||||
| 9. | Barrick Gold Corp. | 4.1 | ||||||
| 10. | Randgold Resources Ltd.-ADR | 3.9 |
The Fund’s holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
| * | Excluding money market fund holdings. |
5 Invesco Gold & Precious Metals Fund
Your Fund’s Long-Term Performance
Results of a $10,000 Investment — Oldest Share Class without Sales Charges since Inception
Fund data from 1/19/84, index data from 1/31/84
Fund data from 1/19/84, index data from 1/31/84
| 1 | Lipper Inc. | |
| 2 | During the reporting period, Lipper changed the name of the Fund’s peer group index from the Lipper Gold Funds Index to the Lipper Precious Metal Funds Index. |
Results of a $10,000 Investment — Oldest Share Class with Sales Charges since Inception
Index data from 1/31/00, Fund data from 2/14/00
Index data from 1/31/00, Fund data from 2/14/00
| 1 | Lipper Inc. | |
| 2 | During the reporting period, Lipper changed the name of the Fund’s peer group index from the Lipper Gold Funds Index to the Lipper Precious Metal Funds Index. |
Past performance cannot guarantee comparable future results.
The performance data shown in the first chart above is that of the Fund’s Investor class shares. The performance of the Fund’s other share classes will differ primarily due to different sales charge structures and class expenses and may be greater than or less than the performance of the Fund’s Investor Class shares. The data shown in this chart includes reinvested distributions, Fund expenses and management fees. Index results include reinvested dividends.
The performance data shown in the second chart above is that of the Fund’s Class C shares. The performance of the Fund’s other share classes will differ primarily due to different sales charge structures and class expenses and may be greater than or less than the performance of the Fund’s Class C shares. The data shown in the second chart above includes reinvested distributions, Fund expenses and management fees. Index results include reinvested dividends, but they do not reflect sales charges.
Performance of the peer group reflects fund expenses and management fees; performance of a market index does not. Performance shown in the charts and table does not reflect deduction of taxes a shareholder would pay on Fund distributions or sale of Fund shares.
continued on page 7
6 Invesco Gold & Precious Metals Fund
Average Annual Total Returns
As of 4/30/10, including maximum applicable sales charges
Class A Shares | ||||
| Inception (3/28/02) | 18.43 | % | ||
| 5 Years | 21.83 | |||
| 1 Year | 47.64 | |||
Class B Shares | ||||
| Inception (3/28/02) | 18.61 | % | ||
| 5 Years | 22.12 | |||
| 1 Year | 50.22 | |||
Class C Shares | ||||
| Inception (2/14/00) | 18.38 | % | ||
| 10 Years | 20.01 | |||
| 5 Years | 22.27 | |||
| 1 Year | 54.18 | |||
Class Y Shares | ||||
| 10 Years | 20.11 | % | ||
| 5 Years | 23.33 | |||
| 1 Year | 56.53 | |||
Investor Class Shares | ||||
| Inception (1/19/84) | 2.49 | % | ||
| 10 Years | 20.06 | |||
| 5 Years | 23.22 | |||
| 1 Year | 56.09 |
Average Annual Total Returns
As of 3/31/10, the most recent calendar quarter-end including maximum applicable sales charges
Class A Shares | ||||
| Inception (3/28/02) | 17.21 | % | ||
| 5 Years | 17.03 | |||
| 1 Year | 27.54 | |||
Class B Shares | ||||
| Inception (3/28/02) | 17.39 | % | ||
| 5 Years | 17.27 | |||
| 1 Year | 29.07 | |||
Class C Shares | ||||
| Inception (2/14/00) | 17.42 | % | ||
| 10 Years | 18.72 | |||
| 5 Years | 17.48 | |||
| 1 Year | 33.08 | |||
Class Y Shares | ||||
| 10 Years | 18.81 | % | ||
| 5 Years | 18.51 | |||
| 1 Year | 35.46 | |||
Investor Class Shares | ||||
| Inception (1/19/84) | 2.12 | % | ||
| 10 Years | 18.76 | |||
| 5 Years | 18.39 | |||
| 1 Year | 35.04 |
Class Y shares incepted on October 3, 2008. Performance shown prior to that date is that of Investor Class shares and includes the 12b-1 fees applicable to Investor Class shares. Investor Class shares 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 Y and Investor Class shares was 1.49%, 2.24%, 2.24%, 1.24% and 1.49%, 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 Y and Investor Class shares was 1.50%, 2.25%, 2.25%, 1.25% and 1.50%, 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 and Investor Class shares do not have a front-end sales charge or a CDSC; therefore, performance is at net asset value.
The performance of the Fund’s share classes will differ primarily due to different sales charge structures and class expenses.
A redemption fee of 2% will be imposed on certain redemptions or exchanges out of the Fund within 31 days of purchase. Exceptions to the redemption fee are listed in the Fund’s prospectus.
| 1 | Total annual operating expenses less any contractual fee waivers and/or expense reimbursements by the adviser in effect through at least June 30, 2010. See current prospectus for more information. |
New Fiscal Year-End
Since our last report to you, the Fund’s fiscal year-end was changed from March 31 to April 30.
Both charts on the previous page are logarithmic charts, which present the fluctuations in the value of the Fund’s share class and its indexes. We believe that a logarithmic chart is more effective than other types of charts in illustrating changes in value during the early years shown in the chart. The vertical axis, the one that indicates the dollar value of an investment, is constructed with each segment representing a percent change in the value of the investment. In both charts, each segment represents a doubling, or 100% change, in the value of the investment.
7 Invesco Gold & Precious Metals Fund
Invesco Gold & Precious Metals Fund’s investment objective is capital growth.
| • | Unless otherwise stated, information presented in this report is as of April 30, 2010, and is based on total net assets. | |
| • | Unless otherwise noted, all data provided by Invesco. | |
| • | To access your Fund’s reports/prospectus visit invesco.com/fundreports. |
About share classes
| • | Effective September 30, 2003, for qualified plans only, those previously established are eligible to purchase Class B shares of any Invesco fund. Please see the prospectus for more information. | |
| • | Class Y shares are available to only certain investors. Please see the prospectus for more information. | |
| • | All Investor Class shares are closed to new investors. Contact your financial adviser about purchasing our other share classes. |
Principal risks of investing in the Fund
| • | Prices of equity securities change in response to many factors, including the historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity. | |
| • | Foreign securities have additional risks, including exchange rate changes, politi-cal and economic upheaval, relative lack of information, relatively low market liquidity, and the potential lack of strict financial and accounting controls and standards. | |
| • | Fluctuations in the price of gold and precious metals often dramatically affect the profitability of the companies in the gold and precious metals sector. Changes in the political or economic climate for the two largest gold producers, South Africa and the former Soviet Union, may have a direct effect on the price of gold worldwide. | |
| • | The Fund’s direct investments in gold bullion will earn no income return. Appreciation in the market price of gold is the sole manner in which the Fund can realize gains on gold bullion. The Fund may have higher storage and custody costs in connection with its ownership in gold bullion. |
| • | Since a large percentage of the Fund’s assets may be invested in securities of a limited number of companies, each investment has a greater effect on the Fund’s overall performance, and any change in the value of those securities could significantly affect the value of your investment in the Fund. |
| • | There is no guarantee that the invest-ment techniques and risk analysis used by the Fund’s portfolio managers will produce the desired results. | |
| • | The prices of securities held by the Fund may decline in response to market risks. | |
| • | The Fund’s investments are concen-trated in a comparatively narrow segment of the economy. Consequent-ly, 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. |
About indexes used in this report
| • | The S&P 500® Index is an unmanaged index considered representative of the U.S. stock market. | |
| • | The Philadelphia Gold & Silver Index (price-only) is a capitalization-weighted, price-only index on the Philadelphia Stock Exchange that includes the leading companies involved in the mining of gold and silver. | |
| • | The Lipper Precious Metal Funds Index is an unmanaged index considered representative of precious metal funds tracked by Lipper. | |
| • | The U.S. Dollar Index measures the performance of the U.S. dollar against a basket of currencies. | |
| • | 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. |
| • | 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 reflects fund expenses; perfor-mance of a market index does not. |
Other information
| • | 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 share-holder transactions and the returns based on those net asset values may differ from the net asset values and returns reported in the Financial Highlights. | |
| • | 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 | IGDAX | |
| Class B Shares | IGDBX | |
| Class C Shares | IGDCX | |
| Class Y Shares | IGDYX | |
| Investor Class Shares | FGLDX |
8 Invesco Gold & Precious Metals Fund
Schedule of Investments
April 30, 2010
| Shares | Value | |||||||
| Common Stocks & Other Equity Interests–97.83% | ||||||||
| Australia–5.83% | ||||||||
| BHP Billiton Ltd.–ADR | 177,000 | $ | 12,883,830 | |||||
| Newcrest Mining Ltd. | 519,000 | 15,599,647 | ||||||
| 28,483,477 | ||||||||
| Canada–64.83% | ||||||||
| Agnico-Eagle Mines Ltd. | 342,000 | 21,600,720 | ||||||
| Alamos Gold Inc. | 716,000 | 10,619,152 | ||||||
Aurizon Mines Ltd.(a) | 1,895,000 | 10,820,450 | ||||||
| Barrick Gold Corp. | 523,000 | 22,776,650 | ||||||
Cameco Corp.(b) | 339,000 | 8,342,790 | ||||||
Centerra Gold Inc.(a) | 422,000 | 4,730,420 | ||||||
Detour Gold Corp.(a)(b) | 508,000 | 10,588,958 | ||||||
Eldorado Gold Corp.(a) | 1,538,000 | 23,491,546 | ||||||
| Franco-Nevada Corp. | 509,000 | 14,642,328 | ||||||
| Goldcorp, Inc. | 702,000 | 30,347,460 | ||||||
Harry Winston Diamond Corp.(a) | 328,000 | 3,589,568 | ||||||
| IAMGOLD Corp. | 1,680,000 | 29,893,121 | ||||||
| Kinross Gold Corp. | 464,000 | 8,827,005 | ||||||
Minefinders Corp. Ltd.(a)(b) | 997,000 | 10,029,820 | ||||||
Osisko Mining Corp.(a)(b) | 1,184,000 | 12,479,717 | ||||||
| Pan American Silver Corp. | 464,000 | 12,286,720 | ||||||
Seabridge Gold Inc.(a) | 438,000 | 14,865,720 | ||||||
Silver Wheaton Corp.(a)(b) | 1,708,000 | 33,340,160 | ||||||
| Teck Resources Ltd.–Class B | 328,000 | 12,844,326 | ||||||
| Yamana Gold Inc. | 1,903,000 | 20,685,610 | ||||||
| 316,802,241 | ||||||||
| Peru–2.87% | ||||||||
| Compania de Minas Buenaventura S.A.–ADR | 426,000 | 14,011,140 | ||||||
| 14,011,140 | ||||||||
| South Africa–9.40% | ||||||||
| Gold Fields Ltd.–ADR | 1,043,000 | 14,017,920 | ||||||
| Harmony Gold Mining Co. Ltd.–ADR | 328,000 | 3,204,560 | ||||||
| Impala Platinum Holdings Ltd. | 350,000 | 9,857,993 | ||||||
Randgold Resources Ltd.–ADR(b) | 224,000 | 18,869,760 | ||||||
| 45,950,233 | ||||||||
| United Kingdom–1.12% | ||||||||
| Rio Tinto PLC | 109,000 | 5,497,539 | ||||||
| United States–13.78% | ||||||||
Coeur d’Alene Mines Corp.(a)(b) | 243,500 | 4,363,520 | ||||||
| Freeport-McMoRan Copper & Gold Inc. | 252,000 | 19,033,560 | ||||||
Hecla Mining Co.(a)(b) | 546,000 | 3,259,620 | ||||||
iShares COMEX Gold Trust(b) | 63,000 | 7,271,460 | ||||||
| Newmont Mining Corp. | 402,000 | 22,544,160 | ||||||
| SPDR Gold Trust | 94,000 | 10,845,720 | ||||||
| 67,318,040 | ||||||||
| Total Common Stocks & Other Equity Interests (Cost $392,951,780) | 478,062,670 | |||||||
| Money Market Funds–1.95% | ||||||||
Liquid Assets Portfolio–Institutional Class(c) | 4,776,784 | 4,776,784 | ||||||
Premier Portfolio–Institutional Class(c) | 4,776,784 | 4,776,784 | ||||||
| Total Money Market Funds (Cost $9,553,568) | 9,553,568 | |||||||
| TOTAL INVESTMENTS (excluding investments purchased with cash collateral from securities on loan)–99.78% (Cost $402,505,348) | 487,616,238 | |||||||
| Investments Purchased with Cash Collateral from Securities on Loan | ||||||||
| Money Market Funds–5.06% | ||||||||
Liquid Assets Portfolio–Institutional Class (Cost $24,709,521)(c)(d) | 24,709,521 | 24,709,521 | ||||||
| TOTAL INVESTMENTS–104.84% (Cost $427,214,869) | 512,325,759 | |||||||
| OTHER ASSETS LESS LIABILITIES–(4.84)% | (23,628,805 | ) | ||||||
| NET ASSETS–100.00% | $ | 488,696,954 | ||||||
Investment Abbreviations:
| ADR | – American Depositary Receipt | |
| SPDR | – Standard & Poor’s Depositary Receipt |
Notes to Schedule of Investments:
| (a) | Non-income producing security. | |
| (b) | All or a portion of this security was out on loan at April 30, 2010. | |
| (c) | The money market fund and the Fund are affiliated by having the same investment adviser. | |
| (d) | The security has been segregated to satisfy the commitment to return the cash collateral received in securities lending transactions upon the borrower’s return of the securities loaned. See Note 1K. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
9 Invesco Gold & Precious Metals Fund
Schedule of Investments
March 31, 2010
| Shares | Value | |||||||
| Common Stocks & Other Equity Interests–96.51% | ||||||||
| Australia–6.73% | ||||||||
| BHP Billiton Ltd.–ADR | 177,000 | $ | 14,216,640 | |||||
| Newcrest Mining Ltd. | 519,000 | 15,630,013 | ||||||
| 29,846,653 | ||||||||
| Canada–59.95% | ||||||||
| Agnico-Eagle Mines Ltd. | 342,000 | 19,039,140 | ||||||
| Alamos Gold Inc. | 716,000 | 9,568,761 | ||||||
Aurizon Mines Ltd.(a) | 1,213,000 | 5,773,880 | ||||||
| Barrick Gold Corp. | 477,000 | 18,288,180 | ||||||
Cameco Corp.(b) | 339,000 | 9,291,990 | ||||||
Detour Gold Corp.(a) | 508,000 | 9,470,593 | ||||||
Eldorado Gold Corp.(a) | 1,538,000 | 18,630,490 | ||||||
| Franco-Nevada Corp. | 636,000 | 17,130,786 | ||||||
Goldcorp, Inc.(a) | 702,000 | 26,128,440 | ||||||
Harry Winston Diamond Corp.(a) | 328,000 | 3,230,254 | ||||||
| IAMGOLD Corp. | 1,680,000 | 22,269,844 | ||||||
| Kinross Gold Corp. | 464,000 | 7,923,735 | ||||||
Minefinders Corp. Ltd.(a)(b) | 806,000 | 7,463,560 | ||||||
Osisko Mining Corp.(a)(b) | 1,184,000 | 10,284,499 | ||||||
| Pan American Silver Corp. | 464,000 | 10,741,600 | ||||||
Seabridge Gold Inc.(a)(b) | 438,000 | 10,669,680 | ||||||
Silver Wheaton Corp.(a)(b) | 1,708,000 | 26,781,440 | ||||||
Teck Resources Ltd.–Class B(a) | 328,000 | 14,293,874 | ||||||
| Yamana Gold Inc. | 1,903,000 | 18,744,550 | ||||||
| 265,725,296 | ||||||||
| Peru–2.98% | ||||||||
| Compania de Minas Buenaventura S.A.–ADR | 426,000 | 13,193,220 | ||||||
| 13,193,220 | ||||||||
| South Africa–9.87% | ||||||||
| Gold Fields Ltd.–ADR | 1,043,000 | 13,162,660 | ||||||
| Harmony Gold Mining Co. Ltd.–ADR | 328,000 | 3,109,440 | ||||||
| Impala Platinum Holdings Ltd. | 350,000 | 10,280,977 | ||||||
| Randgold Resources Ltd.–ADR | 224,000 | 17,209,920 | ||||||
| 43,762,997 | ||||||||
| United Kingdom–1.46% | ||||||||
| Rio Tinto PLC | 109,000 | 6,460,440 | ||||||
| United States–15.52% | ||||||||
Coeur d’Alene Mines Corp.(a) | 243,500 | 3,647,630 | ||||||
| Freeport-McMoRan Copper & Gold Inc. | 294,000 | 24,560,760 | ||||||
Hecla Mining Co.(a)(b) | 546,000 | 2,986,620 | ||||||
iShares COMEX Gold Trust(a)(b) | 63,000 | 6,868,890 | ||||||
| Newmont Mining Corp. | 402,000 | 20,473,860 | ||||||
SPDR Gold Trust(a) | 94,000 | 10,241,300 | ||||||
| 68,779,060 | ||||||||
| Total Common Stocks & Other Equity Interests (Cost $388,640,487) | 427,767,666 | |||||||
| Money Market Funds–3.50% | ||||||||
Liquid Assets Portfolio–Institutional Class(c) | 7,761,117 | 7,761,117 | ||||||
Premier Portfolio–Institutional Class(c) | 7,761,117 | 7,761,117 | ||||||
| Total Money Market Funds (Cost $15,522,234) | 15,522,234 | |||||||
| TOTAL INVESTMENTS (excluding investments purchased with cash collateral from securities on loan)–100.02% (Cost $404,162,721) | 443,289,900 | |||||||
| Investments Purchased with Cash Collateral from Securities on Loan | ||||||||
| Money Market Funds–4.54% | ||||||||
Liquid Assets Portfolio–Institutional Class (Cost $20,103,700)(c)(d) | 20,103,700 | 20,103,700 | ||||||
| TOTAL INVESTMENTS–104.55% (Cost $424,266,421) | 463,393,600 | |||||||
| OTHER ASSETS LESS LIABILITIES–(4.55)% | (20,173,728 | ) | ||||||
| NET ASSETS–100.00% | $ | 443,219,872 | ||||||
Investment Abbreviations:
| ADR | – American Depositary Receipt | |
| SPDR | – Standard & Poor’s Depositary Receipt |
Notes to Schedule of Investments:
| (a) | Non-income producing security. | |
| (b) | All or a portion of this security was out on loan at March 31, 2010. | |
| (c) | The money market fund and the Fund are affiliated by having the same investment adviser. | |
| (d) | The security has been segregated to satisfy the commitment to return the cash collateral received in securities lending transactions upon the borrower’s return of the securities loaned. See Note 1K. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
10 Invesco Gold & Precious Metals Fund
Statement of Assets and Liabilities
April 30, 2010 and March 31, 2010
| April 30, | March 31, | |||||||
| 2010 | 2010 | |||||||
| Assets: | ||||||||
| Investments, at value (Cost $392,951,780 and $388,640,487, respectively)* | $ | 478,062,670 | $ | 427,767,666 | ||||
| Investments in affiliated money market funds, at value and cost, respectively | 34,263,089 | 35,625,934 | ||||||
| Total investments, at value (Cost $427,214,869 and $424,266,421, respectively) | 512,325,759 | 463,393,600 | ||||||
| Cash | 18,262 | — | ||||||
| Foreign currencies, at value (Cost $20,220) | — | 20,220 | ||||||
| Receivables for: | ||||||||
| Fund shares sold | 1,874,631 | 971,210 | ||||||
| Dividends | 161,358 | 108,019 | ||||||
| Investment for trustee deferred compensation and retirement plans | 20,504 | 20,331 | ||||||
| Other assets | 35,857 | 28,718 | ||||||
| Total assets | 514,436,371 | 464,542,098 | ||||||
| Liabilities: | ||||||||
| Payables for: | ||||||||
| Fund shares reacquired | 560,980 | 772,083 | ||||||
| Collateral upon return of securities loaned | 24,709,521 | 20,103,700 | ||||||
| Accrued fees to affiliates | 341,645 | 337,136 | ||||||
| Accrued operating expenses | 83,040 | 66,637 | ||||||
| Trustee deferred compensation and retirement plans | 44,231 | 42,670 | ||||||
| Total liabilities | 25,739,417 | 21,322,226 | ||||||
| Net assets applicable to shares outstanding | $ | 488,696,954 | $ | 443,219,872 | ||||
| Net assets consist of: | ||||||||
| Shares of beneficial interest | $ | 418,901,578 | $ | 418,467,924 | ||||
| Undistributed net investment income (loss) | (11,278,809 | ) | (11,300,721 | ) | ||||
| Undistributed net realized gain (loss) | (4,036,705 | ) | (3,073,822 | ) | ||||
| Undistributed appreciation | 85,110,890 | 39,126,491 | ||||||
| $ | 488,696,954 | $ | 443,219,872 | |||||
| Net Assets: | ||||||||
| Class A | $ | 179,157,896 | $ | 157,680,815 | ||||
| Class B | $ | 45,238,908 | $ | 41,466,977 | ||||
| Class C | $ | 53,588,345 | $ | 51,103,990 | ||||
| Class Y | $ | 5,689,903 | $ | 4,973,341 | ||||
| Investor Class | $ | 205,021,902 | $ | 187,994,749 | ||||
| Shares outstanding, $0.01 par value per share, unlimited number of shares authorized: | ||||||||
| Class A | 20,731,883 | 20,102,992 | ||||||
| Class B | 5,349,285 | 5,398,848 | ||||||
| Class C | 5,973,453 | 6,272,200 | ||||||
| Class Y | 653,078 | 629,042 | ||||||
| Investor Class | 23,585,165 | 23,826,702 | ||||||
| Class A: | ||||||||
| Net asset value per share | $ | 8.64 | $ | 7.84 | ||||
| Maximum offering price per share | ||||||||
| (Net asset value of $8.64 divided by 94.50%) | ||||||||
| (Net asset value of $7.84 divided by 94.50%) | $ | 9.14 | $ | 8.30 | ||||
| Class B: | ||||||||
| Net asset value and offering price per share | $ | 8.46 | $ | 7.68 | ||||
| Class C: | ||||||||
| Net asset value and offering price per share | $ | 8.97 | $ | 8.15 | ||||
| Class Y: | ||||||||
| Net asset value and offering price per share | $ | 8.71 | $ | 7.91 | ||||
| Investor Class: | ||||||||
| Net asset value and offering price per share | $ | 8.69 | $ | 7.89 | ||||
| * | At April 30, 2010 and March 31, 2010, securities with an aggregate value of $24,428,396 and $19,814,504 were on loan to brokers, respectively. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
11 Invesco Gold & Precious Metals Fund
Statement of Operations
For the period April 1, 2010 to April 30, 2010 and the year ended March 31, 2010
| One month ended | Year ended | |||||||
| April 30, | March 31, | |||||||
| 2010 | 2010 | |||||||
| Investment income: | ||||||||
| Dividends (net of foreign withholding taxes of $10,229 and $117,502, respectively) | $ | 188,627 | $ | 1,666,026 | ||||
| Dividends from affiliated money market funds (includes securities lending income of $10,628 and $291,766, respectively) | 11,642 | 398,162 | ||||||
| Total investment income | 200,269 | 2,064,188 | ||||||
| Expenses: | ||||||||
| Advisory fees | 279,588 | 2,927,969 | ||||||
| Administrative services fees | 12,163 | 131,220 | ||||||
| Custodian fees | 4,771 | 48,121 | ||||||
| Distribution fees: | ||||||||
| Class A | 34,712 | 344,873 | ||||||
| Class B | 36,074 | 381,977 | ||||||
| Class C | 44,097 | 451,157 | ||||||
| Investor Class | 40,621 | 431,002 | ||||||
| Transfer agent fees | 82,717 | 938,348 | ||||||
| Trustees’ and officers’ fees and benefits | 4,194 | 30,633 | ||||||
| Other | 21,096 | 176,664 | ||||||
| Total expenses | 560,033 | 5,861,964 | ||||||
| Less: Fees waived and expense offset arrangement(s) | (3,148 | ) | (66,647 | ) | ||||
| Net expenses | 556,885 | 5,795,317 | ||||||
| Net investment income (loss) | (356,616 | ) | (3,731,129 | ) | ||||
| Realized and unrealized gain (loss) from: | ||||||||
| Net realized gain (loss) from: | ||||||||
| Investment securities | (581,759 | ) | (1,804,392 | ) | ||||
| Foreign currencies | (2,596 | ) | 109,510 | |||||
| (584,355 | ) | (1,694,882 | ) | |||||
| Change in net unrealized appreciation (depreciation) of: | ||||||||
| Investment securities | 45,983,711 | 110,541,424 | ||||||
| Foreign currencies | 688 | (1,130 | ) | |||||
| 45,984,399 | 110,540,294 | |||||||
| Net realized and unrealized gain | 45,400,044 | 108,845,412 | ||||||
| Net increase in net assets resulting from operations | $ | 45,043,428 | $ | 105,114,283 | ||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
12 Invesco Gold & Precious Metals Fund
Statement of Changes in Net Assets
For the period April 1, 2010 to April 30, 2010 and the years ended March 31, 2010 and 2009
| One month ended | Year ended March 31, | |||||||||||
| April 30, 2010 | 2010 | 2009 | ||||||||||
| Operations: | ||||||||||||
| Net investment income (loss) | $ | (356,616 | ) | $ | (3,731,129 | ) | $ | (1,017,295 | ) | |||
| Net realized gain (loss) | (584,355 | ) | (1,694,882 | ) | 26,342,984 | |||||||
| Change in net unrealized appreciation (depreciation) | 45,984,399 | 110,540,294 | (121,825,318 | ) | ||||||||
| Net increase (decrease) in net assets resulting from operations | 45,043,428 | 105,114,283 | (96,499,629 | ) | ||||||||
| Distributions to shareholders from net investment income: | ||||||||||||
| Class A | — | (2,724,013 | ) | (372,546 | ) | |||||||
| Class B | — | (306,927 | ) | (76,405 | ) | |||||||
| Class C | — | (357,088 | ) | (73,494 | ) | |||||||
| Class Y | — | (68,574 | ) | (3,230 | ) | |||||||
| Investor Class | — | (3,217,137 | ) | (578,999 | ) | |||||||
| Total distributions from net investment income | — | (6,673,739 | ) | (1,104,674 | ) | |||||||
| Share transactions–net: | ||||||||||||
| Class A | 5,212,997 | 27,104,103 | 5,823,923 | |||||||||
| Class B | (403,582 | ) | (8,127 | ) | (843,741 | ) | ||||||
| Class C | (2,593,451 | ) | 4,251,597 | 4,746,051 | ||||||||
| Class Y | 201,392 | 2,941,201 | 1,210,419 | |||||||||
| Investor Class | (1,983,702 | ) | 8,426,468 | (136,888 | ) | |||||||
| Net increase in net assets resulting from share transactions | 433,654 | 42,715,242 | 10,799,764 | |||||||||
| Net increase (decrease) in net assets | 45,477,082 | 141,155,786 | (86,804,539 | ) | ||||||||
| Net assets: | ||||||||||||
| Beginning of year | 443,219,872 | 302,064,086 | 388,868,625 | |||||||||
| End of year (includes undistributed net investment income (loss) of $(11,278,809), $(11,300,721) and $(1,074,343), respectively) | $ | 488,696,954 | $ | 443,219,872 | $ | 302,064,086 | ||||||
Notes to Financial Statements
April 30, 2010
NOTE 1—Significant Accounting Policies
Invesco Gold & Precious Metals Fund, formerly AIM Gold & Precious Metals Fund, (the “Fund”) is a series portfolio of AIM Sector Funds (Invesco Sector Funds), formerly AIM Sector Funds, (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 six separate portfolios, each authorized to issue an unlimited number of shares of beneficial interest. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class.
On April 30, 2010, the Fund’s fiscal year-end changed from March 31 to April 30.
The Fund’s investment objective is capital growth.
The Fund currently consists of five different classes of shares: Class A, Class B, Class C, Class Y and Investor 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 waiver shares may be subject to contingent deferred sales charges (“CDSC”). Class B shares and Class C shares are sold with a CDSC. Class Y and Investor Class shares are sold at net asset value. Generally, Class B shares will automatically convert to Class A shares on or about the month-end which is at least eight years after the date of purchase.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
| A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. | |
| 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 Gold & Precious Metals Fund
| security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”). | ||
| Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded. | ||
| Debt obligations (including convertible bonds) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations, including commercial paper, having 60 days or less to maturity are recorded at amortized cost which approximates value. Debt securities are subject to interest rate and credit risks. In addition, all debt securities involve some risk of default with respect to interest and/or principal payments. | ||
| Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economical upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards. | ||
| Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including Corporate Loans. | ||
| Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value. | ||
| Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments. | ||
| B. | Securities Transactions and Investment Income — Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded on the accrual basis from settlement date. Dividend income 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 realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the realized and unrealized net gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund’s net asset value and, accordingly, they reduce the Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser. | ||
| The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class. | ||
| C. | Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
14 Invesco Gold & Precious Metals Fund
| D. | Distributions — Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to treat a portion of the proceeds from redemptions as distributions for federal income tax purposes. | |
| E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. | |
| 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 requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. | |
| H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements, that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. | |
| I. | Other Risks — The Fund’s investments are concentrated in a comparatively narrow segment of the economy. Consequently, the Fund may tend to be more volatile than other mutual funds, and the value of the Fund’s investments may tend to rise and fall more rapidly. | |
| The Fund may invest a large percentage of assets in securities of a limited number of companies, such that each investment may have a greater effect on the Fund’s overall performance, and any change in the value of those securities could significantly affect the value of your investment in the Fund. | ||
| Fluctuations in the price of gold and precious metals often dramatically affect the profitability of companies in the gold and precious metals sector. Changes in the political or economic climate for the two largest gold producers, South Africa and the former Soviet Union, may have a direct impact on the price of gold worldwide. | ||
| J. | Redemption Fees — The Fund has a 2% redemption fee that is to be retained by the Fund to offset transaction costs and other expenses associated with short-term redemptions and exchanges. The fee, subject to certain exceptions, is imposed on certain redemptions or exchanges of shares within 31 days of purchase. The redemption fee is recorded as an increase in shareholder capital and is allocated among the share classes based on the relative net assets of each class. | |
| K. | Securities Lending — The Fund may lend portfolio securities having a market value up to one-third of the Fund’s total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily by the securities lending provider. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its sponsored agencies. Cash collateral received in connection with these loans is invested in short-term money market instruments or affiliated money market funds and is shown as such on the Schedule of Investments. It is the Fund’s policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. Upon the failure of the borrower to return the securities, collateral may be liquidated and the securities may be purchased on the open market to replace the loaned securities. The Fund could experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to any loss on the collateral invested. Dividends received on cash collateral investments for securities lending transactions, which are net of compensation to counterparties, is included in Dividends from affiliates on the Statement of Operations. The aggregate value of securities out on loan is shown as a footnote on the Statement of Assets and Liabilities, if any. | |
| L. | 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. | ||
| M. | 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 |
15 Invesco Gold & Precious Metals Fund
| 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 Net Assets | Rate | |||
| First $350 million | 0 | .75% | ||
| Next $350 million | 0 | .65% | ||
| Next $1.3 billion | 0 | .55% | ||
| Next $2 billion | 0 | .45% | ||
| Next $2 billion | 0 | .40% | ||
| Next $2 billion | 0 | .375% | ||
| Over $8 billion | 0 | .35% | ||
Through at least June 30, 2010, the Advisor has contractually agreed to waive advisory fees to the extent necessary so that the advisory fees payable by the Fund (based on the Fund’s average daily net assets) do not exceed the annual rate of:
| Average 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 Trimark Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide discretionary investment management services to the Fund based on the percentage of assets allocated to such Sub-Adviser(s).
On December 31, 2009, Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc., Invesco Aim Private Asset Management, Inc. and Invesco Global Asset Management (N.A.), Inc. merged into Invesco Institutional (N.A.), Inc. and the consolidated adviser firm was renamed Invesco Advisers, Inc.
The Adviser has contractually agreed, through at least June 30, 2010, 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 Investor Class shares to 2.00%, 2.75%, 2.75%, 1.75% and 2.00%, 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 to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary items or non-routine items; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. The Board of Trustees or Invesco may terminate the fee waiver arrangement at any time. For the period April 1, 2010 to April 30, 2010 and the year ended March 31, 2010, the advisor did not waive fees and/or reimburse expenses under this expense limitation.
The Adviser has contractually agreed, through at least June 30, 2010, 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 period April 1, 2010 to April 30, 2010 and the year ended March 31, 2010, the Adviser waived advisory fees of $2,521 and $55,986, respectively.
At the request of the Trustees of the Trust, Invesco Ltd. agreed to reimburse expenses incurred by the Fund in connection with market timing matters in the Invesco Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement are included in the Statement of Operations. For the period April 1, 2010 to April 30, 2010 and the year ended March 31, 2010, Invesco Ltd. reimbursed expenses of the Fund in the amount of $0 and $976, respectively.
16 Invesco Gold & Precious Metals Fund
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 period April 1, 2010 to April 30, 2010 and the year ended March 31, 2010, 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 period April 1, 2010 to April 30, 2010 and the year ended March 31, 2010, 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 Investor 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 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 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 period April 1, 2010 to April 30, 2010 and the year ended March 31, 2010, 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 period April 1, 2009 to April 30, 2010, IDI advised the Fund that IDI retained $6,554 in front-end sales commissions from the sale of Class A shares and $0, $9,801 and $704 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders. During the year ended March 31, 2010, IDI advised the Fund that IDI retained $136,125 in front-end sales commissions from the sale of Class A shares and $54, $94,862 and $7,431 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of Invesco, IIS and/or IDI.
NOTE 3—Additional Valuation Information
Generally Accepted Accounting Principles (“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 April 30, 2010 and March 31, 2010. 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 period April 1, 2010 to April 30, 2010 there were no significant transfers between investment levels:
| April 30, | ||||||||||||||||
| 2010 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Australia | $ | 12,883,830 | $ | 15,599,647 | $ | — | $ | 28,483,477 | ||||||||
| Canada | 316,802,241 | — | — | 316,802,241 | ||||||||||||
| Peru | 14,011,140 | — | — | 14,011,140 | ||||||||||||
| South Africa | 36,092,240 | 9,857,993 | — | 45,950,233 | ||||||||||||
| United Kingdom | — | 5,497,539 | — | 5,497,539 | ||||||||||||
| United States | 101,581,129 | — | — | 101,581,129 | ||||||||||||
| Total Investments | $ | 481,370,580 | $ | 30,955,179 | $ | — | $ | 512,325,759 | ||||||||
17 Invesco Gold & Precious Metals Fund
| March 31, | ||||||||||||||||
| 2010 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Australia | $ | 29,846,653 | $ | — | $ | — | $ | 29,846,653 | ||||||||
| Canada | 265,725,296 | — | — | 265,725,296 | ||||||||||||
| Peru | 13,193,220 | — | — | 13,193,220 | ||||||||||||
| South Africa | 43,762,997 | — | — | ,43,762,997 | ||||||||||||
| United Kingdom | 6,460,440 | — | — | 6,460,440 | ||||||||||||
| United States | 104,404,994 | — | — | 104,404,994 | ||||||||||||
| Total Investments | $ | 463,393,600 | $ | — | $ | — | $ | 463,393,600 | ||||||||
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 period April 1, 2010 to April 30, 2010 and the year ended March 31, 2010, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $627 and $9,685, respectively.
NOTE 5—Trustees’ and Officers’ Fees and Benefits
“Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and “Trustees’ and Officers’ Fees and Benefits” also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. “Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
During the period April 1, 2010 to April 30, 2010 and the year ended March 31, 2010, the Fund paid legal fees of $0 and $2,888, respectively, for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 6—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with The State Street Bank and Trust Company, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 7—Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Period April 1, 2010 to April 30, 2010 and the Years Ended March 31, 2010 and 2009:
| April 30, 2010 | March 31, 2010 | March 31, 2009 | ||||||||||
| Ordinary income | $ | — | $ | 6,673,739 | $ | 1,104,674 | ||||||
Tax Components of Net Assets at Period-End:
As of April 30, 2010, the components of net assets on a tax basis were as follows:
| April 30, 2010 | March 31, 2010 | |||||||
| Undistributed ordinary income | $ | 11,946,010 | $ | 3,829,866 | ||||
| Net unrealized appreciation — investments | 61,609,177 | 23,718,016 | ||||||
| Net unrealized appreciation (depreciation) — other investments | — | (688 | ) | |||||
| Temporary book/tax differences | (41,073 | ) | (39,391 | ) | ||||
| Post-October deferrals | — | (919,607 | ) | |||||
| Capital loss carryforward | (3,718,738 | ) | (1,836,248 | ) | ||||
| Shares of beneficial interest | 418,901,578 | 418,467,924 | ||||||
| Total net assets | $ | 488,696,954 | $ | 443,219,872 | ||||
18 Invesco Gold & Precious Metals 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 differences are attributable primarily to wash sales, the recognition of gains on passive foreign investment companies and exchange traded funds.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund’s temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund has a capital loss carryforward as of April 30, 2010 and March 31, 2010 which expires as follows:
| Capital Loss | ||||||||
| Carryforward* | ||||||||
| Expiration | April 30, 2010 | March 31, 2010 | ||||||
| April 30, 2018 | $ | 1,882,489 | $ | 1,836,248 | ||||
| April 30, 2017 | 1,836,249 | — | ||||||
| Total capital loss carryforward | $ | 3,718,738 | $ | 1,836,248 | ||||
| * | Capital loss carryforwards as of the dates listed above are 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 period April 1, 2010 to April 30, 2010 was $11,931,555 and $7,038,504 and during the year ended March 31, 2010 was $60,348,629 and $9,848,468, 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 | ||||||||
| April 30, 2010 | March 31, 2010 | |||||||
| Aggregate unrealized appreciation of investment securities | $ | 93,452,829 | $ | 59,664,828 | ||||
| Aggregate unrealized (depreciation) of investment securities | (31,843,652 | ) | (35,946,812 | ) | ||||
| Net unrealized appreciation of investment securities | $ | 61,609,177 | $ | 23,718,016 | ||||
| Cost of investments for tax purposes | $ | 450,716,582 | $ | 439,675,584 | ||||
NOTE 9—Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of passive foreign investment companies, on April 30, 2010, undistributed net investment income (loss) was increased by $378,528 and undistributed net realized gain (loss) was decreased by $378,528. This reclassification had no effect on the net assets of the Fund.
Primarily as a result of differing book/tax treatment of expired capital loss carryforward, foreign currency transactions and distributions on March 31, 2010, undistributed net investment income (loss) was increased by $178,490, undistributed net realized gain (loss) was increased by $430,621 and shares of beneficial interest decreased by $609,111. This reclassification had no effect on the net assets of the Fund.
19 Invesco Gold & Precious Metals Fund
NOTE 10—Share Information
| Summary of Share Activity | ||||||||||||||||||||||||
| One month ended | Year ended March 31, | |||||||||||||||||||||||
| April 30, 2010(a) | 2010(b) | 2009 | ||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||
| Sold: | ||||||||||||||||||||||||
| Class A | 1,141,309 | $ | 9,463,238 | 10,892,148 | $ | 79,802,058 | 10,734,474 | $ | 66,134,463 | |||||||||||||||
| Class B | 101,842 | 825,181 | 1,791,490 | 13,086,649 | 2,697,569 | 16,256,748 | ||||||||||||||||||
| Class C | 130,001 | 1,121,827 | 2,796,610 | 21,709,451 | 3,583,461 | 22,435,885 | ||||||||||||||||||
Class Y(c) | 37,939 | 317,694 | 580,080 | 4,261,874 | 256,843 | 1,323,207 | ||||||||||||||||||
| Investor Class | 487,745 | 4,095,284 | 7,755,009 | 58,919,655 | 8,725,762 | 53,390,818 | ||||||||||||||||||
| Issued as reinvestment of dividends: | ||||||||||||||||||||||||
| Class A | — | — | 305,841 | 2,465,078 | 73,836 | 332,261 | ||||||||||||||||||
| Class B | — | — | 34,191 | 270,454 | 14,700 | 64,682 | ||||||||||||||||||
| Class C | — | — | 40,542 | 340,152 | 14,997 | 70,034 | ||||||||||||||||||
| Class Y | — | — | 7,335 | 59,561 | 626 | 2,835 | ||||||||||||||||||
| Investor Class | — | — | 382,389 | 3,101,177 | 122,389 | 553,201 | ||||||||||||||||||
| Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||||||||||
| Class A | 41,210 | 343,694 | 454,671 | 3,298,675 | 447,699 | 2,864,267 | ||||||||||||||||||
| Class B | (42,119 | ) | (343,694 | ) | (465,506 | ) | (3,298,675 | ) | (457,051 | ) | (2,864,267 | ) | ||||||||||||
Reacquired:(d) | ||||||||||||||||||||||||
Class A(c) | (553,628 | ) | (4,593,935 | ) | (8,032,686 | ) | (58,461,708 | ) | (10,571,755 | ) | (63,507,068 | ) | ||||||||||||
| Class B | (109,286 | ) | (885,069 | ) | (1,430,603 | ) | (10,066,555 | ) | (2,476,972 | ) | (14,300,904 | ) | ||||||||||||
| Class C | (428,748 | ) | (3,715,278 | ) | (2,371,583 | ) | (17,798,006 | ) | (2,842,888 | ) | (17,759,868 | ) | ||||||||||||
| Class Y | (13,903 | ) | (116,302 | ) | (187,545 | ) | (1,380,234 | ) | (28,297 | ) | (115,623 | ) | ||||||||||||
Investor Class(c) | (729,282 | ) | (6,078,986 | ) | (7,217,327 | ) | (53,594,364 | ) | (9,185,199 | ) | (54,080,907 | ) | ||||||||||||
| Net increase in share activity | 63,080 | $ | 433,654 | 5,335,056 | $ | 42,715,242 | 1,110,194 | $ | 10,799,764 | |||||||||||||||
| (a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 26% of the outstanding shares of the Fund. IDI has an agreement with these entities to sell Fund shares. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. | |
| (b) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 26% 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. | |
| (c) | Effective upon the commencement date of Class Y shares, October 3, 2008, the following shares were converted from Class A and Investor Class shares into Class Y shares of the Fund: |
| Class | Shares | Amount | ||||||
| Class Y | 136,499 | $ | 694,780 | |||||
| Class A | (96,942 | ) | (490,527 | ) | ||||
| Investor Class | (40,128 | ) | (204,253 | ) | ||||
| (d) | Net of redemption fees of $2,342, $77,199 and $267,230, which were allocated among the classes based on relative net assets of each class for the period April 1, 2010 to April 30, 2010 and the years ended March 31, 2010 and 2009, respectively. |
20 Invesco Gold & Precious Metals Fund
NOTE 11—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 | net assets | assets without | investment | ||||||||||||||||||||||||||||||||||||||||||
| value, | investment | securities (both | Total from | from net | Net asset | Net assets, | with fee waivers | fee waivers | income (loss) | |||||||||||||||||||||||||||||||||||||||
| beginning | income | realized and | investment | investment | value, end | Total | end of period | and/or expenses | and/or expenses | to average | Portfolio | |||||||||||||||||||||||||||||||||||||
| of period | (loss) | unrealized) | operations | income | of period(a) | Return(b) | (000s omitted) | absorbed | absorbed | net assets | turnover(c) | |||||||||||||||||||||||||||||||||||||
| Class A | ||||||||||||||||||||||||||||||||||||||||||||||||
| One month ended 04/30/10 | $ | 7.84 | $ | (0.01 | )(d) | $ | 0.81 | $ | 0.80 | $ | — | $ | 8.64 | 10.20 | % | $ | 179,158 | 1.29 | %(e) | 1.30 | %(e) | (0.77 | )%(e) | 2 | % | |||||||||||||||||||||||
| Year ended 03/31/10 | 5.91 | (0.06 | )(d) | 2.13 | 2.07 | (0.14 | ) | 7.84 | 34.88 | 157,681 | 1.31 | (f) | 1.32 | (f) | (0.79 | )(f) | 3 | |||||||||||||||||||||||||||||||
| Year ended 03/31/09 | 7.77 | (0.01 | )(d) | (1.82 | ) | (1.83 | ) | (0.03 | ) | 5.91 | (23.51 | ) | 97,402 | 1.46 | 1.47 | (0.18 | ) | 39 | ||||||||||||||||||||||||||||||
| Year ended 03/31/08 | 6.11 | (0.02 | ) | 1.73 | 1.71 | (0.05 | ) | 7.77 | 28.00 | 122,756 | 1.35 | 1.36 | (0.48 | ) | 43 | |||||||||||||||||||||||||||||||||
| Year ended 03/31/07 | 5.67 | (0.00 | )(d) | 0.58 | 0.58 | (0.14 | ) | 6.11 | 10.24 | 58,702 | 1.41 | 1.41 | (0.04 | ) | 85 | |||||||||||||||||||||||||||||||||
| Year ended 03/31/06 | 3.55 | (0.00 | )(d) | 2.12 | 2.12 | — | 5.67 | 59.72 | 41,200 | 1.45 | 1.45 | (0.10 | ) | 155 | ||||||||||||||||||||||||||||||||||
| Class B | ||||||||||||||||||||||||||||||||||||||||||||||||
| One month ended 04/30/10 | 7.68 | (0.01 | )(d) | 0.79 | 0.78 | — | 8.46 | 10.16 | 45,239 | 2.04 | (e) | 2.05 | (e) | (1.52 | )(e) | 2 | ||||||||||||||||||||||||||||||||
| Year ended 03/31/10 | 5.77 | (0.11 | )(d) | 2.08 | 1.97 | (0.06 | ) | 7.68 | 34.07 | 41,467 | 2.06 | (f) | 2.07 | (f) | (1.54 | )(f) | 3 | |||||||||||||||||||||||||||||||
| Year ended 03/31/09 | 7.64 | (0.06 | )(d) | (1.80 | ) | (1.86 | ) | (0.01 | ) | 5.77 | (24.22 | ) | 31,584 | 2.21 | 2.22 | (0.93 | ) | 39 | ||||||||||||||||||||||||||||||
| Year ended 03/31/08 | 6.01 | (0.07 | ) | 1.71 | 1.64 | (0.01 | ) | 7.64 | 27.23 | 43,462 | 2.10 | 2.11 | (1.23 | ) | 43 | |||||||||||||||||||||||||||||||||
| Year ended 03/31/07 | 5.60 | (0.05 | )(d) | 0.58 | 0.53 | (0.12 | ) | 6.01 | 9.45 | 25,599 | 2.16 | 2.16 | (0.79 | ) | 85 | |||||||||||||||||||||||||||||||||
| Year ended 03/31/06 | 3.54 | (0.04 | )(d) | 2.10 | 2.06 | — | 5.60 | 58.19 | 19,103 | 2.19 | 2.19 | (0.84 | ) | 155 | ||||||||||||||||||||||||||||||||||
| Class C | ||||||||||||||||||||||||||||||||||||||||||||||||
| One month ended 04/30/10 | 8.15 | (0.01 | )(d) | 0.83 | 0.82 | — | 8.97 | 10.06 | 53,588 | 2.04 | (e) | 2.05 | (e) | (1.52 | )(e) | 2 | ||||||||||||||||||||||||||||||||
| Year ended 03/31/10 | 6.12 | (0.12 | )(d) | 2.21 | 2.09 | (0.06 | ) | 8.15 | 34.08 | 51,104 | 2.06 | (f) | 2.07 | (f) | (1.54 | )(f) | 3 | |||||||||||||||||||||||||||||||
| Year ended 03/31/09 | 8.11 | (0.06 | )(d) | (1.92 | ) | (1.98 | ) | (0.01 | ) | 6.12 | (24.30 | ) | 35,563 | 2.21 | 2.22 | (0.93 | ) | 39 | ||||||||||||||||||||||||||||||
| Year ended 03/31/08 | 6.39 | (0.07 | ) | 1.80 | 1.73 | (0.01 | ) | 8.11 | 27.02 | 40,939 | 2.10 | 2.11 | (1.23 | ) | 43 | |||||||||||||||||||||||||||||||||
| Year ended 03/31/07 | 5.94 | (0.05 | )(d) | 0.62 | 0.57 | (0.12 | ) | 6.39 | 9.59 | 21,188 | 2.16 | 2.16 | (0.79 | ) | 85 | |||||||||||||||||||||||||||||||||
| Year ended 03/31/06 | 3.75 | (0.04 | )(d) | 2.23 | 2.19 | — | 5.94 | 58.40 | 14,758 | 2.19 | 2.19 | (0.84 | ) | 155 | ||||||||||||||||||||||||||||||||||
| Class Y | ||||||||||||||||||||||||||||||||||||||||||||||||
| One month ended 04/30/10 | 7.91 | 0.00 | (d) | 0.80 | 0.80 | — | 8.71 | 10.11 | 5,690 | 1.04 | (e) | 1.05 | (e) | (0.52 | )(e) | 2 | ||||||||||||||||||||||||||||||||
| Year ended 03/31/10 | 5.95 | (0.04 | )(d) | 2.15 | 2.11 | (0.15 | ) | 7.91 | 35.46 | 4,973 | 1.06 | (f) | 1.07 | (f) | (0.54 | )(f) | 3 | |||||||||||||||||||||||||||||||
| Year ended 03/31/09(g) | 5.09 | (0.00 | )(d) | 0.89 | 0.89 | (0.03 | ) | 5.95 | 17.56 | 1,365 | 1.44 | (h) | 1.45 | (h) | (0.16 | )(h) | 39 | |||||||||||||||||||||||||||||||
| Investor Class | ||||||||||||||||||||||||||||||||||||||||||||||||
| One month ended 04/30/10 | 7.89 | (0.01 | )(d) | 0.81 | 0.80 | — | 8.69 | 10.14 | 205,022 | 1.29 | (e) | 1.30 | (e) | (0.77 | )(e) | 2 | ||||||||||||||||||||||||||||||||
| Year ended 03/31/10 | 5.94 | (0.06 | )(d) | 2.15 | 2.09 | (0.14 | ) | 7.89 | 35.04 | 187,995 | 1.31 | (f) | 1.32 | (f) | (0.79 | )(f) | 3 | |||||||||||||||||||||||||||||||
| Year ended 03/31/09 | 7.82 | (0.01 | )(d) | (1.84 | ) | (1.85 | ) | (0.03 | ) | 5.94 | (23.61 | ) | 136,151 | 1.46 | 1.47 | (0.18 | ) | 39 | ||||||||||||||||||||||||||||||
| Year ended 03/31/08 | 6.15 | (0.03 | ) | 1.75 | 1.72 | (0.05 | ) | 7.82 | 27.98 | 181,711 | 1.35 | 1.36 | (0.48 | ) | 43 | |||||||||||||||||||||||||||||||||
| Year ended 03/31/07 | 5.70 | (0.00 | )(d) | 0.59 | 0.59 | (0.14 | ) | 6.15 | 10.36 | 146,934 | 1.41 | 1.41 | (0.04 | ) | 85 | |||||||||||||||||||||||||||||||||
| Year ended 03/31/06 | 3.57 | (0.00 | )(d) | 2.13 | 2.13 | — | 5.70 | 59.66 | 149,160 | 1.44 | 1.44 | (0.09 | ) | 155 | ||||||||||||||||||||||||||||||||||
| (a) | For the one month ended April 30, 2010 and the years ended March 31, 2010, 2009, 2008 and 2007, redemption fees were added to shares of beneficial interest which were less than $0.01 per share. | |
| (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) | Calculated using average shares outstanding. | |
| (e) | Ratios are annualized and based on average daily net assets (000’s omitted) of $168,934, $43,890, $53,651, $5,320 and $197,690 for Class A, Class B, Class C, Class Y and Investor Class shares, respectively. | |
| (f) | Ratios are based on average daily net assets (000’s omitted) of $137,949, $38,198, $45,116, $2,947 and $172,401 for Class A, Class B, Class C, Class Y and Investor Class shares, respectively. | |
| (g) | Commencement date of October 3, 2008. | |
| (h) | Annualized. |
21 Invesco Gold & Precious Metals Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Sector Funds (Invesco Sector Funds)
and Shareholders of Invesco Gold & Precious Metals 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 Gold & Precious Metals Fund (formerly known as AIM Gold & Precious Metals Fund; one of the funds constituting AIM Sector Funds (Invesco Sector Funds), hereafter referred to as the “Fund”) at April 30, 2010 and at March 31, 2010, the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at April 30, 2010 and at March 31, 2010 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
June 4, 2010
Houston, Texas
22 Invesco Gold & Precious Metals 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 November 1, 2009 through April 30, 2010.
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 | (11/01/09) | (04/30/10)1 | Period2 | (04/30/10) | Period2 | Ratio | ||||||||||||||||||||||||
| A | $ | 1,000.00 | $ | 1,198.50 | $ | 6.92 | $ | 1,018.50 | $ | 6.36 | 1.27 | % | ||||||||||||||||||
| B | 1,000.00 | 1,195.20 | 10.99 | 1,014.78 | 10.09 | 2.02 | ||||||||||||||||||||||||
| C | 1,000.00 | 1,194.70 | 10.99 | 1,014.78 | 10.09 | 2.02 | ||||||||||||||||||||||||
| Y | 1,000.00 | 1,199.30 | 5.56 | 1,019.74 | 5.11 | 1.02 | ||||||||||||||||||||||||
| Investor | 1,000.00 | 1,198.70 | 6.92 | 1,018.50 | 6.36 | 1.27 | ||||||||||||||||||||||||
| 1 | The actual ending account value is based on the actual total return of the Fund for the period November 1, 2009 through April 30, 2010, 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 181/365 to reflect the most recent fiscal half year. |
23 Invesco Gold & Precious Metals 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 October 1, 2009 through March 31, 2010.
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 | (10/01/09) | (03/31/10)1 | Period2 | (03/31/10) | Period2 | Ratio | ||||||||||||||||||||||||
| A | $ | 1,000.00 | $ | 1,040.60 | $ | 6.46 | $ | 1,018.60 | $ | 6.39 | 1.27 | % | ||||||||||||||||||
| B | 1,000.00 | 1,037.00 | 10.26 | 1,014.86 | 10.15 | 2.02 | ||||||||||||||||||||||||
| C | 1,000.00 | 1,037.40 | 10.26 | 1,014.86 | 10.15 | 2.02 | ||||||||||||||||||||||||
| Y | 1,000.00 | 1,042.70 | 5.19 | 1,019.85 | 5.14 | 1.02 | ||||||||||||||||||||||||
| Investor | 1,000.00 | 1,041.70 | 6.46 | 1,018.60 | 6.39 | 1.27 | ||||||||||||||||||||||||
| 1 | The actual ending account value is based on the actual total return of the Fund for the period October 1, 2009 through March 31, 2010, 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 182/365 to reflect the most recent fiscal half year. |
24 Invesco Gold & Precious Metals 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:
Federal and State Income Tax | April 30, 2010 | March 31, 2010 | ||||||
| Qualified Dividend Income* | —% | 38.35% | ||||||
| Corporate Dividends Received Deduction* | —% | 4.75% | ||||||
| * | The above percentages are based on ordinary income dividends paid to shareholders during the period April 1, 2010 to April 30, 2010 and the fiscal year ended March 31, 2010. |
25 Invesco Gold & Precious Metals Fund
Trustees and Officers
The address of each trustee and officer of AIM Sector Funds (Invesco Sector Funds) (the “Trust”), is 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. Each trustee oversees 197 portfolios in the Invesco Funds complex. 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.
| Trustee | Other | |||||||
| and/ or | Directorship(s) | |||||||
| Name, Year of Birth and | Officer | Held by | ||||||
| Position(s) Held with the Trust | Since | Principal Occupation(s) During Past 5 Years | Trustee | |||||
Interested Persons | ||||||||
Martin L. Flanagan1 — 1960 Trustee | 2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Trustee, The AIM Family of Funds®; Board of Governors, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business 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 and Vice Chairman, Investment Company Institute | None | |||||
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, Chief Executive Officer and President, 1371 Preferred Inc. (holding company); Director, Chairman, Chief Executive Officer and President, Invesco Management Group Inc. (formerly known as Invesco Aim Management Group, Inc.) (financial services holding company); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent) and AIM GP Canada Inc. (general partner for limited partnerships); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.) (registered transfer agent) and INVESCO Distributors, Inc. (registered broker dealer); Director, President and Chairman, INVESCO Inc. (holding company) and Invesco Canada Holdings Inc. (holding company); Chief Executive Officer, AIM Trimark Corporate Class Inc. (corporate mutual fund company) and AIM Trimark Canada Fund Inc. (corporate mutual fund company); Director and Chief Executive Officer, Invesco Trimark Ltd./Invesco Trimark Ltèe (registered investment adviser and registered transfer agent) and Invesco Trimark Dealer Inc. (registered broker dealer); Trustee, President and Principal Executive Officer, The AIM Family of Funds® (other than AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust); Trustee and Executive Vice President, The AIM Family of Funds® (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust only) Formerly: 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 Capital Management, Inc. ) (formerly, 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 AIM Family of 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. | None | |||||
Independent Trustees | ||||||||
| Bruce L. Crockett — 1944 Trustee and Chair | 2003 | Chairman, Crockett Technology Associates (technology consulting company) Formerly: Director, Captaris (unified messaging provider) | ACE Limited (insurance company); and Investment Company Institute | |||||
| Bob R. Baker — 1936 Trustee | 1983 | Retired | None | |||||
| Frank S. Bayley — 1939 Trustee | 2003 | Retired Formerly: Director, Badgley Funds, Inc. (registered investment company) (2 portfolios) | None | |||||
| James T. Bunch — 1942 Trustee | 2000 | Founder, Green, Manning & Bunch Ltd. (investment banking firm) Formerly: Executive Committee, United States Golf Association | Vice Chairman, Board of Governors, Western Golf Association/Evans Scholars Foundation and Director, Denver Film Society | |||||
| 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 | Board 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) | Administaff | |||||
| Carl Frischling — 1937 Trustee | 2003 | Partner, law firm of Kramer Levin Naftalis and Frankel LLP | Director, Reich & Tang Funds (16 portfolios) | |||||
| Prema Mathai-Davis — 1950 Trustee | 2003 | Retired | None | |||||
| Lewis F. Pennock — 1942 Trustee | 2003 | Partner, law firm of Pennock & Cooper | None | |||||
| Larry Soll — 1942 Trustee | 1997 | Retired | None | |||||
| Raymond Stickel, Jr. — 1944 Trustee | 2005 | Retired Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios) | None | |||||
| 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. |
T-1
Trustees and Officers — (continued)
| Trustee | Other | |||||||
| and/ or | Directorship(s) | |||||||
| Name, Year of Birth and | Officer | Held by | ||||||
| Position(s) Held with the Trust | Since | Principal Occupation(s) During Past 5 Years | Trustee | |||||
Other Officers | ||||||||
| Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer of The AIM Family of Funds® | 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.), 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 INVESCO Distributors, Inc.; Director and Vice President, INVESCO Funds Group, Inc.; Senior Vice President, Chief Legal Officer and Secretary, The AIM Family of Funds®; and Manager, Invesco PowerShares Capital Management LLC Formerly: Director, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco Advisers, Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco Capital Management (formerly known as 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 | |||||
| Lisa O. Brinkley — 1959 Vice President | 2004 | Global Compliance Director, Invesco Ltd.; Chief Compliance Officer, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) and Invesco Investment Services, Inc.(formerly known as Invesco Aim Investment Services, Inc.); and Vice President, The AIM Family of Funds® Formerly: Senior Vice President, Invesco Management Group, Inc. (formerly known as Invesco Aim Management Group, Inc.); Senior Vice President and Chief Compliance Officer, Invesco Advisers, Inc. and The AIM Family of Funds®; Vice President and Chief Compliance Officer, Invesco Capital Management, Inc. (formerly known as Invesco Aim Capital Management, Inc.) and Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.); Vice President, Invesco Investment Services (formerly known as Invesco Aim Investment Services, Inc.) and Fund Management Company | N/A | |||||
| Kevin M. Carome — 1956 Vice President | 2003 | General Counsel, Secretary and Senior Managing Director, Invesco Ltd.; Director, Invesco Holding Company Limited and INVESCO Funds Group, Inc.; Director and Executive Vice President, IVZ, Inc., Invesco Group Services, Inc., Invesco North American Holdings, Inc. and Invesco Investments (Bermuda) Ltd.; Director and Secretary, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Vice President, The AIM Family of Funds®; and Trustee, 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: Senior Managing Director and Secretary, Invesco North American Holdings, Inc.; Vice President and Secretary, IVZ, Inc. and Invesco Group Services, Inc.; Senior Managing Director and Secretary, Invesco Holding Company Limited; Director, Senior Vice President, Secretary and General Counsel, Invesco Management Group Inc. (formerly known as Invesco Aim Management Group, Inc.) and Invesco Advisers, Inc.; Senior Vice President, Invesco Distributors, Inc.; Director, General Counsel and Vice President, Fund Management Company; Vice President, Invesco Capital Management Inc. (formerly known as Invesco Aim Capital Management, Inc.) and Invesco Investment Services, Inc.; Senior Vice President, Chief Legal Officer and Secretary, The AIM Family of Funds®; Director and Vice President, INVESCO Distributors, Inc.; and Chief Executive Officer and President, INVESCO Funds Group, Inc. | N/A | |||||
| Sheri Morris — 1964 Vice President, Treasurer and Principal Financial Officer | 2003 | Vice President, Treasurer and Principal Financial Officer, The AIM Family of Funds®; and Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser) Formerly: Vice President, Invesco Advisers, Inc., Invesco Capital Management, Inc. (formerly known as Invesco Aim Capital Management, Inc.) and Invesco Private Asset Management Inc. (formerly known as Invesco Aim Private Asset Management, Inc.); Assistant Vice President and Assistant Treasurer, The AIM Family of Funds® and Assistant Vice President, Invesco Advisers, Inc., Invesco Capital Management, Inc. (formerly known as Invesco Aim Capital Management, Inc. and Invesco Private Asset Management Inc. (formerly known as Invesco Aim Private Asset Management, Inc.) | N/A | |||||
| Karen Dunn Kelley — 1960 Vice President | 2003 | Head of Invesco’s World Wide Fixed Income and Cash Management Group; Senior Vice President, 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.); Senior Vice President, Invesco Management Group, Inc. (formerly known as Invesco Aim Management Group, Inc.); and Director, Invesco Mortgage Capital Inc.; Vice President, The AIM Family of 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 AIM Family of Funds® (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust only) Formerly: 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 Capital Management, Inc. (formerly known as 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 Capital Management, Inc. (formerly known as Invesco Aim Capital Management, Inc.); Director of Cash Management, Senior Vice President, and Vice President, Invesco Advisers, Inc. and The AIM Family of Funds® (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Tax-Free Investments Trust only) | N/A | |||||
| Lance A. Rejsek — 1967 Anti-Money Laundering Compliance Officer | 2005 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.), Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.), The AIM Family of Funds®, PowerShares Exchange-Traded Fund Trust, PowerShares Exchang-Traded Trust II, PowerShares India Exchange-Traded Fund Trust and PowerShares Actively Managed Exchange-Traded Fund Trust. Formerly: Anti-Money Laundering Compliance Officer, Fund Management Company, Invesco Advisers, Inc., Invesco Capital Management, Inc. (formerly known as Invesco Aim Capital Management, Inc. and Invesco Private Asset Management, Inc. (formerly known as Invesco Aim Private Asset Management, Inc.) | N/A | |||||
T-2
Trustees and Officers — (continued)
| Trustee | Other | |||||||
| and/ or | Directorship(s) | |||||||
| Name, Year of Birth and | Officer | Held by | ||||||
| Position(s) Held with the Trust | Since | Principal Occupation(s) During Past 5 Years | Trustee | |||||
| Todd L. Spillane — 1958 Chief Compliance Officer | 2006 | Senior Vice President, Invesco Management Group Inc. (formerly known as Invesco Aim Management Group, Inc.); 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 AIM Family of Funds®, PowerShares Exchange-Traded Fund Trust, PowerShares Exchang-Traded Trust II, PowerShares India Exchange-Traded Fund Trust and PowerShares Actively Managed Exchange-Traded Fund Trust, INVESCO Private Capital Investments, Inc. (holding company), Invesco Private Capital, Inc. (registered investment adviser) and Invesco Senior Secured Management, Inc. (registered investment adviser); 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 and Chief Compliance Officer, Invesco Advisers, Inc. and Invesco Capital Management, Inc. (formerly known as Invesco Aim Capital Management, Inc.); Chief Compliance Officer, Invesco Global Asset Management (N.A.), Inc.; Vice President, Invesco Capital Management, Inc. (formerly known as Invesco Aim Capital Management, Inc.) and Fund Management Company | 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 | Investment Adviser | Distributor | Auditors | |||
| 11 Greenway Plaza, Suite 2500 Houston, TX 77046-1173 | Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 | Invesco Distributors, Inc. 11 Greenway Plaza, Suite 2500 Houston, TX 77046-1173 | PricewaterhouseCoopers LLP 1201 Louisiana Street, Suite 2900 Houston, TX 77002-5678 | |||
Counsel to the Fund | Counsel to the Independent Trustees | Transfer Agent | Custodian | |||
| Stradley Ronon Stevens & Young, LLP 2600 One Commerce Square Philadelphia, PA 19103 | Kramer, Levin, Naftalis & Frankel LLP 1177 Avenue of the Americas New York, NY 10036-2714 | Invesco Investment Services, Inc. P.O. Box 4739 Houston, TX 77210-4739 | State Street Bank and Trust Company 225 Franklin Boston, MA 02110-2801 |
T-3
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 number of trees used to produce paper. | |
| • | economical. Help reduce your fund’s printing and delivery expenses and put more capital back in your fund’s returns. | |
| • | efficient. Stop waiting for regular mail. Your documents will be sent via email as soon as they’re available. | |
| • | easy. Download, save and print files using your home computer with a few clicks of your mouse. |
This service is provided by Invesco Investment Services, Inc.
Invesco Privacy Policy
You share personal and financial information with us that is necessary for your transactions and your account records. We take very seriously the obligation to keep that information confidential and private.
Invesco collects nonpublic personal information about you from account applications or other forms you complete and from your transactions with us or our affiliates. We do not disclose information about you or our former customers to service providers or other third parties except to the extent necessary to service your account and in other limited circumstances as permitted by law. For example, we use this information to facilitate the delivery of transaction confirmations, financial reports, prospectuses and tax forms.
Even within Invesco, only people involved in the servicing of your accounts and compliance monitoring have access to your information. To ensure the highest level of confidentiality and security, Invesco maintains physical, electronic and procedural safeguards that meet or exceed federal standards. Special measures, such as data encryption and authentication, apply to your communications with us on our website. More detail is available to you at invesco.com/privacy.
Important Notice Regarding Delivery of Security Holder Documents
To reduce Fund expenses, only one copy of most shareholder documents may be mailed to shareholders with multiple accounts at the same address (Householding). Mailing of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact Invesco Investment Services, Inc. at 800 959 4246 or contact your financial institution. We will begin sending you individual copies for each account within 30 days after receiving your request.
Fund holdings and proxy voting information
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is available at invesco.com/completeqtrholdings. Shareholders can also look up the Fund’s Forms N-Q on the SEC website at sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-03826 and 002-85905.
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, 2009, is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov.
If used after July 20, 2010, this report must be accompanied by a Quarterly Performance Review for the most recent quarter-end.
Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the U.S. distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
On April 30, 2010, Invesco Aim Distributors, Inc. became Invesco Distributors, Inc., Invesco Aim Investment Services, Inc. became Invesco Investment Services, Inc., and AIM funds became Invesco funds. In addition, invescoaim.com became invesco.com.
I-GPM-AR-1 Invesco Distributors, Inc.
| Annual Report to Shareholders April 30, 2010 Invesco Leisure Fund Effective April 30, 2010, AIM Leisure Fund was renamed Invesco Leisure Fund. |
| 2 Letters to Shareholders 4 Performance Summary 4 Management Discussion 6 Long-Term Fund Performance 8 Supplemental Information 9 Schedule of Investments 13 Financial Statements 15 Notes to Financial Statements 23 Financial Highlights 24 Auditor’s Report 25 Fund Expenses 27 Tax Information T-1 Trustees and Officers |
Letters to Shareholders
Dear Shareholders:
In the 13 months covered by this report, the U.S. economy improved dramatically from where it stood in early 2009. In the third quarter of 2009, the economy ended its year-long contraction and began growing again. Major U.S. stock market indexes rose sharply in anticipation of economic improvement; despite occasional volatility, they continued rising as evidence mounted that the recovery was genuine. Over the last year, global equity indexes also rallied strongly from their early 2009 lows.
While economic improvement was undeniable, unemployment remained high by historical standards, and unfortunately it appeared unlikely that the jobless rate would decline significantly anytime soon. Stubbornly high unemployment continued to cast a pall over the nation’s economic outlook.
Timely communication
Unpredictable and volatile markets, together with economic uncertainty, caused many of you to seek information relative to your investments. Some of you contacted your financial advisers to ask questions and obtain guidance. Others visited our website, invesco.com, where we offer timely market commentary, investor education information and sector updates. In particular, I recommend the Investment Perspectives articles featured on our home page; they are written by Invesco’s investment professionals and cover a wide range of topics that are updated regularly.
Also on our website, you’ll find a commentary from me that discusses the name change we made on April 30 — from Invesco Aim to Invesco. Some of the changes related to this event include all AIM funds being renamed Invesco funds. (It’s important to note that the funds’ investment strategies and objectives have not changed.) You’ll notice on this report the Invesco logo has replaced the previous Invesco Aim logo. And our new Web address is now invesco.com. These changes are the latest steps in the rebranding process we began two years ago, when we added Invesco in front of Aim. For more information about the change, please read the shareholder Q&A on the account balance page at invesco.com.
At invesco.com you can also access your Fund’s latest quarterly commentary. Simply click on Mutual Funds inside the Financial Products box. Then, in the Fund Information box, click on Quarterly Commentary and select your Fund.
Timely information like that available on our website — together with the advice and guidance of a trusted financial adviser — can be especially useful in uncertain times. Market volatility and economic uncertainty are two factors that can prompt investors to abandon their long-term saving and investment plans. A financial adviser can show you just how costly that could be over the long term — and can explain that saving more and investing more regularly is a time-tested way to build a solid portfolio. He or she can help you identify appropriate investments, given your individual risk tolerance, time horizon and investment goals.
Taking our business forward
Invesco’s acquisition of Morgan Stanley’s retail asset management business, including Van Kampen Investments, was completed on June 1, 2010. Our two companies have similar investment philosophies and cultures, as well as complementary investment expertise. I believe this combination represents the next step in our company’s evolution — and will allow us to better serve you through:
| • | Greater efficiencies and cost savings | ||
| • | A broader range of investment options | ||
| • | A continued commitment to investment excellence, with complementary portfolio management expertise |
While market conditions change from time to time, our commitment to putting our clients first, helping you achieve your financial goals and providing excellent customer service will not.
If you have questions about your account, please contact one of our client services representatives at 800 959 4246. If you have a question or comment for me, please email me at phil@invesco.com.
Thank you for investing with us.
Sincerely,
Philip Taylor
Senior Managing Director, Invesco
Senior Managing Director, Invesco
2 Invesco Leisure Fund
Dear Fellow Shareholders:
By all accounts, last year was a challenging year for all of us. Although the economy and financial markets whipsawed, the final months of the decade concluded with many of us feeling somewhat more optimistic about 2010 as we began to see the markets and economy evidence the first green shoots of recovery.
Perhaps the most valuable takeaway from last year is the manner in which it underscored the importance of adopting the long-term, appropriately diversified investment strategy I’ve mentioned in my previous letters. If anything, last year was the litmus test for this approach.
Please be assured that your Board continues to oversee the Invesco Funds with a strong sense of responsibility for your savings and a deep appreciation for your trust. We have already begun the annual review and management contract renewal process and will continue to seek to manage costs and reward performance in ways that put your interests first. (It might also interest you to know that the Board currently has five committees — Compliance, Audit, Governance, Investments, and Valuation Distribution and Proxy Voting — whose members exercise oversight to maintain the Invesco Funds’ “Investor First” orientation.)
To that end, some of you may have seen that Invesco is assuming the management of the Van Kampen family of mutual funds as well as Morgan Stanley’s retail funds. We view this addition as an excellent opportunity to provide you, our shareholders, access to an even broader range of well-diversified mutual funds under the Invesco umbrella. I’ll keep you updated on the work we’re doing to deliver the value of this acquisition to our shareholders in my upcoming letters.
As always, you are welcome to contact me at bruce@brucecrockett.com with any questions or concerns you may have. We look forward to representing you and serving you in the coming year.
Sincerely,
Bruce L. Crockett
Independent Chair
Invesco Funds Board of Trustees
Independent Chair
Invesco Funds Board of Trustees
3 Invesco Leisure Fund
Management’s Discussion of Fund Performance
Performance summary
During the 13 months ended April 30, 2010, the U.S. economy showed signs of improvement, causing major stock market indexes to rise sharply. The consumer discretionary sector benefited as investors, anticipating an economic recovery, favored cyclical stocks. As a result, all share classes of Invesco Leisure Fund, at net asset value, outperformed the broad market, as measured by the S&P 500 Index, for the reporting period. The Fund’s share classes at NAV, however, underperformed the S&P 500 Consumer Discretionary Index, the Fund’s style-specific index. This was due predominately to security selection within the hotels, restaurants and leisure industry, as well as security selection in, and underweight exposure to, the automobile industry.
Your Fund’s long-term performance can be found later in this report.
Fund vs. Indexes
Total returns, 3/31/09 to 4/30/10, 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 | 56.81 | % | ||
| Class B Shares | 55.59 | |||
| Class C Shares | 55.64 | |||
| Class R Shares | 56.37 | |||
| Class Y Shares | 57.15 | |||
| Investor Class Shares | 56.79 | |||
S&P 500 Index▼ (Broad Market Index) | 47.26 | |||
S&P 500 Consumer Discretionary Index▼* (Style-Specific Index) | 72.17 | |||
Lipper Consumer Services Funds Category Average▼ (Peer Group) | 67.97 |
| ▼ | Lipper Inc. | |
| * | On December 1, 2009, we adopted the S&P 500 Consumer Discretionary Index as the Fund’s style-specific index because we believe it reflects the performance of the type of securities in which the Fund invests. |
How we invest
We focus on companies that profit from consumer spending on leisure activities — products or services purchased with consumers’ discretionary income. The Fund invests in stocks of cable television, publishing, cruise line, advertising, hotel, casino, electronic game and toy manufacturing, restaurant, retailing and entertainment companies.
Stock selection is based on a research driven bottom-up investment approach focusing on company fundamentals and growth prospects. Quantitative screens are used to help identify attractive stock candidates within the universe of leisure-related companies. Portfolio candidates are further refined by fundamental analysis performed at the company level which includes an evaluation of industry dynamics, competitive intensity and drivers of growth.
The investment process seeks to identify attractively valued leisure-related companies exhibiting the following characteristics:
| • | Attractive revenue growth profile | |
| • | Strong free cash flow generation |
Fund data as of 4/30/10
Portfolio Composition | ||||
By sector | ||||
| Consumer Discretionary | 88.3 | % | ||
| Consumer Staples | 5.0 | |||
| Information Technology | 3.8 | |||
Money Market Funds | ||||
Plus Other Assets Less Liabilities | 2.9 | |||
| Total Net Assets | $404.7 million | |||
| Total Number of Holdings* | 59 | |||
Top Equity Holdings*
| 1. Walt Disney Co. (The) | 7.0 | % | ||
| 2. Omnicomm Group Inc. | 3.9 | |||
| 3. Marriott International Inc. | 3.6 | |||
| 4. Home Depot, Inc. (The) | 3.3 | |||
| 5. Lowe’s Cos., Inc. | 3.1 | |||
| 6. International Game Technology | 2.8 | |||
| 7. NIKE, Inc. | 2.8 | |||
| 8. Scripps Networks Interactive, Inc. | 2.8 | |||
| 9. Interpublic Group of Cos., Inc. (The) | 2.7 | |||
| 10. WMS Industries Inc. | 2.3 |
The Fund’s holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
| * | Excluding money market fund holdings. |
| • | Returns on invested capital in excess of weighted-average cost of capital | |
| • | Low capital intensity businesses | |
| • | Management teams that are good stewards of capital |
We construct the portfolio with the goal of holding 40-75 individual stocks with an average investment horizon of 18 to 24 months. Portfolio weightings are adjusted based on current economic and industry conditions.
We may reduce or eliminate exposure to a stock when:
| • | A company reaches its price target. | |
| • | A more compelling opportunity is identified. | |
| • | A change in fundamentals occurs — either company specific or industry wide. | |
| • | A stock’s technical profile indicated negative underlying information which is further determined to have violated a fundamental investment thesis. |
Market conditions and your Fund
The U.S. economy provided signs of improvement during the period, offering indications that the economy has transitioned from a contraction phase into an expansionary phase. Nevertheless, the pace of recovery remained modest and the transition from government stimulus-induced growth to a private economic recovery was uncertain. The U.S. Federal Reserve’s (the Fed) federal funds target rate remained quite low, in a range of between zero and 0.25%.1 Real gross domestic product (GDP) registered positive growth during the reporting period with quarterly growth, on an annualized basis, of 2.2%, 5.6% and 3.0% for the third and fourth quarter of 2009, and the first quarter 2010, respectively.2 Inflation, measured by the seasonally adjusted Consumer Price Index, remained relatively benign. While labor markets improved as layoffs moderated, new hiring remained quite weak. Unemployment, after climbing steadily throughout 2009, fell slightly during the first quarter of 2010 and remained at a rate of 9.9% nationwide as of April 2010.3
Against this backdrop, all stock market sectors delivered double-digit gains for the reporting period.4 Telecommunication services, utilities and health care — traditionally more defensive sectors — were among the laggard sectors of the S&P 500 Index.4
4 Invesco Leisure Fund
Retail-focused industries, such as the automobiles industry and the Internet and catalog retail industry, experienced significant growth during the reporting period. The Fund’s underweight exposure in this area hurt its performance relative to the S&P 500 Consumer Discretionary Index. Security selection in the hotels, restaurants and leisure industry also detracted from Fund performance. The Fund’s underweight exposure to McDonald’s, which represented an average weighting of 7.6% of the benchmark, drove Fund underperformance in this industry.
The Fund’s security selection and overweight exposure to textiles, apparel and luxury goods benefited the Fund’s benchmark-relative performance. An out-of-index holding within this industry, Hanesbrands, was among the top contributors to Fund performance during the reporting period.
As a result of improving economic data during the reporting period, we steadily increased the Fund’s consumer discretionary exposure. In order to fund our increased weighting in consumer discretionary stocks, we reduced our beverage exposure by eliminating these holdings:
Anheuser-Busch InBev, Diageo, Pepsico and Pernod Ricard.
Although traditional media stocks experienced strong price performance following the market bottom of March 2009, many of these companies are structurally challenged due to their ownership of newspapers, magazines, radio and broadcast television stations which are losing market share to other forms of media. As a result, we took advantage of the strength in these stocks and reduced our exposure to traditional media stocks during the year. This allowed us to upgrade the quality of our media holdings as well as reduce our overweight exposure to such stocks. Within movies and entertainment, we sold News Corp. Within cable and satellite, we eliminated Liberty Entertainment and Cablevision Systems from the Fund. And within advertising, we swapped WPP for Interpublic Group as we feel Interpublic has more attractive margin expansion opportunities.
We increased our casino and gaming exposure during the reporting period. We added to our existing holdings in International Game Technology and Penn National Gaming while also adding a new name, WMS Industries. We believe slot machine manufacturers such as International Game Technology and WMS Industries may benefit from an upcoming replacement cycle of slot machines on casino floors.
We believe discretionary spending will likely continue to improve, but the rate of growth may lag past economic recoveries for two reasons. First, consumer leverage remains above the long term average and second, personal savings as a percentage of disposable personal income will likely remain above recent levels as consumers reduce their leverage. However, sales of luxury and big ticket items began to improve as the stock market rose, housing prices stabilized and consumer confidence recovered from the lows they experienced in early 2009.
As always, we would like to caution investors against making investment decisions based on short-term performance. We recommend that you consult a financial adviser to discuss your individual financial program.
Thank you for your continued investment in Invesco Leisure Fund.
| 1 | U.S. Federal Reserve | |
| 2 | Bureau of Economic Analysis | |
| 3 | Bureau of Labor Statistics | |
| 4 | Lipper Inc. |
The views and opinions expressed in management’s discussion of Fund performance are those of Invesco Advisers, Inc. These views and opinions are subject to change at any time based on factors such as market and economic conditions. These views and opinions may not be relied upon as investment advice or recommendations, or as an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but Invesco Advisers, Inc. makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
See important Fund and index disclosures later in this report.
Juan Hartsfield
Chartered Financial Analyst, portfolio manager, is lead manager of Invesco Leisure Fund. Mr. Hartsfield began his investment career in 2000 as an equity analyst and later became a portfolio manager. He joined Invesco in 2004. Mr. Hartsfield earned a B.S. in petroleum engineering from The University of Texas at Austin and an M.B.A. from the University of Michigan.
Jonathan Mueller
Chartered Financial Analyst, portfolio manager, is manager of Invesco Leisure Fund. Mr. Mueller served as a senior equity analyst before being promoted to portfolio manager in 2009. He joined Invesco in 2001. Mr. Mueller earned a B.B.A. in accounting from Texas Christian University and an M.B.A. in finance from The University of Texas at Austin. He is a Certified Public Accountant.
Assisted by the Leisure Team
Fund data as of 3/31/10
Portfolio Composition | ||||
By sector | ||||
| Consumer Discretionary | 86.7 | % | ||
| Consumer Staples | 6.5 | |||
| Information Technology | 6.0 | |||
Money Market Funds | ||||
Plus Other Assets Less Liabilities | 0.8 | |||
| Total Net Assets | $383.6 million | |||
| Total Number of Holdings* | 54 | |||
Top 10 Equity Holdings*
| 1. Walt Disney Co. (The) | 7.0 | % | ||
| 2. Omnicomm Group Inc. | 3.8 | |||
| 3. Marriott International Inc. | 3.2 | |||
| 4. Home Depot, Inc. (The) | 3.2 | |||
| 5. Google Inc. | 2.9 | |||
| 6. Lowe’s Cos., Inc. | 2.9 | |||
| 7. Scripps Networks Interactive, Inc. | 2.9 | |||
| 8. NIKE, Inc. | 2.9 | |||
| 9. Interpublic Group of Cos., Inc. (The) | 2.6 | |||
| 10. International Game Technology | 2.6 |
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. |
5 Invesco Leisure Fund
Your Fund’s Long-Term Performance
Results of a $10,000 Investment — Oldest Share Class without Sales Charges since Inception
Fund data from 1/19/84, index data from 1/31/84
| 1 | Lipper Inc. | |
| 2 | The Invesco Leisure fund was the only fund in the Lipper Consumer Services Funds Category from January 1984 through May 1984, at which time one other fund joined the category. |
Results of a $10,000 Investment — Oldest Share Class with Sales Charges since Inception
Index data from 1/31/00, Fund data from 2/14/00
| 1 | Lipper Inc. |
Past performance cannot guarantee comparable future results.
The performance data shown in the first chart above is that of the Fund’s Investor class shares. The performance of the Fund’s other share classes will differ primarily due to different sales charge structures and class expenses and may be greater than or less than the performance of the Fund’s Investor Class shares. The data shown in this chart includes reinvested distributions, Fund expenses and management fees. Index results include reinvested dividends.
The performance data shown in the second chart above is that of the Fund’s Class C shares. The performance of the Fund’s other share classes will differ primarily due to different sales charge structures and class expenses and may be greater than or less than the performance of the Fund’s Class C shares. The data shown in the second chart above includes reinvested distributions, Fund expenses and management fees. Index results include reinvested dividends, but they do not reflect sales charges.
Performance of the peer group reflects fund expenses and management fees; performance of a market index does not. Performance shown in the charts and table does not reflect deduction of taxes a shareholder would pay on Fund distributions or sale of Fund shares.
During the fiscal year, the Fund elected to use the S&P 500 Consumer Discretionary Index as its style-specific index because we believe it reflects the performance of the type of securities in which the Fund invests. This index appears in the second chart above.
continued on page 7
6 Invesco Leisure Fund
Average Annual Total Returns
As of 4/30/10, including maximum applicable sales charges
Class A Shares | ||||
| Inception (3/28/02) | 2.17 | % | ||
| 5 Years | 0.92 | |||
| 1 Year | 34.91 | |||
Class B Shares | ||||
| Inception (3/28/02) | 2.15 | % | ||
| 5 Years | 1.03 | |||
| 1 Year | 36.73 | |||
Class C Shares | ||||
| Inception(2/14/00) | 1.83 | % | ||
| 10 Years | 2.19 | |||
| 5 Years | 1.31 | |||
| 1 Year | 40.69 | |||
Class R Shares | ||||
| Inception (10/25/05) | 2.06 | % | ||
| 1 Year | 42.44 | |||
Class Y Shares | ||||
| 10 Years | 3.05 | % | ||
| 5 Years | 2.16 | |||
| 1 Year | 43.15 | |||
Investor Class Shares | ||||
| Inception (1/19/84) | 13.50 | % | ||
| 10 Years | 3.01 | |||
| 5 Years | 2.08 | |||
| 1 Year | 42.84 |
Average Annual Total Returns
As of 3/31/10, the most recent calendar quarter-end including maximum applicable sales charges
Class A Shares | ||||
| Inception (3/28/02) | 1.64 | % | ||
| 5 Years | -0.68 | |||
| 1 Year | 47.32 | |||
Class B Shares | ||||
| Inception (3/28/02) | 1.62 | % | ||
| 5 Years | -0.57 | |||
| 1 Year | 49.66 | |||
Class C Shares | ||||
| Inception (2/14/00) | 1.42 | % | ||
| 10 Years | 1.09 | |||
| 5 Years | -0.30 | |||
| 1 Year | 53.69 | |||
Class R Shares | ||||
| Inception (10/25/05) | 1.12 | % | ||
| 1 Year | 55.42 | |||
Class Y Shares | ||||
| 10 Years | 1.94 | % | ||
| 5 Years | 0.53 | |||
| 1 Year | 56.19 | |||
Investor Class Shares | ||||
| Inception (1/19/84) | 13.35 | % | ||
| 10 Years | 1.90 | |||
| 5 Years | 0.45 | |||
| 1 Year | 55.79 |
Class Y shares incepted on October 3, 2008. Performance shown prior to that date is that of Investor Class shares and includes the 12b-1 fees applicable to Investor Class shares. Investor Class shares 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 Investor Class shares was 1.37%, 2.12%, 2.12%, 1.62%, 1.12% and 1.37%, respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.
Class A share performance reflects the maximum 5.50% sales charge, and Class B and Class C share performance reflects the applicable contingent deferred sales charge (CDSC) for the period involved. The CDSC on Class B shares declines from 5% beginning at the time of purchase to 0% at the beginning of the seventh year. The CDSC on Class C shares is 1% for the first year after purchase. Class R, Class Y and Investor 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.
New Fiscal Year-End
Since our last report to you, the Fund’s fiscal year-end was changed from March 31 to April 30.
continued from page 6
Both charts on the previous page are logarithmic charts, which present the fluctuations in the value of the Fund’s share class and its indexes. We believe that a logarithmic chart is more effective than other types of charts in illustrating changes in value during the early years shown in the chart. The vertical axis, the one that indicates the dollar value of an investment, is constructed with each segment representing a percent change in the value of the investment. In both charts, each segment represents a doubling, or 100% change, in the value of the investment.
7 Invesco Leisure Fund
Invesco Leisure Fund’s investment objective is capital growth.
| • | Unless otherwise stated, information presented in this report is as of April 30, 2010, and is based on total net assets. | |
| • | Unless otherwise noted, all data provided by Invesco. | |
| • | To access your Fund’s reports/prospectus visit invesco.com/fundreports. |
About share classes
| • | Effective September 30, 2003, for qualified plans only, those previously established are eligible to purchase Class B shares of any Invesco fund. Please see the prospectus for more information. | |
| • | Class R shares are available only to certain retirement plans. Please see the prospectus for more information. | |
| • | Class Y shares are available to only certain investors. Please see the prospectus for more information. | |
| • | All Investor Class shares are closed to new investors. Contact your financial adviser about purchasing our other share classes. |
Principal risks of investing in the Fund
| • | Prices of equity securities change in response to many factors, including the historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity. | |
| • | Foreign securities have additional risks, including exchange rate changes, political and economic upheaval, relative lack of information, relatively low market liquidity, and the potential lack of strict financial and accounting controls and standards. | |
| • | The leisure sector depends on consumer discretionary spending, which generally falls during economic downturns. | |
| • | Since a large percentage of the Fund’s assets may be invested in securities of a limited number of companies, each investment has a greater effect on the Fund’s overall performance, and any change in the value of those securities could significantly affect the value of your investment in the Fund. | |
| • | There is no guarantee that the investment techniques and risk analysis used by the Fund’s portfolio managers will produce the desired results. | |
| • | The prices of securities held by the Fund may decline in response to market 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. |
About indexes used in this report
| • | The S&P 500® Index is an unmanaged index considered representative of the U.S. stock market. | |
| • | The S&P 500 Consumer Discretionary Index is an unmanaged index considered representative of the consumer discretionary market. | |
| • | The Lipper Consumer Services Funds Category Average represents an average of all of the funds in the Lipper Consumer Services Funds category. | |
| • | 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. | |
| • | 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 reflects fund expenses; performance of a market index does not. |
Other information
| • | The Chartered Financial Analyst® (CFA®) designation is globally recognized and attests to a charterholder’s success in a rigorous and comprehensive study program in the field of investment management and research analysis. | |
| • | CPA® and Certified Public Accountant® are trademarks owned by the American Institute of Certified Public Accountants. | |
| • | 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. | |
| • | 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.
Fund Nasdaq Symbols
| Class A Shares | ILSAX | |||
| Class B Shares | ILSBX | |||
| Class C Shares | IVLCX | |||
| Class R Shares | ILSRX | |||
| Class Y Shares | ILSYX | |||
| Investor Class Shares | FLISX | |||
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
8 Invesco Leisure Fund
Schedule of Investments(a)
April 30, 2010
| Shares | Value | |||||||
| Common Stocks & Other Equity Interest–97.09% | ||||||||
| Advertising–9.66% | ||||||||
Interpublic Group of Cos., Inc. (The)(b) | 1,219,224 | $ | 10,863,286 | |||||
Lamar Advertising Co.–Class A(b) | 223,049 | 8,301,883 | ||||||
| National CineMedia, Inc. | 214,247 | 4,079,263 | ||||||
| Omnicom Group Inc. | 371,871 | 15,864,017 | ||||||
| 39,108,449 | ||||||||
| Apparel Retail–7.28% | ||||||||
| Abercrombie & Fitch Co.–Class A | 167,890 | 7,341,830 | ||||||
| American Eagle Outfitters, Inc. | 369,747 | 6,215,447 | ||||||
| Gap, Inc. (The) | 121,360 | 3,001,233 | ||||||
| Hot Topic, Inc. | 384,749 | 2,939,482 | ||||||
J. Crew Group, Inc.(b) | 63,367 | 2,944,665 | ||||||
| TJX Cos., Inc. | 87,536 | 4,056,418 | ||||||
Urban Outfitters, Inc.(b) | 79,324 | 2,975,443 | ||||||
| 29,474,518 | ||||||||
| Apparel, Accessories & Luxury Goods–3.87% | ||||||||
Carter’s, Inc.(b) | 94,042 | 3,030,033 | ||||||
| Coach, Inc. | 98,593 | 4,116,258 | ||||||
Hanesbrands, Inc.(b) | 153,586 | 4,372,594 | ||||||
| Polo Ralph Lauren Corp. | 46,246 | 4,157,515 | ||||||
| 15,676,400 | ||||||||
| Brewers–0.99% | ||||||||
| Heineken N.V. (Netherlands) | 86,055 | 3,994,675 | ||||||
| Broadcasting–3.94% | ||||||||
Discovery Communications, Inc.–Class A(b) | 226,353 | 8,759,861 | ||||||
| Grupo Televisa S.A.–ADR (Mexico) | 344,932 | 7,167,687 | ||||||
| 15,927,548 | ||||||||
| Cable & Satellite–4.83% | ||||||||
DIRECTV CLASS A(b) | 230,177 | 8,339,313 | ||||||
| Scripps Networks Interactive, Inc.–Class A | 247,309 | 11,212,990 | ||||||
| 19,552,303 | ||||||||
| Casinos & Gaming–7.19% | ||||||||
| International Game Technology | 539,101 | 11,364,249 | ||||||
MGM Mirage(b) | 135,404 | 2,151,570 | ||||||
Penn National Gaming, Inc.(b) | 202,395 | 6,266,149 | ||||||
WMS Industries Inc.(b) | 186,114 | 9,309,422 | ||||||
| 29,091,390 | ||||||||
| Department Stores–4.00% | ||||||||
Kohl’s Corp.(b) | 123,728 | 6,803,803 | ||||||
| Macy’s, Inc. | 199,424 | 4,626,637 | ||||||
| Nordstrom, Inc. | 114,838 | 4,746,254 | ||||||
| 16,176,694 | ||||||||
| Food Retail–1.69% | ||||||||
| Woolworths Ltd. (Australia) | 273,901 | 6,826,867 | ||||||
| Footwear–2.80% | ||||||||
| NIKE, Inc.–Class B | 149,191 | 11,325,089 | ||||||
| General Merchandise Stores–2.21% | ||||||||
| Target Corp. | 157,265 | 8,943,661 | ||||||
| Home Improvement Retail–6.43% | ||||||||
| Home Depot, Inc. (The) | 380,679 | 13,418,935 | ||||||
| Lowe’s Cos., Inc. | 464,564 | 12,598,975 | ||||||
| 26,017,910 | ||||||||
| Hotels, Resorts & Cruise Lines–8.82% | ||||||||
Carnival Corp.(c) | 108,168 | 4,510,606 | ||||||
| Choice Hotels International, Inc. | 121,964 | 4,428,513 | ||||||
Hyatt Hotels Corp.–Class A(b) | 105,588 | 4,347,058 | ||||||
| Marriott International, Inc.–Class A | 395,923 | 14,554,130 | ||||||
Orient-Express Hotels Ltd.–Class A (Bermuda)(b) | 358,016 | 4,886,918 | ||||||
| Regal Hotels International Holdings Ltd. (Hong Kong) | 7,827,800 | 2,977,518 | ||||||
| 35,704,743 | ||||||||
| Hypermarkets & Super Centers–1.31% | ||||||||
| Costco Wholesale Corp. | 90,070 | 5,321,336 | ||||||
| Internet Retail–1.88% | ||||||||
Amazon.com, Inc.(b) | 55,582 | 7,618,069 | ||||||
| Internet Software & Services–3.78% | ||||||||
Google Inc.–Class A(b) | 7,737 | 4,065,329 | ||||||
GSI Commerce, Inc.(b) | 147,036 | 4,006,731 | ||||||
Knot, Inc. (The)(b) | 385,458 | 3,126,065 | ||||||
OpenTable, Inc.(b)(d) | 105,471 | 4,098,603 | ||||||
| 15,296,728 | ||||||||
| Motorcycle Manufacturers–1.25% | ||||||||
| Harley-Davidson, Inc. | 149,344 | 5,052,307 | ||||||
| Movies & Entertainment–11.79% | ||||||||
| Time Warner Inc. | 254,487 | 8,418,430 | ||||||
Viacom Inc.–Class A(b)(d) | 130,287 | 5,082,496 | ||||||
Viacom Inc.–Class B(b) | 170,486 | 6,023,270 | ||||||
| Walt Disney Co. (The) | 764,865 | 28,177,627 | ||||||
| 47,701,823 | ||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
9 Invesco Leisure Fund
| Shares | Value | |||||||
| Personal Products–0.99% | ||||||||
| Estee Lauder Cos. Inc. (The)–Class A | 60,674 | $ | 3,999,630 | |||||
| Restaurants–9.56% | ||||||||
| Brinker International, Inc. | 362,014 | 6,704,499 | ||||||
Buffalo Wild Wings Inc.(b)(d) | 79,664 | 3,293,310 | ||||||
| Darden Restaurants, Inc. | 193,613 | 8,664,182 | ||||||
Jack in the Box Inc.(b) | 239,697 | 5,637,673 | ||||||
| McDonald’s Corp. | 89,527 | 6,319,711 | ||||||
P.F. Chang’s China Bistro, Inc.(b)(d) | 93,420 | 4,076,849 | ||||||
| Starbucks Corp. | 153,623 | 3,991,125 | ||||||
| 38,687,349 | ||||||||
| Specialty Stores–2.82% | ||||||||
| Staples, Inc. | 359,108 | 8,449,811 | ||||||
| Tiffany & Co. | 61,458 | 2,979,484 | ||||||
| 11,429,295 | ||||||||
| Total Common Stocks & Other Equity Interests (Cost $294,158,877) | 392,926,784 | |||||||
| Money Market Funds–0.80% | ||||||||
Liquid Assets Portfolio–Institutional Class(e) | 1,615,106 | 1,615,106 | ||||||
Premier Portfolio–Institutional Class(e) | 1,615,107 | 1,615,107 | ||||||
| Total Money Market Funds (Cost $3,230,213) | 3,230,213 | |||||||
| TOTAL INVESTMENTS (excluding investments purchased with cash collateral from securities on loan)–97.89% (Cost $297,389,090) | 396,156,997 | |||||||
| Investments Purchased with Cash Collateral from Securities on Loan | ||||||||
| Money Market Funds–2.93% | ||||||||
Liquid Assets Portfolio–Institutional Class (Cost $11,876,065)(e)(f) | 11,876,065 | 11,876,065 | ||||||
| TOTAL INVESTMENTS–100.82% (Cost $309,265,155) | 408,033,062 | |||||||
| OTHER ASSETS LESS LIABILITIES–(0.82)% | (3,322,000 | ) | ||||||
| NET ASSETS–100.00% | $ | 404,711,062 | ||||||
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) | Each unit represents one common share with paired trust share. | |
| (d) | All or a portion of this security was out on loan at April 30, 2010. | |
| (e) | The money market fund and the Fund are affiliated by having the same investment adviser. | |
| (f) | The security has been segregated to satisfy the commitment to return the cash collateral received in securities lending transactions upon the borrower’s return of the securities loaned. See Note 1J. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
10 Invesco Leisure Fund
Schedule of Investments(a)
March 31, 2010
| Shares | Value | |||||||
| Common Stocks & Other Equity Interests–99.24% | ||||||||
| Advertising–9.37% | ||||||||
Interpublic Group of Cos., Inc. (The)(b) | 1,219,224 | $ | 10,143,944 | |||||
Lamar Advertising Co.–Class A(b) | 223,049 | 7,661,733 | ||||||
| National CineMedia, Inc. | 214,247 | 3,697,903 | ||||||
| Omnicom Group Inc. | 371,871 | 14,432,314 | ||||||
| 35,935,894 | ||||||||
| Apparel Retail–5.62% | ||||||||
| Abercrombie & Fitch Co.–Class A | 167,890 | 7,662,500 | ||||||
| American Eagle Outfitters, Inc. | 369,747 | 6,847,714 | ||||||
Hot Topic, Inc.(b) | 511,002 | 3,321,513 | ||||||
| TJX Cos., Inc. | 87,536 | 3,722,031 | ||||||
| 21,553,758 | ||||||||
| Apparel, Accessories & Luxury Goods–5.26% | ||||||||
Carter’s, Inc.(b) | 267,493 | 8,064,914 | ||||||
| Coach, Inc. | 98,593 | 3,896,395 | ||||||
Hanesbrands, Inc.(b) | 153,586 | 4,272,763 | ||||||
| Polo Ralph Lauren Corp. | 46,246 | 3,932,760 | ||||||
| 20,166,832 | ||||||||
| Brewers–2.02% | ||||||||
| Heineken N.V. (Netherlands) | 150,982 | 7,752,706 | ||||||
| Broadcasting–3.88% | ||||||||
Discovery Communications, Inc.–Class A(b) | 226,353 | 7,648,468 | ||||||
| Grupo Televisa S.A.–ADR (Mexico) | 344,932 | 7,250,471 | ||||||
| 14,898,939 | ||||||||
| Cable & Satellite–2.86% | ||||||||
| Scripps Networks Interactive, Inc.–Class A | 247,309 | 10,968,154 | ||||||
| Casinos & Gaming–6.09% | ||||||||
| International Game Technology | 539,101 | 9,946,414 | ||||||
Penn National Gaming, Inc.(b) | 202,395 | 5,626,581 | ||||||
WMS Industries Inc.(b) | 186,114 | 7,805,621 | ||||||
| 23,378,616 | ||||||||
| Consumer Electronics–1.35% | ||||||||
Harman International Industries, Inc.(b) | 110,631 | 5,175,318 | ||||||
| Department Stores–4.40% | ||||||||
Kohl’s Corp.(b) | 123,728 | 6,777,820 | ||||||
| Macy’s, Inc. | 199,424 | 4,341,460 | ||||||
| Nordstrom, Inc. | 140,680 | 5,746,778 | ||||||
| 16,866,058 | ||||||||
| Food Retail–1.83% | ||||||||
| Woolworths Ltd. (Australia) | 273,901 | 7,030,246 | ||||||
| Footwear–2.86% | ||||||||
| NIKE, Inc.–Class B | 149,191 | 10,965,538 | ||||||
| General Merchandise Stores–2.16% | ||||||||
| Target Corp. | 157,265 | 8,272,139 | ||||||
| Home Improvement Retail–6.15% | ||||||||
| Home Depot, Inc. (The) | 380,679 | 12,314,966 | ||||||
| Lowe’s Cos., Inc. | 464,564 | 11,261,031 | ||||||
| 23,575,997 | ||||||||
| Hotels, Resorts & Cruise Lines–9.19% | ||||||||
Carnival Corp.(c) | 108,168 | 4,205,572 | ||||||
| Choice Hotels International, Inc. | 179,896 | 6,262,180 | ||||||
Hyatt Hotels Corp.–Class A(b) | 105,588 | 4,113,708 | ||||||
| Marriott International, Inc.–Class A | 395,923 | 12,479,493 | ||||||
Orient-Express Hotels Ltd.–Class A (Bermuda)(b) | 358,016 | 5,076,667 | ||||||
| Regal Hotels International Holdings Ltd. (Hong Kong) | 7,827,800 | 3,112,895 | ||||||
| 35,250,515 | ||||||||
| Hypermarkets & Super Centers–1.40% | ||||||||
| Costco Wholesale Corp. | 90,070 | 5,378,080 | ||||||
| Internet Retail–1.97% | ||||||||
Amazon.com, Inc.(b) | 55,582 | 7,544,145 | ||||||
| Internet Software & Services–6.04% | ||||||||
Google Inc.–Class A(b) | 19,984 | 11,331,128 | ||||||
GSI Commerce, Inc.(b) | 147,036 | 4,068,486 | ||||||
Knot, Inc. (The)(b) | 385,458 | 3,014,281 | ||||||
OpenTable, Inc.(b)(d) | 124,345 | 4,741,275 | ||||||
| 23,155,170 | ||||||||
| Motorcycle Manufacturers–1.09% | ||||||||
| Harley-Davidson, Inc. | 149,344 | 4,192,086 | ||||||
| Movies & Entertainment–12.13% | ||||||||
| Time Warner Inc. | 294,120 | 9,197,132 | ||||||
Viacom Inc.–Class A(b)(d) | 130,287 | 4,778,927 | ||||||
Viacom Inc.–Class B(b) | 170,486 | 5,861,309 | ||||||
| Walt Disney Co. (The) | 764,865 | 26,701,437 | ||||||
| 46,538,805 | ||||||||
| Personal Products–1.24% | ||||||||
| Estee Lauder Cos. Inc. (The)–Class A | 73,051 | 4,738,818 | ||||||
| Restaurants–10.14% | ||||||||
| Brinker International, Inc. | 362,014 | 6,979,630 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
11 Invesco Leisure Fund
| Shares | Value | |||||||
Restaurants–(continued) | ||||||||
Buffalo Wild Wings Inc.(b)(d) | 79,664 | $ | 3,832,635 | |||||
| Darden Restaurants, Inc. | 193,613 | 8,623,523 | ||||||
Jack in the Box Inc.(b) | 239,697 | 5,644,864 | ||||||
| McDonald’s Corp. | 89,527 | 5,973,242 | ||||||
P.F. Chang’s China Bistro, Inc.(b)(d) | 93,420 | 4,122,625 | ||||||
| Starbucks Corp. | 153,623 | 3,728,430 | ||||||
| 38,904,949 | ||||||||
| Specialty Stores–2.19% | ||||||||
| Staples, Inc. | 359,108 | 8,399,536 | ||||||
| Total Common Stocks & Other Equity Interests (Cost $293,794,384) | 380,642,299 | |||||||
| Money Market Funds–0.76% | ||||||||
Liquid Assets Portfolio–Institutional Class(e) | 1,466,934 | 1,466,934 | ||||||
Premier Portfolio–Institutional Class(e) | 1,466,935 | 1,466,935 | ||||||
| Total Money Market Funds (Cost $2,933,869) | 2,933,869 | |||||||
| TOTAL INVESTMENTS (excluding investments purchased with cash collateral from securities on loan)–100.00% (Cost $296,728,253) | 383,576,168 | |||||||
| Investments Purchased with Cash Collateral from Securities on Loan | ||||||||
| Money Market Funds–3.50% | ||||||||
Liquid Assets Portfolio–Institutional Class (Cost $13,413,520)(e)(f) | 13,413,520 | 13,413,520 | ||||||
| TOTAL INVESTMENTS–103.50% (Cost $310,141,773) | 396,989,688 | |||||||
| OTHER ASSETS LESS LIABILITIES–(3.50)% | (13,415,230 | ) | ||||||
| NET ASSETS–100.00% | $ | 383,574,458 | ||||||
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) | Each unit represents one common share with paired trust share. | |
| (d) | All or a portion of this security was out on loan at March 31, 2010. | |
| (e) | The money market fund and the Fund are affiliated by having the same investment adviser. | |
| (f) | The security has been segregated to satisfy the commitment to return the cash collateral received in securities lending transactions upon the borrower’s return of the securities loaned. See Note 1J. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
12 Invesco Leisure Fund
Statement of Assets and Liabilities
April 30, 2010 and March 31, 2010
| April 30, | March 31, | |||||||
| 2010 | 2010 | |||||||
| Assets: | ||||||||
| Investments, at value (Cost $294,158,877 and $293,794,384, respectively)* | $ | 392,926,784 | $ | 380,642,299 | ||||
| Investments in affiliates, at value and cost | 15,106,278 | 16,347,389 | ||||||
| Total investments, at value (Cost $309,265,155 and $310,141,773, respectively) | 408,033,062 | 396,989,688 | ||||||
| Cash | — | 7,673 | ||||||
| Foreign currencies, at value (Cost $3,199,442 and $38, respectively) | 3,216,647 | 35 | ||||||
| Receivables for: | ||||||||
| Investments sold | 5,182,887 | — | ||||||
| Fund shares sold | 209,107 | 456,129 | ||||||
| Dividends | 651,429 | 427,752 | ||||||
| Investment for trustee deferred compensation and retirement plans | 36,967 | 37,299 | ||||||
| Other assets | 34,654 | 25,949 | ||||||
| Total assets | 417,364,753 | 397,944,525 | ||||||
| Liabilities: | ||||||||
| Payables for: | ||||||||
| Fund shares reacquired | 285,263 | 475,772 | ||||||
| Collateral upon return of securities loaned | 11,876,065 | 13,413,520 | ||||||
| Accrued fees to affiliates | 306,888 | 313,121 | ||||||
| Accrued operating expenses | 86,768 | 69,112 | ||||||
| Trustee deferred compensation and retirement plans | 98,707 | 98,542 | ||||||
| Total liabilities | 12,653,691 | 14,370,067 | ||||||
| Net assets applicable to shares outstanding | $ | 404,711,062 | $ | 383,574,458 | ||||
| Net assets consist of: | ||||||||
| Shares of beneficial interest | $ | 353,058,562 | $ | 348,927,250 | ||||
| Undistributed net investment income | 375,706 | 122,211 | ||||||
| Undistributed net realized gain (loss) | (47,506,657 | ) | (52,321,643 | ) | ||||
| Undistributed appreciation | 98,783,451 | 86,846,640 | ||||||
| $ | 404,711,062 | $ | 383,574,458 | |||||
| Net Assets: | ||||||||
| Class A | $ | 66,193,528 | $ | 58,698,223 | ||||
| Class B | $ | 9,534,122 | $ | 9,398,695 | ||||
| Class C | $ | 14,536,372 | $ | 13,954,746 | ||||
| Class R | $ | 1,207,980 | $ | 1,154,185 | ||||
| Class Y | $ | 3,119,585 | $ | 2,481,604 | ||||
| Investor Class | $ | 310,119,475 | $ | 297,887,005 | ||||
| Shares outstanding, $0.01 par value per share, unlimited number of shares authorized: | ||||||||
| Class A | 2,032,880 | 1,882,172 | ||||||
| Class B | 303,996 | 312,700 | ||||||
| Class C | 479,848 | 480,663 | ||||||
| Class R | 37,237 | 37,139 | ||||||
| Class Y | 95,777 | 79,567 | ||||||
| Investor Class | 9,546,083 | 9,573,882 | ||||||
| Class A: | ||||||||
| Net asset value per share | $ | 32.56 | $ | 31.19 | ||||
| Maximum offering price per share | ||||||||
| (Net asset value of $32.56 divided by 94.50%) | ||||||||
| (Net asset value of $31.19 divided by 94.50%) | $ | 34.46 | $ | 33.01 | ||||
| Class B: | ||||||||
| Net asset value and offering price per share | $ | 31.36 | $ | 30.06 | ||||
| Class C: | ||||||||
| Net asset value and offering price per share | $ | 30.29 | $ | 29.03 | ||||
| Class R: | ||||||||
| Net asset value and offering price per share | $ | 32.44 | $ | 31.08 | ||||
| Class Y: | ||||||||
| Net asset value and offering price per share | $ | 32.57 | $ | 31.19 | ||||
| Investor Class: | ||||||||
| Net asset value and offering price per share | $ | 32.49 | $ | 31.11 | ||||
| * | At April 30, 2010 and March 31, 2010 securities with an aggregate value of $11,521,472 and $ 13,091,283, respectively, were on loan to brokers. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
13 Invesco Leisure Fund
Statement of Operations
For the period April 1, 2010 to April 30, 2010 and the year ended March 31, 2010
| One month | Year | |||||||
| ended | ended | |||||||
| April 30, | March 31, | |||||||
| 2010 | 2010 | |||||||
| Investment income: | ||||||||
| Dividends (net of foreign withholding taxes of $12,115 and $55,284, respectively) | $ | 721,007 | $ | 5,229,839 | ||||
| Dividends from affiliated money market funds (includes securities lending income of $4,525 and $118,600, respectively) | 5,041 | 147,414 | ||||||
| Total investment income | 726,048 | 5,377,253 | ||||||
| Expenses: | ||||||||
| Advisory fees | 244,997 | 2,609,681 | ||||||
| Administrative services fees | 11,761 | 130,030 | ||||||
| Custodian fees | 944 | 38,208 | ||||||
| Distribution fees: | ||||||||
| Class A | 13,308 | 134,671 | ||||||
| Class B | 8,013 | 96,423 | ||||||
| Class C | 11,983 | 130,937 | ||||||
| Class R | 495 | 4,345 | ||||||
| Investor Class | 64,000 | 673,207 | ||||||
| Transfer agent fees | 79,007 | 972,253 | ||||||
| Trustees’ and officers’ fees and benefits | 3,720 | 29,599 | ||||||
| Other | 23,928 | 188,562 | ||||||
| Total expenses | 462,156 | 5,007,916 | ||||||
| Less: Fees waived and expense offset arrangement(s) | (1,211 | ) | (22,508 | ) | ||||
| Net expenses | 460,945 | 4,985,408 | ||||||
| Net investment income | 265,103 | 391,845 | ||||||
| Realized and unrealized gain (loss) from: | ||||||||
| Net realized gain (loss) from: | ||||||||
| Investment securities (includes net gains from securities sold to affiliates of $27,524 and $24,522, respectively) | 4,814,986 | 23,531,492 | ||||||
| Foreign currencies | (28,756 | ) | (192,610 | ) | ||||
| 4,786,230 | 23,338,882 | |||||||
| Change in net unrealized appreciation (depreciation) of: | ||||||||
| Investment securities | 11,919,993 | 125,887,686 | ||||||
| Foreign currencies | 16,818 | (1,499 | ) | |||||
| 11,936,811 | 125,886,187 | |||||||
| Net realized and unrealized gain | 16,723,041 | 149,225,069 | ||||||
| Net increase in net assets resulting from operations | $ | 16,988,144 | $ | 149,616,914 | ||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
14 Invesco Leisure Fund
Statement of Changes in Net Assets
For the period April 1, 2010 to April 30, 2010 and the years ended March 31, 2010 and 2009, respectively.
| One month | ||||||||||||
| ended | Year ended | |||||||||||
| April 30, | March 31, | |||||||||||
| 2010 | 2010 | 2009 | ||||||||||
| Operations: | ||||||||||||
| Net investment income | $ | 265,103 | $ | 391,845 | $ | 5,143,695 | ||||||
| Net realized gain (loss) | 4,786,230 | 23,338,882 | (69,221,779 | ) | ||||||||
| Change in net unrealized appreciation (depreciation) | 11,936,811 | 125,886,187 | (193,351,502 | ) | ||||||||
| Net increase (decrease) in net assets resulting from operations | 16,988,144 | 149,616,914 | (257,429,586 | ) | ||||||||
| Distributions to shareholders from net investment income: | ||||||||||||
| Class A | — | (847,445 | ) | — | ||||||||
| Class B | — | (35,799 | ) | — | ||||||||
| Class C | — | (52,286 | ) | — | ||||||||
| Class R | — | (11,251 | ) | — | ||||||||
| Class Y | — | (22,400 | ) | — | ||||||||
| Investor Class | — | (4,373,935 | ) | — | ||||||||
| Total distributions from net investment income | — | (5,343,116 | ) | — | ||||||||
| Distributions to shareholders from net realized gains: | ||||||||||||
| Class A | — | — | (6,005,872 | ) | ||||||||
| Class B | — | — | (1,293,343 | ) | ||||||||
| Class C | — | — | (1,558,409 | ) | ||||||||
| Class R | — | — | (66,149 | ) | ||||||||
| Class Y | — | — | (50,847 | ) | ||||||||
| Investor Class | — | — | (26,637,952 | ) | ||||||||
| Total distributions from net realized gains | — | — | (35,612,572 | ) | ||||||||
| Share transactions–net: | ||||||||||||
| Class A | 4,848,835 | (10,285,056 | ) | (36,048,526 | ) | |||||||
| Class B | (273,450 | ) | (4,243,197 | ) | (6,811,861 | ) | ||||||
| Class C | (23,706 | ) | (2,801,960 | ) | (8,672,930 | ) | ||||||
| Class R | 3,207 | 194,875 | 194,885 | |||||||||
| Class Y | 520,465 | 1,492,256 | 772,263 | |||||||||
| Investor Class | (926,891 | ) | (30,604,930 | ) | (50,886,198 | ) | ||||||
| Net increase (decrease) in net assets resulting from share transactions | 4,148,460 | (46,248,012 | ) | (101,452,367 | ) | |||||||
| Net increase (decrease) in net assets | 21,136,604 | 98,025,786 | (394,494,525 | ) | ||||||||
| Net assets: | ||||||||||||
| Beginning of year | 383,574,458 | 285,548,672 | 680,043,197 | |||||||||
| End of year (includes undistributed net investment income of $375,706 and $122,211 and $5,185,302, respectively) | $ | 404,711,062 | $ | 383,574,458 | $ | 285,548,672 | ||||||
Notes to Financial Statements
One month ended April 30, 2010, twelve months ended March 31, 2010 and 2009
NOTE 1—Significant Accounting Policies
Invesco Leisure Fund, formerly AIM Leisure Fund, (the “Fund”) is a series portfolio of AIM Sector Funds (Invesco Sector Funds), formerly AIM Sector Funds, (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 six separate portfolios, each authorized to issue an unlimited number of shares of beneficial interest. The assets,
15 Invesco Leisure Fund
liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class.
On April 30, 2010, the Fund’s fiscal year-end changed from March 31 to April 30.
The Fund’s investment objective is capital growth.
The Fund currently consists of six different classes of shares: Class A, Class B, Class C, Class R, Class Y and Investor 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 B shares and Class C shares are sold with a CDSC. Class R, Class Y and Investor Class shares are sold at net asset value. Under certain circumstances, Class R shares are subject to a CDSC. Effective April 1, 2010, Class R shares are no longer subject to a CDSC. Generally, Class B shares will automatically convert to Class A shares on or about the month-end which is at least eight years after the date of purchase.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
| A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. | |
| A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”). | ||
| Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded. | ||
| Debt obligations (including convertible bonds) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations, including commercial paper, having 60 days or less to maturity are recorded at amortized cost which approximates value. Debt securities are subject to interest rate and credit risks. In addition, all debt securities involve some risk of default with respect to interest and/or principal payments. | ||
| Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economical upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards. | ||
| Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including Corporate Loans. | ||
| Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value. | ||
| Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments. | ||
| B. | Securities Transactions and Investment Income — Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded on the accrual basis from settlement date. Dividend income 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 realized and unrealized gain (loss) from |
16 Invesco Leisure Fund
| investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the realized and unrealized net gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund’s net asset value and, accordingly, they reduce the Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser. | ||
| The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class. | ||
| C. | Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. | |
| D. | Distributions — Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to treat a portion of the proceeds from redemptions as distributions for federal income tax purposes. | |
| E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. | |
| The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period. | ||
| F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. | |
| G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. | |
| H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements, that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. | |
| I. | Other Risks — The Fund’s investments are concentrated in a comparatively narrow segment of the economy. Consequently, the Fund may tend to be more volatile than other mutual funds, and the value of the Fund’s investments may tend to rise and fall more rapidly. | |
| The leisure sector depends on consumer discretionary spending, which generally falls during economic downturns. | ||
| J. | Securities Lending — The Fund may lend portfolio securities having a market value up to one-third of the Fund’s total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily by the securities lending provider. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its sponsored agencies. Cash collateral received in connection with these loans is invested in short-term money market instruments or affiliated money market funds and is shown as such on the Schedule of Investments. It is the Fund’s policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. Upon the failure of the borrower to return the securities, collateral may be liquidated and the securities may be purchased on the open market to replace the loaned securities. The Fund could experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to any loss on the collateral invested. Dividends received on cash collateral investments for securities lending transactions, which are net of compensation to counterparties, is included in Dividends from affiliates on the Statement of Operations. The aggregate value of securities out on loan is shown as a footnote on the Statement of Assets and Liabilities, if any. | |
| K. | Foreign Currency Translations — Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of |
17 Invesco Leisure Fund
| 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. |
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 Net Assets | Rate | |||
| First $350 million | 0 | .75% | ||
| Next $350 million | 0 | .65% | ||
| Next $1.3 billion | 0 | .55% | ||
| Next $2 billion | 0 | .45% | ||
| Next $2 billion | 0 | .40% | ||
| Next $2 billion | 0 | .375% | ||
| Over $8 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 Trimark Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide discretionary investment management services to the Fund based on the percentage of assets allocated to such Sub-Adviser(s).
On December 31, 2009, Invesco Aim Advisers, Inc., Invesco Aim Capital Management, Inc., Invesco Aim Private Asset Management, Inc. and Invesco Global Asset Management (N.A.), Inc. merged into Invesco Institutional (N.A.), Inc. and the consolidated adviser firm was renamed Invesco Advisers, Inc.
The Adviser has contractually agreed, through at least June 30, 2010, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver (excluding certain items discussed below) of Class A, Class B, Class C, Class R, Class Y and Investor Class shares to 2.00%, 2.75%, 2.75%, 2.25%, 1.75% and 2.00%, 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 to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary items or non-routine items; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. The Board of Trustees or Invesco may terminate the fee waiver arrangement at any time. For the period April 1, 2010 to April 30, 2010 and the year ended March 31, 2010, the Advisor did not waive fees and/or reimburse expenses under this expense limitation.
The Adviser has contractually agreed, through at least June 30, 2010, 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 period April 1, 2010 to April 30, 2010 and the year ended March 31, 2010, the Adviser waived advisory fees of $693 and $12,313, respectively.
At the request of the Trustees of the Trust, Invesco Ltd. agreed to reimburse expenses incurred by the Fund in connection with market timing matters in the Invesco Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement are included in the Statement of Operations. For the period April 1, 2010 to April 30, 2010 and the year ended March 31, 2010, Invesco Ltd. reimbursed expenses of the Fund in the amount of $0 and $919, 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 period April 1, 2010 to April 30, 2010 and the year ended March 31, 2010, 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
18 Invesco Leisure Fund
approved by the Trust’s Board of Trustees. For the period April 1, 2010 to April 30, 2010 and the year ended March 31, 2010, 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 Investor 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 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 period April 1, 2010 to April 30, 2010 and the year ended March 31, 2010, 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 period April 1, 2009 to April 30, 2010, IDI advised the Fund that IDI retained $567 in front-end sales commissions from the sale of Class A shares and $0, $495 and $34 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders. During the year ended March 31, 2010, IDI advised the Fund that IDI retained $6,397 in front-end sales commissions from the sale of Class A shares and $0, $21,197 and $413 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of Invesco, IIS and/or IDI.
NOTE 3—Additional Valuation Information
Generally Accepted Accounting Principles (“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 April 30, 2010 and March 31, 2010. 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 period April 1, 2010 to April 30, 2010, there were no significant transfers between investment levels.
| April 30, 2010 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Equity Securities | $ | 394,234,001 | $ | 13,799,061 | $ | — | $ | 408,033,062 | ||||||||
| March 31, 2010 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Equity Securities | $ | 379,093,841 | $ | 17,895,847 | $ | — | $ | 396,989,688 | ||||||||
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 period April 1, 2010 to April 30, 2010, the Fund engaged in securities purchases of $3,745,530 and securities sales of $89,183, which resulted in net realized gains (losses) of $27,524. For the year ended March 31, 2010, the Fund engaged in securities purchases of $3,779,010 and securities sales of $72,472, which resulted in net realized gains (losses) of $24,522.
19 Invesco Leisure 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 period April 1, 2010 to April 30, 2010 and the year ended March 31, 2010, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $518 and $9,276, respectively.
NOTE 6—Trustees’ and Officers’ Fees and Benefits
“Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and “Trustees’ and Officers’ Fees and Benefits” also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. “Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
During the period April 1, 2010 to April 30, 2010 and the year ended March 31, 2010, the Fund paid legal fees of $0 and $2,838, respectively, for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 7—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with The State Street Bank and Trust Company, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (ii) 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 Period April 1, 2010 to April 30, 2010 and the Years Ended March 31, 2010 and 2009:
| April 30, 2010 | March 31, 2010 | March 31, 2009 | ||||||||||
| Ordinary income | $ | — | $ | 5,343,116 | $ | 288,805 | ||||||
| Long-term capital gain | — | — | 35,323,767 | |||||||||
| Total distributions | $ | — | $ | 5,343,116 | $ | 35,612,572 | ||||||
Tax Components of Net Assets at Period-End:
As of April 30, 2010, and March 31, 2010, the components of net assets on a tax basis were as follows:
| April 30, 2010 | March 31, 2010 | |||||||
| Undistributed ordinary income | $ | 464,930 | $ | 464,930 | ||||
| Net unrealized appreciation — investments | 98,493,499 | 86,573,507 | ||||||
| Net unrealized appreciation (depreciation) — other investments | 15,544 | (1,274 | ) | |||||
| Temporary book/tax differences | (89,224 | ) | (88,638 | ) | ||||
| Post-October Currency loss deferrals | — | (254,081 | ) | |||||
| Capital loss carryforward | (47,232,249 | ) | (52,047,236 | ) | ||||
| Shares of beneficial interest | 353,058,562 | 348,927,250 | ||||||
| Total net assets | $ | 404,711,062 | $ | 383,574,458 | ||||
The differences 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 differences are attributable primarily to wash sales.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund’s temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
20 Invesco Leisure Fund
For the period April 1, 2010 to April 30,2010, and the year ended March 31, 2010, the Fund utilized $4,814,987 and $0, respectively, of capital loss carryforward to offset net realized capital gain for federal income tax purposes. The Fund has a capital loss carryforward as of April 30, 2010 and March 31, 2010, which expires as follows:
| Capital Loss Carryforward* | ||||||||
| Expiration | April 30, 2010 | March 31, 2010 | ||||||
| April 30, 2017 | $ | 43,233,595 | $ | 8,813,641 | ||||
| April 30, 2016 | 3,998,654 | — | ||||||
| April 30, 2018 | — | 43,233,595 | ||||||
| Total capital loss carryforward | $ | 47,232,249 | $ | 52,047,236 | ||||
| * | Capital loss carryforwards as of the dates listed above are 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 period April 1, 2010 to April 30, 2010 was $23,277,409 and $27,226,221 and during the year ended March 31, 2010 was $184,755,928 and $228,567,623, 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 | ||||||||
| April 30, 2010 | March 31, 2010 | |||||||
| Aggregate unrealized appreciation of investment securities | $ | 109,524,678 | $ | 96,171,495 | ||||
| Aggregate unrealized (depreciation) of investment securities | (11,031,179 | ) | (9,597,988 | ) | ||||
| Net unrealized appreciation of investment securities | $ | 98,493,499 | $ | 86,573,507 | ||||
| Cost of investments for tax purposes | $ | 309,539,563 | $ | 310,416,181 | ||||
NOTE 10—Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of foreign currency transactions and net operating losses, on April 30, 2010, undistributed net investment income was decreased by $11,608, undistributed net realized gain (loss) was increased by $28,756 and shares of beneficial interest decreased by $17,148. This reclassification had no effect on the net assets of the Fund.
Primarily as a result of differing book/tax treatment of foreign currency transactions and distributions, on March 31, 2010, undistributed net investment income was decreased by $111,820 and undistributed net realized gain (loss) was increased by $111,820. This reclassification had no effect on the net assets of the Fund.
21 Invesco Leisure Fund
NOTE 11—Share Information
| Summary of Share Activity | ||||||||||||||||||||||||
| One month ended | Year ended March 31, | |||||||||||||||||||||||
| April 30, 2010(a) | 2010(b) | 2009 | ||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||
| Sold: | ||||||||||||||||||||||||
| Class A | 201,931 | $ | 6,529,779 | 356,209 | $ | 9,548,698 | 540,995 | $ | 17,884,731 | |||||||||||||||
| Class B | 3,261 | 103,909 | 15,877 | 411,763 | 45,136 | 1,489,097 | ||||||||||||||||||
| Class C | 8,997 | 275,397 | 53,114 | 1,322,942 | 57,806 | 1,685,687 | ||||||||||||||||||
| Class R | 406 | 13,166 | 13,855 | 355,782 | 12,634 | 376,338 | ||||||||||||||||||
Class Y(c) | 17,894 | 575,391 | 75,510 | 2,081,150 | 30,062 | 812,085 | ||||||||||||||||||
| Investor Class | 119,737 | 3,903,056 | 527,814 | 13,737,193 | 601,761 | 18,058,729 | ||||||||||||||||||
| Issued as reinvestment of dividends: | ||||||||||||||||||||||||
| Class A | — | — | 28,505 | 809,814 | 278,451 | 5,783,432 | ||||||||||||||||||
| Class B | — | — | 1,231 | 33,781 | 61,039 | 1,219,540 | ||||||||||||||||||
| Class C | — | — | 1,834 | 48,627 | 76,246 | 1,471,550 | ||||||||||||||||||
| Class R | — | — | 396 | 11,221 | 3,198 | 66,144 | ||||||||||||||||||
| Class Y | — | — | 676 | 19,200 | 2,377 | 49,265 | ||||||||||||||||||
| Investor Class | — | — | 149,574 | 4,240,423 | 1,247,505 | 25,848,311 | ||||||||||||||||||
| Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||||||||||
| Class A | 6,211 | 204,031 | 25,065 | 653,920 | 56,271 | 1,712,364 | ||||||||||||||||||
| Class B | (6,449 | ) | (204,031 | ) | (26,119 | ) | (653,920 | ) | (58,215 | ) | (1,712,364 | ) | ||||||||||||
| Reacquired: | ||||||||||||||||||||||||
Class A(c) | (57,434 | ) | (1,884,975 | ) | (806,921 | ) | (21,297,488 | ) | (2,007,205 | ) | (61,429,053 | ) | ||||||||||||
| Class B | (5,516 | ) | (173,328 | ) | (162,988 | ) | (4,034,821 | ) | (274,172 | ) | (7,808,134 | ) | ||||||||||||
| Class C | (9,812 | ) | (299,103 | ) | (170,383 | ) | (4,173,529 | ) | (419,708 | ) | (11,830,167 | ) | ||||||||||||
| Class R | (308 | ) | (9,959 | ) | (6,751 | ) | (172,128 | ) | (8,900 | ) | (247,597 | ) | ||||||||||||
| Class Y | (1,684 | ) | (54,926 | ) | (25,006 | ) | (608,094 | ) | (4,052 | ) | (89,087 | ) | ||||||||||||
Investor Class(c) | (147,536 | ) | (4,829,947 | ) | (1,823,792 | ) | (48,582,546 | ) | (3,277,521 | ) | (94,793,238 | ) | ||||||||||||
| Net increase (decrease) in share activity | 129,698 | $ | 4,148,460 | (1,772,300 | ) | $ | (46,248,012 | ) | (3,036,292 | ) | $ | (101,452,367 | ) | |||||||||||
| (a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 20% of the outstanding shares of the Fund. IDI has an agreement with these entities to sell Fund shares. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. | |
| (b) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 21% 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. | |
| (c) | Effective upon the commencement date of Class Y shares, October 3, 2008, the following shares were converted from Class A and Investor Class shares into Class Y shares of the Fund: |
| Class | Shares | Amount | ||||||
| Class Y | 20,792 | $ | 631,856 | |||||
| Class A | (2,736 | ) | (83,298 | ) | ||||
| Investor Class | (18,051 | ) | (548,558 | ) | ||||
22 Invesco Leisure 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(b) | (000s omitted) | absorbed | absorbed | net assets | turnover(c) | |||||||||||||||||||||||||||||||||||||||||||
| Class A | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| One month ended 04/30/10 | $ | 31.19 | $ | 0.02 | $ | 1.35 | $ | 1.37 | $ | — | $ | — | $ | — | $ | 32.56 | 4.39 | % | $ | 66,194 | 1.34 | %(d) | 1.34 | %(d) | 0.83 | %(d) | 6 | % | ||||||||||||||||||||||||||||
| Year ended 03/31/10 | 20.32 | 0.04 | 11.27 | 11.31 | (0.44 | ) | — | (0.44 | ) | 31.19 | 55.88 | 58,698 | 1.39 | (e) | 1.39 | (e) | 0.16 | (e) | 55 | |||||||||||||||||||||||||||||||||||||
| Year ended 03/31/09 | 39.82 | 0.36 | (17.29 | ) | (16.93 | ) | — | (2.57 | ) | (2.57 | ) | 20.32 | (42.67 | ) | 46,322 | 1.36 | 1.36 | 1.16 | 17 | |||||||||||||||||||||||||||||||||||||
| Year ended 03/31/08 | 49.19 | 0.23 | (5.72 | ) | (5.49 | ) | (0.37 | ) | (3.51 | ) | (3.88 | ) | 39.82 | (11.89 | ) | 135,813 | 1.18 | 1.18 | 0.48 | 14 | ||||||||||||||||||||||||||||||||||||
| Year ended 03/31/07 | 43.45 | 0.15 | 9.20 | (f) | 9.35 | (1.05 | ) | (2.56 | ) | (3.61 | ) | 49.19 | 21.86 | (f) | 181,748 | 1.23 | 1.23 | 0.33 | 20 | |||||||||||||||||||||||||||||||||||||
| Year ended 03/31/06 | 45.61 | 0.15 | 2.60 | 2.75 | (0.47 | ) | (4.44 | ) | (4.91 | ) | 43.45 | 6.58 | 132,515 | 1.29 | 1.29 | 0.34 | 20 | |||||||||||||||||||||||||||||||||||||||
| Class B | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| One month ended 04/30/10 | 30.06 | 0.00 | 1.30 | 1.30 | — | — | — | 31.36 | 4.33 | 9,534 | 2.09 | (d) | 2.09 | (d) | 0.08 | (d) | 6 | |||||||||||||||||||||||||||||||||||||||
| Year ended 03/31/10 | 19.51 | (0.15 | ) | 10.80 | 10.65 | (0.10 | ) | — | (0.10 | ) | 30.06 | 54.66 | 9,399 | 2.14 | (e) | 2.14 | (e) | (0.59 | )(e) | 55 | ||||||||||||||||||||||||||||||||||||
| Year ended 03/31/09 | 38.68 | 0.13 | (16.73 | ) | (16.60 | ) | — | (2.57 | ) | (2.57 | ) | 19.51 | (43.08 | ) | 9,454 | 2.11 | 2.11 | 0.41 | 17 | |||||||||||||||||||||||||||||||||||||
| Year ended 03/31/08 | 47.95 | (0.13 | ) | (5.55 | ) | (5.68 | ) | (0.08 | ) | (3.51 | ) | (3.59 | ) | 38.68 | (12.54 | ) | 27,495 | 1.93 | 1.93 | (0.27 | ) | 14 | ||||||||||||||||||||||||||||||||||
| Year ended 03/31/07 | 42.46 | (0.19 | ) | 8.96 | (f) | 8.77 | (0.72 | ) | (2.56 | ) | (3.28 | ) | 47.95 | 20.95 | (f) | 37,553 | 1.98 | 1.98 | (0.42 | ) | 20 | |||||||||||||||||||||||||||||||||||
| Year ended 03/31/06 | 44.86 | (0.17 | ) | 2.54 | 2.37 | (0.33 | ) | (4.44 | ) | (4.77 | ) | 42.46 | 5.81 | 34,272 | 2.02 | 2.02 | (0.39 | ) | 20 | |||||||||||||||||||||||||||||||||||||
| Class C | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| One month ended 04/30/10 | 29.03 | 0.00 | 1.26 | 1.26 | — | — | — | 30.29 | 4.34 | 14,536 | 2.09 | (d) | 2.09 | (d) | 0.08 | (d) | 6 | |||||||||||||||||||||||||||||||||||||||
| Year ended 03/31/10 | 18.84 | (0.14 | ) | 10.43 | 10.29 | (0.10 | ) | — | (0.10 | ) | 29.03 | 54.69 | 13,955 | 2.14 | (e) | 2.14 | (e) | (0.59 | )(e) | 55 | ||||||||||||||||||||||||||||||||||||
| Year ended 03/31/09 | 37.51 | 0.12 | (16.22 | ) | (16.10 | ) | — | (2.57 | ) | (2.57 | ) | 18.84 | (43.09 | ) | 11,232 | 2.11 | 2.11 | 0.41 | 17 | |||||||||||||||||||||||||||||||||||||
| Year ended 03/31/08 | 46.62 | (0.12 | ) | (5.40 | ) | (5.52 | ) | (0.08 | ) | (3.51 | ) | (3.59 | ) | 37.51 | (12.56 | ) | 33,073 | 1.93 | 1.93 | (0.27 | ) | 14 | ||||||||||||||||||||||||||||||||||
| Year ended 03/31/07 | 41.35 | (0.19 | ) | 8.74 | (f) | 8.55 | (0.72 | ) | (2.56 | ) | (3.28 | ) | 46.62 | 20.98 | (f) | 47,521 | 1.98 | 1.98 | (0.42 | ) | 20 | |||||||||||||||||||||||||||||||||||
| Year ended 03/31/06 | 43.82 | (0.17 | ) | 2.47 | 2.30 | (0.33 | ) | (4.44 | ) | (4.77 | ) | 41.35 | 5.78 | 33,549 | 2.02 | 2.02 | (0.39 | ) | 20 | |||||||||||||||||||||||||||||||||||||
| Class R | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| One month ended 04/30/10 | 31.08 | 0.02 | 1.34 | 1.36 | — | — | — | 32.44 | 4.38 | 1,208 | 1.59 | (d) | 1.59 | (d) | 0.58 | (d) | 6 | |||||||||||||||||||||||||||||||||||||||
| Year ended 03/31/10 | 20.22 | (0.02 | ) | 11.21 | 11.19 | (0.33 | ) | — | (0.33 | ) | 31.08 | 55.50 | 1,154 | 1.64 | (e) | 1.64 | (e) | (0.09 | )(e) | 55 | ||||||||||||||||||||||||||||||||||||
| Year ended 03/31/09 | 39.75 | 0.27 | (17.23 | ) | (16.96 | ) | — | (2.57 | ) | (2.57 | ) | 20.22 | (42.82 | ) | 599 | 1.61 | 1.61 | 0.91 | 17 | |||||||||||||||||||||||||||||||||||||
| Year ended 03/31/08 | 49.14 | 0.10 | (5.71 | ) | (5.61 | ) | (0.27 | ) | (3.51 | ) | (3.78 | ) | 39.75 | (12.12 | ) | 903 | 1.43 | 1.43 | 0.23 | 14 | ||||||||||||||||||||||||||||||||||||
| Year ended 03/31/07 | 43.41 | 0.04 | 9.19 | (f) | 9.23 | (0.94 | ) | (2.56 | ) | (3.50 | ) | 49.14 | 21.59 | (f) | 203 | 1.48 | 1.48 | 0.08 | 20 | |||||||||||||||||||||||||||||||||||||
| Year ended 03/31/06(g) | 43.91 | 0.02 | 4.38 | 4.40 | (0.46 | ) | (4.44 | ) | (4.90 | ) | 43.41 | 10.57 | 22 | 1.52 | (h) | 1.52 | (h) | 0.11 | (h) | 20 | ||||||||||||||||||||||||||||||||||||
| Class Y | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| One month ended 04/30/10 | 31.19 | 0.03 | 1.35 | 1.38 | — | — | — | 32.57 | 4.43 | 3,120 | 1.09 | (d) | 1.09 | (d) | 1.08 | (d) | 6 | |||||||||||||||||||||||||||||||||||||||
| Year ended 03/31/10 | 20.31 | 0.11 | 11.25 | 11.36 | (0.48 | ) | — | (0.48 | ) | 31.19 | 56.19 | 2,482 | 1.14 | (e) | 1.14 | (e) | 0.41 | (e) | 55 | |||||||||||||||||||||||||||||||||||||
| Year ended 03/31/09(g) | 30.39 | 0.14 | (7.65 | ) | (7.51 | ) | — | (2.57 | ) | (2.57 | ) | 20.31 | (24.90 | ) | 576 | 1.27 | (h) | 1.28 | (h) | 1.25 | (h) | 17 | ||||||||||||||||||||||||||||||||||
| Investor Class | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| One month ended 04/30/10 | 31.11 | 0.02 | 1.36 | 1.38 | — | — | — | 32.49 | 4.44 | 310,119 | 1.34 | (d) | 1.34 | (d) | 0.83 | (d) | 6 | |||||||||||||||||||||||||||||||||||||||
| Year ended 03/31/10 | 20.28 | 0.04 | 11.23 | 11.27 | (0.44 | ) | — | (0.44 | ) | 31.11 | 55.79 | 297,887 | 1.39 | (e) | 1.39 | (e) | 0.16 | (e) | 55 | |||||||||||||||||||||||||||||||||||||
| Year ended 03/31/09 | 39.74 | 0.35 | (17.24 | ) | (16.89 | ) | — | (2.57 | ) | (2.57 | ) | 20.28 | (42.65 | ) | 217,365 | 1.36 | 1.36 | 1.16 | 17 | |||||||||||||||||||||||||||||||||||||
| Year ended 03/31/08 | 49.10 | 0.23 | (5.71 | ) | (5.48 | ) | (0.37 | ) | (3.51 | ) | (3.88 | ) | 39.74 | (11.89 | ) | 482,760 | 1.18 | 1.18 | 0.48 | 14 | ||||||||||||||||||||||||||||||||||||
| Year ended 03/31/07 | 43.37 | 0.15 | 9.19 | (f) | 9.34 | (1.05 | ) | (2.56 | ) | (3.61 | ) | 49.10 | 21.88 | (f) | 629,840 | 1.23 | 1.23 | 0.33 | 20 | |||||||||||||||||||||||||||||||||||||
| Year ended 03/31/06 | 45.54 | 0.16 | 2.59 | 2.75 | (0.48 | ) | (4.44 | ) | (4.92 | ) | 43.37 | 6.60 | 568,321 | 1.27 | 1.27 | 0.36 | 20 | |||||||||||||||||||||||||||||||||||||||
| (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 annualized and based on average daily net assets (000’s omitted) of $64,764, $9,749, $14,579, $1,206, $2,975(annualized) and $311 for Class A, Class B, Class C, Class R, Class Y, and Investor Class shares, respectively. | |
| (e) | Ratios are based on average daily net assets (000’s omitted) of $53,848, $9,642, $13,089, $868, $1,199 (annualized) and $269,141 for Class A, Class B, Class C, Class R, Class Y, and Investor Class shares, respectively | |
| (f) | Net gains (losses) on securities (both realized and unrealized) per share and total return includes a special dividend received of $10.00 per share owned of Cablevision Systems Corp. — Class A on April 24, 2006. Net gains (losses) on securities (both realized and unrealized) per share excluding the special dividend are $8.81, $8.57, $8.35, $8.80 and $8.80 for Class A, Class B, Class C, Class R and Investor Class shares, respectively. Total returns excluding the special dividend are 20.89%, 19.97%, 19.97%, 20.62% and 20.90% for Class A, Class B, Class C, Class R and Investor Class shares, respectively. | |
| (g) | Commencement date of October 25, 2005 and October 3, 2008 for Class R and Class Y shares, respectively. | |
| (h) | Annualized. |
23 Invesco Leisure Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Sector Funds (Invesco Sector Funds)
and Shareholders of Invesco Leisure 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 Leisure Fund (formerly known as AIM Leisure Fund; one of the funds constituting AIM Sector Funds (Invesco Sector Funds), hereafter referred to as the “Fund”) at April 30, 2010 and at March 31, 2010, the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at April 30, 2010 and at March 31, 2010 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
June 4, 2010
Houston, Texas
24 Invesco Leisure 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 November 1, 2009 through April 30, 2010.
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 | (11/01/09) | (04/30/10)1 | Period2 | (04/30/10) | Period2 | Ratio | ||||||||||||||||||||||||
| A | $ | 1,000.00 | $ | 1,233.80 | $ | 7.59 | $ | 1,018.00 | $ | 6.85 | 1.37 | % | ||||||||||||||||||
| B | 1,000.00 | 1,229.10 | 11.72 | 1,014.28 | 10.59 | 2.12 | ||||||||||||||||||||||||
| C | 1,000.00 | 1,229.10 | 11.72 | 1,014.28 | 10.59 | 2.12 | ||||||||||||||||||||||||
| R | 1,000.00 | 1,232.40 | 8.97 | 1,016.76 | 8.10 | 1.62 | ||||||||||||||||||||||||
| Y | 1,000.00 | 1,235.60 | 6.21 | 1,019.24 | 5.61 | 1.12 | ||||||||||||||||||||||||
| Investor | 1,000.00 | 1,233.90 | 7.59 | 1,018.00 | 6.85 | 1.37 | ||||||||||||||||||||||||
| 1 | The actual ending account value is based on the actual total return of the Fund for the period November 1, 2009 through April 30, 2010, 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 181/365 to reflect the most recent fiscal half year. |
25 Invesco Leisure 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 October 1, 2009 through March 31, 2010.
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 | (10/01/09) | (03/31/10)1 | Period2 | (03/31/10) | Period2 | Ratio | ||||||||||||||||||||||||
| A | $ | 1,000.00 | $ | 1,143.90 | $ | 7.38 | $ | 1,018.05 | $ | 6.94 | 1.38 | % | ||||||||||||||||||
| B | 1,000.00 | 1,139.90 | 11.36 | 1,014.31 | 10.70 | 2.13 | ||||||||||||||||||||||||
| C | 1,000.00 | 1,139.70 | 11.36 | 1,014.31 | 10.70 | 2.13 | ||||||||||||||||||||||||
| R | 1,000.00 | 1,142.50 | 8.71 | 1,016.80 | 8.20 | 1.63 | ||||||||||||||||||||||||
| Y | 1,000.00 | 1,145.60 | 6.04 | 1,019.30 | 5.69 | 1.13 | ||||||||||||||||||||||||
| Investor | 1,000.00 | 1,143.90 | 7.38 | 1,018.05 | 6.94 | 1.38 | ||||||||||||||||||||||||
| 1 | The actual ending account value is based on the actual total return of the Fund for the period October 1, 2009 through March 31, 2010, 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 182/365 to reflect the most recent fiscal half year. |
26 Invesco Leisure 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:
| April 30, | March 31, | |||||||
Federal and State Income Tax | 2010 | 2010 | ||||||
| Qualified Dividend Income* | —% | 100% | ||||||
| Corporate Dividends Received Deduction* | —% | 70% | ||||||
| * | The above percentages are based on ordinary income dividends paid to shareholders during the period April 1, 2010 to April 30,2010 and the fiscal year ended March 31, 2010. |
27 Invesco Leisure Fund
Trustees and Officers
The address of each trustee and officer of AIM Sector Funds (Invesco Sector Funds) (the “Trust”), is 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. Each trustee oversees 197 portfolios in the Invesco Funds complex. 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.
| Trustee | Other | |||||||
| and/ or | Directorship(s) | |||||||
| Name, Year of Birth and | Officer | Held by | ||||||
| Position(s) Held with the Trust | Since | Principal Occupation(s) During Past 5 Years | Trustee | |||||
Interested Persons | ||||||||
Martin L. Flanagan1 — 1960 Trustee | 2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Trustee, The AIM Family of Funds®; Board of Governors, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business 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 and Vice Chairman, Investment Company Institute | None | |||||
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, Chief Executive Officer and President, 1371 Preferred Inc. (holding company); Director, Chairman, Chief Executive Officer and President, Invesco Management Group Inc. (formerly known as Invesco Aim Management Group, Inc.) (financial services holding company); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent) and AIM GP Canada Inc. (general partner for limited partnerships); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.) (registered transfer agent) and INVESCO Distributors, Inc. (registered broker dealer); Director, President and Chairman, INVESCO Inc. (holding company) and Invesco Canada Holdings Inc. (holding company); Chief Executive Officer, AIM Trimark Corporate Class Inc. (corporate mutual fund company) and AIM Trimark Canada Fund Inc. (corporate mutual fund company); Director and Chief Executive Officer, Invesco Trimark Ltd./Invesco Trimark Ltèe (registered investment adviser and registered transfer agent) and Invesco Trimark Dealer Inc. (registered broker dealer); Trustee, President and Principal Executive Officer, The AIM Family of Funds® (other than AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust); Trustee and Executive Vice President, The AIM Family of Funds® (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust only) Formerly: 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 Capital Management, Inc. ) (formerly, 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 AIM Family of 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. | None | |||||
Independent Trustees | ||||||||
| Bruce L. Crockett — 1944 Trustee and Chair | 2003 | Chairman, Crockett Technology Associates (technology consulting company) Formerly: Director, Captaris (unified messaging provider) | ACE Limited (insurance company); and Investment Company Institute | |||||
| Bob R. Baker — 1936 Trustee | 1983 | Retired | None | |||||
| Frank S. Bayley — 1939 Trustee | 2003 | Retired Formerly: Director, Badgley Funds, Inc. (registered investment company) (2 portfolios) | None | |||||
| James T. Bunch — 1942 Trustee | 2000 | Founder, Green, Manning & Bunch Ltd. (investment banking firm) Formerly: Executive Committee, United States Golf Association | Vice Chairman, Board of Governors, Western Golf Association/Evans Scholars Foundation and Director, Denver Film Society | |||||
| 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 | Board 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) | Administaff | |||||
| Carl Frischling — 1937 Trustee | 2003 | Partner, law firm of Kramer Levin Naftalis and Frankel LLP | Director, Reich & Tang Funds (16 portfolios) | |||||
| Prema Mathai-Davis — 1950 Trustee | 2003 | Retired | None | |||||
| Lewis F. Pennock — 1942 Trustee | 2003 | Partner, law firm of Pennock & Cooper | None | |||||
| Larry Soll — 1942 Trustee | 1997 | Retired | None | |||||
| Raymond Stickel, Jr. — 1944 Trustee | 2005 | Retired Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios) | None | |||||
| 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. |
T-1
Trustees and Officers — (continued)
| Trustee | Other | |||||||
| and/ or | Directorship(s) | |||||||
| Name, Year of Birth and | Officer | Held by | ||||||
| Position(s) Held with the Trust | Since | Principal Occupation(s) During Past 5 Years | Trustee | |||||
Other Officers | ||||||||
| Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer of The AIM Family of Funds® | 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.), 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 INVESCO Distributors, Inc.; Director and Vice President, INVESCO Funds Group, Inc.; Senior Vice President, Chief Legal Officer and Secretary, The AIM Family of Funds®; and Manager, Invesco PowerShares Capital Management LLC Formerly: Director, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco Advisers, Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco Capital Management (formerly known as 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 | |||||
| Lisa O. Brinkley — 1959 Vice President | 2004 | Global Compliance Director, Invesco Ltd.; Chief Compliance Officer, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) and Invesco Investment Services, Inc.(formerly known as Invesco Aim Investment Services, Inc.); and Vice President, The AIM Family of Funds® Formerly: Senior Vice President, Invesco Management Group, Inc. (formerly known as Invesco Aim Management Group, Inc.); Senior Vice President and Chief Compliance Officer, Invesco Advisers, Inc. and The AIM Family of Funds®; Vice President and Chief Compliance Officer, Invesco Capital Management, Inc. (formerly known as Invesco Aim Capital Management, Inc.) and Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.); Vice President, Invesco Investment Services (formerly known as Invesco Aim Investment Services, Inc.) and Fund Management Company | N/A | |||||
| Kevin M. Carome — 1956 Vice President | 2003 | General Counsel, Secretary and Senior Managing Director, Invesco Ltd.; Director, Invesco Holding Company Limited and INVESCO Funds Group, Inc.; Director and Executive Vice President, IVZ, Inc., Invesco Group Services, Inc., Invesco North American Holdings, Inc. and Invesco Investments (Bermuda) Ltd.; Director and Secretary, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Vice President, The AIM Family of Funds®; and Trustee, 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: Senior Managing Director and Secretary, Invesco North American Holdings, Inc.; Vice President and Secretary, IVZ, Inc. and Invesco Group Services, Inc.; Senior Managing Director and Secretary, Invesco Holding Company Limited; Director, Senior Vice President, Secretary and General Counsel, Invesco Management Group Inc. (formerly known as Invesco Aim Management Group, Inc.) and Invesco Advisers, Inc.; Senior Vice President, Invesco Distributors, Inc.; Director, General Counsel and Vice President, Fund Management Company; Vice President, Invesco Capital Management Inc. (formerly known as Invesco Aim Capital Management, Inc.) and Invesco Investment Services, Inc.; Senior Vice President, Chief Legal Officer and Secretary, The AIM Family of Funds®; Director and Vice President, INVESCO Distributors, Inc.; and Chief Executive Officer and President, INVESCO Funds Group, Inc. | N/A | |||||
| Sheri Morris — 1964 Vice President, Treasurer and Principal Financial Officer | 2003 | Vice President, Treasurer and Principal Financial Officer, The AIM Family of Funds®; and Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser) Formerly: Vice President, Invesco Advisers, Inc., Invesco Capital Management, Inc. (formerly known as Invesco Aim Capital Management, Inc.) and Invesco Private Asset Management Inc. (formerly known as Invesco Aim Private Asset Management, Inc.); Assistant Vice President and Assistant Treasurer, The AIM Family of Funds® and Assistant Vice President, Invesco Advisers, Inc., Invesco Capital Management, Inc. (formerly known as Invesco Aim Capital Management, Inc. and Invesco Private Asset Management Inc. (formerly known as Invesco Aim Private Asset Management, Inc.) | N/A | |||||
| Karen Dunn Kelley — 1960 Vice President | 2003 | Head of Invesco’s World Wide Fixed Income and Cash Management Group; Senior Vice President, 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.); Senior Vice President, Invesco Management Group, Inc. (formerly known as Invesco Aim Management Group, Inc.); and Director, Invesco Mortgage Capital Inc.; Vice President, The AIM Family of 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 AIM Family of Funds® (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust only) Formerly: 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 Capital Management, Inc. (formerly known as 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 Capital Management, Inc. (formerly known as Invesco Aim Capital Management, Inc.); Director of Cash Management, Senior Vice President, and Vice President, Invesco Advisers, Inc. and The AIM Family of Funds® (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Tax-Free Investments Trust only) | N/A | |||||
| Lance A. Rejsek — 1967 Anti-Money Laundering Compliance Officer | 2005 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.), Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.), The AIM Family of Funds®, PowerShares Exchange-Traded Fund Trust, PowerShares Exchang-Traded Trust II, PowerShares India Exchange-Traded Fund Trust and PowerShares Actively Managed Exchange-Traded Fund Trust. Formerly: Anti-Money Laundering Compliance Officer, Fund Management Company, Invesco Advisers, Inc., Invesco Capital Management, Inc. (formerly known as Invesco Aim Capital Management, Inc. and Invesco Private Asset Management, Inc. (formerly known as Invesco Aim Private Asset Management, Inc.) | N/A | |||||
T-2
Trustees and Officers — (continued)
| Trustee | Other | |||||||
| and/ or | Directorship(s) | |||||||
| Name, Year of Birth and | Officer | Held by | ||||||
| Position(s) Held with the Trust | Since | Principal Occupation(s) During Past 5 Years | Trustee | |||||
| Todd L. Spillane — 1958 Chief Compliance Officer | 2006 | Senior Vice President, Invesco Management Group Inc. (formerly known as Invesco Aim Management Group, Inc.); 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 AIM Family of Funds®, PowerShares Exchange-Traded Fund Trust, PowerShares Exchang-Traded Trust II, PowerShares India Exchange-Traded Fund Trust and PowerShares Actively Managed Exchange-Traded Fund Trust, INVESCO Private Capital Investments, Inc. (holding company), Invesco Private Capital, Inc. (registered investment adviser) and Invesco Senior Secured Management, Inc. (registered investment adviser); 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 and Chief Compliance Officer, Invesco Advisers, Inc. and Invesco Capital Management, Inc. (formerly known as Invesco Aim Capital Management, Inc.); Chief Compliance Officer, Invesco Global Asset Management (N.A.), Inc.; Vice President, Invesco Capital Management, Inc. (formerly known as Invesco Aim Capital Management, Inc.) and Fund Management Company | 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 | Investment Adviser | Distributor | Auditors | |||
| 11 Greenway Plaza, Suite 2500 Houston, TX 77046-1173 | Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 | Invesco Distributors, Inc. 11 Greenway Plaza, Suite 2500 Houston, TX 77046-1173 | PricewaterhouseCoopers LLP 1201 Louisiana Street, Suite 2900 Houston, TX 77002-5678 | |||
Counsel to the Fund | Counsel to the Independent Trustees | Transfer Agent | Custodian | |||
| Stradley Ronon Stevens & Young, LLP 2600 One Commerce Square Philadelphia, PA 19103 | Kramer, Levin, Naftalis & Frankel LLP 1177 Avenue of the Americas New York, NY 10036-2714 | Invesco Investment Services, Inc. P.O. Box 4739 Houston, TX 77210-4739 | State Street Bank and Trust Company 225 Franklin Boston, MA 02110-2801 |
T-3
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 number of trees used to produce paper. | |
| • | economical. Help reduce your fund’s printing and delivery expenses and put more capital back in your fund’s returns. | |
| • | efficient. Stop waiting for regular mail. Your documents will be sent via email as soon as they’re available. | |
| • | easy. Download, save and print files using your home computer with a few clicks of your mouse. |
This service is provided by Invesco Investment Services, Inc.
Invesco Privacy Policy
You share personal and financial information with us that is necessary for your transactions and your account records. We take very seriously the obligation to keep that information confidential and private.
Invesco collects nonpublic personal information about you from account applications or other forms you complete and from your transactions with us or our affiliates. We do not disclose information about you or our former customers to service providers or other third parties except to the extent necessary to service your account and in other limited circumstances as permitted by law. For example, we use this information to facilitate the delivery of transaction confirmations, financial reports, prospectuses and tax forms.
Even within Invesco, only people involved in the servicing of your accounts and compliance monitoring have access to your information. To ensure the highest level of confidentiality and security, Invesco maintains physical, electronic and procedural safeguards that meet or exceed federal standards. Special measures, such as data encryption and authentication, apply to your communications with us on our website. More detail is available to you at invesco.com/privacy.
Important Notice Regarding Delivery of Security Holder Documents
To reduce Fund expenses, only one copy of most shareholder documents may be mailed to shareholders with multiple accounts at the same address (Householding). Mailing of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact Invesco Investment Services, Inc. at 800 959 4246 or contact your financial institution. We will begin sending you individual copies for each account within 30 days after receiving your request.
Fund holdings and proxy voting information
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is available at invesco.com/completeqtrholdings. Shareholders can also look up the Fund’s Forms N-Q on the SEC website at sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov.
The SEC file numbers for the Fund are 811-03826 and 002-85905.
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, 2009, is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov.
If used after July 20, 2010, this report must be accompanied by a Quarterly Performance Review for the most recent quarter-end.
Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the U.S. distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
On April 30, 2010, Invesco Aim Distributors, Inc. became Invesco Distributors, Inc., Invesco Aim Investment Services, Inc. became Invesco Investment Services, Inc., and AIM funds became Invesco funds. In addition, invescoaim.com became invesco.com.
I-LEI-AR-1 Invesco Distributors, Inc.
| Annual Report to Shareholders April 30, 2010 Invesco Technology Fund Effective April 30, 2010, AIM Technology Fund was renamed Invesco Technology Fund. 2 Letters to Shareholders 4 Performance Summary 4 Management Discussion 6 Long-Term Fund Performance 8 Supplemental Information 9 Schedule of Investments 13 Financial Statements 15 Notes to Financial Statements 23 Financial Highlights 24 Auditor’s Report 25 Fund Expenses T-1 Trustees and Officers |
Letters to Shareholders
Dear Shareholders:
In the 13 months covered by this report, the U.S. economy improved dramatically from where it stood in early 2009. In the third quarter of 2009, the economy ended its year-long contraction and began growing again. Major U.S. stock market indexes rose sharply in anticipation of economic improvement; despite occasional volatility, they continued rising as evidence mounted that the recovery was genuine. Over the last year, global equity indexes also rallied strongly from their early 2009 lows.
While economic improvement was undeniable, unemployment remained high by historical standards, and unfortunately it appeared unlikely that the jobless rate would decline significantly anytime soon. Stubbornly high unemployment continued to cast a pall over the nation’s economic outlook.
Timely communication
Unpredictable and volatile markets, together with economic uncertainty, caused many of you to seek information relative to your investments. Some of you contacted your financial advisers to ask questions and obtain guidance. Others visited our website, invesco.com, where we offer timely market commentary, investor education information and sector updates. In particular, I recommend the Investment Perspectives articles featured on our home page; they are written by Invesco’s investment professionals and cover a wide range of topics that are updated regularly.
Also on our website, you’ll find a commentary from me that discusses the name change we made on April 30 — from Invesco Aim to Invesco. Some of the changes related to this event include all AIM funds being renamed Invesco funds. (It’s important to note that the funds’ investment strategies and objectives have not changed.) You’ll notice on this report the Invesco logo has replaced the previous Invesco Aim logo. And our new Web address is now invesco.com. These changes are the latest steps in the rebranding process we began two years ago, when we added Invesco in front of Aim. For more information about the change, please read the shareholder Q&A on the account balance page at invesco.com.
At invesco.com you can also access your Fund’s latest quarterly commentary. Simply click on Mutual Funds inside the Financial Products box. Then, in the Fund Information box, click on Quarterly Commentary and select your Fund.
Timely information like that available on our website — together with the advice and guidance of a trusted financial adviser — can be especially useful in uncertain times. Market volatility and economic uncertainty are two factors that can prompt investors to abandon their long-term saving and investment plans. A financial adviser can show you just how costly that could be over the long term — and can explain that saving more and investing more regularly is a time-tested way to build a solid portfolio. He or she can help you identify appropriate investments, given your individual risk tolerance, time horizon and investment goals.
Taking our business forward
Invesco’s acquisition of Morgan Stanley’s retail asset management business, including Van Kampen Investments, was completed on June 1, 2010. Our two companies have similar investment philosophies and cultures, as well as complementary investment expertise. I believe this combination represents the next step in our company’s evolution — and will allow us to better serve you through:
| • | Greater efficiencies and cost savings | ||
| • | A broader range of investment options | ||
| • | A continued commitment to investment excellence, with complementary portfolio management expertise |
While market conditions change from time to time, our commitment to putting our clients first, helping you achieve your financial goals and providing excellent customer service will not.
If you have questions about your account, please contact one of our client services representatives at 800 959 4246. If you have a question or comment for me, please email me at phil@invesco.com.
Thank you for investing with us.
Sincerely,
Philip Taylor
Senior Managing Director, Invesco
Senior Managing Director, Invesco
2 Invesco Technology Fund
Dear Fellow Shareholders:
By all accounts, last year was a challenging year for all of us. Although the economy and financial markets whipsawed, the final months of the decade concluded with many of us feeling somewhat more optimistic about 2010 as we began to see the markets and economy evidence the first green shoots of recovery.
Perhaps the most valuable takeaway from last year is the manner in which it underscored the importance of adopting the long-term, appropriately diversified investment strategy I’ve mentioned in my previous letters. If anything, last year was the litmus test for this approach.
Please be assured that your Board continues to oversee the Invesco Funds with a strong sense of responsibility for your savings and a deep appreciation for your trust. We have already begun the annual review and management contract renewal process and will continue to seek to manage costs and reward performance in ways that put your interests first. (It might also interest you to know that the Board currently has five committees — Compliance, Audit, Governance, Investments, and Valuation Distribution and Proxy Voting — whose members exercise oversight to maintain the Invesco Funds’ “Investor First” orientation.)
To that end, some of you may have seen that Invesco is assuming the management of the Van Kampen family of mutual funds as well as Morgan Stanley’s retail funds. We view this addition as an excellent opportunity to provide you, our shareholders, access to an even broader range of well-diversified mutual funds under the Invesco umbrella. I’ll keep you updated on the work we’re doing to deliver the value of this acquisition to our shareholders in my upcoming letters.
As always, you are welcome to contact me at bruce@brucecrockett.com with any questions or concerns you may have. We look forward to representing you and serving you in the coming year.
Sincerely,
Bruce L. Crockett
Independent Chair
Invesco Funds Board of Trustees
Independent Chair
Invesco Funds Board of Trustees
3 Invesco Technology Fund
Management’s Discussion of Fund Performance
Performance summary
During the 13 months ended April 30, 2010, the U.S. economy showed signs of improvement, causing major stock market indexes to rise sharply. The information technology (IT) sector enjoyed a banner year with significant double-digit gains. As a result, Invesco Technology Fund’s Class A shares at net asset value outperformed the broad market, as measured by the S&P 500 Index, for the reporting period.
However, the Fund underperformed its style-specific index, the BofA Merrill Lynch 100 Technology Index. We attribute this to our quality-biased investment process, which was out of favor for much of the reporting period, and which caused stocks with low returns on invested capital to appreciate most during the equity market rally.
Your Fund’s long-term performance appears later in this report.
Fund vs. Indexes
Total returns, 3/31/09 to 4/30/10, 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 | 54.88 | % | ||
| Class B Shares | 53.78 | |||
| Class C Shares | 53.74 | |||
| Class Y Shares | 55.21 | |||
| Investor Class Shares | 54.97 | |||
| Institutional Class Shares | 56.05 | |||
| S&P 500 Index▼(Broad Market Index) | 47.26 | |||
| BofA Merrill Lynch 100 Technology Index▼*(Style-Specific Index) | 62.48 | |||
| S&P 500 North American Technology Sector Index▼* (Former Style-Specific Index) | 56.37 | |||
| Lipper Science & Technology Funds Index▼(Peer Group Index) | 54.12 |
| ▼ | Lipper Inc. | |
| * | During the fiscal year, the Fund elected to use the BofA Merrill Lynch 100 Technology Index as its style-specific index rather than the S&P 500 North American Technology Sector Index because it more appropriately reflects the Fund’s investment strategy. |
How we invest
We seek to grow capital by investing in companies we believe generate sustainable, superior earnings and cash flow growth that is not fully reflected in investor expectations or equity valuations. The Fund emphasizes companies believed to have a strategic advantage over their competition and operating in industries believed to be beneficiaries of secular trends. The Fund invests in industries such as hardware, software, telecommunications equipment and services, semiconductors and service-related companies in the IT sector. We use a research oriented bottom-up investment approach focusing on company fundamentals and growth prospects.
We place great emphasis on companies exhibiting high returns on invested capital and generating free cash flow, metrics we believe are good indicators of financial health and growth potential. Also, we seek management teams that maintain high quality balance sheets and manageable debt levels. Valuation also plays a critical role in stock selection.
Risk management is an integral part of our portfolio construction, as our target portfolio attempts to manage volatility and downside risk. Only stocks that exhibit a proper balance of risk and reward are chosen for inclusion in the portfolio. We seek to accomplish this goal by thoroughly understanding the key business drivers of companies in which we invest. The portfolio is constructed with the goal of holding approximately 40-60 individual stocks we believe are best suited to capitalize on secular trends prevalent in the IT sector.
We may reduce or eliminate a stock when:
| • | A stock’s price reaches its valuation target. | |
| • | A company’s fundamentals change or deteriorate. | |
| • | It no longer meets our investment criteria |
Market conditions and your Fund
The U.S. economy provided signs of improvement during the reporting period, offering indications that the economy has transitioned from a contraction phase into an expansionary phase. Nevertheless, the pace of recovery remained modest and the transition from government stimulus-induced growth to a private economic recovery was uncertain. The U.S. Federal Reserve’s (the Fed) federal funds target rate remained quite low, in a range of between zero and 0.25%.1 Real gross domestic product (GDP) registered positive growth during the reporting period with quarterly growth, on an annualized basis, of 2.2%, 5.6% and 3.0% for the third and fourth quarter of 2009, and the first quarter 2010, respectively.2 Inflation, measured by the seasonally adjusted Consumer Price Index, remained relatively benign. While labor markets improved as layoffs moderated, new hiring remained quite weak. Unemployment, after climbing steadily throughout 2009, fell slightly during the first quarter of 2010 and remained at a rate of 9.9% nationwide as of April 2010.3
Against this backdrop, all stock market sectors delivered double-digit gains for the reporting period.4 Telecommunication services, utilities and health care — traditionally more defensive sectors — were among the laggard sectors of the S&P 500 Index.4 The financials, consumer
Fund data as of 4/30/10
Portfolio Composition
By sector | ||||
| Information Technology | 96.5 | % | ||
| Consumer Discretionary | 1.3 | |||
| Financials | 1.2 | |||
Money Market Funds Plus Other Assets | ||||
Less Liabilities | 1.0 | |||
| Total Net Assets | $627.1 million | |||
| Total Number of Holdings* | 62 | |||
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. |
Top 10 Equity Holdings*
| 1. | Apple Inc. | 6.3 | % | |||||
| 2. | Google Inc.-Class A | 4.0 | ||||||
| 3. | Hewlett-Packard Co. | 4.0 | ||||||
| 4. | Microsoft Corp. | 3.8 | ||||||
| 5. | Cognizant Technology Solutions Corp.-Class A | 3.5 | ||||||
| 6. | Intel Corp. | 3.4 | ||||||
| 7. | Check Point Software Technologies Ltd. | 3.2 | ||||||
| 8. | Marvell Technology Group Ltd. | 3.1 | ||||||
| 9. | Cisco Systems, Inc. | 2.7 | ||||||
| 10. | Tyco Electronics Ltd. | 2.7 |
4 Invesco Technology Fund
discretionary, industrials and IT sectors were favored and delivered the greatest returns during the reporting period.4
On an absolute basis, holdings in the following industries had the greatest positive impact on Fund performance during the reporting period:
| • | Computers and peripherals | |
| • | Semiconductors and semiconductor equipment | |
| • | Software |
Relative to the BofA Merrill Lynch 100 Technology Index, our cash weighting, although minor, had the greatest negative impact on Fund performance given the strong rally in stocks. Additionally, our investment in BlueStream Ventures, a private venture capital partnership focused on technology companies, detracted from benchmark-relative performance. This holding is a legacy holding that has been held by the Fund for some time. Private equity generally lacks liquidity, since it is not traded publicly, and therefore is less frequently valued. This can be beneficial to relative performance when equity markets are falling; however, it was detrimental during the reporting period, given the stock market rally.
Another detractor from Fund performance was Synaptics, a company that makes touch-sensitive technologies for the computing phone and MP3 market. Shares of Synaptics fell sharply following weak third quarter 2009 and full-year 2010 revenue guidance, the current state of the global economy, and the announcement that the company’s CEO is retiring. We sold Synaptics during the reporting period.
Conversely, security selection in the semiconductors and IT services industries benefited Fund performance relative to the Fund’s benchmark. Apple and Cognizant Technology Solutions were the top contributors to Fund performance during the reporting period.
Besides recently announcing price cuts and new features for existing products, Apple continued to introduce new innovative products during the reporting period, unveiling a new version of the iPhone and introducing the iPad. The new iPhone 3G S includes new applications, an improved camera and faster downloading capabilities. The iPad was designed to compete with existing net books and may help Apple expand its market share.
Cognizant is a leading provider of IT outsourcing solutions with substantial operations in India and primary clients in North America and Europe. Cognizant boasts regional sales and client relationship offices worldwide in an effort to foster deep, sustainable and long-term client relationships.
The IT sector has the most exposure to domestic financial services firms. As such, we remain conscious of the headwinds affecting business and consumer spending on IT products. Longer term, we continue to see positive trends in the IT sector because we believe three key secular themes that are independent of short-term catalysts continue to offer support:
| • | Globalization: The quest for productivity gains supports increased technology use in international markets. | |
| • | Consumerization: Technology demand is consumer-driven, regardless of age or gender. | |
| • | Proliferation: Technology continues to penetrate products ranging from automobiles and industrial controls to sporting gear and alternative energy. |
As always, we would like to caution investors against making investment decisions based on short-term performance. We recommend that you consult a financial adviser to discuss your individual financial program.
We thank you for your continued investment in Invesco Technology Fund.
| 1 | U.S. Federal Reserve | |
| 2 | Bureau of Economic Analysis | |
| 3 | Bureau of Labor Statistics | |
| 4 | Lipper Inc. |
The views and opinions expressed in management’s discussion of Fund performance are those of Invesco Advisers, Inc. These views and opinions are subject to change at any time based on factors such as market and economic conditions. These views and opinions may not be relied upon as investment advice or recommendations, or as an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but Invesco Advisers, Inc. makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
See important Fund and index disclosures later in this report.
Warren Tennant
Chartered Financial Analyst, portfolio manager, is lead manager of Invesco Technology Fund. Mr. Tennant joined Invesco in 2000. He earned both his B.B.A. in finance and his M.B.A. from The University of Texas at Austin.
Brian Nelson
Chartered Financial Analyst, portfolio manager, is manager of Invesco Technology Fund. Mr. Nelson began his investment career in 1988 and joined Invesco in 2004. He earned a B.A. from the University of California-Santa Barbara and is a member of the CFA Society of San Francisco.
Assisted by the Technology Team
Fund data as of 3/31/10
Portfolio Composition
By sector | ||||
| Information Technology | 94.9 | % | ||
| Consumer Discretionary | 1.3 | |||
| Financials | 1.2 | |||
| Telecommunication Services | 1.1 | |||
Money Market Funds Plus Other Assets | ||||
Less Liabilities | 1.5 | |||
| Total Net Assets | $618.7 million | |||
| Total Number of Holdings* | 60 | |||
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. |
Top 10 Equity Holdings*
| 1. | Apple Inc. | 5.7 | % | |||||
| 2. | Google Inc.-Class A | 4.4 | ||||||
| 3. | Hewlett-Packard Co. | 4.1 | ||||||
| 4. | Microsoft Corp. | 3.7 | ||||||
| 5. | Cognizant Technology Solutions Corp.-Class A | 3.5 | ||||||
| 6. | Intel Corp. | 3.3 | ||||||
| 7. | Check Point Software Technologies Ltd. | 3.2 | ||||||
| 8. | Marvell Technology Group Ltd. | 3.1 | ||||||
| 9. | Cisco Systems, Inc. | 2.7 | ||||||
| 10. | EMC Corp. | 2.6 |
5 Invesco Technology Fund
Your Fund’s Long-Term Performance
Results of a $10,000 Investment — Oldest Share Class without Sales Charges since Inception
Fund data from 1/19/84, index data from 1/31/84
| 1 | Lipper Inc. |
Results of a $10,000 Investment — Oldest Share Class with Sales Charges since Inception
Index data from 1/31/00, Fund data from 2/14/00
| 1 | Lipper Inc. |
Past performance cannot guarantee comparable future results.
The performance data shown in the first chart above is that of the Fund’s Investor class shares. The performance of the Fund’s other share classes will differ primarily due to different sales charge structures and class expenses and may be greater than or less than the performance of the Fund’s Investor Class shares. The data shown in this chart includes reinvested distributions, Fund expenses and management fees. Index results include reinvested dividends.
The performance data shown in the second chart above is that of the Fund’s Class C shares. The performance of the Fund’s other share classes will differ primarily due to different sales charge structures and class expenses and may be greater than or less than the performance of the Fund’s Class C shares. The data shown in the second chart above includes reinvested distributions, Fund expenses and management fees. Index results include reinvested dividends, but they do not reflect sales charges.
Performance of the peer group reflects fund expenses and management fees; performance of a market index does not. Performance shown in the charts and table does not reflect deduction of taxes a shareholder would pay on Fund distributions or sale of Fund shares.
During the reporting period, the Fund elected to use the BofA Merrill Lynch 100 Technology Index as its style-specific index rather than the S&P 500 North American Technology Sector Index because it more appropriately reflects the Fund’s investment strategy. Because
continued on page 7
6 Invesco Technology Fund
Average Annual Total Returns
As of 4/30/10, including maximum applicable sales charges
Class A Shares | ||||
| Inception (3/28/02) | -1.48 | % | ||
| 5 Years | 3.63 | |||
| 1 Year | 35.66 | |||
Class B Shares | ||||
| Inception (3/28/02) | -1.53 | % | ||
| 5 Years | 3.69 | |||
| 1 Year | 37.56 | |||
Class C Shares | ||||
| Inception (2/14/00) | -11.55 | % | ||
| 10 Years | -11.27 | |||
| 5 Years | 4.04 | |||
| 1 Year | 41.58 | |||
Class Y Shares | ||||
| 10 Years | -10.55 | % | ||
| 5 Years | 4.90 | |||
| 1 Year | 43.86 | |||
Investor Class Shares | ||||
| Inception (1/19/84) | 9.57 | % | ||
| 10 Years | -10.57 | |||
| 5 Years | 4.84 | |||
| 1 Year | 43.60 | |||
Institutional Class Shares | ||||
| Inception (12/21/98) | 0.02 | % | ||
| 10 Years | -9.92 | |||
| 5 Years | 5.55 | |||
| 1 Year | 44.73 |
Average Annual Total Returns
As of 3/31/10, the most recent calendar quarter-end including maximum applicable sales charges
Class A Shares | ||||
| Inception (3/28/02) | -1.76 | % | ||
| 5 Years | 2.26 | |||
| 1 Year | 48.46 | |||
Class B Shares | ||||
| Inception (3/28/02) | -1.82 | % | ||
| 5 Years | 2.29 | |||
| 1 Year | 50.94 | |||
Class C Shares | ||||
| Inception (2/14/00 | -11.83 | % | ||
| 10 Years | -12.53 | |||
| 5 Years | 2.65 | |||
| 1 Year | 54.85 | |||
Class Y Shares | ||||
| 10 Years | -11.82 | % | ||
| 5 Years | 3.49 | |||
| 1 Year | 57.34 | |||
Investor Class Shares | ||||
| Inception (1/19/84) | 9.51 | % | ||
| 10 Years | -11.85 | |||
| 5 Years | 3.44 | |||
| 1 Year | 57.13 | |||
Institutional Class Shares | ||||
| Inception (12/21/98) | -0.19 | % | ||
| 10 Years | -11.21 | |||
| 5 Years | 4.14 | |||
| 1 Year | 58.16 |
Class Y shares incepted on October 3, 2008. Performance shown prior to that date is that of Investor Class shares and includes the 12b-1 fees applicable to Investor Class shares. Investor Class shares 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 Y, Investor Class and Institutional Class shares was 1.83%, 2.58%, 2.58%, 1.58%, 1.81% and 0.91%, respectively. 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, Investor Class and Institutional Class shares was 1.84%, 2.59%, 2.59%, 1.59%, 1.82% and 0.92%, 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, 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.
New Fiscal Year-End
Since our last report to you, the Fund’s fiscal year-end was changed from March 31 to April 30.
continued from page 6
this is the first reporting period since we adopted the new index, SEC guidelines require that we compare performance to both the old and new indexes in the second chart on the previous page.
Both charts on the previous page are logarithmic charts, which present the fluctuations in the value of the Fund’s share class and its indexes. We believe that a logarithmic chart is more effective than other types of charts in illustrating changes in value during the early years shown in the chart. The vertical axis, the one that indicates the dollar value of an investment, is constructed with each segment representing a percent change in the value of the investment. In both charts, each segment represents a doubling, or 100% change, in the value of the investment.
7 Invesco Technology Fund
Invesco Technology Fund’s investment objective is capital growth.
| • | Unless otherwise stated, information presented in this report is as of April 30, 2010, and is based on total net assets. | |
| • | Unless otherwise noted, all data provided by Invesco. | |
| • | To access your Fund’s reports/prospectus visit invesco.com/fundreports. |
About share classes
| • | Effective September 30, 2003, for qualified plans only, those previously established are eligible to purchase Class B shares of any Invesco fund. Please see the prospectus for more information. | |
| • | Class Y shares are available to only certain investors. Please see the prospectus for more information. | |
| • | All Investor Class shares are closed to new investors. Contact your financial adviser about purchasing our other share classes. | |
| • | 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 in the Fund risks of investing
| • | Prices of equity securities change in response to many factors, including the historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity. | |
| • | Foreign securities have additional risks, including exchange rate changes, political and economic upheaval, relative lack of information, relatively low market liquidity, and the potential lack of strict financial and accounting controls and standards. | |
| • | Since a large percentage of the Fund’s assets may be invested in securities of a limited number of companies, each investment has a greater effect on the Fund’s overall performance, and any change in the value of those securities could significantly affect the value of your investment in the Fund. | |
| • | There is no guarantee that the investment techniques and risk analysis used by the Fund’s portfolio managers will produce the desired results. |
| • | The prices of securities held by the Fund may decline in response to market 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. | |
| • | Many of the products and services offered in technology-related industries are subject to rapid obsolescence, which may lower the value of securities of companies in this sector. |
About indexes used in this report
| • | The S&P 500® Index is an unmanaged index considered representative of the U.S. stock market. | |
| • | The BofA Merrill Lynch 100 Technology Index is a price-only equal-dollar weighted index of 100 stocks designed to measure the performance of a cross section of large, actively traded technology stocks and American Depositary Receipts. | |
| • | The S&P North American Technology Sector Index is a capitalization-weighted index considered representative of the technology industry. | |
| • | The Lipper Science & Technology Funds Index is an unmanaged index considered representative of science & technology funds tracked by Lipper. | |
| • | 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. | |
| • | 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 reflects fund expenses; performance of a market index does not. |
Other information
| • | The Chartered Financial Analyst® (CFA®) designation is globally recognized and attests to a charter-holder’s success in a rigorous and comprehensive study program in the field of investment management and research analysis. | |
| • | 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. | |
| • | 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.
Fund Nasdaq Symbols
| Class A Shares | ITYAX | |||
| Class B Shares | ITYBX | |||
| Class C Shares | ITHCX | |||
| Class Y Shares | ITYYX | |||
| Investor Class Shares | FTCHX | |||
| Institutional Class Shares | FTPIX | |||
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
8 Invesco Technology Fund
Schedule of Investments(a)
April 30, 2010
| Shares | Value | |||||||
| Common Stocks & Other Equity Interests–98.98% | ||||||||
| Application Software–6.13% | ||||||||
Autodesk, Inc.(b) | 234,945 | $ | 7,990,480 | |||||
NICE Systems Ltd.–ADR (Israel)(b) | 365,541 | 11,627,859 | ||||||
Quest Software, Inc.(b) | 353,330 | 6,193,875 | ||||||
| Solera Holdings Inc. | 154,535 | 6,006,775 | ||||||
TIBCO Software Inc.(b) | 582,895 | 6,645,003 | ||||||
| 38,463,992 | ||||||||
| Communications Equipment–10.51% | ||||||||
Ciena Corp.(b)(c) | 261,322 | 4,831,844 | ||||||
Cisco Systems, Inc.(b) | 638,723 | 17,194,423 | ||||||
Finisar Corp.(b)(c) | 105,510 | 1,578,429 | ||||||
JDS Uniphase Corp.(b) | 530,334 | 6,889,039 | ||||||
| Plantronics, Inc. | 218,726 | 7,261,703 | ||||||
Polycom, Inc.(b) | 177,818 | 5,787,976 | ||||||
QUALCOMM Inc.(b) | 330,831 | 12,816,393 | ||||||
Research In Motion Ltd. (Canada)(b) | 83,642 | 5,954,474 | ||||||
Tellabs, Inc.(b) | 395,175 | 3,588,189 | ||||||
| 65,902,470 | ||||||||
| Computer Hardware–11.09% | ||||||||
Apple Inc.(b) | 150,229 | 39,227,796 | ||||||
Dell Inc.(b) | 337,961 | 5,468,209 | ||||||
| Hewlett-Packard Co. | 478,547 | 24,870,088 | ||||||
| 69,566,093 | ||||||||
| Computer Storage & Peripherals–6.49% | ||||||||
EMC Corp.(b) | 882,707 | 16,780,260 | ||||||
NetApp, Inc.(b) | 140,377 | 4,866,871 | ||||||
QLogic Corp.(b) | 388,361 | 7,522,552 | ||||||
Seagate Technology(b) | 271,616 | 4,989,586 | ||||||
Western Digital Corp.(b) | 159,102 | 6,537,501 | ||||||
| 40,696,770 | ||||||||
| Data Processing & Outsourced Services–3.63% | ||||||||
Alliance Data Systems Corp.(b)(c) | 146,368 | 10,986,382 | ||||||
| MasterCard, Inc.–Class A | 27,648 | 6,857,810 | ||||||
| Western Union Co. | 271,188 | 4,949,181 | ||||||
| 22,793,373 | ||||||||
| Electronic Components–2.47% | ||||||||
| Corning Inc. | 460,565 | 8,865,876 | ||||||
Dolby Laboratories Inc.–Class A(b) | 95,941 | 6,593,066 | ||||||
| 15,458,942 | ||||||||
| Electronic Equipment & Instruments–0.75% | ||||||||
Cogent Inc.(b) | 454,054 | 4,699,459 | ||||||
| Electronic Manufacturing Services–4.72% | ||||||||
Flextronics International Ltd. (Singapore)(b) | 1,641,096 | 12,718,494 | ||||||
| Tyco Electronics Ltd. (Switzerland) | 525,704 | 16,885,612 | ||||||
| 29,604,106 | ||||||||
| Home Entertainment Software–0.70% | ||||||||
Nintendo Co., Ltd. (Japan)(c) | 13,100 | 4,401,610 | ||||||
| Internet Retail–1.31% | ||||||||
Amazon.com, Inc.(b) | 59,703 | 8,182,893 | ||||||
| Internet Software & Services–6.36% | ||||||||
Google Inc.–Class A(b) | 47,766 | 25,098,167 | ||||||
GSI Commerce, Inc.(b) | 243,768 | 6,642,678 | ||||||
VeriSign, Inc.(b) | 136,808 | 3,730,754 | ||||||
Yahoo! Inc.(b) | 268,663 | 4,441,000 | ||||||
| 39,912,599 | ||||||||
| IT Consulting & Other Services–5.77% | ||||||||
Amdocs Ltd.(b) | 225,961 | 7,217,194 | ||||||
Cognizant Technology Solutions Corp.–Class A(b) | 423,299 | 21,664,443 | ||||||
| International Business Machines Corp. | 56,801 | 7,327,329 | ||||||
| 36,208,966 | ||||||||
| Other Diversified Financial Services–1.22% | ||||||||
BlueStream Ventures L.P. (Acquired 08/03/00-06/13/08; Cost $25,801,962)(d)(e) | — | 7,653,343 | ||||||
| Semiconductor Equipment–4.11% | ||||||||
| Applied Materials, Inc. | 675,373 | 9,306,640 | ||||||
| ASML Holding N.V.–New York Shares (Netherlands) | 319,700 | 10,441,402 | ||||||
Cymer, Inc.(b) | 177,322 | 6,055,546 | ||||||
| 25,803,588 | ||||||||
| Semiconductors–17.50% | ||||||||
Avago Technologies Ltd. (Singapore)(b) | 489,477 | 10,044,068 | ||||||
| Intel Corp. | 927,978 | 21,185,738 | ||||||
| Intersil Corp.–Class A | 598,810 | 8,910,293 | ||||||
Marvell Technology Group Ltd.(b) | 940,499 | 19,421,304 | ||||||
Microsemi Corp.(b) | 651,966 | 10,796,557 | ||||||
ON Semiconductor Corp.(b) | 1,233,265 | 9,792,124 | ||||||
Semtech Corp.(b) | 383,649 | 6,963,229 | ||||||
| Taiwan Semiconductor Manufacturing Co. Ltd.–ADR (Taiwan) | 779,369 | 8,253,518 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
9 Invesco Technology Fund
| Shares | Value | |||||||
Semiconductors–(continued) | ||||||||
| Texas Instruments Inc. | 226,757 | $ | 5,897,950 | |||||
| Xilinx, Inc. | 329,154 | 8,485,590 | ||||||
| 109,750,371 | ||||||||
| Systems Software–14.47% | ||||||||
Ariba Inc.(b) | 703,491 | 10,038,816 | ||||||
Check Point Software Technologies Ltd. (Israel)(b) | 571,093 | 20,342,333 | ||||||
McAfee Inc.(b) | 172,883 | 6,007,684 | ||||||
| Microsoft Corp. | 780,368 | 23,832,439 | ||||||
| Oracle Corp. | 481,250 | 12,435,500 | ||||||
Rovi Corp.(b) | 76,594 | 2,985,634 | ||||||
SonicWALL, Inc.(b) | 965,330 | 9,778,793 | ||||||
Symantec Corp.(b) | 316,345 | 5,305,106 | ||||||
| 90,726,305 | ||||||||
| Technology Distributors–1.75% | ||||||||
Anixter International Inc.(b) | 208,800 | 10,941,120 | ||||||
| Total Common Stocks & Other Equity Interests (Cost $448,580,141) | 620,766,000 | |||||||
| Money Market Funds–1.56% | ||||||||
Liquid Assets Portfolio–Institutional Class(f) | 4,898,563 | 4,898,563 | ||||||
Premier Portfolio–Institutional Class(f) | 4,898,563 | 4,898,563 | ||||||
| Total Money Market Funds (Cost $9,797,126) | 9,797,126 | |||||||
| TOTAL INVESTMENTS (excluding investments purchased with cash collateral from securities on loan)–100.54% (Cost $458,377,267) | 630,563,126 | |||||||
| Investments Purchased with Cash Collateral from Securities on Loan | ||||||||
| Money Market Funds–2.37% | ||||||||
Liquid Assets Portfolio–Institutional Class (Cost $14,833,545)(f)(g) | 14,833,545 | 14,833,545 | ||||||
| TOTAL INVESTMENTS–102.91% (Cost $473,210,812) | 645,396,671 | |||||||
| OTHER ASSETS LESS LIABILITIES–(2.91)% | (18,260,542 | ) | ||||||
| NET ASSETS–100.00% | $ | 627,136,129 | ||||||
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) | All or a portion of this security was out on loan at April 30, 2010. | |
| (d) | The Fund has a 10.29% ownership of BlueStream Ventures L.P. (“BlueStream”) and has a remaining commitment of $829,416 to purchase additional interests in BlueStream, which is subject to the terms of the partnership agreement. BlueStream may be considered an affiliated company. Security is considered venture capital. The value of this security as of April 30, 2010 represented 1.22% of the Fund’s Net Assets. See Note 4. | |
| (e) | 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 April 30, 2010 represented 1.22% of the Fund’s Net Assets. | |
| (f) | The money market fund and the Fund are affiliated by having the same investment adviser. | |
| (g) | The security has been segregated to satisfy the commitment to return the cash collateral received in securities lending transactions upon the borrower’s return of the securities loaned. See Note 1J. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
10 Invesco Technology Fund
Schedule of Investments(a)
March 31, 2010
| Shares | Value | |||||||
| Common Stocks & Other Equity Interests–98.52% | ||||||||
| Application Software–3.96% | ||||||||
Autodesk, Inc.(b) | 234,945 | $ | 6,912,082 | |||||
NICE Systems Ltd.–ADR (Israel)(b) | 365,541 | 11,605,926 | ||||||
| Solera Holdings Inc. | 154,535 | 5,972,778 | ||||||
| 24,490,786 | ||||||||
| Communications Equipment–9.53% | ||||||||
Cisco Systems, Inc.(b) | 638,723 | 16,625,960 | ||||||
Finisar Corp.(b)(c) | 105,510 | 1,657,562 | ||||||
JDS Uniphase Corp.(b) | 530,334 | 6,645,085 | ||||||
| Plantronics, Inc. | 218,726 | 6,841,749 | ||||||
Polycom, Inc.(b) | 177,818 | 5,437,674 | ||||||
| QUALCOMM Inc. | 330,831 | 13,891,594 | ||||||
Research In Motion Ltd. (Canada)(b) | 106,136 | 7,848,757 | ||||||
| 58,948,381 | ||||||||
| Computer Hardware–11.81% | ||||||||
Apple Inc.(b) | 150,229 | 35,293,299 | ||||||
Dell Inc.(b) | 337,961 | 5,072,795 | ||||||
| Hewlett-Packard Co. | 478,547 | 25,434,773 | ||||||
| International Business Machines Corp. | 56,801 | 7,284,728 | ||||||
| 73,085,595 | ||||||||
| Computer Storage & Peripherals–6.81% | ||||||||
EMC Corp.(b) | 882,707 | 15,924,034 | ||||||
NetApp, Inc.(b) | 140,377 | 4,570,675 | ||||||
QLogic Corp.(b) | 388,361 | 7,883,729 | ||||||
Seagate Technology(b) | 362,154 | 6,612,932 | ||||||
Western Digital Corp.(b) | 182,906 | 7,131,505 | ||||||
| 42,122,875 | ||||||||
| Data Processing & Outsourced Services–4.29% | ||||||||
Alliance Data Systems Corp.(b)(c) | 232,849 | 14,900,008 | ||||||
| MasterCard, Inc.–Class A | 27,648 | 7,022,592 | ||||||
| Western Union Co. | 271,188 | 4,599,348 | ||||||
| 26,521,948 | ||||||||
| Electronic Components–2.67% | ||||||||
| Corning Inc. | 460,565 | 9,308,019 | ||||||
Dolby Laboratories Inc.–Class A(b) | 122,706 | 7,199,161 | ||||||
| 16,507,180 | ||||||||
| Electronic Equipment & Instruments–0.75% | ||||||||
Cogent Inc.(b) | 454,054 | 4,631,351 | ||||||
| Electronic Manufacturing Services–4.41% | ||||||||
Flextronics International Ltd. (Singapore)(b) | 1,641,096 | 12,866,193 | ||||||
| Tyco Electronics Ltd. (Switzerland) | 525,704 | 14,446,346 | ||||||
| 27,312,539 | ||||||||
| Home Entertainment Software–0.71% | ||||||||
Nintendo Co., Ltd. (Japan)(c) | 13,100 | 4,374,466 | ||||||
| Internet Retail–1.31% | ||||||||
Amazon.com, Inc.(b) | 59,703 | 8,103,488 | ||||||
| Internet Software & Services–7.78% | ||||||||
eBay Inc.(b) | 233,976 | 6,305,653 | ||||||
Google Inc.–Class A(b) | 47,766 | 27,083,800 | ||||||
GSI Commerce, Inc.(b) | 243,768 | 6,745,061 | ||||||
VeriSign, Inc.(b) | 136,808 | 3,558,376 | ||||||
Yahoo! Inc.(b) | 268,663 | 4,440,999 | ||||||
| 48,133,889 | ||||||||
| IT Consulting & Other Services–4.59% | ||||||||
Amdocs Ltd.(b) | 225,961 | 6,803,686 | ||||||
Cognizant Technology Solutions Corp.–Class A(b) | 423,299 | 21,579,783 | ||||||
| 28,383,469 | ||||||||
| Other Diversified Financial Services–1.24% | ||||||||
BlueStream Ventures L.P. (Acquired 08/03/00-06/13/08; Cost $25,801,962)(d)(e) | — | 7,653,343 | ||||||
| Semiconductor Equipment–4.81% | ||||||||
| Applied Materials, Inc. | 675,373 | 9,104,028 | ||||||
ASML Holding N.V.–New York Shares (Netherlands)(c) | 319,700 | 11,317,380 | ||||||
Cymer, Inc.(b) | 249,748 | 9,315,600 | ||||||
| 29,737,008 | ||||||||
| Semiconductors–17.64% | ||||||||
Avago Technologies Ltd. (Singapore)(b) | 511,757 | 10,521,724 | ||||||
| Intel Corp. | 927,978 | 20,656,790 | ||||||
| Intersil Corp.–Class A | 598,810 | 8,838,435 | ||||||
Marvell Technology Group Ltd.(b) | 940,499 | 19,167,370 | ||||||
Microsemi Corp.(b) | 651,966 | 11,305,090 | ||||||
ON Semiconductor Corp.(b) | 1,233,265 | 9,866,120 | ||||||
Semtech Corp.(b) | 383,649 | 6,687,002 | ||||||
| Taiwan Semiconductor Manufacturing Co. Ltd.–ADR (Taiwan) | 779,369 | 8,175,581 | ||||||
| Texas Instruments Inc. | 226,757 | 5,548,744 | ||||||
| Xilinx, Inc. | 329,154 | 8,393,427 | ||||||
| 109,160,283 | ||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
11 Invesco Technology Fund
| Shares | Value | |||||||
| Systems Software–13.56% | ||||||||
Ariba Inc.(b) | 703,491 | $ | 9,039,859 | |||||
Check Point Software Technologies Ltd. (Israel)(b) | 571,093 | 20,022,521 | ||||||
McAfee Inc.(b) | 76,119 | 3,054,656 | ||||||
| Microsoft Corp. | 780,368 | 22,841,371 | ||||||
| Oracle Corp. | 481,250 | 12,363,313 | ||||||
Rovi Corp.(b)(c) | 76,594 | 2,843,935 | ||||||
SonicWALL, Inc.(b) | 965,330 | 8,388,718 | ||||||
Symantec Corp.(b) | 316,345 | 5,352,557 | ||||||
| 83,906,930 | ||||||||
| Technology Distributors–1.58% | ||||||||
Anixter International Inc.(b) | 208,800 | 9,782,280 | ||||||
| Wireless Telecommunication Services–1.07% | ||||||||
American Tower Corp.–Class A(b) | 155,527 | 6,627,005 | ||||||
| Total Common Stocks & Other Equity Interest (Cost $443,116,884) | 609,482,816 | |||||||
| Money Market Funds–1.58% | ||||||||
Liquid Assets Portfolio–Institutional Class(f) | 4,881,299 | 4,881,299 | ||||||
Premier Portfolio–Institutional Class(f) | 4,881,299 | 4,881,299 | ||||||
| Total Money Market Funds (Cost $9,762,598) | 9,762,598 | |||||||
| TOTAL INVESTMENTS (excluding investments purchased with cash collateral from securities on loan)–100.10% (Cost $452,879,482) | 619,245,414 | |||||||
| Investments Purchased with Cash Collateral from Securities on Loan | ||||||||
| Money Market Funds–3.97% | ||||||||
Liquid Assets Portfolio–Institutional Class (Cost $24,586,014)(f)(g) | 24,586,014 | 24,586,014 | ||||||
| TOTAL INVESTMENTS–104.07% (Cost $477,465,496) | 643,831,428 | |||||||
| OTHER ASSETS LESS LIABILITIES–(4.07)% | (25,176,703 | ) | ||||||
| NET ASSETS–100.00% | $ | 618,654,725 | ||||||
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) | All or a portion of this security was out on loan at March 31, 2010. | |
| (d) | The Fund has a 10.29% ownership of BlueStream Ventures L.P. (“BlueStream”) and has a remaining commitment of $829,416 to purchase additional interests in BlueStream, which is subject to the terms of the partnership agreement. BlueStream may be considered an affiliated company. Security is considered venture capital. The value of this security as of March 31, 2010 represented 1.24% of the Fund’s Net Assets. See Note 4. | |
| (e) | 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 March 31, 2010 represented 1.24% of the Fund’s Net Assets. | |
| (f) | The money market fund and the Fund are affiliated by having the same investment adviser. | |
| (g) | The security has been segregated to satisfy the commitment to return the cash collateral received in securities lending transactions upon the borrower’s return of the securities loaned. See Note 1J. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
12 Invesco Technology Fund
Statement of Assets and Liabilities
April 30, 2010 and March 31, 2010
| April 30, 2010 | March 31, 2010 | |||||||
| Assets: | ||||||||
| Investments, at value (Cost $422,778,179 and $417,314,922, respectively)* | $ | 613,112,658 | $ | 601,829,473 | ||||
| Investments in affiliates, at value (Cost $50,432,633 and $60,150,574, respectively) | 32,284,013 | 42,001,955 | ||||||
| Total investments, at value (Cost $473,210,812 and $477,465,496, respectively) | 645,396,671 | 643,831,428 | ||||||
| Cash | — | 44,058 | ||||||
| Foreign currencies, at value (Cost $18,583 and $18,583, respectively) | 18,585 | 18,340 | ||||||
| Receivables for: | ||||||||
| Fund shares sold | 331,565 | 208,750 | ||||||
| Dividends | 431,089 | 491,247 | ||||||
| Investment for trustee deferred compensation and retirement plans | 163,089 | 167,613 | ||||||
| Other assets | 37,233 | 29,282 | ||||||
| Total assets | 646,378,232 | 644,790,718 | ||||||
| Liabilities: | ||||||||
| Payables for: | ||||||||
| Investments purchased | 2,097,695 | 68,032 | ||||||
| Fund shares reacquired | 881,471 | 383,832 | ||||||
| Amount due custodian | 285,548 | — | ||||||
| Collateral upon return of securities loaned | 14,833,545 | 24,586,014 | ||||||
| Accrued fees to affiliates | 698,929 | 677,427 | ||||||
| Accrued operating expenses | 179,204 | 150,812 | ||||||
| Trustee deferred compensation and retirement plans | 265,711 | 269,876 | ||||||
| Total liabilities | 19,242,103 | 26,135,993 | ||||||
| Net assets applicable to shares outstanding | $ | 627,136,129 | $ | 618,654,725 | ||||
| Net assets consist of: | ||||||||
| Shares of beneficial interest | $ | 861,366,868 | $ | 866,810,017 | ||||
| Undistributed net investment income | 14,944,997 | 15,774,501 | ||||||
| Undistributed net realized gain (loss) | (421,360,175 | ) | (430,294,510 | ) | ||||
| Undistributed appreciation | 172,184,439 | 166,364,717 | ||||||
| $ | 627,136,129 | $ | 618,654,725 | |||||
| Net Assets: | ||||||||
| Class A | $ | 191,274,255 | $ | 187,989,880 | ||||
| Class B | $ | 18,852,514 | $ | 19,173,350 | ||||
| Class C | $ | 16,930,995 | $ | 16,688,739 | ||||
| Class Y | $ | 2,930,941 | $ | 2,856,440 | ||||
| Investor Class | $ | 396,631,261 | $ | 391,423,974 | ||||
| Institutional Class | $ | 516,163 | $ | 522,342 | ||||
| Shares outstanding, $0.01 par value per share, unlimited number of shares authorized: | ||||||||
| Class A | 6,703,616 | 6,736,466 | ||||||
| Class B | 702,572 | 730,127 | ||||||
| Class C | 648,135 | 652,791 | ||||||
| Class Y | 103,298 | 102,954 | ||||||
| Investor Class | 14,020,579 | 14,147,441 | ||||||
| Institutional Class | 16,845 | 17,440 | ||||||
| Class A: | ||||||||
| Net asset value per share | $ | 28.53 | $ | 27.91 | ||||
| Maximum offering price per share | ||||||||
| (Net asset value of $28.53 divided by 94.50%) | ||||||||
| (Net asset value of $27.91 divided by 94.50%) | $ | 30.19 | $ | 29.53 | ||||
| Class B: | ||||||||
| Net asset value and offering price per share | $ | 26.83 | $ | 26.26 | ||||
| Class C: | ||||||||
| Net asset value and offering price per share | $ | 26.12 | $ | 25.57 | ||||
| Class Y: | ||||||||
| Net asset value and offering price per share | $ | 28.37 | $ | 27.74 | ||||
| Investor Class: | ||||||||
| Net asset value and offering price per share | $ | 28.29 | $ | 27.67 | ||||
| Institutional Class: | ||||||||
| Net asset value and offering price per share | $ | 30.64 | $ | 29.95 | ||||
| * | Securities with an aggregate value of $14,408,268 and $23,937,474 were on loan to brokers at April 30, 2010 and March 31, 2010, respectively. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
13 Invesco Technology Fund
Statement of Operations
For the one month ended April 30, 2010 and the year ended March 30, 2010
| One month ended | Year ended | |||||||
| April 30, 2010 | March 31, 2010 | |||||||
| Investment income: | ||||||||
| Dividends (net of foreign withholding taxes of $0 and $109,903, respectively) | $ | 51,300 | $ | 3,918,917 | ||||
| Dividends from affiliates (includes securities lending income of $3,845 and $374,638, respectively) | 4,499 | 407,840 | ||||||
| Interest | — | 4,977 | ||||||
| Total investment income | 55,799 | 4,331,734 | ||||||
| Expenses: | ||||||||
| Advisory fees | 368,561 | 3,889,283 | ||||||
| Administrative services fees | 16,133 | 175,236 | ||||||
| Custodian fees | 734 | 25,349 | ||||||
| Distribution fees: | ||||||||
| Class A | 39,716 | 410,472 | ||||||
| Class B | 16,177 | 194,328 | ||||||
| Class C | 14,194 | 139,607 | ||||||
| Investor Class | 78,036 | 855,516 | ||||||
| Transfer agent fees — A, B, C, Y and Investor | 314,624 | 3,628,785 | ||||||
| Transfer agent fees — Institutional | 37 | 532 | ||||||
| Trustees’ and officers’ fees and benefits | 5,411 | 35,003 | ||||||
| Other | 34,640 | 404,687 | ||||||
| Total expenses | 888,263 | 9,758,798 | ||||||
| Less: Fees waived, expenses reimbursed and expense offset arrangement(s) | (2,960 | ) | (513,809 | ) | ||||
| Net expenses | 885,303 | 9,244,989 | ||||||
| Net investment income (loss) | (829,504 | ) | (4,913,255 | ) | ||||
Realized and unrealized gain (loss) from: | ||||||||
| Net realized gain from: | ||||||||
| Investment securities | 8,934,335 | 13,309,177 | ||||||
| Foreign currencies | — | 2,672 | ||||||
| 8,934,335 | 13,311,849 | |||||||
| Change in net unrealized appreciation (depreciation) of: | ||||||||
| Investment securities | 5,819,927 | 224,438,307 | ||||||
| Foreign currencies | (205 | ) | 1,612 | |||||
| 5,819,722 | 224,439,919 | |||||||
| Net realized and unrealized gain | 14,754,057 | 237,751,768 | ||||||
| Net increase in net assets resulting from operations | $ | 13,924,553 | $ | 232,838,513 | ||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
14 Invesco Technology Fund
Statement of Changes in Net Assets
For the one month ended April 30, 2010 and the years ended March 31, 2010 and 2009
| One month ended | Year ended | Year ended | ||||||||||
| April 30, | March 31, | March 31, | ||||||||||
| 2010 | 2010 | 2009 | ||||||||||
| Operations: | ||||||||||||
| Net investment income (loss) | $ | (829,504 | ) | $ | (4,913,255 | ) | $ | (297,189 | ) | |||
| Net realized gain (loss) | 8,934,335 | 13,311,849 | (55,307,469 | ) | ||||||||
| Change in net unrealized appreciation (depreciation) | 5,819,722 | 224,439,919 | (142,046,211 | ) | ||||||||
| Net increase (decrease) in net assets resulting from operations | 13,924,553 | 232,838,513 | (197,650,869 | ) | ||||||||
| Share transactions-net: | ||||||||||||
| Class A | (927,708 | ) | (4,902,658 | ) | (31,669,828 | ) | ||||||
| Class B | (749,006 | ) | (6,218,634 | ) | (12,273,874 | ) | ||||||
| Class C | (122,278 | ) | 1,662,437 | (2,108,236 | ) | |||||||
| Class Y | 9,931 | 2,021,471 | 610,977 | |||||||||
| Investor Class | (3,635,432 | ) | (19,357,328 | ) | (41,288,165 | ) | ||||||
| Institutional Class | (18,656 | ) | (120,432 | ) | 326,108 | |||||||
| Net increase (decrease) in net assets resulting from share transactions | (5,443,149 | ) | (26,915,144 | ) | (86,403,018 | ) | ||||||
| Net increase (decrease) in net assets | 8,481,404 | 205,923,369 | (284,053,887 | ) | ||||||||
| Net assets: | ||||||||||||
| Beginning of period | 618,654,725 | 412,731,356 | 696,785,243 | |||||||||
| End of period (includes undistributed net investment income of $14,944,997, $15,774,501, and $14,116,858 respectively) | $ | 627,136,129 | $ | 618,654,725 | $ | 412,731,356 | ||||||
Notes to Financial Statements
April 30, 2010
NOTE 1—Significant Accounting Policies
Invesco Technology Fund, formerly AIM Technology Fund, (the “Fund”) is a series portfolio of AIM Sector Funds (Invesco Sector Funds), formerly AIM Sector Funds, (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 six separate portfolios, each authorized to issue an unlimited number of shares of beneficial interest. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class.
On April 30, 2010, the Fund’s fiscal year-end changed from March 31 to April 30.
The Fund’s investment objective is capital growth.
The Fund currently consists of six different classes of shares: Class A, Class B, Class C, 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 B shares and Class C shares are sold with a CDSC. Class Y, Investor Class and Institutional Class shares are sold at net asset value. Generally, Class B shares will automatically convert to Class A shares on or the about month-end which is at least eight years after the date of purchase.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
| A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. | |
| 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”). |
15 Invesco Technology Fund
| Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded. | ||
| Debt obligations (including convertible bonds) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations, including commercial paper, having 60 days or less to maturity are recorded at amortized cost which approximates value. Debt securities are subject to interest rate and credit risks. In addition, all debt securities involve some risk of default with respect to interest and/or principal payments. | ||
| Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economical upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards. | ||
| Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including Corporate Loans. | ||
| Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value. | ||
| Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments. | ||
| B. | Securities Transactions and Investment Income — Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded on the accrual basis from settlement date. Dividend income 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 realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the realized and unrealized net gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund’s net asset value and, accordingly, they reduce the Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser. | ||
| The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class. | ||
| C. | Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. | |
| D. | Distributions — Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to treat a portion of the proceeds from redemptions as distributions for federal income tax purposes. | |
| E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. |
16 Invesco Technology Fund
| 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 requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. | |
| H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements, that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. | |
| I. | Other Risks — The Fund’s investments are concentrated in a comparatively narrow segment of the economy. Consequently, the Fund may tend to be more volatile than other mutual funds, and the value of the Fund’s investments may tend to rise and fall more rapidly. | |
| Many of the products and services offered in technology-related industries are subject to rapid obsolescence, which may lower the value of the securities of the companies in this sector. | ||
| J. | Securities Lending — The Fund may lend portfolio securities having a market value up to one-third of the Fund’s total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily by the securities lending provider. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its sponsored agencies. Cash collateral received in connection with these loans is invested in short-term money market instruments or affiliated money market funds and is shown as such on the Schedule of Investments. It is the Fund’s policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. Upon the failure of the borrower to return the securities, collateral may be liquidated and the securities may be purchased on the open market to replace the loaned securities. The Fund could experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to any loss on the collateral invested. Dividends received on cash collateral investments for securities lending transactions, which are net of compensation to counterparties, is included in Dividends from affiliates on the Statement of Operations. The aggregate value of securities out on loan is shown as a footnote on the Statement of Assets and Liabilities, if any. | |
| K. | Foreign Currency Translations — Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. | |
| The Fund may invest in foreign securities which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. | ||
| 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. |
17 Invesco Technology 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 Net Assets | Rate | |||
| First $350 million | 0 | .75% | ||
| Next $350 million | 0 | .65% | ||
| Next $1.3 billion | 0 | .55% | ||
| Next $2 billion | 0 | .45% | ||
| Next $2 billion | 0 | .40% | ||
| Next $2 billion | 0 | .375% | ||
| Over $8 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 Trimark Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide discretionary investment management services to the Fund based on the percentage of assets allocated to such Sub-Adviser(s).
On December 31, 2009, Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc., Invesco Aim Private Asset Management, Inc. and Invesco Global Asset Management (N.A.), Inc. merged into Invesco Institutional (N.A.), Inc. and the consolidated adviser firm was renamed Invesco Advisers, Inc.
Effective July 1, 2009, the Adviser has contractually agreed, through at least June 30, 2010, 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, Investor Class and Institutional Class shares to 2.00%, 2.75%, 2.75%, 1.75%, 2.00% and 1.75%, respectively, of average daily net assets. Prior to July 1, 2009, the Adviser had contractually agreed to waive 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. Investor Class and Institutional Class to 1.55%, 2.30%, 2.30%, 1.30%, 1.55% and 1.30%, 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 to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary items or non-routine items; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. The Board of Trustees or Invesco may terminate the fee waiver arrangement at any time. The Adviser did not waive fees and/or reimburse expenses under this expense limitation for the one month ended April 30, 2010.
Further, the Adviser has contractually agreed, through at least June 30, 2010, 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 period April 1, 2010 to April 30, 2010, the Adviser waived advisory fees of $1,173. For the year ended March 31, 2010, the Adviser waived advisory fees of $14,609 and reimbursed class level expenses of $448,866 for Class A, Class B, Class C, Class Y and Investor Class shares in proportion to the relative net assets of such classes.
At the request of the Trustees of the Trust, Invesco Ltd. agreed to reimburse expenses incurred by the Fund in connection with market timing matters in the Invesco Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement are included in the Statement of Operations. For the period April 1, 2010 to April 30, 2010 and the year ended March 31, 2010, Invesco Ltd. reimbursed expenses of the Fund in the amount of $0 and $3,923, 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 period April 1, 2010 to April 30, 2010 and the year ended March 31, 2010, 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 period April 1, 2010 to April 30, 2010 and the year ended March 31, 2010, 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, 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 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. The Fund, pursuant to the Investor Class Plan, reimburses IDI for its allocated share of expenses incurred pursuant to the Investor Class Plan for the period, up to a maximum annual rate of 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 period April 1, 2010 to April 30, 2010 and the year ended March 31, 2010, expenses incurred under the Plans are shown in the Statement of Operations as distribution fees.
18 Invesco Technology Fund
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 period April 1, 2010 to April 30, 2010, IDI advised the Fund that IDI retained $3,495 in front-end sales commissions from the sale of Class A shares and $0, $2,467 and $46 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders. During the year ended March 31, 2010, IDI advised the Fund that IDI retained $33,637 in front-end sales commissions from the sale of Class A shares and $401, $39,986 and $1,604 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of Invesco, IIS and/or IDI.
NOTE 3—Additional Valuation Information
Generally Accepted Accounting Principles (“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 April 30, 2010 and March 31, 2010. 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 period April 1, 2010 to April 30, 2010, there were no significant transfers between investment levels.
| April 30, 2010 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Equity Securities | $ | 633,341,718 | $ | 4,401,610 | $ | 7,653,343 | $ | 645,396,671 | ||||||||
| March 31, 2010 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Equity Securities | $ | 631,803,619 | $ | 4,374,466 | $ | 7,653,343 | $ | 643,831,428 | ||||||||
NOTE 4—Investments in Other Affiliates
The Investment Company Act of 1940 defines affiliates as those issuances in which a fund holds 5% or more of the outstanding voting securities. The Fund has not owned enough of the outstanding voting securities of the issuer to have control (as defined in the Investment Company Act of 1940) of that issuer. The following is a summary of the investments in affiliates for the one month ended April 30, 2010 and year ended March 31, 2010.
| Change in | ||||||||||||||||||||||||||||
| Unrealized | ||||||||||||||||||||||||||||
| Value | Purchases | Proceeds | Appreciation | Realized | Value | Dividend | ||||||||||||||||||||||
| 03/31/10 | at Cost | from Sales | (Depreciation) | Gain (Loss) | 04/30/10 | Income | ||||||||||||||||||||||
| BlueStream Ventures L.P. | $ | 7,653,343 | $ | — | $ | — | $ | — | $ | — | $ | 7,653,343 | $ | — | ||||||||||||||
| Change in | ||||||||||||||||||||||||||||
| Unrealized | ||||||||||||||||||||||||||||
| Value | Purchases | Proceeds | Appreciation | Realized | Value | Dividend | ||||||||||||||||||||||
| 03/31/09 | at Cost | from Sales | (Depreciation) | Gain (Loss) | 03/31/10 | Income | ||||||||||||||||||||||
| BlueStream Ventures L.P. | $ | 7,383,682 | $ | — | $ | — | $ | 269,661 | $ | — | $ | 7,653,343 | $ | — | ||||||||||||||
NOTE 5—Security Transactions with Affiliated Funds
The Fund is permitted to purchase or sell securities from or to certain other AIM 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.
19 Invesco Technology Fund
Pursuant to these procedures, for the period April 1, 2010 to April 30, 2010, the Fund engaged in securities purchases of $23,767. For the year ended March 31, 2010, the Fund engaged in securities purchases of $477,121.
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 period April 1, 2010 to April 30, 2010 and the year ended March 31, 2010, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $1,787 and $46,411, respectively.
NOTE 7—Trustees’ and Officers’ Fees and Benefits
“Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and “Trustees’ and Officers’ Fees and Benefits” also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. “Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
During the period April 1, 2010 to April 30, 2010 and the year ended March 31, 2010, the Fund paid legal fees of $0 and $3,155, respectively, for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 8—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with The State Street Bank and Trust Company, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (ii) 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
Distributions to Shareholders:
There were no ordinary income or long term distributions during the one month ended April 30, 2010 and the years ended March 31, 2010 and March 31, 2009.
Tax Components of Net Assets at Period-End:
| April 30, 2010 | March 31, 2010 | |||||||
| Net unrealized appreciation — investments | $ | 181,682,092 | $ | 175,720,566 | ||||
| Net unrealized appreciation (depreciation) — other investments | (1,420 | ) | (1,215 | ) | ||||
| Temporary book/tax differences | (1,040,043 | ) | (210,540 | ) | ||||
| Capital loss carryforward | (414,871,368 | ) | (423,664,103 | ) | ||||
| Shares of beneficial interest | 861,366,868 | 866,810,017 | ||||||
| Total net assets | $ | 627,136,129 | $ | 618,654,725 | ||||
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 deferral of losses on certain straddles and the treatment of partnerships.
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, retirement plan benefits and net operating losses for the one month ended April 30, 2010.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
20 Invesco Technology Fund
The Fund has a capital loss carryforward as of April 30, 2010 and March 31, 2010 which expires as follows:
| Capital Loss Carryforward* Expiration | April 30, 2010 | March 31, 2010 | ||||||
| March 31, 2011 | $ | 359,117,378 | 367,910,113 | |||||
| March 31, 2017 | 3,704,356 | 3,704,356 | ||||||
| March 31, 2018 | 52,049,634 | 52,049,634 | ||||||
| Total capital loss carryforward | $ | 414,871,368 | 423,664,103 | |||||
| * | Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. |
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 period April 1, 2010 to April 30, 2010 was $24,667,155 and $26,938,327 and the year ended March 31, 2010 was $170,637,321 and $186,130,832, 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 | ||||||||
| April 30, 2010 | March 31, 2010 | |||||||
| Aggregate unrealized appreciation of investment securities | $ | 210,874,871 | $ | 203,686,887 | ||||
| Aggregate unrealized (depreciation) of investment securities | (29,192,779 | ) | (27,966,321 | ) | ||||
| Net unrealized appreciation of investment securities | $ | 181,682,092 | $ | 175,720,566 | ||||
| Cost of investments for tax purposes | $ | 463,714,579 | $ | 468,110,862 | ||||
NOTE 11—Reclassification of Permanent Differences
There were no reclassifications of permanent differences affecting the net assets of the Fund for the one month ended April 30, 2010.
Primarily as a result of differing book/tax treatment of expired capital loss carryforward, partnership transactions, litigations and foreign currency transactions, on March 31, 2010, undistributed net investment income was increased by $6,570,898, undistributed net realized gain (loss) was increased by $14,838,468 and shares of beneficial interest decreased by $21,409,366. This reclassification had no effect on the net assets of the Fund.
21 Invesco Technology Fund
NOTE 12—Share Information
| Summary of Share Activity | ||||||||||||||||||||||||
| One month ended | Year ended | Year ended | ||||||||||||||||||||||
| April 30, 2010(a) | March 31, 2010(a) | March 31, 2009 | ||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||
| Sold: | ||||||||||||||||||||||||
| Class A | 75,945 | $ | 2,204,119 | 1,355,544 | $ | 30,562,059 | 1,122,931 | $ | 26,184,013 | |||||||||||||||
| Class B | 11,217 | 305,528 | 143,469 | 3,085,971 | 181,822 | 3,831,127 | ||||||||||||||||||
| Class C | 15,834 | 419,976 | 280,346 | 5,978,796 | 104,271 | 2,209,616 | ||||||||||||||||||
Class Y(b) | 916 | 26,391 | 437,117 | 8,969,785 | 32,672 | 645,381 | ||||||||||||||||||
| Investor Class | 120,611 | 3,445,797 | 1,572,726 | 35,993,517 | 1,233,069 | 26,678,309 | ||||||||||||||||||
| Institutional Class | 266 | 8,228 | 40,882 | 1,009,819 | 18,303 | 332,049 | ||||||||||||||||||
| Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||||||||||
| Class A | 21,472 | 620,328 | 211,469 | 4,912,711 | 458,008 | 10,763,061 | ||||||||||||||||||
| Class B | (22,831 | ) | (620,328 | ) | (223,809 | ) | (4,912,711 | ) | (480,915 | ) | (10,763,061 | ) | ||||||||||||
| Reacquired: | ||||||||||||||||||||||||
Class A(b) | (130,267 | ) | (3,752,155 | ) | (1,743,332 | ) | (40,377,428 | ) | (3,161,933 | ) | (68,616,902 | ) | ||||||||||||
| Class B | (15,941 | ) | (434,206 | ) | (195,926 | ) | (4,391,894 | ) | (268,192 | ) | (5,341,940 | ) | ||||||||||||
| Class C | (20,490 | ) | (542,254 | ) | (197,150 | ) | (4,316,359 | ) | (212,421 | ) | (4,317,852 | ) | ||||||||||||
| Class Y | (572 | ) | (16,460 | ) | (364,831 | ) | (6,948,314 | ) | (2,004 | ) | (34,404 | ) | ||||||||||||
Investor Class(b) | (247,473 | ) | (7,081,229 | ) | (2,340,481 | ) | (55,350,845 | ) | (3,083,015 | ) | (67,966,474 | ) | ||||||||||||
| Institutional Class | (861 | ) | (26,884 | ) | (41,736 | ) | (1,130,251 | ) | (330 | ) | (5,941 | ) | ||||||||||||
| Net increase (decrease) in share activity | (192,174 | ) | $ | (5,443,149 | ) | (1,065,712 | ) | $ | (26,915,144 | ) | (4,057,734 | ) | $ | (86,403,018 | ) | |||||||||
| (a) | There is an entity that is a record owner of more than 5% of the outstanding shares of the Fund and owns 11% and 11% of the outstanding shares of the Fund for the one month ended April 30, 2010 and the year ended March 31, 2010, respectively. IDI has an agreement with this entity to sell Fund shares. The Fund, Invesco and/or Invesco affiliates may make payments to this entity, which is considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by this entity is also owned beneficially. | |
| (b) | Effective upon the commencement date of Class Y shares, October 3, 2008, the following shares were converted from Class A and Investor Class shares into Class Y shares of the Fund: |
| Class | Shares | Amount | ||||||
| Class Y | 23,344 | $ | 488,353 | |||||
| Class A | (17,902 | ) | (377,921 | ) | ||||
| Investor Class | (5,279 | ) | (110,432 | ) | ||||
22 Invesco Technology Fund
NOTE 13—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
| Ratio of | Ratio of | |||||||||||||||||||||||||||||||||||||||||||
| expenses | expenses | |||||||||||||||||||||||||||||||||||||||||||
| Net gains | to average | to average net | Ratio of net | |||||||||||||||||||||||||||||||||||||||||
| Net asset | Net | (losses) on | net assets | assets without | investment | |||||||||||||||||||||||||||||||||||||||
| value, | investment | securities (both | Total from | Net asset | Net assets, | with fee waivers | fee waivers | income (loss) | ||||||||||||||||||||||||||||||||||||
| beginning | income | realized and | investment | value, end | Total | end of period | and/or expenses | and/or expenses | to average | Portfolio | ||||||||||||||||||||||||||||||||||
| of period | (loss)(a) | unrealized) | operations | of period | Return(b) | (000s omitted) | absorbed | absorbed | net assets | turnover(c) | ||||||||||||||||||||||||||||||||||
| Class A | ||||||||||||||||||||||||||||||||||||||||||||
| One month ended 04/30/10 | $ | 27.91 | $ | (0.04 | ) | $ | 0.66 | $ | 0.62 | $ | 28.53 | 2.22 | % | $ | 191,274 | 1.66 | %(d) | 1.66 | %(d) | (1.56 | )%(d) | 4 | % | |||||||||||||||||||||
| Year ended 03/31/10 | 17.77 | (0.20 | ) | 10.34 | 10.14 | 27.91 | 57.06 | 187,989 | 1.66 | (e) | 1.75 | (e) | (0.87 | )(e) | 35 | |||||||||||||||||||||||||||||
| Year ended 03/31/09 | 25.58 | (0.00 | )(f) | (7.81 | )(g) | (7.81 | ) | 17.77 | (30.53 | )(g) | 122,823 | 1.55 | 1.83 | (0.02 | )(f) | 68 | ||||||||||||||||||||||||||||
| Year ended 03/31/08 | 28.49 | (0.23 | ) | (2.68 | ) | (2.91 | ) | 25.58 | (10.21 | ) | 217,236 | 1.55 | 1.56 | (0.77 | ) | 42 | ||||||||||||||||||||||||||||
| Year ended 03/31/07 | 28.45 | (0.30 | ) | 0.34 | 0.04 | 28.49 | 0.14 | 284,962 | 1.56 | 1.57 | (1.07 | ) | 126 | |||||||||||||||||||||||||||||||
| Year ended 03/31/06 | 23.59 | (0.28 | ) | 5.14 | 4.86 | 28.45 | 20.60 | 329,461 | 1.57 | 1.63 | (1.09 | ) | 107 | |||||||||||||||||||||||||||||||
| Class B | ||||||||||||||||||||||||||||||||||||||||||||
| One month ended 04/30/10 | 26.26 | (0.05 | ) | 0.62 | 0.57 | 26.83 | 2.17 | 18,853 | 2.41 | (d) | 2.41 | (d) | (2.31 | )(d) | 4 | |||||||||||||||||||||||||||||
| Year ended 03/31/10 | 16.84 | (0.35 | ) | 9.77 | 9.42 | 26.26 | 55.94 | 19,173 | 2.41 | (e) | 2.50 | (e) | (1.62 | )(e) | 35 | |||||||||||||||||||||||||||||
| Year ended 03/31/09 | 24.43 | (0.16 | )(f) | (7.43 | )(g) | (7.59 | ) | 16.84 | (31.07 | )(g) | 16,952 | 2.30 | 2.58 | (0.77 | )(f) | 68 | ||||||||||||||||||||||||||||
| Year ended 03/31/08 | 27.42 | (0.44 | ) | (2.55 | ) | (2.99 | ) | 24.43 | (10.90 | ) | 38,443 | 2.30 | 2.31 | (1.52 | ) | 42 | ||||||||||||||||||||||||||||
| Year ended 03/31/07 | 27.59 | (0.48 | ) | 0.31 | (0.17 | ) | 27.42 | (0.62 | ) | 62,355 | 2.31 | 2.32 | (1.82 | ) | 126 | |||||||||||||||||||||||||||||
| Year ended 03/31/06 | 23.04 | (0.45 | ) | 5.00 | 4.55 | 27.59 | 19.75 | 81,212 | 2.30 | 2.36 | (1.82 | ) | 107 | |||||||||||||||||||||||||||||||
| Class C | ||||||||||||||||||||||||||||||||||||||||||||
| One month ended 04/30/10 | 25.57 | (0.05 | ) | 0.60 | 0.55 | 26.12 | 2.15 | 16,931 | 2.41 | (d) | 2.41 | (d) | (2.31 | )(d) | 4 | |||||||||||||||||||||||||||||
| Year ended 03/31/10 | 16.40 | (0.35 | ) | 9.52 | 9.17 | 25.57 | 55.92 | 16,689 | 2.41 | (e) | 2.50 | (e) | (1.62 | )(e) | 35 | |||||||||||||||||||||||||||||
| Year ended 03/31/09 | 23.78 | (0.16 | )(f) | (7.22 | )(g) | (7.38 | ) | 16.40 | (31.03 | )(g) | 9,340 | 2.30 | 2.58 | (0.77 | )(f) | 68 | ||||||||||||||||||||||||||||
| Year ended 03/31/08 | 26.69 | (0.42 | ) | (2.49 | ) | (2.91 | ) | 23.78 | (10.90 | ) | 16,116 | 2.30 | 2.31 | (1.52 | ) | 42 | ||||||||||||||||||||||||||||
| Year ended 03/31/07 | 26.86 | (0.47 | ) | 0.30 | (0.17 | ) | 26.69 | (0.63 | ) | 21,386 | 2.31 | 2.32 | (1.82 | ) | 126 | |||||||||||||||||||||||||||||
| Year ended 03/31/06 | 22.43 | (0.44 | ) | 4.87 | 4.43 | 26.86 | 19.75 | 26,507 | 2.30 | 2.36 | (1.82 | ) | 107 | |||||||||||||||||||||||||||||||
| Class Y | ||||||||||||||||||||||||||||||||||||||||||||
| One month ended 04/30/10 | 27.74 | (0.03 | ) | 0.66 | 0.63 | 28.37 | 2.27 | 2,931 | 1.41 | (d) | 1.41 | (d) | (1.31 | )(d) | 4 | |||||||||||||||||||||||||||||
| Year ended 03/31/10 | 17.63 | (0.14 | ) | 10.25 | 10.11 | 27.74 | 57.34 | 2,856 | 1.41 | (e) | 1.50 | (e) | (0.62 | )(e) | 35 | |||||||||||||||||||||||||||||
| Year ended 03/31/09(h) | 20.92 | 0.02 | (f) | (3.31 | )(g) | (3.29 | ) | 17.63 | (15.73 | )(g) | 541 | 1.30 | (i) | 1.86 | (i) | 0.23 | (f)(i) | 68 | ||||||||||||||||||||||||||
| Investor Class | ||||||||||||||||||||||||||||||||||||||||||||
| One month ended 04/30/10 | 27.67 | (0.04 | ) | 0.66 | 0.62 | 28.29 | 2.24 | 396,631 | 1.65 | (d) | 1.65 | (d) | (1.55 | )(d) | 4 | |||||||||||||||||||||||||||||
| Year ended 03/31/10 | 17.61 | (0.20 | ) | 10.26 | 10.06 | 27.67 | 57.13 | 391,424 | 1.66 | (e) | 1.75 | (e) | (0.87 | )(e) | 35 | |||||||||||||||||||||||||||||
| Year ended 03/31/09 | 25.35 | (0.00 | )(f) | (7.74 | )(g) | (7.74 | ) | 17.61 | (30.53 | )(g) | 262,730 | 1.53 | 1.81 | 0.00 | (f) | 68 | ||||||||||||||||||||||||||||
| Year ended 03/31/08 | 28.23 | (0.22 | ) | (2.66 | ) | (2.88 | ) | 25.35 | (10.20 | ) | 424,981 | 1.52 | 1.53 | (0.74 | ) | 42 | ||||||||||||||||||||||||||||
| Year ended 03/31/07 | 28.19 | (0.28 | ) | 0.32 | 0.04 | 28.23 | 0.14 | 595,776 | 1.53 | 1.54 | (1.04 | ) | 126 | |||||||||||||||||||||||||||||||
| Year ended 03/31/06 | 23.37 | (0.27 | ) | 5.09 | 4.82 | 28.19 | 20.63 | 783,509 | 1.57 | 1.61 | (1.09 | ) | 107 | |||||||||||||||||||||||||||||||
| Institutional Class | ||||||||||||||||||||||||||||||||||||||||||||
| One month ended 04/30/10 | 29.95 | (0.02 | ) | 0.71 | 0.69 | 30.64 | 2.30 | 516 | 0.90 | (d) | 0.90 | (d) | (0.80 | )(d) | 4 | |||||||||||||||||||||||||||||
| Year ended 03/31/10 | 18.93 | (0.03 | ) | 11.05 | 11.02 | 29.95 | 58.21 | 522 | 0.91 | (e) | 0.91 | (e) | (0.12 | )(e) | 35 | |||||||||||||||||||||||||||||
| Year ended 03/31/09 | 27.07 | 0.12 | (f) | (8.26 | )(g) | (8.14 | ) | 18.93 | (30.07 | )(g) | 346 | 0.90 | 0.91 | 0.63 | (f) | 68 | ||||||||||||||||||||||||||||
| Year ended 03/31/08 | 29.95 | (0.03 | ) | (2.85 | ) | (2.88 | ) | 27.07 | (9.62 | ) | 9 | 0.86 | 0.87 | (0.10 | ) | 42 | ||||||||||||||||||||||||||||
| Year ended 03/31/07 | 29.70 | (0.11 | ) | 0.36 | 0.25 | 29.95 | 0.84 | 12 | 0.86 | 0.86 | (0.37 | ) | 126 | |||||||||||||||||||||||||||||||
| Year ended 03/31/06 | 24.44 | (0.09 | ) | 5.35 | 5.26 | 29.70 | 21.52 | 12 | 0.81 | 0.81 | (0.33 | ) | 107 | |||||||||||||||||||||||||||||||
| (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 annualized and based on average daily net assets (000’s omitted) of $193,283, $19,682, $17,269, $2,953, $402,305 and $532 for Class A, Class B, Class C, Class Y, Investor Class and Institutional Class shares, respectively. | |
| (e) | Ratios are based on average daily net assets (000’s omitted) of $164,189, $19,433, $13,961, $1,381, $344,833 and $709 for Class A, Class B, Class C, Class Y, Investor Class and Institutional Class shares, respectively. | |
| (f) | Net investment income (loss) per share and the ratio of net investment income (loss) to average net assets include a distribution from BlueStreams Ventures L.P. on October 23, 2008. Net investment income (loss) per share and the ratio of net investment income (loss) to average net assts excluding the distribution are $(0.13) and (0.57)%, $(0.29) and (1.32)%, $(0.29) and (1.32)%, $(0.02) and (0.32)%, $(0.13) and (0.55)% and $(0.01) and 0.08% for Class A, Class B, Class C, Class Y, Investor Class and Institutional Class shares, respectively. | |
| (g) | Includes litigation proceeds received during the period. Had the litigation proceeds not been received net gains (losses) on securities (both realized and unrealized) per share would have been $(8.01), $(7.63), $(7.42), $(3.33), $(7.94) and $(8.46) for Class A, Class B, Class C, Class Y, Investor Class and Institutional Class shares, respectively and total returns would have been lower. | |
| (h) | Commencement date of October 3, 2008 for Class Y shares. | |
| (i) | Annualized. |
23 Invesco Technology Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Sector Funds (Invesco Sector Funds)
and Shareholders of Invesco Technology 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 Technology Fund (formerly known as AIM Technology Fund; one of the funds constituting AIM Sector Funds (Invesco Sector Funds), hereafter referred to as the “Fund”) at April 30, 2010 and at March 31, 2010, the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at April 30, 2010 and at March 31, 2010 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
June 4, 2010
Houston, Texas
24 Invesco Technology 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 November 1, 2009 through April 30, 2010.
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 | (11/01/09) | (04/30/10)1 | Period2 | (04/30/10) | Period2 | Ratio | ||||||||||||||||||||||||
| A | $ | 1,000.00 | $ | 1,192.70 | $ | 8.86 | $ | 1,016.71 | $ | 8.15 | 1.63 | % | ||||||||||||||||||
| B | 1,000.00 | 1,188.20 | 12.91 | 1,012.99 | 11.88 | 2.38 | ||||||||||||||||||||||||
| C | 1,000.00 | 1,188.40 | 12.91 | 1,012.99 | 11.88 | 2.38 | ||||||||||||||||||||||||
| Y | 1,000.00 | 1,194.00 | 7.51 | 1,017.95 | 6.90 | 1.38 | ||||||||||||||||||||||||
| Investor | 1,000.00 | 1,193.20 | 8.97 | 1,016.61 | 8.25 | 1.65 | ||||||||||||||||||||||||
| Institutional | 1,000.00 | 1,197.80 | 4.58 | 1,020.63 | 4.21 | 0.84 | ||||||||||||||||||||||||
| 1 | The actual ending account value is based on the actual total return of the Fund for the period November 1, 2009 through April 30, 2010, 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 181/365 to reflect the most recent fiscal half year. |
25 Invesco Technology 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 October 1, 2009 through March 31, 2010.
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 | (10/01/09) | (03/31/10)1 | Period2 | (03/31/10) | Period2 | Ratio | ||||||||||||||||||||||||
| A | $ | 1,000.00 | $ | 1,124.00 | $ | 8.74 | $ | 1,016.70 | $ | 8.30 | 1.65 | % | ||||||||||||||||||
| B | 1,000.00 | 1,119.80 | 12.68 | 1,012.96 | 12.04 | 2.40 | ||||||||||||||||||||||||
| C | 1,000.00 | 1,119.60 | 12.68 | 1,012.96 | 12.04 | �� | 2.40 | |||||||||||||||||||||||
| Y | 1,000.00 | 1,124.90 | 7.42 | 1,017.95 | 7.04 | 1.40 | ||||||||||||||||||||||||
| Investor | 1,000.00 | 1,123.90 | 8.79 | 1,016.65 | 8.35 | 1.66 | ||||||||||||||||||||||||
| Institutional | 1,000.00 | 1,127.70 | 4.51 | 1,020.69 | 4.28 | 0.85 | ||||||||||||||||||||||||
| 1 | The actual ending account value is based on the actual total return of the Fund for the period October 1, 2009 through March 31, 2010, 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 182/365 to reflect the most recent fiscal half year. |
26 Invesco Technology Fund
Trustees and Officers
The address of each trustee and officer of AIM Sector Funds (Invesco Sector Funds) (the “Trust”), is 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. Each trustee oversees 197 portfolios in the Invesco Funds complex. 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.
| Trustee | Other | |||||||
| and/ or | Directorship(s) | |||||||
| Name, Year of Birth and | Officer | Held by | ||||||
| Position(s) Held with the Trust | Since | Principal Occupation(s) During Past 5 Years | Trustee | |||||
Interested Persons | ||||||||
Martin L. Flanagan1 — 1960 Trustee | 2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Trustee, The AIM Family of Funds®; Board of Governors, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business 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 and Vice Chairman, Investment Company Institute | None | |||||
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, Chief Executive Officer and President, 1371 Preferred Inc. (holding company); Director, Chairman, Chief Executive Officer and President, Invesco Management Group Inc. (formerly known as Invesco Aim Management Group, Inc.) (financial services holding company); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent) and AIM GP Canada Inc. (general partner for limited partnerships); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.) (registered transfer agent) and INVESCO Distributors, Inc. (registered broker dealer); Director, President and Chairman, INVESCO Inc. (holding company) and Invesco Canada Holdings Inc. (holding company); Chief Executive Officer, AIM Trimark Corporate Class Inc. (corporate mutual fund company) and AIM Trimark Canada Fund Inc. (corporate mutual fund company); Director and Chief Executive Officer, Invesco Trimark Ltd./Invesco Trimark Ltèe (registered investment adviser and registered transfer agent) and Invesco Trimark Dealer Inc. (registered broker dealer); Trustee, President and Principal Executive Officer, The AIM Family of Funds® (other than AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust); Trustee and Executive Vice President, The AIM Family of Funds® (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust only) Formerly: 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 Capital Management, Inc. ) (formerly, 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 AIM Family of 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. | None | |||||
Independent Trustees | ||||||||
| Bruce L. Crockett — 1944 Trustee and Chair | 2003 | Chairman, Crockett Technology Associates (technology consulting company) Formerly: Director, Captaris (unified messaging provider) | ACE Limited (insurance company); and Investment Company Institute | |||||
| Bob R. Baker — 1936 Trustee | 1983 | Retired | None | |||||
| Frank S. Bayley — 1939 Trustee | 2003 | Retired Formerly: Director, Badgley Funds, Inc. (registered investment company) (2 portfolios) | None | |||||
| James T. Bunch — 1942 Trustee | 2000 | Founder, Green, Manning & Bunch Ltd. (investment banking firm) Formerly: Executive Committee, United States Golf Association | Vice Chairman, Board of Governors, Western Golf Association/Evans Scholars Foundation and Director, Denver Film Society | |||||
| 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 | Board 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) | Administaff | |||||
| Carl Frischling — 1937 Trustee | 2003 | Partner, law firm of Kramer Levin Naftalis and Frankel LLP | Director, Reich & Tang Funds (16 portfolios) | |||||
| Prema Mathai-Davis — 1950 Trustee | 2003 | Retired | None | |||||
| Lewis F. Pennock — 1942 Trustee | 2003 | Partner, law firm of Pennock & Cooper | None | |||||
| Larry Soll — 1942 Trustee | 1997 | Retired | None | |||||
| Raymond Stickel, Jr. — 1944 Trustee | 2005 | Retired Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios) | None | |||||
| 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. |
T-1
Trustees and Officers — (continued)
| Trustee | Other | |||||||
| and/ or | Directorship(s) | |||||||
| Name, Year of Birth and | Officer | Held by | ||||||
| Position(s) Held with the Trust | Since | Principal Occupation(s) During Past 5 Years | Trustee | |||||
Other Officers | ||||||||
| Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer of The AIM Family of Funds® | 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.), 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 INVESCO Distributors, Inc.; Director and Vice President, INVESCO Funds Group, Inc.; Senior Vice President, Chief Legal Officer and Secretary, The AIM Family of Funds®; and Manager, Invesco PowerShares Capital Management LLC Formerly: Director, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco Advisers, Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco Capital Management (formerly known as 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 | |||||
| Lisa O. Brinkley — 1959 Vice President | 2004 | Global Compliance Director, Invesco Ltd.; Chief Compliance Officer, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) and Invesco Investment Services, Inc.(formerly known as Invesco Aim Investment Services, Inc.); and Vice President, The AIM Family of Funds® Formerly: Senior Vice President, Invesco Management Group, Inc. (formerly known as Invesco Aim Management Group, Inc.); Senior Vice President and Chief Compliance Officer, Invesco Advisers, Inc. and The AIM Family of Funds®; Vice President and Chief Compliance Officer, Invesco Capital Management, Inc. (formerly known as Invesco Aim Capital Management, Inc.) and Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.); Vice President, Invesco Investment Services (formerly known as Invesco Aim Investment Services, Inc.) and Fund Management Company | N/A | |||||
| Kevin M. Carome — 1956 Vice President | 2003 | General Counsel, Secretary and Senior Managing Director, Invesco Ltd.; Director, Invesco Holding Company Limited and INVESCO Funds Group, Inc.; Director and Executive Vice President, IVZ, Inc., Invesco Group Services, Inc., Invesco North American Holdings, Inc. and Invesco Investments (Bermuda) Ltd.; Director and Secretary, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Vice President, The AIM Family of Funds®; and Trustee, 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: Senior Managing Director and Secretary, Invesco North American Holdings, Inc.; Vice President and Secretary, IVZ, Inc. and Invesco Group Services, Inc.; Senior Managing Director and Secretary, Invesco Holding Company Limited; Director, Senior Vice President, Secretary and General Counsel, Invesco Management Group Inc. (formerly known as Invesco Aim Management Group, Inc.) and Invesco Advisers, Inc.; Senior Vice President, Invesco Distributors, Inc.; Director, General Counsel and Vice President, Fund Management Company; Vice President, Invesco Capital Management Inc. (formerly known as Invesco Aim Capital Management, Inc.) and Invesco Investment Services, Inc.; Senior Vice President, Chief Legal Officer and Secretary, The AIM Family of Funds®; Director and Vice President, INVESCO Distributors, Inc.; and Chief Executive Officer and President, INVESCO Funds Group, Inc. | N/A | |||||
| Sheri Morris — 1964 Vice President, Treasurer and Principal Financial Officer | 2003 | Vice President, Treasurer and Principal Financial Officer, The AIM Family of Funds®; and Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser) Formerly: Vice President, Invesco Advisers, Inc., Invesco Capital Management, Inc. (formerly known as Invesco Aim Capital Management, Inc.) and Invesco Private Asset Management Inc. (formerly known as Invesco Aim Private Asset Management, Inc.); Assistant Vice President and Assistant Treasurer, The AIM Family of Funds® and Assistant Vice President, Invesco Advisers, Inc., Invesco Capital Management, Inc. (formerly known as Invesco Aim Capital Management, Inc. and Invesco Private Asset Management Inc. (formerly known as Invesco Aim Private Asset Management, Inc.) | N/A | |||||
| Karen Dunn Kelley — 1960 Vice President | 2003 | Head of Invesco’s World Wide Fixed Income and Cash Management Group; Senior Vice President, 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.); Senior Vice President, Invesco Management Group, Inc. (formerly known as Invesco Aim Management Group, Inc.); and Director, Invesco Mortgage Capital Inc.; Vice President, The AIM Family of 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 AIM Family of Funds® (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust only) Formerly: 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 Capital Management, Inc. (formerly known as 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 Capital Management, Inc. (formerly known as Invesco Aim Capital Management, Inc.); Director of Cash Management, Senior Vice President, and Vice President, Invesco Advisers, Inc. and The AIM Family of Funds® (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Tax-Free Investments Trust only) | N/A | |||||
| Lance A. Rejsek — 1967 Anti-Money Laundering Compliance Officer | 2005 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.), Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.), The AIM Family of Funds®, PowerShares Exchange-Traded Fund Trust, PowerShares Exchang-Traded Trust II, PowerShares India Exchange-Traded Fund Trust and PowerShares Actively Managed Exchange-Traded Fund Trust. Formerly: Anti-Money Laundering Compliance Officer, Fund Management Company, Invesco Advisers, Inc., Invesco Capital Management, Inc. (formerly known as Invesco Aim Capital Management, Inc. and Invesco Private Asset Management, Inc. (formerly known as Invesco Aim Private Asset Management, Inc.) | N/A | |||||
T-2
Trustees and Officers — (continued)
| Trustee | Other | |||||||
| and/ or | Directorship(s) | |||||||
| Name, Year of Birth and | Officer | Held by | ||||||
| Position(s) Held with the Trust | Since | Principal Occupation(s) During Past 5 Years | Trustee | |||||
| Todd L. Spillane — 1958 Chief Compliance Officer | 2006 | Senior Vice President, Invesco Management Group Inc. (formerly known as Invesco Aim Management Group, Inc.); 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 AIM Family of Funds®, PowerShares Exchange-Traded Fund Trust, PowerShares Exchang-Traded Trust II, PowerShares India Exchange-Traded Fund Trust and PowerShares Actively Managed Exchange-Traded Fund Trust, INVESCO Private Capital Investments, Inc. (holding company), Invesco Private Capital, Inc. (registered investment adviser) and Invesco Senior Secured Management, Inc. (registered investment adviser); 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 and Chief Compliance Officer, Invesco Advisers, Inc. and Invesco Capital Management, Inc. (formerly known as Invesco Aim Capital Management, Inc.); Chief Compliance Officer, Invesco Global Asset Management (N.A.), Inc.; Vice President, Invesco Capital Management, Inc. (formerly known as Invesco Aim Capital Management, Inc.) and Fund Management Company | 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 | Investment Adviser | Distributor | Auditors | |||
| 11 Greenway Plaza, Suite 2500 Houston, TX 77046-1173 | Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 | Invesco Distributors, Inc. 11 Greenway Plaza, Suite 2500 Houston, TX 77046-1173 | PricewaterhouseCoopers LLP 1201 Louisiana Street, Suite 2900 Houston, TX 77002-5678 | |||
Counsel to the Fund | Counsel to the Independent Trustees | Transfer Agent | Custodian | |||
| Stradley Ronon Stevens & Young, LLP 2600 One Commerce Square Philadelphia, PA 19103 | Kramer, Levin, Naftalis & Frankel LLP 1177 Avenue of the Americas New York, NY 10036-2714 | Invesco Investment Services, Inc. P.O. Box 4739 Houston, TX 77210-4739 | State Street Bank and Trust Company 225 Franklin Boston, MA 02110-2801 |
T-3
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| • | environmentally friendly. Go green by reducing the number of trees used to produce paper. | |
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| • | easy. Download, save and print files using your home computer with a few clicks of your mouse. |
This service is provided by Invesco Investment Services, Inc.
Invesco Privacy Policy
You share personal and financial information with us that is necessary for your transactions and your account records. We take very seriously the obligation to keep that information confidential and private.
Invesco collects nonpublic personal information about you from account applications or other forms you complete and from your transactions with us or our affiliates. We do not disclose information about you or our former customers to service providers or other third parties except to the extent necessary to service your account and in other limited circumstances as permitted by law. For example, we use this information to facilitate the delivery of transaction confirmations, financial reports, prospectuses and tax forms.
Even within Invesco, only people involved in the servicing of your accounts and compliance monitoring have access to your information. To ensure the highest level of confidentiality and security, Invesco maintains physical, electronic and procedural safeguards that meet or exceed federal standards. Special measures, such as data encryption and authentication, apply to your communications with us on our website. More detail is available to you at invesco.com/privacy.
Important Notice Regarding Delivery of Security Holder Documents
To reduce Fund expenses, only one copy of most shareholder documents may be mailed to shareholders with multiple accounts at the same address (Householding). Mailing of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact Invesco Investment Services, Inc. at 800 959 4246 or contact your financial institution. We will begin sending you individual copies for each account within 30 days after receiving your request.
Fund holdings and proxy voting information
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is available at invesco.com/completeqtrholdings. Shareholders can also look up the Fund’s Forms N-Q on the SEC website at sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-03826 and 002-85905.
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, 2009, is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov.
If used after July 20, 2010, this report must be accompanied by a Quarterly Performance Review for the most recent quarter-end.
Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the U.S. distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
On April 30, 2010, Invesco Aim Distributors, Inc. became Invesco Distributors, Inc., Invesco Aim Investment Services, Inc. became Invesco Investment Services, Inc., and AIM funds became Invesco funds. In addition, invescoaim.com became invesco.com.
I-TEC-AR-1 Invesco Distributors, Inc.
| Annual Report to Shareholders April 30, 2010 Invesco Utilities Fund Effective April 30, 2010, AIM Leisure Fund was renamed Invesco Leisure Fund. |
| 2 Letters to Shareholders 4 Performance Summary 4 Management Discussion 6 Long-Term Fund Performance 8 Supplemental Information 9 Schedule of Investments 13 Financial Statements 15 Notes to Financial Statements 23 Financial Highlights 24 Auditor’s Report 25 Fund Expenses 27 Tax Information T-1 Trustees and Officers |
Letters to Shareholders
Dear Shareholders:
In the 13 months covered by this report, the U.S. economy improved dramatically from where it stood in early 2009. In the third quarter of 2009, the economy ended its year-long contraction and began growing again. Major U.S. stock market indexes rose sharply in anticipation of economic improvement; despite occasional volatility, they continued rising as evidence mounted that the recovery was genuine. Over the last year, global equity indexes also rallied strongly from their early 2009 lows.
While economic improvement was undeniable, unemployment remained high by historical standards, and unfortunately it appeared unlikely that the jobless rate would decline significantly anytime soon. Stubbornly high unemployment continued to cast a pall over the nation’s economic outlook.
Timely communication
Unpredictable and volatile markets, together with economic uncertainty, caused many of you to seek information relative to your investments. Some of you contacted your financial advisers to ask questions and obtain guidance. Others visited our website, invesco.com, where we offer timely market commentary, investor education information and sector updates. In particular, I recommend the Investment Perspectives articles featured on our home page; they are written by Invesco’s investment professionals and cover a wide range of topics that are updated regularly.
Also on our website, you’ll find a commentary from me that discusses the name change we made on April 30 — from Invesco Aim to Invesco. Some of the changes related to this event include all AIM funds being renamed Invesco funds. (It’s important to note that the funds’ investment strategies and objectives have not changed.) You’ll notice on this report the Invesco logo has replaced the previous Invesco Aim logo. And our new Web address is now invesco.com. These changes are the latest steps in the rebranding process we began two years ago, when we added Invesco in front of Aim. For more information about the change, please read the shareholder Q&A on the account balance page at invesco.com.
At invesco.com you can also access your Fund’s latest quarterly commentary. Simply click on Mutual Funds inside the Financial Products box. Then, in the Fund Information box, click on Quarterly Commentary and select your Fund.
Timely information like that available on our website — together with the advice and guidance of a trusted financial adviser — can be especially useful in uncertain times. Market volatility and economic uncertainty are two factors that can prompt investors to abandon their long-term saving and investment plans. A financial adviser can show you just how costly that could be over the long term — and can explain that saving more and investing more regularly is a time-tested way to build a solid portfolio. He or she can help you identify appropriate investments, given your individual risk tolerance, time horizon and investment goals.
Taking our business forward
Invesco’s acquisition of Morgan Stanley’s retail asset management business, including Van Kampen Investments, was completed on June 1, 2010. Our two companies have similar investment philosophies and cultures, as well as complementary investment expertise. I believe this combination represents the next step in our company’s evolution — and will allow us to better serve you through:
| • | Greater efficiencies and cost savings | |
| • | A broader range of investment options | |
| • | A continued commitment to investment excellence, with complementary portfolio management expertise |
While market conditions change from time to time, our commitment to putting our clients first, helping you achieve your financial goals and providing excellent customer service will not.
If you have questions about your account, please contact one of our client services representatives at 800 959 4246. If you have a question or comment for me, please email me at phil@invesco.com.
Thank you for investing with us.
Sincerely,
Philip Taylor
Senior Managing Director, Invesco
Senior Managing Director, Invesco
2 Invesco Utilities Fund
Dear Fellow Shareholders:
By all accounts, last year was a challenging year for all of us. Although the economy and financial markets whipsawed, the final months of the decade concluded with many of us feeling somewhat more optimistic about 2010 as we began to see the markets and economy evidence the first green shoots of recovery.
Perhaps the most valuable takeaway from last year is the manner in which it underscored the importance of adopting the long-term, appropriately diversified investment strategy I’ve mentioned in my previous letters. If anything, last year was the litmus test for this approach.
Please be assured that your Board continues to oversee the Invesco Funds with a strong sense of responsibility for your savings and a deep appreciation for your trust. We have already begun the annual review and management contract renewal process and will continue to seek to manage costs and reward performance in ways that put your interests first. (It might also interest you to know that the Board currently has five committees — Compliance, Audit, Governance, Investments, and Valuation Distribution and Proxy Voting — whose members exercise oversight to maintain the Invesco Funds’ “Investor First” orientation.)
To that end, some of you may have seen that Invesco is assuming the management of the Van Kampen family of mutual funds as well as Morgan Stanley’s retail funds. We view this addition as an excellent opportunity to provide you, our shareholders, access to an even broader range of well-diversified mutual funds under the Invesco umbrella. I’ll keep you updated on the work we’re doing to deliver the value of this acquisition to our shareholders in my upcoming letters.
As always, you are welcome to contact me at bruce@brucecrockett.com with any questions or concerns you may have. We look forward to representing you and serving you in the coming year.
Sincerely,
Bruce L. Crockett
Independent Chair
Invesco Funds Board of Trustees
Independent Chair
Invesco Funds Board of Trustees
3 Invesco Utilities Fund
Management’s Discussion of Fund Performance
Performance summary
For the 13 months ended April 30, 2010, the utilities sector lagged the broad market (as measured by the S&P 500), which rallied strongly. Likewise, Invesco Utilities Fund had positive returns but lagged the S&P 500 Index for the period. Investment results for the Fund’s Class A shares at net asset value compared favorably to the Fund’s style-specific benchmark, the S&P 500 Utilities Index.
The Fund’s positive results relative to the S&P 500 Utilities Index were due largely to our holdings in the gas utilities and oil, gas and consumable fuels industries. Performance drivers were largely stock-specific, though the Fund’s electric, gas and multi-utilities industry holdings had the largest positive impact on the Fund’s absolute returns. Given the dramatic market move over the period, there were just two holdings that detracted from the Fund’s absolute returns for the fiscal year.
Your Fund’s long-term performance appears later in this report.
Fund vs. Indexes
Total returns, 3/31/09 to 4/30/10, 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 | 24.20 | % | ||
| Class B Shares | 23.31 | |||
| Class C Shares | 23.28 | |||
| Class Y Shares | 24.55 | |||
| Investor Class Shares | 24.27 | |||
| Institutional Class Shares | 24.84 | |||
S&P 500 Index▼ (Broad Market Index) | 47.26 | |||
S&P 500 Utilities Index▼ *(Style-Specific Index) | 22.14 | |||
Lipper Utility Funds Index▼ (Peer Group Index) | 29.86 |
| ▼ | Lipper Inc. | |
| * | On December 1, 2009, we adopted the S&P 500 Utilities Index as the Fund’s style-specific index because we believe it reflects the performance of the type of securities in which the Fund invests. |
How we invest
In selecting investments, we focus on companies within the electric utility, natural gas, water and telecommunications industries. We emphasize companies with solid balance sheets and operational cash flows that support sustained or increasing dividends. Fundamental research and financial statement analysis are the backbone of our bottom-up investment process. Using a variety of valuation techniques, we estimate the potential return of holdings over a two-year investment period. We construct the portfolio to provide the best combination of price appreciation potential, dividend income and risk profile; the Fund typically maintains full sector exposure. We manage risk by maintaining an average of 30-50 positions, low turnover and a rigorous sell discipline.
We maintain a rigorous sell discipline when any of the following occur:
| • | There is deterioration in the capital structure that jeopardizes the dividend. |
| • | The target price is met. |
Fund data as of 4/30/10
Portfolio Composition
By sector
By sector
| Utilities | 89.0 | % | ||
| Telecommunication Services | 4.4 | |||
| Energy | 3.4 | |||
Money Market Funds Plus Other Assets | ||||
Less Liabilities | 3.2 | |||
| Total Net Assets | $229.3 million | |||
| Total Number of Holdings* | 31 | |||
Top 10 Equity Holdings*
| 1. Entergy Corp. | 5.0 | % | ||
| 2. CMS Energy Corp. | 5.0 | |||
| 3. Dominion Resources, Inc. | 4.8 | |||
| 4. PG&E Corp. | 4.6 | |||
| 5. ONEOK, Inc. | 4.3 | |||
| 6. Edison International | 4.1 | |||
| 7. Xcel Energy, Inc. | 4.1 | |||
| 8. American Electric Power Co., Inc. | 3.9 | |||
| 9. Southern Co. | 3.9 | |||
| 10. Pepco Holdings, Inc. | 3.6 |
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. |
| • | There is a significant decline in price. |
| • | A more compelling investment opportunity exists. |
We are committed to providing strategic exposure to a traditionally defensive and income oriented asset class by using a total return approach to managing the Fund, emphasizing capital appreciation, current income and capital preservation.
Market conditions and your Fund
The 13 months ended April 30, 2010, were characterized by a strong rally in equity markets and generally improving economic conditions. The period began, however, amid a sharp economic downturn in the aftermath of the credit crisis. During this time, central banks coordinated easing efforts and companies cut costs aggressively; as a result, liquidity improved and valuations in both the credit and equity markets recovered from their lows. Fueled by fiscal and monetary stimulus, economic conditions stabilized and returned to a modest level of growth.
Corporate profits also improved, and by the end of the period, a number of companies reported improving demand and a return of top-line revenue growth. Recognizing a more stable environment, the U.S. Federal Reserve began signaling the eventual removal of excess liquidity from the financial system, though the pace of the reversal of the current accommodative monetary policy was uncertain. The employment picture was also uncertain; while layoffs declined, new hiring remained soft, and the unemployment rate hovered at just under 10% for much of the fiscal year.1
The stock market rally that began in March 2009, continued through much of the fiscal year with major U.S. equity indexes posting double digit gains.2 All 10 sectors of the S&P 500 Index had double digit returns for the period.2 More economically sensitive sectors such as financials, consumer discretionary and industrials had the highest returns, while the traditionally defensive telecommunication services and utilities sectors had the lowest returns.2
The largest contributor to the Fund’s absolute return was gas utility ONEOK. Despite weakness in a number of its business units due to lower natural gas prices, new natural gas liquids pipeline capacity increased ONEOK’s gathering and processing volumes and provided a consistent source of cash flows. The company’s multi-year expansion plan includes increases in pipeline capacity, which we believe should provide
4 Invesco Utilities Fund
additional earnings. The company raised its dividend during the fiscal year, and its shares were added to the S&P 500 Index.
Oil and gas producer Williams Companies also raised its dividend during the year and was a top contributor to Fund returns. Largely exploration and production driven, the company was negatively affected by lower natural gas prices, which depressed earnings for much of the period. However, within Williams’ pipeline business, higher volumes and lucrative hedges offset some of the impact of lower natural gas prices. In a move that was greeted favorably by investors, the company announced a restructuring plan designed to shift assets to Williams Partners (not a Fund holding), an affiliated pipeline and distribution business.
A significant detractor from Fund results was Ameren, a public utility company operating primarily in regulated markets in Illinois and Missouri. Following a dividend cut of approximately 39% in February 20093, the company reduced its earnings guidance for fiscal 2009 due to reduced demand and tighter credit. We eliminated our position during the period.
Another detractor was PPL, a Pennsyl-vania-based utility company that generates and delivers electricity predominately in the northeastern U.S. In April 2010, the company announced that it would acquire two U.S.-based, regulated subsidiaries of German utility E.ON. The approximately $7.6 billion purchase price was higher than anticipated, and the company’s shares declined following the announcement.
During the year, we made a number of modest changes to the Fund’s positioning, which included reducing our exposure to the telecommunications industry and emphasizing regulated over non-regulated utilities given their relatively attractive valuations. At the end of the year, the Fund’s largest industry allocations were in the electric, gas and multi-utilities industries.
As the Fund’s fiscal year closed, a dominant issue affecting the utility sector was the multi-year decline in both consumer and industrial electrical consumption. While investors debate the trajectory of electrical demand recovery, the impact of a tepid recovery could result in further pressure on state utility commissions to deny rate increases or for utilities to file for lower returns on equity. As a result of the improvement in credit markets, many companies have reduced their debt and generally improved their financial metrics. The volatility of commodity prices also decreased from historic peak levels in 20094, enabling regulated utilities to better manage their input costs. Valuations for the group have improved and they remain modestly attractive relative to historical levels.
In closing, we would like to thank you for your continued investment in Invesco Utilities Fund. We are committed to providing investors strategic exposure to a traditionally defensive and income oriented asset class through our total return approach.
| 1 | Bureau of Labor Statistics | |
| 2 | Lipper Inc. | |
| 3 | Ameren Corp. | |
| 4 | Bloomberg L.P. |
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 index disclosures later in this report.
Meggan Walsh
Chartered Financial Analyst, senior portfolio manager, is manager of Invesco Utilities Fund. She began her investment career in 1987 and joined Invesco in 1991. Ms. Walsh earned a B.S. in finance from the University of Maryland and an M.B.A. from Loyola University Maryland.
Davis Paddock
Chartered Financial Analyst, portfolio manager, is manager of Invesco Utilities Fund. He joined Invesco in 2001. Mr. Paddock earned a B.A. and an M.B.A. from The University of Texas at Austin.
Assisted by the Utilities Team
Fund data as of 3/31/10
Portfolio Composition
By sector
By sector
| Utilities | 88.2 | % | ||
| Telecommunication Services | 4.9 | |||
| Energy | 3.3 | |||
Money Market Funds Plus Other Assets | ||||
Less Liabilities | 3.6 | |||
| Total Net Assets | $228.6 million | |||
| Total Number of Holdings* | 31 | |||
Top 10 Equity Holdings*
| 1. Entergy Corp. | 5.1 | % | ||
| 2. Dominion Resources, Inc. | 4.8 | |||
| 3. CMS Energy Corp. | 4.7 | |||
| 4. PG&E Corp. | 4.4 | |||
| 5. Edison International | 4.1 | |||
| 6. Xcel Energy, Inc. | 4.0 | |||
| 7. ONEOK, Inc. | 4.0 | |||
| 8. American Electric Power Co., Inc. | 3.9 | |||
| 9. PPL Corp. | 3.9 | |||
| 10. Southern Co. | 3.7 |
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. |
5 Invesco Utilities Fund
Your Fund’s Long-Term Performance
Results of a $10,000 Investment — Oldest Share Class without Sales Charges since Inception
Index data from 5/31/86, Fund data from 6/2/86
| 1 | Lipper Inc. |
Results of a $10,000 Investment — Oldest Share Class with Sales Charges since Inception
Index data from 1/31/00, Fund data from 2/14/00
| 1 | Lipper Inc. |
Past performance cannot guarantee comparable future results.
The performance data shown in the first chart above is that of the Fund’s Investor Class shares. The performance of the Fund’s other share classes will differ primarily due to different sales charge structures and class expenses and may be greater than or less than the performance of the Fund’s Investor Class shares. The data shown in this chart includes reinvested distributions, Fund expenses and management fees. Index results include reinvested dividends.
The performance data shown in the second chart above is that of the Fund’s Class C shares. The performance of the Fund’s other share classes will differ primarily due to different sales charge structures and class expenses and may be greater than or less than the performance of the Fund’s Class C shares. The data shown in the second chart above includes reinvested distributions, Fund expenses and management fees. Index results include reinvested dividends, but they do not reflect sales charges.
Performance of the peer group reflects fund expenses and management fees; performance of a market index does not. Performance shown in the charts and table does not reflect deduction of taxes a shareholder would pay on Fund distributions or sale of Fund shares.
During the fiscal year, the Fund elected to use the S&P 500 Utilities Index as its style-specific index because we believe it reflects the performance of the type of securities in which the Fund invests. This index appears in the second chart above.
Both charts above are logarithmic charts, which present the fluctuations in the value of the Fund’s share class and its indexes. We believe that a logarithmic chart is more effective than other types of charts in illustrating changes in value during the early years shown in the chart. The vertical axis, the one that indicates the dollar value of an investment, is constructed with each segment representing a percent change in the value of the investment. In both charts, each segment represents a doubling, or 100% change, in the value of the investment.
6 Invesco Utilities Fund
Average Annual Total Returns
As of 4/30/10, including maximum applicable sales charges
Class A Shares | ||||
| Inception (3/28/02) | 5.48 | % | ||
| 5 Years | 4.02 | |||
| 1 Year | 16.29 | |||
Class B Shares | ||||
| Inception (3/28/02) | 5.45 | % | ||
| 5 Years | 4.06 | |||
| 1 Year | 17.08 | |||
Class C Shares | ||||
| Inception (2/14/00) | -1.32 | % | ||
| 10 Years | -0.89 | |||
| 5 Years | 4.42 | |||
| 1 Year | 21.08 | |||
Class Y Shares | ||||
| 10 Years | -0.03 | % | ||
| 5 Years | 5.29 | |||
| 1 Year | 23.33 | |||
Investor Class Shares | ||||
| Inception (6/2/86) | 7.76 | % | ||
| 10 Years | -0.07 | |||
| 5 Years | 5.21 | |||
| 1 Year | 23.03 | |||
Institutional Class Shares | ||||
| Inception (10/25/05) | 3.95 | % | ||
| 1 Year | 23.72 |
Average Annual Total Returns
As of 3/31/10, the most recent calendar quarter-end including maximum applicable sales charges
Class A Shares | ||||
| Inception (3/28/02) | 5.28 | % | ||
| 5 Years | 3.75 | |||
| 1 Year | 17.17 | |||
Class B Shares | ||||
| Inception (3/28/02) | 5.25 | % | ||
| 5 Years | 3.80 | |||
| 1 Year | 18.08 | |||
Class C Shares | ||||
| Inception (2/14/00) | -1.52 | % | ||
| 10 Years | -1.79 | |||
| 5 Years | 4.16 | |||
| 1 Year | 22.07 | |||
Class Y Shares | ||||
| 10 Years | -0.94 | % | ||
| 5 Years | 5.01 | |||
| 1 Year | 24.35 | |||
Investor Class Shares | ||||
| Inception (6/2/86) | 7.70 | % | ||
| 10 Years | -0.98 | |||
| 5 Years | 4.93 | |||
| 1 Year | 24.05 | |||
Institutional Class Shares | ||||
| Inception (10/25/05) | 3.56 | % | ||
| 1 Year | 24.64 |
Class Y shares incepted on October 3, 2008. Performance shown prior to that date is that of Investor Class shares and includes the 12b-1 fees applicable to Investor Class shares. Investor Class shares 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 Y, Investor Class and Institutional Class shares was 1.51%, 2.26%, 2.26%, 1.26%, 1.51% and 1.02%, 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, 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 Fund not waived fees and/or reimbursed expenses in the past, performance would have been lower.
New Fiscal Year-End
Since our last report to you, the Fund’s fiscal year-end was changed from March 31 to April 30.
7 Invesco Utilities Fund
Invesco Utilities Fund’s investment objectives are capital growth and income.
| • | Unless otherwise stated, information presented in this report is as of April 30, 2010, and is based on total net assets. | |
| • | Unless otherwise noted, all data provided by Invesco. | |
| • | To access your Fund’s reports/prospectus visit invesco.com/fundreports. |
About share classes
| • | Effective September 30, 2003, for qualified plans only, those previously established are eligible to purchase Class B shares of any Invesco fund. Please see the prospectus for more information. |
| • | Class Y shares are available to only certain investors. Please see the prospectus for more information. | |
| • | All Investor Class shares are closed to new investors. Contact your financial adviser about purchasing our other share classes. | |
| • | 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
| • | Prices of equity securities change in response to many factors, including the historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity. | |
| • | Foreign securities have additional risks, including exchange rate changes, political and economic upheaval, relative lack of information, relatively low market liquidity, and the potential lack of strict financial and accounting controls and standards. |
| • | Since a large percentage of the Fund’s assets may be invested in securities of a limited number of companies, each investment has a greater effect on the Fund’s overall performance, and any change in the value of those securities could significantly affect the value of your investment in the Fund. |
| • | There is no guarantee that the investment techniques and risk analysis used by the Fund’s portfolio managers will produce the desired results. |
| • | The prices of securities held by the Fund may decline in response to market 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. |
| • | Government regulation, difficulty in obtaining adequate financing and investment return, environmental issues, fuel prices for generation of electricity, natural gas availability, power marketing and trading risks, and risks associated with nuclear power facilities may adversely affect the market value of the Fund’s holdings. |
About indexes used in this report
| • | The S&P 500® Index is an unmanaged index considered representative of the U.S. stock market. |
| • | The S&P 500 Utilities Index is an unmanaged index considered representative of the utilities market. |
| • | The Lipper Utility Funds Index is an unmanaged index considered representative of utility funds tracked by Lipper. |
| • | 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. |
| • | 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 reflects fund expenses; performance of a market index does not. |
Other information
| • | The Chartered Financial Analyst® (CFA®) designation is globally recognized and attests to a charter-holder’s success in a rigorous and comprehensive study program in the field of investment management and research analysis. |
| • | 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. |
| • | 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.
Fund Nasdaq Symbols
| Class A Shares | IAUTX | |||
| Class B Shares | IBUTX | |||
| Class C Shares | IUTCX | |||
| Class Y Shares | IAUYX | |||
| Investor Class Shares | FSTUX | |||
| Institutional Class Shares | FSIUX | |||
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
8 Invesco Utilities Fund
Schedule of Investments(a)
April 30, 2010
| Shares | Value | |||||||
| Common Stocks–96.77% | ||||||||
| Electric Utilities–44.02% | ||||||||
| American Electric Power Co., Inc. | 259,932 | $ | 8,915,668 | |||||
| Duke Energy Corp. | 422,440 | 7,088,543 | ||||||
E.ON AG (Germany)(b) | 181,827 | 6,720,770 | ||||||
| Edison International | 275,236 | 9,459,861 | ||||||
| Entergy Corp. | 141,866 | 11,532,287 | ||||||
| Exelon Corp. | 161,655 | 7,046,541 | ||||||
| FirstEnergy Corp. | 182,411 | 6,907,905 | ||||||
| FPL Group, Inc. | 99,930 | 5,201,357 | ||||||
| Northeast Utilities | 201,714 | 5,605,632 | ||||||
| Pepco Holdings, Inc. | 493,430 | 8,260,018 | ||||||
| Portland General Electric Co. | 373,902 | 7,433,172 | ||||||
| PPL Corp. | 319,998 | 7,923,150 | ||||||
| Southern Co. | 256,562 | 8,866,783 | ||||||
| 100,961,687 | ||||||||
| Gas Utilities–11.83% | ||||||||
| AGL Resources Inc. | 180,315 | 7,124,246 | ||||||
| EQT Corp. | 71,631 | 3,115,232 | ||||||
| ONEOK, Inc. | 200,000 | 9,828,000 | ||||||
| Questar Corp. | 89,061 | 4,270,475 | ||||||
| UGI Corp. | 101,519 | 2,790,757 | ||||||
| 27,128,710 | ||||||||
| Independent Power Producers & Energy Traders–3.24% | ||||||||
NRG Energy, Inc.(c) | 307,000 | 7,420,190 | ||||||
| Integrated Telecommunication Services–4.35% | ||||||||
| AT&T Inc. | 172,662 | 4,499,572 | ||||||
| Verizon Communications Inc. | 189,471 | 5,473,817 | ||||||
| 9,973,389 | ||||||||
| Multi-Utilities–29.89% | ||||||||
| CMS Energy Corp. | 700,151 | 11,384,455 | ||||||
| Dominion Resources, Inc. | 265,238 | 11,086,948 | ||||||
| National Grid PLC (United Kingdom) | 770,524 | 7,438,849 | ||||||
| PG&E Corp. | 238,605 | 10,450,899 | ||||||
| Public Service Enterprise Group Inc. | 223,875 | 7,193,104 | ||||||
| Sempra Energy | 150,445 | 7,398,885 | ||||||
| Wisconsin Energy Corp. | 80,074 | 4,204,686 | ||||||
| Xcel Energy, Inc. | 432,000 | 9,396,000 | ||||||
| 68,553,826 | ||||||||
| Oil & Gas Storage & Transportation–3.44% | ||||||||
| El Paso Corp. | 193,159 | 2,337,224 | ||||||
| Williams Cos., Inc. (The) | 235,177 | 5,552,529 | ||||||
| 7,889,753 | ||||||||
| Total Common Stocks (Cost $208,671,297) | 221,927,555 | |||||||
| Money Market Funds–3.16% | ||||||||
Liquid Assets Portfolio–Institutional Class(d) | 3,626,976 | 3,626,976 | ||||||
Premier Portfolio–Institutional Class(d) | 3,626,976 | 3,626,976 | ||||||
| Total Money Market Funds (Cost $7,253,952) | 7,253,952 | |||||||
| TOTAL INVESTMENTS (excluding investments purchased with cash collateral from securities on loan)–99.93% (Cost $215,925,249) | 229,181,507 | |||||||
| Investments Purchased with Cash Collateral from Securities on Loan | ||||||||
| Money Market Funds–2.33% | ||||||||
Liquid Assets Portfolio–Institutional Class (Cost $5,342,960)(d)(e) | 5,342,960 | 5,342,960 | ||||||
| TOTAL INVESTMENTS–102.26% (Cost $221,268,209) | 234,524,467 | |||||||
| OTHER ASSETS LESS LIABILITIES–(2.26)% | (5,183,910 | ) | ||||||
| NET ASSETS–100.00% | $ | 229,340,557 | ||||||
Investment Abbreviations:
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) | All or a portion of this security was out on loan at April 30, 2010. | |
| (c) | Non-income producing security. | |
| (d) | The money market fund and the Fund are affiliated by having the same investment adviser. | |
| (e) | The security has been segregated to satisfy the commitment to return the cash collateral received in securities lending transactions upon the borrower’s return of the securities loaned. See Note 1J. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
9 Invesco Utilities Fund
Schedule of Investments(a)
March 31, 2010
| Shares | Value | |||||||
| Common Stocks–96.43% | ||||||||
| Electric Utilities–44.45% | ||||||||
| American Electric Power Co., Inc. | 259,932 | $ | 8,884,476 | |||||
| Duke Energy Corp. | 422,440 | 6,894,221 | ||||||
| E.ON AG (Germany) | 181,827 | 6,714,299 | ||||||
| Edison International | 275,236 | 9,404,814 | ||||||
| Entergy Corp. | 141,866 | 11,540,799 | ||||||
| Exelon Corp. | 161,655 | 7,082,105 | ||||||
| FirstEnergy Corp. | 182,411 | 7,130,446 | ||||||
| FPL Group, Inc. | 110,318 | 5,331,669 | ||||||
| Northeast Utilities | 201,714 | 5,575,375 | ||||||
| Pepco Holdings, Inc. | 493,430 | 8,462,324 | ||||||
| Portland General Electric Co. | 373,902 | 7,220,048 | ||||||
| PPL Corp. | 319,998 | 8,867,145 | ||||||
| Southern Co. | 256,562 | 8,507,596 | ||||||
| 101,615,317 | ||||||||
| Gas Utilities–11.80% | ||||||||
| AGL Resources Inc. | 216,240 | 8,357,676 | ||||||
| EQT Corp. | 71,631 | 2,936,871 | ||||||
| ONEOK, Inc. | 200,000 | 9,130,000 | ||||||
| Questar Corp. | 89,061 | 3,847,435 | ||||||
| UGI Corp. | 101,519 | 2,694,315 | ||||||
| 26,966,297 | ||||||||
| Independent Power Producers & Energy Traders–2.81% | ||||||||
NRG Energy, Inc.(b) | 307,000 | 6,416,300 | ||||||
| Integrated Telecommunication Services–4.95% | ||||||||
| AT&T Inc. | 210,869 | 5,448,855 | ||||||
| Verizon Communications Inc. | 189,471 | 5,877,390 | ||||||
| 11,326,245 | ||||||||
| Multi-Utilities–29.13% | ||||||||
| CMS Energy Corp. | 700,151 | 10,824,335 | ||||||
| Dominion Resources, Inc. | 265,238 | 10,903,934 | ||||||
| National Grid PLC (United Kingdom) | 770,524 | 7,506,777 | ||||||
| PG&E Corp. | 238,605 | 10,121,624 | ||||||
| Public Service Enterprise Group Inc. | 223,875 | 6,608,790 | ||||||
| Sempra Energy | 150,445 | 7,507,206 | ||||||
| Wisconsin Energy Corp. | 80,074 | 3,956,456 | ||||||
| Xcel Energy, Inc. | 432,000 | 9,158,400 | ||||||
| 66,587,522 | ||||||||
| Oil & Gas Storage & Transportation–3.29% | ||||||||
| El Paso Corp. | 193,159 | 2,093,843 | ||||||
| Williams Cos., Inc. (The) | 235,177 | 5,432,589 | ||||||
| 7,526,432 | ||||||||
| Total Common Stocks (Cost $211,559,764) | 220,438,113 | |||||||
| Money Market Funds–2.99% | ||||||||
Liquid Assets Portfolio–Institutional Class(c) | 3,417,807 | 3,417,807 | ||||||
Premier Portfolio–Institutional Class(c) | 3,417,807 | 3,417,807 | ||||||
| Total Money Market Funds (Cost $6,835,614) | 6,835,614 | |||||||
| TOTAL INVESTMENTS–99.42% (Cost $218,395,378) | 227,273,727 | |||||||
| OTHER ASSETS LESS LIABILITIES–0.58% | 1,314,695 | |||||||
| NET ASSETS–100.00% | $ | 228,588,422 | ||||||
Investment Abbreviations:
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 Utilities Fund
Statement of Assets and Liabilities
April 30, 2010 and March 31, 2010
| April 30, | March 31, | |||||||
| 2010 | 2010 | |||||||
| Assets: | ||||||||
| Investments, at value (Cost $208,671,297 and $211,559,764, respectively)* | $ | 221,927,555 | $ | 220,438,113 | ||||
| Investments in affiliated money market funds, at value and cost | 12,596,912 | 6,835,614 | ||||||
| Total investments, at value (Cost $221,268,209 and $218,395,378, respectively) | 234,524,467 | 227,273,727 | ||||||
| Receivables for: | ||||||||
| Investments sold | 262,659 | 1,288,726 | ||||||
| Fund shares sold | 138,460 | 73,693 | ||||||
| Dividends | 390,262 | 600,772 | ||||||
| Investment for trustee deferred compensation and retirement plans | 53,009 | 52,906 | ||||||
| Other assets | 37,051 | 28,751 | ||||||
| Total assets | 235,405,908 | 229,318,575 | ||||||
| Liabilities: | ||||||||
| Payables for: | ||||||||
| Fund shares reacquired | 373,252 | 395,647 | ||||||
| Dividends | — | 36 | ||||||
| Collateral upon return of securities loaned | 5,342,960 | — | ||||||
| Accrued fees to affiliates | 180,546 | 180,711 | ||||||
| Accrued operating expenses | 75,140 | 61,120 | ||||||
| Trustee deferred compensation and retirement plans | 93,453 | 92,639 | ||||||
| Total liabilities | 6,065,351 | 730,153 | ||||||
| Net assets applicable to shares outstanding | $ | 229,340,557 | $ | 228,588,422 | ||||
| Net assets consist of: | ||||||||
| Shares of beneficial interest | $ | 232,714,504 | $ | 238,591,995 | ||||
| Undistributed net investment income | 224,713 | 138,678 | ||||||
| Undistributed net realized gain (loss) | (16,855,108 | ) | (19,021,322 | ) | ||||
| Undistributed appreciation | 13,256,448 | 8,879,071 | ||||||
| $ | 229,340,557 | $ | 228,588,422 | |||||
| Net Assets: | ||||||||
| Class A | $ | 130,405,887 | $ | 129,685,119 | ||||
| Class B | $ | 15,680,173 | $ | 15,827,802 | ||||
| Class C | $ | 12,457,048 | $ | 12,722,951 | ||||
| Class Y | $ | 1,056,500 | $ | 1,038,083 | ||||
| Investor Class | $ | 59,707,387 | $ | 59,380,793 | ||||
| Institutional Class | $ | 10,033,562 | $ | 9,933,674 | ||||
| Shares outstanding, $0.01 par value per share, unlimited number of shares authorized: | ||||||||
| Class A | 9,133,477 | 9,265,636 | ||||||
| Class B | 1,095,751 | 1,127,606 | ||||||
| Class C | 863,309 | 898,906 | ||||||
| Class Y | 73,384 | 73,570 | ||||||
| Investor Class | 4,147,547 | 4,207,800 | ||||||
| Institutional Class | 702,400 | 709,687 | ||||||
| Class A: | ||||||||
| Net asset value per share | $ | 14.28 | $ | 14.00 | ||||
| Maximum offering price per share: | ||||||||
| (Net asset value of $14.28 divided by 94.50%) | ||||||||
| (Net asset value of $14.00 divided by 94.50%) | $ | 15.11 | $ | 14.81 | ||||
| Class B: | ||||||||
| Net asset value and offering price per share | $ | 14.31 | $ | 14.04 | ||||
| Class C: | ||||||||
| Net asset value and offering price per share | $ | 14.43 | $ | 14.15 | ||||
| Series Y: | ||||||||
| Net asset value and offering price per share | $ | 14.40 | $ | 14.11 | ||||
| Investor Class: | ||||||||
| Net asset value and offering price per share | $ | 14.40 | $ | 14.11 | ||||
| Institutional Class: | ||||||||
| Net asset value and offering price per share | $ | 14.28 | $ | 14.00 | ||||
| * | At April 30, 2010, securities with an aggregate value of $5,045,479 were on loan to brokers. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
11 Invesco Utilities Fund
| Statement of Operations |
For the period April 1, 2010 to April 30, 2010 and for the year ended March 31, 2010
| One Month | Year | |||||||
| ended | ended | |||||||
| April 30, | March 31, | |||||||
| Investment income: | 2010 | 2010 | ||||||
| Dividends (net of foreign withholding taxes of $0 and $56,094, respectively) | $ | 383,336 | $ | 9,502,452 | ||||
| Dividends from affiliated money market funds | 594 | 9,975 | ||||||
| Total investment income | 383,930 | 9,512,427 | ||||||
| Expenses: | ||||||||
| Advisory fees | 142,294 | 1,731,624 | ||||||
| Administrative services fees | 8,473 | 103,103 | ||||||
| Custodian fees | 1,070 | 14,254 | ||||||
| Distribution fees: | ||||||||
| Class A | 26,926 | 324,591 | ||||||
| Class B | 13,145 | 177,474 | ||||||
| Class C | 10,511 | 127,472 | ||||||
| Investor Class | 12,314 | 148,110 | ||||||
| Transfer agent fees — A, B, C, Y and Investor | 59,702 | 781,756 | ||||||
| Transfer agent fees — Institutional | 569 | 4,155 | ||||||
| Trustees’ and officers’ fees and benefits | 3,355 | 25,987 | ||||||
| Other | 19,621 | 300,539 | ||||||
| Total expenses | 297,980 | 3,739,065 | ||||||
| Less: Fees waived, expenses reimbursed and expense offset arrangement(s) | (1,698 | ) | (30,492 | ) | ||||
| Net expenses | 296,282 | 3,708,573 | ||||||
| Net investment income | 87,648 | 5,803,854 | ||||||
| Realized and unrealized gain (loss) from: | ||||||||
| Net realized gain (loss) from: | ||||||||
| Investment securities | 104,408 | (8,646,175 | ) | |||||
| Foreign currencies | (1,754 | ) | 4,218 | |||||
| Foreign currency contracts | 141 | — | ||||||
| 102,795 | (8,641,957 | ) | ||||||
| Change in net unrealized appreciation (depreciation) of: | ||||||||
| Investment securities | 4,377,909 | 50,889,796 | ||||||
| Foreign currencies | (532 | ) | 547 | |||||
| 4,377,377 | 50,890,343 | |||||||
| Net realized and unrealized gain | 4,480,172 | 42,248,386 | ||||||
| Net increase in net assets resulting from operations | $ | 4,567,820 | $ | 48,052,240 | ||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
12 Invesco Utilities Fund
Statement of Changes in Net Assets
For the period April 1, 2010 to April 30, 2010 and for the years ended March 31, 2010 and 2009
| One month ended | Year ended | |||||||||||
| April 30, | March 31, | |||||||||||
| 2010 | 2010 | 2009 | ||||||||||
| Operations: | ||||||||||||
| Net investment income | $ | 87,648 | $ | 5,803,854 | $ | 6,810,246 | ||||||
| Net realized gain (loss) | 102,795 | (8,641,957 | ) | (2,698,181 | ) | |||||||
| Change in net unrealized appreciation (depreciation) | 4,377,377 | 50,890,343 | (125,758,225 | ) | ||||||||
| Net increase (decrease) in net assets resulting from operations | 4,567,820 | 48,052,240 | (121,646,160 | ) | ||||||||
| Distributions to shareholders from net investment income: | ||||||||||||
| Class A | — | (3,302,932 | ) | (4,148,191 | ) | |||||||
| Class B | — | (316,849 | ) | (524,622 | ) | |||||||
| Class C | — | (227,107 | ) | (309,233 | ) | |||||||
| Class Y | — | (21,333 | ) | (4,448 | ) | |||||||
| Investor Class | — | (1,510,545 | ) | (1,847,527 | ) | |||||||
| Institutional Class | — | (330,591 | ) | (401,712 | ) | |||||||
| Total distributions from net investment income | — | (5,709,357 | ) | (7,235,733 | ) | |||||||
| Share transactions-net: | ||||||||||||
| Class A | (1,883,657 | ) | (12,296,835 | ) | (25,250,837 | ) | ||||||
| Class B | (451,263 | ) | (5,880,676 | ) | (16,773,218 | ) | ||||||
| Class C | (511,948 | ) | (1,409,142 | ) | (3,516,850 | ) | ||||||
| Class Y | (2,535 | ) | 683,838 | 339,880 | ||||||||
| Investor Class | (862,556 | ) | (4,772,488 | ) | (10,946,889 | ) | ||||||
| Institutional Class | (103,726 | ) | (1,233,630 | ) | (3,538,683 | ) | ||||||
| Net increase (decrease) in net assets resulting from share transactions | (3,815,685 | ) | (24,908,933 | ) | (59,686,597 | ) | ||||||
| Net increase (decrease) in net assets | 752,135 | 17,433,950 | (188,568,490 | ) | ||||||||
| Net assets: | ||||||||||||
| Beginning of year | 228,588,422 | 211,154,472 | 399,722,962 | |||||||||
| End of year (includes undistributed net investment income of $224,713, $138,678 and $(100,127), respectively) | $ | 229,340,557 | $ | 228,588,422 | $ | 211,154,472 | ||||||
Notes to Financial Statements
April 30, 2010
NOTE 1—Significant Accounting Policies
Invesco Utilities Fund, formerly AIM Utilities Fund, (the “Fund”) is a series portfolio of AIM Sector Funds (Invesco Sector Funds), formerly AIM Sector Funds, (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 six separate portfolios, each authorized to issue an unlimited number of shares of beneficial interest. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class.
On April 30, 2010, the Fund’s fiscal year-end changed from March 31 to April 30.
The Fund’s investment objectives are capital growth and income.
The Fund currently consists of six different classes of shares: Class A, Class B, Class C, 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 B shares and Class C shares are sold with a CDSC. Class Y, Investor Class and Institutional Class shares are sold at net asset value. Generally, Class B shares will automatically convert to Class A shares on or the about month-end which is at least eight years after the date of purchase.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
| A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. |
13 Invesco Utilities Fund
| A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”). | ||
| Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded. | ||
| Debt obligations (including convertible bonds) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations, including commercial paper, having 60 days or less to maturity are recorded at amortized cost which approximates value. Debt securities are subject to interest rate and credit risks. In addition, all debt securities involve some risk of default with respect to interest and/or principal payments. | ||
| Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economical upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards. | ||
| Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including Corporate Loans. | ||
| Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value. | ||
| Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments. | ||
| B. | Securities Transactions and Investment Income — Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded on the accrual basis from settlement date. Dividend income 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 realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the realized and unrealized net 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 Utilities Fund
| and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. | ||
| D. | Distributions — Distributions from income are declared and paid quarterly and are recorded on ex-dividend date. Distributions from net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to treat a portion of the proceeds from redemptions as distributions for federal income tax purposes. | |
| E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. | |
| The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period. | ||
| F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund are charged to the operations of such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses attributable to the Institutional Class are charged to such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses relating to all other classes are allocated among those classes based on relative net assets. All other expenses are allocated among the classes based on relative net assets. | |
| G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. | |
| H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements, that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. | |
| I. | Other Risks — The Fund’s investments are concentrated in a comparatively narrow segment of the economy. Consequently, the Fund may tend to be more volatile than other mutual funds, and the value of the Fund’s investments may tend to rise and fall more rapidly. | |
| The Fund may invest a large percentage of assets in securities of a limited number of companies, such that each investment may have a greater effect on the Fund’s overall performance, and any change in the value of those securities could significantly affect the value of your investment in the Fund. | ||
| Government regulation, difficulties in obtaining adequate financing and investment return, environmental issues, prices of fuel for generation of electricity, availability of natural gas, risks associated with power marketing and trading, and risks associated with nuclear power facilities may adversely affect the market value of the Fund’s holdings. | ||
| J. | Securities Lending — The Fund may lend portfolio securities having a market value up to one-third of the Fund’s total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily by the securities lending provider. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its sponsored agencies. Cash collateral received in connection with these loans is invested in short-term money market instruments or affiliated money market funds and is shown as such on the Schedule of Investments. It is the Fund’s policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. Upon the failure of the borrower to return the securities, collateral may be liquidated and the securities may be purchased on the open market to replace the loaned securities. The Fund could experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to any loss on the collateral invested. Dividends received on cash collateral investments for securities lending transactions, which are net of compensation to counterparties, is included in Dividends from affiliates on the Statement of Operations. The aggregate value of securities out on loan is shown as a footnote on the Statement of Assets and Liabilities, if any. | |
| K. | Foreign Currency Translations — Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. | |
| The Fund may invest in foreign securities which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. |
15 Invesco Utilities Fund
| 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. |
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 Net Assets | Rate | |||
| First $350 million | 0 | .75% | ||
| Next $350 million | 0 | .65% | ||
| Next $1.3 billion | 0 | .55% | ||
| Next $2 billion | 0 | .45% | ||
| Next $2 billion | 0 | .40% | ||
| Next $2 billion | 0 | .375% | ||
| Over $8 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 Trimark Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide discretionary investment management services to the Fund based on the percentage of assets allocated to such Sub-Adviser(s).
On December 31, 2009, Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc., Invesco Aim Private Asset Management, Inc. and Invesco Global Asset Management (N.A.), Inc. merged into Invesco Institutional (N.A.), Inc. and the consolidated adviser firm was renamed Invesco Advisers, Inc.
The Adviser had contractually agreed, through at least June 30, 2010, 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, Investor Class and Institutional Class shares to 2.00%, 2.75%, 2.75%, 1.75%, 2.00% and 1.75%, 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 to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary items or non-routine items; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. The Board of Trustees or Invesco may terminate the fee waiver arrangement at any time. 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, 2010, 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 period April 1, 2010 to April 30, 2010 and the year ended March 31, 2010, the Adviser waived advisory fees of $1,175 and $20,328, respectively.
At the request of the Trustees of the Trust, Invesco Ltd. agreed to reimburse expenses incurred by the Fund in connection with market timing matters in the Invesco Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement are included in the Statement of Operations. For the period April 1, 2010 to April 30, 2010 and the year ended March 31, 2010, Invesco Ltd. reimbursed expenses of the Fund in the amount of $0 and $883, 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 period April 1, 2010 to April 30, 2010 and the year ended March 31, 2010, 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 period April 1, 2010 to April 30, 2010 and the year ended March 31, 2010, 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, 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 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 and 0.25% of the average
16 Invesco Utilities Fund
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 period April 1, 2010 to April 30, 2010 and the year ended March 31, 2010, expenses incurred under the Plan 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 period April 1, 2009 to April 30, 2010, IDI advised the Fund that IDI retained $1,753 in front-end sales commissions from the sale of Class A shares and $0, $2,255 and $23 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders. During the year ended March 31, 2010, IDI advised the Fund that IDI retained $35,838 in front-end sales commissions from the sale of Class A shares and $380, $43,848 and $964 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of Invesco, IIS and/or IDI.
NOTE 3—Additional Valuation Information
Generally Accepted Accounting Principles (“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 April 30, 2010 and March 31, 2010. 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 period April 1, 2010 to April 30, 2010, there were no significant transfers between investment levels.
| April 30, 2010 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Equity Securities | $ | 227,085,618 | $ | 7,438,849 | $ | — | $ | 234,524,467 | ||||||||
| March 31, 2010 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Equity Securities | $ | 219,766,950 | $ | 7,506,777 | $ | — | $ | 227,273,727 | ||||||||
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 period April 1, 2010 to April 30, 2010 and the year ended March 31, 2010, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $523 and $9,281, respectively.
NOTE 5—Trustees’ and Officers’ Fees and Benefits
“Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and “Trustees’ and Officers’ Fees and Benefits” also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. “Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
During the period April 1, 2010 to April 30, 2010 and the year ended March 31, 2010, the Fund paid legal fees of $0 and $2,646, respectively, for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust.
17 Invesco Utilities Fund
NOTE 6—Cash Balances
The Funds are permitted to temporarily carry a negative or overdrawn balance in its account with The State Street Bank and Trust Company, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 7—Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Period April 1, 2010 to April 30, 2010 and the Years Ended March 31, 2010 and 2009:
| April 30, 2010 | March 31, 2010 | March 31, 2009 | ||||||||||
| Ordinary income | $ | — | $ | 5,709,357 | $ | 7,235,733 | ||||||
| Long-term capital gain | — | — | — | |||||||||
| Total distributions | $ | — | $ | 5,709,357 | $ | 7,235,733 | ||||||
Tax Components of Net Assets at Period-End:
As of April 30, 2010 and March 31, 2010 the components of net assets on a tax basis were as follows:
| April 30, 2010 | March 31, 2010 | |||||||
| Undistributed ordinary income | $ | 315,814 | $ | 233,554 | ||||
| Net unrealized appreciation — investments | 12,857,622 | 8,479,713 | ||||||
| Net unrealized appreciation- other investments | 190 | 720 | ||||||
| Temporary book/tax differences | (91,101 | ) | (90,018 | ) | ||||
| Post-October deferrals | — | (4,858 | ) | |||||
| Capital loss carryforward | (16,456,472 | ) | (18,622,684 | ) | ||||
| Shares of beneficial interest | 232,714,504 | 238,591,995 | ||||||
| Total net assets | $ | 229,340,557 | $ | 228,588,422 | ||||
The differences 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 differences are attributable primarily to wash sales.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund’s temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund utilized $104,408 and $0 during the period April 1, 2010 to April 30, 2010 and the year ended March 31, 2010, respectively of capital loss carryforward to offset net realized capital gain for federal income tax purposes. The Fund has a capital loss carryforward as of April 30, 2010 and March 31, 2010 which expires as follows:
| Capital Loss Carryforward* | ||||||||
| Expiration | April 30, 2010 | March, 31, 2010 | ||||||
| April 30, 2011 | $ | — | $ | 2,166,212 | ||||
| April 30, 2012 | 303,708 | 303,708 | ||||||
| April 30, 2017 | 16,152,764 | 16,152,764 | ||||||
| Total capital loss carryforward | $ | 16,456,472 | $ | 18,622,684 | ||||
| * | Capital loss carryforwards as of the dates listed above are 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 period April 1, 2010 to April 30, 2010 was $0 and $2,918,142 and the year ended March 31, 2010 was $30,089,306 and $51,090,369,
18 Invesco Utilities Fund
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 | ||||||||
| April 30, 2010 | March 31, 2010 | |||||||
| Aggregate unrealized appreciation of investment securities | $ | 26,870,737 | $ | 25,871,687 | ||||
| Aggregate unrealized (depreciation) of investment securities | (14,013,115 | ) | (17,391,974 | ) | ||||
| Net unrealized appreciation of investment securities | $ | 12,857,622 | $ | 8,479,713 | ||||
| Cost of investments for tax purposes | $ | 221,666,845 | $ | 218,794,014 | ||||
NOTE 9—Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of expired capital loss carryforwards, on April 30, 2010, undistributed net investment income was decreased by $1,613, undistributed net realized gain (loss) was increased by $2,063,419 and shares of beneficial interest decreased by $2,061,806. This reclassification had no effect on the net assets of the Fund.
Primarily as a result of differing book/tax treatment of expired capital loss carryforwards, on March 31, 2010, undistributed net investment income was increased by $144,308, undistributed net realized gain (loss) was increased by $3,447,423 and shares of beneficial interest decreased by $3,591,731. This reclassification had no effect on the net assets of the Fund.
19 Invesco Utilities Fund
NOTE 10—Share Information
| Summary of Share Activity | ||||||||||||||||||||||||
| One month ended | Year ended March 31, | |||||||||||||||||||||||
| April 30, 2010(a) | 2010(a) | 2009 | ||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||
| Sold: | ||||||||||||||||||||||||
| Class A | 50,448 | $ | 718,429 | 1,145,287 | $ | 15,866,051 | 2,353,313 | $ | 36,625,925 | |||||||||||||||
| Class B | 10,273 | 146,603 | 148,588 | 2,002,311 | 405,105 | 6,448,164 | ||||||||||||||||||
| Class C | 11,394 | 163,990 | 215,891 | 2,986,046 | 429,522 | 6,945,679 | ||||||||||||||||||
Class Y(b) | 2,022 | 29,112 | 133,707 | 1,883,447 | 28,425 | 370,241 | ||||||||||||||||||
| Investor Class | 18,267 | 262,986 | 349,112 | 4,791,947 | 462,072 | 7,010,287 | ||||||||||||||||||
| Institutional Class | 4,710 | 67,237 | 164,198 | 2,148,656 | 166,555 | 2,530,651 | ||||||||||||||||||
| Issued as reinvestment of dividends: | ||||||||||||||||||||||||
| Class A | — | — | 217,409 | 2,990,021 | 265,477 | 3,772,825 | ||||||||||||||||||
| Class B | — | — | 21,047 | 289,240 | 33,445 | 475,210 | ||||||||||||||||||
| Class C | — | — | 15,050 | 209,242 | 20,031 | 284,006 | ||||||||||||||||||
| Class Y | — | — | 1,264 | 17,717 | 368 | 4,448 | ||||||||||||||||||
| Investor Class | — | — | 103,032 | 1,428,598 | 122,643 | 1,752,066 | ||||||||||||||||||
| Institutional Class | — | — | 24,078 | 330,591 | 28,082 | 401,712 | ||||||||||||||||||
| Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||||||||||
| Class A | 18,421 | 259,923 | 256,330 | 3,403,648 | 625,195 | 9,961,386 | ||||||||||||||||||
| Class B | (18,369 | ) | (259,923 | ) | (255,683 | ) | (3,403,648 | ) | (623,503 | ) | (9,961,386 | ) | ||||||||||||
| Reacquired: | ||||||||||||||||||||||||
Class A(b) | (201,028 | ) | (2,862,009 | ) | (2,581,280 | ) | (34,556,555 | ) | (4,994,906 | ) | (75,610,973 | ) | ||||||||||||
| Class B | (23,759 | ) | (337,943 | ) | (359,300 | ) | (4,768,579 | ) | (915,528 | ) | (13,735,206 | ) | ||||||||||||
| Class C | (46,991 | ) | (675,938 | ) | (341,981 | ) | (4,604,430 | ) | (720,487 | ) | (10,746,535 | ) | ||||||||||||
| Class Y | (2,208 | ) | (31,647 | ) | (87,138 | ) | (1,217,326 | ) | (3,056 | ) | (34,809 | ) | ||||||||||||
Investor Class(b) | (78,520 | ) | (1,125,542 | ) | (807,266 | ) | (10,993,033 | ) | (1,325,059 | ) | (19,709,242 | ) | ||||||||||||
| Institutional Class | (11,997 | ) | (170,963 | ) | (276,249 | ) | (3,712,877 | ) | (432,231 | ) | (6,471,046 | ) | ||||||||||||
| Net increase (decrease) in share activity | (267,337 | ) | $ | (3,815,685 | ) | (1,913,904 | ) | $ | (24,908,933 | ) | (4,074,537 | ) | $ | (59,686,597 | ) | |||||||||
| (a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 12% of the outstanding shares of the Fund, for both the one month ended April 30, 2010 and the year ended March 31, 2010, respectively. IDI has an agreement with these entities to sell Fund shares. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. | |
| (b) | Effective upon the commencement date of Class Y shares, October 3, 2008, the following shares were converted from Class A and Investor into Class Y shares of the Fund: |
| Class | Shares | Amount | ||||||
| Class Y | 10,878 | $ | 157,844 | |||||
| Class A | (7,141 | ) | (102,754 | ) | ||||
| Investor Class | (3,797 | ) | (55,090 | ) | ||||
20 Invesco Utilities Fund
NOTE 11—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 to | Ratio of net | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Net gains | to average | average net | investment | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net asset | Net | (losses) on | Dividends | net assets | assets without | income | ||||||||||||||||||||||||||||||||||||||||||||||
| value, | investment | securities | Total from | from net | Net asset | Net assets, | with fee waivers | fee waivers | (loss) | |||||||||||||||||||||||||||||||||||||||||||
| beginning | income | (both realized | investment | investment | value, end | Total | end of period | and/or expenses | and/or expenses | to average | Portfolio | |||||||||||||||||||||||||||||||||||||||||
| of period | (loss) | and unrealized) | operations | income | of period | Return(a) | (000s omitted) | absorbed | absorbed | net assets | turnover(b) | |||||||||||||||||||||||||||||||||||||||||
| Class A | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| One month ended 04/30/10 | $ | 14.00 | $ | 0.01 | (c) | $ | 0.27 | $ | 0.28 | $ | — | $ | 14.28 | 2.00 | % | $ | 130,406 | 1.49 | %(e) | 1.50 | %(e) | 0.53 | %(e) | 0 | % | |||||||||||||||||||||||||||
| Year ended 03/31/10 | 11.57 | 0.34 | (c) | 2.43 | 2.77 | (0.34 | ) | 14.00 | 24.06 | 129,685 | 1.53 | (f) | 1.54 | (f) | 2.58 | (f) | 14 | |||||||||||||||||||||||||||||||||||
| Year ended 03/31/09 | 17.89 | 0.35 | (c) | (6.29 | )(d) | (5.94 | ) | (0.38 | ) | 11.57 | (33.56 | )(d) | 118,328 | 1.48 | 1.50 | 2.26 | 5 | |||||||||||||||||||||||||||||||||||
| Year ended 03/31/08 | 18.15 | 0.32 | (c) | (0.27 | ) | 0.05 | (0.31 | ) | 17.89 | 0.20 | 214,352 | 1.31 | 1.34 | 1.69 | 25 | |||||||||||||||||||||||||||||||||||||
| Year ended 03/31/07 | 13.92 | 0.31 | 4.23 | 4.54 | (0.31 | ) | 18.15 | 33.05 | 214,289 | 1.31 | 1.41 | 2.01 | 33 | |||||||||||||||||||||||||||||||||||||||
| Year ended 03/31/06 | 12.28 | 0.28 | 1.65 | 1.93 | (0.29 | ) | 13.92 | 15.74 | 135,835 | 1.30 | 1.46 | 2.06 | 37 | |||||||||||||||||||||||||||||||||||||||
| Class B | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| One month ended 04/30/10 | 14.04 | (0.00 | )(c) | 0.27 | 0.27 | — | 14.31 | 1.92 | 15,680 | 2.24 | (e) | 2.25 | (e) | (0.22 | )(e) | 0 | ||||||||||||||||||||||||||||||||||||
| Year ended 03/31/10 | 11.60 | 0.24 | (c) | 2.44 | 2.68 | (0.24 | ) | 14.04 | 23.19 | 15,828 | 2.28 | (f) | 2.29 | (f) | 1.83 | (f) | 14 | |||||||||||||||||||||||||||||||||||
| Year ended 03/31/09 | 17.95 | 0.24 | (c) | (6.32 | )(d) | (6.08 | ) | (0.27 | ) | 11.60 | (34.12 | )(d) | 18,254 | 2.23 | 2.25 | 1.51 | 5 | |||||||||||||||||||||||||||||||||||
| Year ended 03/31/08 | 18.21 | 0.18 | (c) | (0.27 | ) | (0.09 | ) | (0.17 | ) | 17.95 | (0.53 | ) | 47,990 | 2.06 | 2.09 | 0.94 | 25 | |||||||||||||||||||||||||||||||||||
| Year ended 03/31/07 | 13.97 | 0.20 | 4.24 | 4.44 | (0.20 | ) | 18.21 | 32.02 | 49,840 | 2.06 | 2.16 | 1.26 | 33 | |||||||||||||||||||||||||||||||||||||||
| Year ended 03/31/06 | 12.32 | 0.18 | 1.66 | 1.84 | (0.19 | ) | 13.97 | 14.92 | 41,888 | 2.05 | 2.21 | 1.31 | 37 | |||||||||||||||||||||||||||||||||||||||
| Class C | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| One month ended 04/30/10 | 14.15 | (0.00 | )(c) | 0.28 | 0.28 | — | 14.43 | 1.98 | 12,457 | 2.24 | (e) | 2.25 | (e) | (0.22 | )(e) | 0 | ||||||||||||||||||||||||||||||||||||
| Year ended 03/31/10 | 11.70 | 0.25 | (c) | 2.45 | 2.70 | (0.25 | ) | 14.15 | 23.09 | 12,723 | 2.28 | (f) | 2.29 | (f) | 1.83 | (f) | 14 | |||||||||||||||||||||||||||||||||||
| Year ended 03/31/09 | 18.09 | 0.24 | (c) | (6.36 | )(d) | (6.12 | ) | (0.27 | ) | 11.70 | (34.06 | )(d) | 11,817 | 2.23 | 2.25 | 1.51 | 5 | |||||||||||||||||||||||||||||||||||
| Year ended 03/31/08 | 18.35 | 0.18 | (c) | (0.27 | ) | (0.09 | ) | (0.17 | ) | 18.09 | (0.52 | ) | 23,176 | 2.06 | 2.09 | 0.94 | 25 | |||||||||||||||||||||||||||||||||||
| Year ended 03/31/07 | 14.08 | 0.20 | 4.27 | 4.47 | (0.20 | ) | 18.35 | 31.99 | 17,711 | 2.06 | 2.16 | 1.26 | 33 | |||||||||||||||||||||||||||||||||||||||
| Year ended 03/31/06 | 12.41 | 0.18 | 1.68 | 1.86 | (0.19 | ) | 14.08 | 14.98 | 11,208 | 2.05 | 2.21 | 1.31 | 37 | |||||||||||||||||||||||||||||||||||||||
| Class Y | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| One month ended 04/30/10 | 14.11 | 0.01 | (c) | 0.28 | 0.29 | — | 14.40 | 2.06 | 1,057 | 1.24 | (e) | 1.25 | (e) | 0.78 | (e) | 0 | ||||||||||||||||||||||||||||||||||||
| Year ended 03/31/10 | 11.67 | 0.39 | (c) | 2.43 | 2.82 | (0.38 | ) | 14.11 | 24.26 | 1,038 | 1.28 | (f) | 1.29 | (f) | 2.83 | (f) | 14 | |||||||||||||||||||||||||||||||||||
| Year ended 03/31/09(g) | 14.51 | 0.15 | (c) | (2.77 | )(d) | (2.62 | ) | (0.22 | ) | 11.67 | (18.13 | )(d) | 300 | 1.46 | (h) | 1.47 | (h) | 2.28 | (h) | 5 | ||||||||||||||||||||||||||||||||
| Investor Class | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| One month ended 04/30/10 | 14.11 | 0.01 | (c) | 0.28 | 0.29 | — | 14.40 | 2.06 | 59,707 | 1.49 | (e) | 1.50 | (e) | 0.53 | (e) | 0 | ||||||||||||||||||||||||||||||||||||
| Year ended 03/31/10 | 11.67 | 0.35 | (c) | 2.44 | 2.79 | (0.35 | ) | 14.11 | 23.96 | 59,381 | 1.53 | (f) | 1.54 | (f) | 2.58 | (f) | 14 | |||||||||||||||||||||||||||||||||||
| Year ended 03/31/09 | 18.04 | 0.35 | (c) | (6.34 | )(d) | (5.99 | ) | (0.38 | ) | 11.67 | (33.54 | )(d) | 53,227 | 1.48 | 1.50 | 2.26 | 5 | |||||||||||||||||||||||||||||||||||
| Year ended 03/31/08 | 18.30 | 0.32 | (c) | (0.27 | ) | 0.05 | (0.31 | ) | 18.04 | 0.22 | 95,682 | 1.31 | 1.34 | 1.69 | 25 | |||||||||||||||||||||||||||||||||||||
| Year ended 03/31/07 | 14.04 | 0.32 | 4.26 | 4.58 | (0.32 | ) | 18.30 | 33.00 | 106,793 | 1.31 | 1.41 | 2.01 | 33 | |||||||||||||||||||||||||||||||||||||||
| Year ended 03/31/06 | 12.38 | 0.28 | 1.67 | 1.95 | (0.29 | ) | 14.04 | 15.79 | 84,701 | 1.30 | 1.46 | 2.06 | 37 | |||||||||||||||||||||||||||||||||||||||
| Institutional Class | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| One month ended 04/30/10 | 14.00 | 0.01 | (c) | 0.27 | 0.28 | — | 14.28 | 2.00 | 10,034 | 0.98 | (e) | 0.99 | (e) | 1.04 | (e) | 0 | ||||||||||||||||||||||||||||||||||||
| Year ended 03/31/10 | 11.57 | 0.42 | (c) | 2.43 | 2.85 | (0.42 | ) | 14.00 | 24.75 | 9,934 | 0.97 | (f) | 0.98 | (f) | 3.14 | (f) | 14 | |||||||||||||||||||||||||||||||||||
| Year ended 03/31/09 | 17.89 | 0.42 | (c) | (6.29 | )(d) | (5.87 | ) | (0.45 | ) | 11.57 | (33.24 | )(d) | 9,228 | 1.00 | 1.01 | 2.74 | 5 | |||||||||||||||||||||||||||||||||||
| Year ended 03/31/08 | 18.15 | 0.40 | (c) | (0.27 | ) | 0.13 | (0.39 | ) | 17.89 | 0.63 | 18,522 | 0.89 | 0.89 | 2.11 | 25 | |||||||||||||||||||||||||||||||||||||
| Year ended 03/31/07 | 13.92 | 0.36 | 4.24 | 4.60 | (0.37 | ) | 18.15 | 33.54 | 5,132 | 0.91 | 0.91 | 2.41 | 33 | |||||||||||||||||||||||||||||||||||||||
| Year ended 03/31/06(g) | 13.48 | 0.13 | 0.46 | 0.59 | (0.15 | ) | 13.92 | 4.34 | 719 | 0.92 | (h) | 1.05 | (h) | 2.44 | (h) | 37 | ||||||||||||||||||||||||||||||||||||
| (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) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. | |
| (c) | Calculated using average shares outstanding. | |
| (d) | Includes litigation proceeds received during the period. Had the litigation proceeds not been received, net gains (losses) on securities (both realized and unrealized) per share would have been $(6.39), $(6.42), $(6.46), $(2.83), $(6.44) and $(6.39) for Class A, Class B, Class C, Class Y, Investor Class and Institutional Class shares, respectively and total return would have been lower. | |
| (e) | Ratios are based on average daily net assets (000’s omitted) of $131,041, $15,993, $12,789, $1,046, $59,927 and $10,036 for Class A, Class B, Class C, Class Y, Investor Class and Institutional Class shares, respectively. | |
| (f) | Ratios are based on average daily net assets (000’s omitted) of $129,805, $17,749, $12,745, $792, $59,228 and $10,511 for Class A, Class B, Class C, Class Y, Investor Class and Institutional Class shares, respectively. | |
| (g) | Commencement date of October 3, 2008 and October 25, 2005 for Class Y and Institutional Class shares, respectively. | |
| (h) | Annualized. |
21 Invesco Utilities Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Sector Funds (Invesco Sector Funds)
and Shareholders of Invesco Utilities 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 Utilities Fund (formerly known as AIM Utilities Fund; one of the funds constituting AIM Sector Funds (Invesco Sector Funds), hereafter referred to as the “Fund”) at April 30, 2010 and at March 31, 2010, the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at April 30, 2010 and at March 31, 2010 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
June 4, 2010
Houston, Texas
22 Invesco Utilities 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 November 1, 2009 through April 30, 2010.
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 | (11/01/09) | (04/30/10)1 | Period2 | (04/30/10) | Period2 | Ratio | ||||||||||||||||||||||||
| A | $ | 1,000.00 | $ | 1,088.20 | $ | 7.61 | $ | 1,017.50 | $ | 7.35 | 1.47 | % | ||||||||||||||||||
| B | 1,000.00 | 1,084.10 | 11.47 | 1,013.79 | 11.08 | 2.22 | ||||||||||||||||||||||||
| C | 1,000.00 | 1,084.20 | 11.47 | 1,013.79 | 11.08 | 2.22 | ||||||||||||||||||||||||
| Y | 1,000.00 | 1,089.60 | 6.32 | 1,018.74 | 6.11 | 1.22 | ||||||||||||||||||||||||
| Investor | 1,000.00 | 1,088.30 | 7.61 | 1,017.50 | 7.35 | 1.47 | ||||||||||||||||||||||||
| Institutional | 1,000.00 | 1,090.30 | 4.87 | 1,020.13 | 4.71 | 0.94 | ||||||||||||||||||||||||
| 1 | The actual ending account value is based on the actual total return of the Fund for the period November 1, 2009 through April 30, 2010, 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 181/365 to reflect the most recent fiscal half year. |
23 Invesco Utilities 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 October 1, 2009 through March 31, 2010.
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 | (10/01/09) | (03/31/10)1 | Period2 | (3/31/10) | Period2 | Ratio | ||||||||||||||||||||||||
| A | $ | 1,000.00 | $ | 1,037.20 | $ | 7.67 | $ | 1,017.40 | $ | 7.59 | 1.51 | % | ||||||||||||||||||
| B | 1,000.00 | 1,033.40 | 11.46 | 1,013.66 | 11.35 | 2.26 | ||||||||||||||||||||||||
| C | 1,000.00 | 1,033.90 | 11.46 | 1,013.66 | 11.35 | 2.26 | ||||||||||||||||||||||||
| Y | 1,000.00 | 1,039.00 | 6.41 | 1,018.65 | 6.34 | 1.26 | ||||||||||||||||||||||||
| Investor | 1,000.00 | 1,037.70 | 7.67 | 1,017.40 | 7.59 | �� | 1.51 | |||||||||||||||||||||||
| Institutional | 1,000.00 | 1,039.90 | 5.09 | 1,019.95 | 5.04 | 1.00 | ||||||||||||||||||||||||
| 1 | The actual ending account value is based on the actual total return of the Fund for the period October 1, 2009 through March 31, 2010, 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 182/365 to reflect the most recent fiscal half year. |
24 Invesco Utilities 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:
Federal and State Income Tax | April 30, 2010 | March 31, 2010 | ||||||
| Qualified Dividend Income* | — | 100% | ||||||
| Corporate Dividends Received Deduction* | — | 100% | ||||||
| * | The above percentages are based on ordinary income dividends paid to shareholders during the period April 1, 2010 to April 30, 2010 and the fiscal year ended March 31, 2010. |
25 Invesco Utilities Fund
Trustees and Officers
The address of each trustee and officer of AIM Sector Funds (Invesco Sector Funds) (the “Trust”), is 11 Greenway Plaza, Suite 2500, Houston, Texas 77046-1173. Each trustee oversees 197 portfolios in the Invesco Funds complex. 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.
| Trustee | Other | |||||||
| and/ or | Directorship(s) | |||||||
| Name, Year of Birth and | Officer | Held by | ||||||
| Position(s) Held with the Trust | Since | Principal Occupation(s) During Past 5 Years | Trustee | |||||
Interested Persons | ||||||||
Martin L. Flanagan1 — 1960 Trustee | 2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Trustee, The AIM Family of Funds®; Board of Governors, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business 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 and Vice Chairman, Investment Company Institute | None | |||||
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, Chief Executive Officer and President, 1371 Preferred Inc. (holding company); Director, Chairman, Chief Executive Officer and President, Invesco Management Group Inc. (formerly known as Invesco Aim Management Group, Inc.) (financial services holding company); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent) and AIM GP Canada Inc. (general partner for limited partnerships); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.) (registered transfer agent) and INVESCO Distributors, Inc. (registered broker dealer); Director, President and Chairman, INVESCO Inc. (holding company) and Invesco Canada Holdings Inc. (holding company); Chief Executive Officer, AIM Trimark Corporate Class Inc. (corporate mutual fund company) and AIM Trimark Canada Fund Inc. (corporate mutual fund company); Director and Chief Executive Officer, Invesco Trimark Ltd./Invesco Trimark Ltèe (registered investment adviser and registered transfer agent) and Invesco Trimark Dealer Inc. (registered broker dealer); Trustee, President and Principal Executive Officer, The AIM Family of Funds® (other than AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust); Trustee and Executive Vice President, The AIM Family of Funds® (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust only) Formerly: 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 Capital Management, Inc. ) (formerly, 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 AIM Family of 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. | None | |||||
Independent Trustees | ||||||||
| Bruce L. Crockett — 1944 Trustee and Chair | 2003 | Chairman, Crockett Technology Associates (technology consulting company) Formerly: Director, Captaris (unified messaging provider) | ACE Limited (insurance company); and Investment Company Institute | |||||
| Bob R. Baker — 1936 Trustee | 1983 | Retired | None | |||||
| Frank S. Bayley — 1939 Trustee | 2003 | Retired Formerly: Director, Badgley Funds, Inc. (registered investment company) (2 portfolios) | None | |||||
| James T. Bunch — 1942 Trustee | 2000 | Founder, Green, Manning & Bunch Ltd. (investment banking firm) Formerly: Executive Committee, United States Golf Association | Vice Chairman, Board of Governors, Western Golf Association/Evans Scholars Foundation and Director, Denver Film Society | |||||
| 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 | Board 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) | Administaff | |||||
| Carl Frischling — 1937 Trustee | 2003 | Partner, law firm of Kramer Levin Naftalis and Frankel LLP | Director, Reich & Tang Funds (16 portfolios) | |||||
| Prema Mathai-Davis — 1950 Trustee | 2003 | Retired | None | |||||
| Lewis F. Pennock — 1942 Trustee | 2003 | Partner, law firm of Pennock & Cooper | None | |||||
| Larry Soll — 1942 Trustee | 1997 | Retired | None | |||||
| Raymond Stickel, Jr. — 1944 Trustee | 2005 | Retired Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios) | None | |||||
| 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. |
T-1
Trustees and Officers — (continued)
| Trustee | Other | |||||||
| and/ or | Directorship(s) | |||||||
| Name, Year of Birth and | Officer | Held by | ||||||
| Position(s) Held with the Trust | Since | Principal Occupation(s) During Past 5 Years | Trustee | |||||
Other Officers | ||||||||
| Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer of The AIM Family of Funds® | 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.), 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 INVESCO Distributors, Inc.; Director and Vice President, INVESCO Funds Group, Inc.; Senior Vice President, Chief Legal Officer and Secretary, The AIM Family of Funds®; and Manager, Invesco PowerShares Capital Management LLC Formerly: Director, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco Advisers, Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco Capital Management (formerly known as 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 | |||||
| Lisa O. Brinkley — 1959 Vice President | 2004 | Global Compliance Director, Invesco Ltd.; Chief Compliance Officer, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) and Invesco Investment Services, Inc.(formerly known as Invesco Aim Investment Services, Inc.); and Vice President, The AIM Family of Funds® Formerly: Senior Vice President, Invesco Management Group, Inc. (formerly known as Invesco Aim Management Group, Inc.); Senior Vice President and Chief Compliance Officer, Invesco Advisers, Inc. and The AIM Family of Funds®; Vice President and Chief Compliance Officer, Invesco Capital Management, Inc. (formerly known as Invesco Aim Capital Management, Inc.) and Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.); Vice President, Invesco Investment Services (formerly known as Invesco Aim Investment Services, Inc.) and Fund Management Company | N/A | |||||
| Kevin M. Carome — 1956 Vice President | 2003 | General Counsel, Secretary and Senior Managing Director, Invesco Ltd.; Director, Invesco Holding Company Limited and INVESCO Funds Group, Inc.; Director and Executive Vice President, IVZ, Inc., Invesco Group Services, Inc., Invesco North American Holdings, Inc. and Invesco Investments (Bermuda) Ltd.; Director and Secretary, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Vice President, The AIM Family of Funds®; and Trustee, 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: Senior Managing Director and Secretary, Invesco North American Holdings, Inc.; Vice President and Secretary, IVZ, Inc. and Invesco Group Services, Inc.; Senior Managing Director and Secretary, Invesco Holding Company Limited; Director, Senior Vice President, Secretary and General Counsel, Invesco Management Group Inc. (formerly known as Invesco Aim Management Group, Inc.) and Invesco Advisers, Inc.; Senior Vice President, Invesco Distributors, Inc.; Director, General Counsel and Vice President, Fund Management Company; Vice President, Invesco Capital Management Inc. (formerly known as Invesco Aim Capital Management, Inc.) and Invesco Investment Services, Inc.; Senior Vice President, Chief Legal Officer and Secretary, The AIM Family of Funds®; Director and Vice President, INVESCO Distributors, Inc.; and Chief Executive Officer and President, INVESCO Funds Group, Inc. | N/A | |||||
| Sheri Morris — 1964 Vice President, Treasurer and Principal Financial Officer | 2003 | Vice President, Treasurer and Principal Financial Officer, The AIM Family of Funds®; and Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser) Formerly: Vice President, Invesco Advisers, Inc., Invesco Capital Management, Inc. (formerly known as Invesco Aim Capital Management, Inc.) and Invesco Private Asset Management Inc. (formerly known as Invesco Aim Private Asset Management, Inc.); Assistant Vice President and Assistant Treasurer, The AIM Family of Funds® and Assistant Vice President, Invesco Advisers, Inc., Invesco Capital Management, Inc. (formerly known as Invesco Aim Capital Management, Inc. and Invesco Private Asset Management Inc. (formerly known as Invesco Aim Private Asset Management, Inc.) | N/A | |||||
| Karen Dunn Kelley — 1960 Vice President | 2003 | Head of Invesco’s World Wide Fixed Income and Cash Management Group; Senior Vice President, 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.); Senior Vice President, Invesco Management Group, Inc. (formerly known as Invesco Aim Management Group, Inc.); and Director, Invesco Mortgage Capital Inc.; Vice President, The AIM Family of 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 AIM Family of Funds® (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust) and Short-Term Investments Trust only) Formerly: 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 Capital Management, Inc. (formerly known as 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 Capital Management, Inc. (formerly known as Invesco Aim Capital Management, Inc.); Director of Cash Management, Senior Vice President, and Vice President, Invesco Advisers, Inc. and The AIM Family of Funds® (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Tax-Free Investments Trust only) | N/A | |||||
| Lance A. Rejsek — 1967 Anti-Money Laundering Compliance Officer | 2005 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.), Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.), The AIM Family of Funds®, PowerShares Exchange-Traded Fund Trust, PowerShares Exchang-Traded Trust II, PowerShares India Exchange-Traded Fund Trust and PowerShares Actively Managed Exchange-Traded Fund Trust. Formerly: Anti-Money Laundering Compliance Officer, Fund Management Company, Invesco Advisers, Inc., Invesco Capital Management, Inc. (formerly known as Invesco Aim Capital Management, Inc. and Invesco Private Asset Management, Inc. (formerly known as Invesco Aim Private Asset Management, Inc.) | N/A | |||||
T-2
Trustees and Officers — (continued)
| Trustee | Other | |||||||
| and/ or | Directorship(s) | |||||||
| Name, Year of Birth and | Officer | Held by | ||||||
| Position(s) Held with the Trust | Since | Principal Occupation(s) During Past 5 Years | Trustee | |||||
| Todd L. Spillane — 1958 Chief Compliance Officer | 2006 | Senior Vice President, Invesco Management Group Inc. (formerly known as Invesco Aim Management Group, Inc.); 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 AIM Family of Funds®, PowerShares Exchange-Traded Fund Trust, PowerShares Exchang-Traded Trust II, PowerShares India Exchange-Traded Fund Trust and PowerShares Actively Managed Exchange-Traded Fund Trust, INVESCO Private Capital Investments, Inc. (holding company), Invesco Private Capital, Inc. (registered investment adviser) and Invesco Senior Secured Management, Inc. (registered investment adviser); 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 and Chief Compliance Officer, Invesco Advisers, Inc. and Invesco Capital Management, Inc. (formerly known as Invesco Aim Capital Management, Inc.); Chief Compliance Officer, Invesco Global Asset Management (N.A.), Inc.; Vice President, Invesco Capital Management, Inc. (formerly known as Invesco Aim Capital Management, Inc.) and Fund Management Company | 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 | Investment Adviser | Distributor | Auditors | |||
| 11 Greenway Plaza, Suite 2500 Houston, TX 77046-1173 | Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 | Invesco Distributors, Inc. 11 Greenway Plaza, Suite 2500 Houston, TX 77046-1173 | PricewaterhouseCoopers LLP 1201 Louisiana Street, Suite 2900 Houston, TX 77002-5678 | |||
Counsel to the Fund | Counsel to the Independent Trustees | Transfer Agent | Custodian | |||
| Stradley Ronon Stevens & Young, LLP 2600 One Commerce Square Philadelphia, PA 19103 | Kramer, Levin, Naftalis & Frankel LLP 1177 Avenue of the Americas New York, NY 10036-2714 | Invesco Investment Services, Inc. P.O. Box 4739 Houston, TX 77210-4739 | State Street Bank and Trust Company 225 Franklin Boston, MA 02110-2801 |
T-3
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 number of trees used to produce paper. | |
| • | economical. Help reduce your fund’s printing and delivery expenses and put more capital back in your fund’s returns. | |
| • | efficient. Stop waiting for regular mail. Your documents will be sent via email as soon as they’re available. | |
| • | easy. Download, save and print files using your home computer with a few clicks of your mouse. |
This service is provided by Invesco Investment Services, Inc.
Invesco Privacy Policy
You share personal and financial information with us that is necessary for your transactions and your account records. We take very seriously the obligation to keep that information confidential and private.
Invesco collects nonpublic personal information about you from account applications or other forms you complete and from your transactions with us or our affiliates. We do not disclose information about you or our former customers to service providers or other third parties except to the extent necessary to service your account and in other limited circumstances as permitted by law. For example, we use this information to facilitate the delivery of transaction confirmations, financial reports, prospectuses and tax forms.
Even within Invesco, only people involved in the servicing of your accounts and compliance monitoring have access to your information. To ensure the highest level of confidentiality and security, Invesco maintains physical, electronic and procedural safeguards that meet or exceed federal standards. Special measures, such as data encryption and authentication, apply to your communications with us on our website. More detail is available to you at invesco.com/privacy.
Important Notice Regarding Delivery of Security Holder Documents
To reduce Fund expenses, only one copy of most shareholder documents may be mailed to shareholders with multiple accounts at the same address (Householding). Mailing of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact Invesco Investment Services, Inc. at 800 959 4246 or contact your financial institution. We will begin sending you individual copies for each account within 30 days after receiving your request.
Fund holdings and proxy voting information
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is available at invesco.com/completeqtrholdings. Shareholders can also look up the Fund’s Forms N-Q on the SEC website at sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov.
The SEC file numbers for the Fund are 811-03826 and 002-85905.
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, 2009, is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov.
If used after July 20, 2010, this report must be accompanied by a Quarterly Performance Review for the most recent quarter-end.
Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the U.S. distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
On April 30, 2010, Invesco Aim Distributors, Inc. became Invesco Distributors, Inc., Invesco Aim Investment Services, Inc. became Invesco Investment Services, Inc., and AIM funds became Invesco funds. In addition, invescoaim.com became invesco.com.
I-UTI-AR-1 Invesco Distributors, Inc.
ITEM 2. CODE OF ETHICS.
As of the end of the period covered by this report, the Registrant had adopted a code of ethics (the “Code”) that applies to the Registrant’s principal executive officer (“PEO”) and principal financial officer (“PFO”). There were no amendments to the Code 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
PWC billed the Registrant aggregate fees for services rendered to the Registrant for the last two fiscal years as follows:
| Percentage of | Percentage of | Percentage of | ||||||||||||||||||||||
| Fees Billed | Fees Billed | Fees Billed | ||||||||||||||||||||||
| Applicable to | Applicable to | Applicable to | ||||||||||||||||||||||
| Non-Audit | Non-Audit | Non-Audit | ||||||||||||||||||||||
| Services | Services | Services | ||||||||||||||||||||||
| Provided for | Provided for | Provided for | ||||||||||||||||||||||
| Fees Billed for | fiscal year end | Fees Billed for | fiscal year end | Fees Billed for | fiscal year end | |||||||||||||||||||
| Services | 4/30/2010 | Services | 3/31/2010 | Services | 3/31/2009 | |||||||||||||||||||
| Rendered to | Pursuant to | Rendered to | Pursuant to | Rendered to the | Pursuant to | |||||||||||||||||||
| the Registrant | Waiver of Pre- | the Registrant | Waiver of Pre- | Registrant for | Waiver of Pre- | |||||||||||||||||||
| for fiscal year | Approval | for fiscal year | Approval | fiscal year end | Approval | |||||||||||||||||||
| end 4/30/2010 | Requirement(1) | end 3/31/2010 | Requirement(1) | 3/31/2009 | Requirement(1) | |||||||||||||||||||
| Audit Fees | $ | 75,706 | N/A | $ | 216,300 | N/A | $ | 228,607 | N/A | |||||||||||||||
| Audit-Related Fees | $ | 0 | 0 | % | $ | 0 | 0 | % | $ | 0 | 0 | % | ||||||||||||
Tax Fees(2) | $ | 7,175 | 0 | % | $ | 47,078 | 0 | % | $ | 49,199 | 0 | % | ||||||||||||
| All Other Fees | $ | 0 | 0 | % | $ | 0 | 0 | % | $ | 0 | 0 | % | ||||||||||||
| Total Fees | $ | 82,881 | 0 | % | $ | 263,378 | 0 | % | $ | 277,806 | 0 | % | ||||||||||||
PWC billed the Registrant aggregate non-audit fees of $7,175 for the fiscal year ended April 30, 2010, $47,078 for the fiscal year ended March 31, 2010 and $49,199 for the fiscal year ended March 31, 2009 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) | Tax fees for the fiscal year end April 30, 2010 includes fees billed for reviewing tax returns. Tax fees for the fiscal year end March 31, 2010 includes fees billed for reviewing tax returns and consultation services. Tax fees for the fiscal year March 31, 2009 includes fees billed for reviewing tax returns and consultation services. |
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 as follows:
| Fees Billed for | Fees Billed for | Fees Billed | ||||||||||||||||||||||
| Non-Audit | Non-Audit | for Non-Audit | ||||||||||||||||||||||
| Services | Services | Services | ||||||||||||||||||||||
| Rendered to | Rendered to | Rendered to | ||||||||||||||||||||||
| Invesco and | Invesco and | Invesco and | ||||||||||||||||||||||
| Invesco | Percentage of | Invesco | Percentage of | Invesco | Percentage of | |||||||||||||||||||
| Affiliates for | Fees Billed | Affiliates for | Fees Billed | Affiliates for | Fees Billed | |||||||||||||||||||
| fiscal year end | Applicable to | fiscal year end | Applicable to | fiscal year end | Applicable to | |||||||||||||||||||
| 4/30/2010 | Non-Audit | 3/31/2010 | Non-Audit | 3/31/2009 | Non-Audit | |||||||||||||||||||
| That Were | Services | That Were | Services | That Were | Services | |||||||||||||||||||
| Required | Provided for | Required | Provided for | Required | Provided for | |||||||||||||||||||
| to be Pre- | fiscal year end | to be Pre- | fiscal year end | to be Pre- | fiscal year end | |||||||||||||||||||
| Approved | 4/30/2010 | Approved | 3/31/2010 | Approved | 3/31/2009 | |||||||||||||||||||
| by the | Pursuant to | by the | Pursuant to | by the | Pursuant to | |||||||||||||||||||
| Registrant's | Waiver of Pre- | Registrant's | Waiver of Pre- | Registrant's | Waiver of Pre- | |||||||||||||||||||
| Audit | Approval | Audit | Approval | Audit | Approval | |||||||||||||||||||
| Committee | Requirement(1) | Committee | Requirement(1) | Committee | Requirement(1) | |||||||||||||||||||
| Audit-Related Fees | $ | 0 | 0 | % | $ | 0 | 0 | % | $ | 0 | 0 | % | ||||||||||||
| Tax Fees | $ | 0 | 0 | % | $ | 0 | 0 | % | $ | 0 | 0 | % | ||||||||||||
| All Other Fees | $ | 0 | 0 | % | $ | 0 | 0 | % | $ | 0 | 0 | % | ||||||||||||
Total Fees(2) | $ | 0 | 0 | % | $ | 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 April 30, 2010, $0 for the fiscal year ended March 31, 2010, and $0 for the fiscal year ended March 31, 2009 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 AIM Funds (the “Funds”)
Last Amended September 18, 2006
POLICIES AND PROCEDURES
As adopted by the Audit Committees of
the AIM Funds (the “Funds”)
Last Amended September 18, 2006
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 Committee”) 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. 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 Committee at its 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 Committee 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 Committee’s 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 Committee 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 Committee 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 Committee 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 Committee 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
On an annual basis, A I M Advisors, Inc. (“AIM”) 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 Committee on a periodic basis as to the results of such monitoring. Both the Funds’ Treasurer and management of AIM will immediately report to the chairman of the Audit Committee any breach of these policies and procedures that comes to the attention of the Funds’ Treasurer or senior management of AIM.
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 March 19, 2010, 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 March 19, 2010, 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 Sector Funds (Invesco Sector Funds) | ||||
| By: | /s/ PHILIP A. TAYLOR | |||
| Philip A. Taylor | ||||
| Principal Executive Officer | ||||
Date: June 14, 2010
Pursuant to the requirements of the Securities and Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| By: | /s/ PHILIP A. TAYLOR | |||
| Philip A. Taylor | ||||
| Principal Executive Officer | ||||
Date: June 14, 2010
| By: | /s/ Sheri Morris | |||
| Sheri Morris | ||||
| Principal Financial Officer | ||||
Date: June 14, 2010
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. |