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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)*
(Exact name of registrant as specified in charter)
| 11 Greenway Plaza, Suite 2500 Houston, Texas | 77046 | |
| (Address of principal executive offices) | (Zip code) | |
Philip A. Taylor 11 Greenway Plaza, Suite 2500 Houston, Texas 77046
(Name and address of agent for service)
(Name and address of agent for service)
Registrant’s telephone number, including area code: (713) 626-1919
Date of fiscal year end: 3/31
Date of reporting period: 9/30/11
*Fund included is Invesco Technology Sector Fund.
Item 1. Reports to Stockholders.
Invesco Technology Sector Fund
Semiannual Report to Shareholders § September 30, 2011
Nasdaq:
A: IFOAX § B: IFOBX § C: IFOCX § Y: IFODX
Semiannual Report to Shareholders § September 30, 2011
Nasdaq:
A: IFOAX § B: IFOBX § C: IFOCX § Y: IFODX
| 2 | Fund Performance | |
| 3 | Letters to Shareholders | |
| 4 | Schedule of Investments | |
| 6 | Financial Statements | |
| 8 | Notes to Financial Statements | |
| 14 | Financial Highlights | |
| 15 | Fund Expenses | |
| 16 | Approval of Investment Advisory and Sub-Advisory Agreements | |
For the most current month-end Fund performance and commentary, please visit invesco.com/performance.
Unless otherwise noted, all data provided by Invesco.
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 Performance
Performance summary
Fund vs. Indexes
Cumulative total returns, 3/31/11 to 9/30/11, at net asset value (NAV). Performance shown does not include applicable contingent deferred sales charges (CDSC) or front-end sales charges, which would have reduced performance.
| Class A Shares* | -15.97 | % | ||
| Class B Shares* | -16.41 | |||
| Class C Shares* | -16.41 | |||
| Class Y Shares* | -15.94 | |||
S&P 500 Index▼ (Broad Market Index) | -13.79 | |||
BofA Merrill Lynch 100 Technology Index▼ (Style-Specific Index)** | -22.32 | |||
NYSE Arca Tech 100 Index (price only)▼ (Former Style-Specific Index)** | -13.31 | |||
Lipper Science & Technology Funds Index▼ (Peer Group Index) | -16.97 | |||
Source(s): ▼Lipper Inc.
| * | Performance includes litigation proceeds. Had these proceeds not been received, total return would have been lower. | |
| ** | During the reporting period, the Fund has elected to use the BofA Merrill Lynch 100 Technology Index as its style-specific index rather than the NYSE Arca Tech 100 Index (price only) because the BofA Merrill Lynch 100 Technology Index more appropriately reflects the Fund’s investment style. |
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 NYSE Arca Tech 100 Index (price-only) is a price-weighted index composed of common stocks and American Depositary Receipts of technology-related companies listed on U.S. exchanges.
The Lipper Science & Technology Funds Index is an unmanaged index considered representative of science and technology funds tracked by Lipper.
The Fund is not managed to track the performance of any particular index, including the index(es) defined here, and consequently, the performance of the Fund may deviate significantly from the performance of the index(es).
A direct investment cannot be made in an index. Unless otherwise indicated, index results include reinvested dividends, and they do not reflect sales charges. Performance of the peer group, if applicable, reflects fund expenses; performance of a market index does not.
Average Annual Total Returns
As of 9/30/11, including maximum applicable sales charges
As of 9/30/11, including maximum applicable sales charges
Class A Shares | ||||
| Inception (7/28/97) | 1.68 | % | ||
| 10 Years | -0.13 | |||
| 5 Years | -1.42 | |||
| 1 Year | -1.99 | |||
Class B Shares | ||||
| Inception (11/28/95) | 2.43 | % | ||
| 10 Years | -0.19 | |||
| 5 Years | -1.46 | |||
| 1 Year | -2.18 | |||
Class C Shares | ||||
| Inception (7/28/97) | 1.31 | % | ||
| 10 Years | -0.33 | |||
| 5 Years | -1.06 | |||
| 1 Year | -1.82 | |||
Class Y Shares | ||||
| Inception (7/28/97) | 2.31 | % | ||
| 10 Years | -0.65 | |||
| 5 Years | -0.06 | |||
| 1 Year | -3.88 | |||
Performance includes litigation proceeds. Had these proceeds not been received, total return would have been lower.
Effective June 1, 2010, Class A, Class B, Class C and Class I shares of the predecessor fund, Morgan Stanley Technology Fund, advised by Morgan Stanley Investment Advisors Inc. were reorganized into Class A, Class B, Class C and Class Y shares, respectively, of Invesco Technology Sector Fund. Returns shown above for Class A, Class B, Class C and Class Y shares are blended returns of the predecessor fund and Invesco Technology Sector Fund. Share class returns will differ from the predecessor fund because of different expenses.
The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Please visit invesco.com/performance for the
most recent month-end performance. Performance figures reflect reinvested distributions, changes in net asset value and the effect of the maximum sales charge unless otherwise stated. Performance figures do not reflect deduction of taxes a shareholder would pay on Fund distributions or sale of Fund shares. Investment return and principal value will fluctuate so that you may have a gain or loss when you sell shares.
The total annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Class A, Class B, Class C and Class Y shares was 1.70%, 2.45%, 2.45% and 1.45%, respectively. The expense ratios presented above may vary from the expense ratios
presented in other sections of this report that are based on expenses incurred during the period covered by this report.
Class A share performance reflects the maximum 5.50% sales charge, and Class B and Class C share performance reflects the applicable contingent deferred sales charge (CDSC) for the period involved. The CDSC on Class B shares declines from 5% beginning at the time of purchase to 0% at the beginning of the seventh year. The CDSC on Class C shares is 1% for the first year after purchase. Class Y shares do not have a front-end sales charge or a CDSC; therefore, performance is at net asset value.
The performance of the Fund’s share classes will differ primarily due to different sales charge structures and class expenses.
| 2 | Invesco Technology Sector Fund |
Letters to Shareholders
Bruce Crockett
Dear Fellow Shareholders:
In these uncertain times, investors face risks that could make it more difficult to achieve their long-term financial goals — a secure retirement, home ownership, a child’s college education. Although the markets are complex and dynamic, there are ways to simplify the process and potentially increase your odds of achieving your goals. The best approach is to create a solid financial plan that helps you save and invest in ways that anticipate your needs over the long term.
Your financial adviser can help you define your financial plan and help you better understand your tolerance for risk. Your financial adviser also can develop an asset allocation strategy that seeks to balance your investment approach, providing some protection against a decline in the markets while allowing you to participate in rising markets. Invesco calls this type of approach “intentional investing.” It means thinking carefully, planning thoughtfully and acting deliberately.
While no investment can guarantee favorable returns, your Board remains committed to managing costs and enhancing the performance of Invesco’s funds as part of our Investor First orientation. We continue to oversee the funds with the same strong sense of responsibility for your money and your continued trust that we’ve always maintained.
Thanks to the approval of our fund shareholders, Invesco has made great progress in realigning our U.S. mutual fund product line following our acquisition of Morgan Stanley’s retail asset management business, including Van Kampen Investments. When completed, the realignment will reduce overlap in the product lineup, enhance efficiency across our product line and build a solid foundation for further growth to meet client and shareholder needs. I would like to thank those of you who voted your proxy, and I hope our shareholders haven’t been too inconvenienced by the process.
As always, please contact me at bruce@brucecrockett.com with any questions or concerns you may have. On behalf of your Board, we look forward to continuing to represent your interests and serving your needs.
Sincerely,
Bruce L. Crockett
Independent Chair, Invesco Funds Board of Trustees
Independent Chair, Invesco Funds Board of Trustees
Philip Taylor
Dear Shareholders:
Enclosed is important information about your Fund and its performance. I encourage you to read this report to learn more about your Fund’s short- and long-term performance and its holdings as of the close of the reporting period.
In light of economic uncertainty and market volatility, I suggest you check the timely market updates and commentary from many of our fund managers and other investment professionals at invesco.com/us. On our website, you also can obtain information about your account at any hour of the day or night. I invite you to visit and explore the tools and information we offer at invesco.com/us.
Invesco offers a broad array of traditional mutual funds, as well as other investment products, including single-country, sector, regional and global investments spanning equity, fixed income and alternative asset classes. Across our product line, investment excellence is our ultimate goal. Each of our funds is managed by specialized teams of investment professionals, and as a company, we maintain a single focus — investment management — that allows our fund managers to concentrate on doing what they do best: managing your money.
Our adherence to stated investment objectives and strategies allows your financial adviser to build a diversified portfolio that meets your individual risk tolerance and financial goals. It also means that when your goals change, your financial adviser will be able to find an Invesco fund that’s appropriate for your needs.
If you have questions about your account, please contact one of our client service representatives at 800 959 4246. If you have a general Invesco-related question or comment for me, I invite you to email me directly at phil@invesco.com.
All of us at Invesco look forward to serving your investment management needs for many years to come. Thank you for investing with us.
Sincerely,
Philip Taylor
Senior Managing Director, Invesco Ltd.
Senior Managing Director, Invesco Ltd.
| 3 | Invesco Technology Sector Fund |
Schedule of Investments(a)
September 30, 2011
(Unaudited)
| Shares | Value | |||||||
| Common Stocks & Other Equity Interests–95.11% | ||||||||
| Application Software–7.92% | ||||||||
Autodesk, Inc.(b) | 45,022 | $ | 1,250,711 | |||||
Citrix Systems, Inc.(b) | 42,724 | 2,329,740 | ||||||
NICE Systems Ltd.–ADR (Israel)(b) | 47,342 | 1,436,830 | ||||||
Nuance Communications, Inc.(b) | 64,639 | 1,316,050 | ||||||
Salesforce.com, Inc.(b) | 6,748 | 771,161 | ||||||
TIBCO Software Inc.(b) | 27,349 | 612,344 | ||||||
| 7,716,836 | ||||||||
| Communications Equipment–8.29% | ||||||||
Acme Packet, Inc.(b) | 13,370 | 569,428 | ||||||
Ciena Corp.(b) | 46,791 | 524,059 | ||||||
F5 Networks, Inc.(b) | 8,887 | 631,421 | ||||||
Finisar Corp.(b) | 25,713 | 451,006 | ||||||
JDS Uniphase Corp.(b) | 63,658 | 634,670 | ||||||
Polycom, Inc.(b) | 38,286 | 703,314 | ||||||
| QUALCOMM, Inc. | 78,654 | 3,824,944 | ||||||
Sonus Networks, Inc.(b) | 162,097 | 351,751 | ||||||
| Sycamore Networks, Inc. | 21,376 | 385,837 | ||||||
| 8,076,430 | ||||||||
| Computer Hardware–9.56% | ||||||||
Apple, Inc.(b) | 24,448 | 9,319,089 | ||||||
| Computer Storage & Peripherals–4.80% | ||||||||
EMC Corp.(b) | 149,530 | 3,138,635 | ||||||
NetApp, Inc.(b) | 21,102 | 716,202 | ||||||
SanDisk Corp.(b) | 20,426 | 824,189 | ||||||
| 4,679,026 | ||||||||
| Data Processing & Outsourced Services–9.09% | ||||||||
Alliance Data Systems Corp.(b) | 12,829 | 1,189,248 | ||||||
Genpact Ltd. (Bermuda)(b) | 69,628 | 1,001,947 | ||||||
| MasterCard, Inc.–Class A | 10,363 | 3,286,729 | ||||||
VeriFone Systems, Inc.(b) | 21,768 | 762,315 | ||||||
| Visa Inc.–Class A | 22,618 | 1,938,815 | ||||||
Wright Express Corp.(b) | 17,912 | 681,373 | ||||||
| 8,860,427 | ||||||||
| Electronic Manufacturing Services–2.17% | ||||||||
| Jabil Circuit, Inc. | 63,486 | 1,129,416 | ||||||
| TE Connectivity Ltd. | 35,077 | 987,067 | ||||||
| 2,116,483 | ||||||||
| Fertilizers & Agricultural Chemicals–0.91% | ||||||||
| Monsanto Co. | 14,764 | 886,431 | ||||||
| Internet Retail–2.59% | ||||||||
Amazon.com, Inc.(b) | 10,310 | 2,229,331 | ||||||
Netflix Inc.(b) | 2,631 | 297,724 | ||||||
| 2,527,055 | ||||||||
| Internet Software & Services–7.37% | ||||||||
eBay Inc.(b) | 28,809 | 849,578 | ||||||
Google, Inc.–Class A(b) | 7,101 | 3,652,612 | ||||||
Responsys, Inc.(b) | 28,678 | 309,149 | ||||||
ValueClick, Inc.(b) | 69,063 | 1,074,620 | ||||||
Velti PLC (Ireland)(b) | 65,835 | 435,169 | ||||||
| VeriSign, Inc. | 30,298 | 866,826 | ||||||
| 7,187,954 | ||||||||
| IT Consulting & Other Services–5.29% | ||||||||
| Accenture PLC–Class A (Ireland) | 29,880 | 1,574,078 | ||||||
Cognizant Technology Solutions Corp.–Class A(b) | 32,400 | 2,031,480 | ||||||
| International Business Machines Corp. | 8,833 | 1,546,040 | ||||||
| 5,151,598 | ||||||||
| Life Sciences Tools & Services–0.96% | ||||||||
Agilent Technologies, Inc.(b) | 29,980 | 936,875 | ||||||
| Research & Consulting Services–0.56% | ||||||||
Acacia Research–Acacia Technologies(b) | 15,078 | 542,657 | ||||||
| Semiconductor Equipment–4.99% | ||||||||
| ASML Holding N.V.–New York Shares (Netherlands) | 26,038 | 899,352 | ||||||
Cymer, Inc.(b) | 19,215 | 714,414 | ||||||
Novellus Systems, Inc.(b) | 119,211 | 3,249,692 | ||||||
| 4,863,458 | ||||||||
| Semiconductors–17.40% | ||||||||
| ARM Holdings PLC–ADR (United Kingdom) | 8,365 | 213,308 | ||||||
Atmel Corp.(b) | 164,755 | 1,329,573 | ||||||
| Avago Technologies Ltd. (Singapore) | 34,269 | 1,122,995 | ||||||
| Broadcom Corp.–Class A | 58,772 | 1,956,520 | ||||||
Cirrus Logic, Inc.(b) | 38,583 | 568,713 | ||||||
| Cypress Semiconductor Corp. | 62,525 | 935,999 | ||||||
| Intel Corp. | 105,681 | 2,254,176 | ||||||
Lattice Semiconductor Corp.(b) | 157,504 | 826,896 | ||||||
Marvell Technology Group Ltd.(b) | 69,768 | 1,013,729 | ||||||
Micron Technology, Inc.(b) | 158,620 | 799,445 | ||||||
| Microsemi Corp. | 144,492 | 2,308,982 | ||||||
ON Semiconductor Corp.(b) | 119,972 | 860,199 | ||||||
Semtech Corp.(b) | 69,144 | 1,458,938 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
4 Invesco Technology Sector Fund
| Shares | Value | |||||||
Semiconductors–(continued) | ||||||||
Skyworks Solutions, Inc.(b) | 34,776 | $ | 623,881 | |||||
| Xilinx, Inc. | 24,924 | 683,915 | ||||||
| 16,957,269 | ||||||||
| Systems Software–13.21% | ||||||||
Ariba Inc.(b) | 51,159 | 1,417,616 | ||||||
Check Point Software Technologies Ltd. (Israel)(b) | 51,253 | 2,704,108 | ||||||
CommVault Systems, Inc.(b) | 15,987 | 592,478 | ||||||
| Microsoft Corp. | 88,046 | 2,191,465 | ||||||
| Oracle Corp. | 91,673 | 2,634,682 | ||||||
Red Hat, Inc.(b) | 30,118 | 1,272,787 | ||||||
Rovi Corp.(b) | 48,053 | 2,065,318 | ||||||
| 12,878,454 | ||||||||
| Total Common Stocks & Other Equity Interests (Cost $87,783,392) | 92,700,042 | |||||||
| Money Market Funds–5.38% | ||||||||
Liquid Assets Portfolio–Institutional Class(c) | 2,621,144 | 2,621,144 | ||||||
Premier Portfolio–Institutional Class(c) | 2,621,144 | 2,621,144 | ||||||
| Total Money Market Funds (Cost $5,242,288) | 5,242,288 | |||||||
| TOTAL INVESTMENTS–100.49% (Cost $93,025,680) | 97,942,330 | |||||||
| OTHER ASSETS LESS LIABILITIES–(0.49)% | (475,270 | ) | ||||||
| NET ASSETS–100.00% | $ | 97,467,060 | ||||||
Investment Abbreviation:
| ADR | – American Depositary Receipt |
Notes to Schedule of Investments:
| (a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. | |
| (b) | Non-income producing security. | |
| (c) | The money market fund and the Fund are affiliated by having the same investment adviser. |
By sector, based on Net Assets
as of September 30, 2011
| Information Technology | 90.1 | % | ||
| Consumer Discretionary | 2.6 | |||
| Health Care | 1.0 | |||
| Materials | 0.9 | |||
| Industrials | 0.5 | |||
| Money Market Funds Plus Other Assets Less Liabilities | 4.9 | |||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
5 Invesco Technology Sector Fund
Statement of Assets and Liabilities
September 30, 2011
(Unaudited)
| Assets: | ||||
| Investments, at value (Cost $87,783,392) | $ | 92,700,042 | ||
| Investments in affiliated money market funds, at value and cost | 5,242,288 | |||
| Total investments, at value (Cost $93,025,680) | 97,942,330 | |||
| Foreign currencies, at value (Cost $30) | 31 | |||
| Receivable for: | ||||
| Investments sold | 700,823 | |||
| Fund shares sold | 147 | |||
| Dividends | 3,902 | |||
| Investment for trustee deferred compensation and retirement plans | 2,022 | |||
| Other assets | 39,549 | |||
| Total assets | 98,688,804 | |||
| Liabilities: | ||||
| Payable for: | ||||
| Investments purchased | 648,100 | |||
| Fund shares reacquired | 133,078 | |||
| Accrued fees to affiliates | 388,677 | |||
| Accrued other operating expenses | 48,632 | |||
| Trustee deferred compensation and retirement plans | 3,257 | |||
| Total liabilities | 1,221,744 | |||
| Net assets applicable to shares outstanding | $ | 97,467,060 | ||
| Net assets consist of: | ||||
| Shares of beneficial interest | $ | 156,711,361 | ||
| Undistributed net investment income (loss) | (686,215 | ) | ||
| Undistributed net realized gain (loss) | (63,474,736 | ) | ||
| Unrealized appreciation | 4,916,650 | |||
| $ | 97,467,060 | |||
| Net Assets: | ||||
| Class A | $ | 83,888,025 | ||
| Class B | $ | 5,011,531 | ||
| Class C | $ | 8,253,631 | ||
| Class Y | $ | 313,873 | ||
| Shares outstanding, $0.01 par value per share, with an unlimited number of shares authorized: | ||||
| Class A | 8,532,605 | |||
| Class B | 571,970 | |||
| Class C | 942,075 | |||
| Class Y | 30,832 | |||
| Class A: | ||||
| Net asset value per share | $ | 9.83 | ||
| Maximum offering price per share (Net asset value of $9.83 divided by 94.50%) | $ | 10.40 | ||
| Class B: | ||||
| Net asset value and offering price per share | $ | 8.76 | ||
| Class C: | ||||
| Net asset value and offering price per share | $ | 8.76 | ||
| Class Y: | ||||
| Net asset value and offering price per share | $ | 10.18 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
6 Invesco Technology Sector Fund
Statement of Operations
For the six months ended September 30, 2011
(Unaudited)
| Investment income: | ||||
| Dividends (net of foreign withholding taxes of $3,123) | $ | 330,682 | ||
| Dividends from affiliated money market funds (includes securities lending income of $1,645) | 3,307 | |||
| Total investment income | 333,989 | |||
| Expenses: | ||||
| Advisory fees | 384,979 | |||
| Administrative services fees | 25,000 | |||
| Custodian fees | 3,391 | |||
| Distribution fees: | ||||
| Class A | 122,430 | |||
| Class B | 34,091 | |||
| Class C | 48,875 | |||
| Transfer agent fees | 315,905 | |||
| Trustees’ and officers’ fees and benefits | 8,132 | |||
| Other | 77,973 | |||
| Total expenses | 1,020,776 | |||
| Less: Fees waived and expense offset arrangement(s) | (2,885 | ) | ||
| Net expenses | 1,017,891 | |||
| Net investment income (loss) | (683,902 | ) | ||
| Realized and unrealized gain (loss) from: | ||||
| Net realized gain from: | ||||
| Investment securities | 7,264,652 | |||
| Foreign currencies | 6 | |||
| 7,264,658 | ||||
| Change in net unrealized appreciation (depreciation) of: | ||||
| Investment securities | (25,676,673 | ) | ||
| Foreign currencies | (6 | ) | ||
| (25,676,679 | ) | |||
| Net realized and unrealized gain (loss) | (18,412,021 | ) | ||
| Net increase (decrease) in net assets resulting from operations | $ | (19,095,923 | ) | |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
7 Invesco Technology Sector Fund
Statement of Changes in Net Assets
For the six months ended September 30, 2011 and the year ended March 31, 2011
(Unaudited)
| September 30, | March 31, | |||||||
| 2011 | 2011 | |||||||
| Operations: | ||||||||
| Net investment income (loss) | $ | (683,902 | ) | $ | (1,442,829 | ) | ||
| Net realized gain (loss) | 7,264,658 | (12,664,873 | ) | |||||
| Change in net unrealized appreciation (depreciation) | (25,676,679 | ) | 28,934,550 | |||||
| Net increase (decrease) in net assets resulting from operations | (19,095,923 | ) | 14,826,848 | |||||
| Share transactions–net: | ||||||||
| Class A | (6,476,305 | ) | (12,499,979 | ) | ||||
| Class B | (2,331,299 | ) | (6,678,345 | ) | ||||
| Class C | (875,537 | ) | (1,372,987 | ) | ||||
| Class Y | 4,243 | 76,095 | ||||||
| Net increase (decrease) in net assets resulting from share transactions | (9,678,898 | ) | (20,475,216 | ) | ||||
| Net increase (decrease) in net assets | (28,774,821 | ) | (5,648,368 | ) | ||||
| Net assets: | ||||||||
| Beginning of period | 126,241,881 | 131,890,249 | ||||||
| End of period (includes undistributed net investment income (loss) of ($686,215) and ($2,313), respectively) | $ | 97,467,060 | $ | 126,241,881 | ||||
Notes to Financial Statements
September 30, 2011
(Unaudited)
NOTE 1—Significant Accounting Policies
Invesco Technology Sector Fund (the “Fund”) is a series portfolio of AIM Sector Funds (Invesco 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 thirteen separate portfolios, each authorized to issue an unlimited number of shares of beneficial interest. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class.
The Fund’s investment objective is long-term capital appreciation.
The Fund currently consists of four different classes of shares: Class A, Class B, Class C and Class Y. Class A shares are sold with a front-end sales charge unless certain waiver criteria are met and under certain circumstances load waived shares may be subject to contingent deferred sales charges (“CDSC”). Class C shares are sold with a CDSC. Class Y shares are sold at net asset value. Effective November 30, 2010, new or additional investments in Class B shares are no longer permitted. Existing shareholders of Class B shares may continue to reinvest dividends and capital gains distributions in Class B shares until they convert. Also, shareholders in Class B shares will be able to exchange those shares for Class B shares of other Invesco Funds offering such shares until they convert. Generally, Class B shares will automatically convert to Class A shares on or about the month-end which is at least eight years after the date of purchase. Redemption of Class B shares prior to conversion date will be subject to a CDSC.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
| A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. | |
| A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”). | ||
| Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded. |
8 Invesco Technology Sector Fund
| Debt obligations (including convertible bonds) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations, including commercial paper, having 60 days or less to maturity are recorded at amortized cost which approximates value. Debt securities are subject to interest rate and credit risks. In addition, all debt securities involve some risk of default with respect to interest and/or principal payments. | ||
| Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trade is not the current value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economical upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards. | ||
| Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including Corporate Loans. | ||
| Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value. | ||
| Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments. | ||
| B. | Securities Transactions and Investment Income — Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. | |
| The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held. | ||
| Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund’s net asset value and, accordingly, they reduce the Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser. | ||
| The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class. | ||
| C. | Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. | |
| D. | Distributions — Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to treat a portion of the proceeds from redemptions as distributions for federal income tax purposes. | |
| E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. | |
| The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period. | ||
| F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
9 Invesco Technology Sector Fund
| G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. | |
| H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. | |
| I. | Other Risks — The Fund’s investments are concentrated in a comparatively narrow segment of the economy, which may make the Fund more volatile. | |
| Many products and services offered in technology-related industries are subject to rapid obsolescence, which may lower the value of the issuers 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. |
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 $500 million | 0 | .67% | ||
| Next $2.5 billion | 0 | .645% | ||
| Over $3 billion | 0 | .62% | ||
10 Invesco Technology Sector Fund
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2012, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Class A, Class B, Class C, and Class Y shares to 2.00%, 2.75%, 2.75%, 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 and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless the Board of the Trustees and Invesco mutually agree to amend or continue the fee waiver agreement, it will terminate on June 30, 2012. The Adviser did not waive fees and/or reimburse expenses during the period under this expense limitation.
Further, the Adviser has contractually agreed, through at least June 30, 2012, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash (excluding investments of cash collateral from securities lending) in such affiliated money market funds.
For the six months ended September 30, 2011, the Adviser waived advisory fees of $2,725.
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 six months ended September 30, 2011, expenses incurred under the agreement are shown in the Statement of Operations as administrative services fees.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (“IIS”) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. IIS may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. All fees payable by IIS to intermediaries that provide omnibus account services or sub-accounting are charged back to the Fund, subject to certain limitations approved by the Trust’s Board of Trustees. For the six months ended September 30, 2011, the expenses incurred under the agreement are shown in the Statement of Operations as transfer agent fees.
Shares of the Fund are distributed by Invesco Distributors, Inc. (“IDI”), an affiliate of the Adviser. The Fund has adopted a Plan of Distribution (the “Plan”) pursuant to Rule 12b-1 under the 1940 Act. The Plan provides that the Fund will reimburse IDI for distribution related expenses that IDI incurs up to a maximum of the following annual rates: (1) Class A — up to 0.25% of the average daily net assets of Class A shares; (2) Class B — up to 1.00% of the average daily net assets of Class B shares; and (3) Class C — up to 1.00% of the average daily net assets of Class C shares.
In the case of Class B shares, provided that the Plan continues in effect, any cumulative expenses incurred by IDI, but not yet reimbursed to IDI, may be recovered through the payment of future distribution fees from the Fund pursuant to the Plan and contingent deferred sales charges paid by investors upon redemption of Class B shares.
For the six months ended September 30, 2011, expenses incurred under these agreements are shown in the Statement of Operations as distribution fees.
Front-end sales commissions and CDSC (collectively the “sales charges”) are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the six months ended September 30, 2011, IDI advised the Fund that IDI retained $358 in front-end sales commissions from the sale of Class A shares and $0, $3,100 and $117 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of the Adviser, Invesco Ltd., IIS and/or IDI.
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3) generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
| Level 1 — | Prices are determined using quoted prices in an active market for identical assets. | |
| Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. | |
| Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
11 Invesco Technology Sector Fund
The following is a summary of the tiered valuation input levels, as of September 30, 2011. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
During the six months ended September 30, 2011, there were no significant transfers between investment levels.
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Equity Securities | $ | 97,942,330 | $ | — | $ | — | $ | 97,942,330 | ||||||||
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 six months ended September 30, 2011, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $160.
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 six months ended September 30, 2011, the Fund paid legal fees of $1,075 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A partner of that firm is a Trustee of the Trust.
NOTE 6—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 7—Tax Information
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Reclassifications are made to the Fund’s capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be reported at the Fund’s fiscal year-end.
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 had a capital loss carryforward as of March 31, 2011, which expires as follows:
| Capital Loss | ||||
| Expiration | Carryforward* | |||
| March 31, 2012 | $ | 25,113,400 | ||
| March 31, 2015 | 19,506,592 | |||
| March 31, 2017 | 12,866,974 | |||
| March 31, 2019 | 13,022,536 | |||
| Total capital loss carryforward | $ | 70,509,502 | ||
| * | Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. |
12 Invesco Technology Sector Fund
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 six months ended September 30, 2011 was $19,335,602 and $32,624,572, respectively. Cost of investments on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed Federal income tax reporting period-end.
| Unrealized Appreciation (Depreciation) of Investment Securities on a Tax Basis | ||||
| Aggregate unrealized appreciation of investment securities | $ | 11,919,696 | ||
| Aggregate unrealized (depreciation) of investment securities | (7,232,938 | ) | ||
| Net unrealized appreciation of investment securities | $ | 4,686,758 | ||
| Cost of investments for tax purposes is $93,255,572. | ||||
NOTE 9—Share Information
| Summary of Share Activity | ||||||||||||||||
| Six months ended | Year ended | |||||||||||||||
| September 30, 2011(a) | March 31, 2011 | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
| Sold: | ||||||||||||||||
| Class A | 82,092 | $ | 933,866 | 551,426 | $ | 5,887,514 | ||||||||||
| Class B | 2,727 | 27,626 | 29,945 | 272,976 | ||||||||||||
| Class C | 11,455 | 116,512 | 59,766 | 610,322 | ||||||||||||
| Class Y | 1,614 | 19,149 | 68,325 | 855,902 | ||||||||||||
| Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||
| Class A | 147,169 | 1,649,637 | 325,775 | 3,326,723 | ||||||||||||
| Class B | (164,827 | ) | (1,649,637 | ) | (362,987 | ) | (3,326,723 | ) | ||||||||
| Reacquired: | ||||||||||||||||
| Class A | (813,919 | ) | (9,059,808 | ) | (2,116,262 | ) | (21,714,216 | ) | ||||||||
| Class B | (70,232 | ) | (709,288 | ) | (403,345 | ) | (3,624,598 | ) | ||||||||
| Class C | (100,865 | ) | (992,049 | ) | (214,910 | ) | (1,983,309 | ) | ||||||||
| Class Y | (1,271 | ) | (14,906 | ) | (67,301 | ) | (779,807 | ) | ||||||||
| Net increase (decrease) in share activity | (906,057 | ) | $ | (9,678,898 | ) | (2,129,568 | ) | $ | (20,475,216 | ) | ||||||
| (a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 75% of the outstanding shares of the Fund. IDI has an agreement with these entities to sell Fund shares. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. 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. |
13 Invesco Technology Sector Fund
NOTE 10—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
| Ratio of | Ratio of | |||||||||||||||||||||||||||||||||||||||||||
| Net gains | expenses | expenses | ||||||||||||||||||||||||||||||||||||||||||
| (losses) on | to average | to average net | Ratio of net | |||||||||||||||||||||||||||||||||||||||||
| Net asset | Net | securities | net assets | assets without | investment | |||||||||||||||||||||||||||||||||||||||
| value, | investment | (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 | ||||||||||||||||||||||||||||||||||||||||||||
| Six months ended 09/30/11 | $ | 11.70 | $ | (0.06 | ) | $ | (1.81 | )(d) | $ | (1.87 | ) | $ | 9.83 | (15.98 | )%(d) | $ | 83,888 | 1.67 | %(e) | 1.67 | %(e) | (1.09 | )%(e) | 17 | % | |||||||||||||||||||
| Year ended 03/31/11 | 10.27 | (0.11 | ) | 1.54 | 1.43 | 11.70 | 13.92 | 106,661 | 1.70 | 1.70 | (1.08 | ) | 214 | |||||||||||||||||||||||||||||||
| Year ended 03/31/10 | 7.12 | (0.11 | ) | 3.26 | 3.15 | 10.27 | 44.24 | 106,337 | 1.92 | (g) | 1.92 | (g) | (1.23 | )(g) | 113 | |||||||||||||||||||||||||||||
| Year ended 03/31/09 | 10.32 | (0.11 | ) | (3.09 | ) | (3.20 | ) | 7.12 | (31.01 | ) | 78,705 | 2.00 | (g) | 2.00 | (g) | (1.32 | )(g) | 81 | ||||||||||||||||||||||||||
| Year ended 03/31/08 | 10.42 | (0.13 | ) | 0.03 | (0.10 | ) | 10.32 | (0.96 | ) | 94,361 | 1.72 | (g) | 1.72 | (g) | (1.18 | )(g) | 122 | |||||||||||||||||||||||||||
| Year ended 03/31/07 | 10.68 | (0.13 | ) | (0.13 | ) | (0.26 | ) | 10.42 | (2.43 | ) | 86,308 | 1.80 | 1.80 | (1.27 | ) | 100 | ||||||||||||||||||||||||||||
| Class B | ||||||||||||||||||||||||||||||||||||||||||||
| Six months ended 09/30/11 | 10.47 | (0.09 | ) | (1.62 | )(d) | (1.71 | ) | 8.76 | (16.33 | )(d)(f) | 5,012 | 2.42 | (e)(f) | 2.42 | (e)(f) | (1.84 | )(e)(f) | 17 | ||||||||||||||||||||||||||
| Year ended 03/31/11 | 9.26 | (0.17 | ) | 1.38 | 1.21 | 10.47 | 13.07 | 8,418 | 2.45 | 2.45 | (1.83 | ) | 214 | |||||||||||||||||||||||||||||||
| Year ended 03/31/10 | 6.47 | (0.16 | ) | 2.95 | 2.79 | 9.26 | 43.12 | 14,261 | 2.67 | (g) | 2.67 | (g) | (1.98 | )(g) | 113 | |||||||||||||||||||||||||||||
| Year ended 03/31/09 | 9.45 | (0.17 | ) | (2.81 | ) | (2.98 | ) | 6.47 | (31.53 | ) | 19,556 | 2.75 | (g) | 2.75 | (g) | (2.07 | )(g) | 81 | ||||||||||||||||||||||||||
| Year ended 03/31/08 | 9.61 | (0.20 | ) | 0.04 | (0.16 | ) | 9.45 | (1.66 | ) | 81,609 | 2.47 | (g) | 2.47 | (g) | (1.93 | )(g) | 122 | |||||||||||||||||||||||||||
| Year ended 03/31/07 | 9.92 | (0.19 | ) | (0.12 | ) | (0.31 | ) | 9.61 | (3.13 | ) | 144,588 | 2.55 | 2.55 | (2.02 | ) | 100 | ||||||||||||||||||||||||||||
| Class C | ||||||||||||||||||||||||||||||||||||||||||||
| Six months ended 09/30/11 | 10.46 | (0.09 | ) | (1.61 | )(d) | (1.70 | ) | 8.76 | (16.25 | )(d)(f) | 8,254 | 2.41 | (e)(f) | 2.41 | (e)(f) | (1.83 | )(e)(f) | 17 | ||||||||||||||||||||||||||
| Year ended 03/31/11 | 9.25 | (0.17 | ) | 1.38 | 1.21 | 10.46 | 13.08 | 10,794 | 2.45 | 2.45 | (1.83 | ) | 214 | |||||||||||||||||||||||||||||||
| Year ended 03/31/10 | 6.46 | (0.16 | ) | 2.95 | 2.79 | 9.25 | 43.19 | 10,981 | 2.67 | (g) | 2.67 | (g) | (1.98 | )(g) | 113 | |||||||||||||||||||||||||||||
| Year ended 03/31/09 | 9.44 | (0.17 | ) | (2.81 | ) | (2.98 | ) | 6.46 | (31.57 | ) | 8,927 | 2.75 | (g) | 2.75 | (g) | (2.07 | )(g) | 81 | ||||||||||||||||||||||||||
| Year ended 03/31/08 | 9.60 | (0.20 | ) | 0.04 | (0.16 | ) | 9.44 | (1.67 | ) | 15,835 | 2.47 | (g) | 2.47 | (g) | (1.93 | )(g) | 122 | |||||||||||||||||||||||||||
| Year ended 03/31/07 | 9.92 | (0.19 | ) | (0.13 | ) | (0.32 | ) | 9.60 | (3.23 | ) | 19,823 | 2.55 | 2.55 | (2.02 | ) | 100 | ||||||||||||||||||||||||||||
| Class Y | ||||||||||||||||||||||||||||||||||||||||||||
| Six months ended 09/30/11 | 12.10 | (0.05 | ) | (1.87 | )(d) | (1.92 | ) | 10.18 | (15.87 | )(d) | 314 | 1.42 | (e) | 1.42 | (e) | (0.84 | )(e) | 17 | ||||||||||||||||||||||||||
| Year ended 03/31/11 | 10.59 | (0.09 | ) | 1.60 | 1.51 | 12.10 | 14.26 | 369 | 1.45 | 1.45 | (0.83 | ) | 214 | |||||||||||||||||||||||||||||||
| Year ended 03/31/10 | 7.33 | (0.09 | ) | 3.35 | 3.26 | 10.59 | 44.47 | 312 | 1.67 | (g) | 1.67 | (g) | (0.98 | )(g) | 113 | |||||||||||||||||||||||||||||
| Year ended 03/31/09 | 10.60 | (0.09 | ) | (3.18 | ) | (3.27 | ) | 7.33 | (30.85 | ) | 218 | 1.75 | (g) | 1.75 | (g) | (1.07 | )(g) | 81 | ||||||||||||||||||||||||||
| Year ended 03/31/08 | 10.67 | (0.11 | ) | 0.04 | (0.07 | ) | 10.60 | (0.66 | ) | 860 | 1.47 | (g) | 1.47 | (g) | (0.93 | )(g) | 122 | |||||||||||||||||||||||||||
| Year ended 03/31/07 | 10.91 | (0.10 | ) | (0.14 | ) | (0.24 | ) | 10.67 | (2.20 | ) | 1,809 | 1.55 | 1.55 | (1.02 | ) | 100 | ||||||||||||||||||||||||||||
| (a) | Calculated using average shares outstanding. | |
| (b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges and is not annualized for periods less than one year, if applicable. | |
| (c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. | |
| (d) | Includes 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 $(1.90), $(1.72), $(1.70), and $(1.96) for Class A, Class B, Class C and Class Y shares, respectively and total returns would have been lower. | |
| (e) | Ratios are annualized and based on average daily net assets (000’s omitted) of $97,918, $6,815, $9,833, $352 for Class A, Class B, Class C, and Class Y shares, respectively. | |
| (f) | The total return, ratio of expenses to average net assets and ratio of net investment income to average net assets reflect actual 12b-1 fees of 1.00% and 0.99% for Class B and Class C shares, respectively. | |
| (g) | Ratios reflect the rebate of certain Fund expenses in connection with the investments from a Morgan Stanley affiliate during the period. The effect of the rebate on the ratios was less than 0.005% for each of the years ended March 31, 2010, 2009 and 2008, respectively. |
NOTE 11—Proposed Reorganization
The Board of Trustees unanimously approved an Agreement and Plan of Reorganization (the “Agreement”) pursuant to which the Fund would transfer all of its assets and liabilities to Invesco Technology Fund (the “Acquiring Fund”) in exchange for shares of the Acquiring Fund.
The Agreement requires approval of the Fund’s shareholders and will be submitted to the shareholders for their consideration at a meeting held on November 28, 2011.
14 Invesco Technology Sector 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 April 1, 2011 through September 30, 2011.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the hypothetical information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
| HYPOTHETICAL | ||||||||||||||||||||||||||||||
| (5% annual return before | ||||||||||||||||||||||||||||||
| ACTUAL | expenses) | |||||||||||||||||||||||||||||
| Beginning | Ending | Expenses | Ending | Expenses | Annualized | |||||||||||||||||||||||||
| Account Value | Account Value | Paid During | Account Value | Paid During | Expense | |||||||||||||||||||||||||
| Class | (04/01/11) | (09/30/11)1 | Period2 | (09/30/11) | Period2 | Ratio | ||||||||||||||||||||||||
| A | $ | 1,000.00 | $ | 840.30 | $ | 7.68 | $ | 1,016.65 | $ | 8.42 | 1.67 | % | ||||||||||||||||||
| B | 1,000.00 | 835.90 | 11.11 | 1,012.90 | 12.18 | 2.42 | ||||||||||||||||||||||||
| C | 1,000.00 | 835.90 | 11.06 | 1,012.95 | 12.13 | 2.41 | ||||||||||||||||||||||||
| Y | 1,000.00 | 840.60 | 6.53 | 1,017.90 | 7.16 | 1.42 | ||||||||||||||||||||||||
| 1 | The actual ending account value is based on the actual total return of the Fund for the period April 1, 2011 through September 30, 2011, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund’s expense ratio and a hypothetical annual return of 5% before expenses. |
| 2 | Expenses are equal to the Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 183/365 to reflect the most recent fiscal half year. |
15 Invesco Technology Sector Fund
| Approval of Investment Advisory and Sub-Advisory Contracts |
The Board of Trustees (the Board) of AIM Sector Funds (Invesco Sector Funds) is required under the Investment Company Act of 1940, as amended, to approve annually the renewal of the Invesco Technology Sector Fund (the Fund) investment advisory agreement with Invesco Advisers, Inc. (Invesco Advisers) and the Master Intergroup Sub-Advisory Contract for Mutual Funds (the sub-advisory contracts) with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers). During contract renewal meetings held on June 14-15, 2011, the Board as a whole, and the disinterested or “independent” Trustees, who comprise 80% of the Board, voting separately, approved the continuance of the Fund’s investment advisory agreement and the sub-advisory contracts for another year, effective July 1, 2011. In doing so, the Board considered the process that it follows in reviewing and approving the Fund’s investment advisory agreement and sub-advisory contracts and the information that it is provided. The Board determined that the Fund’s investment advisory agreement and the sub-advisory contracts are in the best interests of the Fund and its shareholders and the compensation to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable. The Board noted that it had approved a merger of the Fund with Invesco Technology Fund and that shareholder approval is being solicited. Approval of the investment advisory agreement and the sub-advisory contracts was based on the agreements that would remain in place if the merger does not occur.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is responsible for overseeing the management of a number of the series portfolios of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies and limitations and investment risks of these funds. The Sub-Committees meet regularly and at designated contract renewal meetings each year to conduct a review of the performance, fees, expenses and other matters related to their assigned Invesco Funds. Each Sub-Committee recommends to the Investments Committee, which in turn recommends to the full Board, whether to approve the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Trustees receive comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and an independent company, Lipper, Inc. (Lipper). The Trustees also receive an independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. The independent Trustees are assisted in their annual evaluation of the Fund’s investment advisory agreement by the Senior Officer and by independent legal counsel. The independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in private sessions with the Senior Officer and counsel.
In evaluating the fairness and reasonableness of the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Trustees also considered information provided in connection with fund acquisitions approved by the Trustees to rationalize the Invesco Funds product range following the acquisition of the retail mutual fund business of Morgan Stanley (the Morgan Stanley Transaction). The Trustees recognized that the advisory fees for the Invesco Funds include advisory fees that are the result of years of review and negotiation between the Trustees and Invesco Advisers as well as advisory fees inherited from Morgan Stanley and Van Kampen funds acquired in the Morgan Stanley Transaction. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these same arrangements throughout the year and in prior years. One Trustee may have weighed a particular piece of information differently than another Trustee.
The discussion below serves as the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 15, 2011, and may not reflect consideration of factors that became known to the Board after that date, including, for example, changes to the Fund’s performance, advisory fees, expense limitations and/or fee waivers.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
| A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers, with whom the Board met during the year. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s consideration of Invesco Advisers’ performance and investment process oversight, independent credit analysis and investment risk management.
In determining whether to continue the Fund’s investment advisory agreement, the Board considered the prior relationship between Invesco Advisers and the Fund, as well as the Board’s knowledge of Invesco Advisers’ operations, and concluded that it is beneficial to maintain the current relationship, in part, because of such knowledge. The Board also considered services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution and legal and compliance. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and the advisory services are provided in accordance with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services provided by the Affiliated Sub-Advisers under the sub-advisory contracts and the credentials and experience of the officers and employees of the Affiliated Sub-Advisers who provide these services. The Board noted that the Affiliated Sub-Advisers have offices and personnel that are located in financial centers around the world. As a result, the Affiliated Sub-Advisers can provide research and investment analysis on the markets and economies of various countries in which the Fund invests and make recommendations on securities of companies located in such countries. The Board concluded that the sub-advisory contracts benefit the Fund and its shareholders by permitting Invesco Advisers to use the resources and talents of the Affiliated Sub-Advisers in managing the Fund. The Board concluded that the nature, extent and quality of the services provided by the Affiliated Sub-Advisers are appropriate and
16 Invesco Technology Sector Fund
satisfactory and in accordance with the terms of the Fund’s sub-advisory contracts.
| B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
The Board compared the Fund’s performance during the past one, three and five calendar years to the performance of funds in the Lipper performance universe and against the Lipper Science & Technology Funds Index. The Board noted that performance of Class A shares of the Fund was in the fifth quintile of the performance universe for the one, three and five year periods (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board noted that performance of Class A shares of the Fund was below the performance of the Index for the one, three and five year periods. Although the independent written evaluation of the Fund’s Senior Officer only considered Fund performance through the most recent calendar year, the Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
| C. | Advisory and Sub-Advisory Fees and Fee Waivers |
The Board compared the Fund’s contractual advisory fee rate to the contractual advisory fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the contractual advisory fee rate for Class A shares of the Fund was below the median contractual advisory fee rate of funds in the expense group. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using audited financial data from the most recent annual report of each fund in the expense group that was publicly available as of the end of the past calendar year and including only one fund per investment adviser. The Board noted that comparative data is as of varying dates, which may affect the comparability of data during times of market volatility.
The Board also compared the Fund’s effective fee rate (the advisory fee after advisory fee waivers and before expense limitations/waivers) to the advisory fee rates of other mutual funds advised by Invesco Advisers and its affiliates with investment strategies comparable to those of the Fund. The Board noted that the Fund’s rate was below the rate of one mutual fund and above the rate of one mutual fund with comparable investment strategies.
Other than the mutual funds described above, the Board noted that Invesco Advisers and the Affiliated Sub-Advisers do not manage other mutual funds or client accounts in a manner substantially similar to the management of the Fund.
The Board noted that Invesco Advisers has contractually agreed to waive fees and/or limit expenses of the Fund through at least June 30, 2012 in an amount necessary to limit total annual operating expenses to a specified percentage of average daily net assets for each class of the Fund. The Board noted that at the current expense ratio for the Fund, this expense waiver does not have any impact.
The Board also considered the services provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the allocation of fees between Invesco Advisers and the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board noted that Invesco Advisers provides services to sub-advised Invesco Funds, including oversight of the Affiliated Sub-Advisers as well as the additional services described above other than day-to-day portfolio management. The Board also noted that the sub-advisory fees have no direct effect on the Fund or its shareholders, as they are paid by Invesco Advisers to the Affiliated Sub-Advisers.
Based upon the information and considerations described above, the Board concluded that the Fund’s advisory and sub-advisory fees are fair and reasonable.
| D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule. The Board also noted that the Fund shares directly in economies of scale through lower fees charged by third party service providers based on the combined size of the Invesco Funds and other clients advised by Invesco Advisers.
| E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the profitability of Invesco Advisers and its affiliates in providing these services. The Board reviewed with Invesco Advisers the methodology used to prepare the profitability information. The Board considered the profitability of Invesco Advisers in connection with managing the Fund and the Invesco Funds. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its subsidiaries provide to the Fund and the Invesco Funds. The Board concluded that the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund is not excessive given the nature, quality and extent of the services provided to the Invesco Funds. The Board considered whether Invesco Advisers and each Affiliated Sub-Adviser are financially sound and have the resources necessary to perform their obligations under the investment advisory agreement and sub-advisory contracts. The Board concluded that Invesco Advisers and each Affiliated Sub-Adviser have the financial resources necessary to fulfill these obligations.
| F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund, including the fees received for their provision of administrative, transfer agency and distribution services to the Fund. The Board considered the performance of Invesco Advisers and its affiliates in providing these services and the organizational structure employed to provide these services. The Board also considered that these services are provided to the Fund pursuant to written contracts that are reviewed and approved on an annual basis by the Board; that the services are required for the operation of the Fund; that Invesco Advisers and its affiliates can provide services, the nature and quality of which are at least equal to those provided by others offering the same or similar services; and that the fees for such services are fair and reasonable in light of the usual and customary charges by others for services of the same nature and quality.
The Board considered the benefits realized by Invesco Advisers and the Affiliated Sub-Advisers as a result of portfolio brokerage transactions executed through “soft dollar” arrangements. The Board noted that soft dollar arrangements shift the payment obligation for research and execution services from Invesco Advisers and the Affiliated Sub-Advisers to the Invesco Funds and therefore may reduce Invesco Advisers’ and the Affiliated Sub-Advisers’ expenses. The Board concluded that the soft dollar arrangements are appropriate. The Board also concluded that, based on their review and representations made by the Chief Compliance Officer of the Invesco Funds, these arrangements are consistent with regulatory requirements.
The Board considered that the Fund’s uninvested cash and cash collateral from any securities lending arrangements may be invested in money market funds advised by Invesco Advisers pursuant to procedures approved by the Board. The Board noted that Invesco Advisers receives advisory fees from these affiliated money market funds attributable to such investments, although Invesco Advisers has contractually agreed to waive through varying periods the advisory fees payable by the Invesco Funds. The waiver is in an amount equal to 100% of the net advisory fee Invesco Advisers receives from the affiliated money market funds with respect to the Fund’s investment in the affiliated money market funds of uninvested cash, but not cash collateral. The Board concluded that the Fund’s investment of uninvested cash and cash collateral from any securities lending arrangements in the affiliated money market funds is in the best interests of the Fund and its shareholders.
17 Invesco Technology Sector Fund
Invesco mailing information
Send general correspondence to Invesco Investment Services, Inc., P.O. Box 219078, Kansas City, MO 64121-9078.
Send general correspondence to Invesco Investment Services, Inc., P.O. Box 219078, Kansas City, MO 64121-9078.
Invesco privacy policy
You share personal and financial information with us that is necessary for your transactions and your account records. We take very seriously the obligation to keep that information confidential and private.
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.
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.
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, 2011, is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov.
Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the U.S. distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
MS-TECH-SAR-1 Invesco Distributors, Inc.
TABLE OF CONTENTS
| ITEM 2. | CODE OF ETHICS. |
| 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. |
| Not applicable. |
| ITEM 4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES. |
| Not applicable. |
| 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 INVESTMENT COMPANIES. |
| Not applicable. |
| ITEM 9. | PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. |
| Not applicable. |
| ITEM 10. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. |
| None. |
| ITEM 11. | CONTROLS AND PROCEDURES. |
| (a) | As of September 16, 2011, an evaluation was performed under the supervision and with the participation of the officers of the Registrant, including the Principal Executive Officer (“PEO”) and Principal Financial Officer (“PFO”), to assess the effectiveness of the Registrant’s disclosure controls and procedures, as that term is defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”), as amended. Based on that evaluation, the Registrant’s officers, including the PEO and PFO, concluded that, as of September 16, 2011, the Registrant’s disclosure controls and procedures were reasonably designed to ensure: (1) that information required to be disclosed by the Registrant on Form N-CSR is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the Securities and Exchange Commission; and (2) that |
| material information relating to the Registrant is made known to the PEO and PFO as appropriate to allow timely decisions regarding required disclosure. |
| (b) | There have been no changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the second fiscal quarter of the period covered by the report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting. |
| ITEM 12. | EXHIBITS. |
| 12(a) (1) | Not applicable. |
| 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: December 8, 2011
Pursuant to the requirements of the Securities and Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| By: | /s/ Philip A. Taylor | |||
| Philip A. Taylor | ||||
| Principal Executive Officer | ||||
Date: December 8, 2011
| By: | /s/ Sheri Morris | |||
| Sheri Morris | ||||
| Principal Financial Officer | ||||
Date: December 8, 2011
EXHIBIT INDEX
| 12(a) (1) | Not applicable. | |
| 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. |