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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: 4/30
Date of reporting period: 10/31/11
*Funds included are: Invesco Energy Fund, Invesco Gold & Precious Metals Fund, Invesco Leisure Fund, Invesco Technology Fund, Invesco U.S. Mid Cap Value Fund, Invesco Utilities Fund, Invesco Van Kampen American Value Fund, Invesco Van Kampen Comstock Fund, Invesco Van Kampen Mid Cap Growth Fund, Invesco Van Kampen Small Cap Value Fund and Invesco Van Kampen Value Opportunities Fund.
Item 1. Reports to Stockholders.
![(Invesco Logo)](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8576301.gif)
Semiannual Report to Shareholders § October 31, 2011
Nasdaq:
A: IENAX § B: IENBX § C: IEFCX § Y: IENYX § Investor: FSTEX § Institutional: IENIX
![(Invesco Logo)](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8576302.gif)
2 | Fund Performance | |
4 | Letters to Shareholders | |
5 | Schedule of Investments | |
7 | Financial Statements | |
9 | Notes to Financial Statements | |
16 | Financial Highlights | |
17 | Fund Expenses | |
18 | 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, 4/30/11 to 10/31/11, at net asset value (NAV). Performance shown does not include applicable contingent deferred sales charges (CDSC) or front-end sales charges, which would have reduced performance.
Class A Shares | -17.20 | % | ||
Class B Shares | -17.52 | |||
Class C Shares | -17.53 | |||
Class Y Shares | -17.10 | |||
Investor Class Shares | -17.20 | |||
Institutional Class Shares | -17.04 | |||
S&P 500 Index ▼ (Broad Market Index) | -7.12 | |||
Dow Jones U.S. Oil & Gas Index ▼(Former Style-Specific Index)* | -12.83 | |||
MSCI World Energy Indexn (Style-Specific Index)* | -13.55 | |||
Lipper Natural Resource Funds Index ▼ (Peer Group Index) | -16.71 | |||
Source(s): ▼ Lipper Inc.; n MSCI via FactSet Research Systems Inc. | ||
* | During the reporting period, the Fund has elected to use the MSCI World Energy Index as its style-specific index rather than the Dow Jones U.S. Oil & Gas Index because the MSCI World Energy Index more closely reflects the performance of the types of securities in which the Fund invests. |
The S&P 500® Index is an unmanaged index considered representative of the U.S. stock market.
The Dow Jones U.S. Oil & Gas Index is an unmanaged index considered representative of the U.S. energy market.
The MSCI World Energy Index is a free float-adjusted market capitalization index that represents the energy segment in global developed market equity performance.
The Lipper Natural Resource Funds Index is an unmanaged index considered representative of natural resource funds tracked by Lipper.
The Fund is not managed to track the performance of any particular index, including the 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.
2 Invesco Energy Fund
Average Annual Total Returns
As of 10/31/11, including maximum applicable sales charges
Class A Shares | ||||||||
Inception (3/28/02) | 12.07 | % | ||||||
5 | Years | 4.88 | ||||||
1 | Year | 4.99 | ||||||
Class B Shares | ||||||||
Inception (3/28/02) | 12.05 | % | ||||||
5 | Years | 5.00 | ||||||
1 | Year | 5.26 | ||||||
Class C Shares | ||||||||
Inception (2/14/00) | 13.09 | % | ||||||
10 | Years | 13.03 | ||||||
5 | Years | 5.28 | ||||||
1 | Year | 9.27 | ||||||
Class Y Shares | ||||||||
10 | Years | 13.94 | % | |||||
5 | Years | 6.23 | ||||||
1 | Year | 11.39 | ||||||
Investor Class Shares | ||||||||
Inception (1/19/84) | 10.00 | % | ||||||
10 | Years | 13.85 | ||||||
5 | Years | 6.07 | ||||||
1 | Year | 11.13 | ||||||
Institutional Class Shares | ||||||||
Inception (1/31/06) | 4.24 | % | ||||||
5 | Years | 6.53 | ||||||
1 | Year | 11.49 |
Class Y shares incepted on October 3, 2008. Performance shown prior to that date is that of Investor Class shares and includes the 12b-1 fees applicable to Investor Class shares. Investor Class share performance reflects any applicable fee waivers or expense reimbursements.
The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Please visit invesco.com/performance for the most recent month-end performance. Performance figures reflect reinvested distributions, changes in net asset value and the effect of the maximum sales charge unless otherwise stated. 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.
Average Annual Total Returns
As of 9/30/11, the most recent calendar quarter-end, including maximum applicable sales charges
Class A Shares | ||||||||
Inception (3/28/02) | 10.00 | % | ||||||
5 | Years | 1.64 | ||||||
1 | Year | -9.38 | ||||||
Class B Shares | ||||||||
Inception (3/28/02) | 9.98 | % | ||||||
5 | Years | 1.76 | ||||||
1 | Year | -9.57 | ||||||
Class C Shares | ||||||||
Inception (2/14/00) | 11.39 | % | ||||||
10 | Years | 11.74 | ||||||
5 | Years | 2.03 | ||||||
1 | Year | -5.81 | ||||||
Class Y Shares | ||||||||
10 | Years | 12.63 | % | |||||
5 | Years | 2.96 | ||||||
1 | Year | -3.85 | ||||||
Investor Class Shares | ||||||||
Inception (1/19/84) | 9.29 | % | ||||||
10 | Years | 12.55 | ||||||
5 | Years | 2.80 | ||||||
1 | Year | -4.10 | ||||||
Institutional Class Shares | ||||||||
Inception (1/31/06) | 0.90 | % | ||||||
5 | Years | 3.24 | ||||||
1 | Year | -3.83 |
The total annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Class A, Class B, Class C, Class Y, Investor Class and Institutional Class shares was 1.13%, 1.88%, 1.88%, 0.88%, 1.13% and 0.77%, respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.
Class A share performance reflects the maximum 5.50% sales charge, and Class B and Class C share performance reflects the applicable contingent deferred sales charge (CDSC) for the period involved. The CDSC on Class B shares declines from 5% beginning at the time of purchase to 0% at the beginning of the seventh year. The CDSC on Class C shares is 1% for the first year after purchase. Class Y, Investor Class and Institutional Class shares do not have a front-end sales charge or a CDSC; therefore, performance is at net asset value.
The performance of the Fund’s share classes will differ primarily due to different sales charge structures and class expenses.
Had the adviser not waived fees and/or reimbursed expenses on Class B or Class C shares in the past, performance would have been lower.
3 Invesco Energy Fund
Letters to Shareholders
![(PHOTO OF BRUCE CROCKETT)](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8576303.jpg)
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,
![(-S- BRUCE CROCKETT)](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8576304.gif)
Bruce L. Crockett
Independent Chair, Invesco Funds Board of Trustees
Independent Chair, Invesco Funds Board of Trustees
![(PHOTO OF PHILIP TAYLOR)](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8576305.jpg)
Philip Taylor
Dear Shareholders:
Enclosed is important information about your Fund and its performance. I encourage you to read this report to learn more about your Fund’s short- and long-term performance.
The start of a new year is always a good time to catch up with your financial adviser. Looking ahead to the new year and evaluating your individual situation, your financial adviser can provide valuable insight into whether your investments are still appropriate for your individual needs, goals and risk tolerance. This may provide reassurance in times of economic uncertainty and market volatility such as we saw in 2011 — and are likely to see again in 2012.
On our website, invesco.com/us, we provide timely market updates and commentary from many of our fund managers and other investment professionals. Also on our website, you 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.
Across our broad array of investment products, 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 — meaning 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,
![(-S PHILIP TAYLOR)](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8576306.gif)
Philip Taylor
Senior Managing Director, Invesco Ltd.
Senior Managing Director, Invesco Ltd.
4 Invesco Energy Fund
Schedule of Investments(a)
October 31, 2011
(Unaudited)
Shares | Value | |||||||
Common Stocks & Other Equity Interests–95.29% | ||||||||
Coal & Consumable Fuels–1.48% | ||||||||
Peabody Energy Corp. | 554,018 | $ | 24,027,761 | |||||
Integrated Oil & Gas–20.73% | ||||||||
BG Group PLC (United Kingdom) | 428,448 | 9,284,833 | ||||||
BP PLC–ADR (United Kingdom) | 106,880 | 4,721,958 | ||||||
Chevron Corp. | 548,442 | 57,613,832 | ||||||
ConocoPhillips | 336,346 | 23,426,499 | ||||||
Exxon Mobil Corp. | 1,179,167 | 92,081,151 | ||||||
Hess Corp. | 420,293 | 26,293,530 | ||||||
Occidental Petroleum Corp. | 931,092 | 86,535,691 | ||||||
Royal Dutch Shell PLC–ADR (United Kingdom) | 411,451 | 29,175,991 | ||||||
Total S.A.–ADR (France) | 152,161 | 7,958,020 | ||||||
337,091,505 | ||||||||
Oil & Gas Drilling–12.87% | ||||||||
Atwood Oceanics, Inc.(b) | 454,568 | 19,428,236 | ||||||
Ensco PLC–ADR (United Kingdom) | 1,182,399 | 58,717,934 | ||||||
Helmerich & Payne, Inc. | 821,671 | 43,696,464 | ||||||
Nabors Industries Ltd.(b) | 524,185 | 9,608,311 | ||||||
Patterson-UTI Energy, Inc. | 570,649 | 11,595,588 | ||||||
Rowan Cos., Inc.(b) | 1,409,099 | 48,599,825 | ||||||
Seadrill Ltd. (Bermuda)(c) | 535,224 | 17,731,971 | ||||||
209,378,329 | ||||||||
Oil & Gas Equipment & Services–35.98% | ||||||||
Baker Hughes Inc. | 1,457,493 | 84,520,019 | ||||||
Cameron International Corp.(b) | 1,532,848 | 75,324,151 | ||||||
Dresser-Rand Group, Inc.(b) | 166,270 | 8,047,468 | ||||||
FMC Technologies, Inc.(b) | 186,559 | 8,361,575 | ||||||
Halliburton Co. | 2,256,398 | 84,299,029 | ||||||
Key Energy Services, Inc.(b) | 1,916,187 | 24,776,298 | ||||||
Lufkin Industries, Inc. | 176,514 | 10,430,212 | ||||||
National Oilwell Varco Inc. | 1,285,617 | 91,703,061 | ||||||
Oceaneering International, Inc. | 195,422 | 8,174,502 | ||||||
Schlumberger Ltd. | 1,589,415 | 116,774,320 | ||||||
Superior Energy Services, Inc.(b)(c) | 645,611 | 18,154,581 | ||||||
Weatherford International Ltd.(b) | 3,523,238 | 54,610,189 | ||||||
585,175,405 | ||||||||
Oil & Gas Exploration & Production–22.45% | ||||||||
Anadarko Petroleum Corp. | 1,055,801 | 82,880,378 | ||||||
Apache Corp. | 799,539 | 79,658,070 | ||||||
Cabot Oil & Gas Corp. | 134,175 | 10,428,081 | ||||||
Canadian Natural Resources Ltd. (Canada) | 289,946 | 10,218,003 | ||||||
CNOOC Ltd. (China) | 4,126,000 | 7,798,466 | ||||||
EOG Resources, Inc. | 418,590 | 37,434,504 | ||||||
Kosmos Energy LLC.(b) | 668,996 | 10,369,438 | ||||||
Marathon Oil Corp. | 393,771 | 10,249,859 | ||||||
Newfield Exploration Co.(b) | 566,435 | 22,804,673 | ||||||
Noble Energy, Inc. | 221,442 | 19,783,628 | ||||||
Range Resources Corp. | 194,232 | 13,370,931 | ||||||
Resolute Energy Corp.(b)(c) | 650,238 | 8,453,094 | ||||||
Southwestern Energy Co.(b) | 444,891 | 18,703,218 | ||||||
Whiting Petroleum Corp.(b) | 708,914 | 32,999,947 | ||||||
365,152,290 | ||||||||
Oil & Gas Refining & Marketing–1.78% | ||||||||
Marathon Petroleum Corp. | 425,164 | 15,263,387 | ||||||
Valero Energy Corp. | 553,413 | 13,613,960 | ||||||
28,877,347 | ||||||||
Total Common Stocks & Other Equity Interests (Cost $1,282,627,162) | 1,549,702,637 | |||||||
Money Market Funds–6.39% | ||||||||
Liquid Assets Portfolio–Institutional Class(d) | 52,012,495 | 52,012,495 | ||||||
Premier Portfolio–Institutional Class(d) | 52,012,496 | 52,012,496 | ||||||
Total Money Market Funds (Cost $104,024,991) | 104,024,991 | |||||||
TOTAL INVESTMENTS (excluding investments purchased with cash collateral from securities on loan)–101.68% (Cost $1,386,652,153) | 1,653,727,628 | |||||||
Investments Purchased with Cash Collateral from Securities on Loan | ||||||||
Money Market Funds–0.43% | ||||||||
Liquid Assets Portfolio–Institutional Class (Cost $6,917,413)(d)(e) | 6,917,413 | 6,917,413 | ||||||
TOTAL INVESTMENTS–102.11% (Cost $1,393,569,566) | 1,660,645,041 | |||||||
OTHER ASSETS LESS LIABILITIES–(2.11)% | (34,327,866 | ) | ||||||
NET ASSETS–100.00% | $ | 1,626,317,175 | ||||||
Investment Abbreviations:
ADR | – American Depositary Receipt |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
5 Invesco Energy Fund
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. | |
(b) | Non-income producing security. | |
(c) | All or a portion of this security was out on loan at October 31, 2011. | |
(d) | The money market fund and the Fund are affiliated by having the same investment adviser. | |
(e) | The security has been segregated to satisfy the commitment to return the cash collateral received in securities lending transactions upon the borrower’s return of the securities loaned. See Note 1J. |
By industry, based on Net Assets
as of October 31, 2011
Oil & Gas Equipment & Services | 36.0 | % | ||
Oil & Gas Exploration & Production | 22.4 | |||
Integrated Oil & Gas | 20.7 | |||
Oil & Gas Drilling | 12.9 | |||
Oil & Gas Refining & Marketing | 1.8 | |||
Coal & Consumable Fuels | 1.5 | |||
Money Market Funds Plus Other Assets Less Liabilities | 4.7 | |||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
6 Invesco Energy Fund
Statement of Assets and Liabilities
October 31, 2011
(Unaudited)
Assets: | ||||
Investments, at value (Cost $1,282,627,162)* | $ | 1,549,702,637 | ||
Investments in affiliated money market funds, at value and cost | 110,942,404 | |||
Total investments, at value (Cost $1,393,569,566) | 1,660,645,041 | |||
Receivable for: | ||||
Investments sold | 9,418,041 | |||
Fund shares sold | 5,807,463 | |||
Dividends | 435,321 | |||
Investment for trustee deferred compensation and retirement plans | 44,196 | |||
Other assets | 58,303 | |||
Total assets | 1,676,408,365 | |||
Liabilities: | ||||
Payable for: | ||||
Investments purchased | 34,171,930 | |||
Fund shares reacquired | 7,588,575 | |||
Collateral upon return of securities loaned | 6,917,413 | |||
Accrued fees to affiliates | 1,104,559 | |||
Accrued other operating expenses | 138,930 | |||
Trustee deferred compensation and retirement plans | 169,783 | |||
Total liabilities | 50,091,190 | |||
Net assets applicable to shares outstanding | $ | 1,626,317,175 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 1,463,509,393 | ||
Undistributed net investment income (loss) | (1,296,332 | ) | ||
Undistributed net realized gain (loss) | (102,966,572 | ) | ||
Unrealized appreciation | 267,070,686 | |||
$ | 1,626,317,175 | |||
Net Assets: | ||||
Class A | $ | 782,318,610 | ||
Class B | $ | 84,700,419 | ||
Class C | $ | 216,969,379 | ||
Class Y | $ | 69,387,635 | ||
Investor Class | $ | 456,301,022 | ||
Institutional Class | $ | 16,640,110 | ||
Shares outstanding, $0.01 par value per share, with an unlimited number of shares authorized: | ||||
Class A | 19,990,568 | |||
Class B | 2,367,276 | |||
Class C | 6,214,852 | |||
Class Y | 1,771,888 | |||
Investor Class | 11,701,168 | |||
Institutional Class | 417,280 | |||
Class A: | ||||
Net asset value per share | $ | 39.13 | ||
Maximum offering price per share | ||||
(Net asset value of $39.13 divided by 94.50%) | $ | 41.41 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 35.78 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 34.91 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 39.16 | ||
Investor Class: | ||||
Net asset value and offering price per share | $ | 39.00 | ||
Institutional Class: | ||||
Net asset value and offering price per share | $ | 39.88 | ||
* | At October 31, 2011, securities with an aggregate value of $6,334,960 were on loan to brokers. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
7 Invesco Energy Fund
Statement of Operations
For the six months ended October 31, 2011
(Unaudited)
Investment income: | ||||
Dividends (net of foreign withholding taxes of $179,899) | $ | 10,058,885 | ||
Dividends from affiliated money market funds (includes securities lending income of $60,414) | 85,062 | |||
Total investment income | 10,143,947 | |||
Expenses: | ||||
Advisory fees | 5,431,305 | |||
Administrative services fees | 216,446 | |||
Custodian fees | 45,877 | |||
Distribution fees: | ||||
Class A | 1,087,852 | |||
Class B | 474,861 | |||
Class C | 1,184,420 | |||
Investor Class | 618,499 | |||
Transfer agent fees — A, B, C, Y and Investor | 1,874,467 | |||
Transfer agent fees — Institutional | 9,343 | |||
Trustees’ and officers’ fees and benefits | 41,229 | |||
Other | 247,812 | |||
Total expenses | 11,232,111 | |||
Less: Fees waived, expenses reimbursed and expense offset arrangement(s) | (35,150 | ) | ||
Net expenses | 11,196,961 | |||
Net investment income (loss) | (1,053,014 | ) | ||
Realized and unrealized gain (loss) from: | ||||
Net realized gain from: | ||||
Investment securities | 35,988,284 | |||
Foreign currencies | 186,967 | |||
36,175,251 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | (403,206,439 | ) | ||
Foreign currencies | (9,214 | ) | ||
(403,215,653 | ) | |||
Net realized and unrealized gain (loss) | (367,040,402 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | (368,093,416 | ) | |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
8 Invesco Energy Fund
Statement of Changes in Net Assets
For the six months ended October 31, 2011 and the year ended April 30, 2011
(Unaudited)
October 31, | April 30, | |||||||
2011 | 2011 | |||||||
Operations: | ||||||||
Net investment income (loss) | $ | (1,053,014 | ) | $ | (3,628,995 | ) | ||
Net realized gain | 36,175,251 | 78,019,602 | ||||||
Change in net unrealized appreciation (depreciation) | (403,215,653 | ) | 383,254,977 | |||||
Net increase (decrease) in net assets resulting from operations | (368,093,416 | ) | 457,645,584 | |||||
Distributions to shareholders from net investment income: | ||||||||
Class A | — | (595,398 | ) | |||||
Class Y | — | (166,845 | ) | |||||
Investor Class | — | (381,243 | ) | |||||
Institutional Class | — | (40,505 | ) | |||||
Total distributions from net investment income | — | (1,183,991 | ) | |||||
Share transactions–net: | ||||||||
Class A | (85,834,243 | ) | 89,450,564 | |||||
Class B | (11,910,806 | ) | (20,427,752 | ) | ||||
Class C | (17,039,804 | ) | 15,806,696 | |||||
Class Y | 1,038,634 | 18,477,902 | ||||||
Investor Class | (36,936,005 | ) | (23,434,111 | ) | ||||
Institutional Class | 5,115,926 | 3,472,720 | ||||||
Net increase (decrease) in net assets resulting from share transactions | (145,566,298 | ) | 83,346,019 | |||||
Net increase (decrease) in net assets | (513,659,714 | ) | 539,807,612 | |||||
Net assets: | ||||||||
Beginning of period | 2,139,976,889 | 1,600,169,277 | ||||||
End of period (includes undistributed net investment income (loss) of $(1,296,332) and $(243,318), respectively) | $ | 1,626,317,175 | $ | 2,139,976,889 | ||||
Notes to Financial Statements
October 31, 2011
(Unaudited)
NOTE 1—Significant Accounting Policies
Invesco Energy 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 growth of capital.
The Fund currently consists of six different classes of shares: Class A, Class B, Class C, Class Y, Investor Class and Institutional Class. Investor Class shares of the Fund are offered only to certain grandfathered investors. Class A shares are sold with a front-end sales charge unless certain waiver criteria are met and under certain circumstances load waived shares may be subject to contingent deferred sales charges (“CDSC”). Class C shares are sold with a CDSC. Class Y, Investor Class and Institutional Class shares are sold at net asset value. Effective November 30, 2010, new or additional investments in Class B shares are no longer permitted. Existing shareholders of Class B shares may continue to reinvest dividends and capital gains distributions in Class B shares until they convert. Also, shareholders in Class B shares will be able to exchange those shares for Class B shares of other Invesco Funds offering such shares until they convert. Generally, Class B shares will automatically convert to Class A shares on or the about month-end which is at least eight years after the date of purchase. Redemption of Class B shares prior to conversion date will be subject to a CDSC.
9 Invesco Energy Fund
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. | |
A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”). | ||
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded. | ||
Debt obligations (including convertible bonds) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Debt securities are subject to interest rate and credit risks. In addition, all debt securities involve some risk of default with respect to interest and/or principal payments. | ||
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trade is not the current value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and 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 |
10 Invesco Energy Fund
and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. | ||
D. | Distributions — Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to treat a portion of the proceeds from redemptions as distributions for federal income tax purposes. | |
E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. | |
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period. | ||
F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund are charged to the operations of such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses attributable to the Institutional Class are charged to such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses relating to all other classes are allocated among those classes based on relative net assets. All other expenses are allocated among the classes based on relative net assets. | |
G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. | |
H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. | |
I. | Other Risks — The Fund’s investments are concentrated in a comparatively narrow segment of the economy, which may make the Fund more volatile. | |
The businesses in which the Fund invests may be adversely affected by foreign, federal or state regulations governing energy production, distribution and sale. Although individual security selection drives the performance of the Fund, short-term fluctuations in commodity prices may cause price fluctuations in its shares. | ||
J. | Securities Lending — The Fund may lend portfolio securities having a market value up to one-third of the Fund’s total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily by the securities lending provider. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its sponsored agencies. Cash collateral received in connection with these loans is invested in short-term money market instruments or affiliated money market funds and is shown as such on the Schedule of Investments. It is the Fund’s policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. Upon the failure of the borrower to return the securities, collateral may be liquidated and the securities may be purchased on the open market to replace the loaned securities. The Fund could experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to any loss on the collateral invested. Dividends received on cash collateral investments for securities lending transactions, which are net of compensation to counterparties, is included in Dividends from affiliates on the Statement of Operations. The aggregate value of securities out on loan is shown as a footnote on the Statement of Assets and Liabilities, if any. | |
K. | Foreign Currency Translations — Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of 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 |
11 Invesco Energy Fund
reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statement of Operations. The primary risks associated with foreign currency contracts include failure of the counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities. |
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser based on the annual rate of the Fund’s average daily net assets as follows:
Average Net Assets | Rate | |||
First $350 million | 0 | .75% | ||
Next $350 million | 0 | .65% | ||
Next $1.3 billion | 0 | .55% | ||
Next $2 billion | 0 | .45% | ||
Next $2 billion | 0 | .40% | ||
Next $2 billion | 0 | .375% | ||
Over $8 billion | 0 | .35% | ||
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco 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 August 31, 2012, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Class A, Class B, Class C, Class Y, Investor Class and Institutional Class shares to 2.00%, 2.75%, 2.75%, 1.75%, 2.00% and 1.75%, respectively, of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waivers 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 August 31, 2012. The Adviser did not waive fees and/or reimburse expenses during the period under this expense limitation.
The Adviser has contractually agreed, through at least June 30, 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 October 31, 2011, the Adviser waived advisory fees of $31,661.
At the request of the Trustees of the Trust, Invesco Ltd. agreed to reimburse expenses incurred by the Fund in connection with market timing matters in the Invesco Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement are included in the Statement of Operations. For the six months ended October 31, 2011, Invesco Ltd. reimbursed expenses of the Fund in the amount of $1,633.
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 October 31, 2011, expenses incurred under the agreement are shown in the Statement of Operations as administrative services fees.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (“IIS”) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. IIS may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. All fees payable by IIS to intermediaries that provide omnibus account services or sub-accounting are charged back to the Fund, subject to certain limitations approved by the Trust’s Board of Trustees. For the six months ended October 31, 2011, expenses incurred under the agreement are shown in the Statement of Operations as transfer agent fees.
The Trust has entered into master distribution agreements with Invesco Distributors, Inc. (“IDI”) to serve as the distributor for the Class A, Class B, Class C, Class Y, Investor Class and Institutional Class shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund’s Class A, Class B, Class C and Investor Class shares (collectively, the “Plans”). The Fund, pursuant to the Plans, pays IDI compensation at the annual rate of 0.25% of the Fund’s average daily net assets of Class A shares, 1.00% of the average daily net assets of Class B and Class C shares and 0.25% of the average daily net assets of Investor Class shares. Of the Plan payments, up to 0.25% of the average daily net assets of each class of shares may be paid to furnish continuing personal shareholder services to customers who purchase and own shares of such classes. Any amounts not paid as a service fee under the Plans would constitute an asset-based sales charge. Rules of the Financial Industry Regulatory Authority (“FINRA”) impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. For the six months ended October 31, 2011, expenses incurred under the Plan are shown in the Statement of Operations as distribution fees.
12 Invesco Energy Fund
Front-end sales commissions and CDSC (collectively, the “sales charges”) are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the six months ended October 31, 2011, IDI advised the Fund that IDI retained $111,995 in front-end sales commissions from the sale of Class A shares and $16,975, $80,552 and $28,974 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—Supplemental Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3) generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
Level 1 — | Prices are determined using quoted prices in an active market for identical assets. | |
Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. | |
Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of October 31, 2011. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
During the six months ended October 31, 2011, there were no significant transfers between investment levels.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 1,643,561,742 | $ | 17,083,299 | $ | — | $ | 1,660,645,041 | ||||||||
NOTE 4—Security Transactions with Affiliated Funds
The Fund is permitted to purchase or sell securities from or to certain other Invesco Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment adviser (or affiliated investment advisers), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, for the six months ended October 31, 2011, the Fund engaged in securities purchases of $3,323,707.
NOTE 5—Expense Offset Arrangement(s)
The expense offset arrangement are comprised of (1) transfer agency credits which result from balances in Dem and Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions and (2) custodian credits which result from periodic overnight cash balances at the custodian. For the six months ended October 31, 2011, the Fund received credits from these arrangements, which resulted in the reduction of Fund’s total expenses of $1,856.
NOTE 6—Trustees’ and Officers’ Fees and Benefits
“Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and “Trustees’ and Officers’ Fees and Benefits” also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. “Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
During the six months ended October 31, 2011, the Fund paid legal fees of $2,104 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.
13 Invesco Energy Fund
NOTE 7—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with The State Street Bank and Trust Company, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 8—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 April 30, 2011, which expires as follows:
Capital Loss | ||||
Expiration | Carryforward* | |||
April 30, 2017 | $ | 105,225,424 | ||
April 30, 2018 | 29,171,183 | |||
Total capital loss carryforward | $ | 134,396,607 | ||
* | Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. |
NOTE 9—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the six months ended October 31, 2011 was $601,923,297 and $794,385,107, 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 | $ | 287,323,309 | ||
Aggregate unrealized (depreciation) of investment securities | (24,993,050 | ) | ||
Net unrealized appreciation of investment securities | $ | 262,330,259 | ||
Cost of investments for tax purposes is $1,398,314,782. |
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NOTE 10—Share Information
Summary of Share Activity | ||||||||||||||||
Six months ended | Year ended | |||||||||||||||
October 31, 2011(a) | April 30, 2011 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Class A | 2,980,514 | $ | 121,669,692 | 8,472,162 | $ | 344,600,164 | ||||||||||
Class B | 82,362 | 3,060,540 | 341,503 | 11,826,377 | ||||||||||||
Class C | 608,702 | 22,101,723 | 1,911,825 | 68,858,262 | ||||||||||||
Class Y | 589,644 | 24,367,763 | 1,177,062 | 47,607,588 | ||||||||||||
Investor Class | 1,198,623 | 48,978,117 | 3,287,182 | 131,052,367 | ||||||||||||
Institutional Class | 208,259 | 8,360,345 | 180,935 | 7,357,957 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Class A | — | — | 14,483 | 578,437 | ||||||||||||
Class Y | — | — | 3,820 | 152,350 | ||||||||||||
Investor Class | — | — | 9,396 | 373,881 | ||||||||||||
Institutional Class | — | — | 993 | 40,312 | ||||||||||||
Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||
Class A | 89,592 | 3,688,412 | 215,358 | 8,339,625 | ||||||||||||
Class B | (97,825 | ) | (3,688,412 | ) | (233,977 | ) | (8,339,625 | ) | ||||||||
Reacquired: | ||||||||||||||||
Class A | (5,258,098 | ) | (211,192,347 | ) | (7,168,633 | ) | (264,067,662 | ) | ||||||||
Class B | (301,787 | ) | (11,282,934 | ) | (723,952 | ) | (23,914,504 | ) | ||||||||
Class C | (1,090,407 | ) | (39,141,527 | ) | (1,609,310 | ) | (53,051,566 | ) | ||||||||
Class Y | (592,006 | ) | (23,329,129 | ) | (749,590 | ) | (29,282,036 | ) | ||||||||
Investor Class | (2,114,551 | ) | (85,914,122 | ) | (4,176,029 | ) | (154,860,359 | ) | ||||||||
Institutional Class | (80,461 | ) | (3,244,419 | ) | (101,936 | ) | (3,925,549 | ) | ||||||||
Net increase (decrease) in share activity | (3,777,439 | ) | $ | (145,566,298 | ) | 851,292 | $ | 83,346,019 | ||||||||
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 20% of the outstanding shares of the Fund. IDI has an agreement with these entities to sell Fund shares. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as securities brokerage, distribution, third party record keeping and account servicing. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
15 Invesco Energy Fund
NOTE 11—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Ratio of | Ratio of | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net gains | expenses | expenses | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
(losses) on | to average | to average net | Ratio of net | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset | Net | securities | Dividends | Distributions | net assets | assets without | investment | |||||||||||||||||||||||||||||||||||||||||||||||||
value, | investment | (both | Total from | from net | from net | Net asset | Net assets, | with fee waivers | fee waivers | income (loss) | ||||||||||||||||||||||||||||||||||||||||||||||
beginning | income | realized and | investment | investment | realized | Total | value, end | Total | end of period | and/or expenses | and/or expenses | to average | Portfolio | |||||||||||||||||||||||||||||||||||||||||||
of period | (loss)(a) | unrealized) | operations | income | gains | Distributions | of period | Return(b) | (000s omitted) | absorbed | absorbed | net assets | turnover(c) | |||||||||||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | $ | 47.26 | $ | 0.00 | $ | (8.13 | ) | $ | (8.13 | ) | $ | — | $ | — | $ | — | $ | 39.13 | (17.20 | )% | $ | 782,319 | 1.13 | %(d) | 1.13 | %(d) | 0.00 | %(d) | 34 | % | ||||||||||||||||||||||||||
Year ended 04/30/11 | 35.99 | (0.03 | ) | 11.33 | 11.30 | (0.03 | ) | — | (0.03 | ) | 47.26 | 31.42 | 1,048,194 | 1.13 | 1.13 | (0.10 | ) | 58 | ||||||||||||||||||||||||||||||||||||||
One month ended 04/30/10 | 35.34 | (0.03 | ) | 0.68 | 0.65 | — | — | — | 35.99 | 1.84 | 742,987 | 1.16 | (e) | 1.16 | (e) | (1.00 | )(e) | 9 | ||||||||||||||||||||||||||||||||||||||
Year ended 03/31/10 | 23.91 | 0.07 | 11.38 | 11.45 | (0.02 | ) | — | (0.02 | ) | 35.34 | 47.91 | 725,470 | 1.17 | 1.18 | 0.22 | 49 | ||||||||||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 43.71 | 0.07 | (19.47 | ) | (19.40 | ) | — | (0.40 | ) | (0.40 | ) | 23.91 | (44.39 | ) | 453,133 | 1.16 | 1.17 | 0.20 | 61 | |||||||||||||||||||||||||||||||||||||
Year ended 03/31/08 | 41.02 | 0.00 | 13.10 | 13.10 | — | (10.41 | ) | (10.41 | ) | 43.71 | 32.35 | 851,105 | 1.11 | 1.12 | 0.01 | 64 | ||||||||||||||||||||||||||||||||||||||||
Year ended 03/31/07 | 43.17 | (0.04 | ) | 4.44 | 4.40 | — | (6.55 | ) | (6.55 | ) | 41.02 | 10.48 | 538,155 | 1.17 | 1.17 | (0.08 | ) | 52 | ||||||||||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | 43.37 | (0.14 | ) | (7.45 | ) | (7.59 | ) | — | — | — | 35.78 | (17.50 | ) | 84,700 | 1.88 | (d) | 1.88 | (d) | (0.75 | )(d) | 34 | |||||||||||||||||||||||||||||||||||
Year ended 04/30/11 | 33.25 | (0.29 | ) | 10.41 | 10.12 | — | — | — | 43.37 | 30.44 | 116,438 | 1.88 | 1.88 | (0.85 | ) | 58 | ||||||||||||||||||||||||||||||||||||||||
One month ended 04/30/10 | 32.68 | (0.05 | ) | 0.62 | 0.57 | — | — | — | 33.25 | 1.75 | 109,771 | 1.91 | (e) | 1.91 | (e) | (1.75 | )(e) | 9 | ||||||||||||||||||||||||||||||||||||||
Year ended 03/31/10 | 22.26 | (0.16 | ) | 10.58 | 10.42 | — | — | — | 32.68 | 46.81 | 108,880 | 1.92 | 1.93 | (0.53 | ) | 49 | ||||||||||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 41.04 | (0.19 | ) | (18.19 | ) | (18.38 | ) | — | (0.40 | ) | (0.40 | ) | 22.26 | (44.79 | ) | 78,085 | 1.91 | 1.92 | (0.55 | ) | 61 | |||||||||||||||||||||||||||||||||||
Year ended 03/31/08 | 39.28 | (0.32 | ) | 12.49 | 12.17 | — | (10.41 | ) | (10.41 | ) | 41.04 | 31.35 | 172,190 | 1.86 | 1.87 | (0.74 | ) | 64 | ||||||||||||||||||||||||||||||||||||||
Year ended 03/31/07 | 41.90 | (0.34 | ) | 4.27 | 3.93 | — | (6.55 | ) | (6.55 | ) | 39.28 | 9.64 | 136,404 | 1.92 | 1.92 | (0.83 | ) | 52 | ||||||||||||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | 42.32 | (0.14 | ) | (7.27 | ) | (7.41 | ) | — | — | — | 34.91 | (17.51 | ) | 216,969 | 1.88 | (d) | 1.88 | (d) | (0.75 | )(d) | 34 | |||||||||||||||||||||||||||||||||||
Year ended 04/30/11 | 32.44 | (0.29 | ) | 10.17 | 9.88 | — | — | — | 42.32 | 30.46 | 283,422 | 1.88 | 1.88 | (0.85 | ) | 58 | ||||||||||||||||||||||||||||||||||||||||
One month ended 04/30/10 | 31.88 | (0.05 | ) | 0.61 | 0.56 | — | — | — | 32.44 | 1.76 | 207,451 | 1.91 | (e) | 1.91 | (e) | (1.75 | )(e) | 9 | ||||||||||||||||||||||||||||||||||||||
Year ended 03/31/10 | 21.71 | (0.16 | ) | 10.33 | 10.17 | — | — | — | 31.88 | 46.85 | 205,003 | 1.92 | 1.93 | (0.53 | ) | 49 | ||||||||||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 40.06 | (0.19 | ) | (17.76 | ) | (17.95 | ) | — | (0.40 | ) | (0.40 | ) | 21.71 | (44.82 | ) | 122,123 | 1.91 | 1.92 | (0.55 | ) | 61 | |||||||||||||||||||||||||||||||||||
Year ended 03/31/08 | 38.53 | (0.32 | ) | 12.26 | 11.94 | — | (10.41 | ) | (10.41 | ) | 40.06 | 31.37 | 231,832 | 1.86 | 1.87 | (0.74 | ) | 64 | ||||||||||||||||||||||||||||||||||||||
Year ended 03/31/07 | 41.22 | (0.34 | ) | 4.20 | 3.86 | — | (6.55 | ) | (6.55 | ) | 38.53 | 9.63 | 156,394 | 1.92 | 1.92 | (0.83 | ) | 52 | ||||||||||||||||||||||||||||||||||||||
Class Y | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | 47.23 | 0.06 | (8.13 | ) | (8.07 | ) | — | — | — | 39.16 | (17.09 | ) | 69,388 | 0.88 | (d) | 0.88 | (d) | 0.25 | (d) | 34 | ||||||||||||||||||||||||||||||||||||
Year ended 04/30/11 | 35.96 | 0.06 | 11.33 | 11.39 | (0.12 | ) | — | (0.12 | ) | 47.23 | 31.73 | 83,807 | 0.88 | 0.88 | 0.15 | 58 | ||||||||||||||||||||||||||||||||||||||||
One month ended 04/30/10 | 35.31 | (0.02 | ) | 0.67 | 0.65 | — | — | — | 35.96 | 1.84 | 48,291 | 0.91 | (e) | 0.91 | (e) | (0.75 | )(e) | 9 | ||||||||||||||||||||||||||||||||||||||
Year ended 03/31/10 | 23.86 | 0.16 | 11.36 | 11.52 | (0.07 | ) | — | (0.07 | ) | 35.31 | 48.29 | 47,084 | 0.92 | 0.93 | 0.47 | 49 | ||||||||||||||||||||||||||||||||||||||||
Year ended 03/31/09(f) | 31.13 | 0.04 | (6.91 | ) | (6.87 | ) | — | (0.40 | ) | (0.40 | ) | 23.86 | (22.08 | ) | 8,894 | 1.04 | (e) | 1.05 | (e) | 0.32 | (e) | 61 | ||||||||||||||||||||||||||||||||||
Investor Class | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | 47.09 | 0.00 | (8.09 | ) | (8.09 | ) | — | — | — | 39.00 | (17.18 | ) | 456,301 | 1.13 | (d) | 1.13 | (d) | 0.00 | (d) | 34 | ||||||||||||||||||||||||||||||||||||
Year ended 04/30/11 | 35.86 | (0.03 | ) | 11.29 | 11.26 | (0.03 | ) | — | (0.03 | ) | 47.09 | �� | 31.42 | 594,201 | 1.13 | 1.13 | (0.10 | ) | 58 | |||||||||||||||||||||||||||||||||||||
One month ended 04/30/10 | 35.22 | (0.03 | ) | 0.67 | 0.64 | — | — | — | 35.86 | 1.82 | 484,002 | 1.16 | (e) | 1.16 | (e) | (1.00 | )(e) | 9 | ||||||||||||||||||||||||||||||||||||||
Year ended 03/31/10 | 23.82 | 0.07 | 11.35 | 11.42 | (0.02 | ) | — | (0.02 | ) | 35.22 | 47.96 | 475,026 | 1.17 | 1.18 | 0.22 | 49 | ||||||||||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 43.56 | 0.07 | (19.41 | ) | (19.34 | ) | — | (0.40 | ) | (0.40 | ) | 23.82 | (44.40 | ) | 335,874 | 1.16 | 1.17 | 0.20 | 61 | |||||||||||||||||||||||||||||||||||||
Year ended 03/31/08 | 40.91 | 0.00 | 13.06 | 13.06 | — | (10.41 | ) | (10.41 | ) | 43.56 | 32.34 | 681,147 | 1.11 | 1.12 | 0.01 | 64 | ||||||||||||||||||||||||||||||||||||||||
Year ended 03/31/07 | 43.07 | (0.04 | ) | 4.43 | 4.39 | — | (6.55 | ) | (6.55 | ) | 40.91 | 10.48 | 491,847 | 1.17 | 1.17 | (0.08 | ) | 52 | ||||||||||||||||||||||||||||||||||||||
Institutional Class | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | 48.07 | 0.07 | (8.26 | ) | (8.19 | ) | — | — | — | 39.88 | (17.04 | ) | 16,640 | 0.81 | (d) | 0.81 | (d) | 0.32 | (d) | 34 | ||||||||||||||||||||||||||||||||||||
Year ended 04/30/11 | 36.60 | 0.10 | 11.55 | 11.65 | (0.18 | ) | — | (0.18 | ) | 48.07 | 31.92 | 13,915 | 0.77 | 0.77 | 0.26 | 58 | ||||||||||||||||||||||||||||||||||||||||
One month ended 04/30/10 | 35.93 | (0.02 | ) | 0.69 | 0.67 | — | — | — | 36.60 | 1.87 | 7,667 | 0.77 | (e) | 0.77 | (e) | (0.61 | )(e) | 9 | ||||||||||||||||||||||||||||||||||||||
Year ended 03/31/10 | 24.32 | 0.21 | 11.59 | 11.80 | (0.19 | ) | — | (0.19 | ) | 35.93 | 48.57 | 6,411 | 0.74 | 0.75 | 0.65 | 49 | ||||||||||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 44.23 | 0.24 | (19.75 | ) | (19.51 | ) | — | (0.40 | ) | (0.40 | ) | 24.32 | (44.11 | ) | 3,416 | 0.70 | 0.71 | 0.66 | 61 | |||||||||||||||||||||||||||||||||||||
Year ended 03/31/08 | 41.25 | 0.20 | 13.19 | 13.39 | — | (10.41 | ) | (10.41 | ) | 44.23 | 32.90 | 2,240 | 0.68 | 0.69 | 0.44 | 64 | ||||||||||||||||||||||||||||||||||||||||
Year ended 03/31/07 | 43.20 | 0.16 | 4.44 | 4.60 | — | (6.55 | ) | (6.55 | ) | 41.25 | 10.95 | 101 | 0.72 | 0.72 | 0.37 | 52 | ||||||||||||||||||||||||||||||||||||||||
(a) | Calculated using average shares outstanding. | |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges and is not annualized for periods less than one year, if applicable. | |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. | |
(d) | Ratios are annualized and based on average daily net assets (000’s omitted) of $865,552, $94,456, $235,597, $72,193, $492,110 and $13,469 for Class A, Class B, Class C, Class Y, Investor Class and Institutional Class shares, respectively. | |
(e) | Annualized. | |
(f) | Commencement date of October 3, 2008. |
16 Invesco Energy Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments or contingent deferred sales charges on redemptions, and redemption fees, if any; and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period May 1, 2011 through October 31, 2011.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the hypothetical information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
HYPOTHETICAL | ||||||||||||||||||||||||||||||
(5% annual return before | ||||||||||||||||||||||||||||||
ACTUAL | expenses) | |||||||||||||||||||||||||||||
Beginning | Ending | Expenses | Ending | Expenses | Annualized | |||||||||||||||||||||||||
Account Value | Account Value | Paid During | Account Value | Paid During | Expense | |||||||||||||||||||||||||
Class | (05/01/11) | (10/31/11)1 | Period2 | (10/31/11) | Period2 | Ratio | ||||||||||||||||||||||||
A | $ | 1,000.00 | $ | 828.00 | $ | 5.21 | $ | 1,019.51 | $ | 5.75 | 1.13 | % | ||||||||||||||||||
B | 1,000.00 | 824.80 | 8.65 | 1,015.73 | 9.55 | 1.88 | ||||||||||||||||||||||||
C | 1,000.00 | 824.70 | 8.65 | 1,015.73 | 9.55 | 1.88 | ||||||||||||||||||||||||
Y | 1,000.00 | 829.00 | 4.06 | 1,020.77 | 4.48 | 0.88 | ||||||||||||||||||||||||
Investor | 1,000.00 | 828.00 | 5.21 | 1,019.51 | 5.75 | 1.13 | ||||||||||||||||||||||||
Institutional | 1,000.00 | 829.60 | 3.74 | 1,021.12 | 4.13 | 0.81 | ||||||||||||||||||||||||
1 | The actual ending account value is based on the actual total return of the Fund for the period May 1, 2011 through October 31, 2011, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund’s expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/366 to reflect the most recent fiscal half year |
17 Invesco Energy 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 Energy Fund (the Fund) investment advisory agreement with Invesco Advisers, Inc. (Invesco Advisers) and the Master Intergroup Sub-Advisory Contract for Mutual Funds (the sub-advisory contracts) with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers). During contract renewal meetings held on June 14-15, 2011, the Board as a whole, and the disinterested or “independent” Trustees, who comprise 80% of the Board, voting separately, approved the continuance of the Fund’s investment advisory agreement and the sub-advisory contracts for another year, effective July 1, 2011. In doing so, the Board considered the process that it follows in reviewing and approving the Fund’s investment advisory agreement and sub-advisory contracts and the information that it is provided. The Board determined that the Fund’s investment advisory agreement and the sub-advisory contracts are in the best interests of the Fund and its shareholders and the compensation to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is responsible for overseeing the management of a number of the series portfolios of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies and limitations and investment risks of these funds. The Sub-Committees meet regularly and at designated contract renewal meetings each year to conduct a review of the performance, fees, expenses and other matters related to their assigned Invesco Funds. Each Sub-Committee recommends to the Investments Committee, which in turn recommends to the full Board, whether to approve the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Trustees receive comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and an independent company, Lipper, Inc. (Lipper). The Trustees also receive an independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. The independent Trustees are assisted in their annual evaluation of the Fund’s investment advisory agreement by the Senior Officer and by independent legal counsel. The independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in private sessions with the Senior Officer and counsel.
In evaluating the fairness and reasonableness of the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Trustees also considered information provided in connection with fund acquisitions approved by the Trustees to rationalize the Invesco Funds product range following the acquisition of the retail mutual fund business of Morgan Stanley (the Morgan Stanley Transaction). The Trustees recognized that the advisory fees for the Invesco Funds include advisory fees that are the result of years of review and negotiation between the Trustees and Invesco Advisers as well as advisory fees inherited from Morgan Stanley and Van Kampen funds acquired in the Morgan Stanley Transaction. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these same arrangements throughout the year and in prior years. One Trustee may have weighed a particular piece of information differently than another Trustee.
The discussion below serves as the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 15, 2011, and may not reflect consideration of factors that became known to the Board after that date, including, for example, changes to the Fund’s performance, advisory fees, expense limitations and/or fee waivers.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers, with whom the Board met during the year. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s considerations 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
18 Invesco Energy 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 Natural Resources Funds Index. The Board noted that performance of Investor Class shares of the Fund was in the fifth quintile of the performance universe for the one year period and the first quintile for the three and five year periods (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board noted that performance of Investor Class shares of the Fund was below the performance of the Index for the one year period and above the performance of the Index for the three and five year periods. In response to an inquiry from the Board, Invesco Advisers noted that stock selection was responsible for underperformance of the Fund in 2010. Although the independent written evaluation of the Fund’s Senior Officer only considered Fund performance through the most recent calendar year, the Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
C. | Advisory and Sub-Advisory Fees and Fee Waivers |
The Board compared the Fund’s contractual advisory fee rate to the contractual advisory fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the contractual advisory fee rate for Investor Class shares of the Fund was below the median contractual advisory fee rate of funds in the expense group. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using audited financial data from the most recent annual report of each fund in the expense group that was publicly available as of the end of the past calendar year and including only one fund per investment adviser. The Board noted that comparative data is as of varying dates, which may affect the comparability of data during times of market volatility.
The Board noted that Invesco Advisers and the Affiliated Sub-Advisers do not advise other mutual funds or client accounts with comparable investment strategies.
The Board noted that Invesco Advisers has contractually agreed to waive fees and/or limit expenses of the Fund through at least August 31, 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.
19 Invesco Energy Fund
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Invesco mailing information
Send general correspondence to Invesco Investment Services, Inc., P.O. Box 219078, Kansas City, MO 64121-9078.
Invesco privacy policy
You share personal and financial information with us that is necessary for your transactions and your account records. We take very seriously the obligation to keep that information confidential and private.
Invesco collects nonpublic personal information about you from account applications or other forms you complete and from your transactions with us or our affiliates. We do not disclose information about you or our former customers to service providers or other third parties except to the extent necessary to service your account and in other limited circumstances as permitted by law. For example, we use this information to facilitate the delivery of transaction confirmations, financial reports, prospectuses and tax forms.
Even within Invesco, only people involved in the servicing of your accounts and compliance monitoring have access to your information. To ensure the highest level of confidentiality and security, Invesco maintains physical, electronic and procedural safeguards that meet or exceed federal standards. Special measures, such as data encryption and authentication, apply to your communications with us on our website. More detail is available to you at invesco.com/privacy.
Important notice regarding delivery of security holder documents
To reduce Fund expenses, only one copy of most shareholder documents may be mailed to shareholders with multiple accounts at the same address (Householding). Mailing of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact Invesco Investment Services, Inc. at 800 959 4246 or contact your financial institution. We will begin sending you individual copies for each account within 30 days after receiving your request.
Fund holdings and proxy voting information
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is available at invesco.com/completeqtrholdings. Shareholders can also look up the Fund’s Forms N-Q on the SEC website at sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-03826 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.
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Information regarding how the Fund voted proxies related to its portfolio securities during the 12 months ended June 30, 2011, is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov.
Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the U.S. distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
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.
I-ENE-SAR-1 | Invesco Distributors, Inc. |
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Invesco Gold & Precious Metals Fund
Semiannual Report to Shareholders § October 31, 2011
Nasdaq:
A: IGDAX § B: IGDBX § C: IGDCX § Y: IGDYX § Investor: FGLDX
![(GRAPHIC)](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8578002.gif)
2 | Fund Performance | |
4 | Letters to Shareholders | |
5 | Schedule of Investments | |
7 | Financial Statements | |
9 | Notes to Financial Statements | |
15 | Financial Highlights | |
16 | Fund Expenses | |
17 | 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, 4/30/11 to 10/31/11, at net asset value (NAV). Performance shown does not include applicable contingent deferred sales charges (CDSC) or front-end sales charges, which would have reduced performance.
Class A Shares | -9.45 | % | ||
Class B Shares | -9.77 | |||
Class C Shares | -9.72 | |||
Class Y Shares | -9.28 | |||
Investor Class Shares | -9.40 | |||
S&P 500 Index▼ (Broad Market Index) | -7.12 | |||
Philadelphia Gold & Silver Index (price-only)▼ (Style-Specific Index) | -9.44 | |||
Lipper Precious Metals Funds Index▼ (Peer Group Index) | -9.63 | |||
Source(s): ▼Lipper Inc. |
The S&P 500® Index is an unmanaged index considered representative of the U.S. stock market.
The Philadelphia Gold & Silver Index (price-only) is a capitalization-weighted, price-only index on the Philadelphia Stock Exchange that includes the leading companies involved in the mining of gold and silver.
The Lipper Precious Metals Funds Index is an unmanaged index considered representative of precious metals 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.
2 | Invesco Gold & Precious Metals Fund |
Average Annual Total Returns
As of 10/31/11, including maximum applicable sales charges
Class A Shares | ||||||||
Inception (3/28/02) | 17.67 | % | ||||||
5 | Years | 12.46 | ||||||
1 | Year | -1.38 | ||||||
Class B Shares | ||||||||
Inception (3/28/02) | 17.82 | % | ||||||
5 | Years | 12.65 | ||||||
1 | Year | -1.51 | ||||||
Class C Shares | ||||||||
Inception (2/14/00) | 17.65 | % | ||||||
10 | Years | 20.39 | ||||||
5 | Years | 12.85 | ||||||
1 | Year | 2.58 | ||||||
Class Y Shares | ||||||||
10 | Years | 21.45 | % | |||||
5 | Years | 13.92 | ||||||
1 | Year | 4.57 | ||||||
Investor Class Shares | ||||||||
Inception (1/19/84) | 3.07 | % | ||||||
10 | Years | 21.34 | ||||||
5 | Years | 13.72 | ||||||
1 | Year | 4.29 |
Class Y shares incepted on October 3, 2008. Performance shown prior to that date is that of Investor Class shares and includes the 12b-1 fees applicable to Investor Class shares. Investor Class share performance reflects any applicable fee waivers or expense reimbursements.
The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Please visit invesco.com/performance for the most recent month-end performance. Performance figures reflect reinvested distributions, changes in net asset value and the effect of the maximum sales charge unless otherwise stated. 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.
Average Annual Total Returns
As of 9/30/11, the most recent calendar quarter-end, including maximum applicable sales charges
Class A Shares | ||||||||
Inception (3/28/02) | 16.75 | % | ||||||
5 | Years | 11.95 | ||||||
1 | Year | -7.29 | ||||||
Class B Shares | ||||||||
Inception (3/28/02) | 16.90 | % | ||||||
5 | Years | 12.18 | ||||||
1 | Year | -7.37 | ||||||
Class C Shares | ||||||||
Inception (2/14/00) | 16.89 | % | ||||||
10 | Years | 18.94 | ||||||
5 | Years | 12.35 | ||||||
1 | Year | -3.62 | ||||||
Class Y Shares | ||||||||
10 | Years | 20.08 | % | |||||
5 | Years | 13.42 | ||||||
1 | Year | -1.67 | ||||||
Investor Class Shares | ||||||||
Inception (1/19/84) | 2.75 | % | ||||||
10 | Years | 19.98 | ||||||
5 | Years | 13.23 | ||||||
1 | Year | -1.97 |
The total annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Class A, Class B, Class C, Class Y and Investor Class shares was 1.25%, 2.00%, 2.00%, 1.00% and 1.25%, respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.
Class A share performance reflects the maximum 5.50% sales charge, and Class B and Class C share performance reflects the applicable contingent deferred sales charge (CDSC) for the period involved. The CDSC on Class B shares declines from 5% beginning at the time of purchase to 0% at the beginning of the seventh year. The CDSC on Class C shares is 1% for the first year after purchase. Class Y and Investor Class shares do not have a front-end sales charge or a CDSC; therefore, performance is at net asset value.
The performance of the Fund’s share classes will differ primarily due to different sales charge structures and class expenses.
A redemption fee of 2% is imposed on certain redemptions or exchanges out of the Fund within 31 days of purchase. Exceptions to the redemption fee are listed in the Fund’s prospectus. Effective January 1, 2012, after the close of the reporting period, the Fund will eliminate the redemption fee, if applicable, assessed on shares of the Fund redeemed or exchanged within 31 days of purchase.
3 | Invesco Gold & Precious Metals Fund |
Letters to Shareholders
![(PHOTO OF BRUCE CROCKETT)](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8578003.jpg)
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,
![-s- Bruce L. Crockett](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8578004.gif)
Bruce L. Crockett
Independent Chair, Invesco Funds Board of Trustees
Independent Chair, Invesco Funds Board of Trustees
![(PHOTO OF PHILIP TAYLOR)](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8578005.jpg)
Philip Taylor
Dear Shareholders:
Enclosed is important information about your Fund and its performance. I encourage you to read this report to learn more about your Fund’s short- and long-term performance.
The start of a new year is always a good time to catch up with your financial adviser. Looking ahead to the new year and evaluating your individual situation, your financial adviser can provide valuable insight into whether your investments are still appropriate for your individual needs, goals and risk tolerance. This may provide reassurance in times of economic uncertainty and market volatility such as we saw in 2011 – and are likely to see again in 2012.
On our website, invesco.com/us, we provide timely market updates and commentary from many of our fund managers and other investment professionals. Also on our website, you 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.
Across our broad array of investment products, 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 – meaning 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,
![-s Philip Taylor](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8578006.gif)
Philip Taylor
Senior Managing Director, Invesco Ltd.
Senior Managing Director, Invesco Ltd.
4 | Invesco Gold & Precious Metals Fund |
Schedule of Investments
October 31, 2011
(Unaudited)
Shares | Value | |||||||
Common Stocks & Other Equity Interests–96.83% | ||||||||
Australia–4.68% | ||||||||
BHP Billiton Ltd.–ADR(a) | 78,170 | $ | 6,103,514 | |||||
Newcrest Mining Ltd. | 657,229 | 23,136,875 | ||||||
29,240,389 | ||||||||
Canada–65.64% | ||||||||
Agnico-Eagle Mines Ltd.(b) | 306,994 | 13,320,470 | ||||||
Alamos Gold Inc. | 366,319 | 6,774,166 | ||||||
Aurizon Mines Ltd.(b) | 3,150,416 | 17,957,371 | ||||||
Barrick Gold Corp.(b) | 742,715 | 36,764,393 | ||||||
Cameco Corp.(b) | 429,429 | 9,202,663 | ||||||
Centerra Gold Inc. | 534,239 | 10,580,899 | ||||||
Detour Gold Corp.(b) | 866,128 | 28,648,115 | ||||||
Eldorado Gold Corp. | 693,337 | 13,016,139 | ||||||
Franco-Nevada Corp. | 404,367 | 16,005,265 | ||||||
Goldcorp, Inc.(b) | 744,748 | 36,373,492 | ||||||
Harry Winston Diamond Corp.(b) | 395,295 | 4,786,172 | ||||||
IAMGOLD Corp. | 1,563,216 | 33,576,946 | ||||||
International Tower Hill Mines Ltd.(b) | 806,335 | 4,152,625 | ||||||
Kinross Gold Corp. | 1,210,898 | 17,246,528 | ||||||
Minefinders Corp. Ltd.(a)(b) | 1,542,034 | 21,850,622 | ||||||
New Gold Inc.(b) | 1,667,082 | 20,635,925 | ||||||
Osisko Mining Corp.(b) | 1,552,165 | 18,700,033 | ||||||
Pan American Silver Corp.(b) | 587,755 | 16,433,630 | ||||||
Queenston Mining, Inc.(b) | 835,556 | 5,091,892 | ||||||
Silver Wheaton Corp.(b) | 893,395 | 30,911,467 | ||||||
Tahoe Resources Inc.(b) | 663,754 | 12,513,995 | ||||||
Yamana Gold Inc.(b) | 2,410,253 | 36,081,487 | ||||||
410,624,295 | ||||||||
Peru–0.54% | ||||||||
Cia de Minas Buenaventura S.A.–ADR | 82,980 | 3,396,371 | ||||||
South Africa–10.05% | ||||||||
Gold Fields Ltd.–ADR | 1,043,412 | 18,186,671 | ||||||
Harmony Gold Mining Co. Ltd.–ADR(a) | 415,836 | 5,459,927 | ||||||
Impala Platinum Holdings Ltd. | 443,093 | 10,163,922 | ||||||
Randgold Resources Ltd.–ADR | 265,439 | 29,084,151 | ||||||
62,894,671 | ||||||||
United States–15.92% | ||||||||
Coeur d’Alene Mines Corp.(b) | 124,952 | 3,195,023 | ||||||
Freeport-McMoRan Copper & Gold Inc. | 485,365 | 19,540,795 | ||||||
iShares Gold Trust | 808,200 | 13,553,514 | ||||||
Newmont Mining Corp. | 443,002 | 29,605,824 | ||||||
SPDR Gold Shares | 118,700 | 19,863,258 | ||||||
Stillwater Mining Co.(b) | 1,219,516 | 13,853,701 | ||||||
99,612,115 | ||||||||
Total Common Stocks & Other Equity Interests (Cost $448,092,513) | 605,767,841 | |||||||
Money Market Funds–3.22% | ||||||||
Liquid Assets Portfolio–Institutional Class(c) | 10,068,661 | 10,068,661 | ||||||
Premier Portfolio–Institutional Class(c) | 10,068,660 | 10,068,660 | ||||||
Total Money Market Funds (Cost $20,137,321) | 20,137,321 | |||||||
TOTAL INVESTMENTS (excluding investments purchased with cash collateral from securities on loan)–100.05% (Cost $468,229,834) | 625,905,162 | |||||||
Investments Purchased with Cash Collateral from Securities on Loan–3.74% | ||||||||
Liquid Assets Portfolio–Institutional Class (Cost $23,396,230)(c)(d) | 23,396,230 | 23,396,230 | ||||||
TOTAL INVESTMENTS–103.79% (Cost $491,626,064) | 649,301,392 | |||||||
OTHER ASSETS LESS LIABILITIES–(3.79)% | (23,685,810 | ) | ||||||
NET ASSETS–100.00% | $ | 625,615,582 | ||||||
Investment Abbreviations:
ADR | – American Depositary Receipt | |
SPDR | – Standard & Poor’s Depositary Receipt |
Notes to Schedule of Investments:
(a) | All or a portion of this security was out on loan at October 31, 2011. | |
(b) | Non-income producing security. | |
(c) | The money market fund and the Fund are affiliated by having the same investment adviser. | |
(d) | The security has been segregated to satisfy the commitment to return the cash collateral received in securities lending transactions upon the borrower’s return of the securities loaned. See Note 1K. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
5 Invesco Gold & Precious Metals Fund
By industry, based on Net Assets
as of October 31, 2011
Gold | 67.2 | % | ||
Precious Metals & Minerals | 18.7 | |||
Investment Companies — Exchange Traded Funds | 5.3 | |||
Diversified Metals & Mining | 4.1 | |||
Coal & Consumable Fuels | 1.5 | |||
Money Market Funds Plus Other Assets Less Liabilities | 3.2 | |||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
6 Invesco Gold & Precious Metals Fund
Statement of Assets and Liabilities
October 31, 2011
(Unaudited)
Assets: | ||||
Investments, at value (Cost $448,092,513)* | $ | 605,767,841 | ||
Investments in affiliated money market funds, at value and cost | 43,533,551 | |||
Total investments, at value (Cost $491,626,064) | 649,301,392 | |||
Foreign currencies, at value (Cost $149,745) | 152,067 | |||
Receivable for: | ||||
Fund shares sold | 1,006,152 | |||
Dividends | 123,330 | |||
Investment for trustee deferred compensation and retirement plans | 25,010 | |||
Other assets | 43,248 | |||
Total assets | 650,651,199 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares reacquired | 1,118,006 | |||
Collateral upon return of securities loaned | 23,396,230 | |||
Accrued fees to affiliates | 402,589 | |||
Accrued other operating expenses | 60,387 | |||
Trustee deferred compensation and retirement plans | 58,405 | |||
Total liabilities | 25,035,617 | |||
Net assets applicable to shares outstanding | $ | 625,615,582 | ||
Net assets consist of: | ||||
shares of beneficial interest | $ | 473,564,008 | ||
Undistributed net investment income (loss) | (33,246,253 | ) | ||
Undistributed net realized gain | 27,620,177 | |||
Unrealized appreciation | 157,677,650 | |||
$ | 625,615,582 | |||
Net Assets: | ||||
Class A | $ | 251,646,402 | ||
Class B | $ | 44,731,834 | ||
Class C | $ | 71,824,070 | ||
Class Y | $ | 15,123,506 | ||
Investor Class | $ | 242,289,770 | ||
Shares outstanding, $0.01 par value per share, with an unlimited number of shares authorized: | ||||
Class A | 24,760,098 | |||
Class B | 4,525,437 | |||
Class C | 6,839,702 | |||
Class Y | 1,473,125 | |||
Investor Class | 23,696,352 | |||
Class A: | ||||
Net asset value per share | $ | 10.16 | ||
Maximum offering price per share (Net asset value of $10.16 divided by 94.50%) | $ | 10.75 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 9.88 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 10.50 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 10.27 | ||
Investor Class: | ||||
Net asset value and offering price per share | $ | 10.22 | ||
* | At October 31, 2011, securities with an aggregate value of $21,837,551 were on loan to brokers. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
7 Invesco Gold & Precious Metals Fund
Statement of Operations
For the six months ended October 31, 2011
(Unaudited)
Investment income: | ||||
Dividends (net of foreign withholding taxes of $207,477) | $ | 2,623,947 | ||
Dividends from affiliated money market funds (includes securities lending income of $37,622) | 44,965 | |||
Total investment income | 2,668,912 | |||
Expenses: | ||||
Advisory fees | 2,260,146 | |||
Administrative services fees | 93,857 | |||
Custodian fees | 36,418 | |||
Distribution fees: | ||||
Class A | 316,255 | |||
Class B | 238,093 | |||
Class C | 365,096 | |||
Investor Class | 314,892 | |||
Transfer agent fees | 703,750 | |||
Trustees’ and officers’ fees and benefits | 17,935 | |||
Other | 130,437 | |||
Total expenses | 4,476,879 | |||
Less: Fees waived, expenses reimbursed and expense offset arrangement(s) | (13,486 | ) | ||
Net expenses | 4,463,393 | |||
Net investment income (loss) | (1,794,481 | ) | ||
Realized and unrealized gain (loss) from: | ||||
Net realized gain from: | ||||
Investment securities | 7,320,294 | |||
Foreign currencies | 6,743 | |||
7,327,037 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | (73,827,174 | ) | ||
Foreign currencies | 3,977 | |||
(73,823,197 | ) | |||
Net realized and unrealized gain (loss) | (66,496,160 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | (68,290,641 | ) | |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
8 Invesco Gold & Precious Metals Fund
Statement of Changes in Net Assets
For the six months ended October 31, 2011 and the year ended April 30, 2011
(Unaudited)
October 31, | April 30, | |||||||
2011 | 2011 | |||||||
Operations: | ||||||||
Net investment income (loss) | $ | (1,794,481 | ) | $ | (4,651,998 | ) | ||
Net realized gain | 7,327,037 | 27,833,505 | ||||||
Change in net unrealized appreciation (depreciation) | (73,823,197 | ) | 146,389,957 | |||||
Net increase (decrease) in net assets resulting from operations | (68,290,641 | ) | 169,571,464 | |||||
Distributions to shareholders from net investment income: | ||||||||
Class A | — | (7,600,971 | ) | |||||
Class B | — | (1,455,384 | ) | |||||
Class C | — | (1,769,557 | ) | |||||
Class Y | — | (395,074 | ) | |||||
Investor Class | — | (7,803,639 | ) | |||||
Total distributions from net investment income | — | (19,024,625 | ) | |||||
Share transactions–net: | ||||||||
Class A | 3,755,049 | 38,182,849 | ||||||
Class B | (5,371,754 | ) | (2,853,703 | ) | ||||
Class C | (517,092 | ) | 9,804,269 | |||||
Class Y | 1,380,347 | 7,334,472 | ||||||
Investor Class | (10,854,174 | ) | 13,802,167 | |||||
Net increase (decrease) in net assets resulting from share transactions | (11,607,624 | ) | 66,270,054 | |||||
Net increase (decrease) in net assets | (79,898,265 | ) | 216,816,893 | |||||
Net assets: | ||||||||
Beginning of period | 705,513,847 | 488,696,954 | ||||||
End of period (includes undistributed net investment income (loss) of $(33,246,253) and $(31,451,772), respectively) | $ | 625,615,582 | $ | 705,513,847 | ||||
Notes to Financial Statements
October 31, 2011
(Unaudited)
NOTE 1—Significant Accounting Policies
Invesco Gold & Precious Metals 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 growth of capital.
The Fund currently consists of five different classes of shares: Class A, Class B, Class C, Class Y and Investor Class. Investor Class shares of the Fund are offered only to certain grandfathered investors. Class A shares are sold with a front-end sales charge unless certain waiver criteria are met and under certain circumstances load waiver shares may be subject to contingent deferred sales charges (“CDSC”). Class C shares are sold with a CDSC. Class Y and Investor Class shares are sold at net asset value. Effective November 30, 2010, new or additional investments in Class B shares are no longer permitted. Existing shareholders of Class B shares may continue to reinvest dividends and capital gains distributions in Class B shares until they convert. Also, shareholders in Class B shares will be able to exchange those shares for Class B shares of other Invesco Funds offering such shares until they convert. Generally, Class B shares will automatically convert to Class A shares on or about the month-end which is at least eight years after the date of purchase. Redemption of Class B shares prior to conversion date will be subject to a CDSC.
9 Invesco Gold & Precious Metals Fund
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. | |
A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”). | ||
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded. | ||
Debt obligations (including convertible bonds) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Debt securities are subject to interest rate and credit risks. In addition, all debt securities involve some risk of default with respect to interest and/or principal payments. | ||
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trade is not the current value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and 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 |
10 Invesco Gold & Precious Metals Fund
evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. | ||
D. | Distributions — Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to treat a portion of the proceeds from redemptions as distributions for federal income tax purposes. | |
E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. | |
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period. | ||
F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. | |
G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. | |
H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. | |
I. | Other Risks — The Fund’s investments are concentrated in a comparatively narrow segment of the economy, which may make the Fund more volatile. | |
The Fund may invest a large percentage of its assets in a limited number of securities or other instruments, which could negatively affect the value of the Fund. | ||
Fluctuations in the price of gold and precious metals may affect the profitability of companies in the gold and precious metals sector. Changes in the political or economic conditions of countries where companies in the gold and precious metals sector are located may have a direct effect on the price of gold and precious metals. | ||
J. | Redemption Fees — The Fund has a 2% redemption fee that is to be retained by the Fund to offset transaction costs and other expenses associated with short-term redemptions and exchanges. The fee, subject to certain exceptions, is imposed on certain redemptions or exchanges of shares within 31 days of purchase. The redemption fee is recorded as an increase in shareholder capital and is allocated among the share classes based on the relative net assets of each class. Effective January 1, 2012, the Fund will eliminate the 2% redemption fee, if applicable, assessed on shares of the Fund redeemed or exchanged within 31 days of purchase. | |
K. | Securities Lending — The Fund may lend portfolio securities having a market value up to one-third of the Fund’s total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily by the securities lending provider. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its sponsored agencies. Cash collateral received in connection with these loans is invested in short-term money market instruments or affiliated money market funds and is shown as such on the Schedule of Investments. It is the Fund’s policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. Upon the failure of the borrower to return the securities, collateral may be liquidated and the securities may be purchased on the open market to replace the loaned securities. The Fund could experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to any loss on the collateral invested. Dividends received on cash collateral investments for securities lending transactions, which are net of compensation to counterparties, is included in Dividends from affiliates on the Statement of Operations. The aggregate value of securities out on loan is shown as a footnote on the Statement of Assets and Liabilities, if any. | |
L. | Foreign Currency Translations — Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. |
11 Invesco Gold & Precious Metals Fund
The Fund may invest in foreign securities which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. | ||
M. | Foreign Currency Contracts — The Fund may enter into foreign currency contracts to manage or minimize currency or exchange rate risk. The Fund may also enter into foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to “lock in” the U.S. dollar price of that security. A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The use of foreign currency contracts does not eliminate fluctuations in the price of the underlying securities the Fund owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statement of Operations. The primary risks associated with foreign currency contracts include failure of the counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities. |
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser based on the annual rate of the Fund’s average daily net assets as follows:
Average Net Assets | Rate | |||
First $350 million | 0 | .75% | ||
Next $350 million | 0 | .65% | ||
Next $1.3 billion | 0 | .55% | ||
Next $2 billion | 0 | .45% | ||
Next $2 billion | 0 | .40% | ||
Next $2 billion | 0 | .375% | ||
Over $8 billion | 0 | .35% | ||
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco 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 August 31, 2012, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Class A, Class B, Class C, Class Y and Investor Class shares to 2.00%, 2.75%, 2.75%, 1.75% and 2.00%, respectively, of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waivers 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 August 31, 2012. The Adviser did not waive fees and/or reimburse expenses during the period under this expense limitation.
The Adviser has contractually agreed, through at least June 30, 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 October 31, 2011, the Adviser waived advisory fees of $11,731.
At the request of the Trustees of the Trust, Invesco Ltd. agreed to reimburse expenses incurred by the Fund in connection with market timing matters in the Invesco Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement are included in the Statement of Operations. For the six months ended October 31, 2011, Invesco Ltd. reimbursed expenses of the Fund in the amount of $712.
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 October 31, 2011, expenses incurred under the agreement are shown in the Statement of Operations as administrative services fees.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (“IIS”) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. IIS may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. All fees payable by IIS to intermediaries that provide omnibus account services or sub-accounting are charged back to the Fund, subject to certain limitations approved by the Trust’s Board of Trustees. For the six months ended October 31, 2011, expenses incurred under the agreement are shown in the Statement of Operations as transfer agent fees.
The Trust has entered into master distribution agreements with Invesco Distributors, Inc. (“IDI”) to serve as the distributor for the Class A, Class B, Class C, Class Y and Investor Class shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund’s Class A, Class B, Class C and Investor Class shares (collectively, the “Plans”). The Fund, pursuant to the Plans, pays IDI compensation at the annual rate of 0.25% of the Fund’s average daily net assets of Class A shares, 1.00% of the average daily net assets of Class B and Class C shares and 0.25% of the average daily net
12 Invesco Gold & Precious Metals Fund
assets of Investor Class shares. Of the Plan payments, up to 0.25% of the average daily net assets of each class of shares may be paid to furnish continuing personal shareholder services to customers who purchase and own shares of such classes. Any amounts not paid as a service fee under the Plans would constitute an asset-based sales charge. Rules of the Financial Industry Regulatory Authority (“FINRA”) impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. For the six months ended October 31, 2011, expenses incurred under the Plans are shown in the Statement of Operations as distribution fees.
Front-end sales commissions and CDSC (collectively, the “sales charges”) are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the six months ended October 31, 2011, IDI advised the Fund that IDI retained $61,350 in front-end sales commissions from the sale of Class A shares and $507, $40,228 and $8,516 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of the Adviser, Invesco Ltd., IIS and/or IDI.
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3) generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
Level 1 — | Prices are determined using quoted prices in an active market for identical assets. | |
Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. | |
Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of October 31, 2011. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
During the six months ended October 31, 2011, there were no significant transfers between investment levels.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Australia | $ | 6,103,514 | $ | 23,136,875 | $ | — | $ | 29,240,389 | ||||||||
Canada | 410,624,295 | — | — | 410,624,295 | ||||||||||||
Peru | 3,396,371 | — | — | 3,396,371 | ||||||||||||
South Africa | 52,730,749 | 10,163,922 | — | 62,894,671 | ||||||||||||
United States | 143,145,666 | — | — | 143,145,666 | ||||||||||||
Total Investments | $ | 616,000,595 | $ | 33,300,797 | $ | — | $ | 649,301,392 | ||||||||
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 October 31, 2011, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $1,043.
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 October 31, 2011, the Fund paid legal fees of $1,141 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 The State Street Bank and Trust Company, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the
13 Invesco Gold & Precious Metals Fund
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.
The Fund did not have a capital loss carryforward as of April 30, 2011.
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 October 31, 2011 was $36,180,546 and $53,578,495, 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 | $ | 141,056,859 | ||
Aggregate unrealized (depreciation) of investment securities | (30,796,788 | ) | ||
Net unrealized appreciation of investment securities | $ | 110,260,071 | ||
Cost of investments for tax purposes is $539,041,321. |
NOTE 9—Share Information
Summary of Share Activity | ||||||||||||||||
Six months ended | Year ended | |||||||||||||||
October 31, 2011(a) | April 30, 2011 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Class A | 4,918,206 | $ | 50,764,619 | 11,095,239 | $ | 108,380,511 | ||||||||||
Class B | 311,114 | 3,127,954 | 1,561,316 | 14,624,389 | ||||||||||||
Class C | 1,053,366 | 11,247,470 | 2,477,856 | 25,406,411 | ||||||||||||
Class Y | 787,262 | 8,188,563 | 1,069,261 | 10,933,622 | ||||||||||||
Investor Class | 2,582,888 | 26,738,180 | 7,716,325 | 77,081,447 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Class A | — | — | 641,013 | 6,813,971 | ||||||||||||
Class B | — | — | 124,681 | 1,297,921 | ||||||||||||
Class C | — | — | 148,191 | 1,637,512 | ||||||||||||
Class Y | — | — | 33,115 | 354,665 | ||||||||||||
Investor Class | — | — | 707,607 | 7,564,320 | ||||||||||||
Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||
Class A | 180,388 | 1,844,234 | 727,621 | 7,188,451 | ||||||||||||
Class B | (185,208 | ) | (1,844,234 | ) | (745,192 | ) | (7,188,451 | ) | ||||||||
Reacquired:(b) | ||||||||||||||||
Class A | (4,819,008 | ) | (48,853,804 | ) | (8,715,244 | ) | (84,200,084 | ) | ||||||||
Class B | (668,931 | ) | (6,655,474 | ) | (1,221,628 | ) | (11,587,562 | ) | ||||||||
Class C | (1,115,399 | ) | (11,764,562 | ) | (1,697,765 | ) | (17,239,654 | ) | ||||||||
Class Y | (683,206 | ) | (6,808,216 | ) | (386,385 | ) | (3,953,815 | ) | ||||||||
Investor Class | (3,675,145 | ) | (37,592,354 | ) | (7,220,488 | ) | (70,843,600 | ) | ||||||||
Net increase (decrease) in share activity | (1,313,673 | ) | $ | (11,607,624 | ) | 6,315,523 | $ | 66,270,054 | ||||||||
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 21% of the outstanding shares of the Fund. IDI has an agreement with these entities to sell Fund shares. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. | |
(b) | Net of redemption fees of $86,308 and $74,350 allocated among the classes based on relative net assets of each class for the years ended October 31, 2011 and 2010, respectively. |
14 Invesco Gold & Precious Metals 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 | securities | Dividends | net assets | assets without | investment | |||||||||||||||||||||||||||||||||||||||||||
value, | Net | (both | Total from | from net | Net asset | Net assets, | with fee waivers | fee waivers | income (loss) | |||||||||||||||||||||||||||||||||||||||
beginning | investment | realized and | investment | investment | value, end | Total | end of period | and/or expenses | and/or expenses | to average | Portfolio | |||||||||||||||||||||||||||||||||||||
of period | income (loss) | unrealized) | operations | income | of period(a) | Return(b) | (000s omitted) | absorbed | absorbed | net assets | turnover(c) | |||||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | $ | 11.22 | $ | (0.02 | )(d) | $ | (1.04 | ) | $ | (1.06 | ) | $ | — | $ | 10.16 | (9.45 | )% | $ | 251,646 | 1.26 | %(e) | 1.26 | %(e) | (0.43 | )%(e) | 6 | % | |||||||||||||||||||||
Year ended 04/30/11 | 8.64 | (0.06 | )(d) | 2.97 | 2.91 | (0.33 | ) | 11.22 | 33.86 | 274,558 | 1.23 | 1.23 | (0.65 | ) | 30 | |||||||||||||||||||||||||||||||||
One month ended 04/30/10 | 7.84 | (0.01 | )(d) | 0.81 | 0.80 | — | 8.64 | 10.20 | 179,158 | 1.29 | (f) | 1.30 | (f) | (0.77 | )(f) | 2 | ||||||||||||||||||||||||||||||||
Year ended 03/31/10 | 5.91 | (0.06 | )(d) | 2.13 | 2.07 | (0.14 | ) | 7.84 | 34.88 | 157,681 | 1.31 | 1.32 | (0.79 | ) | 3 | |||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 7.77 | (0.01 | )(d) | (1.82 | ) | (1.83 | ) | (0.03 | ) | 5.91 | (23.51 | ) | 97,402 | 1.46 | 1.47 | (0.18 | ) | 39 | ||||||||||||||||||||||||||||||
Year ended 03/31/08 | 6.11 | (0.02 | ) | 1.73 | 1.71 | (0.05 | ) | 7.77 | 28.00 | 122,756 | 1.35 | 1.36 | (0.48 | ) | 43 | |||||||||||||||||||||||||||||||||
Year ended 03/31/07 | 5.67 | (0.00 | )(d) | 0.58 | 0.58 | (0.14 | ) | 6.11 | 10.24 | 58,702 | 1.41 | 1.41 | (0.04 | ) | 85 | |||||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | 10.95 | (0.06 | )(d) | (1.01 | ) | (1.07 | ) | — | 9.88 | (9.77 | ) | 44,732 | 2.01 | (e) | 2.01 | (e) | (1.18 | )(e) | 6 | |||||||||||||||||||||||||||||
Year ended 04/30/11 | 8.46 | (0.13 | )(d) | 2.89 | 2.76 | (0.27 | ) | 10.95 | 32.73 | 55,497 | 1.98 | 1.98 | (1.40 | ) | 30 | |||||||||||||||||||||||||||||||||
One month ended 04/30/10 | 7.68 | (0.01 | )(d) | 0.79 | 0.78 | — | 8.46 | 10.16 | 45,239 | 2.04 | (f) | 2.05 | (f) | (1.52 | )(f) | 2 | ||||||||||||||||||||||||||||||||
Year ended 03/31/10 | 5.77 | (0.11 | )(d) | 2.08 | 1.97 | (0.06 | ) | 7.68 | 34.07 | 41,467 | 2.06 | 2.07 | (1.54 | ) | 3 | |||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 7.64 | (0.06 | )(d) | (1.80 | ) | (1.86 | ) | (0.01 | ) | 5.77 | (24.22 | ) | 31,584 | 2.21 | 2.22 | (0.93 | ) | 39 | ||||||||||||||||||||||||||||||
Year ended 03/31/08 | 6.01 | (0.07 | ) | 1.71 | 1.64 | (0.01 | ) | 7.64 | 27.23 | 43,462 | 2.10 | 2.11 | (1.23 | ) | 43 | |||||||||||||||||||||||||||||||||
Year ended 03/31/07 | 5.60 | (0.05 | )(d) | 0.58 | 0.53 | (0.12 | ) | 6.01 | 9.45 | 25,599 | 2.16 | 2.16 | (0.79 | ) | 85 | |||||||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | 11.63 | (0.06 | )(d) | (1.07 | ) | (1.13 | ) | — | 10.50 | (9.72 | ) | 71,824 | 2.01 | (e) | 2.01 | (e) | (1.18 | )(e) | 6 | |||||||||||||||||||||||||||||
Year ended 04/30/11 | 8.97 | (0.14 | )(d) | 3.07 | 2.93 | (0.27 | ) | 11.63 | 32.77 | 80,280 | 1.98 | 1.98 | (1.40 | ) | 30 | |||||||||||||||||||||||||||||||||
One month ended 04/30/10 | 8.15 | (0.01 | )(d) | 0.83 | 0.82 | — | 8.97 | 10.06 | 53,588 | 2.04 | (f) | 2.05 | (f) | (1.52 | )(f) | 2 | ||||||||||||||||||||||||||||||||
Year ended 03/31/10 | 6.12 | (0.12 | )(d) | 2.21 | 2.09 | (0.06 | ) | 8.15 | 34.08 | 51,104 | 2.06 | 2.07 | (1.54 | ) | 3 | |||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 8.11 | (0.06 | )(d) | (1.92 | ) | (1.98 | ) | (0.01 | ) | 6.12 | (24.30 | ) | 35,563 | 2.21 | 2.22 | (0.93 | ) | 39 | ||||||||||||||||||||||||||||||
Year ended 03/31/08 | 6.39 | (0.07 | ) | 1.80 | 1.73 | (0.01 | ) | 8.11 | 27.02 | 40,939 | 2.10 | 2.11 | (1.23 | ) | 43 | |||||||||||||||||||||||||||||||||
Year ended 03/31/07 | 5.94 | (0.05 | )(d) | 0.62 | 0.57 | (0.12 | ) | 6.39 | 9.59 | 21,188 | 2.16 | 2.16 | (0.79 | ) | 85 | |||||||||||||||||||||||||||||||||
Class Y | ||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | 11.32 | (0.01 | )(d) | (1.04 | ) | (1.05 | ) | — | 10.27 | (9.28 | ) | 15,124 | 1.01 | (e) | 1.01 | (e) | (0.18 | )(e) | 6 | |||||||||||||||||||||||||||||
Year ended 04/30/11 | 8.71 | (0.04 | )(d) | 3.00 | 2.96 | (0.35 | ) | 11.32 | 34.19 | 15,493 | 0.98 | 0.98 | (0.40 | ) | 30 | |||||||||||||||||||||||||||||||||
One month ended 04/30/10 | 7.91 | 0.00 | (d) | 0.80 | 0.80 | — | 8.71 | 10.11 | 5,690 | 1.04 | (f) | 1.05 | (f) | (0.52 | )(f) | 2 | ||||||||||||||||||||||||||||||||
Year ended 03/31/10 | 5.95 | (0.04 | )(d) | 2.15 | 2.11 | (0.15 | ) | 7.91 | 35.46 | 4,973 | 1.06 | 1.07 | (0.54 | ) | 3 | |||||||||||||||||||||||||||||||||
Year ended 03/31/09(g) | 5.09 | (0.00 | )(d) | 0.89 | 0.89 | (0.03 | ) | 5.95 | 17.56 | 1,365 | 1.44 | (f) | 1.45 | (f) | (0.16 | )(f) | 39 | |||||||||||||||||||||||||||||||
Investor Class | ||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | 11.28 | (0.02 | )(d) | (1.04 | ) | (1.06 | ) | — | 10.22 | (9.40 | ) | 242,290 | 1.26 | (e) | 1.26 | (e) | (0.43 | )(e) | 6 | |||||||||||||||||||||||||||||
Year ended 04/30/11 | 8.69 | (0.06 | )(d) | 2.98 | 2.92 | (0.33 | ) | 11.28 | 33.78 | 279,686 | 1.23 | 1.23 | (0.65 | ) | 30 | |||||||||||||||||||||||||||||||||
One month ended 04/30/10 | 7.89 | (0.01 | )(d) | 0.81 | 0.80 | — | 8.69 | 10.14 | 205,022 | 1.29 | (e) | 1.30 | (f) | (0.77 | )(f) | 2 | ||||||||||||||||||||||||||||||||
Year ended 03/31/10 | 5.94 | (0.06 | )(d) | 2.15 | 2.09 | (0.14 | ) | 7.89 | 35.04 | 187,995 | 1.31 | 1.32 | (0.79 | ) | 3 | |||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 7.82 | (0.01 | )(d) | (1.84 | ) | (1.85 | ) | (0.03 | ) | 5.94 | (23.61 | ) | 136,151 | 1.46 | 1.47 | (0.18 | ) | 39 | ||||||||||||||||||||||||||||||
Year ended 03/31/08 | 6.15 | (0.03 | ) | 1.75 | 1.72 | (0.05 | ) | 7.82 | 27.98 | 181,711 | 1.35 | 1.36 | (0.48 | ) | 43 | |||||||||||||||||||||||||||||||||
Year ended 03/31/07 | 5.70 | (0.00 | )(d) | 0.59 | 0.59 | (0.14 | ) | 6.15 | 10.36 | 146,934 | 1.41 | 1.41 | (0.04 | ) | 85 | |||||||||||||||||||||||||||||||||
(a) | Includes redemption fees added to shares of beneficial interest which were less than $0.005 per share. | |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges and is not annualized for periods less than one year, if applicable. | |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. | |
(d) | Calculated using average shares outstanding. | |
(e) | Ratios are annualized and based on average daily net assets (000’s) of $251,629, $47,360, $72,622, $15,648 and $250,544 for Class A, Class B, Class C, Class Y and Investor Class shares, respectively. | |
(f) | Annualized. | |
(g) | Commencement date of October 3, 2008. |
15 Invesco Gold & Precious Metals Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments or contingent deferred sales charges on redemptions, and redemption fees, if any; and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period May 1, 2011 through October 31, 2011.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the hypothetical information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
HYPOTHETICAL | ||||||||||||||||||||||||||||||
(5% annual return before | ||||||||||||||||||||||||||||||
ACTUAL | expenses) | |||||||||||||||||||||||||||||
Beginning | Ending | Expenses | Ending | Expenses | Annualized | |||||||||||||||||||||||||
Account Value | Account Value | Paid During | Account Value | Paid During | Expense | |||||||||||||||||||||||||
Class | (05/01/11) | (10/31/11)1 | Period2 | (10/31/11) | Period2 | Ratio | ||||||||||||||||||||||||
A | $ | 1,000.00 | $ | 905.50 | $ | 6.02 | $ | 1,018.82 | $ | 6.38 | 1.26 | % | ||||||||||||||||||
B | 1,000.00 | 902.30 | 9.60 | 1,015.05 | 10.17 | 2.01 | ||||||||||||||||||||||||
C | 1,000.00 | 902.80 | 9.60 | 1,015.05 | 10.17 | 2.01 | ||||||||||||||||||||||||
Y | 1,000.00 | 907.20 | 4.83 | 1,020.07 | 5.11 | 1.01 | ||||||||||||||||||||||||
Investor | 1,000.00 | 906.00 | 6.04 | 1,018.80 | 6.39 | 1.26 | ||||||||||||||||||||||||
1 | The actual ending account value is based on the actual total return of the Fund for the period May 1, 2011 through October 31, 2011, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund’s expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/366 to reflect the most recent fiscal half year |
16 Invesco Gold & Precious Metals 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 Gold & Precious Metals Fund (the Fund) investment advisory agreement with Invesco Advisers, Inc. (Invesco Advisers) and the Master Intergroup Sub-Advisory Contract for Mutual Funds (the sub-advisory contracts) with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers). During contract renewal meetings held on June 14-15, 2011, the Board as a whole, and the disinterested or “independent” Trustees, who comprise 80% of the Board, voting separately, approved the continuance of the Fund’s investment advisory agreement and the sub-advisory contracts for another year, effective July 1, 2011. In doing so, the Board considered the process that it follows in reviewing and approving the Fund’s investment advisory agreement and sub-advisory contracts and the information that it is provided. The Board determined that the Fund’s investment advisory agreement and the sub-advisory contracts are in the best interests of the Fund and its shareholders and the compensation to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is responsible for overseeing the management of a number of the series portfolios of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies and limitations and investment risks of these funds. The Sub-Committees meet regularly and at designated contract renewal meetings each year to conduct a review of the performance, fees, expenses and other matters related to their assigned Invesco Funds. Each Sub-Committee recommends to the Investments Committee, which in turn recommends to the full Board, whether to approve the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Trustees receive comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and an independent company, Lipper, Inc. (Lipper). The Trustees also receive an independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. The independent Trustees are assisted in their annual evaluation of the Fund’s investment advisory agreement by the Senior Officer and by independent legal counsel. The independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in private sessions with the Senior Officer and counsel.
In evaluating the fairness and reasonableness of the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Trustees also considered information provided in connection with fund acquisitions approved by the Trustees to rationalize the Invesco Funds product range following the acquisition of the retail mutual fund business of Morgan Stanley (the Morgan Stanley Transaction). The Trustees recognized that the advisory fees for the Invesco Funds include advisory fees that are the result of years of review and negotiation between the Trustees and Invesco Advisers as well as advisory fees inherited from Morgan Stanley and Van Kampen funds acquired in the Morgan Stanley Transaction. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these same arrangements throughout the year and in prior years. One Trustee may have weighed a particular piece of information differently than another Trustee.
The discussion below serves as the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 15, 2011, and may not reflect consideration of factors that became known to the Board after that date, including, for example, changes to the Fund’s performance, advisory fees, expense limitations and/or fee waivers.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers, with whom the Board met during the year. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s consideration of Invesco Advisers’ performance and investment process oversight, independent credit analysis and investment risk management.
In determining whether to continue the Fund’s investment advisory agreement, the Board considered the prior relationship between Invesco Advisers and the Fund, as well as the Board’s knowledge of Invesco Advisers’ operations, and concluded that it is beneficial to maintain the current relationship, in part, because of such knowledge. The Board also considered services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution and legal and compliance. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and the advisory services are provided in accordance with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services provided by the Affiliated Sub-Advisers under the sub-advisory contracts and the credentials and experience of the officers and employees of the Affiliated Sub-Advisers who provide these services. The Board noted that the Affiliated Sub-Advisers have offices and personnel that are located in financial centers around the world. As a result, the Affiliated Sub-Advisers can provide research and investment analysis on the markets and economies of various countries in which the Fund invests and make recommendations on securities of companies located in such countries. The Board concluded that the sub-advisory contracts benefit the Fund and its shareholders by permitting Invesco Advisers to use the resources and talents of the Affiliated Sub-Advisers in managing the Fund. The Board concluded that the
17 Invesco Gold & Precious Metals Fund
nature, extent and quality of the services provided by the Affiliated Sub-Advisers are appropriate and satisfactory and in accordance with the terms of the Fund’s sub-advisory contracts.
B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
The Board 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 Precious Metals Funds Index. The Board noted that performance of Investor Class shares of the Fund was in the third quintile of the performance universe for the one, three and five year periods (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board noted that performance of Investor Class 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 Investor Class shares of the Fund was below the median contractual advisory fee rate of funds in the expense group. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using audited financial data from the most recent annual report of each fund in the expense group that was publicly available as of the end of the past calendar year and including only one fund per investment adviser. The Board noted that comparative data is as of varying dates, which may affect the comparability of data during times of market volatility.
The Board noted that Invesco Advisers and the Affiliated Sub-Advisers do not advise other mutual funds or client accounts with investment strategies comparable to those of the Fund.
The Board noted that Invesco Advisers has contractually agreed to waive fees and/or limit expenses of the Fund through at least August 31, 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.
18 Invesco Gold & Precious Metals Fund
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Invesco mailing information
Send general correspondence to Invesco Investment Services, Inc., P.O. Box 219078, Kansas City, MO 64121-9078.
Invesco privacy policy
You share personal and financial information with us that is necessary for your transactions and your account records. We take very seriously the obligation to keep that information confidential and private.
Invesco collects nonpublic personal information about you from account applications or other forms you complete and from your transactions with us or our affiliates. We do not disclose information about you or our former customers to service providers or other third parties except to the extent necessary to service your account and in other limited circumstances as permitted by law. For example, we use this information to facilitate the delivery of transaction confirmations, financial reports, prospectuses and tax forms.
Even within Invesco, only people involved in the servicing of your accounts and compliance monitoring have access to your information. To ensure the highest level of confidentiality and security, Invesco maintains physical, electronic and procedural safeguards that meet or exceed federal standards. Special measures, such as data encryption and authentication, apply to your communications with us on our website. More detail is available to you at invesco.com/privacy.
Important notice regarding delivery of security holder documents
To reduce Fund expenses, only one copy of most shareholder documents may be mailed to shareholders with multiple accounts at the same address (Householding). Mailing of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact Invesco Investment Services, Inc. at 800 959 4246 or contact your financial institution. We will begin sending you individual copies for each account within 30 days after receiving your request.
Fund holdings and proxy voting information
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is available at invesco.com/completeqtrholdings. Shareholders can also look up the Fund’s Forms N-Q on the SEC website at sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-03826 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.
![(INVESCO LOGO)](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8578008.gif)
Information regarding how the Fund voted proxies related to its portfolio securities during the 12 months ended June 30, 2011, is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov.
Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the U.S. distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
Invesco 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.
I-GPM-SAR-1 | Invesco Distributors, Inc. |
![(INVESCO LOGO)](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8578301.gif)
Invesco Leisure Fund
Semiannual Report to Shareholders § October 31, 2011
Nasdaq:
Semiannual Report to Shareholders § October 31, 2011
Nasdaq:
A: ILSAX § B: ILSBX § C: IVLCX § R: ILSRX § Y: ILSYX § Investor: FLISX
![(MOUNTAIN COVER GRAPHIC)](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8578302.gif)
2 | Fund Performance | |
4 | Letters to Shareholders | |
5 | Schedule of Investments | |
7 | Financial Statements | |
9 | Notes to Financial Statements | |
16 | Financial Highlights | |
17 | Fund Expenses | |
18 | 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, 4/30/11 to 10/31/11, at net asset value (NAV). Performance shown does not include applicable contingent deferred sales charges (CDSC) or front-end sales charges, which would have reduced performance.
Class A Shares | -5.41 | % | ||
Class B Shares | -5.77 | |||
Class C Shares | -5.76 | |||
Class R Shares | -5.55 | |||
Class Y Shares | -5.27 | |||
Investor Class Shares | -5.42 | |||
S&P 500 Index▼(Broad Market Index) | -7.12 | |||
S&P 500 Consumer Discretionary Index▼(Style-Specific Index) | -3.11 | |||
Lipper Consumer Services Funds Category Average▼(Peer Group) | -5.25 |
Source(s): ▼Lipper Inc.
The S&P 500® Index is an unmanaged index considered representative of the U.S. stock market.
The S&P 500 Consumer Discretionary Index is an unmanaged index considered representative of the consumer discretionary market.
The Lipper Consumer Services Funds Category Average represents an average of all of the funds in the Lipper Consumer Services Funds category.
The Fund is not managed to track the performance of any particular index, including the 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.
2 Invesco Leisure Fund
Average Annual Total Returns
As of 10/31/11, including maximum applicable sales charges
Class A Shares | ||||
Inception (3/28/02) | 2.54 | % | ||
5 Years | -1.74 | |||
1 Year | 1.29 | |||
Class B Shares | ||||
Inception (3/28/02) | 2.53 | % | ||
5 Years | -1.67 | |||
1 Year | 1.38 | |||
Class C Shares | ||||
Inception (2/14/00) | 2.08 | % | ||
10 Years | 4.13 | |||
5 Years | -1.37 | |||
1 Year | 5.38 | |||
Class R Shares | ||||
Inception (10/25/05) | 2.62 | % | ||
5 Years | -0.87 | |||
1 Year | 6.93 | |||
Class Y Shares | ||||
10 Years | 5.04 | % | ||
5 Years | -0.46 | |||
1 Year | 7.49 | |||
Investor Class Shares | ||||
Inception (1/19/84) | 12.99 | % | ||
10 Years | 4.96 | |||
5 Years | -0.62 | |||
1 Year | 7.19 |
Class Y shares incepted on October 3, 2008. Performance shown prior to that date is that of Investor Class shares and includes the 12b-1 fees applicable to Investor Class shares. Investor Class share performance reflects any applicable fee waivers or expense reimbursements.
The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Please visit invesco.com/performance for the most recent month-end performance. Performance figures reflect reinvested distributions, changes in net asset value and the effect of the maximum sales charge unless otherwise stated. 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.
Average Annual Total Returns
As of 9/30/11, the most recent calendar quarter-end, including maximum applicable sales charges
Class A Shares | ||||
Inception (3/28/02) | 1.35 | % | ||
5 Years | -2.85 | |||
1 Year | -5.74 | |||
Class B Shares | ||||
Inception (3/28/02) | 1.33 | % | ||
5 Years | -2.78 | |||
1 Year | -5.92 | |||
Class C Shares | ||||
Inception (2/14/00) | 1.11 | % | ||
10 Years | 3.48 | |||
5 Years | -2.48 | |||
1 Year | -1.99 | |||
Class R Shares | ||||
Inception (10/25/05) | 0.72 | % | ||
5 Years | -1.99 | |||
1 Year | -0.48 | |||
Class Y Shares | ||||
10 Years | 4.39 | % | ||
5 Years | -1.59 | |||
1 Year | 0.02 | |||
Investor Class Shares | ||||
Inception (1/19/84) | 12.57 | % | ||
10 Years | 4.31 | |||
5 Years | -1.75 | |||
1 Year | -0.23 |
The total annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Class A, Class B, Class C, Class R, Class Y and Investor Class shares was 1.33%, 2.08%, 2.08%, 1.58%, 1.08% and 1.33%, respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.
Class A share performance reflects the maximum 5.50% sales charge, and Class B and Class C share performance reflects the applicable contingent deferred sales charge (CDSC) for the period involved. The CDSC on Class B shares declines from 5% beginning at the time of purchase to 0% at the beginning of the seventh year. The CDSC on Class C shares is 1% for the first year after purchase. Class R, Class Y and Investor Class shares do not have a front-end sales charge or a
CDSC; therefore, performance is at net asset value.
The performance of the Fund’s share classes will differ primarily due to different sales charge structures and class expenses.
3 Invesco Leisure Fund
Letters to Shareholders
![(PHOTO OF BRUCE CROCKETT)](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8578303.jpg)
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,
![-s- Bruce L. Crockett](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8578304.gif)
Bruce L. Crockett
Independent Chair, Invesco Funds Board of Trustees
Independent Chair, Invesco Funds Board of Trustees
![(PHOTO OF PHILIP TAYLOR)](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8578305.jpg)
Philip Taylor
Dear Shareholders:
Enclosed is important information about your Fund and its performance. I encourage you to read this report to learn more about your Fund’s short- and long-term performance.
The start of a new year is always a good time to catch up with your financial adviser. Looking ahead to the new year and evaluating your individual situation, your financial adviser can provide valuable insight into whether your investments are still appropriate for your individual needs, goals and risk tolerance. This may provide reassurance in times of economic uncertainty and market volatility such as we saw in 2011 – and are likely to see again in 2012.
On our website, invesco.com/us, we provide timely market updates and commentary from many of our fund managers and other investment professionals. Also on our website, you 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.
Across our broad array of investment products, 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 – meaning 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,
![-s- Philip Taylor](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8578306.gif)
Philip Taylor
Senior Managing Director, Invesco Ltd.
Senior Managing Director, Invesco Ltd.
4 Invesco Leisure Fund
Schedule of Investments(a)
October 31, 2011
(Unaudited)
Shares | Value | |||||||
Common Stocks & Other Equity Interests–98.32% | ||||||||
Advertising–2.26% | ||||||||
Interpublic Group of Cos., Inc. (The) | 601,304 | $ | 5,700,362 | |||||
National CineMedia, Inc. | 156,280 | 1,890,988 | ||||||
7,591,350 | ||||||||
Apparel Retail–1.61% | ||||||||
Abercrombie & Fitch Co.–Class A | 72,868 | 5,421,379 | ||||||
Apparel, Accessories & Luxury Goods–2.43% | ||||||||
Lululemon Athletica Inc.(b)(c) | 29,805 | 1,683,386 | ||||||
Prada S.p.A. (Italy)(c) | 885,000 | 4,260,355 | ||||||
Under Armour, Inc.–Class A(c) | 26,338 | 2,223,191 | ||||||
8,166,932 | ||||||||
Auto Parts & Equipment–1.81% | ||||||||
Johnson Controls, Inc. | 184,417 | 6,072,852 | ||||||
Automobile Manufacturers–1.94% | ||||||||
Ford Motor Co.(c) | 301,251 | 3,518,612 | ||||||
Honda Motor Co., Ltd. (Japan) | 98,866 | 2,979,979 | ||||||
6,498,591 | ||||||||
Automotive Retail–3.04% | ||||||||
AutoZone, Inc.(c) | 12,445 | 4,027,077 | ||||||
CarMax, Inc.(c) | 205,911 | 6,189,685 | ||||||
10,216,762 | ||||||||
Broadcasting–4.19% | ||||||||
CBS Corp.–Class B | 263,896 | 6,811,156 | ||||||
Scripps Networks Interactive, Inc.–Class A | 171,110 | 7,268,753 | ||||||
14,079,909 | ||||||||
Cable & Satellite–9.84% | ||||||||
Comcast Corp.–Class A | 595,020 | 13,953,219 | ||||||
DIRECTV–Class A(c) | 309,066 | 14,050,140 | ||||||
Time Warner Cable Inc. | 79,207 | 5,044,694 | ||||||
33,048,053 | ||||||||
Casinos & Gaming–6.51% | ||||||||
Las Vegas Sands Corp.(c) | 197,228 | 9,259,855 | ||||||
Penn National Gaming, Inc.(c) | 350,406 | 12,614,616 | ||||||
21,874,471 | ||||||||
Computer Hardware–4.42% | ||||||||
Apple Inc.(c) | 36,711 | 14,859,879 | ||||||
Consumer Finance–1.94% | ||||||||
EZCORP, Inc.–Class A(c) | 234,114 | 6,503,687 | ||||||
Department Stores–6.63% | ||||||||
Kohl’s Corp. | 154,379 | 8,183,631 | ||||||
Macy’s, Inc. | 461,871 | 14,100,921 | ||||||
22,284,552 | ||||||||
Footwear–6.67% | ||||||||
Deckers Outdoor Corp.(c) | 62,971 | 7,256,778 | ||||||
NIKE, Inc.–Class B | 157,057 | 15,132,442 | ||||||
22,389,220 | ||||||||
General Merchandise Stores–0.48% | ||||||||
Dollar Tree, Inc.(c) | 20,289 | 1,622,308 | ||||||
Home Improvement Retail–1.14% | ||||||||
Home Depot, Inc. (The) | 106,889 | 3,826,626 | ||||||
Homefurnishing Retail–1.50% | ||||||||
Bed Bath & Beyond, Inc.(c) | 81,609 | 5,046,701 | ||||||
Hotels, Resorts & Cruise Lines–3.06% | ||||||||
Hyatt Hotels Corp.–Class A(c) | 130,040 | 4,836,188 | ||||||
Marriott International Inc.–Class A | 83,722 | 2,637,243 | ||||||
Starwood Hotels & Resorts Worldwide, Inc. | 56,012 | 2,806,761 | ||||||
10,280,192 | ||||||||
Hypermarkets & Super Centers–3.87% | ||||||||
Costco Wholesale Corp. | 156,040 | 12,990,330 | ||||||
Internet Retail–5.12% | ||||||||
Amazon.com, Inc.(c) | 71,995 | 15,371,653 | ||||||
Priceline.com Inc.(c) | 3,603 | 1,829,315 | ||||||
17,200,968 | ||||||||
Internet Software & Services–3.60% | ||||||||
Baidu, Inc.–ADR (China)(c) | 34,069 | 4,775,792 | ||||||
eBay Inc.(c) | 49,593 | 1,578,545 | ||||||
Google Inc.–Class A(c) | 7,844 | 4,648,668 | ||||||
Yandex NV–Class A (Netherlands)(c) | 39,578 | 1,089,187 | ||||||
12,092,192 | ||||||||
Motorcycle Manufacturers–1.47% | ||||||||
Harley-Davidson, Inc. | 127,330 | 4,953,137 | ||||||
Movies & Entertainment–8.73% | ||||||||
News Corp.–Class A | 239,600 | 4,197,792 | ||||||
Time Warner Inc. | 192,430 | 6,733,126 | ||||||
Viacom Inc.–Class A(b) | 121,958 | 6,517,436 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
5 Invesco Leisure Fund
Shares | Value | |||||||
Movies & Entertainment–(continued) | ||||||||
Viacom Inc.–Class B | 152,158 | $ | 6,672,128 | |||||
Walt Disney Co. (The) | 149,222 | 5,204,863 | ||||||
29,325,345 | ||||||||
Restaurants–8.00% | ||||||||
Chipotle Mexican Grill, Inc.(c) | 15,689 | 5,273,387 | ||||||
Darden Restaurants, Inc. | 162,267 | 7,769,344 | ||||||
P.F. Chang’s China Bistro, Inc.(b) | 54,952 | 1,709,007 | ||||||
Starbucks Corp. | 286,610 | 12,135,067 | ||||||
26,886,805 | ||||||||
Soft Drinks–0.73% | ||||||||
Hansen Natural Corp.(c) | 27,600 | 2,458,884 | ||||||
Specialized Consumer Services–2.05% | ||||||||
Weight Watchers International, Inc.(b) | 92,117 | 6,873,771 | ||||||
Specialty Stores–2.20% | ||||||||
Tiffany & Co. | 92,854 | 7,403,249 | ||||||
Systems Software–3.08% | ||||||||
Rovi Corp.(c) | 208,712 | 10,339,592 | ||||||
Total Common Stocks & Other Equity Interests (Cost $264,667,531) | 330,307,737 | |||||||
Money Market Funds–1.61% | ||||||||
Liquid Assets Portfolio–Institutional Class(d) | 2,708,865 | 2,708,865 | ||||||
Premier Portfolio–Institutional Class(d) | 2,708,864 | 2,708,864 | ||||||
Total Money Market Funds (Cost $5,417,729) | 5,417,729 | |||||||
TOTAL INVESTMENTS (excluding investments purchased with cash collateral from securities on loan)–99.93% (Cost $270,085,260) | 335,725,466 | |||||||
Investments Purchased with Cash Collateral from Securities on Loan | ||||||||
Money Market Funds–3.86% | ||||||||
Liquid Assets Portfolio–Institutional Class (Cost $12,954,550)(d)(e) | 12,954,550 | 12,954,550 | ||||||
TOTAL INVESTMENTS–103.79% (Cost $283,039,810) | 348,680,016 | |||||||
OTHER ASSETS LESS LIABILITIES–(3.79)% | (12,730,484 | ) | ||||||
NET ASSETS–100.00% | $ | 335,949,532 | ||||||
Investment Abbreviations:
ADR | – American Depositary Receipt |
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. | |
(b) | All or a portion of this security was out on loan at October 31, 2011. | |
(c) | Non-income producing security. | |
(d) | The money market fund and the Fund are affiliated by having the same investment adviser. | |
(e) | The security has been segregated to satisfy the commitment to return the cash collateral received in securities lending transactions upon the borrower’s return of the securities loaned. See Note 1J. |
By sector, based on Net Assets
as of October 31, 2011
Consumer Discretionary | 80.7 | % | ||
Information Technology | 11.1 | |||
Consumer Staples | 4.6 | |||
Financials | 1.9 | |||
Money Market Funds Plus Other Assets Less Liabilities | 1.7 | |||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
6 Invesco Leisure Fund
Statement of Assets and Liabilities
October 31, 2011
(Unaudited)
Assets: | ||||
Investments, at value (Cost $264,667,531)* | $ | 330,307,737 | ||
Investments in affiliated money market funds, at value and cost | 18,372,279 | |||
Total investments, at value (Cost $283,039,810) | 348,680,016 | |||
Receivable for: | ||||
Investments sold | 711,977 | |||
Fund shares sold | 78,567 | |||
Dividends | 92,263 | |||
Investment for trustee deferred compensation and retirement plans | 39,429 | |||
Other assets | 38,082 | |||
Total assets | 349,640,334 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares reacquired | 339,265 | |||
Collateral upon return of securities loaned | 12,954,550 | |||
Accrued fees to affiliates | 236,041 | |||
Accrued other operating expenses | 56,295 | |||
Trustee deferred compensation and retirement plans | 104,651 | |||
Total liabilities | 13,690,802 | |||
Net assets applicable to shares outstanding | $ | 335,949,532 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 261,420,427 | ||
Undistributed net investment income (loss) | (723,528 | ) | ||
Undistributed net realized gain | 9,612,749 | |||
Unrealized appreciation | 65,639,884 | |||
$ | 335,949,532 | |||
Net Assets: | ||||
Class A | $ | 51,861,729 | ||
Class B | $ | 4,791,997 | ||
Class C | $ | 10,662,778 | ||
Class R | $ | 1,096,210 | ||
Class Y | $ | 4,281,609 | ||
Investor Class | $ | 263,255,209 | ||
Shares outstanding, $0.01 par value per share, with an unlimited number of shares authorized: | ||||
Class A | 1,490,890 | |||
Class B | 144,473 | |||
Class C | 332,808 | |||
Class R | 31,709 | |||
Class Y | 122,838 | |||
Investor Class | 7,585,306 | |||
Class A: | ||||
Net asset value per share | $ | 34.79 | ||
Maximum offering price per share (Net asset value of $34.79 divided by 94.50%) | $ | 36.81 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 33.17 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 32.04 | ||
Class R: | ||||
Net asset value and offering price per share | $ | 34.57 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 34.86 | ||
Investor Class: | ||||
Net asset value and offering price per share | $ | 34.71 | ||
* | At October 31, 2011, securities with an aggregate value of $12,695,513 were on loan to brokers. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
7 Invesco Leisure Fund
Statement of Operations
For the six months ended October 31, 2011
(Unaudited
Investment income: | ||||
Dividends (net of foreign withholding taxes of $3,543) | $ | 1,717,443 | ||
Dividends from affiliated money market funds (includes securities lending income of $86,541) | 89,216 | |||
Total investment income | 1,806,659 | |||
Expenses: | ||||
Advisory fees | 1,315,102 | |||
Administrative services fees | 65,466 | |||
Custodian fees | 7,298 | |||
Distribution fees: | ||||
Class A | 66,032 | |||
Class B | 28,112 | |||
Class C | 57,720 | |||
Class R | 3,006 | |||
Investor Class | 345,010 | |||
Transfer agent fees | 433,120 | |||
Trustees’ and officers’ fees and benefits | 14,103 | |||
Other | 89,067 | |||
Total expenses | 2,424,036 | |||
Less: Fees waived, expenses reimbursed and expense offset arrangement(s) | (5,322 | ) | ||
Net expenses | 2,418,714 | |||
Net investment income (loss) | (612,055 | ) | ||
Realized and unrealized gain (loss) from: | ||||
Net realized gain from: | ||||
Investment securities | 20,326,264 | |||
Foreign currencies | 2,437 | |||
20,328,701 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | (40,635,003 | ) | ||
Foreign currencies | 28 | |||
(40,634,975 | ) | |||
Net realized and unrealized gain (loss) | (20,306,274 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | (20,918,329 | ) | |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
8 Invesco Leisure Fund
Statement of Changes in Net Assets
For the six months ended October 31, 2011 and the year ended April 30, 2011
(Unaudited)
Six months | ||||||||
ended | Year ended | |||||||
October 31, | April 30, | |||||||
2011 | 2011 | |||||||
Operations: | ||||||||
Net investment income (loss) | $ | (612,055 | ) | $ | (276,709 | ) | ||
Net realized gain | 20,328,701 | 36,774,985 | ||||||
Change in net unrealized appreciation (depreciation) | (40,634,975 | ) | 7,491,408 | |||||
Net increase (decrease) in net assets resulting from operations | (20,918,329 | ) | 43,989,684 | |||||
Distributions to shareholders from net investment income: | ||||||||
Class A | — | (78,408 | ) | |||||
Class Y | — | (17,501 | ) | |||||
Investor Class | — | (381,138 | ) | |||||
Total distributions from net investment income | — | (477,047 | ) | |||||
Share transactions–net: | ||||||||
Class A | (3,833,657 | ) | (13,762,131 | ) | ||||
Class B | (1,652,516 | ) | (3,338,903 | ) | ||||
Class C | (1,488,359 | ) | (3,010,961 | ) | ||||
Class R | (258,359 | ) | 31,185 | |||||
Class Y | 2,505,038 | (1,445,594 | ) | |||||
Investor Class | (20,741,074 | ) | (44,360,507 | ) | ||||
Net increase (decrease) in net assets resulting from share transactions | (25,468,927 | ) | (65,886,911 | ) | ||||
Net increase (decrease) in net assets | (46,387,256 | ) | (22,374,274 | ) | ||||
Net assets: | ||||||||
Beginning of period | 382,336,788 | 404,711,062 | ||||||
End of period (includes undistributed net investment income (loss) of $(723,528) and $(111,473), respectively) | $ | 335,949,532 | $ | 382,336,788 | ||||
Notes to Financial Statements
October 31,2011
(Unaudited)
NOTE 1—Significant Accounting Policies
Invesco Leisure 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 growth of capital.
The Fund currently consists of six different classes of shares: Class A, Class B, Class C, Class R, Class Y and Investor Class. Investor Class shares of the Fund are offered only to certain grandfathered investors. Class A shares are sold with a front-end sales charge unless certain waiver criteria are met and under certain circumstances load waived shares may be subject to contingent deferred sales charges (“CDSC”). Class C shares are sold with a CDSC. Class R, Class Y and Investor Class shares are sold at net asset value. Effective November 30, 2010, new or additional investments in Class B shares are no longer permitted. Existing shareholders of Class B shares may continue to reinvest dividends and capital gains distributions in Class B shares until they convert. Also, shareholders in Class B shares will be able to exchange those shares for Class B shares of other Invesco Funds offering such shares until they convert. Generally, Class B shares will automatically convert to Class A shares on or about the month-end which is at least eight years after the date of purchase. Redemption of Class B shares prior to conversion date will be subject to a CDSC.
9 Invesco Leisure Fund
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. | |
A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”). | ||
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded. | ||
Debt obligations (including convertible bonds) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Debt securities are subject to interest rate and credit risks. In addition, all debt securities involve some risk of default with respect to interest and/or principal payments. | ||
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trade is not the current value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and 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 |
10 Invesco Leisure Fund
and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. | ||
D. | Distributions — Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to treat a portion of the proceeds from redemptions as distributions for federal income tax purposes. | |
E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. | |
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period. | ||
F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. | |
G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. | |
H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. | |
I. | Other Risks — The Fund’s investments are concentrated in a comparatively narrow segment of the economy, which may make the Fund more volatile. | |
The leisure sector depends on consumer discretionary spending, which generally falls during economic downturns. Securities of gambling casinos are often subject to high price volatility and are considered speculative. Securities of companies that make video and electronic games may be affected by the games’ risk of rapid obsolescence. | ||
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 |
11 Invesco Leisure Fund
associated with foreign currency contracts include failure of the counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities. |
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser based on the annual rate of the Fund’s average daily net assets as follows:
Average Net Assets | Rate | |||
First $350 million | 0 | .75% | ||
Next $350 million | 0 | .65% | ||
Next $1.3 billion | 0 | .55% | ||
Next $2 billion | 0 | .45% | ||
Next $2 billion | 0 | .40% | ||
Next $2 billion | 0 | .375% | ||
Over $8 billion | 0 | .35% | ||
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco 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 August 31, 2012, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Class A, Class B, Class C, Class R, Class Y and Investor Class shares to 2.00%, 2.75%, 2.75%, 2.25%, 1.75% and 2.00%, respectively, of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waivers 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 August 31, 2012. The Adviser did not waive fees and/or reimburse expenses during the period under this expense limitation.
The Adviser has contractually agreed, through at least June 30, 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 October 31, 2011, the Adviser waived advisory fees of $4,233.
At the request of the Trustees of the Trust, Invesco Ltd. agreed to reimburse expenses incurred by the Fund in connection with market timing matters in the Invesco Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement are included in the Statement of Operations. For the six months ended October 31, 2011, Invesco Ltd. reimbursed expenses of the Fund in the amount of $483.
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 October 31, 2011, expenses incurred under the agreement are shown in the Statement of Operations as administrative services fees.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (“IIS”) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. IIS may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. All fees payable by IIS to intermediaries that provide omnibus account services or sub-accounting are charged back to the Fund, subject to certain limitations approved by the Trust’s Board of Trustees. For the six months ended October 31, 2011, expenses incurred under the agreement are shown in the Statement of Operations as transfer agent fees.
The Trust has entered into master distribution agreements with Invesco Distributors, Inc. (“IDI”) to serve as the distributor for the Class A, Class B, Class C, Class R, Class Y and Investor Class shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund’s Class A, Class B, Class C, Class R and Investor Class shares (collectively, the “Plans”). The Fund, pursuant to the Plans, pays IDI compensation at the annual rate of 0.25% of the Fund’s average daily net assets of Class A shares, 1.00% of the average daily net assets of Class B and Class C shares, 0.50% of the average daily net assets of Class R shares and 0.25% of the average daily net assets of Investor Class shares. Of Plan payments, up to 0.25% of the average daily net assets of each class of shares may be paid to furnish continuing personal shareholder services to customers who purchase and own shares of such classes. Any amounts not paid as a service fee under the Plans would constitute an asset-based sales charge. Rules of the Financial Industry Regulatory Authority (“FINRA”) impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. For the six months ended October 31, 2011, expenses incurred under the Plans are shown in the Statement of Operations as distribution fees.
Front-end sales commissions and CDSC (collectively, the “sales charges”) are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance
12 Invesco Leisure Fund
to the shareholder. During the six months ended October 31, 2011, IDI advised the Fund that IDI retained $1,563 in front-end sales commissions from the sale of Class A shares and $0, $5,126 and $(74) from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of the Adviser, Invesco Ltd., IIS and/or IDI.
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3) generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
Level 1 — | Prices are determined using quoted prices in an active market for identical assets. | |
Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. | |
Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of October 31, 2011. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments
During the six months ended October 31, 2011, there were no significant transfers between investment levels.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 341,439,681 | $ | 7,240,335 | $ | — | $ | 348,680,016 | ||||||||
NOTE 4—Security Transactions with Affiliated Funds
The Fund is permitted to purchase or sell securities from or to certain other Invesco Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment adviser (or affiliated investment advisers), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, for the six months ended October 31, 2011, the Fund engaged in securities purchases of $254,434.
NOTE 5—Expense Offset Arrangement(s)
The expense offset arrangement is comprised of transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions. For the six months ended October 31, 2011, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $606.
NOTE 6—Trustees’ and Officers’ Fees and Benefits
“Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and “Trustees’ and Officers’ Fees and Benefits” also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. “Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
During the six months ended October 31, 2011, the Fund paid legal fees of $954 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A partner of that firm is a Trustee of the Trust.
NOTE 7—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with The State Street Bank and Trust Company, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
13 Invesco Leisure Fund
NOTE 8—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. Under these limitation rules, the Fund is limited to utilizing $xx of capital loss carryforward in the fiscal year ending April 30, 2012.
The Fund had a capital loss carryforward as of April 30, 2011, which expires as follows:
Capital Loss | ||||
Expiration | Carryforward* | |||
April 30, 2017 | $ | 10,484,381 | ||
* | Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. |
NOTE 9—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the six months ended October 31, 2011 was $114,658,555 and $143,261,819, 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 | $ | 70,571,476 | ||
Aggregate unrealized (depreciation) of investment securities | (5,162,841 | ) | ||
Net unrealized appreciation of investment securities | $ | 65,408,635 | ||
Cost of investments for tax purposes is $283,271,381. |
14 Invesco Leisure Fund
NOTE 10—Share Information
Summary of Share Activity | ||||||||||||||||
Year ended | Year ended | |||||||||||||||
October 31, 2011(a) | April 30, 2011 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Class A | 323,894 | $ | 11,405,134 | 487,175 | $ | 15,933,000 | ||||||||||
Class B | 5,518 | 179,204 | 28,814 | 928,195 | ||||||||||||
Class C | 11,253 | 369,021 | 35,630 | 1,096,911 | ||||||||||||
Class R | 2,901 | 100,015 | 6,222 | 202,477 | ||||||||||||
Class Y | 93,946 | 3,500,278 | 115,873 | 3,680,234 | ||||||||||||
Investor Class | 152,961 | 5,312,857 | 435,347 | 14,213,524 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Class A | — | — | 2,080 | 72,608 | ||||||||||||
Class B | — | — | — | — | ||||||||||||
Class C | — | — | — | — | ||||||||||||
Class R | — | — | — | — | ||||||||||||
Class Y | — | — | 472 | 16,458 | ||||||||||||
Investor Class | — | — | 10,615 | 369,611 | ||||||||||||
Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||
Class A | 23,933 | 844,704 | 58,256 | 1,888,172 | ||||||||||||
Class B | (25,056 | ) | (844,704 | ) | (60,683 | ) | (1,888,172 | ) | ||||||||
Reacquired: | ||||||||||||||||
Class A | (459,148 | ) | (16,083,495 | ) | (978,180 | ) | (31,655,911 | ) | ||||||||
Class B | (29,910 | ) | (987,016 | ) | (78,206 | ) | (2,378,926 | ) | ||||||||
Class C | (57,294 | ) | (1,857,380 | ) | (136,629 | ) | (4,107,872 | ) | ||||||||
Class R | (9,539 | ) | (358,374 | ) | (5,112 | ) | (171,292 | ) | ||||||||
Class Y | (29,396 | ) | (995,240 | ) | (153,834 | ) | (5,142,286 | ) | ||||||||
Investor Class | (748,331 | ) | (26,053,931 | ) | (1,811,369 | ) | (58,943,642 | ) | ||||||||
Net increase (decrease) in share activity | (744,268 | ) | $ | (25,468,927 | ) | (2,043,529 | ) | $ | (65,886,911 | ) | ||||||
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 22% of the outstanding shares of the Fund. IDI has an agreement with these entities to sell Fund shares. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as securities brokerage, distribution, third party record keeping and account servicing. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
15 Invesco Leisure Fund
NOTE 11—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Ratio of | Ratio of | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
expenses | expenses | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net gains | to average | to average net | Ratio of net | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset | Net | (losses) on | Dividends | Distributions | net assets | assets without | investment | |||||||||||||||||||||||||||||||||||||||||||||||||
value, | investment | securities (both | Total from | from net | from net | Net asset | Net assets, | with fee waivers | fee waivers | income (loss) | ||||||||||||||||||||||||||||||||||||||||||||||
beginning | income | realized and | investment | investment | realized | Total | value, end | Total | end of period | and/or expenses | and/or expenses | to average | Portfolio | |||||||||||||||||||||||||||||||||||||||||||
of period | (loss)(a) | unrealized) | operations | income | gains | Distributions | of period | Return(b) | (000s omitted) | absorbed | absorbed | net assets | turnover(c) | |||||||||||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | $ | 36.78 | $ | (0.06 | ) | $ | (1.93 | ) | $ | (1.99 | ) | $ | — | $ | — | $ | — | $ | 34.79 | (5.41 | )% | $ | 51,862 | 1.35 | %(d) | 1.35 | %(d) | (0.32 | )%(d) | 33 | % | |||||||||||||||||||||||||
Year ended 04/30/11 | 32.56 | (0.01 | ) | 4.27 | 4.26 | (0.04 | ) | — | (0.04 | ) | 36.78 | 13.10 | 58,922 | 1.33 | 1.33 | (0.03 | ) | 53 | ||||||||||||||||||||||||||||||||||||||
One month ended 04/30/10 | 31.19 | 0.02 | 1.35 | 1.37 | — | — | — | 32.56 | 4.39 | 66,194 | 1.34 | (e) | 1.34 | (e) | 0.83 | (e) | 6 | |||||||||||||||||||||||||||||||||||||||
Year ended 03/31/10 | 20.32 | 0.04 | 11.27 | 11.31 | (0.44 | ) | — | (0.44 | ) | 31.19 | 55.88 | 58,698 | 1.39 | 1.39 | 0.16 | 55 | ||||||||||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 39.82 | 0.36 | (17.29 | ) | (16.93 | ) | — | (2.57 | ) | (2.57 | ) | 20.32 | (42.67 | ) | 46,322 | 1.36 | 1.36 | 1.16 | 17 | |||||||||||||||||||||||||||||||||||||
Year ended 03/31/08 | 49.19 | 0.23 | (5.72 | ) | (5.49 | ) | (0.37 | ) | (3.51 | ) | (3.88 | ) | 39.82 | (11.89 | ) | 135,813 | 1.18 | 1.18 | 0.48 | 14 | ||||||||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | 35.20 | (0.18 | ) | (1.85 | ) | (2.03 | ) | — | — | — | 33.17 | (5.77 | ) | 4,792 | 2.10 | (d) | 2.10 | (d) | (1.07 | )(d) | 33 | |||||||||||||||||||||||||||||||||||
Year ended 04/30/11 | 31.36 | (0.24 | ) | 4.08 | 3.84 | — | — | — | 35.20 | 12.25 | 6,826 | 2.08 | 2.08 | (0.78 | ) | 53 | ||||||||||||||||||||||||||||||||||||||||
One month ended 04/30/10 | 30.06 | 0.00 | 1.30 | 1.30 | — | — | — | 31.36 | 4.33 | 9,534 | 2.09 | (e) | 2.09 | (e) | 0.08 | (e) | 6 | |||||||||||||||||||||||||||||||||||||||
Year ended 03/31/10 | 19.51 | (0.15 | ) | 10.80 | 10.65 | (0.10 | ) | — | (0.10 | ) | 30.06 | 54.66 | 9,399 | 2.14 | 2.14 | (0.59 | ) | 55 | ||||||||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 38.68 | 0.13 | (16.73 | ) | (16.60 | ) | — | (2.57 | ) | (2.57 | ) | 19.51 | (43.08 | ) | 9,454 | 2.11 | 2.11 | 0.41 | 17 | |||||||||||||||||||||||||||||||||||||
Year ended 03/31/08 | 47.95 | (0.13 | ) | (5.55 | ) | (5.68 | ) | (0.08 | ) | (3.51 | ) | (3.59 | ) | 38.68 | (12.54 | ) | 27,495 | 1.93 | 1.93 | (0.27 | ) | 14 | ||||||||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | 34.00 | (0.17 | ) | (1.79 | ) | (1.96 | ) | — | — | — | 32.04 | (5.76 | ) | 10,663 | 2.10 | (d) | 2.10 | (d) | (1.07 | )(d) | 33 | |||||||||||||||||||||||||||||||||||
Year ended 04/30/11 | 30.29 | (0.24 | ) | 3.95 | 3.71 | — | — | — | 34.00 | 12.25 | 12,881 | 2.08 | 2.08 | (0.78 | ) | 53 | ||||||||||||||||||||||||||||||||||||||||
One month ended 04/30/10 | 29.03 | 0.00 | 1.26 | 1.26 | — | — | — | 30.29 | 4.34 | 14,536 | 2.09 | (e) | 2.09 | (e) | 0.08 | (e) | 6 | |||||||||||||||||||||||||||||||||||||||
Year ended 03/31/10 | 18.84 | (0.14 | ) | 10.43 | 10.29 | (0.10 | ) | — | (0.10 | ) | 29.03 | 54.69 | 13,955 | 2.14 | 2.14 | (0.59 | ) | 55 | ||||||||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 37.51 | 0.12 | (16.22 | ) | (16.10 | ) | — | (2.57 | ) | (2.57 | ) | 18.84 | (43.09 | ) | 11,232 | 2.11 | 2.11 | 0.41 | 17 | |||||||||||||||||||||||||||||||||||||
Year ended 03/31/08 | 46.62 | (0.12 | ) | (5.40 | ) | (5.52 | ) | (0.08 | ) | (3.51 | ) | (3.59 | ) | 37.51 | (12.56 | ) | 33,073 | 1.93 | 1.93 | (0.27 | ) | 14 | ||||||||||||||||||||||||||||||||||
Class R | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | 36.59 | (0.10 | ) | (1.92 | ) | (2.02 | ) | — | — | — | 34.57 | (5.52 | ) | 1,096 | 1.60 | (d) | 1.60 | (d) | (0.57 | )(d) | 33 | |||||||||||||||||||||||||||||||||||
Year ended 04/30/11 | 32.44 | (0.09 | ) | 4.24 | 4.15 | — | — | — | 36.59 | 12.79 | 1,403 | 1.58 | 1.58 | (0.28 | ) | 53 | ||||||||||||||||||||||||||||||||||||||||
One month ended 04/30/10 | 31.08 | 0.02 | 1.34 | 1.36 | — | — | — | 32.44 | 4.38 | 1,208 | 1.59 | (e) | 1.59 | (e) | 0.58 | (e) | 6 | |||||||||||||||||||||||||||||||||||||||
Year ended 03/31/10 | 20.22 | (0.02 | ) | 11.21 | 11.19 | (0.33 | ) | — | (0.33 | ) | 31.08 | 55.50 | 1,154 | 1.64 | 1.64 | (0.09 | ) | 55 | ||||||||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 39.75 | 0.27 | (17.23 | ) | (16.96 | ) | — | (2.57 | ) | (2.57 | ) | 20.22 | (42.82 | ) | 599 | 1.61 | 1.61 | 0.91 | 17 | |||||||||||||||||||||||||||||||||||||
Year ended 03/31/08 | 49.14 | 0.10 | (5.71 | ) | (5.61 | ) | (0.27 | ) | (3.51 | ) | (3.78 | ) | 39.75 | (12.12 | ) | 903 | 1.43 | 1.43 | 0.23 | 14 | ||||||||||||||||||||||||||||||||||||
Class Y | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | 36.80 | (0.01 | ) | (1.93 | ) | (1.94 | ) | — | — | — | 34.86 | (5.27 | ) | 4,282 | 1.10 | (d) | 1.10 | (d) | (0.07 | )(d) | 33 | |||||||||||||||||||||||||||||||||||
Year ended 04/30/11 | 32.57 | 0.07 | 4.28 | 4.35 | (0.12 | ) | — | (0.12 | ) | 36.80 | 13.37 | 2,145 | 1.08 | 1.08 | 0.22 | 53 | ||||||||||||||||||||||||||||||||||||||||
One month ended 04/30/10 | 31.19 | 0.03 | 1.35 | 1.38 | — | — | — | 32.57 | 4.43 | 3,120 | 1.09 | (e) | 1.09 | (e) | 1.08 | (e) | 6 | |||||||||||||||||||||||||||||||||||||||
Year ended 03/31/10 | 20.31 | 0.11 | 11.25 | 11.36 | (0.48 | ) | — | (0.48 | ) | 31.19 | 56.19 | 2,482 | 1.14 | 1.14 | 0.41 | 55 | ||||||||||||||||||||||||||||||||||||||||
Year ended 03/31/09(f) | 30.39 | 0.14 | (7.65 | ) | (7.51 | ) | — | (2.57 | ) | (2.57 | ) | 20.31 | (24.90 | ) | 576 | 1.27 | (g) | 1.28 | (g) | 1.25 | (g) | 17 | ||||||||||||||||||||||||||||||||||
Investor Class | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | 36.69 | (0.06 | ) | (1.92 | ) | (1.98 | ) | — | — | — | 34.71 | (5.40 | ) | 263,255 | 1.35 | (d) | 1.35 | (d) | (0.32 | )(d) | 33 | |||||||||||||||||||||||||||||||||||
Year ended 04/30/11 | 32.49 | (0.01 | ) | 4.25 | 4.24 | (0.04 | ) | — | (0.04 | ) | 36.69 | 13.07 | 300,160 | 1.33 | 1.33 | (0.03 | ) | 53 | ||||||||||||||||||||||||||||||||||||||
One month ended 04/30/10 | 31.11 | 0.02 | 1.36 | 1.38 | — | — | — | 32.49 | 4.44 | 310,119 | 1.34 | (e) | 1.34 | (e) | 0.83 | (e) | 6 | |||||||||||||||||||||||||||||||||||||||
Year ended 03/31/10 | 20.28 | 0.04 | 11.23 | 11.27 | (0.44 | ) | — | (0.44 | ) | 31.11 | 55.79 | 297,887 | 1.39 | 1.39 | 0.16 | 55 | ||||||||||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 39.74 | 0.35 | (17.24 | ) | (16.89 | ) | — | (2.57 | ) | (2.57 | ) | 20.28 | (42.65 | ) | 217,365 | 1.36 | 1.36 | 1.16 | 17 | |||||||||||||||||||||||||||||||||||||
Year ended 03/31/08 | 49.10 | 0.23 | (5.71 | ) | (5.48 | ) | (0.37 | ) | (3.51 | ) | (3.88 | ) | 39.74 | (11.89 | ) | 482,760 | 1.18 | 1.18 | 0.48 | 14 | ||||||||||||||||||||||||||||||||||||
(a) | Calculated using average shares outstanding. | |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges and is not annualized for periods less than one year, if applicable. | |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. | |
(d) | Ratios are annualized and based on average daily net assets (000’s omitted) of $52,539, $5,592, $11,481, $1,196, $3,472 and $274,208 for Class A, Class B, Class C, Class R, Class Y and Investor Class shares, respectively. | |
(e) | Annualized. | |
(f) | Commencement date of October 3, 2008. |
16 Invesco Leisure Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments or contingent deferred sales charges on redemptions, and redemption fees, if any; and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period May 1, 2011 through October 31, 2011.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the hypothetical information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
HYPOTHETICAL | ||||||||||||||||||||||||||||||
ACTUAL | (5% annual return before expenses) | |||||||||||||||||||||||||||||
Beginning | Ending | Expenses | Ending | Expenses | Annualized | |||||||||||||||||||||||||
Account Value | Account Value | Paid During | Account Value | Paid During | Expense | |||||||||||||||||||||||||
Class | (05/01/11) | (10/31/11)1 | Period2 | (10/31/11) | Period2 | Ratio | ||||||||||||||||||||||||
A | $ | 1,000.00 | $ | 945.90 | $ | 6.60 | $ | 1,018.35 | $ | 6.85 | 1.35 | % | ||||||||||||||||||
B | 1,000.00 | 942.30 | 10.25 | 1,014.58 | 10.63 | 2.10 | ||||||||||||||||||||||||
C | 1,000.00 | 942.40 | 10.25 | 1,014.58 | 10.63 | 2.10 | ||||||||||||||||||||||||
R | 1,000.00 | 944.50 | 7.82 | 1,017.09 | 8.11 | 1.60 | ||||||||||||||||||||||||
Y | 1,000.00 | 947.30 | 5.38 | 1,019.61 | 5.58 | 1.10 | ||||||||||||||||||||||||
Investor | 1,000.00 | 945.80 | 6.60 | 1,018.35 | 6.85 | 1.35 | ||||||||||||||||||||||||
1 | The actual ending account value is based on the actual total return of the Fund for the period May 1, 2011 through October 31, 2011, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund’s expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half year |
17 Invesco Leisure 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 Leisure Fund (the Fund) investment advisory agreement with Invesco Advisers, Inc. (Invesco Advisers) and the Master Intergroup Sub-Advisory Contract for Mutual Funds (the sub-advisory contracts) with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers). During contract renewal meetings held on June 14-15, 2011, the Board as a whole, and the disinterested or “independent” Trustees, who comprise 80% of the Board, voting separately, approved the continuance of the Fund’s investment advisory agreement and the sub-advisory contracts for another year, effective July 1, 2011. In doing so, the Board considered the process that it follows in reviewing and approving the Fund’s investment advisory agreement and sub-advisory contracts and the information that it is provided. The Board determined that the Fund’s investment advisory agreement and the sub-advisory contracts are in the best interests of the Fund and its shareholders and the compensation to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is responsible for overseeing the management of a number of the series portfolios of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies and limitations and investment risks of these funds. The Sub-Committees meet regularly and at designated contract renewal meetings each year to conduct a review of the performance, fees, expenses and other matters related to their assigned Invesco Funds. Each Sub-Committee recommends to the Investments Committee, which in turn recommends to the full Board, whether to approve the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Trustees receive comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and an independent company, Lipper, Inc. (Lipper). The Trustees also receive an independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. The independent Trustees are assisted in their annual evaluation of the Fund’s investment advisory agreement by the Senior Officer and by independent legal counsel. The independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in private sessions with the Senior Officer and counsel.
In evaluating the fairness and reasonableness of the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Trustees also considered information provided in connection with fund acquisitions approved by the Trustees to rationalize the Invesco Funds product range following the acquisition of the retail mutual fund business of Morgan Stanley (the Morgan Stanley Transaction). The Trustees recognized that the advisory fees for the Invesco Funds include advisory fees that are the result of years of review and negotiation between the Trustees and Invesco Advisers as well as advisory fees inherited from Morgan Stanley and Van Kampen funds acquired in the Morgan Stanley Transaction. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these same arrangements throughout the year and in prior years. One Trustee may have weighed a particular piece of information differently than another Trustee.
The discussion below serves as the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 15, 2011, and may not reflect consideration of factors that became known to the Board after that date, including, for example, changes to the Fund’s performance, advisory fees, expense limitations and/or fee waivers.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers, with whom the Board met during the year. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s consideration of Invesco Advisers’ performance and investment process oversight, independent credit analysis and investment risk management.
In determining whether to continue the Fund’s investment advisory agreement, the Board considered the prior relationship between Invesco Advisers and the Fund, as well as the Board’s knowledge of Invesco Advisers’ operations, and concluded that it is beneficial to maintain the current relationship, in part, because of such knowledge. The Board also considered services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution and legal and compliance. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and the advisory services are provided in accordance with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services provided by the Affiliated Sub-Advisers under the sub-advisory contracts and the credentials and experience of the officers and employees of the Affiliated Sub-Advisers who provide these services. The Board noted that the Affiliated Sub-Advisers have offices and personnel that are located in financial centers around the world. As a result, the Affiliated Sub-Advisers can provide research and investment analysis on the markets and economies of various countries in which the Fund invests and make recommendations on securities of companies located in such countries. The Board concluded that the sub-advisory contracts benefit the Fund and its shareholders by permitting Invesco Advisers to use the resources and talents of the Affiliated Sub-Advisers in managing the Fund. The Board concluded that the nature, extent and quality of the services provided by the Affiliated Sub-Advisers are appropriate and satisfactory and in accordance with the terms of the Fund’s sub-advisory contracts.
B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
18 Invesco Leisure 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 Consumer Services Funds Index. The Board noted that performance of Investor Class shares of the Funds was in the fifth quintile of the performance universe for the one year period, the fourth quintile for the three year period and the third quintile for the five year period (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board noted that performance of Investor Class shares of the Fund was below the performance of the Index for the one and three year periods, and that Index performance data was not available beyond the three year period. Invesco Advisers advised the Board that a new lead portfolio manager was named in May and that performance was impacted by the conservative, quality bias of the Fund which caused underperformance during the low-quality rally in 2009. 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 Investor Class shares of the Fund was at the median contractual advisory fee rate of funds in the expense group. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using audited financial data from the most recent annual report of each fund in the expense group that was publicly available as of the end of the past calendar year and including only one fund per investment adviser. The Board noted that comparative data is as of varying dates, which may affect the comparability of data during times of market volatility.
The Board also compared the Fund’s effective fee rate (the advisory fee after any advisory fee waivers and before any expense limitations/waivers) to the advisory fee rates of other mutual funds advised by Invesco Advisers and its affiliates with investment strategies comparable to those of the Fund. The Board noted that the Fund’s effective fee rate was the below the effective fee rate of the other mutual fund with investment strategies comparable to the Fund.
Other than the mutual fund described above, the Board noted that Invesco Advisers and the Affiliated Sub-Advisers do not advise other client accounts with investment strategies comparable to those of the Fund.
The Board noted that Invesco Advisers has contractually agreed to waive fees and/or limit expenses of the Fund through at least August 31, 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.
19 Invesco Leisure Fund
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Invesco mailing information
Send general correspondence to Invesco Investment Services, Inc., P.O. Box 219078, Kansas City, MO 64121-9078.
Invesco privacy policy
You share personal and financial information with us that is necessary for your transactions and your account records. We take very seriously the obligation to keep that information confidential and private.
Invesco collects nonpublic personal information about you from account applications or other forms you complete and from your transactions with us or our affiliates. We do not disclose information about you or our former customers to service providers or other third parties except to the extent necessary to service your account and in other limited circumstances as permitted by law. For example, we use this information to facilitate the delivery of transaction confirmations, financial reports, prospectuses and tax forms.
Even within Invesco, only people involved in the servicing of your accounts and compliance monitoring have access to your information. To ensure the highest level of confidentiality and security, Invesco maintains physical, electronic and procedural safeguards that meet or exceed federal standards. Special measures, such as data encryption and authentication, apply to your communications with us on our website. More detail is available to you at invesco.com/privacy.
Important notice regarding delivery of security holder documents
To reduce Fund expenses, only one copy of most shareholder documents may be mailed to shareholders with multiple accounts at the same address (Householding). Mailing of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact Invesco Investment Services, Inc. at 800 959 4246 or contact your financial institution. We will begin sending you individual copies for each account within 30 days after receiving your request.
Fund holdings and proxy voting information
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is available at invesco.com/completeqtrholdings. Shareholders can also look up the Fund’s Forms N-Q on the SEC website at sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-03826 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.
![(INVESCO LOGO)](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8578308.gif)
Information regarding how the Fund voted proxies related to its portfolio securities during the 12 months ended June 30, 2011, is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov.
Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the U.S. distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
I-LEI-SAR-1 | Invesco Distributors, Inc. |
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Invesco Technology Fund
Semiannual Report to Shareholders § October 31, 2011
Nasdaq:
A: ITYAX § B: ITYBX § C: ITHCX § Y: ITYYX § Investor: FTCHX § Institutional: FTPIX
Semiannual Report to Shareholders § October 31, 2011
Nasdaq:
A: ITYAX § B: ITYBX § C: ITHCX § Y: ITYYX § Investor: FTCHX § Institutional: FTPIX
![(logo)](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8577502.gif)
2 | Fund Performance | |
4 | Letters to Shareholders | |
5 | Schedule of Investments | |
7 | Financial Statements | |
9 | Notes to Financial Statements | |
16 | Financial Highlights | |
17 | Fund Expenses | |
18 | 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, 4/30/11 to 10/31/11, at net asset value (NAV). Performance shown does not include applicable contingent deferred sales charges (CDSC) or front-end sales charges, which would have reduced performance.
Class A Shares | -6.94 | % | ||
Class B Shares | -7.20 | |||
Class C Shares | -7.24 | |||
Class Y Shares | -6.80 | |||
Investor Class Shares | -6.91 | |||
Institutional Class Shares | -6.60 | |||
S&P 500 Index▼ (Broad Market Index) | -7.12 | |||
BofA Merrill Lynch 100 Technology Index▼ (Style-Specific Index) | -13.68 | |||
Lipper Science & Technology Funds Index▼ (Peer Group Index) | -9.93 | |||
Source(s): ▼Lipper Inc.
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 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.
2 Invesco Technology Fund
Average Annual Total Returns
As of 10/31/11, including maximum applicable sales charges
Class A Shares | ||||||||
Inception (3/28/02) | 0.38 | % | ||||||
5 | Years | 2.38 | ||||||
1 | Year | 5.60 | ||||||
Class B Shares | ||||||||
Inception (3/28/02) | 0.33 | % | ||||||
5 | Years | 2.43 | ||||||
1 | Year | 6.01 | ||||||
Class C Shares | ||||||||
Inception (2/14/00) | -9.02 | % | ||||||
10 | Years | 1.00 | ||||||
5 | Years | 2.79 | ||||||
1 | Year | 9.94 | ||||||
Class Y Shares | ||||||||
10 | Years | 1.81 | % | |||||
5 | Years | 3.70 | ||||||
1 | Year | 12.04 | ||||||
Investor Class Shares | ||||||||
Inception (1/19/84) | 9.65 | % | ||||||
10 | Years | 1.75 | ||||||
5 | Years | 3.59 | ||||||
1 | Year | 11.85 | ||||||
Institutional Class Shares | ||||||||
Inception (12/21/98) | 1.32 | % | ||||||
10 | Years | 2.51 | ||||||
5 | Years | 4.27 | ||||||
1 | Year | 12.45 |
Class Y shares incepted on October 3, 2008. Performance shown prior to that date is that of Investor Class shares and includes the 12b-1 fees applicable to Investor Class shares. Investor Class share performance reflects any applicable fee waivers or expense reimbursements.
The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Please visit invesco.com/performance for the most recent month-end performance. Performance figures reflect reinvested distributions, changes in net asset value and the effect of the maximum sales charge unless otherwise stated. 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.
Average Annual Total Returns
As of 9/30/11, the most recent calendar quarter-end, including maximum applicable sales charges
Class A Shares | ||||||||
Inception (3/28/02) | -0.87 | % | ||||||
5 | Years | 0.32 | ||||||
1 | Year | -0.47 | ||||||
Class B Shares | ||||||||
Inception (3/28/02) | -0.91 | % | ||||||
5 | Years | 0.33 | ||||||
1 | Year | -0.37 | ||||||
Class C Shares | ||||||||
Inception (2/14/00) | -10.01 | % | ||||||
10 | Years | 1.40 | ||||||
5 | Years | 0.71 | ||||||
1 | Year | 3.60 | ||||||
Class Y Shares | ||||||||
10 | Years | 2.22 | % | |||||
5 | Years | 1.61 | % | |||||
1 | Year | 5.61 | % | |||||
Investor Class Shares | ||||||||
Inception (1/19/84) | 9.21 | % | ||||||
10 | Years | 2.16 | ||||||
5 | Years | 1.50 | ||||||
1 | Year | 5.41 | ||||||
Institutional Class Shares | ||||||||
Inception (12/21/98) | 0.38 | % | ||||||
10 | Years | 2.93 | ||||||
5 | Years | 2.16 | ||||||
1 | Year | 6.01 | ||||||
The total annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Class A, Class B, Class C, Class Y, Investor Class and Institutional Class shares was 1.55%, 2.30%, 2.30%, 1.30%, 1.46% and 0.89%, respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.
Class A share performance reflects the maximum 5.50% sales charge, and Class B and Class C share performance reflects the applicable contingent deferred sales charge (CDSC) for the period involved. The CDSC on Class B shares declines from 5% beginning at the time of purchase to 0% at the beginning of the seventh year. The CDSC on Class C shares is 1% for the first year after purchase. Class Y, Investor Class and Institutional Class shares do not have a front-end sales
charge or a CDSC; therefore, performance is at net asset value.
The performance of the Fund’s share classes will differ primarily due to different sales charge structures and class expenses.
Had the adviser not waived fees and/ or expenses in the past, performance would have been lower.
3 Invesco Technology Fund
Letters to Shareholders
![(PHOTO OF BRUCE CROCKETT)](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8577503.jpg)
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 Bruce Crockett balance your investment approach, providing some protection against a decline in the markets while allowing you to participate in rising markets. Invesco calls this type of approach “intentional investing.” It means thinking carefully, planning thoughtfully and acting deliberately.
While no investment can guarantee favorable returns, your Board remains committed to managing costs and enhancing the performance of Invesco’s funds as part of our Investor First orientation. We continue to oversee the funds with the same strong sense of responsibility for your money and your continued trust that we’ve always maintained.
Thanks to the approval of our fund shareholders, Invesco has made great progress in realigning our U.S. mutual fund product line following our acquisition of Morgan Stanley’s retail asset management business, including Van Kampen Investments. When completed, the realignment will reduce overlap in the product lineup, enhance efficiency across our product line and build a solid foundation for further growth to meet client and shareholder needs. I would like to thank those of you who voted your proxy, and I hope our shareholders haven’t been too inconvenienced by the process.
As always, please contact me at bruce@brucecrockett.com with any questions or concerns you may have. On behalf of your Board, we look forward to continuing to represent your interests and serving your needs.
Sincerely,
![-s- Bruce L. Crockett](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8577504.gif)
Bruce L. Crockett
Independent Chair, Invesco Funds Board of Trustees
Independent Chair, Invesco Funds Board of Trustees
![(PHOTO OF PHILIP TAYLOR)](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8577508.jpg)
Philip Taylor
Dear Shareholders:
Enclosed is important information about your Fund and its performance. I encourage you to read this report to learn more about your Fund’s short- and long-term performance.
The start of a new year is always a good time to catch up with your financial adviser. Looking ahead to the new year and evaluating your individual situation, your financial adviser can provide valuable insight into whether your investments are still appropriate for your individual needs, goals and risk tolerance. This may provide reassurance in times of economic uncertainty and market volatility such as we saw in 2011 — and are likely to see again in 2012.
On our website, invesco.com/us, we provide timely market updates and commentary from many of our fund managers and other investment professionals. Also on our website, you 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.
Across our broad array of investment products, 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 — meaning 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,
![-s- Philip Taylor](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8577505.gif)
Philip Taylor
Senior Managing Director, Invesco Ltd.
Senior Managing Director, Invesco Ltd.
4 Invesco Technology Fund
Schedule of Investments(a)
October 31, 2011
(Unaudited)
Shares | Value | |||||||
Common Stocks & Other Equity Interests–95.49% | ||||||||
Application Software–8.34% | ||||||||
Autodesk, Inc.(b) | 294,327 | $ | 10,183,714 | |||||
Citrix Systems, Inc.(b) | 282,439 | 20,570,032 | ||||||
NICE Systems Ltd.–ADR (Israel)(b) | 246,671 | 8,820,955 | ||||||
Nuance Communications, Inc.(b) | 377,265 | 9,989,977 | ||||||
Salesforce.com, Inc.(b) | 44,597 | 5,938,983 | ||||||
TIBCO Software Inc.(b) | 180,052 | 5,201,702 | ||||||
60,705,363 | ||||||||
Communications Equipment–8.21% | ||||||||
ADTRAN, Inc. | 116,634 | 3,918,902 | ||||||
Ciena Corp.(b) | 301,339 | 3,971,648 | ||||||
F5 Networks, Inc.(b) | 58,667 | 6,098,435 | ||||||
Finisar Corp.(b) | 169,802 | 3,479,243 | ||||||
JDS Uniphase Corp.(b) | 385,773 | 4,629,276 | ||||||
Polycom, Inc.(b) | 247,908 | 4,097,919 | ||||||
QUALCOMM, Inc. | 501,831 | 25,894,480 | ||||||
Sonus Networks, Inc.(b) | 1,041,358 | 2,759,599 | ||||||
Sycamore Networks, Inc. | 131,065 | 2,519,069 | ||||||
Ubiquiti Networks Inc.(b) | 115,211 | 2,418,279 | ||||||
59,786,850 | ||||||||
Computer Hardware–9.32% | ||||||||
Apple Inc.(b) | 167,651 | 67,861,772 | ||||||
Computer Storage & Peripherals–5.85% | ||||||||
EMC Corp.(b) | 939,700 | 23,032,047 | ||||||
NetApp, Inc.(b) | 186,667 | 7,645,880 | ||||||
SanDisk Corp.(b) | 133,626 | 6,770,830 | ||||||
Synaptics Inc.(b) | 153,434 | 5,184,535 | ||||||
42,633,292 | ||||||||
Data Processing & Outsourced Services–8.59% | ||||||||
Alliance Data Systems Corp.(b) | 83,865 | 8,591,131 | ||||||
Genpact Ltd. (Bermuda)(b) | 460,148 | 7,431,390 | ||||||
MasterCard, Inc.–Class A | 43,074 | 14,957,016 | ||||||
VeriFone Systems, Inc.(b) | 161,996 | 6,837,851 | ||||||
Visa Inc.–Class A | 155,130 | 14,467,424 | ||||||
Western Union Co. (The) | 271,188 | 4,737,654 | ||||||
Wright Express Corp.(b) | 117,327 | 5,500,290 | ||||||
62,522,756 | ||||||||
Electronic Manufacturing Services–1.75% | ||||||||
Jabil Circuit, Inc. | 442,182 | 9,091,262 | ||||||
TE Connectivity Ltd. | 103,221 | 3,669,506 | ||||||
12,760,768 | ||||||||
Fertilizers & Agricultural Chemicals–0.91% | ||||||||
Monsanto Co. | 91,446 | 6,652,697 | ||||||
Internet Retail–2.21% | ||||||||
Amazon.com, Inc.(b) | 75,298 | 16,076,876 | ||||||
Internet Software & Services–8.28% | ||||||||
Baidu, Inc.–ADR (China)(b) | 27,837 | 3,902,191 | ||||||
eBay Inc.(b) | 225,737 | 7,185,209 | ||||||
Google Inc.–Class A(b) | 50,090 | 29,685,337 | ||||||
Responsys, Inc.(b) | 189,764 | 2,072,223 | ||||||
ValueClick, Inc.(b) | 451,491 | 7,946,241 | ||||||
Velti PLC (Ireland)(b) | 423,530 | 3,566,123 | ||||||
VeriSign, Inc. | 185,792 | 5,962,065 | ||||||
60,319,389 | ||||||||
IT Consulting & Other Services–6.68% | ||||||||
Accenture PLC–Class A (Ireland) | 170,791 | 10,291,866 | ||||||
Cognizant Technology Solutions Corp.–Class A(b) | 361,131 | 26,272,280 | ||||||
International Business Machines Corp. | 65,487 | 12,090,865 | ||||||
48,655,011 | ||||||||
Life Sciences Tools & Services–1.00% | ||||||||
Agilent Technologies, Inc.(b) | 196,447 | 7,282,290 | ||||||
Other Diversified Financial Services–0.54% | ||||||||
BlueStream Ventures L.P. (Canada) (Acquired 08/03/00-06/13/08; Cost $25,801,962)(c)(d) | — | 3,930,124 | ||||||
Research & Consulting Services–0.54% | ||||||||
Acacia Research(b) | 99,504 | 3,964,239 | ||||||
Semiconductor Equipment–2.80% | ||||||||
ASML Holding N.V.–New York Shares (Netherlands) | 82,172 | 3,445,472 | ||||||
Cymer, Inc.(b) | 126,387 | 5,491,515 | ||||||
Novellus Systems, Inc.(b) | 222,720 | 7,694,976 | ||||||
Teradyne, Inc.(b) | 262,080 | 3,752,986 | ||||||
20,384,949 | ||||||||
Semiconductors–16.53% | ||||||||
ARM Holdings PLC–ADR (United Kingdom) | 53,751 | 1,509,865 | ||||||
Atmel Corp.(b) | 953,883 | 10,073,004 | ||||||
Avago Technologies Ltd. (Singapore) | 187,575 | 6,334,408 | ||||||
Broadcom Corp.–Class A | 401,126 | 14,476,637 | ||||||
Cypress Semiconductor Corp. | 411,835 | 7,870,167 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
5 Invesco Technology Fund
Shares | Value | |||||||
Semiconductors–(continued) | ||||||||
Diodes Inc.(b) | 82,954 | $ | 1,855,681 | |||||
Intel Corp. | 676,742 | 16,607,249 | ||||||
Lattice Semiconductor Corp.(b) | 1,205,070 | 7,628,093 | ||||||
Marvell Technology Group Ltd.(b) | 550,315 | 7,698,907 | ||||||
Micron Technology, Inc.(b) | 794,340 | 4,440,361 | ||||||
Microsemi Corp.(b) | 905,944 | 16,723,726 | ||||||
ON Semiconductor Corp.(b) | 435,517 | 3,296,864 | ||||||
Semtech Corp.(b) | 455,435 | 11,121,723 | ||||||
Skyworks Solutions, Inc.(b) | 262,032 | 5,190,854 | ||||||
Volterra Semiconductor Corp.(b) | 105,556 | 2,501,677 | ||||||
Xilinx, Inc. | 91,592 | 3,064,668 | ||||||
120,393,884 | ||||||||
Systems Software–13.94% | ||||||||
Ariba Inc.(b) | 219,261 | 6,946,189 | ||||||
Check Point Software Technologies Ltd. (Israel)(b) | 335,067 | 19,309,911 | ||||||
CommVault Systems, Inc.(b) | 84,342 | 3,591,282 | ||||||
Microsoft Corp. | 746,469 | 19,878,469 | ||||||
Oracle Corp. | 716,594 | 23,482,785 | ||||||
Red Hat, Inc.(b) | 197,090 | 9,785,519 | ||||||
Rovi Corp.(b) | 264,716 | 13,114,031 | ||||||
Symantec Corp.(b) | 316,345 | 5,381,028 | ||||||
101,489,214 | ||||||||
Total Common Stocks & Other Equity Interests (Cost $541,022,703) | 695,419,474 | |||||||
Money Market Funds–4.18% | ||||||||
Liquid Assets Portfolio–Institutional Class(e) | 15,198,638 | 15,198,638 | ||||||
Premier Portfolio–Institutional Class(e) | 15,198,638 | 15,198,638 | ||||||
Total Money Market Funds (Cost $30,397,276) | 30,397,276 | |||||||
TOTAL INVESTMENTS–99.67% (Cost $571,419,979) | 725,816,750 | |||||||
OTHER ASSETS LESS LIABILITIES–0.33% | 2,430,556 | |||||||
NET ASSETS–100.00% | $ | 728,247,306 | ||||||
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 Fund has a 10.29% ownership of BlueStream Ventures L.P. (“BlueStream”) and has a remaining commitment of $829,416 to purchase additional interests in BlueStream, which is subject to the terms of the partnership agreement. BlueStream may be considered an affiliated company. Security is considered venture capital. The value of this security as of October 31, 2011 represented 0.54% of the Fund’s Net Assets. See Note 4. | |
(d) | Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended. The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The value of this security at October 31, 2011 represented 0.54% of the Fund’s Net Assets. | |
(e) | The money market fund and the Fund are affiliated by having the same investment adviser. |
By sector, based on Net Assets
as of October 31, 2011
Information Technology | 90.3 | % | ||
Consumer Discretionary | 2.2 | |||
Health Care | 1.0 | |||
Materials | 0.9 | |||
Industrials | 0.6 | |||
Financials | 0.5 | |||
Money Market Funds Plus Other Assets Less Liabilities | 4.5 | |||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
6 Invesco Technology Fund
Statement of Assets and Liabilities
October 31, 2011
(Unaudited)
Assets: | ||||
Investments, at value (Cost $515,220,741) | $ | 691,489,350 | ||
Investments in affiliates, at value (Cost $56,199,238) | 34,327,400 | |||
Total investments, at value (Cost $571,419,979) | 725,816,750 | |||
Foreign currencies, at value (Cost $18,585) | 19,470 | |||
Receivable for: | ||||
Investments sold | 6,776,489 | |||
Fund shares sold | 748,947 | |||
Dividends | 188,300 | |||
Investment for trustee deferred compensation and retirement plans | 155,232 | |||
Other assets | 41,274 | |||
Total assets | 733,746,462 | |||
Liabilities: | ||||
Payable for: | ||||
Investments purchased | 3,240,704 | |||
Fund shares reacquired | 1,015,161 | |||
Accrued fees to affiliates | 807,734 | |||
Accrued other operating expenses | 170,469 | |||
Trustee deferred compensation and retirement plans | 265,088 | |||
Total liabilities | 5,499,156 | |||
Net assets applicable to shares outstanding | $ | 728,247,306 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 550,654,063 | ||
Undistributed net investment income | 11,886,162 | |||
Undistributed net realized gain | 9,667,710 | |||
Unrealized appreciation | 156,039,371 | |||
$ | 728,247,306 | |||
Net Assets: | ||||
Class A | $ | 286,186,484 | ||
Class B | $ | 26,296,509 | ||
Class C | $ | 26,728,307 | ||
Class Y | $ | 3,182,945 | ||
Investor Class | $ | 385,121,764 | ||
Institutional Class | $ | 731,297 | ||
Shares outstanding, $0.01 par value per share, with an unlimited number of shares authorized: | ||||
Class A | 8,577,166 | |||
Class B | 846,892 | |||
Class C | 884,577 | |||
Class Y | 95,564 | |||
Investor Class | 11,628,157 | |||
Institutional Class | 20,197 | |||
Class A: | ||||
Net asset value per share | $ | 33.37 | ||
Maximum offering price per share (Net asset value of $33.37 divided by 94.50%) | $ | 35.31 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 31.05 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 30.22 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 33.31 | ||
Investor Class: | ||||
Net asset value and offering price per share | $ | 33.12 | ||
Institutional Class: | ||||
Net asset value and offering price per share | $ | 36.21 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
7 Invesco Technology Fund
Statement of Operations
For the six months ended October 31, 2011
(Unaudited)
Investment income: | ||||
Dividends (net of foreign withholding taxes of $1,277) | $ | 1,986,694 | ||
Dividends from affiliates (includes securities lending income of $7,344) | 22,078 | |||
Total investment income | 2,008,772 | |||
Expenses: | ||||
Advisory fees | 2,522,888 | |||
Administrative services fees | 108,565 | |||
Custodian fees | 15,061 | |||
Distribution fees: | ||||
Class A | 346,475 | |||
Class B | 134,927 | |||
Class C | 134,003 | |||
Investor Class | 439,903 | |||
Transfer agent fees — A, B, C, Y and Investor | 1,994,428 | |||
Transfer agent fees — Institutional | 313 | |||
Trustees’ and officers’ fees and benefits | 18,281 | |||
Other | 223,242 | |||
Total expenses | 5,938,086 | |||
Less: Fees waived, expenses reimbursed and expense offset arrangement(s) | (36,884 | ) | ||
Net expenses | 5,901,202 | |||
Net investment income (loss) | (3,892,430 | ) | ||
Realized and unrealized gain (loss) from: | ||||
Net realized gain from: | ||||
Investment securities | 45,941,767 | |||
Foreign currencies | 6,546 | |||
45,948,313 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | (99,833,881 | ) | ||
Foreign currencies | (1,216 | ) | ||
(99,835,097 | ) | |||
Net realized and unrealized gain (loss) | (53,886,784 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | (57,779,214 | ) | |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
8 Invesco Technology Fund
Statement of Changes in Net Assets
For the six months ended October 31, 2011 and the year ended April 30, 2011
(Unaudited)
October 31, | April 30, | |||||||
2011 | 2011 | |||||||
Operations: | ||||||||
Net investment income (loss) | $ | (3,892,430 | ) | $ | (4,420,746 | ) | ||
Net realized gain | 45,948,313 | 94,242,478 | ||||||
Change in net unrealized appreciation (depreciation) | (99,835,097 | ) | 55,177,982 | |||||
Net increase (decrease) in net assets resulting from operations | (57,779,214 | ) | 144,999,714 | |||||
Share transactions–net: | ||||||||
Class A | 79,602,365 | (8,685,846 | ) | |||||
Class B | 12,443,897 | (6,212,701 | ) | |||||
Class C | 7,231,404 | 1,047,773 | ||||||
Class Y | (239,391 | ) | 48,266 | |||||
Investor Class | (18,833,598 | ) | (52,636,171 | ) | ||||
Institutional Class | 124,153 | 526 | ||||||
Net increase (decrease) in net assets resulting from share transactions | 80,328,830 | (66,438,153 | ) | |||||
Net increase in net assets | 22,549,616 | 78,561,561 | ||||||
Net assets: | ||||||||
Beginning of period | 705,697,690 | 627,136,129 | ||||||
End of period (includes undistributed net investment income of $11,886,162 and $15,778,592, respectively) | $ | 728,247,306 | $ | 705,697,690 | ||||
Notes to Financial Statements
October 31, 2011
(Unaudited)
NOTE 1—Significant Accounting Policies
Invesco Technology 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 growth of capital.
The Fund currently consists of six different classes of shares: Class A, Class B, Class C, Class Y, Investor Class and Institutional Class. Investor Class shares of the Fund are offered only to certain grandfathered investors. Class A shares are sold with a front-end sales charge unless certain waiver criteria are met and under certain circumstances load waived shares may be subject to contingent deferred sales charges (“CDSC”). Class C shares are sold with a CDSC. Class Y, Investor Class and Institutional Class shares are sold at net asset value. Effective November 30, 2010, new or additional investments in Class B shares are no longer permitted. Existing shareholders of Class B shares may continue to reinvest dividends and capital gains distributions in Class B shares until they convert. Also, shareholders in Class B shares will be able to exchange those shares for Class B shares of other Invesco Funds offering such shares until they convert. Generally, Class B shares will automatically convert to Class A shares on or the about month-end which is at least eight years after the date of purchase. 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 |
9 Invesco Technology Fund
independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”). | ||
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded. | ||
Debt obligations (including convertible bonds) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Debt securities are subject to interest rate and credit risks. In addition, all debt securities involve some risk of default with respect to interest and/or principal payments. | ||
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trade is not the current value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economical upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards. | ||
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including Corporate Loans. | ||
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value. | ||
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments. | ||
B. | Securities Transactions and Investment Income — Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. Bond premiums and discounts are amortized and/or accreted for financial reporting purposes. | |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held. | ||
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund’s net asset value and, accordingly, they reduce the Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser. | ||
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class. | ||
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 |
10 Invesco Technology Fund
federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. | ||
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period. | ||
F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund are charged to the operations of such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses attributable to the Institutional Class are charged to such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses relating to all other classes are allocated among those classes based on relative net assets. All other expenses are allocated among the classes based on relative net assets. | |
G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. | |
H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. | |
I. | Other Risks — The Fund’s investments are concentrated in a comparatively narrow segment of the economy, 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. |
11 Invesco Technology Fund
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser based on the annual rate of the Fund’s average daily net assets as follows:
Average Net Assets | Rate | |||
First $350 million | 0 | .75% | ||
Next $350 million | 0 | .65% | ||
Next $1.3 billion | 0 | .55% | ||
Next $2 billion | 0 | .45% | ||
Next $2 billion | 0 | .40% | ||
Next $2 billion | 0 | .375% | ||
Over $8 billion | 0 | .35% | ||
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Sub-Adviser(s).
Effective May 23, 2011, the Adviser has contractually agreed, through at least June 30, 2012, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Class A, Class B, Class C, Class Y, Investor Class and Institutional Class shares to 1.76%, 2.51%, 2.51%, 1.51%, 1.76% and 1.51%, respectively, of average daily net assets. Prior to May 23, 2011, the Adviser had contractually agreed to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Class A, Class B, Class C, Class Y, Investor Class and Institutional Class shares to 2.00%, 2.75%, 2.75%, 1.75%, 2.00% and 1.75%, respectively, of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waivers 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.
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 October 31, 2011, the Adviser waived advisory fees of $26,606.
At the request of the Trustees of the Trust, Invesco Ltd. agreed to reimburse expenses incurred by the Fund in connection with market timing matters in the Invesco Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement are included in the Statement of Operations. For the six months ended October 31, 2011, Invesco Ltd. reimbursed expenses of the Fund in the amount of $6,237.
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 October 31, 2011, expenses incurred under the agreement are shown in the Statement of Operations as administrative services fees.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (“IIS”) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. IIS may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. All fees payable by IIS to intermediaries that provide omnibus account services or sub-accounting are charged back to the Fund, subject to certain limitations approved by the Trust’s Board of Trustees. For the six months ended October 31, 2011, expenses incurred under the agreement are shown in the Statement of Operations as transfer agent fees.
The Trust has entered into master distribution agreements with Invesco Distributors, Inc. (“IDI”) to serve as the distributor for the Class A, Class B, Class C, Class Y, Investor Class and Institutional Class shares of the Fund.
The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund’s Class A, Class B, Class C and Investor Class shares (collectively, the “Plans”). The Fund, pursuant to the Plans, pays IDI compensation at the annual rate of 0.25% of the Fund’s average daily net assets of Class A shares, 1.00% of the average daily net assets of Class B and Class C shares. The Fund, pursuant to the Investor Class Plan, reimburses IDI for its allocated share of expenses incurred pursuant to the Investor Class Plan for the period, up to a maximum annual rate of 0.25% of the average daily net assets of Investor Class shares. Of the Plan payments, up to 0.25% of the average daily net assets of each class of shares may be paid to furnish continuing personal shareholder services to customers who purchase and own shares of such classes. Any amounts not paid as a service fee under the Plans would constitute an asset-based sales charge. Rules of the Financial Industry Regulatory Authority (“FINRA”) impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. For the six months ended October 31, 2011, expenses incurred under the Plans are shown in the Statement of Operations as distribution fees.
12 Invesco Technology Fund
Front-end sales commissions and CDSC (collectively, the “sales charges”) are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the six months ended October 31, 2011, IDI advised the Fund that IDI retained $15,441 in front-end sales commissions from the sale of Class A shares and $68, $17,009 and $6,179 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of the Adviser, Invesco Ltd., IIS and/or IDI.
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3) generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
Level 1 — | Prices are determined using quoted prices in an active market for identical assets. | |
Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. | |
Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of October 31, 2011. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
During the six months ended October 31, 2011, there were no significant transfers between investment levels.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 721,886,626 | $ | — | $ | 3,930,124 | $ | 725,816,750 | ||||||||
NOTE 4—Investments in Other Affiliates
The Investment Company Act of 1940 defines affiliates as those issuances in which a fund holds 5% or more of the outstanding voting securities. The Fund has not owned enough of the outstanding voting securities of the issuer to have control (as defined in the Investment Company Act of 1940) of that issuer. The following is a summary of the investments in affiliates for the six months ended October 31, 2011.
Change in | ||||||||||||||||||||||||||||
Unrealized | ||||||||||||||||||||||||||||
Value | Purchases | Proceeds | Appreciation | Realized | Value | Dividend | ||||||||||||||||||||||
04/30/11 | at Cost | from Sales | (Depreciation) | Gain (Loss) | 10/31/11 | Income | ||||||||||||||||||||||
BlueStream Ventures L.P. | $ | 7,247,932 | $ | — | $ | — | $ | (3,317,808 | ) | $ | — | $ | 3,930,124 | $ | — | |||||||||||||
NOTE 5—Expense Offset Arrangement(s)
The expense offset arrangement is comprised of transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions. For the six months ended October 31, 2011, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $4,041.
NOTE 6—Trustees’ and Officers’ Fees and Benefits
“Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and “Trustees’ and Officers’ Fees and Benefits” also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. “Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
During the six months ended October 31, 2011, the Fund paid legal fees of $1,188 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.
13 Invesco Technology Fund
NOTE 7—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with The State Street Bank and Trust Company, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 8—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 April 30, 2011, which expires as follows:
Capital Loss | ||||
Expiration | Carryforward* | |||
April 30, 2017 | $ | 36,280,603 | ||
* | Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. |
NOTE 9—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the six months ended October 31, 2011 was $146,717,494 and $157,346,949, 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 | $ | 209,407,721 | ||
Aggregate unrealized (depreciation) of investment securities | (39,025,909 | ) | ||
Net unrealized appreciation of investment securities | $ | 170,381,812 | ||
Cost of investments for tax purposes is $555,434,938. |
14 Invesco Technology Fund
NOTE 10—Share Information
Summary of Share Activity | ||||||||||||||||
Six months ended | Year ended | |||||||||||||||
October 31, 2011(a) | April 30, 2011 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Class A | 597,629 | $ | 19,505,237 | 1,236,800 | $ | 38,764,605 | ||||||||||
Class B | 25,405 | 760,002 | 70,366 | 1,986,218 | ||||||||||||
Class C | 60,176 | 1,782,820 | 273,048 | 8,029,165 | ||||||||||||
Class Y | 9,653 | 316,975 | 37,066 | 1,163,825 | ||||||||||||
Investor Class | 342,724 | 11,077,738 | 914,352 | 27,956,650 | ||||||||||||
Institutional Class | 5,491 | 183,424 | 4,369 | 148,771 | ||||||||||||
Issued in connection with acquisitions:(b) | ||||||||||||||||
Class A | 2,635,778 | 93,781,193 | — | — | ||||||||||||
Class B | 550,787 | 18,312,828 | — | — | ||||||||||||
Class C | 313,417 | 10,137,110 | — | — | ||||||||||||
Class Y | 612 | 21,728 | — | — | ||||||||||||
Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||
Class A | 115,445 | 3,842,083 | 141,297 | 4,409,434 | ||||||||||||
Class B | (123,838 | ) | (3,842,083 | ) | (150,902 | ) | (4,409,434 | ) | ||||||||
Reacquired: | ||||||||||||||||
Class A | (1,163,088 | ) | (37,526,148 | ) | (1,690,311 | ) | (51,859,885 | ) | ||||||||
Class B | (91,029 | ) | (2,786,850 | ) | (136,469 | ) | (3,789,485 | ) | ||||||||
Class C | (160,439 | ) | (4,688,526 | ) | (249,760 | ) | (6,981,392 | ) | ||||||||
Class Y | (17,741 | ) | (578,094 | ) | (37,324 | ) | (1,115,559 | ) | ||||||||
Investor Class | (913,235 | ) | (29,911,336 | ) | (2,736,263 | ) | (80,592,821 | ) | ||||||||
Institutional Class | (1,684 | ) | (59,271 | ) | (4,824 | ) | (148,245 | ) | ||||||||
Net increase (decrease) in share activity | 2,186,063 | $ | 80,328,830 | (2,328,555 | ) | $ | (66,438,153 | ) | ||||||||
(a) | There is an entity that is a record owner of more than 5% of the outstanding shares of the Fund and owns 8% of the outstanding shares of the Fund. IDI has an agreement with this entity to sell Fund shares. The Fund, Invesco and/or Invesco affiliates may make payments to this entity, which is considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, distribution, third party record keeping and account servicing. The Fund has no knowledge as to whether all or any portion of the shares owned of record by this entity are also owned beneficially. | |
(b) | As of the open of business on May 23, 2011 the Fund acquired all the net assets of Invesco Van Kampen Technology Fund pursuant to a plan of reorganization approved by the Trustees of the Fund on November 10, 2010 and by the shareholders of Invesco Van Kampen Technology Fund on April 14, 2011. The acquisition was accomplished by a tax-free exchange of 3,500,594 shares of the Fund for 21,922,655 shares outstanding of Invesco Van Kampen Technology Fund as of the close of business on May 20, 2011. Each class of Invesco Van Kampen Technology Fund was exchanged for the like class of shares of the Fund based on the relative net asset value of Invesco Van Kampen Technology Fund to the net asset value of the Fund at the close of business on May 20, 2011. Invesco Van Kampen Technology Fund’s net assets at that date of $122,252,859, including $28,512,047 of unrealized appreciation, were combined with those of the Fund. The net assets of the Fund immediately before the acquisition were $694,559,865 and $816,812,724 immediately after the acquisition. |
15 Invesco Technology Fund
NOTE 11—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Ratio of | Ratio of | |||||||||||||||||||||||||||||||||||||||||||
expenses | expenses | |||||||||||||||||||||||||||||||||||||||||||
Net gains | to average | to average net | Ratio of net | |||||||||||||||||||||||||||||||||||||||||
Net asset | Net | (losses) on | net assets | assets without | investment | |||||||||||||||||||||||||||||||||||||||
value, | investment | securities (both | Total from | Net asset | Net assets, | with fee waivers | fee waivers | income (loss) | ||||||||||||||||||||||||||||||||||||
beginning | income | realized and | investment | value, end | Total | end of period | and/or expenses | and/or expenses | to average | Portfolio | ||||||||||||||||||||||||||||||||||
of period | (loss)(a) | unrealized) | operations | of period | Return(b) | (000s omitted) | absorbed | absorbed | net assets | turnover(c) | ||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | $ | 35.86 | $ | (0.17 | ) | $ | (2.32 | ) | $ | (2.49 | ) | $ | 33.37 | (6.94 | )% | $ | 286,186 | 1.59 | %(d) | 1.60 | %(d) | (1.04 | )%(d) | 24 | % | |||||||||||||||||||
Year ended 04/30/11 | 28.53 | (0.22 | ) | 7.55 | (e) | 7.33 | 35.86 | 25.69 | 229,174 | 1.55 | 1.55 | (0.73 | ) | 42 | ||||||||||||||||||||||||||||||
One month ended 04/30/10 | 27.91 | (0.04 | ) | 0.66 | 0.62 | 28.53 | 2.22 | 191,274 | 1.66 | (f) | 1.66 | (f) | (1.56 | )(f) | 4 | |||||||||||||||||||||||||||||
Year ended 03/31/10 | 17.77 | (0.20 | ) | 10.34 | 10.14 | 27.91 | 57.06 | 187,989 | 1.66 | 1.75 | (0.87 | ) | 35 | |||||||||||||||||||||||||||||||
Year ended 03/31/09 | 25.58 | (0.00 | )(g) | (7.81 | )(h) | (7.81 | ) | 17.77 | (30.53 | )(h) | 122,823 | 1.55 | 1.83 | (0.02 | )(g) | 68 | ||||||||||||||||||||||||||||
Year ended 03/31/08 | 28.49 | (0.23 | ) | (2.68 | ) | (2.91 | ) | 25.58 | (10.21 | ) | 217,236 | 1.55 | 1.56 | (0.77 | ) | 42 | ||||||||||||||||||||||||||||
Year ended 03/31/07 | 28.45 | (0.30 | ) | 0.34 | 0.04 | 28.49 | 0.14 | 284,962 | 1.56 | 1.57 | (1.07 | ) | 126 | |||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | 33.47 | (0.27 | ) | (2.15 | ) | (2.42 | ) | 31.05 | (7.23 | ) | 26,297 | 2.34 | (d) | 2.35 | (d) | (1.79 | )(d) | 24 | ||||||||||||||||||||||||||
Year ended 04/30/11 | 26.83 | (0.41 | ) | 7.05 | (e) | 6.64 | 33.47 | 24.75 | 16,253 | 2.30 | 2.30 | (1.48 | ) | 42 | ||||||||||||||||||||||||||||||
One month ended 04/30/10 | 26.26 | (0.05 | ) | 0.62 | 0.57 | 26.83 | 2.17 | 18,853 | 2.41 | (f) | 2.41 | (f) | (2.31 | )(f) | 4 | |||||||||||||||||||||||||||||
Year ended 03/31/10 | 16.84 | (0.35 | ) | 9.77 | 9.42 | 26.26 | 55.94 | 19,173 | 2.41 | 2.50 | (1.62 | ) | 35 | |||||||||||||||||||||||||||||||
Year ended 03/31/09 | 24.43 | (0.16 | )(g) | (7.43 | )(h) | (7.59 | ) | 16.84 | (31.07 | )(h) | 16,952 | 2.30 | 2.58 | (0.77 | )(g) | 68 | ||||||||||||||||||||||||||||
Year ended 03/31/08 | 27.42 | (0.44 | ) | (2.55 | ) | (2.99 | ) | 24.43 | (10.90 | ) | 38,443 | 2.30 | 2.31 | (1.52 | ) | 42 | ||||||||||||||||||||||||||||
Year ended 03/31/07 | 27.59 | (0.48 | ) | 0.31 | (0.17 | ) | 27.42 | (0.62 | ) | 62,355 | 2.31 | 2.32 | (1.82 | ) | 126 | |||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | 32.58 | (0.27 | ) | (2.09 | ) | (2.36 | ) | 30.22 | (7.24 | ) | 26,728 | 2.34 | (d) | 2.35 | (d) | (1.79 | )(d) | 24 | ||||||||||||||||||||||||||
Year ended 04/30/11 | 26.12 | (0.41 | ) | 6.87 | (e) | 6.46 | 32.58 | 24.73 | 21,875 | 2.30 | 2.30 | (1.48 | ) | 42 | ||||||||||||||||||||||||||||||
One month ended 04/30/10 | 25.57 | (0.05 | ) | 0.60 | 0.55 | 26.12 | 2.15 | 16,931 | 2.41 | (f) | 2.41 | (f) | (2.31 | )(f) | 4 | |||||||||||||||||||||||||||||
Year ended 03/31/10 | 16.40 | (0.35 | ) | 9.52 | 9.17 | 25.57 | 55.92 | 16,689 | 2.41 | 2.50 | (1.62 | ) | 35 | |||||||||||||||||||||||||||||||
Year ended 03/31/09 | 23.78 | (0.16 | )(g) | (7.22 | )(h) | (7.38 | ) | 16.40 | (31.03 | )(h) | 9,340 | 2.30 | 2.58 | (0.77 | )(g) | 68 | ||||||||||||||||||||||||||||
Year ended 03/31/08 | 26.69 | (0.42 | ) | (2.49 | ) | (2.91 | ) | 23.78 | (10.90 | ) | 16,116 | 2.30 | 2.31 | (1.52 | ) | 42 | ||||||||||||||||||||||||||||
Year ended 03/31/07 | 26.86 | (0.47 | ) | 0.30 | (0.17 | ) | 26.69 | (0.63 | ) | 21,386 | 2.31 | 2.32 | (1.82 | ) | 126 | |||||||||||||||||||||||||||||
Class Y | ||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | 35.74 | (0.13 | ) | (2.30 | ) | (2.43 | ) | 33.31 | (6.80 | ) | 3,183 | 1.34 | (d) | 1.35 | (d) | (0.79 | )(d) | 24 | ||||||||||||||||||||||||||
Year ended 04/30/11 | 28.37 | (0.14 | ) | 7.51 | (e) | 7.37 | 35.74 | 25.98 | 3,683 | 1.30 | 1.30 | (0.48 | ) | 42 | ||||||||||||||||||||||||||||||
One month ended 04/30/10 | 27.74 | (0.03 | ) | 0.66 | 0.63 | 28.37 | 2.27 | 2,931 | 1.41 | (f) | 1.41 | (f) | (1.31 | )(f) | 4 | |||||||||||||||||||||||||||||
Year ended 03/31/10 | 17.63 | (0.14 | ) | 10.25 | 10.11 | 27.74 | 57.34 | 2,856 | 1.41 | 1.50 | (0.62 | ) | 35 | |||||||||||||||||||||||||||||||
Year ended 03/31/09(i) | 20.92 | 0.02 | (g) | (3.31 | )(h) | (3.29 | ) | 17.63 | (15.73 | )(h) | 541 | 1.30 | (f) | 1.86 | (f) | 0.23 | (f)(g) | 68 | ||||||||||||||||||||||||||
Investor Class | ||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | 35.58 | (0.17 | ) | (2.29 | ) | (2.46 | ) | 33.12 | (6.91 | ) | 385,122 | 1.56 | (d) | 1.57 | (d) | (1.01 | )(d) | 24 | ||||||||||||||||||||||||||
Year ended 04/30/11 | 28.29 | (0.19 | ) | 7.48 | (e) | 7.29 | 35.58 | 25.77 | 434,078 | 1.46 | 1.46 | (0.64 | ) | 42 | ||||||||||||||||||||||||||||||
One month ended 04/30/10 | 27.67 | (0.04 | ) | 0.66 | 0.62 | 28.29 | 2.24 | 396,631 | 1.65 | (f) | 1.65 | (f) | (1.55 | )(f) | 4 | |||||||||||||||||||||||||||||
Year ended 03/31/10 | 17.61 | (0.20 | ) | 10.26 | 10.06 | 27.67 | 57.13 | 391,424 | 1.66 | 1.75 | (0.87 | ) | 35 | |||||||||||||||||||||||||||||||
Year ended 03/31/09 | 25.35 | (0.00 | )(g) | (7.74 | )(h) | (7.74 | ) | 17.61 | (30.53 | )(h) | 262,730 | 1.53 | 1.81 | 0.00 | (g) | 68 | ||||||||||||||||||||||||||||
Year ended 03/31/08 | 28.23 | (0.22 | ) | (2.66 | ) | (2.88 | ) | 25.35 | (10.20 | ) | 424,981 | 1.52 | 1.53 | (0.74 | ) | 42 | ||||||||||||||||||||||||||||
Year ended 03/31/07 | 28.19 | (0.28 | ) | 0.32 | 0.04 | 28.23 | 0.14 | 595,776 | 1.53 | 1.54 | (1.04 | ) | 126 | |||||||||||||||||||||||||||||||
Institutional Class | ||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | 38.77 | (0.06 | ) | (2.50 | ) | (2.56 | ) | 36.21 | (6.60 | ) | 731 | 0.89 | (d) | 0.90 | (d) | (0.34 | )(d) | 24 | ||||||||||||||||||||||||||
Year ended 04/30/11 | 30.64 | (0.02 | ) | 8.15 | (e) | 8.13 | 38.77 | 26.53 | 635 | 0.89 | 0.89 | (0.07 | ) | 42 | ||||||||||||||||||||||||||||||
One month ended 04/30/10 | 29.95 | (0.02 | ) | 0.71 | 0.69 | 30.64 | 2.30 | 516 | 0.90 | (f) | 0.90 | (f) | (0.80 | )(f) | 4 | |||||||||||||||||||||||||||||
Year ended 03/31/10 | 18.93 | (0.03 | ) | 11.05 | 11.02 | 29.95 | 58.21 | 522 | 0.91 | 0.91 | (0.12 | ) | 35 | |||||||||||||||||||||||||||||||
Year ended 03/31/09 | 27.07 | 0.12 | (g) | (8.26 | )(h) | (8.14 | ) | 18.93 | (30.07 | )(h) | 346 | 0.90 | 0.91 | 0.63 | (g) | 68 | ||||||||||||||||||||||||||||
Year ended 03/31/08 | 29.95 | (0.03 | ) | (2.85 | ) | (2.88 | ) | 27.07 | (9.62 | ) | 9 | 0.86 | 0.87 | (0.10 | ) | 42 | ||||||||||||||||||||||||||||
Year ended 03/31/07 | 29.70 | (0.11 | ) | 0.36 | 0.25 | 29.95 | 0.84 | 12 | 0.86 | 0.86 | (0.37 | ) | 126 | |||||||||||||||||||||||||||||||
(a) | Calculated using average shares outstanding. | |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges and is not annualized for periods less than one year, if applicable. | |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. For the period ended October 31, 2011, the portfolio turnover calculation excludes the value of securities purchased of $90,282,548 and sold of $17,342,422 in the effort to realign the Fund’s portfolio holdings after the reorganization of Invesco Van Kampen Technology Fund into the Fund. | |
(d) | Ratios are annualized and based on average daily net assets (000’s omitted) of $275,673, $26,839, $26,655, $3,268, $388,462 and $622 for Class A, Class B, Class C, Class Y, Investor Class and Institutional Class shares, respectively. | |
(e) | Net gains (losses) on securities (both realized and unrealized includes capital gains realized on a distribution from BlueStream Ventures L.P. on October 17, 2010. Net gains (losses) on securities (both realized and unrealized), excluding capital gains are $7.29, $6.81, $6.63, $7.25, $7.22 and $7.87 for Class A, Class B, Class C, Class Y, Investor Class and Institutional Class shares, respectively. | |
(f) | Annualized. | |
(g) | Net investment income (loss) per share and the ratio of net investment income (loss) to average net assets include a distribution from BlueStream Ventures L.P. on October 23, 2008. Net investment income (loss) per share and the ratio of net investment income (loss) to average net assets excluding the distribution are $(0.13) and (0.57)%; $(0.29) and (1.32)%; $(0.29) and (1.32)%; $(0.02) and (0.32)%; $(0.13) and (0.55)% and $(0.01) and 0.08% for Class A, Class B, Class C, Class Y, Investor Class and Institutional Class shares, respectively. | |
(h) | Includes litigation proceeds received during the period. Had the litigation proceeds not been received, Net gains (losses) on securities (both realized and unrealized) per share would have been $(8.01), $(7.63), $(7.42), $(3.33), $(7.94) and $(8.46) for Class A, Class B, Class C, Class Y, Investor Class and Institutional Class shares, respectively and total returns would have been lower. | |
(i) | Commencement date of October 3, 2008. |
16 Invesco Technology Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments or contingent deferred sales charges on redemptions, and redemption fees, if any; and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period May 1, 2011 through October 31, 2011.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the hypothetical information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
HYPOTHETICAL | ||||||||||||||||||||||||||||||
ACTUAL | (5% annual return before expenses) | |||||||||||||||||||||||||||||
Beginning | Ending | Expenses | Ending | Expenses | Annualized | |||||||||||||||||||||||||
Account Value | Account Value | Paid During | Account Value | Paid During | Expense | |||||||||||||||||||||||||
Class | (05/01/11) | (10/31/11)1 | Period2 | (10/31/11) | Period2 | Ratio | ||||||||||||||||||||||||
A | $ | 1,000.00 | $ | 930.60 | $ | 7.72 | $ | 1,017.14 | $ | 8.06 | 1.59 | % | ||||||||||||||||||
B | 1,000.00 | 928.00 | 11.34 | 1,013.37 | 11.84 | 2.34 | ||||||||||||||||||||||||
C | 1,000.00 | 927.60 | 11.34 | 1,013.37 | 11.84 | 2.34 | ||||||||||||||||||||||||
Y | 1,000.00 | 932.00 | 6.51 | 1,018.40 | 6.80 | 1.34 | ||||||||||||||||||||||||
Investor | 1,000.00 | 930.90 | 7.57 | 1,017.29 | 7.91 | 1.56 | ||||||||||||||||||||||||
Institutional | 1,000.00 | 934.00 | 4.33 | 1,020.66 | 4.53 | 0.89 | ||||||||||||||||||||||||
1 | The actual ending account value is based on the actual total return of the Fund for the period May 1, 2011 through October 31, 2011, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund’s expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/366 to reflect the most recent fiscal half year. |
17 Invesco Technology 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 Fund (the Fund) investment advisory agreement with Invesco Advisers, Inc. (Invesco Advisers) and the Master Intergroup Sub-Advisory Contract for Mutual Funds (the sub-advisory contracts) with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers). During contract renewal meetings held on June 14-15, 2011, the Board as a whole, and the disinterested or “independent” Trustees, who comprise 80% of the Board, voting separately, approved the continuance of the Fund’s investment advisory agreement and the sub-advisory contracts for another year, effective July 1, 2011. In doing so, the Board considered the process that it follows in reviewing and approving the Fund’s investment advisory agreement and sub-advisory contracts and the information that it is provided. The Board determined that the Fund’s investment advisory agreement and the sub-advisory contracts are in the best interests of the Fund and its shareholders and the compensation to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is responsible for overseeing the management of a number of the series portfolios of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies and limitations and investment risks of these funds. The Sub-Committees meet regularly and at designated contract renewal meetings each year to conduct a review of the performance, fees, expenses and other matters related to their assigned Invesco Funds. Each Sub-Committee recommends to the Investments Committee, which in turn recommends to the full Board, whether to approve the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Trustees receive comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and an independent company, Lipper, Inc. (Lipper). The Trustees also receive an independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. The independent Trustees are assisted in their annual evaluation of the Fund’s investment advisory agreement by the Senior Officer and by independent legal counsel. The independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in private sessions with the Senior Officer and counsel.
In evaluating the fairness and reasonableness of the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Trustees also considered information provided in connection with fund acquisitions approved by the Trustees to rationalize the Invesco Funds product range following the acquisition of the retail mutual fund business of Morgan Stanley (the Morgan Stanley Transaction). The Trustees recognized that the advisory fees for the Invesco Funds include advisory fees that are the result of years of review and negotiation between the Trustees and Invesco Advisers as well as advisory fees inherited from Morgan Stanley and Van Kampen funds acquired in the Morgan Stanley Transaction. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these same arrangements throughout the year and in prior years. One Trustee may have weighed a particular piece of information differently than another Trustee.
The discussion below serves as the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 15, 2011, and may not reflect consideration of factors that became known to the Board after that date, including, for example, changes to the Fund’s performance, advisory fees, expense limitations and/or fee waivers.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers, with whom the Board met during the year. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s consideration of Invesco Advisers’ performance and investment process oversight, independent credit analysis and investment risk management.
In determining whether to continue the Fund’s investment advisory agreement, the Board considered the prior relationship between Invesco Advisers and the Fund, as well as the Board’s knowledge of Invesco Advisers’ operations, and concluded that it is beneficial to maintain the current relationship, in part, because of such knowledge. The Board also considered services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution and legal and compliance. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and the advisory services are provided in accordance with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services provided by the Affiliated Sub-Advisers under the sub-advisory contracts and the credentials and experience of the officers and employees of the Affiliated Sub-Advisers who provide these services. The Board noted that the Affiliated Sub-Advisers have offices and personnel that are located in financial centers around the world. As a result, the Affiliated Sub-Advisers can provide research and investment analysis on the markets and economies of various countries in which the Fund invests and make recommendations on securities of companies located in such countries. The Board concluded that the sub-advisory contracts benefit the Fund and its shareholders by permitting Invesco Advisers to use the resources and talents of the Affiliated Sub-Advisers in managing the Fund. The Board concluded that the nature, extent and quality of the services provided by the Affiliated Sub-Advisers are appropriate and satisfactory and in accordance with the terms of the Fund’s sub-advisory contracts.
18 Invesco Technology Fund
B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
The Board compared the Fund’s performance during the past one, three and five calendar years to the performance of funds in the Lipper performance universe and against the Lipper Science & Technology Funds Index. The Board noted that performance of Investor Class shares of the Fund was in the second quintile of the performance universe for the one year period, the third quintile for the three year period and the fourth quintile for the five year period (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board noted that performance of Investor Class shares of the Fund was above the performance of the Index for the one and three year periods and below the performance of the Index for the five year period. Although the independent written evaluation of the Fund’s Senior Officer only considered Fund performance through the most recent calendar year, the Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
C. | Advisory and Sub-advisory Fees and Fee Waivers |
The Board compared the Fund’s contractual advisory fee rate to the contractual advisory fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the contractual advisory fee rate for Investor Class shares of the Fund was below the median contractual advisory fee rate of funds in the expense group. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using audited financial data from the most recent annual report of each fund in the expense group that was publicly available as of the end of the past calendar year and including only one fund per investment adviser. The Board noted that comparative data is as of varying dates, which may affect the comparability of data during times of market volatility.
The Board also compared the Fund’s effective fee rate (the advisory fee after any advisory fee waivers and before any expense limitations/waivers) to the advisory fee rates of other mutual funds advised by Invesco Advisers and its affiliates with investment strategies comparable to those of the Fund. The Board noted that the Fund’s effective fee rate was below the effective fee rate of one mutual fund and above the rate of one mutual fund advised by Invesco Advisers with comparable investment strategies.
Other than the mutual fund described above, the Board noted that Invesco Advisers and the Affiliated Sub-Advisers do not manage other mutual funds or client accounts in a manner substantially similar to the management of the Fund.
The Board noted that Invesco Advisers has contractually agreed to waive fees and/or limit expenses of the Fund through at least June 30, 2012 in an amount necessary to limit total annual operating expenses to a specified percentage of average daily net assets for each class of the Fund. The Board also considered the effect this fee waiver would have on the Fund’s total estimated expenses.
The Board also considered the services provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the allocation of fees between Invesco Advisers and the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board noted that Invesco Advisers provides services to sub-advised Invesco Funds, including oversight of the Affiliated Sub-Advisers as well as the additional services described above other than day-to-day 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.
19 Invesco Technology Fund
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Invesco mailing information
Send general correspondence to Invesco Investment Services, Inc., P.O. Box 219078, Kansas City, MO 64121-9078.
Invesco privacy policy
You share personal and financial information with us that is necessary for your transactions and your account records. We take very seriously the obligation to keep that information confidential and private.
Invesco collects nonpublic personal information about you from account applications or other forms you complete and from your transactions with us or our affiliates. We do not disclose information about you or our former customers to service providers or other third parties except to the extent necessary to service your account and in other limited circumstances as permitted by law. For example, we use this information to facilitate the delivery of transaction confirmations, financial reports, prospectuses and tax forms.
Even within Invesco, only people involved in the servicing of your accounts and compliance monitoring have access to your information. To ensure the highest level of confidentiality and security, Invesco maintains physical, electronic and procedural safeguards that meet or exceed federal standards. Special measures, such as data encryption and authentication, apply to your communications with us on our website. More detail is available to you at invesco.com/privacy.
Important notice regarding delivery of security holder documents
To reduce Fund expenses, only one copy of most shareholder documents may be mailed to shareholders with multiple accounts at the same address (Householding). Mailing of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact Invesco Investment Services, Inc. at 800 959 4246 or contact your financial institution. We will begin sending you individual copies for each account within 30 days after receiving your request.
Fund holdings and proxy voting information
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is available at invesco.com/completeqtrholdings. Shareholders can also look up the Fund’s Forms N-Q on the SEC website at sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-03826 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.
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Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the U.S. distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
I-TEC-SAR-1 Invesco Distributors, Inc.
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Invesco U.S. Mid Cap Value Fund
Semiannual Report to Shareholders § October 31, 2011
Nasdaq:
A: MMCAX § B: MMCDX § C: MMCCX § Y: MPMVX
A: MMCAX § B: MMCDX § C: MMCCX § Y: MPMVX
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2 | Fund Performance | |
4 | Letters to Shareholders | |
5 | Schedule of Investments | |
7 | Financial Statements | |
9 | Notes to Financial Statements | |
15 | Financial Highlights | |
16 | Fund Expenses | |
17 | 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, 4/30/11 to 10/31/11, at net asset value (NAV). Performance shown does not include applicable contingent deferred sales charges (CDSC) or front-end sales charges, which would have reduced performance.
Class A Shares* | -9.91 | % | ||
Class B Shares* | -10.23 | |||
Class C Shares* | -10.23 | |||
Class Y Shares* | -9.78 | |||
S&P 500 Index▼(Broad Market Index) | -7.12 | |||
Russell Midcap Value Index▼(Style-Specific Index) | -11.02 | |||
Lipper Mid-Cap Value Funds Index▼(Peer Group Index) | -13.23 | |||
Source(s): ▼Lipper Inc. | ||
* | Performance includes litigation proceeds. Had these proceeds not been received, total return would have been lower. |
The S&P 500® Index is an unmanaged index considered representative of the U.S. stock market.
The Russell Midcap® Value Index is an unmanaged index considered representative of mid-cap value stocks. The Russell Midcap Value Index is a trademark/service mark of the Frank Russell Co. Russell® is a trademark of the Frank Russell Co.
The Lipper Mid-Cap Value Funds Index is an unmanaged index considered representative of mid-cap value 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.
2 Invesco U.S. Mid Cap Value Fund
Average Annual Total Returns
As of 10/31/11, including maximum applicable sales charges
Class A Shares | ||||||||
Inception (7/17/98) | 6.41 | % | ||||||
10 | Years | 7.05 | ||||||
5 | Years | 3.31 | ||||||
1 | Year | 0.88 | ||||||
Class B Shares | ||||||||
10 | Years | 6.86 | % | |||||
5 | Years | 3.36 | ||||||
1 | Year | 0.99 | ||||||
Class C Shares | ||||||||
10 | Years | 6.86 | % | |||||
5 | Years | 3.71 | ||||||
1 | Year | 4.95 | ||||||
Class Y Shares | ||||||||
Inception (12/30/94) | 12.67 | % | ||||||
10 | Years | 7.97 | ||||||
5 | Years | 4.83 | ||||||
1 | Year | 7.01 | ||||||
Performance includes litigation proceeds. Had these proceeds not been received, total return would have been lower.
Effective June 1, 2010, Class I and Investment Class shares of the predecessor fund, Morgan Stanley U.S. Mid Cap Value Fund, advised by Morgan Stanley Investment Advisors Inc. were reorganized into Class Y shares, and Class P shares were reorganized into Class A shares of Invesco U.S. Mid Cap Value Fund. Returns shown above for Class Y and Class A shares are blended returns of the predecessor fund and Invesco U.S. Mid Cap Value Fund. Share class returns will differ from the predecessor fund because of different expenses.
Class B and Class C shares incepted on June 1, 2010. Performance shown prior to that date is that of the predecessor fund’s Class P shares restated to reflect the higher 12b-1 fees applicable to Class B and Class C shares, respectively. Class B and Class C share performance reflects any applicable fee waivers or expense reimbursements. The inception date of the predecessor fund’s Class P shares was July 17, 1998.
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
Average Annual Total Returns
As of 9/30/11, the most recent calendar quarter-end, including maximum applicable sales charges
Class A Shares | ||||||||
Inception (7/17/98) | 5.39 | % | ||||||
10 | Years | 6.28 | ||||||
5 | Years | 1.30 | ||||||
1 | Year | -8.29 | ||||||
Class B Shares | ||||||||
10 | Years | 6.08 | % | |||||
5 | Years | 1.29 | ||||||
1 | Year | -8.42 | ||||||
Class C Shares | ||||||||
10 | Years | 6.08 | % | |||||
5 | Years | 1.67 | ||||||
1 | Year | -4.64 | ||||||
Class Y Shares | ||||||||
Inception (12/30/94) | 11.86 | % | ||||||
10 | Years | 7.19 | ||||||
5 | Years | 2.77 | ||||||
1 | Year | -2.71 | ||||||
Performance includes litigation proceeds. Had these proceeds not been received, total return would have been lower.
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 net annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Class A, Class B, Class C and Class Y shares was 1.28%, 2.03%, 2.03% and 1.03%, respectively.1 The total annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Class A, Class B, Class C and Class Y shares was 1.34%, 2.09%, 2.09% and 1.09%, 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.
1 | Total annual Fund operating expenses after any contractual fee waivers and/or expense reimbursements by the adviser in effect through at least June 30, 2012. See current prospectus for more information. |
3 Invesco U.S. Mid Cap Value Fund
Letters to Shareholders
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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,
![-s- Bruce L. Crockett](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8579304.gif)
Bruce L. Crockett
Independent Chair, Invesco Funds Board of Trustees
Independent Chair, Invesco Funds Board of Trustees
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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.
The start of a new year is always a good time to catch up with your financial adviser. Looking ahead to the new year and evaluating your individual situation, your financial adviser can provide valuable insight into whether your investments are still appropriate for your individual needs, goals and risk tolerance. This may provide reassurance in times of economic uncertainty and market volatility such as we saw in 2011 – and are likely to see again in 2012.
On our website, invesco.com/us, we provide timely market updates and commentary from many of our fund managers and other investment professionals. Also on our website, you 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.
Across our broad array of investment products, 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 – meaning 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,
![-s- Philip Taylor](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8579306.gif)
Philip Taylor
Senior Managing Director, Invesco Ltd.
Senior Managing Director, Invesco Ltd.
4 Invesco U.S. Mid Cap Value Fund
Schedule of Investments(a)
October 31, 2011
(Unaudited)
Shares | Value | |||||||
Common Stocks & Other Equity Interests–90.38% | ||||||||
Alternative Carriers–2.96% | ||||||||
TW Telecom, Inc.(b) | 320,558 | $ | 5,930,323 | |||||
Asset Management & Custody Banks–2.22% | ||||||||
Northern Trust Corp. | 110,104 | 4,455,909 | ||||||
Computer Hardware–2.26% | ||||||||
Diebold, Inc. | 140,654 | 4,540,311 | ||||||
Data Processing & Outsourced Services–3.11% | ||||||||
Fidelity National Information Services, Inc. | 238,320 | 6,239,218 | ||||||
Diversified Banks–1.78% | ||||||||
Comerica, Inc. | 140,107 | 3,579,734 | ||||||
Electric Utilities–4.51% | ||||||||
Edison International | 174,475 | 7,083,685 | ||||||
Great Plains Energy, Inc. | 94,367 | 1,957,172 | ||||||
9,040,857 | ||||||||
Electronic Manufacturing Services–1.48% | ||||||||
Flextronics International Ltd. (Singapore)(b) | 453,385 | 2,976,472 | ||||||
Food Distributors–1.88% | ||||||||
Sysco Corp. | 135,776 | 3,763,711 | ||||||
Food Retail–3.01% | ||||||||
Safeway, Inc. | 312,279 | 6,048,844 | ||||||
Health Care Facilities–4.40% | ||||||||
Brookdale Senior Living, Inc.(b) | 264,996 | 4,393,634 | ||||||
HealthSouth Corp.(b) | 250,676 | 4,426,938 | ||||||
8,820,572 | ||||||||
Heavy Electrical Equipment–2.07% | ||||||||
Babcock & Wilcox Co. (The)(b) | 189,087 | 4,158,023 | ||||||
Home Furnishings–2.26% | ||||||||
Mohawk Industries, Inc.(b) | 86,251 | 4,541,115 | ||||||
Housewares & Specialties–3.10% | ||||||||
Newell Rubbermaid, Inc. | 420,537 | 6,223,948 | ||||||
Industrial Machinery–2.91% | ||||||||
Snap-On, Inc. | 108,838 | 5,841,335 | ||||||
Insurance Brokers–5.06% | ||||||||
Marsh & McLennan Cos., Inc. | 188,047 | 5,757,999 | ||||||
Willis Group Holdings PLC (Ireland) | 120,868 | 4,388,717 | ||||||
10,146,716 | ||||||||
Integrated Oil & Gas–1.98% | ||||||||
Murphy Oil Corp. | 71,738 | 3,972,133 | ||||||
Investment Banking & Brokerage–0.70% | ||||||||
Charles Schwab Corp. (The) | 114,515 | 1,406,244 | ||||||
Motorcycle Manufacturers–2.95% | ||||||||
Harley-Davidson, Inc. | 152,363 | 5,926,921 | ||||||
Multi-Utilities–3.91% | ||||||||
CenterPoint Energy, Inc. | 190,537 | 3,970,791 | ||||||
Wisconsin Energy Corp. | 119,513 | 3,875,807 | ||||||
7,846,598 | ||||||||
Office Electronics–2.79% | ||||||||
Zebra Technologies Corp.–Class A(b) | 156,394 | 5,589,522 | ||||||
Office Services & Supplies–0.59% | ||||||||
Avery Dennison Corp. | 44,761 | 1,190,643 | ||||||
Oil & Gas Exploration & Production–2.08% | ||||||||
Pioneer Natural Resources Co. | 49,786 | 4,177,045 | ||||||
Oil & Gas Storage & Transportation–6.90% | ||||||||
El Paso Corp. | 317,834 | 7,949,029 | ||||||
Williams Cos., Inc. (The) | 195,866 | 5,897,525 | ||||||
13,846,554 | ||||||||
Packaged Foods & Meats–3.19% | ||||||||
ConAgra Foods, Inc. | 252,720 | 6,401,398 | ||||||
Paper Packaging–2.01% | ||||||||
Sonoco Products Co. | 128,619 | 4,037,350 | ||||||
Personal Products–1.22% | ||||||||
Avon Products, Inc. | 133,657 | 2,443,250 | ||||||
Property & Casualty Insurance–2.90% | ||||||||
ACE Ltd. (Switzerland) | 80,709 | 5,823,154 | ||||||
Regional Banks–3.99% | ||||||||
BB&T Corp. | 168,551 | 3,933,980 | ||||||
Wintrust Financial Corp. | 141,149 | 4,076,383 | ||||||
8,010,363 | ||||||||
Restaurants–2.31% | ||||||||
Darden Restaurants, Inc. | 96,938 | 4,641,391 | ||||||
Retail REIT’s–1.64% | ||||||||
Weingarten Realty Investors | 142,100 | 3,298,141 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
5 Invesco U.S. Mid Cap Value Fund
Shares | Value | |||||||
Specialty Chemicals–5.17% | ||||||||
Valspar Corp. (The) | 129,450 | $ | 4,513,921 | |||||
W.R. Grace & Co.(b) | 140,245 | 5,860,839 | ||||||
10,374,760 | ||||||||
Specialty Stores–2.18% | ||||||||
Staples, Inc. | 291,774 | 4,364,939 | ||||||
Trucking–0.86% | ||||||||
Swift Transportation Co.(b) | 194,867 | 1,734,316 | ||||||
Total Common Stocks & Other Equity Interests (Cost $180,577,598) | 181,391,810 | |||||||
Preferred Stocks–0.80% | ||||||||
Health Care Facilities–0.80% | ||||||||
HealthSouth Corp., Series A, $65.00 Conv. Pfd. (Cost $1,499,018) | 1,810 | 1,611,353 | ||||||
Money Market Funds–9.27% | ||||||||
Liquid Assets Portfolio–Institutional Class(c) | 9,297,496 | 9,297,496 | ||||||
Premier Portfolio–Institutional Class(c) | 9,297,497 | 9,297,497 | ||||||
Total Money Market Funds (Cost $18,594,993) | 18,594,993 | |||||||
TOTAL INVESTMENTS–100.45% (Cost $200,671,609) | 201,598,156 | |||||||
OTHER ASSETS LESS LIABILITIES–(0.45)% | (897,422 | ) | ||||||
NET ASSETS–100.00% | $ | 200,700,734 | ||||||
Investment Abbreviations:
Conv. | – Convertible | |
Pfd. | – Preferred | |
REIT | – Real Estate Investment Trust |
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. | |
(b) | Non-income producing security. | |
(c) | The money market fund and the Fund are affiliated by having the same investment adviser. |
By sector, based on Net Assets
as of October 31, 2011
Financials | 18.3 | % | ||
Consumer Discretionary | 12.8 | |||
Energy | 11.0 | |||
Information Technology | 9.6 | |||
Consumer Staples | 9.3 | |||
Utilities | 8.4 | |||
Materials | 7.2 | |||
Industrials | 6.4 | |||
Health Care | 5.2 | |||
Telecommunication Services | 3.0 | |||
Money Market Funds Plus Other Assets Less Liabilities | 8.8 | |||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
6 Invesco U.S. Mid Cap Value Fund
Statement of Assets and Liabilities
October 31, 2011
(Unaudited)
Assets: | ||||
Investments, at value (Cost $182,076,616) | $ | 183,003,163 | ||
Investments in affiliated money market funds, at value and cost | 18,594,993 | |||
Total investments, at value (Cost $200,671,609) | 201,598,156 | |||
Receivable for: | ||||
Investments sold | 1,460,098 | |||
Fund shares sold | 203,487 | |||
Dividends | 169,957 | |||
Investment for trustee deferred compensation and retirement plans | 2,313 | |||
Other assets | 24,291 | |||
Total assets | 203,458,302 | |||
Liabilities: | ||||
Payable for: | ||||
Investments purchased | 2,466,337 | |||
Fund shares reacquired | 107,383 | |||
Accrued fees to affiliates | 132,020 | |||
Accrued other operating expenses | 46,343 | |||
Trustee deferred compensation and retirement plans | 5,485 | |||
Total liabilities | 2,757,568 | |||
Net assets applicable to shares outstanding | $ | 200,700,734 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 201,239,591 | ||
Undistributed net investment income | 1,306,351 | |||
Undistributed net realized gain (loss) | (2,771,755 | ) | ||
Unrealized appreciation | 926,547 | |||
$ | 200,700,734 | |||
Net Assets: | ||||
Class A | $ | 49,682,635 | ||
Class B | $ | 166,471 | ||
Class C | $ | 365,588 | ||
Class Y | $ | 150,486,040 | ||
Shares outstanding, $0.01 par value per share, with an unlimited number of shares authorized: | ||||
Class A | 1,380,327 | |||
Class B | 4,675 | |||
Class C | 10,267 | |||
Class Y | 4,130,689 | |||
Class A: | ||||
Net asset value per share | $ | 35.99 | ||
Maximum offering price per share | ||||
(Net asset value of $35.99 divided by 94.50%) | $ | 38.09 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 35.61 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 35.61 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 36.43 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
7 Invesco U.S. Mid Cap Value Fund
Statement of Operations
For the six months ended October 31, 2011
(Unaudited)
Investment income: | ||||
Dividends | $ | 1,931,815 | ||
Dividends from affiliated money market funds | 4,612 | |||
Total investment income | 1,936,427 | |||
Expenses: | ||||
Advisory fees | 751,436 | |||
Administrative services fees | 25,137 | |||
Custodian fees | 5,142 | |||
Distribution fees: | ||||
Class A | 63,475 | |||
Class B | 912 | |||
Class C | 1,781 | |||
Transfer agent fees | 199,126 | |||
Trustees’ and officers’ fees and benefits | 12,923 | |||
Other | 90,919 | |||
Total expenses | 1,150,851 | |||
Less: Fees waived | (31,366 | ) | ||
Net expenses | 1,119,485 | |||
Net investment income | 816,942 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain from: | ||||
Investment securities | 5,879,193 | |||
Options written | 111,218 | |||
5,990,411 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | (30,557,157 | ) | ||
Options written | 320,373 | |||
(30,236,784 | ) | |||
Net realized and unrealized gain (loss) | (24,246,373 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | (23,429,431 | ) | |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
8 Invesco U.S. Mid Cap Value Fund
Statement of Changes in Net Assets
For the six months ended October 31, 2011, the period October 1, 2010 through April 30, 2011 and the year ended September 30, 2010
(Unaudited)
Six months | Seven months | |||||||||||
ended | ended | Year ended | ||||||||||
October 31, | April 30, | September 30, | ||||||||||
2011 | 2011 | 2010 | ||||||||||
Operations: | ||||||||||||
Net investment income | $ | 816,942 | $ | 518,008 | $ | 1,380,251 | ||||||
Net realized gain | 5,990,411 | 11,124,016 | 19,291,483 | |||||||||
Change in net unrealized appreciation (depreciation) | (30,236,784 | ) | 30,663,595 | 4,643,017 | ||||||||
Net increase (decrease) in net assets resulting from operations | (23,429,431 | ) | 42,305,619 | 25,314,751 | ||||||||
Distributions to shareholders from net investment income: | ||||||||||||
Class A | — | (183,349 | ) | (215,361 | ) | |||||||
Class B | — | (947 | ) | — | ||||||||
Class C | — | (1,856 | ) | — | ||||||||
Class Y | — | (841,698 | ) | (953,564 | ) | |||||||
Total distributions from net investment income | — | (1,027,850 | ) | (1,168,925 | ) | |||||||
Share transactions–net: | ||||||||||||
Class A | (1,174,828 | ) | 4,934,889 | 6,817,640 | ||||||||
Class B | (28,049 | ) | 3,727 | 158,831 | ||||||||
Class C | 17,649 | 126,299 | 169,317 | |||||||||
Class Y | (6,981,214 | ) | 9,357,721 | 12,963,153 | ||||||||
Net increase (decrease) in net assets resulting from share transactions | (8,166,442 | ) | 14,422,636 | 20,108,941 | ||||||||
Net increase (decrease) in net assets | (31,595,873 | ) | 55,700,405 | 44,254,767 | ||||||||
Net assets: | ||||||||||||
Beginning of period | 232,296,607 | 176,596,202 | 132,341,435 | |||||||||
End of period (includes undistributed net investment income of $1,306,351, $489,409 and $806,883, respectively) | $ | 200,700,734 | $ | 232,296,607 | $ | 176,596,202 | ||||||
Notes to Financial Statements
October 31, 2011
(Unaudited)
NOTE 1—Significant Accounting Policies
Invesco U.S. Mid Cap Value 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 to seek above-average total return over a market cycle of three to five years.
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 |
9 Invesco U.S. Mid Cap Value Fund
security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”). | ||
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded. | ||
Debt obligations (including convertible bonds) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Debt securities are subject to interest rate and credit risks. In addition, all debt securities involve some risk of default with respect to interest and/or principal payments. | ||
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trade is not the current value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and 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. |
10 Invesco U.S. Mid Cap Value Fund
E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. | |
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period. | ||
F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. | |
G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. | |
H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. | |
I. | Call Options Written — The Fund may write call options. A call option gives the purchaser of such option the right to buy, and the writer (the Fund) the obligation to sell, the underlying security at the stated exercise price during the option period. Written call options are recorded as a liability in the Statement of Assets and Liabilities. The amount of the liability is subsequently valued to reflect the current market value of the option written. If a written call option expires on the stipulated expiration date, or if the Fund enters into a closing purchase transaction, the Fund realizes a gain (or a loss if the closing purchase transaction exceeds the premium received when the option was written) without regard to any unrealized gain or loss on the underlying security, and the liability related to such option is extinguished. If a written option is exercised, the Fund realizes a gain or a loss from the sale of the underlying security and the proceeds of the sale are increased by the premium originally received. Realized gains and losses on these contracts are included in the Statement of Operations. A risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised. | |
J. | Collateral — To the extent the Fund has pledged or segregated a security as collateral and that security is subsequently sold, it is the Fund’s practice to replace such collateral no later than the next business day. |
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser based on the annual rate of the Fund’s average daily net assets as follows:
Average Net Assets | Rate | |||
First $1 billion | 0 | .72% | ||
Over $1 billion | 0 | .65% | ||
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 1.27%, 2.02%, 2.02% and 1.02%, 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.
11 Invesco U.S. Mid Cap Value Fund
Further, the Adviser has contractually agreed, through at least June 30, 2012, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the six months ended October 31, 2011, the Adviser waived advisory fees of $31,366.
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 October 31, 2011, expenses incurred under the agreement are shown in the Statement of Operations as administrative services fees.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (“IIS”) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. IIS may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. All fees payable by IIS to intermediaries that provide omnibus account services or sub-accounting are charged back to the Fund, subject to certain limitations approved by the Trust’s Board of Trustees. For the six months ended October 31, 2011, the expenses incurred under the agreement are shown in the Statement of Operations as transfer agent fees.
The Trust has entered into master distribution agreements with Invesco Distributors, Inc. (“IDI”) to serve as the distributor for the Class A, Class B, Class C and Class Y shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund’s Class A, Class B and Class C shares (collectively, the “Plans”). The Fund, pursuant to the Plans, pays IDI compensation at the annual rate of 0.25% of the Fund’s average daily net assets of Class A shares and 1.00% of the average daily net assets of each class of Class B and Class C shares. Of the Plan payments, up to 0.25% of the average daily net assets of each class of shares may be paid to furnish continuing personal shareholder services to customers who purchase and own shares of such classes. Any amounts not paid as a service fee under the Plans would constitute an asset-based sales charge. Rules of the Financial Industry Regulatory Authority (“FINRA”) impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. For the six months ended October 31, 2011, expenses incurred under the Plans are shown in the Statement of Operations as distribution fees.
Front-end sales commissions and CDSC (collectively, the “sales charges”) are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the six months ended October 31, 2011, IDI advised the Fund that IDI retained $192 in front-end sales commissions from the sale of Class A shares and $202, $56 and $11 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of the Adviser, Invesco Ltd., IIS and/or IDI.
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3) generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
Level 1 — | Prices are determined using quoted prices in an active market for identical assets. | |
Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. | |
Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of October 31, 2011. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
During the six months ended October 31, 2011, there were no significant transfers between investment levels.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 199,986,803 | $ | 1,611,353 | $ | — | $ | 201,598,156 | ||||||||
NOTE 4—Derivative Investments
The Fund has implemented the required disclosures about derivative instruments and hedging activities in accordance with GAAP. This disclosure is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position and financial performance. The enhanced disclosure has no impact on the results of operations reported in the financial statements.
12 Invesco U.S. Mid Cap Value Fund
Effect of Derivative Instruments for the six months ended October 31, 2011
The table below summarizes the gains on derivative instruments, detailed by primary risk exposure, recognized in earnings during the period:
Location of Gain on | ||||
Statement of Operations | ||||
Options* | ||||
Realized Gain | ||||
Equity risk | $ | 111,218 | ||
Change in Unrealized Appreciation | ||||
Equity risk | 320,373 | |||
Total | $ | 431,591 | ||
* | The average value of options outstanding during the period was $86,961. |
Transactions During the Period | ||||||||||||||||
Call Option Contracts | ||||||||||||||||
Number of | Premiums | |||||||||||||||
Contracts | Received | |||||||||||||||
Beginning of period | 850 | $ | 117,377 | |||||||||||||
Written | 1,900 | 342,609 | ||||||||||||||
Closed | (2,300 | ) | (397,402 | ) | ||||||||||||
Expired | (450 | ) | (62,584 | ) | ||||||||||||
End of period | 0 | $ | 0 | |||||||||||||
NOTE 5—Security Transactions with Affiliated Funds
The Fund is permitted to purchase or sell securities from or to certain other Invesco Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment adviser (or affiliated investment advisers), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, for the six months ended October 31, 2011, the Fund engaged in securities purchases of $226,523.
NOTE 6—Trustees’ and Officers’ Fees and Benefits
“Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and “Trustees’ and Officers’ Fees and Benefits” also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. “Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
During the six months ended October 31, 2011, the Fund paid legal fees of $841 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A partner of that firm is a Trustee of the Trust.
NOTE 7—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 8—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.
13 Invesco U.S. Mid Cap Value Fund
The Fund had a capital loss carryforward as of April 30, 2011, which expires as follows:
Capital Loss | ||||
Expiration | Carryforward* | |||
April 30, 2017 | $ | 8,517,517 | ||
* | Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. |
NOTE 9—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the six months ended October 31, 2011 was $32,758,396 and $41,011,076, 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 | $ | 17,508,081 | ||
Aggregate unrealized (depreciation) of investment securities | (16,826,184 | ) | ||
Net unrealized appreciation of investment securities | $ | 681,897 | ||
Cost of investments for tax purposes is $200,916,259. |
NOTE 10—Share Information
Summary of Share Activity | ||||||||||||||||||||||||
Six months ended | Seven months ended | Year ended | ||||||||||||||||||||||
October 31, 2011(a) | April 30, 2011 | September 30, 2010 | ||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||
Sold: | ||||||||||||||||||||||||
Class A | 241,960 | $ | 8,796,895 | 305,044 | $ | 11,105,853 | 611,764 | $ | 19,009,935 | |||||||||||||||
Class B(b) | — | — | 4,084 | 139,246 | 5,484 | 173,020 | ||||||||||||||||||
Class C(b) | 2,036 | 67,074 | 10,129 | 348,196 | 5,815 | 182,369 | ||||||||||||||||||
Class Y | 544,787 | 19,998,472 | 753,315 | 28,002,517 | 1,524,745 | 47,465,243 | ||||||||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||||||||||
Class A | — | — | 4,437 | 158,881 | 7,629 | 215,361 | ||||||||||||||||||
Class B(b) | — | — | 847 | 29,634 | — | — | ||||||||||||||||||
Class C(b) | — | — | 51 | 1,814 | — | — | ||||||||||||||||||
Class Y | — | — | 23,050 | 833,503 | 33,392 | 951,470 | ||||||||||||||||||
Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||||||||||
Class A | 328 | 12,549 | 816 | 28,649 | 75 | 2,384 | ||||||||||||||||||
Class B(b) | (331 | ) | (12,549 | ) | (820 | ) | (28,649 | ) | (75 | ) | (2,384 | ) | ||||||||||||
Reacquired: | ||||||||||||||||||||||||
Class A | (278,044 | ) | (9,984,272 | ) | (171,699 | ) | (6,358,494 | ) | (404,495 | ) | (12,410,040 | ) | ||||||||||||
Class B(b) | (429 | ) | (15,500 | ) | (3,712 | ) | (136,504 | ) | (373 | ) | (11,805 | ) | ||||||||||||
Class C(b) | (1,412 | ) | (49,425 | ) | (5,943 | ) | (223,711 | ) | (409 | ) | (13,052 | ) | ||||||||||||
Class Y | (751,122 | ) | (26,979,686 | ) | (518,264 | ) | (19,478,299 | ) | (1,151,888 | ) | (35,453,560 | ) | ||||||||||||
Net increase (decrease) in share activity | (242,227 | ) | $ | (8,166,442 | ) | 401,335 | $ | 14,422,636 | 631,664 | $ | 20,108,941 | |||||||||||||
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 69% of the outstanding shares of the Fund. IDI has an agreement with these entities to sell Fund shares. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as securities brokerage, distribution, third party record keeping and account servicing. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. | |
(b) | Commencement date of June 1, 2010. |
14 Invesco U.S. Mid Cap Value Fund
NOTE 11—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Ratio of | Ratio of | |||||||||||||||||||||||||||||||||||||||||||||||
Net gains | expenses | expenses | ||||||||||||||||||||||||||||||||||||||||||||||
(losses) on | to average | to average net | Ratio of net | |||||||||||||||||||||||||||||||||||||||||||||
Net asset | Net | securities | Dividends | net assets | assets without | investment | ||||||||||||||||||||||||||||||||||||||||||
value, | investment | (both | Total from | from net | Net asset | Net assets, | with fee waivers | fee waivers | income (loss) | |||||||||||||||||||||||||||||||||||||||
beginning | income | realized and | investment | investment | value, end | Total | end of period | and/or expenses | and/or expenses | to average | Portfolio | |||||||||||||||||||||||||||||||||||||
of period | (loss)(a) | unrealized) | operations | income | of period | Return(b) | (000s omitted) | absorbed | absorbed | net assets | turnover(c) | |||||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | $ | 39.95 | $ | 0.11 | $ | (4.07 | )(d) | $ | (3.96 | ) | $ | — | $ | 35.99 | (9.91 | )%(d) | $ | 49,683 | 1.26 | %(e) | 1.29 | %(e) | 0.60 | %(e) | 16 | % | ||||||||||||||||||||||
Seven months ended 04/30/11 | 32.63 | 0.05 | 7.41 | 7.46 | (0.14 | ) | 39.95 | 22.90 | 56,567 | 1.26 | (f) | 1.30 | (f) | 0.24 | (f) | 26 | ||||||||||||||||||||||||||||||||
Year ended 09/30/10 | 27.71 | 0.22 | 4.90 | 5.12 | (0.20 | ) | 32.63 | (g) | 18.58 | 41,681 | 1.17 | 1.18 | 0.72 | 60 | ||||||||||||||||||||||||||||||||||
Year ended 09/30/09 | 28.65 | 0.26 | (0.93 | ) | (0.67 | ) | (0.27 | ) | 27.71 | (g) | (2.28 | )(h) | 29,445 | 1.26 | (i) | 1.26 | (i) | 1.21 | (i) | 75 | ||||||||||||||||||||||||||||
Year ended 09/30/08 | 36.26 | 0.20 | (7.61 | ) | (7.41 | ) | (0.20 | ) | 28.65 | (g) | (20.29 | ) | 23,190 | 1.15 | (i) | 1.15 | (i) | 0.61 | (i) | 64 | ||||||||||||||||||||||||||||
Year ended 09/30/07 | 28.94 | 0.19 | 7.28 | 7.47 | (0.15 | ) | 36.26 | (g) | 25.87 | 17,661 | 1.14 | (i) | 1.14 | (i) | 0.56 | (i) | 87 | |||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | 39.67 | (0.03 | ) | (4.03 | )(d) | (4.06 | ) | — | 35.61 | (10.23 | )(d) | 166 | 2.01 | (e) | 2.04 | (e) | (0.15 | )(e) | 16 | |||||||||||||||||||||||||||||
Seven months ended 04/30/11 | 32.52 | (0.11 | ) | 7.39 | 7.28 | (0.13 | ) | 39.67 | 22.43 | 216 | 2.01 | (f) | 2.05 | (f) | (0.51 | )(f) | 26 | |||||||||||||||||||||||||||||||
Year ended 09/30/10(j) | 31.06 | 0.00 | 1.46 | 1.46 | — | 32.52 | (g) | 4.70 | 164 | 1.89 | (f) | 1.89 | (f) | 0.00 | (f) | 60 | ||||||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | 39.67 | (0.03 | ) | (4.03 | )(d) | (4.06 | ) | — | 35.61 | (10.23 | )(d) | 366 | 2.01 | (e) | 2.04 | (e) | (0.15 | )(e) | 16 | |||||||||||||||||||||||||||||
Seven months ended 04/30/11 | 32.54 | (0.11 | ) | 7.37 | 7.26 | (0.13 | ) | 39.67 | 22.35 | 382 | 2.01 | (f) | 2.05 | (f) | (0.51 | )(f) | 26 | |||||||||||||||||||||||||||||||
Year ended 09/30/10(j) | 31.06 | 0.00 | 1.48 | 1.48 | — | 32.54 | (g) | 4.76 | 176 | 1.89 | (f) | 1.89 | (f) | 0.00 | (f) | 60 | ||||||||||||||||||||||||||||||||
Class Y | ||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | 40.38 | 0.16 | (4.11 | )(d) | (3.95 | ) | — | 36.43 | (9.78 | )(d) | 150,486 | 1.01 | (e) | 1.04 | (e) | 0.85 | (e) | 16 | ||||||||||||||||||||||||||||||
Seven months ended 04/30/11 | 32.99 | 0.11 | 7.48 | 7.59 | (0.20 | ) | 40.38 | 23.08 | 175,132 | 1.01 | (f) | 1.05 | (f) | 0.49 | (f) | 26 | ||||||||||||||||||||||||||||||||
Year ended 09/30/10 | 28.02 | 0.31 | 4.92 | 5.23 | (0.26 | ) | 32.99 | (g) | 18.81 | 134,575 | 0.92 | 0.94 | 0.97 | 60 | ||||||||||||||||||||||||||||||||||
Year ended 09/30/09 | 28.95 | 0.31 | (0.93 | ) | (0.62 | ) | (0.31 | ) | 28.02 | (g) | (1.65 | )(h) | 97,897 | 1.00 | (i) | 1.00 | (i) | 1.41 | (i) | 75 | ||||||||||||||||||||||||||||
Year ended 09/30/08 | 36.46 | 0.28 | (7.54 | ) | (7.26 | ) | (0.25 | ) | 28.95 | (g) | (20.07 | ) | 107,988 | 0.89 | (i) | 0.89 | (i) | 0.84 | (i) | 64 | ||||||||||||||||||||||||||||
Year ended 09/30/07 | 29.09 | 0.27 | 7.32 | 7.59 | (0.22 | ) | 36.46 | (g) | 26.19 | 151,610 | 0.89 | (i) | 0.89 | (i) | 0.80 | (i) | 87 | |||||||||||||||||||||||||||||||
(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 $(4.30), $(4.26), $(4.26) and $(4.34) 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 $50,504, $181, $354 and $156,558 for Class A, Class B, Class C and Class Y shares, respectively. | |
(f) | Annualized. | |
(g) | Includes redemption fees added to shares of beneficial interest which were less than $0.005 per share. | |
(h) | Performance was positively impacted by approximately 1.16% due to the receipt of proceeds from the settlements of class action suits involving primarily one of the Fund’s past holdings. This was a one-time settlement and as a result, the impact on the NAV and consequently the performance will not likely be repeated in the future. Had these settlements not occurred, the total return from Class A and Class Y shares would have been approximately (3.44)% and (2.81)%, respectively. | |
(i) | The ratios reflect the rebate of certain Fund expenses in connection with investments in a Morgan Stanley affiliates during the period. The effect of the rebate on the ratios is 0.01% for the year ended September 30, 2009 and less than 0.005% for the years ended September 30, 2008 and 2007, respectively. | |
(j) | Commencement date of June 1, 2010. |
NOTE 12—Proposed Reorganization
The Board of Trustees of the Fund 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 Van Kampen American Value Fund (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 to be held in or around April 2012. Upon closing of the reorganization, shareholders of the Fund will receive a corresponding class of shares of the Acquiring Fund in exchange for their shares of the Fund and the Fund will liquidate and cease operations.
15 Invesco U.S. Mid Cap Value 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 May 1, 2011 through October 31, 2011.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the hypothetical information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
HYPOTHETICAL | ||||||||||||||||||||||||||||||
(5% annual return before | ||||||||||||||||||||||||||||||
ACTUAL | expenses) | |||||||||||||||||||||||||||||
Beginning | Ending | Expenses | Ending | Expenses | Annualized | |||||||||||||||||||||||||
Account Value | Account Value | Paid During | Account Value | Paid During | Expense | |||||||||||||||||||||||||
Class | (05/01/11) | (10/31/11)1 | Period2 | (10/31/11) | Period2 | Ratio | ||||||||||||||||||||||||
A | $ | 1,000.00 | $ | 900.90 | $ | 6.02 | $ | 1,018.80 | $ | 6.39 | 1.26 | % | ||||||||||||||||||
B | 1,000.00 | 897.70 | 9.59 | 1,015.03 | 10.18 | 2.01 | ||||||||||||||||||||||||
C | 1,000.00 | 897.70 | 9.59 | 1,015.03 | 10.18 | 2.01 | ||||||||||||||||||||||||
Y | 1,000.00 | 902.20 | 4.83 | 1,020.06 | 5.13 | 1.01 | ||||||||||||||||||||||||
1 | The actual ending account value is based on the actual total return of the Fund for the period May 1, 2011 through October 31, 2011, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund’s expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/366 to reflect the most recent fiscal half year. |
16 Invesco U.S. Mid Cap Value 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 U.S. Mid Cap Value Fund (the Fund) investment advisory agreement with Invesco Advisers, Inc. (Invesco Advisers) and the Master Intergroup Sub-Advisory Contract for Mutual Funds (the sub-advisory contracts) with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers). During contract renewal meetings held on June 14-15, 2011, the Board as a whole, and the disinterested or “independent” Trustees, who comprise 80% of the Board, voting separately, approved the continuance of the Fund’s investment advisory agreement and the sub-advisory contracts for another year, effective July 1, 2011. In doing so, the Board considered the process that it follows in reviewing and approving the Fund’s investment advisory agreement and sub-advisory contracts and the information that it is provided. The Board determined that the Fund’s investment advisory agreement and the sub-advisory contracts are in the best interests of the Fund and its shareholders and the compensation to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is responsible for overseeing the management of a number of the series portfolios of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies and limitations and investment risks of these funds. The Sub-Committees meet regularly and at designated contract renewal meetings each year to conduct a review of the performance, fees, expenses and other matters related to their assigned Invesco Funds. Each Sub-Committee recommends to the Investments Committee, which in turn recommends to the full Board, whether to approve the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Trustees receive comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and an independent company, Lipper, Inc. (Lipper). The Trustees also receive an independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. The independent Trustees are assisted in their annual evaluation of the Fund’s investment advisory agreement by the Senior Officer and by independent legal counsel. The independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in private sessions with the Senior Officer and counsel.
In evaluating the fairness and reasonableness of the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Trustees also considered information provided in connection with fund acquisitions approved by the Trustees to rationalize the Invesco Funds product range following the acquisition of the retail mutual fund business of Morgan Stanley (the Morgan Stanley Transaction). The Trustees recognized that the advisory fees for the Invesco Funds include advisory fees that are the result of years of review and negotiation between the Trustees and Invesco Advisers as well as advisory fees inherited from Morgan Stanley and Van Kampen funds acquired in the Morgan Stanley Transaction. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these same arrangements throughout the year and in prior years. One Trustee may have weighed a particular piece of information differently than another Trustee.
The discussion below serves as the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 15, 2011, and may not reflect consideration of factors that became known to the Board after that date, including, for example, changes to the Fund’s performance, advisory fees, expense limitations and/or fee waivers.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers, with whom the Board met during the year. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s consideration of Invesco Advisers’ performance and investment process oversight, independent credit analysis and investment risk management.
In determining whether to continue the Fund’s investment advisory agreement, the Board considered the prior relationship between Invesco Advisers and the Fund, as well as the Board’s knowledge of Invesco Advisers’ operations, and concluded that it is beneficial to maintain the current relationship, in part, because of such knowledge. The Board also considered services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution and legal and compliance. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and the advisory services are provided in accordance with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services provided by the Affiliated Sub-Advisers under the sub-advisory contracts and the credentials and experience of the officers and employees of the Affiliated Sub-Advisers who provide these services. The Board noted that the Affiliated Sub-Advisers have offices and personnel that are located in financial centers around the world. As a result, the Affiliated Sub-Advisers can provide research and investment analysis on the markets and economies of various countries in which the Fund invests and make recommendations on securities of companies located in such countries. The Board concluded that the sub-advisory contracts benefit the Fund and its shareholders by permitting Invesco Advisers to use the resources and talents of the Affiliated Sub-Advisers in managing the Fund. The Board concluded that the nature, extent and quality of the services provided by the Affiliated Sub-Advisers are appropriate and satisfactory and in accordance with the terms of the Fund’s sub-advisory contracts.
B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
The Board 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 Mid Cap
17 Invesco U.S. Mid Cap Value Fund
Value Funds Index. The Board noted that performance of Class A shares of the Fund was in the first quintile of the performance universe for the one and five year periods and the second quintile for the three year period (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board noted that performance of Class A shares of the Fund was above the performance of the Index for the one, 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 its expense group. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using audited financial data from the most recent annual report of each fund in the expense group that was publicly available as of the end of the past calendar year and including only one fund per investment adviser. The Board noted that comparative data is as of varying dates, which may affect the comparability of data during times of market volatility.
The Board also compared the Fund’s effective fee rate (the advisory fee after advisory fee waivers and before expense limitations/waivers) to the advisory fee rates of other mutual funds advised by Invesco Advisers and its affiliates with investment strategies comparable to those of the Fund. The Board noted that the Fund’s rate was the same as the rate of two other mutual funds advised by Invesco Advisers and below the total account level fee of two mutual funds sub-advised by Invesco Advisers.
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 also considered the effect this fee waiver would have on the Fund’s total estimated expenses.
The Board also considered the services provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the allocation of fees between Invesco Advisers and the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board noted that Invesco Advisers provides services to sub-advised Invesco Funds, including oversight of the Affiliated Sub-Advisers as well as the additional services described above other than day-to-day portfolio management. The Board also noted that the sub-advisory fees have no direct effect on the Fund or its shareholders, as they are paid by Invesco Advisers to the Affiliated Sub-Advisers.
Based upon the information and considerations described above, the Board concluded that the Fund’s advisory and sub-advisory fees are fair and reasonable.
D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule. The Board also noted that the Fund shares directly in economies of scale through lower fees charged by third party service providers based on the combined size of the Invesco Funds and other clients advised by Invesco Advisers.
E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the profitability of Invesco Advisers and its affiliates in providing these services. The Board reviewed with Invesco Advisers the methodology used to prepare the profitability information. The Board considered the profitability of Invesco Advisers in connection with managing the Fund and the Invesco Funds. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its subsidiaries provide to the Fund and the Invesco Funds. The Board concluded that the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund is not excessive given the nature, quality and extent of the services provided to the Invesco Funds. The Board considered whether Invesco Advisers and each Affiliated Sub-Adviser are financially sound and have the resources necessary to perform their obligations under the investment advisory agreement and sub-advisory contracts. The Board concluded that Invesco Advisers and each Affiliated Sub-Adviser have the financial resources necessary to fulfill these obligations.
F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund, including the fees received for their provision of administrative, transfer agency and distribution services to the Fund. The Board considered the performance of Invesco Advisers and its affiliates in providing these services and the organizational structure employed to provide these services. The Board also considered that these services are provided to the Fund pursuant to written contracts that are reviewed and approved on an annual basis by the Board; that the services are required for the operation of the Fund; that Invesco Advisers and its affiliates can provide services, the nature and quality of which are at least equal to those provided by others offering the same or similar services; and that the fees for such services are fair and reasonable in light of the usual and customary charges by others for services of the same nature and quality.
The Board considered the benefits realized by Invesco Advisers and the Affiliated Sub-Advisers as a result of portfolio brokerage transactions executed through “soft dollar” arrangements. The Board noted that soft dollar arrangements shift the payment obligation for research and execution services from Invesco Advisers and the Affiliated Sub-Advisers to the Invesco Funds and therefore may reduce Invesco Advisers’ and the Affiliated Sub-Advisers’ expenses. The Board concluded that the soft dollar arrangements are appropriate. The Board also concluded that, based on their review and representations made by the Chief Compliance Officer of the Invesco Funds, these arrangements are consistent with regulatory requirements.
The Board considered that the Fund’s uninvested cash and cash collateral from any securities lending arrangements may be invested in money market funds advised by Invesco Advisers pursuant to procedures approved by the Board. The Board noted that Invesco Advisers receives advisory fees from these affiliated money market funds attributable to such investments, although Invesco Advisers has contractually agreed to waive through varying periods the advisory fees payable by the Invesco Funds. The waiver is in an amount equal to 100% of the net advisory fee Invesco Advisers receives from the affiliated money market funds with respect to the Fund’s investment in the affiliated money market funds of uninvested cash, but not cash collateral. The Board concluded that the Fund’s investment of uninvested cash and cash collateral from any securities lending arrangements in the affiliated money market funds is in the best interests of the Fund and its shareholders.
18 Invesco U.S. Mid Cap Value Fund
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Invesco mailing information
Send general correspondence to Invesco Investment Services, Inc., P.O. Box 219078, Kansas City, MO 64121-9078.
Invesco privacy policy
You share personal and financial information with us that is necessary for your transactions and your account records. We take very seriously the obligation to keep that information confidential and private.
Invesco collects nonpublic personal information about you from account applications or other forms you complete and from your transactions with us or our affiliates. We do not disclose information about you or our former customers to service providers or other third parties except to the extent necessary to service your account and in other limited circumstances as permitted by law. For example, we use this information to facilitate the delivery of transaction confirmations, financial reports, prospectuses and tax forms.
Even within Invesco, only people involved in the servicing of your accounts and compliance monitoring have access to your information. To ensure the highest level of confidentiality and security, Invesco maintains physical, electronic and procedural safeguards that meet or exceed federal standards. Special measures, such as data encryption and authentication, apply to your communications with us on our website. More detail is available to you at invesco.com/privacy.
Important notice regarding delivery of security holder documents
To reduce Fund expenses, only one copy of most shareholder documents may be mailed to shareholders with multiple accounts at the same address (Householding). Mailing of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact Invesco Investment Services, Inc. at 800 959 4246 or contact your financial institution. We will begin sending you individual copies for each account within 30 days after receiving your request.
Fund holdings and proxy voting information
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is available at invesco.com/completeqtrholdings. Shareholders can also look up the Fund’s Forms N-Q on the SEC website at sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-03826 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.
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Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the U.S. distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
MS-USMCV-SAR-1 | Invesco Distributors, Inc. |
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Invesco Utilities Fund
Semiannual Report to Shareholders § October 31, 2011
Nasdaq:
A: IAUTX § B: IBUTX § C: IUTCX § Y: IAUYX § Investor: FSTUX § Institutional: FSIUX
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2 | Fund Performance | |
4 | Letters to Shareholders | |
5 | Schedule of Investments | |
6 | Financial Statements | |
8 | Notes to Financial Statements | |
15 | Financial Highlights | |
16 | Fund Expenses | |
17 | 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, 4/30/11 to 10/31/11, at net asset value (NAV). Performance shown does not include applicable contingent deferred sales charges (CDSC) or front-end sales charges, which would have reduced performance.
Class A Shares | 3.53 | % | ||
Class B Shares | 3.20 | |||
Class C Shares | 3.12 | |||
Class Y Shares | 3.70 | |||
Investor Class Shares | 3.57 | |||
Institutional Class Shares | 3.85 | |||
S&P 500 Index▼ (Broad Market Index) | -7.12 | |||
S&P 500 Utilities Index▼ (Style-Specific Index) | 7.34 | |||
Lipper Utility Funds Index▼ (Peer Group Index) | 0.34 | |||
Source(s): ▼Lipper Inc. |
The S&P 500® Index is an unmanaged index considered representative of the U.S. stock market.
The S&P 500 Utilities Index is an unmanaged index considered representative of the utilities market.
The Lipper Utility Funds Index is an unmanaged index considered representative of utility funds tracked by Lipper.
The Fund is not managed to track the performance of any particular index, including the 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.
2 | Invesco Utilities Fund |
Average Annual Total Returns
As of 10/31/11, including maximum applicable sales charges
Class A Shares | ||||||||
Inception (3/28/02) | 6.65 | % | ||||||
5 | Years | 1.81 | ||||||
1 | Year | 7.56 | ||||||
Class B Shares | ||||||||
Inception (3/28/02) | 6.63 | % | ||||||
5 | Years | 1.83 | ||||||
1 | Year | 7.95 | ||||||
Class C Shares | ||||||||
Inception (2/14/00) | 0.33 | % | ||||||
10 | Years | 5.59 | ||||||
5 | Years | 2.21 | ||||||
1 | Year | 11.93 | ||||||
Class Y Shares | ||||||||
10 | Years | 6.54 | % | |||||
5 | Years | 3.12 | ||||||
1 | Year | 14.09 | ||||||
Investor Class Shares | ||||||||
Inception (6/2/86) | 8.07 | % | ||||||
10 | Years | 6.46 | ||||||
5 | Years | 2.97 | ||||||
1 | Year | 13.81 | ||||||
Institutional Class Shares | ||||||||
Inception (10/25/05) | 6.33 | % | ||||||
5 | Years | 3.48 | ||||||
1 | Year | 14.43 | ||||||
Class Y shares incepted on October 3, 2008. Performance shown prior to that date is that of Investor Class shares and includes the 12b-1 fees applicable to Investor Class shares. Investor Class share performance reflects any applicable fee waivers or expense reimbursements.
The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Please visit invesco.com/performance for the most recent month-end performance. Performance figures reflect reinvested distributions, changes in net asset value and the effect of the maximum sales charge unless otherwise stated. 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.
Average Annual Total Returns
As of 9/30/11, the most recent calendar quarter-end, including maximum applicable sales charges
Class A Shares | ||||||||
Inception (3/28/02) | 6.34 | % | ||||||
5 | Years | 2.05 | ||||||
1 | Year | 6.48 | ||||||
Class B Shares | ||||||||
Inception (3/28/02) | 6.32 | % | ||||||
5 | Years | 2.08 | ||||||
1 | Year | 6.87 | ||||||
Class C Shares | ||||||||
Inception (2/14/00) | 0.06 | % | ||||||
10 | Years | 5.52 | ||||||
5 | Years | 2.46 | ||||||
1 | Year | 10.86 | ||||||
Class Y Shares | ||||||||
10 | Years | 6.46 | % | |||||
5 | Years | 3.37 | ||||||
1 | Year | 12.96 | ||||||
Investor Class Shares | ||||||||
Inception (6/2/86) | 7.96 | % | ||||||
10 | Years | 6.39 | ||||||
5 | Years | 3.23 | ||||||
1 | Year | 12.74 | ||||||
Institutional Class Shares | ||||||||
Inception (10/25/05) | 5.83 | % | ||||||
5 | Years | 3.74 | ||||||
1 | Year | 13.28 |
The net annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Class A, Class B, Class C, Class Y, Investor Class and Institutional Class shares was 1.32%, 2.07%, 2.07%, 1.07%, 1.32% and 0.94%, respectively.1 The total annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Class A, Class B, Class C, Class Y, Investor Class and Institutional Class shares was 1.46%, 2.21%, 2.21%, 1.21%, 1.46% and 0.94%, respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.
Class A share performance reflects the maximum 5.50% sales charge, and Class B and Class C share performance reflects the applicable contingent deferred sales charge (CDSC) for the period involved. The CDSC on Class B shares declines
from 5% beginning at the time of purchase to 0% at the beginning of the seventh year. The CDSC on Class C shares is 1% for the first year after purchase. Class Y, Investor Class and Institutional Class shares do not have a front-end sales charge or a CDSC; therefore, performance is at net asset value.
The performance of the Fund’s share classes will differ primarily due to different sales charge structures and class expenses.
Had the adviser not waived fees and/or reimbursed expenses in the past, performance would have been lower.
1 | Total annual Fund operating expenses after any contractual fee waivers and/or expense reimbursements by the adviser in effect through at least June 30, 2013. See current prospectus for more information. |
3 | Invesco Utilities Fund |
Letters to Shareholders
![(PHOTO OF BRUCE L. CROCKETT)](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8579403.jpg)
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,
![-s- Bruce L. Crockett](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8579404.gif)
Bruce L. Crockett
Independent Chair, Invesco Funds Board of Trustees
Independent Chair, Invesco Funds Board of Trustees
![(PHOTO OF PHILIP TAYLOR)](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8579405.jpg)
Philip Taylor
Dear Shareholders:
Enclosed is important information about your Fund and its performance. I encourage you to read this report to learn more about your Fund’s short- and long-term performance.
The start of a new year is always a good time to catch up with your financial adviser. Looking ahead to the new year and evaluating your individual situation, your financial adviser can provide valuable insight into whether your investments are still appropriate for your individual needs, goals and risk tolerance. This may provide reassurance in times of economic uncertainty and market volatility such as we saw in 2011 — and are likely to see again in 2012.
On our website, invesco.com/us, we provide timely market updates and commentary from many of our fund managers and other investment professionals. Also on our website, you 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.
Across our broad array of investment products, 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 — meaning 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,
![-s- Philip taylor](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8579406.gif)
Philip Taylor
Senior Managing Director, Invesco Ltd.
Senior Managing Director, Invesco Ltd.
4 | Invesco Utilities Fund |
Schedule of Investments(a)
October 31, 2011
(Unaudited)
Shares | Value | |||||||
Common Stocks–92.00% | ||||||||
Electric Utilities–45.95% | ||||||||
American Electric Power Co., Inc. | 454,227 | $ | 17,842,037 | |||||
Duke Energy Corp. | 526,505 | 10,751,232 | ||||||
E.ON AG (Germany) | 223,618 | 5,406,294 | ||||||
Edison International | 332,770 | 13,510,462 | ||||||
Entergy Corp. | 204,536 | 14,147,755 | ||||||
Exelon Corp. | 376,370 | 16,707,064 | ||||||
FirstEnergy Corp. | 205,141 | 9,223,139 | ||||||
NextEra Energy, Inc. | 69,285 | 3,907,674 | ||||||
Northeast Utilities | 277,565 | 9,595,422 | ||||||
Pepco Holdings, Inc. | 663,796 | 13,143,161 | ||||||
Pinnacle West Capital Corp. | 109,372 | 4,985,176 | ||||||
Portland General Electric Co. | 664,980 | 16,318,609 | ||||||
PPL Corp. | 318,897 | 9,366,005 | ||||||
Progress Energy, Inc. | 149,121 | 7,769,204 | ||||||
Southern Co. | 450,065 | 19,442,808 | ||||||
172,116,042 | ||||||||
Gas Utilities–5.85% | ||||||||
AGL Resources Inc. | 191,084 | 8,014,063 | ||||||
Atmos Energy Corp. | 86,358 | 2,963,807 | ||||||
ONEOK, Inc. | 53,105 | 4,038,635 | ||||||
UGI Corp. | 240,200 | 6,886,534 | ||||||
21,903,039 | ||||||||
Independent Power Producers & Energy Traders–6.70% | ||||||||
Calpine Corp.(b) | 564,166 | 8,558,398 | ||||||
Constellation Energy Group Inc. | 166,652 | 6,616,085 | ||||||
NRG Energy, Inc.(b) | 463,452 | 9,927,142 | ||||||
25,101,625 | ||||||||
Integrated Telecommunication Services–4.46% | ||||||||
AT&T Inc. | 146,168 | 4,284,184 | ||||||
CenturyLink Inc. | 136,213 | 4,802,870 | ||||||
Verizon Communications Inc. | 206,230 | 7,626,386 | ||||||
16,713,440 | ||||||||
Multi-Utilities–27.74% | ||||||||
CMS Energy Corp. | 168,165 | 3,501,195 | ||||||
Consolidated Edison, Inc. | 52,723 | 3,051,080 | ||||||
Dominion Resources, Inc. | 338,270 | 17,451,349 | ||||||
DTE Energy Co. | 130,388 | 6,794,519 | ||||||
National Grid PLC (United Kingdom) | 1,729,948 | 17,134,814 | ||||||
NiSource Inc. | 160,817 | 3,552,448 | ||||||
PG&E Corp. | 158,865 | 6,815,309 | ||||||
Public Service Enterprise Group Inc. | 232,023 | 7,819,175 | ||||||
Sempra Energy | 180,913 | 9,720,455 | ||||||
TECO Energy, Inc. | 600,319 | 11,147,924 | ||||||
Xcel Energy, Inc. | 653,912 | 16,903,625 | ||||||
103,891,893 | ||||||||
Oil & Gas Storage & Transportation–1.30% | ||||||||
Southern Union Co. | 115,715 | 4,863,501 | ||||||
Total Common Stocks (Cost $295,978,269) | 344,589,540 | |||||||
Money Market Funds–8.67% | ||||||||
Liquid Assets Portfolio–Institutional Class(c) | 16,223,311 | 16,223,311 | ||||||
Premier Portfolio–Institutional Class(c) | 16,223,312 | 16,223,312 | ||||||
Total Money Market Funds (Cost $32,446,623) | 32,446,623 | |||||||
TOTAL INVESTMENTS–100.67% (Cost $328,424,892) | 377,036,163 | |||||||
OTHER ASSETS LESS LIABILITIES–(0.67)% | (2,494,287 | ) | ||||||
NET ASSETS–100.00% | $ | 374,541,876 | ||||||
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 October 31, 2011
Utilities | 87.5 | % | ||
Telecommunication Services | 4.5 | |||
Money Market Funds Plus Other Assets Less Liabilities | 8.0 | |||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
5 Invesco Utilities Fund
Statement of Assets and Liabilities
October 31, 2011
(Unaudited)
Assets: | ||||
Investments, at value (Cost $295,978,269) | $ | 344,589,540 | ||
Investments in affiliated money market funds, at value and cost | 32,446,623 | |||
Total investments, at value (Cost $328,424,892) | 377,036,163 | |||
Receivable for: | ||||
Investments sold | 1,693,390 | |||
Fund shares sold | 952,671 | |||
Dividends | 416,479 | |||
Investment for trustee deferred compensation and retirement plans | 61,337 | |||
Other assets | 39,970 | |||
Total assets | 380,200,010 | |||
Liabilities: | ||||
Payable for: | ||||
Investments purchased | 4,820,232 | |||
Fund shares reacquired | 394,232 | |||
Accrued fees to affiliates | 240,444 | |||
Accrued other operating expenses | 95,968 | |||
Trustee deferred compensation and retirement plans | 107,258 | |||
Total liabilities | 5,658,134 | |||
Net assets applicable to shares outstanding | $ | 374,541,876 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 329,955,631 | ||
Undistributed net investment income | 968,728 | |||
Undistributed net realized gain (loss) | (4,991,865 | ) | ||
Unrealized appreciation | 48,609,382 | |||
$ | 374,541,876 | |||
Net Assets: | ||||
Class A | $ | 246,750,584 | ||
Class B | $ | 20,644,959 | ||
Class C | $ | 25,866,000 | ||
Class Y | $ | 2,838,818 | ||
Investor Class | $ | 70,395,737 | ||
Institutional Class | $ | 8,045,778 | ||
Shares outstanding, $0.01 par value per share, with an unlimited number of shares authorized: | ||||
Class A | 14,908,954 | |||
Class B | 1,244,646 | |||
Class C | 1,546,635 | |||
Class Y | 170,119 | |||
Investor Class | 4,218,572 | |||
Institutional Class | 485,722 | |||
Class A: | ||||
Net asset value per share | $ | 16.55 | ||
Maximum offering price per share (Net asset value of $16.55 divided by 94.50%) | $ | 17.51 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 16.59 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 16.72 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 16.69 | ||
Investor Class: | ||||
Net asset value and offering price per share | $ | 16.69 | ||
Institutional Class: | ||||
Net asset value and offering price per share | $ | 16.56 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
6 Invesco Utilities Fund
Statement of Operations
For the six months ended October 31, 2011
(Unaudited)
Investment income: | ||||
Dividends (net of foreign withholding taxes of $59,432) | $ | 6,850,006 | ||
Dividends from affiliated money market funds | 7,351 | |||
Total investment income | 6,857,357 | |||
Expenses: | ||||
Advisory fees | 1,264,484 | |||
Administrative services fees | 63,914 | |||
Custodian fees | 6,908 | |||
Distribution fees: | ||||
Class A | 272,244 | |||
Class B | 100,226 | |||
Class C | 108,314 | |||
Investor Class | 85,038 | |||
Transfer agent fees — A, B, C, Y and Investor | 455,958 | |||
Transfer agent fees — Institutional | 68 | |||
Trustees’ and officers’ fees and benefits | 14,613 | |||
Other | 122,094 | |||
Total expenses | 2,493,861 | |||
Less: Fees waived, expenses reimbursed and expense offset arrangement(s) | (113,512 | ) | ||
Net expenses | 2,380,349 | |||
Net investment income | 4,477,008 | |||
Realized and unrealized gain from: | ||||
Net realized gain (loss) from: | ||||
Investment securities | 3,000,813 | |||
Foreign currencies | (14,924 | ) | ||
2,985,889 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | 3,524,518 | |||
Foreign currencies | (2,798 | ) | ||
3,521,720 | ||||
Net realized and unrealized gain | 6,507,609 | |||
Net increase in net assets resulting from operations | $ | 10,984,617 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
7 Invesco Utilities Fund
Statement of Changes in Net Assets
For the six months ended October 31, 2011 and the year ended April 30, 2011
(Unaudited)
October 31, | April 30, | |||||||
2011 | 2011 | |||||||
Operations: | ||||||||
Net investment income | $ | 4,477,008 | $ | 5,916,387 | ||||
Net realized gain | 2,985,889 | 8,944,092 | ||||||
Change in net unrealized appreciation | 3,521,720 | 18,320,596 | ||||||
Net increase in net assets resulting from operations | 10,984,617 | 33,181,075 | ||||||
Distributions to shareholders from net investment income: | ||||||||
Class A | (2,847,406 | ) | (3,237,600 | ) | ||||
Class B | (185,295 | ) | (258,360 | ) | ||||
Class C | (199,004 | ) | (221,773 | ) | ||||
Class Y | (29,695 | ) | (31,103 | ) | ||||
Investor Class | (882,335 | ) | (1,478,651 | ) | ||||
Institutional Class | (109,434 | ) | (235,462 | ) | ||||
Total distributions from net investment income | (4,253,169 | ) | (5,462,949 | ) | ||||
Share transactions–net: | ||||||||
Class A | 110,554,301 | (14,097,201 | ) | |||||
Class B | 6,691,585 | (3,739,502 | ) | |||||
Class C | 12,006,189 | (593,647 | ) | |||||
Class Y | 1,386,571 | 190,949 | ||||||
Investor Class | 8,207,031 | (6,818,934 | ) | |||||
Institutional Class | 50,329 | (3,085,926 | ) | |||||
Net increase (decrease) in net assets resulting from share transactions | 138,896,006 | (28,144,261 | ) | |||||
Net increase (decrease) in net assets | 145,627,454 | (426,135 | ) | |||||
Net assets: | ||||||||
Beginning of period | 228,914,422 | 229,340,557 | ||||||
End of period (includes undistributed net investment income of $968,728 and $744,889, respectively) | $ | 374,541,876 | $ | 228,914,422 | ||||
Notes to Financial Statements
October 31, 2011
(Unaudited)
NOTE 1—Significant Accounting Policies
Invesco Utilities 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 growth of capital and, secondarily, current income.
The Fund currently consists of six different classes of shares: Class A, Class B, Class C, Class Y, Investor Class and Institutional Class. Investor Class shares of the Fund are offered only to certain grandfathered investors. Class A shares are sold with a front-end sales charge unless certain waiver criteria are met and under certain circumstances load waived shares may be subject to contingent deferred sales charges (“CDSC”). Class C shares are sold with a CDSC. Class Y, Investor Class and Institutional Class shares are sold at net asset value. Effective November 30, 2010, new or additional investments in Class B shares are no longer permitted. Existing shareholders of Class B shares may continue to reinvest dividends and capital gains distributions in Class B shares until they convert. Also, shareholders in Class B shares will be able to exchange those shares for Class B shares of other Invesco Funds offering such shares until they convert.
8 Invesco Utilities Fund
Generally, Class B shares will automatically convert to Class A shares on or the about month-end which is at least eight years after the date of purchase. Redemption of Class B shares prior to conversion date will be subject to a CDSC.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. | |
A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”). | ||
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded. | ||
Debt obligations (including convertible bonds) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. 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 |
9 Invesco Utilities Fund
of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. | ||
D. | Distributions — Distributions from income are declared and paid quarterly and are recorded on ex-dividend date. Distributions from net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to treat a portion of the proceeds from redemptions as distributions for federal income tax purposes. | |
E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. | |
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period. | ||
F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund are charged to the operations of such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses attributable to the Institutional Class are charged to such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses relating to all other classes are allocated among those classes based on relative net assets. All other expenses are allocated among the classes based on relative net assets. | |
G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. | |
H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. | |
I. | Other Risks — The Fund’s investments are concentrated in a comparatively narrow segment of the economy, which may make the Fund more volatile. | |
The Fund may invest a large percentage of its assets in a limited number of securities or other instruments, which could negatively affect the value of the Fund. | ||
The following factors may affect the Fund’s investments in the utilities sector: governmental regulation, economic factors, ability of the issuer to obtain financing, prices of natural resources and risks associated with nuclear power. | ||
J. | Foreign Currency Translations — Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. | |
The Fund may invest in foreign securities which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. | ||
K. | Foreign Currency Contracts — The Fund may enter into foreign currency contracts to manage or minimize currency or exchange rate risk. The Fund may also enter into foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to “lock in” the U.S. dollar price of that security. A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The use of foreign currency contracts does not eliminate fluctuations in the price of the underlying securities the Fund owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statement of Operations. The primary risks associated with foreign currency contracts include failure of the counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities. |
10 Invesco Utilities Fund
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser based on the annual rate of the Fund’s average daily net assets as follows:
Average Daily Net Assets | Rate | |||
First $350 million | 0 | .75% | ||
Next $350 million | 0 | .65% | ||
Next $1.3 billion | 0 | .55% | ||
Next $2 billion | 0 | .45% | ||
Next $2 billion | 0 | .40% | ||
Next $2 billion | 0 | .375% | ||
Over $8 billion | 0 | .35% | ||
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Sub-Adviser(s).
Effective May 23, 2011, the Adviser has contractually agreed, through at least June 30, 2013, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Class A, Class B, Class C, Class Y, Investor Class and Institutional Class shares to 1.32%, 2.07%, 2.07%, 1.07%, 1.32% and 1.07%, respectively, of average daily net assets. Prior to May 23, 2011, the Adviser had contractually agreed to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Class A, Class B, Class C, Class Y, Investor Class and Institutional Class shares to 2.00%, 2.75%, 2.75%, 1.75%, 2.00% and 1.75%, respectively, of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waivers 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, 2013. To the extent that the annualized expense ratio does not exceed the expense limitation, the Adviser will retain its ability to be reimbursed for such fee waivers or reimbursements prior to each fiscal year.
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 October 31, 2011, the Adviser waived advisory fees $10,381 and reimbursed class level expenses of $67,239, $6,189, $6,688, $620 and $21,003 of Class A, Class B, Class C, Class Y and Investor Class shares, respectively.
At the request of the Trustees of the Trust, Invesco Ltd. agreed to reimburse expenses incurred by the Fund in connection with market timing matters in the Invesco Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement are included in the Statement of Operations. For the six months ended October 31, 2011, Invesco Ltd. reimbursed expenses of the Fund in the amount of $544.
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 October 31, 2011, expenses incurred under the agreement are shown in the Statement of Operations as administrative services fees.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (“IIS”) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. IIS may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. All fees payable by IIS to intermediaries that provide omnibus account services or sub-accounting are charged back to the Fund, subject to certain limitations approved by the Trust’s Board of Trustees. For the six months ended October 31, 2011, expenses incurred under the agreement are shown in the Statement of Operations as transfer agent fees.
The Trust has entered into master distribution agreements with Invesco Distributors, Inc. (“IDI”) to serve as the distributor for the Class A, Class B, Class C, Class Y, Investor Class and Institutional Class shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund’s Class A, Class B, Class C and Investor Class shares (collectively, the “Plans”). The Fund, pursuant to the Plans, pays IDI compensation at the annual rate of 0.25% of the Fund’s average daily net assets of Class A shares, 1.00% of the average daily net assets of Class B and Class C shares and 0.25% of the average daily net assets of Investor Class shares. Of the Plan payments, up to 0.25% of the average daily net assets of each class of shares may be paid to furnish continuing personal shareholder services to customers who purchase and own shares of such classes. Any amounts not paid as a service fee under the Plans would constitute an asset-based sales charge. Rules of the Financial Industry Regulatory Authority (“FINRA”) impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. For the six months ended October 31, 2011, expenses incurred under the Plan are shown in the Statement of Operations as distribution fees.
11 Invesco Utilities Fund
Front-end sales commissions and CDSC (collectively, the “sales charges”) are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the six months ended October 31, 2011, IDI advised the Fund that IDI retained $25,192 in front-end sales commissions from the sale of Class A shares and $9, $21,153 and $466 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of the Adviser, Invesco Ltd., IIS and/or IDI.
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3) generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
Level 1 — | Prices are determined using quoted prices in an active market for identical assets. | |
Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. | |
Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of October 31, 2011. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
During the six months ended October 31, 2011, there were no significant transfers between investment levels.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 354,495,055 | $ | 22,541,108 | $ | — | $ | 377,036,163 | ||||||||
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 October 31, 2011, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $848.
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 October 31, 2011, the Fund paid legal fees of $871 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 The State Street Bank and Trust Company, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 7—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.
12 Invesco Utilities Fund
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund had a capital loss carryforward as of April 30, 2011, which expires as follows:
Capital Loss | ||||
Expiration | Carryforward* | |||
April 30, 2017 | $ | 7,560,695 | ||
* | Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. |
NOTE 8—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the six months ended October 31, 2011 was $35,016,777 and $16,628,901, 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 | $ | 51,995,484 | ||
Aggregate unrealized (depreciation) of investment securities | (3,801,272 | ) | ||
Net unrealized appreciation of investment securities | $ | 48,194,212 | ||
Cost of investments for tax purposes is $328,841,951. |
13 Invesco Utilities Fund
NOTE 9—Share Information
Summary of Share Activity | ||||||||||||||||
Six months ended | Year ended | |||||||||||||||
October 31, 2011(a) | April 30, 2011 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Class A | 2,037,331 | $ | 32,707,517 | 647,274 | $ | 9,427,309 | ||||||||||
Class B | 107,840 | 1,754,228 | 93,386 | 1,341,429 | ||||||||||||
Class C | 359,054 | 5,840,387 | 181,355 | 2,706,814 | ||||||||||||
Class Y | 88,441 | 1,427,840 | 41,213 | 625,869 | ||||||||||||
Investor Class | 2,073,901 | 33,774,012 | 231,583 | 3,420,383 | ||||||||||||
Institutional Class | 48,284 | 773,403 | 85,983 | 1,246,595 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Class A | 154,902 | 2,478,788 | 201,237 | 2,918,845 | ||||||||||||
Class B | 10,484 | 168,260 | 16,279 | 236,504 | ||||||||||||
Class C | 11,089 | 179,529 | 13,979 | 205,049 | ||||||||||||
Class Y | 1,513 | 24,450 | 1,804 | 26,446 | ||||||||||||
Investor Class | 51,713 | 833,454 | 94,984 | 1,389,313 | ||||||||||||
Institutional Class | 6,811 | 109,050 | 16,282 | 235,454 | ||||||||||||
Issued in connection with acquisitions:(b) | ||||||||||||||||
Class A | 5,771,955 | 95,030,805 | — | — | ||||||||||||
Class B | 548,086 | 9,040,291 | — | — | ||||||||||||
Class C | 512,232 | 8,517,635 | — | — | ||||||||||||
Class Y | 18,025 | 299,246 | — | — | ||||||||||||
Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||
Class A | 124,893 | 2,029,504 | 140,063 | 2,072,116 | ||||||||||||
Class B | (124,625 | ) | (2,029,504 | ) | (139,735 | ) | (2,072,116 | ) | ||||||||
Reacquired: | ||||||||||||||||
Class A | (1,360,796 | ) | (21,692,313 | ) | (1,941,382 | ) | (28,515,471 | ) | ||||||||
Class B | (139,851 | ) | (2,241,690 | ) | (222,969 | ) | (3,245,319 | ) | ||||||||
Class C | (157,038 | ) | (2,531,362 | ) | (237,345 | ) | (3,505,510 | ) | ||||||||
Class Y | (23,230 | ) | (364,965 | ) | (31,031 | ) | (461,366 | ) | ||||||||
Investor Class | (1,595,773 | ) | (26,400,435 | ) | (785,383 | ) | (11,628,630 | ) | ||||||||
Institutional Class | (52,314 | ) | (832,124 | ) | (321,724 | ) | (4,567,975 | ) | ||||||||
Net increase (decrease) in share activity | 8,472,927 | $ | 138,896,006 | (1,914,147 | ) | $ | (28,144,261 | ) | ||||||||
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 16% of the outstanding shares of the Fund. IDI has an agreement with these entities to sell Fund shares. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as securities brokerage, distribution, third party record keeping and account servicing. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. | |
(b) | As of the opening of business on May 23, 2011, the Fund acquired all the net assets of Invesco Van Kampen Utility Fund pursuant to a plan of reorganization approved by the Trustees of the Fund on November 10, 2010 and by the shareholders of Invesco Van Kampen Utility Fund on April 14, 2011. The acquisition was accomplished by a tax free exchange of 6,850,298 shares of the Fund for 5,962,860 shares outstanding of Invesco Van Kampen Utility Fund as of the close of business on May 20, 2011. Each class of Invesco Van Kampen Utility Fund was exchanged for the like class of shares of the Fund based on the relative net asset value of Invesco Van Kampen Utility Fund to the net asset value of the Fund on the close of business, May 20, 2011. Invesco Van Kampen Utility Fund’s net assets at that date of $112,887,977 including $13,510,618 of unrealized appreciation was combined with those net assets of the Fund. The net assets of the Fund immediately before the acquisition were $254,710,579. The net assets of the Fund immediately following the reorganization were $367,598,556. |
14 Invesco Utilities 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 | |||||||||||||||||||||||||||||||||||||||||||||||
expenses | expenses | |||||||||||||||||||||||||||||||||||||||||||||||
Net gains | to average | to average net | Ratio of net | |||||||||||||||||||||||||||||||||||||||||||||
Net asset | Net | (losses) on | Dividends | net assets | assets without | investment | ||||||||||||||||||||||||||||||||||||||||||
value, | investment | securities (both | Total from | from net | Net asset | Net assets, | with fee waivers | fee waivers | income (loss) | |||||||||||||||||||||||||||||||||||||||
beginning | income | realized and | investment | investment | value, end | Total | end of period | and/or expenses | and/or expenses | to average | Portfolio | |||||||||||||||||||||||||||||||||||||
of period | (loss) | unrealized) | operations | income | of period | return(a) | (000s omitted) | absorbed | absorbed | net assets | turnover(b) | |||||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | $ | 16.18 | $ | 0.22 | (c) | $ | 0.35 | $ | 0.57 | $ | (0.20 | ) | $ | 16.55 | 3.59 | % | $ | 246,751 | 1.33 | %(d) | 1.40 | %(d) | 2.73 | %(d) | 7 | % | ||||||||||||||||||||||
Year ended 04/30/11 | 14.28 | 0.40 | (c) | 1.87 | 2.27 | (0.37 | ) | 16.18 | 16.24 | 132,403 | 1.45 | 1.46 | 2.75 | 17 | ||||||||||||||||||||||||||||||||||
One month ended 04/30/10 | 14.00 | 0.01 | (c) | 0.27 | 0.28 | — | 14.28 | 2.00 | 130,406 | 1.49 | (e) | 1.50 | (e) | 0.53 | (e) | 0 | ||||||||||||||||||||||||||||||||
Year ended 03/31/10 | 11.57 | 0.34 | (c) | 2.43 | 2.77 | (0.34 | ) | 14.00 | 24.06 | 129,685 | 1.53 | 1.54 | 2.58 | 14 | ||||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 17.89 | 0.35 | (c) | (6.29 | )(f) | (5.94 | ) | (0.38 | ) | 11.57 | (33.56 | )(f) | 118,328 | 1.48 | 1.50 | 2.26 | 5 | |||||||||||||||||||||||||||||||
Year ended 03/31/08 | 18.15 | 0.32 | (c) | (0.27 | ) | 0.05 | (0.31 | ) | 17.89 | 0.20 | 214,352 | 1.31 | 1.34 | 1.69 | 25 | |||||||||||||||||||||||||||||||||
Year ended 03/31/07 | 13.92 | 0.31 | 4.23 | 4.54 | (0.31 | ) | 18.15 | 33.05 | 214,289 | 1.31 | 1.41 | 2.01 | 33 | |||||||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | 16.22 | 0.16 | (c) | 0.35 | 0.51 | (0.14 | ) | 16.59 | 3.20 | 20,645 | 2.08 | (d) | 2.15 | (d) | 1.98 | (d) | 7 | |||||||||||||||||||||||||||||||
Year ended 04/30/11 | 14.31 | 0.29 | (c) | 1.88 | 2.17 | (0.26 | ) | 16.22 | 15.42 | 13,669 | 2.20 | 2.21 | 2.00 | 17 | ||||||||||||||||||||||||||||||||||
One month ended 04/30/10 | 14.04 | (0.00 | )(c) | 0.27 | 0.27 | — | 14.31 | 1.92 | 15,680 | 2.24 | (e) | 2.25 | (e) | (0.22 | )(e) | 0 | ||||||||||||||||||||||||||||||||
Year ended 03/31/10 | 11.60 | 0.24 | (c) | 2.44 | 2.68 | (0.24 | ) | 14.04 | 23.19 | 15,828 | 2.28 | 2.29 | 1.83 | 14 | ||||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 17.95 | 0.24 | (c) | (6.32 | )(f) | (6.08 | ) | (0.27 | ) | 11.60 | (34.12 | )(f) | 18,254 | 2.23 | 2.25 | 1.51 | 5 | |||||||||||||||||||||||||||||||
Year ended 03/31/08 | 18.21 | 0.18 | (c) | (0.27 | ) | (0.09 | ) | (0.17 | ) | 17.95 | (0.53 | ) | 47,990 | 2.06 | 2.09 | 0.94 | 25 | |||||||||||||||||||||||||||||||
Year ended 03/31/07 | 13.97 | 0.20 | 4.24 | 4.44 | (0.20 | ) | 18.21 | 32.02 | 49,840 | 2.06 | 2.16 | 1.26 | 33 | |||||||||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | 16.36 | 0.16 | (c) | 0.34 | 0.50 | (0.14 | ) | 16.72 | 3.12 | 25,866 | 2.08 | (d) | 2.15 | (d) | 1.98 | (d) | 7 | |||||||||||||||||||||||||||||||
Year ended 04/30/11 | 14.43 | 0.30 | (c) | 1.90 | 2.20 | (0.27 | ) | 16.36 | 15.45 | 13,433 | 2.20 | 2.21 | 2.00 | 17 | ||||||||||||||||||||||||||||||||||
One month ended 04/30/10 | 14.15 | (0.00 | )(c) | 0.28 | 0.28 | — | 14.43 | 1.98 | 12,457 | 2.24 | (e) | 2.25 | (e) | (0.22 | )(e) | 0 | ||||||||||||||||||||||||||||||||
Year ended 03/31/10 | 11.70 | 0.25 | (c) | 2.45 | 2.70 | (0.25 | ) | 14.15 | 23.09 | 12,723 | 2.28 | 2.29 | 1.83 | 14 | ||||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 18.09 | 0.24 | (c) | (6.36 | )(f) | (6.12 | ) | (0.27 | ) | 11.70 | (34.06 | )(f) | 11,817 | 2.23 | 2.25 | 1.51 | 5 | |||||||||||||||||||||||||||||||
Year ended 03/31/08 | 18.35 | 0.18 | (c) | (0.27 | ) | (0.09 | ) | (0.17 | ) | 18.09 | (0.52 | ) | 23,176 | 2.06 | 2.09 | 0.94 | 25 | |||||||||||||||||||||||||||||||
Year ended 03/31/07 | 14.08 | 0.20 | 4.27 | 4.47 | (0.20 | ) | 18.35 | 31.99 | 17,711 | 2.06 | 2.16 | 1.26 | 33 | |||||||||||||||||||||||||||||||||||
Class Y | ||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | 16.32 | 0.24 | (c) | 0.36 | 0.60 | (0.23 | ) | 16.69 | 3.70 | 2,839 | 1.08 | (d) | 1.15 | (d) | 2.98 | (d) | 7 | |||||||||||||||||||||||||||||||
Year ended 04/30/11 | 14.40 | 0.44 | (c) | 1.89 | 2.33 | (0.41 | ) | 16.32 | 16.56 | 1,393 | 1.20 | 1.21 | 3.00 | 17 | ||||||||||||||||||||||||||||||||||
One month ended 04/30/10 | 14.11 | 0.01 | (c) | 0.28 | 0.29 | — | 14.40 | 2.06 | 1,057 | 1.24 | (e) | 1.25 | (e) | 0.78 | (e) | 0 | ||||||||||||||||||||||||||||||||
Year ended 03/31/10 | 11.67 | 0.39 | (c) | 2.43 | 2.82 | (0.38 | ) | 14.11 | 24.26 | 1,038 | 1.28 | 1.29 | 2.83 | 14 | ||||||||||||||||||||||||||||||||||
Year ended 03/31/09(g) | 14.51 | 0.15 | (c) | (2.77 | )(f) | (2.62 | ) | (0.22 | ) | 11.67 | (18.13 | )(f) | 300 | 1.46 | (e) | 1.47 | (e) | 2.28 | (e) | 5 | ||||||||||||||||||||||||||||
Investor Class | ||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | 16.32 | 0.22 | (c) | 0.36 | 0.58 | (0.21 | ) | 16.69 | 3.57 | 70,396 | 1.33 | (d) | 1.40 | (d) | 2.73 | (d) | 7 | |||||||||||||||||||||||||||||||
Year ended 04/30/11 | 14.40 | 0.41 | (c) | 1.89 | 2.30 | (0.38 | ) | 16.32 | 16.27 | 60,196 | 1.45 | 1.46 | 2.75 | 17 | ||||||||||||||||||||||||||||||||||
One month ended 04/30/10 | 14.11 | 0.01 | (c) | 0.28 | 0.29 | — | 14.40 | 2.06 | 59,707 | 1.49 | (e) | 1.50 | (e) | 0.53 | (e) | 0 | ||||||||||||||||||||||||||||||||
Year ended 03/31/10 | 11.67 | 0.35 | (c) | 2.44 | 2.79 | (0.35 | ) | 14.11 | 23.96 | 59,381 | 1.53 | 1.54 | 2.58 | 14 | ||||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 18.04 | 0.35 | (c) | (6.34 | )(f) | (5.99 | ) | (0.38 | ) | 11.67 | (33.54 | )(f) | 53,227 | 1.48 | 1.50 | 2.26 | 5 | |||||||||||||||||||||||||||||||
Year ended 03/31/08 | 18.30 | 0.32 | (c) | (0.27 | ) | 0.05 | (0.31 | ) | 18.04 | 0.22 | 95,682 | 1.31 | 1.34 | 1.69 | 25 | |||||||||||||||||||||||||||||||||
Year ended 03/31/07 | 14.04 | 0.32 | 4.26 | 4.58 | (0.32 | ) | 18.30 | 33.00 | 106,793 | 1.31 | 1.41 | 2.01 | 33 | |||||||||||||||||||||||||||||||||||
Institutional Class | ||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | 16.19 | 0.26 | (c) | 0.34 | 0.60 | (0.23 | ) | 16.56 | 3.79 | 8,046 | 0.86 | (d) | 0.87 | (d) | 3.20 | (d) | 7 | |||||||||||||||||||||||||||||||
Year ended 04/30/11 | 14.28 | 0.48 | (c) | 1.88 | 2.36 | (0.45 | ) | 16.19 | 16.94 | 7,820 | 0.93 | 0.94 | 3.27 | 17 | ||||||||||||||||||||||||||||||||||
One month ended 04/30/10 | 14.00 | 0.01 | (c) | 0.27 | 0.28 | — | 14.28 | 2.00 | 10,034 | 0.98 | (e) | 0.99 | (e) | 1.04 | (e) | 0 | ||||||||||||||||||||||||||||||||
Year ended 03/31/10 | 11.57 | 0.42 | (c) | 2.43 | 2.85 | (0.42 | ) | 14.00 | 24.75 | 9,934 | 0.97 | 0.98 | 3.14 | 14 | ||||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 17.89 | 0.42 | (c) | (6.29 | )(f) | (5.87 | ) | (0.45 | ) | 11.57 | (33.24 | )(f) | 9,228 | 1.00 | 1.01 | 2.74 | 5 | |||||||||||||||||||||||||||||||
Year ended 03/31/08 | 18.15 | 0.40 | (c) | (0.27 | ) | 0.13 | (0.39 | ) | 17.89 | 0.63 | 18,522 | 0.89 | 0.89 | 2.11 | 25 | |||||||||||||||||||||||||||||||||
Year ended 03/31/07 | 13.92 | 0.36 | 4.24 | 4.60 | (0.37 | ) | 18.15 | 33.54 | 5,132 | 0.91 | 0.91 | 2.41 | 33 | |||||||||||||||||||||||||||||||||||
(a) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges and is not annualized for periods less than one year, if applicable. | |
(b) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. For the period ending October 31, 2011, the portfolio Turnover calculation excludes the value of securities purchased of $95,656,625 and sold of $8,278,596 in the effort to realign the Fund’s portfolio holdings after the reorganization of Invesco Van Kampen Utility Fund into the Fund. | |
(c) | Calculated using average shares outstanding. | |
(d) | Ratios are annualized and based on average daily net assets (000’s omitted) of $216,611, $19,936, $21,545, $1,998, $67,660 and $7,612 for Class A, Class B, Class C, Class Y, Investor Class and Institutional Class shares, respectively. | |
(e) | Annualized. | |
(f) | Includes litigation proceeds received during the period. Had the litigation proceeds not been received, net gains (losses) on securities (both realized and unrealized) per share would have been $(6.39), $(6.42), $(6.46), $(2.83), $(6.44) and $(6.39) for Class A, Class B, Class C, Class Y, Investor Class and Institutional Class shares respectively, and total returns would have been lower. | |
(g) | Commencement date of October 3, 2008. |
15 Invesco Utilities Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments or contingent deferred sales charges on redemptions, and redemption fees, if any; and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period May 1, 2011 through October 31, 2011.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the hypothetical information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
HYPOTHETICAL | ||||||||||||||||||||||||||||||
(5% annual return before | ||||||||||||||||||||||||||||||
ACTUAL | expenses) | |||||||||||||||||||||||||||||
Beginning | Ending | Expenses | Ending | Expenses | Annualized | |||||||||||||||||||||||||
Account Value | Account Value | Paid During | Account Value | Paid During | Expense | |||||||||||||||||||||||||
Class | (05/01/11) | (10/31/11)1 | Period2,3 | (10/31/11) | Period2,4 | Ratio2 | ||||||||||||||||||||||||
A | $ | 1,000.00 | $ | 1,035.30 | $ | 6.80 | $ | 1,018.45 | $ | 6.75 | 1.33 | % | ||||||||||||||||||
B | 1,000.00 | 1,032.00 | 10.62 | 1,014.68 | 10.53 | 2.08 | ||||||||||||||||||||||||
C | 1,000.00 | 1,031.20 | 10.62 | 1,014.68 | 10.53 | 2.08 | ||||||||||||||||||||||||
Y | 1,000.00 | 1,037.00 | 5.53 | 1,019.71 | 5.48 | 1.08 | ||||||||||||||||||||||||
Investor | 1,000.00 | 1,037.00 | 5.43 | 1,018.45 | 6.75 | 1.33 | ||||||||||||||||||||||||
Institutional | 1,000.00 | 1,038.50 | 4.32 | 1,020.81 | 4.37 | 0.86 | ||||||||||||||||||||||||
1 | The actual ending account value is based on the actual total return of the Fund for the period May 1, 2011 through October 31, 2011, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund’s expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half year. Effective May 23, 2011, the Fund’s Adviser has contractually agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit Total Annual Fund Operating Expense of Class A, Class B, Class C, Class Y, Invesco Class and Institutional Class shares to 1.32%, 2.07%, 2.07%, 1.07%, 1.32% and 1.07% of average daily net assets, respectively. The annualized expense ratios restated as if these agreements had been in effect throughout the entire most recent fiscal half year are 1.32%, 2.07%, 2.07%, 1.07%, 1.32% and 0.85% for Class A, Class B, Class C, Class Y, Investor Class and Institutional Class shares, respectively. |
3 | The actual expenses paid restated as if the changes discussed above had been in effect throughout the entire most recent fiscal half year are $6.75, $10.57, 10.57, $5.48, $5.38 and $4.27 for Class A, Class B, Class C, Class Y, Investor Class and Institutional Class shares, respectively. |
4 | The hypothetical expenses paid restated as if the changes discussed above had been in effect throughout the entire most recent fiscal half year are $6.70, $10.48, $10.48, $5.43, $6.70 and $4.32 for Class A, Class B, Class C, Class Y, Investor Class and Institutional Class shares, respectively. |
16 Invesco Utilities 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 Utilities Fund (the Fund) investment advisory agreement with Invesco Advisers, Inc. (Invesco Advisers) and the Master Intergroup Sub-Advisory Contract for Mutual Funds (the sub-advisory contracts) with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers). During contract renewal meetings held on June 14-15, 2011, the Board as a whole, and the disinterested or “independent” Trustees, who comprise 80% of the Board, voting separately, approved the continuance of the Fund’s investment advisory agreement and the sub-advisory contracts for another year, effective July 1, 2011. In doing so, the Board considered the process that it follows in reviewing and approving the Fund’s investment advisory agreement and sub-advisory contracts and the information that it is provided. The Board determined that the Fund’s investment advisory agreement and the sub-advisory contracts are in the best interests of the Fund and its shareholders and the compensation to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is responsible for overseeing the management of a number of the series portfolios of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies and limitations and investment risks of these funds. The Sub-Committees meet regularly and at designated contract renewal meetings each year to conduct a review of the performance, fees, expenses and other matters related to their assigned Invesco Funds. Each Sub-Committee recommends to the Investments Committee, which in turn recommends to the full Board, whether to approve the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Trustees receive comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and an independent company, Lipper, Inc. (Lipper). The Trustees also receive an independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. The independent Trustees are assisted in their annual evaluation of the Fund’s investment advisory agreement by the Senior Officer and by independent legal counsel. The independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in private sessions with the Senior Officer and counsel.
In evaluating the fairness and reasonableness of the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Trustees also considered information provided in connection with fund acquisitions approved by the Trustees to rationalize the Invesco Funds product range following the acquisition of the retail mutual fund business of Morgan Stanley (the Morgan Stanley Transaction). The Trustees recognized that the advisory fees for the Invesco Funds include advisory fees that are the result of years of review and negotiation between the Trustees and Invesco Advisers as well as advisory fees inherited from Morgan Stanley and Van Kampen funds acquired in the Morgan Stanley Transaction. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these same arrangements throughout the year and in prior years. One Trustee may have weighed a particular piece of information differently than another Trustee.
The discussion below serves as the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 15, 2011, and may not reflect consideration of factors that became known to the Board after that date, including, for example, changes to the Fund’s performance, advisory fees, expense limitations and/or fee waivers.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers, with whom the Board met during the year. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s consideration of Invesco Advisers’ performance and investment process oversight, independent credit analysis and investment risk management.
In determining whether to continue the Fund’s investment advisory agreement, the Board considered the prior relationship between Invesco Advisers and the Fund, as well as the Board’s knowledge of Invesco Advisers’ operations, and concluded that it is beneficial to maintain the current relationship, in part, because of such knowledge. The Board also considered services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution and legal and compliance. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and the advisory services are provided in accordance with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services provided by the Affiliated Sub-Advisers under the sub-advisory contracts and the credentials and experience of the officers and employees of the Affiliated Sub-Advisers who provide these services. The Board noted that the Affiliated Sub-Advisers have offices and personnel that are located in financial centers around the world. As a result, the Affiliated Sub-Advisers can provide research and investment analysis on the markets and economies of various countries in which the Fund invests and make recommendations on securities of companies located in such countries. The Board concluded that the sub-advisory contracts benefit the Fund and its shareholders by permitting Invesco Advisers to use the resources and talents of the Affiliated Sub-Advisers in managing the Fund. The Board concluded that the nature, extent and quality of the services provided by the Affiliated Sub-Advisers are appropriate and satisfactory and in accordance with the terms of the Fund’s sub-advisory contracts.
17 Invesco Utilities Fund
B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
The Board compared the Fund’s performance during the past one, three and five calendar years to the performance of funds in the Lipper performance universe and against the Lipper Utility Funds Index. The Board noted that performance of Investor Class shares of the Fund was in the fourth quintile of the performance universe for the one year period and the third quintile for the three and five year periods (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board noted that performance of Investor Class 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 Investor Class 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 effective fee rate was above the effective rate of the other mutual fund with comparable investment strategies.
Other than the mutual fund described above, the Board noted that Invesco Advisers and the Affiliated Sub-Advisers do not advise other client accounts with investment strategies comparable to those of the Fund.
The Board also noted that Invesco Advisers has contractually agreed to waive fees and/or limit expenses of the Fund through at least June 30, 2013 in an amount necessary to limit total annual operating expenses to a specified percentage of average daily net assets for each class of the Fund. The Board also considered the effect this fee waiver would have on the Fund’s total estimated expenses.
The Board also considered the services provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the allocation of fees between Invesco Advisers and the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board noted that Invesco Advisers provides services to sub-advised Invesco Funds, including oversight of the Affiliated Sub-Advisers as well as the additional services described above other than day-to-day portfolio management. The Board also noted that the sub-advisory fees have no direct effect on the Fund or its shareholders, as they are paid by Invesco Advisers to the Affiliated Sub-Advisers.
Based upon the information and considerations described above, the Board concluded that the Fund’s advisory and sub-advisory fees are fair and reasonable.
D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule. The Board also noted that the Fund shares directly in economies of scale through lower fees charged by third party service providers based on the combined size of the Invesco Funds and other clients advised by Invesco Advisers.
E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the profitability of Invesco Advisers and its affiliates in providing these services. The Board reviewed with Invesco Advisers the methodology used to prepare the profitability information. The Board considered the profitability of Invesco Advisers in connection with managing the Fund and the Invesco Funds. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its subsidiaries provide to the Fund and the Invesco Funds. The Board concluded that the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund is not excessive given the nature, quality and extent of the services provided to the Invesco Funds. The Board considered whether Invesco Advisers and each Affiliated Sub-Adviser are financially sound and have the resources necessary to perform their obligations under the investment advisory agreement and sub-advisory contracts. The Board concluded that Invesco Advisers and each Affiliated Sub-Adviser have the financial resources necessary to fulfill these obligations.
F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund, including the fees received for their provision of administrative, transfer agency and distribution services to the Fund. The Board considered the performance of Invesco Advisers and its affiliates in providing these services and the organizational structure employed to provide these services. The Board also considered that these services are provided to the Fund pursuant to written contracts that are reviewed and approved on an annual basis by the Board; that the services are required for the operation of the Fund; that Invesco Advisers and its affiliates can provide services, the nature and quality of which are at least equal to those provided by others offering the same or similar services; and that the fees for such services are fair and reasonable in light of the usual and customary charges by others for services of the same nature and quality.
The Board considered the benefits realized by Invesco Advisers and the Affiliated Sub-Advisers as a result of portfolio brokerage transactions executed through “soft dollar” arrangements. The Board noted that soft dollar arrangements shift the payment obligation for research and execution services from Invesco Advisers and the Affiliated Sub-Advisers to the Invesco Funds and therefore may reduce Invesco Advisers’ and the Affiliated Sub-Advisers’ expenses. The Board concluded that the soft dollar arrangements are appropriate. The Board also concluded that, based on their review and representations made by the Chief Compliance Officer of the Invesco Funds, these arrangements are consistent with regulatory requirements.
The Board considered that the Fund’s uninvested cash and cash collateral from any securities lending arrangements may be invested in money market funds advised by Invesco Advisers pursuant to procedures approved by the Board. The Board noted that Invesco Advisers receives advisory fees from these affiliated money market funds attributable to such investments, although Invesco Advisers has contractually agreed to waive through varying periods the advisory fees payable by the Invesco Funds. The waiver is in an amount equal to 100% of the net advisory fee Invesco Advisers receives from the affiliated money market funds with respect to the Fund’s investment in the affiliated money market funds of uninvested cash, but not cash collateral. The Board concluded that the Fund’s investment of uninvested cash and cash collateral from any securities lending arrangements in the affiliated money market funds is in the best interests of the Fund and its shareholders.
18 Invesco Utilities Fund
![(image)](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8579407.gif)
Invesco mailing information
Send general correspondence to Invesco Investment Services, Inc., P.O. Box 219078, Kansas City, MO 64121-9078.
Invesco privacy policy
You share personal and financial information with us that is necessary for your transactions and your account records. We take very seriously the obligation to keep that information confidential and private.
Invesco collects nonpublic personal information about you from account applications or other forms you complete and from your transactions with us or our affiliates. We do not disclose information about you or our former customers to service providers or other third parties except to the extent necessary to service your account and in other limited circumstances as permitted by law. For example, we use this information to facilitate the delivery of transaction confirmations, financial reports, prospectuses and tax forms.
Even within Invesco, only people involved in the servicing of your accounts and compliance monitoring have access to your information. To ensure the highest level of confidentiality and security, Invesco maintains physical, electronic and procedural safeguards that meet or exceed federal standards. Special measures, such as data encryption and authentication, apply to your communications with us on our website. More detail is available to you at invesco.com/privacy.
Important notice regarding delivery of security holder documents
To reduce Fund expenses, only one copy of most shareholder documents may be mailed to shareholders with multiple accounts at the same address (Householding). Mailing of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact Invesco Investment Services, Inc. at 800 959 4246 or contact your financial institution. We will begin sending you individual copies for each account within 30 days after receiving your request.
Fund holdings and proxy voting information
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is available at invesco.com/completeqtrholdings. Shareholders can also look up the Fund’s Forms N-Q on the SEC website at sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-03826 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.
![(INVESCO LOGO)](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8579400.gif)
Information regarding how the Fund voted proxies related to its portfolio securities during the 12 months ended June 30, 2011, is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov.
Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the U.S. distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
I-UTI-SAR-1 Invesco Distributors, Inc.
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Invesco Van Kampen American Value Fund
Semiannual Report to Shareholders § October 31, 2011
Nasdaq:
A: MSAVX § B: MGAVX § C: MSVCX § R: MSARX § Y: MSAIX § Institutional: MSAJX
![(IMAGE)](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8578102.gif)
2 | Fund Performance | |
4 | Letters to Shareholders | |
5 | Schedule of Investments | |
7 | Financial Statements | |
9 | Notes to Financial Statements | |
16 | Financial Highlights | |
18 | Fund Expenses | |
19 | 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, 4/30/11 to 10/31/11, at net asset value (NAV). Performance shown does not include applicable contingent deferred sales charges (CDSC) or front-end sales charges, which would have reduced performance.
Class A Shares | -10.67 | % | ||
Class B Shares | -10.64 | |||
Class C Shares | -10.97 | |||
Class R Shares | -10.79 | |||
Class Y Shares | -10.59 | |||
Institutional Class Shares | -10.44 | |||
S&P 500 Index6 (Broad Market Index) | -7.12 | |||
Russell Midcap Value Index6 (Style-Specific Index) | -11.02 | |||
Lipper Mid-Cap Value Funds Index6 (Peer Group Index) | -13.23 | |||
Source(s): 6Lipper Inc.
The S&P 500® Index is an unmanaged index considered representative of the U.S. stock market.
The Russell Midcap® Value Index is an unmanaged index considered representative of mid-cap value stocks. The Russell Midcap Value Index is a trademark/service mark of the Frank Russell Co. Russell® is a trademark of the Frank Russell Co.
The Lipper Mid-Cap Value Funds Index is an unmanaged index considered representative of mid-cap value 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.
2 Invesco Van Kampen American Value Fund
Average Annual Total Returns
As of 10/31/11, including maximum applicable sales charges
Class A Shares | ||||
Inception (10/18/93) | 8.32 | % | ||
10 Years | 6.95 | |||
5 Years | 1.22 | |||
1 Year | 0.33 | |||
Class B Shares | ||||
Inception (8/1/95) | 8.16 | % | ||
10 Years | 7.14 | |||
5 Years | 1.83 | |||
1 Year | 1.14 | |||
Class C Shares | ||||
Inception (10/18/93) | 7.88 | % | ||
10 Years | 6.83 | |||
5 Years | 1.62 | |||
1 Year | 4.42 | |||
Class R Shares | ||||
Inception (3/20/07) | 0.53 | % | ||
1 Year | 5.85 | |||
Class Y Shares | ||||
Inception (2/7/06) | 4.07 | % | ||
5 Years | 2.62 | |||
1 Year | 6.36 | |||
Institutional Class Shares | ||||
10 Years | 7.62 | % | ||
5 Years | 2.49 | |||
1 Year | 6.62 |
Effective June 1, 2010, Class A, Class B, Class C, Class I and Class R shares of the predecessor fund, Van Kampen American Value Fund, advised by Van Kampen Asset Management were reorganized into Class A, Class B, Class C, Class Y and Class R shares, respectively, of Invesco Van Kampen American Value Fund. Returns shown above for Class A, Class B, Class C, Class R and Class Y shares are blended returns of the predecessor fund and Invesco Van Kampen American Value Fund. Share class returns will differ from the predecessor fund because of different expenses.
Institutional Class shares incepted on June 1, 2010. Performance shown prior to that date is that of the predecessor fund’s Class A shares and includes the 12b-1 fees applicable to Class A shares. Class A share performance reflects any applicable fee waivers or expense reimbursements.
The performance data quoted represent past performance and cannot guarantee comparable future
Average Annual Total Returns
As of 9/30/11, the most recent calendar quarter-end, including maximum applicable sales charges
Class A Shares | ||||
Inception (10/18/93) | 7.56 | % | ||
10 Years | 6.03 | |||
5 Year | -0.79 | |||
1 Year | -8.88 | |||
Class B Shares | ||||
Inception (8/1/95) | 7.32 | % | ||
10 Years | 6.21 | |||
5 Year | -0.19 | |||
1 Year | -8.43 | |||
Class C Shares | ||||
Inception (10/18/93) | 7.13 | % | ||
10 Years | 5.90 | |||
5 Year | -0.40 | |||
1 Year | -5.20 | |||
Class R Shares | ||||
Inception (3/20/07) | -2.36 | % | ||
1 Year | -3.83 | |||
Class Y Shares | ||||
Inception (2/7/06) | 1.72 | % | ||
5 Year | 0.59 | |||
1 Year | -3.38 | |||
Institutional Class Shares | ||||
10 Years | 6.69 | % | ||
5 Year | 0.45 | |||
1 Year | -3.16 |
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, Class R, Class Y and Institutional Class shares was 1.27%, 1.27%, 1.99%, 1.52%, 1.02% and 0.80%, respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based
on expenses incurred during the period covered by this report.
Class A share performance reflects the maximum 5.50% sales charge, and Class B and Class C share performance reflects the applicable contingent deferred sales charge (CDSC) for the period involved. For shares purchased prior to June 1, 2010, the CDSC on Class B shares declines from 5% at the time of purchase to 0% at the beginning of the sixth year. For shares purchased on or after June 1, 2010, the CDSC on Class B shares declines from 5% at the time of purchase to 0% at the beginning of the seventh year. The CDSC on Class C shares is 1% for the first year after purchase. Class R, Class Y and Institutional Class shares do not have a front-end sales charge or a CDSC; therefore, performance is at net asset value.
The performance of the Fund’s share classes will differ primarily due to different sales charge structures and class expenses.
3 Invesco Van Kampen American Value Fund
Letters to Shareholders
![(PHOTO OF BRUCE CROCKETT)](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8578103.jpg)
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,
![-s- Bruce L. Crockett](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8578104.gif)
Bruce L. Crockett
Independent Chair, Invesco Funds Board of Trustees
![(PHOTO OF PHILIP TAYLOR)](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8578105.jpg)
Philip Taylor
Dear Shareholders:
Enclosed is important information about your Fund and its performance. I encourage you to read this report to learn more about your Fund’s short- and long-term performance.
The start of a new year is always a good time to catch up with your financial adviser. Looking ahead to the new year and evaluating your individual situation, your financial adviser can provide valuable insight into whether your investments are still appropriate for your individual needs, goals and risk tolerance. This may provide reassurance in times of economic uncertainty and market volatility such as we saw in 2011 – and are likely to see again in 2012.
On our website, invesco.com/us, we provide timely market updates and commentary from many of our fund managers and other investment professionals. Also on our website, you 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.
Across our broad array of investment products, 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 – meaning 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,
![-s- Philip Taylor](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8578106.gif)
Philip Taylor
Senior Managing Director, Invesco Ltd.
4 Invesco Van Kampen American Value Fund
Schedule of Investments(a)
October 31, 2011
(Unaudited)
Shares | Value | |||||||
Common Stocks & Other Equity Interests–90.33% | ||||||||
Alternative Carriers–2.93% | ||||||||
TW Telecom, Inc.(b) | 1,320,835 | $ | 24,435,448 | |||||
Asset Management & Custody Banks–2.22% | ||||||||
Northern Trust Corp. | 458,072 | 18,538,174 | ||||||
Computer Hardware–2.28% | ||||||||
Diebold, Inc. | 588,220 | 18,987,742 | ||||||
Data Processing & Outsourced Services–3.06% | ||||||||
Fidelity National Information Services, Inc. | 973,468 | 25,485,392 | ||||||
Diversified Banks–1.77% | ||||||||
Comerica, Inc. | 576,612 | 14,732,437 | ||||||
Electric Utilities–4.57% | ||||||||
Edison International | 738,534 | 29,984,481 | ||||||
Great Plains Energy, Inc. | 392,488 | 8,140,201 | ||||||
38,124,682 | ||||||||
Electronic Manufacturing Services–1.47% | ||||||||
Flextronics International Ltd. (Singapore)(b) | 1,873,411 | 12,298,943 | ||||||
Food Distributors–1.87% | ||||||||
Sysco Corp. | 563,930 | 15,632,140 | ||||||
Food Retail–2.99% | ||||||||
Safeway, Inc. | 1,285,184 | 24,894,014 | ||||||
Health Care Facilities–4.36% | ||||||||
Brookdale Senior Living, Inc.(b) | 1,091,890 | 18,103,536 | ||||||
HealthSouth Corp.(b) | 1,035,235 | 18,282,250 | ||||||
36,385,786 | ||||||||
Heavy Electrical Equipment–2.05% | ||||||||
Babcock & Wilcox Co. (The)(b) | 777,995 | 17,108,110 | ||||||
Home Furnishings–2.22% | ||||||||
Mohawk Industries, Inc.(b) | 351,357 | 18,498,946 | ||||||
Housewares & Specialties–3.07% | ||||||||
Newell Rubbermaid, Inc. | 1,729,742 | 25,600,182 | ||||||
Industrial Machinery–2.90% | ||||||||
Snap-On, Inc. | 449,941 | 24,148,333 | ||||||
Insurance Brokers–5.09% | ||||||||
Marsh & McLennan Cos., Inc. | 774,023 | 23,700,584 | ||||||
Willis Group Holdings PLC (Ireland) | 515,649 | 18,723,215 | ||||||
42,423,799 | ||||||||
Integrated Oil & Gas–1.96% | ||||||||
Murphy Oil Corp. | 295,165 | 16,343,286 | ||||||
Investment Banking & Brokerage–0.70% | ||||||||
Charles Schwab Corp. (The) | 476,103 | 5,846,545 | ||||||
Motorcycle Manufacturers–2.92% | ||||||||
Harley-Davidson, Inc. | 627,059 | 24,392,595 | ||||||
Multi-Utilities–3.87% | ||||||||
CenterPoint Energy, Inc. | 784,598 | 16,351,023 | ||||||
Wisconsin Energy Corp. | 491,061 | 15,925,108 | ||||||
32,276,131 | ||||||||
Office Electronics–2.79% | ||||||||
Zebra Technologies Corp.–Class A(b) | 651,277 | 23,276,640 | ||||||
Office Services & Supplies–0.60% | ||||||||
Avery Dennison Corp. | 186,528 | 4,961,645 | ||||||
Oil & Gas Exploration & Production–2.10% | ||||||||
Pioneer Natural Resources Co. | 209,209 | 17,552,635 | ||||||
Oil & Gas Storage & Transportation–6.87% | ||||||||
El Paso Corp. | 1,318,608 | 32,978,386 | ||||||
Williams Cos., Inc. (The) | 808,412 | 24,341,285 | ||||||
57,319,671 | ||||||||
Packaged Foods & Meats–3.25% | ||||||||
ConAgra Foods, Inc. | 1,068,675 | 27,069,538 | ||||||
Paper Packaging–2.08% | ||||||||
Sonoco Products Co. | 552,874 | 17,354,715 | ||||||
Personal Products–1.30% | ||||||||
Avon Products, Inc. | 591,387 | 10,810,554 | ||||||
Property & Casualty Insurance–2.84% | ||||||||
ACE Ltd. (Switzerland) | 328,836 | 23,725,517 | ||||||
Regional Banks–4.07% | ||||||||
BB&T Corp. | 712,413 | 16,627,719 | ||||||
Wintrust Financial Corp. | 598,713 | 17,290,832 | ||||||
33,918,551 | ||||||||
Restaurants–2.27% | ||||||||
Darden Restaurants, Inc. | 396,117 | 18,966,082 | ||||||
Retail REIT’s–1.69% | ||||||||
Weingarten Realty Investors | 607,700 | 14,104,717 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
5 Invesco Van Kampen American Value Fund
Shares | Value | |||||||
Specialty Chemicals–5.16% | ||||||||
Valspar Corp. (The) | 542,410 | $ | 18,913,837 | |||||
W.R. Grace & Co.(b) | 576,846 | 24,106,394 | ||||||
43,020,231 | ||||||||
Specialty Stores–2.15% | ||||||||
Staples, Inc. | 1,200,820 | 17,964,267 | ||||||
Trucking–0.86% | ||||||||
Swift Transportation Co.(b) | 808,828 | 7,198,569 | ||||||
Total Common Stocks & Other Equity Interests (Cost $731,796,705) | 753,396,017 | |||||||
Preferred Stocks–0.82% | ||||||||
Health Care Facilities–0.82% | ||||||||
HealthSouth Corp., Series A, $65.00 Conv. Pfd. (Cost $6,354,956) | 7,660 | 6,819,315 | ||||||
Money Market Funds–8.47% | ||||||||
Liquid Assets Portfolio–Institutional Class(c) | 35,348,666 | 35,348,666 | ||||||
Premier Portfolio–Institutional Class(c) | 35,348,667 | 35,348,667 | ||||||
Total Money Market Funds (Cost $70,697,333) | 70,697,333 | |||||||
TOTAL INVESTMENTS–99.62% (Cost $808,848,994) | 830,912,665 | |||||||
OTHER ASSETS LESS LIABILITIES–0.38% | 3,163,665 | |||||||
NET ASSETS–100.00% | $ | 834,076,330 | ||||||
Investment Abbreviations:
Conv. | – Convertible | |
Pfd. | – Preferred | |
REIT | – Real Estate Investment Trust |
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. | |
(b) | Non-income producing security. | |
(c) | The money market fund and the Fund are affiliated by having the same investment adviser. |
By sector, based on Net Assets
as of October 31, 2011
Financials | 18.4 | % | ||
Consumer Discretionary | 12.6 | |||
Energy | 10.9 | |||
Information Technology | 9.6 | |||
Consumer Staples | 9.4 | |||
Utilities | 8.5 | |||
Materials | 7.2 | |||
Industrials | 6.4 | |||
Health Care | 5.2 | |||
Telecommunication Services | 2.9 | |||
Money Market Funds Plus Other Assets Less Liabilities | 8.9 | |||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
6 Invesco Van Kampen American Value Fund
Statement of Assets and Liabilities
October 31, 2011
(Unaudited)
Assets: | ||||
Investments, at value (Cost $738,151,661) | $ | 760,215,332 | ||
Investments in affiliated money market funds, at value and cost | 70,697,333 | |||
Total investments, at value (Cost $808,848,994) | 830,912,665 | |||
Receivable for: | ||||
Investments sold | 6,088,652 | |||
Fund shares sold | 1,428,270 | |||
Dividends | 714,904 | |||
Fund expenses absorbed | 28,292 | |||
Investment for trustee deferred compensation and retirement plans | 26,489 | |||
Other assets | 47,299 | |||
Total assets | 839,246,571 | |||
Liabilities: | ||||
Payable for: | ||||
Investments purchased | 2,728,920 | |||
Fund shares reacquired | 1,565,979 | |||
Accrued fees to affiliates | 629,452 | |||
Accrued other operating expenses | 184,300 | |||
Trustee deferred compensation and retirement plans | 61,590 | |||
Total liabilities | 5,170,241 | |||
Net assets applicable to shares outstanding | $ | 834,076,330 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 878,718,401 | ||
Undistributed net investment income | 1,802,980 | |||
Undistributed net realized gain (loss) | (68,508,722 | ) | ||
Unrealized appreciation | 22,063,671 | |||
$ | 834,076,330 | |||
Net Assets: | ||||
Class A | $ | 580,404,952 | ||
Class B | $ | 45,092,306 | ||
Class C | $ | 67,828,567 | ||
Class R | $ | 23,292,914 | ||
Class Y | $ | 111,926,764 | ||
Institutional Class | $ | 5,530,827 | ||
Shares outstanding, $0.01 par value per share, with an unlimited number of shares authorized: | ||||
Class A | 21,788,147 | |||
Class B | 1,858,977 | |||
Class C | 2,833,483 | |||
Class R | 875,018 | |||
Class Y | 4,186,656 | |||
Institutional Class | 206,739 | |||
Class A: | ||||
Net asset value per share | $ | 26.64 | ||
Maximum offering price per share | ||||
(Net asset value of $26.64 divided by 94.50%) | $ | 28.19 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 24.26 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 23.94 | ||
Class R: | ||||
Net asset value and offering price per share | $ | 26.62 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 26.73 | ||
Institutional Class: | ||||
Net asset value and offering price per share | $ | 26.75 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
7 Invesco Van Kampen American Value Fund
Statement of Operations
For the six months ended October 31, 2011
(Unaudited)
Investment income: | ||||
Dividends | $ | 7,945,387 | ||
Dividends from affiliated money market funds | 15,105 | |||
Total investment income | 7,960,492 | |||
Expenses: | ||||
Advisory fees | 3,028,713 | |||
Administrative services fees | 122,142 | |||
Custodian fees | 17,081 | |||
Distribution fees: | ||||
Class A | 746,407 | |||
Class B | 240,859 | |||
Class C | 342,222 | |||
Class R | 53,240 | |||
Transfer agent fees — A, B, C, R and Y | 1,062,173 | |||
Transfer agent fees — Institutional | 155 | |||
Trustees’ and officers’ fees and benefits | 17,904 | |||
Other | 184,651 | |||
Total expenses | 5,815,547 | |||
Less: Fees waived and expense offset arrangement(s) | (226,280 | ) | ||
Net expenses | 5,589,267 | |||
Net investment income | 2,371,225 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain from: | ||||
Investment securities | 25,333,081 | |||
Option contracts written | 368,267 | |||
25,701,348 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | (135,051,622 | ) | ||
Option contracts written | 1,036,509 | |||
(134,015,113 | ) | |||
Net realized and unrealized gain (loss) | (108,313,765 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | (105,942,540 | ) | |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
8 Invesco Van Kampen American Value Fund
Statement of Changes in Net Assets
For the six months ended October 31, 2011, the ten months ended April 30, 2011 and the year ended June 30, 2010
(Unaudited)
Six months ended | Ten months ended | Year ended | ||||||||||
October 31, | April 30, | June 30, | ||||||||||
2011 | 2011 | 2010 | ||||||||||
Operations: | ||||||||||||
Net investment income | $ | 2,371,225 | $ | 1,456,613 | $ | 2,535,562 | ||||||
Net realized gain | 25,701,348 | 36,371,018 | 49,893,610 | |||||||||
Change in net unrealized appreciation (depreciation) | (134,015,113 | ) | 143,461,327 | 80,978,189 | ||||||||
Net increase (decrease) in net assets resulting from operations | (105,942,540 | ) | 181,288,958 | 133,407,361 | ||||||||
Distributions to shareholders from net investment income: | ||||||||||||
Class A | (954,015 | ) | (695,973 | ) | (2,484,527 | ) | ||||||
Class B | (77,974 | ) | (12,844 | ) | (146,581 | ) | ||||||
Class C | — | — | (18,616 | ) | ||||||||
Class R | (7,031 | ) | (1,526 | ) | (22,038 | ) | ||||||
Class Y | (321,401 | ) | (82,850 | ) | (116,335 | ) | ||||||
Institutional Class | (11,513 | ) | (2,927 | ) | (11 | ) | ||||||
Total distributions from net investment income | (1,371,934 | ) | (796,120 | ) | (2,788,108 | ) | ||||||
Share transactions–net: | ||||||||||||
Class A | 106,744,761 | (47,249,197 | ) | (57,254,421 | ) | |||||||
Class B | 13,646,868 | (6,956,116 | ) | (6,236,507 | ) | |||||||
Class C | 30,146,830 | (4,651,257 | ) | (3,424,520 | ) | |||||||
Class R | 8,283,989 | 900,661 | 7,020,443 | |||||||||
Class Y | 87,802,421 | 20,088,726 | (97,400 | ) | ||||||||
Institutional Class | 5,905,802 | (2,740,068 | ) | 2,592,095 | ||||||||
Net increase (decrease) in net assets resulting from share transactions | 252,530,671 | (40,607,251 | ) | (57,400,310 | ) | |||||||
Net increase in net assets | 145,216,197 | 139,885,587 | 73,218,943 | |||||||||
Net assets: | ||||||||||||
Beginning of period | 688,860,133 | 548,974,546 | 475,755,603 | |||||||||
End of period (includes undistributed net investment income of $1,802,980, $803,689 and $113,196 respectively) | $ | 834,076,330 | $ | 688,860,133 | $ | 548,974,546 | ||||||
Notes to Financial Statements
October 31, 2011
(Unaudited)
NOTE 1—Significant Accounting Policies
Invesco Van Kampen American Value 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 to seek to provide a high total return by investing in equity securities of small- to medium-sized corporations.
The Fund currently consists of six different classes of shares: Class A, Class B, Class C, Class R, Class Y and Institutional Class. Class A shares are sold with a front-end sales charge unless certain waiver criteria are met and under certain circumstances load waived shares may be subject to contingent deferred sales charges (“CDSC”). Class C shares are sold with a CDSC. Class R, Class Y and Institutional Class shares are sold at net asset value. Effective November 30, 2010, new or additional investments in Class B shares are no longer permitted. Existing shareholders of Class B shares may continue to reinvest dividends and capital gains distributions in Class B shares until they convert. Also, shareholders in Class B shares will be able to exchange those shares for Class B shares of other
9 Invesco Van Kampen American Value Fund
Invesco Funds offering such shares until they convert. Generally, Class B shares will automatically convert to Class A shares on or about the month-end which is at least eight years after the date of purchase. Redemption of Class B shares prior to conversion date will be subject to a CDSC.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. | |
A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”). | ||
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded. | ||
Debt obligations (including convertible bonds) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. 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 |
10 Invesco Van Kampen American Value Fund
laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. | ||
D. | Distributions — Distributions from income are declared and paid quarterly and are recorded on ex-dividend date. Distributions from net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to treat a portion of the proceeds from redemptions as distributions for federal income tax purposes. | |
E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. | |
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period. | ||
F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund are charged to the operations of such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses attributable to the Institutional Class are charged to such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses relating to all other classes are allocated among those classes based on relative net assets. All other expenses are allocated among the classes based on relative net assets. Prior to the Reorganization, incremental transfer agency fees which are unique to each class of shares of the Acquired Fund were charged to the operations of such class. | |
G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. | |
H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. | |
I. | Call Options Written and Purchased — The Fund may write and/or buy call options. A call option gives the purchaser of such option the right to buy, and the writer the obligation to sell, the underlying security at the stated exercise price during the option period. Options written by the Fund normally will have expiration dates between three and nine months from the date written. The exercise price of a call option may be below, equal to, or above the current market value of the underlying security at the time the option is written. | |
When the Fund writes a call option, an amount equal to the premium received by the Fund is recorded as an asset and an equivalent liability in the Statement of Assets and Liabilities. The amount of the liability is subsequently “marked-to-market” to reflect the current market value of the option written. If a written call option expires on the stipulated expiration date, or if the Fund enters into a closing purchase transaction, the Fund realizes a gain (or a loss if the closing purchase transaction exceeds the premium received when the option was written) without regard to any unrealized gain or loss on the underlying security, and the liability related to such option is extinguished. If a written option is exercised, the Fund realizes a gain or a loss from the sale of the underlying security and the proceeds of the sale are increased by the premium originally received. Realized and unrealized gains and losses on these contracts are included in the Statement of Operation. A risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised. | ||
When the Fund buys a call option, an amount equal to the premium paid by the Fund is recorded as an investment on the Statement of Assets and Liabilities. The amount of the investment is subsequently “marked-to-market” to reflect the current value of the option purchased. Realized and unrealized gains and losses on these contracts are included in the Statement of Operations. A risk in buying an option is that the Fund pays a premium whether or not the option is exercised. In addition, there can be no assurance that a liquid secondary market will exist for any option purchased. | ||
J. | Put Options Purchased — The Fund may purchase put options including options on securities indexes and/or futures contracts. By purchasing a put option, the Fund obtains the right (but not the obligation) to sell the option’s underlying instrument at a fixed strike price. In return for this right, the Fund pays an option premium. The option’s underlying instrument may be a security, securities index, or a futures contract. Put options may be used by the Fund to hedge securities it owns by locking in a minimum price at which the Fund can sell. If security prices fall, the put option could be exercised to offset all or a portion of the Fund’s resulting losses. At the same time, because the maximum the Fund has at risk is the cost of the option, purchasing put options does not eliminate the potential for the Fund to profit from an increase in the value of the securities hedged. Realized and unrealized gains and losses on these contracts are included in the Statement of Operations. A risk in buying an option is that the Fund pays a premium whether or not the option is exercised. In addition, there can be no assurance that a liquid secondary market will exist for any option purchased. |
11 Invesco Van Kampen American Value Fund
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Effective May 23, 2011, under the terms of the investment advisory agreement, the Fund paid 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 | .72% | ||
Next $535 million | 0 | .715% | ||
Next $31.965 billion | 0 | .65% | ||
Over $33 billion | 0 | .64% | ||
Prior to May 23, 2011, the Fund paid 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 $1 billion | 0 | .72% | ||
Over $1.035 billion | 0 | .65% | ||
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Sub-Adviser(s).
Effective May 23, 2011, the Adviser has contractually agreed, through at least June 30, 2012, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Class A, Class B, Class C, Class R, Class Y and Institutional Class shares to 1.41%, 1.65% (after Rule 12b-1 fee limit), 2.16%, 1.66%, 1.16% and 1.16%, respectively, of average daily net assets. Prior to May 23, 2011, the Adviser had contractually agreed, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Class A, Class B, Class C, Class R, Class Y and Institutional Class shares to 1.41%, 2.16%, 2.16%, 1.66%, 1.16% and 1.16%, 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 the expense limitation.
Further, the Adviser has contractually agreed, through at least June 30, 2012, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the six months ended October 31, 2011, the Adviser waived advisory fees of $28,691.
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 October 31, 2011, expenses incurred under the agreement are shown in the Statement of Operations as administrative services fees.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (“IIS”) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. IIS may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. All fees payable by IIS to intermediaries that provide omnibus account services or sub-accounting are charged back to the Fund, subject to certain limitations approved by the Trust’s Board of Trustees. For the six months ended October 31, 2011, expenses incurred under the agreement are shown in the Statement of Operations as transfer agent fees.
Shares of the Fund are distributed by Invesco Distributors, Inc. (“IDI”). The Fund has adopted a distribution plan pursuant to Rule 12b-1 under the 1940 Act, and a service plan (collectively, the “Plans”) for Class A shares, Class B shares, Class C shares and Class R shares to compensate IDI for the sale, distribution, shareholder servicing and maintenance of shareholder accounts for these shares. Under the Plans, the Fund will incur annual fees of up to 0.25% of Class A average daily net assets, up to 1.00% each of Class B and Class C average daily net assets and up to 0.50% of Class R average daily net assets.
Effective May 23, 2011, IDI has contractually agreed to limit Rule 12b-1 plan fees on Class B to 0.49% of average daily net assets, through at least June 30, 2012.
With respect to Class B and Class C shares, the Fund is authorized to reimburse in future years any distribution related expenses that exceed the maximum annual reimbursement rate for such class, so long as such reimbursement does not cause the Fund to exceed the Class B and Class C maximum annual reimbursement rate, respectively. With respect to Class A shares, distribution related expenses that exceed the maximum annual reimbursement rate for such class are not carried forward to future years and the Fund will not reimburse IDI for any such expenses.
Expenses under the Plans before fee waivers are shown as distribution fees in the Statement of Operations as distribution fees. For the six months ended October 31, 2011, 12b-1 fees for Class B shares were $59,694 after fee waivers of $181,165 and 12b-1 fees for Class C shares were $326,796 after fee waivers of $15,426.
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 October 31, 2011, IDI advised the Fund that IDI retained $64,955 in front-end sales commissions from the sale of Class A shares and $68, $28,157 and $1,679 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.
12 Invesco Van Kampen American Value Fund
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3) generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
Level 1 — | Prices are determined using quoted prices in an active market for identical assets. | |
Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. | |
Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of October 31, 2011. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
For the six months ended October 31, 2011, there were no significant transfers between investment levels.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 824,093,350 | $ | 6,819,315 | $ | — | $ | 830,912,665 | ||||||||
NOTE 4—Derivative Investments
The Fund has implemented the required disclosures about derivative instruments and hedging activities in accordance with GAAP. This disclosure is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position and financial performance. The enhanced disclosure has no impact on the results of operations reported in the financial statements.
Effect of Derivative Instruments for the six months ended October 31, 2011
The table below summarizes the gains (losses) on derivative instruments, detailed by primary risk exposure, recognized in earnings during the period:
Location of Gain on | ||||
Statement of Operations | ||||
Options* | ||||
Realized Gain | ||||
Equity risk | $ | 368,267 | ||
Change in Unrealized Appreciation | ||||
Equity risk | 1,036,509 | |||
Total | $ | 1,404,776 | ||
* | The average value of options outstanding during the period was $293,345. |
Transactions During the Period | ||||||||
Call Option Contracts | ||||||||
Number of | Premiums | |||||||
Contracts | Received | |||||||
Beginning of period | 2,750 | $ | 379,741 | |||||
Written | 6,575 | 1,162,877 | ||||||
Closed | (7,975 | ) | (1,354,653 | ) | ||||
Expired | (1,350 | ) | (187,965 | ) | ||||
End of period | — | $ | — | |||||
NOTE 5—Security Transactions with Affiliated Funds
The Fund is permitted to purchase or sell securities from or to certain other Invesco Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment adviser (or affiliated investment advisers), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, for the six months ended October 31, 2011, the Fund engaged in securities purchases of $958,285.
13 Invesco Van Kampen American Value Fund
NOTE 6—Expense Offset Arrangement(s)
The expense offset arrangement is comprised of transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions. For the six months ended October 31, 2011, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $998.
NOTE 7—Trustees’ and Officers’ Fees and Benefits
“Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and “Trustees’ and Officers’ Fees and Benefits” also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. “Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
During the six months ended October 31, 2011, the Fund paid legal fees of $1,213 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A partner of that firm is a Trustee of the Trust.
NOTE 8—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 9—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 April 30, 2011, which expires as follows:
Capital Loss | ||||
Expiration | Carryforward* | |||
April 30, 2017 | $ | 23,733,744 | ||
April 30, 2018 | 69,879,698 | |||
Total capital loss carryforward | $ | 93,613,442 | ||
* | Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. |
NOTE 10—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the six months ended October 31, 2011 was $93,991,755 and $114,980,212, 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 | $ | 89,200,381 | ||
Aggregate unrealized (depreciation) of investment securities | (67,733,338 | ) | ||
Net unrealized appreciation of investment securities | $ | 21,467,043 | ||
Cost of investments for tax purposes is $809,445,622. |
14 Invesco Van Kampen American Value Fund
NOTE 11—Share Information
Summary of Share Activity | ||||||||||||||||||||||||
Six months ended | Ten months ended | Year ended | ||||||||||||||||||||||
October 31, 2011(a) | April 30, 2011 | June 30, 2010 | ||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||
Sold: | ||||||||||||||||||||||||
Class A | 1,570,924 | $ | 42,437,689 | 2,262,609 | $ | 59,945,505 | 4,418,487 | $ | 97,663,692 | |||||||||||||||
Class B | 20,811 | 536,329 | 109,536 | 2,478,759 | 263,259 | 5,348,613 | ||||||||||||||||||
Class C | 103,017 | 2,523,010 | 132,881 | 3,190,416 | 295,419 | 6,013,333 | ||||||||||||||||||
Class R | 299,003 | 8,002,771 | 322,162 | 8,395,693 | 497,325 | 11,370,627 | ||||||||||||||||||
Class Y | 551,349 | 15,045,161 | 931,565 | 24,470,353 | 649,141 | 14,255,642 | ||||||||||||||||||
Institutional Class | 209,375 | 5,970,916 | 1,607 | 39,338 | 116,167 | 2,592,084 | ||||||||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||||||||||
Class A | 34,489 | 914,518 | 23,765 | 645,045 | 105,667 | 2,316,459 | ||||||||||||||||||
Class B | 3,115 | 75,230 | 505 | 12,409 | 6,957 | 140,415 | ||||||||||||||||||
Class C | — | — | — | — | 882 | 16,365 | ||||||||||||||||||
Class R | 269 | 7,030 | 58 | 1,526 | 987 | 21,991 | ||||||||||||||||||
Class Y | 11,239 | 299,747 | 2,659 | 71,591 | 3,434 | 76,566 | ||||||||||||||||||
Institutional Class | 442 | 11,187 | 121 | 2,887 | 1 | 11 | ||||||||||||||||||
Issued in connection with acquistions:(b) | ||||||||||||||||||||||||
Class A | 5,489,600 | 162,514,936 | — | — | — | — | ||||||||||||||||||
Class B | 838,701 | 22,606,208 | — | — | — | — | ||||||||||||||||||
Class C | 1,394,212 | 37,138,560 | — | — | — | — | ||||||||||||||||||
Class R | 257,971 | 7,628,842 | — | — | — | — | ||||||||||||||||||
Class Y | 3,001,010 | 89,143,744 | — | — | — | — | ||||||||||||||||||
Institutional Class | 9,398 | 279,372 | — | — | — | — | ||||||||||||||||||
Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||||||||||
Class A | 154,317 | 4,166,232 | 122,871 | 3,257,453 | — | — | ||||||||||||||||||
Class B | (169,456 | ) | (4,166,232 | ) | (135,010 | ) | (3,257,453 | ) | — | — | ||||||||||||||
Reacquired: | ||||||||||||||||||||||||
Class A | (3,860,582 | ) | (103,288,614 | ) | (4,288,226 | ) | (111,097,200 | ) | (7,100,338 | ) | (157,234,572 | ) | ||||||||||||
Class B | (223,664 | ) | (5,404,667 | ) | (262,509 | ) | (6,189,831 | ) | (580,643 | ) | (11,725,535 | ) | ||||||||||||
Class C | (400,487 | ) | (9,514,740 | ) | (333,533 | ) | (7,841,673 | ) | (469,954 | ) | (9,454,218 | ) | ||||||||||||
Class R | (266,625 | ) | (7,354,654 | ) | (280,018 | ) | (7,496,558 | ) | (193,028 | ) | (4,372,175 | ) | ||||||||||||
Class Y | (627,539 | ) | (16,686,231 | ) | (166,531 | ) | (4,453,218 | ) | (634,583 | ) | (14,429,608 | ) | ||||||||||||
Institutional Class | (13,265 | ) | (355,673 | ) | (117,107 | ) | (2,782,293 | ) | — | — | ||||||||||||||
Net increase (decrease) in share activity | 8,387,624 | $ | 252,530,671 | (1,672,595 | ) | $ | (40,607,251 | ) | (2,620,820 | ) | $ | (57,400,310 | ) | |||||||||||
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 35% of the outstanding shares of the Fund. IDI has an agreement with these entities to sell Fund shares. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as securities brokerage, distribution, third party record keeping and account servicing. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. | |
(b) | As of the open of business on May 23, 2011, the Fund acquired all the net assets of Invesco Mid-Cap Value Fund and Invesco Mid Cap Basic Value Fund pursuant to a plan of reorganization approved by the Trustees of the Fund on November 10, 2010 and by the shareholders of Invesco Mid-Cap Value Fund and Invesco Mid Cap Basic Value Fund, respectively on April 14, 2011. The acquisition was accomplished by a tax-free exchange of 10,990,892 shares of the Fund for 11,782,241 shares outstanding of Invesco Mid-Cap Value Fund and 14,984,047 shares outstanding of Invesco Mid Cap Basic Value Fund as of the close of business on May 20, 2011. Each class of shares of Invesco Mid-Cap Value Fund and Invesco Mid Cap Basic Value Fund was exchanged for the like class of shares of the Fund based on the relative net asset value of Invesco Mid-Cap Value Fund and Invesco Mid Cap Basic Value Fund to the net asset value of the Fund on the close of business, May 20, 2011. Invesco Mid-Cap Value Fund’s net assets as of the close of business on May 20, 2011 of $121,971,596 including $19,608,737 of unrealized appreciation and Invesco Mid Cap Basic Value Fund’s net assets as of the close of business on May 20, 2011 of $197,340,066 including $39,514,293 of unrealized appreciation, were combined with the net assets of the Fund immediately before the acquisition of $681,095,239. The combined aggregate net assets of the Fund subsequent to the reorginization were $1,000,406,901. |
15 Invesco Van Kampen American Value Fund
NOTE 12—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Ratio of | Ratio of | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net gains | expenses | expenses | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
(losses) on | to average | to average net | Ratio of net | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset | Net | securities | Dividends | Distributions | net assets | assets without | investment | |||||||||||||||||||||||||||||||||||||||||||||||||
value, | investment | (both | Total from | from net | from net | Net asset | Net assets, | with fee waivers | fee waivers | income (loss) | ||||||||||||||||||||||||||||||||||||||||||||||
beginning | income | realized and | investment | investment | realized | Total | value, end | Total | end of period | and/or expenses | and/or expenses | to average | Portfolio | |||||||||||||||||||||||||||||||||||||||||||
of period | (loss)(a) | unrealized) | operations | income | gains | Distributions | of period | Return(b) | (000s omitted) | absorbed | absorbed | net assets | turnover(c) | |||||||||||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | $ | 29.86 | $ | 0.08 | $ | (3.26 | ) | $ | (3.18 | ) | $ | (0.04 | ) | $ | — | $ | (0.04 | ) | $ | 26.64 | (10.64 | )% | $ | 580,405 | 1.29 | %(d) | 1.30 | %(d) | 0.60 | %(d) | 16 | % | ||||||||||||||||||||||||
Ten months ended 04/30/11 | 22.22 | 0.07 | 7.61 | 7.68 | (0.04 | ) | — | (0.04 | ) | 29.86 | 34.57 | 549,428 | 1.26 | (e) | 1.27 | (e) | 0.34 | (e) | 28 | |||||||||||||||||||||||||||||||||||||
Year ended 06/30/10 | 17.44 | 0.11 | 4.78 | 4.89 | (0.11 | ) | — | (0.11 | ) | 22.22 | 28.07 | 450,675 | 1.31 | 1.31 | 0.50 | 50 | ||||||||||||||||||||||||||||||||||||||||
Year ended 06/30/09 | 24.18 | 0.16 | (6.54 | ) | (6.38 | ) | (0.14 | ) | (0.22 | ) | (0.36 | ) | 17.44 | (26.17 | )(f) | 398,513 | 1.41 | 1.41 | 0.90 | 60 | ||||||||||||||||||||||||||||||||||||
Year ended 06/30/08 | 34.55 | 0.12 | (5.01 | ) | (4.89 | ) | (0.14 | ) | (5.34 | ) | (5.48 | ) | 24.18 | (16.43 | )(f) | 633,126 | 1.25 | 1.25 | 0.43 | 65 | ||||||||||||||||||||||||||||||||||||
Year ended 06/30/07 | 28.46 | 0.15 | 7.63 | 7.78 | (0.10 | ) | (1.59 | ) | (1.69 | ) | 34.55 | 28.00 | (f) | 674,636 | 1.25 | 1.25 | 0.47 | 80 | ||||||||||||||||||||||||||||||||||||||
Year ended 06/30/06 | 24.91 | 0.07 | 3.48 | 3.55 | — | — | — | 28.46 | 14.25 | (f) | 390,930 | 1.29 | 1.29 | 0.25 | 61 | |||||||||||||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | 27.19 | 0.07 | (2.96 | ) | (2.89 | ) | (0.04 | ) | — | (0.04 | ) | 24.26 | (10.64 | )(g) | 45,092 | 1.29 | (d)(g) | 2.05 | (d)(g) | 0.60 | (d)(g) | 16 | ||||||||||||||||||||||||||||||||||
Ten months ended 04/30/11 | 20.23 | 0.04 | 6.93 | 6.97 | (0.01 | ) | — | (0.01 | ) | 27.19 | 34.45 | (g) | 37,780 | 1.38 | (e)(g) | 1.39 | (e)(g) | 0.22 | (e)(g) | 28 | ||||||||||||||||||||||||||||||||||||
Year ended 06/30/10 | 15.89 | 0.05 | 4.37 | 4.42 | (0.08 | ) | — | (0.08 | ) | 20.23 | 27.82 | (g) | 33,933 | 1.55 | (g) | 1.55 | (g) | 0.26 | (g) | 50 | ||||||||||||||||||||||||||||||||||||
Year ended 06/30/09 | 22.11 | 0.14 | (6.00 | ) | (5.86 | ) | (0.14 | ) | (0.22 | ) | (0.36 | ) | 15.89 | (26.22 | )(h)(i) | 31,586 | 1.48 | (i) | 1.48 | (i) | 0.82 | (i) | 60 | |||||||||||||||||||||||||||||||||
Year ended 06/30/08 | 32.11 | 0.02 | (4.59 | ) | (4.57 | ) | (0.09 | ) | (5.34 | ) | (5.43 | ) | 22.11 | (16.70 | )(h)(i) | 53,854 | 1.59 | (i) | 1.59 | (i) | 0.08 | (i) | 65 | |||||||||||||||||||||||||||||||||
Year ended 06/30/07 | 26.71 | (0.08 | ) | 7.14 | 7.06 | (0.07 | ) | (1.59 | ) | (1.66 | ) | 32.11 | 27.10 | (h)(i) | 88,060 | 1.97 | (i) | 1.97 | (i) | (0.26 | )(i) | 80 | ||||||||||||||||||||||||||||||||||
Year ended 06/30/06 | 23.35 | 0.04 | 3.32 | 3.36 | — | — | — | 26.71 | 14.39 | (h)(i) | 85,074 | 1.28 | (i) | 1.28 | (i) | 0.16 | (i) | 61 | ||||||||||||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | 26.89 | (0.01 | ) | (2.94 | ) | (2.95 | ) | — | — | — | 23.94 | (10.97 | )(j) | 67,829 | 2.00 | (d)(j) | 2.05 | (d)(j) | (0.11 | )(d)(j) | 16 | |||||||||||||||||||||||||||||||||||
Ten months ended 04/30/11 | 20.11 | (0.07 | ) | 6.85 | 6.78 | — | — | — | 26.89 | 33.72 | (j) | 46,700 | 1.97 | (e)(j) | 1.98 | (e)(j) | (0.37 | )(e)(j) | 28 | |||||||||||||||||||||||||||||||||||||
Year ended 06/30/10 | 15.82 | (0.05 | ) | 4.35 | 4.30 | (0.01 | ) | — | (0.01 | ) | 20.11 | 27.18 | 38,952 | 2.06 | 2.06 | (0.25 | ) | 50 | ||||||||||||||||||||||||||||||||||||||
Year ended 06/30/09 | 22.03 | 0.03 | (5.96 | ) | (5.93 | ) | (0.06 | ) | (0.22 | ) | (0.28 | ) | 15.82 | (26.68 | )(i)(k) | 33,390 | 2.11 | (i) | 2.11 | (i) | 0.19 | (i) | 60 | |||||||||||||||||||||||||||||||||
Year ended 06/30/08 | 32.05 | (0.09 | ) | (4.59 | ) | (4.68 | ) | — | (5.34 | ) | (5.34 | ) | 22.03 | (17.09 | )(k) | 54,508 | 2.00 | 2.00 | (0.33 | ) | 65 | |||||||||||||||||||||||||||||||||||
Year ended 06/30/07 | 26.67 | (0.08 | ) | 7.12 | 7.04 | (0.07 | ) | (1.59 | ) | (1.66 | ) | 32.05 | 27.06 | (i)(k) | 70,089 | 2.00 | (i) | 2.00 | (i) | (0.28 | )(i) | 80 | ||||||||||||||||||||||||||||||||||
Year ended 06/30/06 | 23.51 | (0.14 | ) | 3.30 | 3.16 | — | — | — | 26.67 | 13.39 | (i)(k) | 56,699 | 2.03 | (i) | 2.03 | (i) | (0.54 | )(i) | 61 | |||||||||||||||||||||||||||||||||||||
Class R | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | 29.84 | 0.05 | (3.26 | ) | (3.21 | ) | (0.01 | ) | — | (0.01 | ) | 26.62 | (10.76 | ) | 23,293 | 1.54 | (d) | 1.55 | (d) | 0.35 | (d) | 16 | ||||||||||||||||||||||||||||||||||
Ten months ended 04/30/11 | 22.23 | 0.02 | 7.59 | 7.61 | (0.00 | ) | — | (0.00 | ) | 29.84 | 34.24 | 17,440 | 1.51 | (e) | 1.52 | (e) | 0.09 | (e) | 28 | |||||||||||||||||||||||||||||||||||||
Year ended 06/30/10 | 17.44 | 0.06 | 4.79 | 4.85 | (0.06 | ) | — | (0.06 | ) | 22.23 | 27.84 | 12,052 | 1.56 | 1.56 | 0.27 | 50 | ||||||||||||||||||||||||||||||||||||||||
Year ended 06/30/09 | 24.19 | 0.12 | (6.55 | ) | (6.43 | ) | (0.10 | ) | (0.22 | ) | (0.32 | ) | 17.44 | (26.36 | )(l) | 4,132 | 1.70 | 1.70 | 0.73 | 60 | ||||||||||||||||||||||||||||||||||||
Year ended 06/30/08 | 34.55 | 0.06 | (5.01 | ) | (4.95 | ) | (0.07 | ) | (5.34 | ) | (5.41 | ) | 24.19 | (16.65 | )(l) | 1,102 | 1.51 | 1.51 | 0.20 | 65 | ||||||||||||||||||||||||||||||||||||
Year ended 06/30/07(m) | 31.71 | 0.01 | 2.84 | 2.85 | (0.01 | ) | — | (0.01 | ) | 34.55 | 9.00 | (l) | 121 | 1.50 | (e) | 1.50 | (e) | 0.10 | (e) | 80 | ||||||||||||||||||||||||||||||||||||
Class Y(n) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | 29.98 | 0.11 | (3.28 | ) | (3.17 | ) | (0.08 | ) | — | (0.08 | ) | 26.73 | (10.59 | ) | 111,927 | 1.04 | (d) | 1.05 | (d) | 0.85 | (d) | 16 | ||||||||||||||||||||||||||||||||||
Ten months ended 04/30/11 | 22.31 | 0.13 | 7.63 | 7.76 | (0.09 | ) | — | (0.09 | ) | 29.98 | 34.81 | 37,488 | 1.01 | (e) | 1.02 | (e) | 0.59 | (e) | 28 | |||||||||||||||||||||||||||||||||||||
Year ended 06/30/10 | 17.50 | 0.17 | 4.81 | 4.98 | (0.17 | ) | — | (0.17 | ) | 22.31 | 28.47 | 10,772 | 1.06 | 1.06 | 0.76 | 50 | ||||||||||||||||||||||||||||||||||||||||
Year ended 06/30/09 | 24.27 | 0.21 | (6.58 | ) | (6.37 | ) | (0.18 | ) | (0.22 | ) | (0.40 | ) | 17.50 | (25.99 | )(o) | 8,135 | 1.19 | 1.19 | 1.23 | 60 | ||||||||||||||||||||||||||||||||||||
Year ended 06/30/08 | 34.65 | 0.18 | (5.00 | ) | (4.82 | ) | (0.22 | ) | (5.34 | ) | (5.56 | ) | 24.27 | (16.24 | )(o) | 6,909 | 1.02 | 1.02 | 0.67 | 65 | ||||||||||||||||||||||||||||||||||||
Year ended 06/30/07 | 28.49 | 0.22 | 7.65 | 7.87 | (0.12 | ) | (1.59 | ) | (1.71 | ) | 34.65 | 28.35 | (o) | 939 | 1.01 | 1.01 | 0.69 | 80 | ||||||||||||||||||||||||||||||||||||||
Year ended 06/30/06(m) | 27.92 | 0.09 | 0.48 | 0.57 | — | — | — | 28.49 | 2.01 | (o) | 48 | 1.06 | (e) | 1.06 | (e) | 0.87 | (e) | 61 | ||||||||||||||||||||||||||||||||||||||
Institutional Class | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | 29.98 | 0.14 | (3.27 | ) | (3.13 | ) | (0.10 | ) | — | (0.10 | ) | 26.75 | (10.44 | ) | 5,531 | 0.80 | (d) | 0.81 | (d) | 1.09 | (d) | 16 | ||||||||||||||||||||||||||||||||||
Ten months ended 04/30/11 | 22.31 | 0.15 | 7.64 | 7.79 | (0.12 | ) | — | (0.12 | ) | 29.98 | 34.98 | 24 | 0.79 | (e) | 0.80 | (e) | 0.81 | (e) | 28 | |||||||||||||||||||||||||||||||||||||
Year ended 06/30/10(m) | 23.19 | 0.03 | (0.88 | ) | (0.85 | ) | (0.03 | ) | — | (0.03 | ) | 22.31 | (3.69 | ) | 2,592 | 0.62 | (e) | 0.62 | (e) | 1.37 | (e) | 50 | ||||||||||||||||||||||||||||||||||
(a) | Calculated using average shares outstanding. | |
(b) | Includes adjustments for six months ended October 31, 2011 and ten months ended April 30, 2011 in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges and is not annualized for periods less than one year, if applicable. | |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. For the period ending October 31, 2011, the portfolio turnover calculation excludes the value of securities purchased of $250,607,755 and sold of $65,421,229 in the effort to realign the Fund’s portfolio holdings after the reorganization of Invesco Mid-Cap Value Fund and Invesco Mid Cap Basic Value Fund into the Fund. | |
(d) | Ratios are annualized and based on average daily net assets (000’s omitted) of $593,880, $47,910, $68,072, $21,180, $104,356 and $3,539 for Class A, Class B, Class C, Class R, Class Y and Institutional Class shares, respectively. | |
(e) | Annualized. | |
(f) | Assumes reinvestment of all distributions for the period and does not include payment of the maximum sales charge of 5.75% or contingent deferred sales charge (CDSC). On purchases of $1 million or more, a CDSC of 1% may be imposed on certain redemptions made within eighteen months of purchase. If the sales charges were included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to 0.25% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. | |
(g) | The total return, ratio of expenses to average net assets and ratio of net investment income (loss) to average net assets reflect actual 12b-1 fees of 1.00%, 0.37% and 0.49% for the six months ended October 31, 2011, the ten months ended April 30, 2011 and the year ended June 30, 2010. | |
(h) | Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 5%, charged on certain redemptions made within one year of purchase and declining to 0% after the fifth year. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to 1% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. |
16 Invesco Van Kampen American Value Fund
NOTE 12—Financial Highlights—(continued)
(i) | The total return, ratio of expenses to average net assets and ratio of net investment income (loss) to average net assets reflect actual 12b-1 fees of less than 1%. | |
(j) | The total return, ratio of expenses to average net assets and ratio of net investment income (loss) to average net assets reflect actual 12b-1 fees of 1.00% and 0.96% for the six months ended October 31, 2011 and the ten months ended April 30, 2011. | |
(k) | Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 1%, charged on certain redemptions made within one year of purchase. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to 1% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. | |
(l) | Assumes reinvestment of all distributions for the period. These returns include combined Rule 12b-1 fees and service fees of up to 0.50% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption on Fund shares. | |
(m) | Commencement date of March 20, 2007, February 7, 2006 and June 1, 2010 for Class R, Class Y and Institutional Class shares, respectively. | |
(n) | On June 1, 2010, the Fund’s former Class I shares were reorganized into Class Y shares. | |
(o) | Assumes reinvestment of all distributions for the period. These returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption on Fund shares. |
NOTE 13—Proposed Reorganization
The Board of Trustees of the Fund unanimously approved an Agreement and Plan of Reorganization (the “Agreement”) pursuant to which the Fund would acquire all of the assets and liabilities of Invesco U.S. Mid Cap Value Fund (the “Target Fund”) in exchange for shares of the Fund.
The Agreement requires approval of the Tartget Fund’s shareholders and will be submitted to the shareholders for their consideration at a meeting to be held in or around April 2012. Upon closing of the reorganization, shareholders of the Target Fund will receive a corresponding class of shares of the Fund in exchange for their shares of the Target Fund and the Target Fund will liquidate and cease operations.
17 Invesco Van Kampen American Value 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 May 1, 2011 through October 31, 2011.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the hypothetical information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
HYPOTHETICAL | ||||||||||||||||||||||||||||||
ACTUAL | (5% annual return before expenses) | |||||||||||||||||||||||||||||
Beginning | Ending | Expenses | Ending | Expenses | Annualized | |||||||||||||||||||||||||
Account Value | Account Value | Paid During | Account Value | Paid During | Expense | |||||||||||||||||||||||||
Class | (05/01/11) | (10/31/11)1 | Period2 | (10/31/11) | Period2 | Ratio | ||||||||||||||||||||||||
A | $ | 1,000.00 | $ | 893.30 | $ | 6.14 | $ | 1,018.65 | $ | 6.55 | 1.29 | % | ||||||||||||||||||
B | 1,000.00 | 893.60 | 6.14 | 1,018.65 | 6.55 | 1.29 | ||||||||||||||||||||||||
C | 1,000.00 | 890.30 | 9.50 | 1,015.08 | 10.13 | 2.00 | ||||||||||||||||||||||||
R | 1,000.00 | 892.10 | 7.32 | 1,017.39 | 7.81 | 1.54 | ||||||||||||||||||||||||
Y | 1,000.00 | 894.10 | 4.95 | 1,019.91 | 5.28 | 1.04 | ||||||||||||||||||||||||
Institutional | 1,000.00 | 895.60 | 3.81 | 1,021.11 | 4.06 | 0.80 | ||||||||||||||||||||||||
1 | The actual ending account value is based on the actual total return of the Fund for the period May 1, 2011 through October 31, 2011, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund’s expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/366 to reflect the most recent fiscal half year. |
18 Invesco Van Kampen American Value 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 Van Kampen American Value Fund (the Fund) investment advisory agreement with Invesco Advisers, Inc. (Invesco Advisers) and the Master Intergroup Sub-Advisory Contract for Mutual Funds (the sub-advisory contracts) with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers). During contract renewal meetings held on June 14-15, 2011, the Board as a whole, and the disinterested or “independent” Trustees, who comprise 80% of the Board, voting separately, approved the continuance of the Fund’s investment advisory agreement and the sub-advisory contracts for another year, effective July 1, 2011. In doing so, the Board considered the process that it follows in reviewing and approving the Fund’s investment advisory agreement and sub-advisory contracts and the information that it is provided. The Board determined that the Fund’s investment advisory agreement and the sub-advisory contracts are in the best interests of the Fund and its shareholders and the compensation to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is responsible for overseeing the management of a number of the series portfolios of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies and limitations and investment risks of these funds. The Sub-Committees meet regularly and at designated contract renewal meetings each year to conduct a review of the performance, fees, expenses and other matters related to their assigned Invesco Funds. Each Sub-Committee recommends to the Investments Committee, which in turn recommends to the full Board, whether to approve the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Trustees receive comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and an independent company, Lipper, Inc. (Lipper). The Trustees also receive an independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. The independent Trustees are assisted in their annual evaluation of the Fund’s investment advisory agreement by the Senior Officer and by independent legal counsel. The independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in private sessions with the Senior Officer and counsel.
In evaluating the fairness and reasonableness of the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Trustees also considered information provided in connection with fund acquisitions approved by the Trustees to rationalize the Invesco Funds product range following the acquisition of the retail mutual fund business of Morgan Stanley (the Morgan Stanley Transaction). The Trustees recognized that the advisory fees for the Invesco Funds include advisory fees that are the result of years of review and negotiation between the Trustees and Invesco Advisers as well as advisory fees inherited from Morgan Stanley and Van Kampen funds acquired in the Morgan Stanley Transaction. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these same arrangements throughout the year and in prior years. One Trustee may have weighed a particular piece of information differently than another Trustee.
The discussion below serves as the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 15, 2011, and may not reflect consideration of factors that became known to the Board after that date, including, for example, changes to the Fund’s performance, advisory fees, expense limitations and/or fee waivers.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers, with whom the Board met during the year. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s consideration of Invesco Advisers’ performance and investment process oversight, independent credit analysis and investment risk management.
In determining whether to continue the Fund’s investment advisory agreement, the Board considered the prior relationship between Invesco Advisers and the Fund, as well as the Board’s knowledge of Invesco Advisers’ operations, and concluded that it is beneficial to maintain the current relationship, in part, because of such knowledge. The Board also considered services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution and legal and compliance. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and the advisory services are provided in accordance with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services provided by the Affiliated Sub-Advisers under the sub-advisory contracts and the credentials and experience of the officers and employees of the Affiliated Sub-Advisers who provide these services. The Board noted that the Affiliated Sub-Advisers have offices and personnel that are located in financial centers around the world. As a result, the Affiliated Sub-Advisers can provide research and investment analysis on the markets and economies of various countries in which the Fund invests and make recommendations on securities of companies located in such countries. The Board concluded that the sub-advisory contracts benefit the Fund and its shareholders by permitting Invesco Advisers to use the resources and talents of the Affiliated Sub-Advisers in managing the Fund. The Board concluded that the nature, extent and quality of the services provided by the Affiliated Sub-Advisers are appropriate and satisfactory and in accordance with the terms of the Fund’s sub-advisory contracts.
B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
19 Invesco Van Kampen American Value 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 Mid Cap Value Funds Index. The Board noted that performance of Class A shares of the Fund was in the third quintile of the performance universe for the one year period, the fourth quintile for the three year period and the second quintile for the five year period (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board noted that performance of Class A shares of the Fund was above the performance of the Index for the one and five year periods and below the performance of the Index for the three year period. Although the independent written evaluation of the Fund’s Senior Officer only considered Fund performance through the most recent calendar year, the Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
C. | Advisory and Sub-Advisory Fees and Fee Waivers |
The Board compared the Fund’s contractual advisory fee rate to the contractual advisory fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the contractual advisory fee rate for Class A shares of the Fund was below the median contractual advisory fee rate of funds in the expense group. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using audited financial data from the most recent annual report of each fund in the expense group that was publicly available as of the end of the past calendar year and including only one fund per investment adviser. The Board noted that comparative data is as of varying dates, which may affect the comparability of data during times of market volatility.
The Board also compared the Fund’s effective fee rate (the advisory fee after advisory fee waivers and before expense limitations/waivers) to the advisory fee rates of other mutual funds advised by Invesco Advisers and its affiliates with investment strategies comparable to those of the Fund. The Board noted that the Fund’s rate was the same as the rate of two other mutual funds advised by Invesco Advisers and below the total account level fee of two mutual funds sub-advised by Invesco Advisers.
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.
20 Invesco Van Kampen American Value Fund
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Invesco mailing information
Send general correspondence to Invesco Investment Services, Inc., P.O. Box 219078, Kansas City, MO 64121-9078.
Invesco privacy policy
You share personal and financial information with us that is necessary for your transactions and your account records. We take very seriously the obligation to keep that information confidential and private.
Invesco collects nonpublic personal information about you from account applications or other forms you complete and from your transactions with us or our affiliates. We do not disclose information about you or our former customers to service providers or other third parties except to the extent necessary to service your account and in other limited circumstances as permitted by law. For example, we use this information to facilitate the delivery of transaction confirmations, financial reports, prospectuses and tax forms.
Even within Invesco, only people involved in the servicing of your accounts and compliance monitoring have access to your information. To ensure the highest level of confidentiality and security, Invesco maintains physical, electronic and procedural safeguards that meet or exceed federal standards. Special measures, such as data encryption and authentication, apply to your communications with us on our website. More detail is available to you at invesco.com/privacy.
Important notice regarding delivery of security holder documents
To reduce Fund expenses, only one copy of most shareholder documents may be mailed to shareholders with multiple accounts at the same address (Householding). Mailing of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact Invesco Investment Services, Inc. at 800 959 4246 or contact your financial institution. We will begin sending you individual copies for each account within 30 days after receiving your request.
Fund holdings and proxy voting information
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is available at invesco.com/completeqtrholdings. Shareholders can also look up the Fund’s Forms N-Q on the SEC website at sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-03826 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.
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Information regarding how the Fund voted proxies related to its portfolio securities during the 12 months ended June 30, 2011, is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov.
Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the U.S. distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
VK-AMVA-SAR-1 Invesco Distributors, Inc.
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Invesco Van Kampen Comstock Fund
Semiannual Report to Shareholders § October 31, 2011
Nasdaq:
A: ACSTX § B: ACSWX § C: ACSYX § R: ACSRX § Y: ACSDX § Institutional: ACSHX
Semiannual Report to Shareholders § October 31, 2011
Nasdaq:
A: ACSTX § B: ACSWX § C: ACSYX § R: ACSRX § Y: ACSDX § Institutional: ACSHX
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2 | Fund Performance | |
4 | Letters to Shareholders | |
5 | Schedule of Investments | |
8 | Financial Statements | |
10 | Notes to Financial Statements | |
16 | Financial Highlights | |
18 | Fund Expenses | |
19 | 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, 4/30/11 to 10/31/11, at net asset value (NAV). Performance shown does not include applicable contingent deferred sales charges (CDSC) or front-end sales charges, which would have reduced performance.
Class A Shares | -10.84 | % | ||
Class B Shares | -10.84 | |||
Class C Shares | -11.17 | |||
Class R Shares | -10.90 | |||
Class Y Shares | -10.72 | |||
Institutional Class Shares | -10.58 | |||
S&P 500 Index▼ (Broad Market Index) | -7.12 | |||
Russell 1000 Value Index▼ (Style-Specific Index) | -9.49 | |||
Lipper Large-Cap Value Funds Index▼ (Peer Group Index) | -10.49 | |||
Source(s): ▼Lipper Inc. | ||
The Fund recently adopted a three-tier benchmark structure to compare its performance to broad market, style-specific and peer group market measures. |
The S&P 500® Index is an unmanaged index considered representative of the U.S. stock market.
The Russell 1000® Value Index is an unmanaged index considered representative of large-cap value stocks. The Russell 1000 Value Index is a trademark/service mark of the Frank Russell Co. Russell® is a trademark of the Frank Russell Co.
The Lipper Large-Cap Value Funds Index is an unmanaged index considered representative of large-cap value 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.
2 Invesco Van Kampen Comstock Fund
Average Annual Total Returns
As of 10/31/11, including maximum applicable sales charges
Class A Shares | ||||||||
Inception (10/7/68) | 10.43 | % | ||||||
10 | Years | 3.21 | ||||||
5 | Years | -2.07 | ||||||
1 | Year | -1.47 | ||||||
Class B Shares | ||||||||
Inception (10/19/92) | 8.77 | % | ||||||
10 | Years | 3.32 | ||||||
5 | Years | -1.44 | ||||||
1 | Year | -0.75 | ||||||
Class C Shares | ||||||||
Inception (10/26/93) | 8.06 | % | ||||||
10 | Years | 3.02 | ||||||
5 | Years | -1.70 | ||||||
1 | Year | 2.47 | ||||||
Class R Shares | ||||||||
Inception (10/1/02) | 6.79 | % | ||||||
5 | Years | -1.21 | ||||||
1 | Year | 3.99 | ||||||
Class Y Shares | ||||||||
Inception (10/29/04) | 2.97 | % | ||||||
5 | Years | -0.71 | ||||||
1 | Year | 4.52 | ||||||
Institutional Class Shares | ||||||||
10 | Years | 3.86 | % | |||||
5 | Years | -0.85 | ||||||
1 | Year | 4.77 |
Effective June 1, 2010, Class A, Class B, Class C, Class I and Class R shares of the predecessor fund, Van Kampen Comstock Fund, advised by Van Kampen Asset Management were reorganized into Class A, Class B, Class C, Class Y and Class R shares, respectively, of Invesco Van Kampen Comstock Fund. Returns shown above for Class A, Class B, Class C, Class R and Class Y shares are blended returns of the predecessor fund and Invesco Van Kampen Comstock Fund. Share class returns will differ from the predecessor fund because of different expenses.
Institutional Class shares incepted on June 1, 2010. Performance shown prior to that date is that of the predecessor fund’s Class A shares and includes the 12b-1 fees applicable to Class A shares. Class A share performance reflects any applicable fee waivers or expense reimbursements.
Average Annual Total Returns
As of 9/30/11, the most recent calendar quarter-end, including maximum applicable sales charges
Class A Shares | ||||||||
Inception (10/7/68) | 10.16 | % | ||||||
10 | Years | 2.28 | ||||||
5 | Years | -3.76 | ||||||
1 | Year | -8.13 | ||||||
Class B Shares | ||||||||
Inception (10/19/92) | 8.18 | % | ||||||
10 | Years | 2.38 | ||||||
5 | Years | -3.16 | ||||||
1 | Year | -7.49 | ||||||
Class C Shares | ||||||||
Inception (10/26/93) | 7.44 | % | ||||||
10 | Years | 2.09 | ||||||
5 | Years | -3.39 | ||||||
1 | Year | -4.38 | ||||||
Class R Shares | ||||||||
Inception (10/1/02) | 5.55 | % | ||||||
5 | Years | -2.92 | ||||||
1 | Year | -3.00 | ||||||
Class Y Shares | ||||||||
Inception (10/29/04) | 1.36 | % | ||||||
5 | Years | -2.42 | ||||||
1 | Year | -2.44 | ||||||
Institutional Class Shares | ||||||||
10 | Years | 2.91 | % | |||||
5 | Years | -2.57 | ||||||
1 | Year | -2.28 |
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, Class R, Class Y and Institutional Class shares was 0.84%, 0.84%,
1.59%, 1.09%, 0.59% and 0.42%, respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.
Class A share performance reflects the maximum 5.50% sales charge, and Class B and Class C share performance reflects the applicable contingent deferred sales charge (CDSC) for the period involved. For shares purchased prior to June 1, 2010, the CDSC on Class B shares declines from 5% at the time of purchase to 0% at the beginning of the sixth year. For shares purchased on or after June 1, 2010, the CDSC on Class B shares declines from 5% at the time of purchase to 0% at the beginning of the seventh year. The CDSC on Class C shares is 1% for the first year after purchase. Class R, Class Y and Institutional Class shares do not have a front-end sales charge or a CDSC; therefore, performance is at net asset value.
The performance of the Fund’s share classes will differ primarily due to different sales charge structures and class expenses.
3 Invesco Van Kampen Comstock Fund
Letters to Shareholders
![(PHOTO OF BRUCE CROCKETT)](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8576402.jpg)
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.
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,
![-s- Bruce L. Crockett](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8576403.gif)
Bruce L. Crockett
Independent Chair, Invesco Funds Board of Trustees
![(PHOTO OF PHILIP TAYLOR)](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8576404.jpg)
Philip Taylor
Dear Shareholders:
Enclosed is important information about your Fund and its performance. I encourage you to read this report to learn more about your Fund’s short- and long-term performance.
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.
The start of a new year is always a good time to catch up with your financial adviser. Looking ahead to the new year and evaluating your individual situation, your financial adviser can provide valuable insight into whether your investments are still appropriate for your individual needs, goals and risk tolerance. This may provide reassurance in times of economic uncertainty and market volatility such as we saw in 2011 – and are likely to see again in 2012.
On our website, invesco.com/us, we provide timely market updates and commentary from many of our fund managers and other investment professionals. Also on our website, you 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.
Across our broad array of investment products, 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 – meaning 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,
![-s-Philip Taylor](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8576405.gif)
Philip Taylor
Senior Managing Director, Invesco Ltd.
![-s-Philip Taylor](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8576405.gif)
Philip Taylor
Senior Managing Director, Invesco Ltd.
4 Invesco Van Kampen Comstock Fund
Schedule of Investments(a)
October 31, 2011
(Unaudited)
Shares | Value | |||||||
| ||||||||
Common Stocks & Other Equity Interests–97.67% | ||||||||
Aerospace & Defense–2.36% | ||||||||
Honeywell International Inc. | 2,317,054 | $ | 121,413,629 | |||||
Textron Inc. | 3,905,928 | 75,853,122 | ||||||
197,266,751 | ||||||||
Aluminum–1.03% | ||||||||
Alcoa Inc. | 8,001,288 | 86,093,859 | ||||||
Asset Management & Custody Banks–1.98% | ||||||||
Bank of New York Mellon Corp. (The) | 5,937,664 | 126,353,490 | ||||||
State Street Corp. | 965,380 | 38,991,698 | ||||||
165,345,188 | ||||||||
Automobile Manufacturers–1.58% | ||||||||
General Motors Co.(b) | 5,098,675 | 131,800,749 | ||||||
Cable & Satellite–5.46% | ||||||||
Comcast Corp.–Class A | 13,342,086 | 312,871,917 | ||||||
Time Warner Cable Inc. | 2,234,063 | 142,287,472 | ||||||
455,159,389 | ||||||||
Communications Equipment–1.03% | ||||||||
Cisco Systems, Inc. | 4,638,841 | 85,957,724 | ||||||
Computer Hardware–2.82% | ||||||||
Dell Inc.(b) | 5,533,652 | 87,487,038 | ||||||
Hewlett-Packard Co. | 5,565,097 | 148,087,231 | ||||||
235,574,269 | ||||||||
Data Processing & Outsourced Services–0.15% | ||||||||
Western Union Co. (The) | 719,546 | 12,570,469 | ||||||
Department Stores–0.34% | ||||||||
Macy’s, Inc. | 925,816 | 28,265,162 | ||||||
Diversified Banks–2.30% | ||||||||
U.S. Bancorp | 2,015,301 | 51,571,553 | ||||||
Wells Fargo & Co. | 5,419,777 | 140,426,422 | ||||||
191,997,975 | ||||||||
Drug Retail–1.75% | ||||||||
CVS Caremark Corp. | 4,014,041 | 145,709,688 | ||||||
Electric Utilities–2.89% | ||||||||
FirstEnergy Corp. | 2,204,162 | 99,099,124 | ||||||
PPL Corp. | 4,821,358 | 141,603,284 | ||||||
240,702,408 | ||||||||
Electrical Components & Equipment–0.75% | ||||||||
Emerson Electric Co. | 1,305,584 | 62,824,702 | ||||||
General Merchandise Stores–0.77% | ||||||||
Target Corp. | 1,166,331 | 63,856,622 | ||||||
Health Care Distributors–1.02% | ||||||||
Cardinal Health, Inc. | 1,920,395 | 85,015,887 | ||||||
Home Improvement Retail–1.50% | ||||||||
Home Depot, Inc. (The) | 1,564,816 | 56,020,413 | ||||||
Lowe’s Cos., Inc. | 3,303,726 | 69,444,320 | ||||||
125,464,733 | ||||||||
Household Products–0.37% | ||||||||
Procter & Gamble Co. (The) | 477,984 | 30,586,196 | ||||||
Hypermarkets & Super Centers–1.12% | ||||||||
Wal-Mart Stores, Inc. | 1,648,799 | 93,519,879 | ||||||
Industrial Conglomerates–1.37% | ||||||||
General Electric Co. | 6,840,119 | 114,298,388 | ||||||
Industrial Machinery–1.69% | ||||||||
Ingersoll-Rand PLC (Ireland) | 4,522,549 | 140,786,950 | ||||||
Integrated Oil & Gas–7.44% | ||||||||
BP PLC–ADR (United Kingdom) | 4,115,876 | 181,839,402 | ||||||
Chevron Corp. | 1,626,947 | 170,910,782 | ||||||
Murphy Oil Corp. | 1,763,775 | 97,660,222 | ||||||
Royal Dutch Shell PLC–ADR (United Kingdom) | 2,398,284 | 170,062,318 | ||||||
620,472,724 | ||||||||
Integrated Telecommunication Services–2.82% | ||||||||
AT&T Inc. | 3,407,866 | 99,884,553 | ||||||
Verizon Communications Inc. | 3,654,393 | 135,139,453 | ||||||
235,024,006 | ||||||||
Internet Software & Services–3.68% | ||||||||
eBay Inc.(b) | 5,292,901 | 168,473,039 | ||||||
Yahoo! Inc.(b) | 8,876,612 | 138,830,212 | ||||||
307,303,251 | ||||||||
Investment Banking & Brokerage–1.86% | ||||||||
Goldman Sachs Group, Inc. (The) | 702,938 | 77,006,858 | ||||||
Morgan Stanley | 4,428,098 | 78,111,649 | ||||||
155,118,507 | ||||||||
Life & Health Insurance–1.71% | ||||||||
Aflac, Inc. | 714,789 | 32,229,836 | ||||||
MetLife, Inc. | 2,763,258 | 97,156,151 | ||||||
Torchmark Corp. | 314,234 | 12,861,598 | ||||||
142,247,585 | ||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
5 Invesco Van Kampen Comstock Fund
Shares | Value | |||||||
Managed Health Care–2.64% | ||||||||
UnitedHealth Group Inc. | 3,027,065 | $ | 145,268,850 | |||||
WellPoint, Inc. | 1,086,348 | 74,849,377 | ||||||
220,118,227 | ||||||||
Movies & Entertainment–5.26% | ||||||||
News Corp.–Class B | 7,435,764 | 132,728,387 | ||||||
Time Warner Inc. | 2,959,463 | 103,551,610 | ||||||
Viacom Inc.–Class B | 4,623,043 | 202,720,436 | ||||||
439,000,433 | ||||||||
Multi-Utilities–0.03% | ||||||||
Sempra Energy | 54,059 | 2,904,590 | ||||||
Oil & Gas Drilling–0.54% | ||||||||
Noble Corp.(b) | 1,257,821 | 45,206,087 | ||||||
Oil & Gas Equipment & Services–3.61% | ||||||||
Halliburton Co. | 4,713,591 | 176,099,760 | ||||||
Weatherford International Ltd.(b) | 8,047,212 | 124,731,786 | ||||||
300,831,546 | ||||||||
Oil & Gas Exploration & Production–0.76% | ||||||||
Chesapeake Energy Corp. | 2,266,808 | 63,742,641 | ||||||
Other Diversified Financial Services–6.34% | ||||||||
Bank of America Corp. | 12,863,908 | 87,860,492 | ||||||
Citigroup Inc. | 6,915,055 | 218,446,587 | ||||||
JPMorgan Chase & Co. | 6,393,314 | 222,231,595 | ||||||
528,538,674 | ||||||||
Packaged Foods & Meats–4.23% | ||||||||
Kraft Foods, Inc.–Class A | 5,223,401 | 183,759,247 | ||||||
Unilever N.V.–New York Shares (Netherlands) | 4,896,373 | 169,071,760 | ||||||
352,831,007 | ||||||||
Paper Products–2.96% | ||||||||
International Paper Co. | 8,899,916 | 246,527,673 | ||||||
Personal Products–0.33% | ||||||||
Avon Products, Inc. | 1,505,079 | 27,512,844 | ||||||
Pharmaceuticals–8.54% | ||||||||
Abbott Laboratories | 732,590 | 39,464,623 | ||||||
Bristol-Myers Squibb Co. | 5,223,570 | 165,012,576 | ||||||
GlaxoSmithKline PLC–ADR (United Kingdom) | 2,091,450 | 93,676,046 | ||||||
Merck & Co., Inc. | 4,037,507 | 139,293,991 | ||||||
Pfizer Inc. | 10,803,768 | 208,080,572 | ||||||
Roche Holding AG–ADR (Switzerland) | 1,620,647 | 67,325,404 | ||||||
712,853,212 | ||||||||
Property & Casualty Insurance–3.90% | ||||||||
Allstate Corp. (The) | 6,537,406 | 172,195,274 | ||||||
Chubb Corp. (The) | 677,831 | 45,448,568 | ||||||
Travelers Cos., Inc. (The) | 1,847,891 | 107,824,440 | ||||||
325,468,282 | ||||||||
Regional Banks–2.17% | ||||||||
Fifth Third Bancorp | 5,230,691 | 62,820,599 | ||||||
PNC Financial Services Group, Inc. | 2,200,665 | 118,197,717 | ||||||
181,018,316 | ||||||||
Semiconductor Equipment–0.37% | ||||||||
KLA-Tencor Corp. | 648,864 | 30,555,006 | ||||||
Semiconductors–0.76% | ||||||||
Intel Corp. | 2,593,972 | 63,656,073 | ||||||
Soft Drinks–1.21% | ||||||||
Coca-Cola Co. (The) | 899,628 | 61,462,585 | ||||||
PepsiCo, Inc. | 631,936 | 39,780,371 | ||||||
101,242,956 | ||||||||
Specialty Stores–0.82% | ||||||||
Staples, Inc. | 4,583,084 | 68,562,937 | ||||||
Systems Software–2.35% | ||||||||
Microsoft Corp. | 7,353,582 | 195,825,889 | ||||||
Wireless Telecommunication Services–1.06% | ||||||||
Vodafone Group PLC–ADR (United Kingdom) | 3,185,609 | 88,687,355 | ||||||
Total Common Stocks & Other Equity Interests (Cost $8,468,961,200) | 8,148,046,809 | |||||||
Money Market Funds–2.36% | ||||||||
Liquid Assets Portfolio–Institutional Class(c) | 98,345,651 | 98,345,651 | ||||||
Premier Portfolio–Institutional Class(c) | 98,345,652 | 98,345,652 | ||||||
Total Money Market Funds (Cost $196,691,303) | 196,691,303 | |||||||
TOTAL INVESTMENTS–100.03% (Cost $8,665,652,503) | 8,344,738,112 | |||||||
OTHER ASSETS LESS LIABILITIES–(0.03)% | (2,835,981 | ) | ||||||
NET ASSETS–100.00% | $ | 8,341,902,131 | ||||||
Investment Abbreviation:
ADR | – American Depositary Receipt |
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. | |
(b) | Non-income producing security. | |
(c) | The money market fund and the Fund are affiliated by having the same investment adviser. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
6 Invesco Van Kampen Comstock Fund
By sector, based on Net Assets
As of October 31, 2011
Financials | 20.3 | % | ||
Consumer Discretionary | 15.7 | |||
Energy | 12.3 | |||
Health Care | 12.2 | |||
Information Technology | 11.2 | |||
Consumer Staples | 9.0 | |||
Industrials | 6.2 | |||
Materials | 4.0 | |||
Telecommunication Services | 3.9 | |||
Utilities | 2.9 | |||
Money Market Funds Plus Other Assets Less Liabilities | 2.3 | |||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
7 Invesco Van Kampen Comstock Fund
Statement of Assets and Liabilities
October 31, 2011
(Unaudited)
Assets: | ||||
Investments, at value (Cost $8,468,961,200) | $ | 8,148,046,809 | ||
Investments in affiliated money market funds, at value and cost | 196,691,303 | |||
Total investments, at value (Cost $8,665,652,503) | 8,344,738,112 | |||
Receivable for: | ||||
Investments sold | 9,744,660 | |||
Fund shares sold | 9,164,974 | |||
Dividends | 10,028,269 | |||
Investment for trustee deferred compensation and retirement plans | 75,141 | |||
Other assets | 146,890 | |||
Total assets | 8,373,898,046 | |||
Liabilities: | ||||
Payable for: | ||||
Investments purchased | 7,776,218 | |||
Fund shares reacquired | 16,821,035 | |||
Accrued fees to affiliates | 6,466,913 | |||
Accrued other operating expenses | 701,682 | |||
Trustee deferred compensation and retirement plans | 230,067 | |||
Total liabilities | 31,995,915 | |||
Net assets applicable to shares outstanding | $ | 8,341,902,131 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 10,109,037,180 | ||
Undistributed net investment income | 14,938,105 | |||
Undistributed net realized gain (loss) | (1,461,158,763 | ) | ||
Unrealized appreciation (depreciation) | (320,914,391 | ) | ||
$ | 8,341,902,131 | |||
Net Assets: | ||||
Class A | $ | 5,120,992,952 | ||
Class B | $ | 383,509,056 | ||
Class C | $ | 433,863,011 | ||
Class R | $ | 182,123,772 | ||
Class Y | $ | 1,938,596,618 | ||
Institutional Class | $ | 282,816,722 | ||
Shares outstanding, $0.01 par value per share, with an unlimited number of shares authorized: | ||||
Class A | 336,207,579 | |||
Class B | 25,177,825 | |||
Class C | 28,486,220 | |||
Class R | 11,958,165 | |||
Class Y | 127,270,172 | |||
Institutional Class | 18,569,462 | |||
Class A: | ||||
Net asset value per share | $ | 15.23 | ||
Maximum offering price per share (Net asset value of $15.23 divided by 94.50%) | $ | 16.12 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 15.23 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 15.23 | ||
Class R: | ||||
Net asset value and offering price per share | $ | 15.23 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 15.23 | ||
Institutional Class: | ||||
Net asset value and offering price per share | $ | 15.23 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
8 Invesco Van Kampen Comstock Fund
Statement of Operations
For the six months ended October 31, 2011
(Unaudited)
Investment income: | ||||
Dividends (net of foreign withholding taxes of $1,528,833) | $ | 101,119,260 | ||
Dividends from affiliated money market funds | 78,474 | |||
Total investment income | 101,197,734 | |||
Expenses: | ||||
Advisory fees | 16,397,048 | |||
Administrative services fees | 378,985 | |||
Custodian fees | 31,113 | |||
Distribution fees: | ||||
Class A | 6,761,291 | |||
Class B | 545,934 | |||
Class C | 2,319,862 | |||
Class R | 459,012 | |||
Transfer agent fees — A, B, C, R and Y | 10,784,120 | |||
Transfer agent fees — Institutional | 4,497 | |||
Trustees’ and officers’ fees and benefits | 137,129 | |||
Other | (717,594 | ) | ||
Total expenses | 37,101,397 | |||
Less: Fees waived and expense offset arrangement(s) | (137,825 | ) | ||
Net expenses | 36,963,572 | |||
Net investment income | 64,234,162 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain from investment securities (includes net gains from securities sold to affiliates of $1,796,212) | 269,712,959 | |||
Change in net unrealized appreciation (depreciation) of investment securities | (1,334,491,443 | ) | ||
Net realized and unrealized gain (loss) | (1,064,778,484 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | (1,000,544,322 | ) | |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
9 Invesco Van Kampen Comstock Fund
Statement of Changes in Net Assets
For the six months ended October 31, 2011, the period January 1, 2011 to April 30, 2011 and the year ended December 31, 2010
(Unaudited)
Six months ended | Four months ended | Year ended | ||||||||||
October 31, | April 30, | December 31, | ||||||||||
2011 | 2011 | 2010 | ||||||||||
Operations: | ||||||||||||
Net investment income | $ | 64,234,162 | $ | 35,199,844 | $ | 113,153,134 | ||||||
Net realized gain | 269,712,959 | 204,614,367 | 293,180,587 | |||||||||
Change in net unrealized appreciation (depreciation) | (1,334,491,443 | ) | 590,608,061 | 788,017,622 | ||||||||
Net increase (decrease) in net assets resulting from operations | (1,000,544,322 | ) | 830,422,272 | 1,194,351,343 | ||||||||
Distributions to shareholders from net investment income: | ||||||||||||
Class A | (36,814,888 | ) | (18,862,166 | ) | (80,694,827 | ) | ||||||
Class B | (2,975,190 | ) | (1,710,658 | ) | (8,731,269 | ) | ||||||
Class C | (1,424,460 | ) | (681,230 | ) | (3,665,887 | ) | ||||||
Class R | (1,015,380 | ) | (490,405 | ) | (2,071,686 | ) | ||||||
Class Y | (14,709,465 | ) | (6,385,755 | ) | (22,478,529 | ) | ||||||
Institutional Class | (1,647,746 | ) | (671,089 | ) | (1,244,823 | ) | ||||||
Total distributions from net investment income | (58,587,129 | ) | (28,801,303 | ) | (118,887,021 | ) | ||||||
Share transactions–net: | ||||||||||||
Class A | (266,402,931 | ) | (196,690,160 | ) | (717,064,306 | ) | ||||||
Class B | (83,623,865 | ) | (69,281,758 | ) | (283,232,032 | ) | ||||||
Class C | (30,595,930 | ) | (27,590,259 | ) | (95,819,927 | ) | ||||||
Class R | 5,706,033 | (2,737,192 | ) | (2,479,997 | ) | |||||||
Class Y | 365,455,854 | 93,673,279 | 179,854,507 | |||||||||
Institutional Class | 128,605,567 | (11,741,262 | ) | 137,799,814 | ||||||||
Net increase (decrease) in net assets resulting from share transactions | 119,144,728 | (214,367,352 | ) | (780,941,941 | ) | |||||||
Net increase (decrease) in net assets | (939,986,723 | ) | 587,253,617 | 294,522,381 | ||||||||
Net assets: | ||||||||||||
Beginning of period | 9,281,888,854 | 8,694,635,237 | 8,400,112,856 | |||||||||
End of period (includes undistributed net investment income of $14,938,105, $9,291,072 and $2,892,531, respectively) | $ | 8,341,902,131 | $ | 9,281,888,854 | $ | 8,694,635,237 | ||||||
Notes to Financial Statements
October 31, 2011
(Unaudited)
NOTE 1—Significant Accounting Policies
Invesco Van Kampen Comstock 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 to seek capital growth and income through investments in equity securities, including common stocks, preferred stocks and securities convertible into common and preferred stocks.
The Fund currently consists of six different classes of shares: Class A, Class B, Class C, Class R, Class Y and Institutional Class. Class A shares are sold with a front-end sales charge unless certain waiver criteria are met and under certain circumstances load waived shares may be subject to contingent deferred sales charges (“CDSC”). Class C shares are sold with a CDSC. Class R, Class Y and Institutional Class shares are sold at net asset value. Effective November 30, 2010, new or additional investments in Class B shares are no longer permitted. Existing shareholders of Class B shares may continue to reinvest dividends and capital gains distributions in Class B shares until they convert. Also, shareholders in Class B shares will be able to exchange those shares for Class B shares of other
10 Invesco Van Kampen Comstock Fund
Invesco Funds offering such shares until they convert. Generally, Class B shares will automatically convert to Class A shares on or about the month-end which is at least eight years after the date of purchase. Redemption of Class B shares prior to conversion date will be subject to a CDSC.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. | |
A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”). | ||
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded. | ||
Debt obligations (including convertible bonds) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. 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 |
11 Invesco Van Kampen Comstock Fund
of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. | ||
D. | Distributions — Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to treat a portion of the proceeds from redemptions as distributions for federal income tax purposes. | |
E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. | |
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period. | ||
F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund are charged to the operations of such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses attributable to the Institutional Class are charged to such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses relating to all other classes are allocated among those classes based on relative net assets. All other expenses are allocated among the classes based on relative net assets. Prior to the Reorganization, incremental transfer agency fees which are unique to each class of shares of the Acquired Fund were charged to the operations of such class. | |
G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. | |
H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser based on the annual rate of the Fund’s average daily net assets as follows:
Average Daily Net Assets | Rate | |||
First $1 billion | 0 | .50% | ||
Next $1 billion | 0 | .45% | ||
Next $1 billion | 0 | .40% | ||
Over $3 billion | 0 | .35% | ||
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(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, Class R, Class Y and Institutional Class shares to 0.89%, 1.64%, 1.64%, 1.14%, 0.64% and 0.64% respectively, of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless the Board of Trustees and Invesco mutually agree to amend or continue the fee waiver agreement, it will terminate on June 30, 2012. The Adviser did not waive fees and/or reimburse expenses during the period under this expense limitation.
Further, the Adviser has contractually agreed, through at least June 30, 2012, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the six months ended October 31, 2011, the Adviser waived advisory fees of $133,372.
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 October 31, 2011, expenses incurred under the agreement are shown in the Statement of Operations as administrative services fees.
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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 October 31, 2011, expenses incurred under the agreement are shown in the Statement of Operations as transfer agent fees.
Shares of the Fund are distributed by Invesco Distributors, Inc. (“IDI”). The Fund has adopted a distribution plan pursuant to Rule 12b-1 under the 1940 Act, and a service plan (collectively, the “Plans”) for Class A, Class B, Class C and Class R shares to compensate IDI for the sale, distribution, shareholder servicing and maintenance of shareholder accounts for these shares. Under the Plans, the Fund will incur annual fees of up to 0.25% of Class A average daily net assets, up to 1.00% each of Class B and Class C average daily net assets and up to 0.50% of Class R average daily net assets.
With respect to Class B and Class C shares, the Fund is authorized to reimburse in future years any distribution related expenses that exceed the maximum annual reimbursement rate for such class, so long as such reimbursement does not cause the Fund to exceed the Class B and Class C maximum annual reimbursement rate, respectively. With respect to Class A shares, distribution related expenses that exceed the maximum annual reimbursement rate for such class are not carried forward to future years and the Fund will not reimburse IDI for any such expenses.
For the six months ended October 31, 2011, expenses incurred under these agreements are shown in the Statement of Operations as distribution fees.
Front-end sales commissions and CDSC (collectively, the “sales charges”) are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the six months ended October 31, 2011, IDI advised the Fund that IDI retained $258,817 in front-end sales commissions from the sale of Class A shares and $191, $192,545 and $5,278 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of the Adviser, Invesco Ltd., IIS and/or IDI.
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3) generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
Level 1 — | Prices are determined using quoted prices in an active market for identical assets. | |
Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. | |
Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of October 31, 2011. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
During the six months ended October 31, 2011, there were no significant transfers between investment levels.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 8,277,412,708 | $ | 67,325,404 | $ | — | $ | 8,344,738,112 | ||||||||
NOTE 4—Security Transactions with Affiliated Funds
The Fund is permitted to purchase or sell securities from or to certain other Invesco Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment adviser (or affiliated investment advisers), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, for the six months ended October 31, 2011, the Fund engaged in securities purchases of $5,298,604 and securities sales of $4,378,891, which resulted in net realized gains of $1,796,212.
NOTE 5—Expense Offset Arrangement(s)
The expense offset arrangement is comprised of transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions. For the six months ended October 31, 2011, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $4,453.
13 Invesco Van Kampen Comstock Fund
NOTE 6—Trustees’ and Officers’ Fees and Benefits
“Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and “Trustees’ and Officers’ Fees and Benefits” also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. “Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
During the six months ended October 31, 2011, the Fund paid legal fees of $7,105 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A partner of that firm is a Trustee of the Trust.
NOTE 7—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 8—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 April 30, 2011, which expires as follows:
Capital Loss | ||||
Expiration | Carryforward* | |||
April 30, 2016 | $ | 502,721,429 | ||
April 30, 2017 | 1,215,153,460 | |||
Total capital loss carryforward | $ | 1,717,874,889 | ||
* | Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. |
NOTE 9—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the six months ended October 31, 2011 was $904,163,869 and $1,038,304,908, 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 | $ | 776,249,717 | ||
Aggregate unrealized (depreciation) of investment securities | (1,110,313,505 | ) | ||
Net unrealized appreciation (depreciation) of investment securities | $ | (334,063,788 | ) | |
Cost of investments for tax purposes is $8,678,801,900. |
14 Invesco Van Kampen Comstock Fund
NOTE 10—Share Information
Summary of Share Activity | ||||||||||||||||||||||||
Six months ended | Four months ended | Year ended | ||||||||||||||||||||||
October 31, 2011(a) | April 30, 2011 | December 31, 2010 | ||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||
Sold: | ||||||||||||||||||||||||
Class A | 15,047,171 | $ | 231,922,259 | 11,667,337 | $ | 192,263,341 | 38,551,688 | $ | 556,413,934 | |||||||||||||||
Class B | 126,842 | 2,054,830 | 105,462 | 1,732,762 | 1,854,262 | �� | 26,227,224 | |||||||||||||||||
Class C | 560,185 | 8,815,182 | 615,165 | 10,136,719 | 1,440,492 | 20,664,843 | ||||||||||||||||||
Class R | 2,159,820 | 33,147,135 | 1,383,642 | 22,744,177 | 3,375,858 | 48,026,521 | ||||||||||||||||||
Class Y | 35,985,550 | 534,795,524 | 11,855,227 | 195,169,957 | 41,292,215 | 586,527,561 | ||||||||||||||||||
Institutional Class | 9,673,293 | 141,912,644 | 45,232 | 742,493 | 13,636,920 | 182,662,007 | ||||||||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||||||||||
Class A | 2,211,686 | 33,663,331 | 1,198,716 | 19,131,516 | 5,411,360 | 76,300,880 | ||||||||||||||||||
Class B | 179,445 | 2,735,042 | 108,889 | 1,737,878 | 591,072 | 8,320,963 | ||||||||||||||||||
Class C | 79,115 | 1,200,244 | 42,529 | 679,616 | 214,596 | 3,024,170 | ||||||||||||||||||
Class R | 65,757 | 999,645 | 30,705 | 490,365 | 141,414 | 1,996,890 | ||||||||||||||||||
Class Y | 923,634 | 14,012,123 | 408,318 | 6,516,756 | 1,478,340 | 20,886,323 | ||||||||||||||||||
Institutional Class | 108,618 | 1,647,630 | 42,071 | 671,038 | 84,733 | 1,244,771 | ||||||||||||||||||
Issued in connection with acquisitions:(b) | ||||||||||||||||||||||||
Class A | 7,328,363 | 122,829,460 | — | — | — | — | ||||||||||||||||||
Class B | 403,540 | 6,766,085 | — | — | — | — | ||||||||||||||||||
Class C | 554,316 | 9,284,997 | — | — | — | — | ||||||||||||||||||
Class R | 108,762 | 1,821,636 | — | — | — | — | ||||||||||||||||||
Class Y | 4,939,741 | 82,789,108 | — | — | — | — | ||||||||||||||||||
Institutional Class | 42,555 | 713,103 | — | — | — | — | ||||||||||||||||||
Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||||||||||
Class A | 3,118,886 | 48,474,411 | 2,145,518 | 35,759,307 | 6,973,316 | 98,797,748 | ||||||||||||||||||
Class B | (3,118,859 | ) | (48,474,411 | ) | (2,146,367 | ) | (35,759,307 | ) | (6,973,316 | ) | (98,797,748 | ) | ||||||||||||
Reacquired: | ||||||||||||||||||||||||
Class A | (45,774,361 | ) | (703,292,392 | ) | (26,943,439 | ) | (443,844,324 | ) | (101,907,916 | ) | (1,448,576,868 | ) | ||||||||||||
Class B | (3,010,774 | ) | (46,705,411 | ) | (2,246,954 | ) | (36,993,091 | ) | (15,490,819 | ) | (218,982,471 | ) | ||||||||||||
Class C | (3,230,075 | ) | (49,896,353 | ) | (2,333,684 | ) | (38,406,594 | ) | (8,407,387 | ) | (119,508,940 | ) | ||||||||||||
Class R | (1,964,612 | ) | (30,262,383 | ) | (1,581,031 | ) | (25,971,734 | ) | (3,708,182 | ) | (52,503,408 | ) | ||||||||||||
Class Y | (17,608,465 | ) | (266,140,901 | ) | (6,555,310 | ) | (108,013,434 | ) | (31,019,923 | ) | (427,559,377 | ) | ||||||||||||
Institutional Class | (1,012,018 | ) | (15,667,810 | ) | (803,280 | ) | (13,154,793 | ) | (3,248,662 | ) | (46,106,964 | ) | ||||||||||||
Net increase (decrease) in share activity | 7,898,115 | $ | 119,144,728 | (12,961,254 | ) | $ | (214,367,352 | ) | (55,709,939 | ) | $ | (780,941,941 | ) | |||||||||||
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 33% of the outstanding shares of the Fund. IDI has an agreement with these entities to sell Fund shares. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as securities brokerage, distribution, third party record keeping and account servicing. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. | |
(b) | As of the opening of business on May 23, 2011, the Fund acquired all the net assets of Invesco Large Cap Basic Value Fund and Invesco Value II Fund pursuant to a plan of reorganization approved by the Trustees of the Fund on November 10, 2010 and by the shareholders of Invesco Large Cap Basic Value Fund and Invesco Value II, respectively on April 14, 2011. The acquisition was accomplished by a tax- free exchange of 13,377,277 shares of the Fund for 7,828,863 shares outstanding of Invesco Large Cap Basic Value Fund and 8,473,367 shares outstanding of Invesco Value II Fund as of the close of business on May 20, 2011. Each class of shares of Invesco Large Cap Basic Value Fund and Invesco Value II Fund was exchanged for the like class of shares of the Fund based on the relative net asset value of Invesco Large Cap Basic Value Fund and Invesco Value II Fund to the net asset value of the Fund on the close of business, May 20, 2011. Invesco Large Cap Basic Value Fund’s net assets as of the close of business on May 20, 2011 of $85,450,496 including $18,438,726 of unrealized appreciation and Invesco Value II Fund’s net assets as of the close of business on May 20, 2011 of $138,753,893 including $21,433,501 of unrealized appreciation, were combined with the net assets of the Fund. The net assets of the Fund immediately before the acquisition were $9,011,495,941. The net assets of the Fund immediately following the reorganization were $9,235,700,330. |
15 Invesco Van Kampen Comstock Fund
NOTE 11—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Ratio of | Ratio of | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net gains | expenses | expenses | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
(losses) on | to average | to average net | Ratio of net | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset | securities | Dividends | Distributions | net assets | assets without | investment | ||||||||||||||||||||||||||||||||||||||||||||||||||
value, | Net | (both | Total from | from net | from net | Net asset | Net assets, | with fee waivers | fee waivers | income | ||||||||||||||||||||||||||||||||||||||||||||||
beginning | investment | realized and | investment | investment | realized | Total | value, end | Total | end of period | and/or expenses | and/or expenses | to average | Portfolio | |||||||||||||||||||||||||||||||||||||||||||
of period | income(a) | unrealized) | operations | income | gains | distributions | of period | return | (000s omitted) | absorbed | absorbed | net assets | turnover(b) | |||||||||||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | $ | 17.20 | $ | 0.12 | $ | (1.98 | ) | $ | (1.86 | ) | $ | (0.11 | ) | $ | — | $ | (0.11 | ) | $ | 15.23 | (10.84 | )%(c) | $ | 5,120,993 | 0.89 | %(d) | 0.89 | %(d) | 1.49 | %(d) | 11 | % | ||||||||||||||||||||||||
Four months ended 04/30/11 | 15.73 | 0.06 | 1.46 | 1.52 | (0.05 | ) | — | (0.05 | ) | 17.20 | 9.71 | (c) | 6,092,190 | 0.84 | 0.84 | 1.18 | 10 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/10 | 13.81 | 0.20 | 1.93 | 2.13 | (0.21 | ) | — | (0.21 | ) | 15.73 | 15.60 | (c) | 5,760,670 | 0.86 | 0.86 | 1.39 | 18 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/09 | 10.85 | 0.19 | 2.95 | 3.14 | (0.18 | ) | — | (0.18 | ) | 13.81 | 29.45 | (e) | 5,759,425 | 0.89 | 0.89 | 1.63 | 14 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/08 | 17.48 | 0.32 | (6.48 | ) | (6.16 | ) | (0.32 | ) | (0.15 | ) | (0.47 | ) | 10.85 | (35.89 | )(e) | 5,798,794 | 0.84 | 0.84 | 2.16 | 19 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/07 | 19.26 | 0.36 | (0.69 | ) | (0.33 | ) | (0.37 | ) | (1.08 | ) | (1.45 | ) | 17.48 | (1.89 | )(e) | 12,091,921 | 0.78 | 0.78 | 1.82 | 22 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/06 | 17.81 | 0.35 | 2.43 | 2.78 | (0.38 | ) | (0.95 | ) | (1.33 | ) | 19.26 | 16.06 | (e) | 13,686,078 | 0.80 | 0.80 | 1.92 | 26 | ||||||||||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | 17.20 | 0.12 | (1.98 | ) | (1.86 | ) | (0.11 | ) | — | (0.11 | ) | 15.23 | (10.84 | )(c)(f) | 383,509 | 0.89 | (d)(f) | 0.89 | (d)(f) | 1.49 | (d)(f) | 11 | ||||||||||||||||||||||||||||||||||
Four months ended 04/30/11 | 15.73 | 0.06 | 1.46 | 1.52 | (0.05 | ) | — | (0.05 | ) | 17.20 | 9.71 | (c)(f) | 526,168 | 0.84 | (f) | 0.84 | (f) | 1.18 | (f) | 10 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/10 | 13.81 | 0.20 | 1.93 | 2.13 | (0.21 | ) | — | (0.21 | ) | 15.73 | 15.60 | (c)(f) | 547,060 | 0.86 | (f) | 0.86 | (f) | 1.39 | (f) | 18 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/09 | 10.85 | 0.19 | 2.95 | 3.14 | (0.18 | ) | — | (0.18 | ) | 13.81 | 29.45 | (g)(h) | 756,515 | 0.89 | (g) | 0.89 | (g) | 1.64 | (g) | 14 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/08 | 17.49 | 0.32 | (6.49 | ) | (6.17 | ) | (0.32 | ) | (0.15 | ) | (0.47 | ) | 10.85 | (35.93 | )(g)(h) | 906,301 | 0.84 | (g) | 0.84 | (g) | 2.16 | (g) | 19 | |||||||||||||||||||||||||||||||||
Year ended 12/31/07 | 19.26 | 0.23 | (0.68 | ) | (0.45 | ) | (0.24 | ) | (1.08 | ) | (1.32 | ) | 17.49 | (2.46 | )(g)(h) | 1,991,609 | 1.41 | (g) | 1.41 | (g) | 1.19 | (g) | 22 | |||||||||||||||||||||||||||||||||
Year ended 12/31/06 | 17.81 | 0.21 | 2.43 | 2.64 | (0.24 | ) | (0.95 | ) | (1.19 | ) | 19.26 | 15.21 | (h) | 2,518,352 | 1.55 | 1.55 | 1.17 | 26 | ||||||||||||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | 17.20 | 0.06 | (1.98 | ) | (1.92 | ) | (0.05 | ) | — | (0.05 | ) | 15.23 | (11.17 | )(c) | 433,863 | 1.64 | (d) | 1.64 | (d) | 0.74 | (d) | 11 | ||||||||||||||||||||||||||||||||||
Four months ended 04/30/11 | 15.74 | 0.02 | 1.46 | 1.48 | (0.02 | ) | — | (0.02 | ) | 17.20 | 9.43 | (c) | 524,840 | 1.59 | 1.59 | 0.43 | 10 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/10 | 13.81 | 0.09 | 1.94 | 2.03 | (0.10 | ) | — | (0.10 | ) | 15.74 | 14.82 | (c) | 506,742 | 1.61 | 1.61 | 0.64 | 18 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/09 | 10.86 | 0.10 | 2.94 | 3.04 | (0.09 | ) | — | (0.09 | ) | 13.81 | 28.37 | (i) | 538,048 | 1.64 | 1.64 | 0.87 | 14 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/08 | 17.49 | 0.21 | (6.48 | ) | (6.27 | ) | (0.21 | ) | (0.15 | ) | (0.36 | ) | 10.86 | (36.35 | )(i) | 544,631 | 1.59 | 1.59 | 1.41 | 19 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/07 | 19.27 | 0.21 | (0.69 | ) | (0.48 | ) | (0.22 | ) | (1.08 | ) | (1.30 | ) | 17.49 | (2.63 | )(i) | 1,243,097 | 1.53 | 1.53 | 1.07 | 22 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/06 | 17.82 | 0.21 | 2.43 | 2.64 | (0.24 | ) | (0.95 | ) | (1.19 | ) | 19.27 | 15.20 | (i) | 1,495,779 | 1.55 | 1.55 | 1.17 | 26 | ||||||||||||||||||||||||||||||||||||||
Class R | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | 17.19 | 0.10 | (1.97 | ) | (1.87 | ) | (0.09 | ) | — | (0.09 | ) | 15.23 | (10.90 | )(c) | 182,124 | 1.14 | (d) | 1.14 | (d) | 1.24 | (d) | 11 | ||||||||||||||||||||||||||||||||||
Four months ended 04/30/11 | 15.73 | 0.05 | 1.45 | 1.50 | (0.04 | ) | — | (0.04 | ) | 17.19 | 9.57 | (c) | 199,254 | 1.09 | 1.09 | 0.93 | 10 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/10 | 13.81 | 0.16 | 1.93 | 2.09 | (0.17 | ) | — | (0.17 | ) | 15.73 | 15.32 | (c) | 184,927 | 1.11 | 1.11 | 1.14 | 18 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/09 | 10.85 | 0.15 | 2.96 | 3.11 | (0.15 | ) | — | (0.15 | ) | 13.81 | 29.13 | (j) | 164,959 | 1.14 | 1.14 | 1.35 | 14 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/08 | 17.49 | 0.28 | (6.49 | ) | (6.21 | ) | (0.28 | ) | (0.15 | ) | (0.43 | ) | 10.85 | (36.09 | )(j) | 130,746 | 1.09 | 1.09 | 1.91 | 19 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/07 | 19.26 | 0.31 | (0.68 | ) | (0.37 | ) | (0.32 | ) | (1.08 | ) | (1.40 | ) | 17.49 | (2.09 | )(j) | 296,167 | 1.03 | 1.03 | 1.56 | 22 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/06 | 17.81 | 0.30 | 2.43 | 2.73 | (0.33 | ) | (0.95 | ) | (1.28 | ) | 19.26 | 15.78 | (j) | 274,266 | 1.05 | 1.05 | 1.67 | 26 | ||||||||||||||||||||||||||||||||||||||
Class Y(k) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | 17.20 | 0.13 | (1.98 | ) | (1.85 | ) | (0.12 | ) | — | (0.12 | ) | 15.23 | (10.72 | )(c) | 1,938,597 | 0.64 | (d) | 0.64 | (d) | 1.74 | (d) | 11 | ||||||||||||||||||||||||||||||||||
Four months ended 04/30/11 | 15.73 | 0.08 | 1.45 | 1.53 | (0.06 | ) | — | (0.06 | ) | 17.20 | 9.78 | (c) | 1,771,697 | 0.59 | 0.59 | 1.43 | 10 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/10 | 13.80 | 0.23 | 1.94 | 2.17 | (0.24 | ) | — | (0.24 | ) | 15.73 | 15.97 | (c) | 1,530,636 | 0.61 | 0.61 | 1.65 | 18 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/09 | 10.85 | 0.21 | 2.95 | 3.16 | (0.21 | ) | — | (0.21 | ) | 13.80 | 29.67 | (l) | 1,181,166 | 0.64 | 0.64 | 1.85 | 14 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/08 | 17.48 | 0.35 | (6.48 | ) | (6.13 | ) | (0.35 | ) | (0.15 | ) | (0.50 | ) | 10.85 | (35.73 | )(l) | 896,154 | 0.59 | 0.59 | 2.41 | 19 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/07 | 19.25 | 0.40 | (0.68 | ) | (0.28 | ) | (0.41 | ) | (1.08 | ) | (1.49 | ) | 17.48 | (1.59 | )(l) | 1,857,415 | 0.53 | 0.53 | 2.07 | 22 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/06 | 17.80 | 0.40 | 2.43 | 2.83 | (0.43 | ) | (0.95 | ) | (1.38 | ) | 19.25 | 16.36 | (l) | 1,858,227 | 0.55 | 0.55 | 2.16 | 26 | ||||||||||||||||||||||||||||||||||||||
Institutional Class | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | 17.19 | 0.15 | (1.97 | ) | (1.82 | ) | (0.14 | ) | — | (0.14 | ) | 15.23 | (10.58 | )(c) | 282,817 | 0.39 | (d) | 0.39 | (d) | 1.99 | (d) | 11 | ||||||||||||||||||||||||||||||||||
Four months ended 04/30/11 | 15.72 | 0.09 | 1.45 | 1.54 | (0.07 | ) | — | (0.07 | ) | 17.19 | 9.82 | (c) | 167,740 | 0.36 | 0.36 | 1.66 | 10 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/10(m) | 13.33 | 0.14 | 2.44 | 2.58 | (0.19 | ) | — | (0.19 | ) | 15.72 | 19.53 | (c) | 164,600 | 0.49 | (n) | 0.49 | (n) | 1.68 | (n) | 18 | ||||||||||||||||||||||||||||||||||||
(a) | Calculated using average shares outstanding. | |
(b) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. For the period ending October 31, 2011, the portfolio turnover calculation excludes the value of securities purchased of $180,889,411 and sold of $56,511,988 in the effort to realign the Fund’s portfolio holdings after the reorganization of Invesco Large Cap Basic Value Fund and Invesco Value II Fund into the Fund. | |
(c) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges and is not annualized for periods less than one year. | |
(d) | Ratios are annualized and based on average daily net assets (000’s omitted) of $5,392,578, $438,213, $461,451, $182,607, $1,796,758, and $190,069 for Class A, Class B, Class C, Class R, Class Y and Institutional Class shares, respectively. | |
(e) | Assumes reinvestment of all distributions for the period and does not include payment of the maximum sales charge of 5.75% or contingent deferred sales charge (CDSC). On purchases of $1 million or more, a CDSC of 1% may be imposed on certain redemptions made within eighteen months of purchase. If the sales charges were included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to 0.25% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. | |
(f) | The total return, ratio of expenses to average net assets and ratio of net investment income to average net assets reflect actual 12b-1 fees of 0.25%. | |
(g) | The total return, ratio of expenses to average net assets and ratio of net investment income to average net assets reflect actual 12b-1 fees of 1.00%. | |
(h) | Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 5%, charged on certain redemptions made within one year of purchase and declining to 0% after the fifth year. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to 1% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. | |
(i) | Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 1%, charged on certain redemptions made within one year of purchase. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to 1% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. | |
(j) | Assumes reinvestment of all distributions for the period. These returns include combined Rule 12b-1 fees and service fees of up to 0.50% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption on Fund shares. | |
(k) | On June 1, 2010, the Fund’s former Class I shares were reorganized into Class Y shares. | |
(l) | Assumes reinvestment of all distributions for the period. These returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption on Fund shares. | |
(m) | Commencement date of June 1, 2010. | |
(n) | Annualized. |
16 Invesco Van Kampen Comstock Fund
NOTE 12—Proposed Reorganization
The Board of Trustees unanimously approved an Agreement and Plan of Reorganization (the “Agreement”) pursuant to which the Fund would acquire all of the assets and liabilities of Invesco Value Fund (the “Target Fund”) in exchange for shares of the Fund.
The Target Fund’s shareholders approved the Agreement on November 28, 2011 and the reorganization is expected to be consummated on December 19, 2011. Upon closing of the reorganization, shareholders of the Target Fund will receive a corresponding share class of the Fund in exchange for their shares of the Target Fund and the Target Fund will liquidate and cease operations.
17 Invesco Van Kampen Comstock 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 May 1, 2011 through October 31, 2011.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the hypothetical information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
HYPOTHETICAL | ||||||||||||||||||||||||||||||
ACTUAL | (5% annual return before expenses) | |||||||||||||||||||||||||||||
Beginning | Ending | Expenses | Ending | Expenses | Annualized | |||||||||||||||||||||||||
Account Value | Account Value | Paid During | Account Value | Paid During | Expense | |||||||||||||||||||||||||
Class | (05/01/11) | (10/31/11)1 | Period2 | (10/31/11) | Period2 | Ratio | ||||||||||||||||||||||||
A | $ | 1,000.00 | $ | 891.60 | $ | 4.23 | $ | 1,020.66 | $ | 4.52 | 0.89 | % | ||||||||||||||||||
B | 1,000.00 | 891.60 | 4.23 | 1,020.66 | 4.52 | 0.89 | ||||||||||||||||||||||||
C | 1,000.00 | 888.30 | 7.78 | 1,016.89 | 8.31 | 1.64 | ||||||||||||||||||||||||
R | 1,000.00 | 891.00 | 5.42 | 1,019.41 | 5.79 | 1.14 | ||||||||||||||||||||||||
Y | 1,000.00 | 892.80 | 3.05 | 1,021.92 | 3.25 | 0.64 | ||||||||||||||||||||||||
Institutional | 1,000.00 | 894.20 | 1.96 | 1,023.18 | 1.98 | 0.39 | ||||||||||||||||||||||||
1 | The actual ending account value is based on the actual total return of the Fund for the period May 1, 2011 through October 31, 2011, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund’s expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half year. |
18 Invesco Van Kampen Comstock 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 Van Kampen Comstock Fund (the Fund) investment advisory agreement with Invesco Advisers, Inc. (Invesco Advisers) and the Master Intergroup Sub-Advisory Contract for Mutual Funds (the sub-advisory contracts) with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers). During contract renewal meetings held on June 14-15, 2011, the Board as a whole, and the disinterested or “independent” Trustees, who comprise 80% of the Board, voting separately, approved the continuance of the Fund’s investment advisory agreement and the sub-advisory contracts for another year, effective July 1, 2011. In doing so, the Board considered the process that it follows in reviewing and approving the Fund’s investment advisory agreement and sub-advisory contracts and the information that it is provided. The Board determined that the Fund’s investment advisory agreement and the sub-advisory contracts are in the best interests of the Fund and its shareholders and the compensation to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is responsible for overseeing the management of a number of the series portfolios of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies and limitations and investment risks of these funds. The Sub-Committees meet regularly and at designated contract renewal meetings each year to conduct a review of the performance, fees, expenses and other matters related to their assigned Invesco Funds. Each Sub-Committee recommends to the Investments Committee, which in turn recommends to the full Board, whether to approve the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Trustees receive comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and an independent company, Lipper, Inc. (Lipper). The Trustees also receive an independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. The independent Trustees are assisted in their annual evaluation of the Fund’s investment advisory agreement by the Senior Officer and by independent legal counsel. The independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in private sessions with the Senior Officer and counsel.
In evaluating the fairness and reasonableness of the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Trustees also considered information provided in connection with fund acquisitions approved by the Trustees to rationalize the Invesco Funds product range following the acquisition of the retail mutual fund business of Morgan Stanley (the Morgan Stanley Transaction). The Trustees recognized that the advisory fees for the Invesco Funds include advisory fees that are the result of years of review and negotiation between the Trustees and Invesco Advisers as well as advisory fees inherited from Morgan Stanley and Van Kampen funds acquired in the Morgan Stanley Transaction. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these same arrangements throughout the year and in prior years. One Trustee may have weighed a particular piece of information differently than another Trustee.
The discussion below serves as the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 15, 2011, and may not reflect consideration of factors that became known to the Board after that date, including, for example, changes to the Fund’s performance, advisory fees, expense limitations and/or fee waivers.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers, with whom the Board met during the year. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s consideration of Invesco Advisers’ performance and investment process oversight, independent credit analysis and investment risk management.
In determining whether to continue the Fund’s investment advisory agreement, the Board considered the prior relationship between Invesco Advisers and the Fund, as well as the Board’s knowledge of Invesco Advisers’ operations, and concluded that it is beneficial to maintain the current relationship, in part, because of such knowledge. The Board also considered services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution and legal and compliance. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and the advisory services are provided in accordance with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services provided by the Affiliated Sub-Advisers under the sub-advisory contracts and the credentials and experience of the officers and employees of the Affiliated Sub-Advisers who provide these services. The Board noted that the Affiliated Sub-Advisers have offices and personnel that are located in financial centers around the world. As a result, the Affiliated Sub-Advisers can provide research and investment analysis on the markets and economies of various countries in which the Fund invests and make recommendations on securities of companies located in such countries. The Board concluded that the sub-advisory contracts benefit the Fund and its shareholders by permitting Invesco Advisers to use the resources and talents of the Affiliated Sub-Advisers in managing the Fund. The Board concluded that the nature, extent and quality of the services provided by the Affiliated Sub-Advisers are appropriate and satisfactory and in accordance with the terms of the Fund’s sub-advisory contracts.
B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
The Board compared the Fund’s performance during the past one, three and five calendar years to the performance of funds in the Lipper performance universe and against the Lipper Large Cap Value Funds Index. The Board noted that performance of Class A shares of the Fund was in the first quintile of
19 Invesco Van Kampen Comstock Fund
the performance universe for the one and three year periods and the second quintile for the five year period (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board noted that performance of Class A shares of the Fund was above the performance of the Index for the one, three and five year periods. Although the independent written evaluation of the Fund’s Senior Officer only considered Fund performance through the most recent calendar year, the Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
C. | Advisory and Sub-Advisory Fees and Fee Waivers |
The Board compared the Fund’s contractual advisory fee rate to the contractual advisory fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the contractual advisory fee rate for Class A shares of the Fund was below the median contractual advisory fee rate of funds in the expense group. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using audited financial data from the most recent annual report of each fund in the expense group that was publicly available as of the end of the past calendar year and including only one fund per investment adviser. The Board noted that comparative data is as of varying dates, which may affect the comparability of data during times of market volatility.
The Board also compared the Fund’s effective fee rate (the advisory fee after advisory fee waivers and before expense limitations/waivers) to the advisory fee rates of other mutual funds advised by Invesco Advisers and its affiliates with investment strategies comparable to those of the Fund. The Board noted that the Fund’s rate was below the rate of two mutual funds with comparable investment strategies and below the total account level fee of eight mutual funds sub-advised by Invesco Advisers with comparable investment strategies. The Board did not consider a comparison of fees to an off-shore fund to be apt as the fee includes more than the advisory fee.
The Board also considered the fees charged by Invesco Advisers and the Affiliated Sub-Advisers to other client accounts with investment strategies comparable to those of the Fund. The Board noted that Invesco Advisers or the Affiliated Sub-Advisers may charge lower fees to large institutional clients solely for investment management services. Invesco Advisers reviewed with the Board the significantly greater scope of services it provides to the Invesco Funds relative to other client accounts. These additional services include provision of administrative services, officers and office space, oversight of service providers, preparation of annual registration statement updates and financial information and regulatory compliance under the Investment Company Act of 1940, as amended. Invesco Advisers also reviewed generally the higher frequency of shareholder purchases and redemptions in the Invesco Funds relative to the flow of assets for other client accounts. Invesco Advisers advised the Board that advance notice of redemptions is often provided to Invesco Advisers by institutional clients. The Board did note that sub-advisory fees charged by the Affiliated Sub-Advisers to manage the Invesco Funds and to manage other client accounts were often more comparable. The Board concluded that the aggregate services provided to the Invesco Funds were sufficiently different from those provided to institutional clients, and the Board not place significant weight on these fee comparisons.
The Board noted that Invesco Advisers has contractually agreed to waive fees and/or limit expenses of the Fund through at least June 30, 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.
20 Invesco Van Kampen Comstock Fund
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Invesco mailing information
Send general correspondence to Invesco Investment Services, Inc., P.O. Box 219078, Kansas City, MO 64121-9078.
Invesco privacy policy
You share personal and financial information with us that is necessary for your transactions and your account records. We take very seriously the obligation to keep that information confidential and private.
Invesco collects nonpublic personal information about you from account applications or other forms you complete and from your transactions with us or our affiliates. We do not disclose information about you or our former customers to service providers or other third parties except to the extent necessary to service your account and in other limited circumstances as permitted by law. For example, we use this information to facilitate the delivery of transaction confirmations, financial reports, prospectuses and tax forms.
Even within Invesco, only people involved in the servicing of your accounts and compliance monitoring have access to your information. To ensure the highest level of confidentiality and security, Invesco maintains physical, electronic and procedural safeguards that meet or exceed federal standards. Special measures, such as data encryption and authentication, apply to your communications with us on our website. More detail is available to you at invesco.com/privacy.
Important notice regarding delivery of security holder documents
To reduce Fund expenses, only one copy of most shareholder documents may be mailed to shareholders with multiple accounts at the same address (Householding). Mailing of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact Invesco Investment Services, Inc. at 800 959 4246 or contact your financial institution. We will begin sending you individual copies for each account within 30 days after receiving your request.
Fund holdings and proxy voting information
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is available at invesco.com/completeqtrholdings. Shareholders can also look up the Fund’s Forms N-Q on the SEC website at sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-03826 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.
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VK-COM-SAR-1 Invesco Distributors, Inc.
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Invesco Van Kampen Mid Cap Growth Fund
Semiannual Report to Shareholders § October 31, 2011
Semiannual Report to Shareholders § October 31, 2011
Nasdaq:
A: VGRAX § B: VGRBX § C: VGRCX § R: VGRRX § Y: VGRDX § Institutional: VGRJX
A: VGRAX § B: VGRBX § C: VGRCX § R: VGRRX § Y: VGRDX § Institutional: VGRJX
![(LOGO)](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8576502.gif)
2 | Fund Performance | |
4 | Letters to Shareholders | |
5 | Schedule of Investments | |
8 | Financial Statements | |
10 | Notes to Financial Statements | |
16 | Financial Highlights | |
17 | Fund Expenses | |
18 | 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, 4/30/11 to 10/31/11, at net asset value (NAV). Performance shown does not include applicable contingent deferred sales charges (CDSC) or front-end sales charges, which would have reduced performance.
Class A Shares | -15.77 | % | ||
Class B Shares | -15.80 | |||
Class C Shares | -16.10 | |||
Class R Shares | -15.88 | |||
Class Y Shares | -15.65 | |||
Institutional Class Shares | -15.58 | |||
S&P 500 Index▼(Broad Market Index) | -7.12 | |||
Russell Midcap Growth Index▼(Style-Specific Index) | -10.22 | |||
Lipper Mid-Cap Growth Funds Index▼(Peer Group Index) | -12.51 | |||
Source(s): ▼Lipper Inc.
The Fund recently adopted a three-tier benchmark structure to compare its performance to broad market, style-specific and peer group market measures.
The S&P 500® Index is an unmanaged index considered representative of the U.S. stock market.
The Russell Midcap® Growth Index is an unmanaged index considered representative of mid-cap growth stocks. The Russell Midcap Growth Index is a trademark/service mark of the Frank Russell Co. Russell® is a trademark of the Frank Russell Co.
The Lipper Mid-Cap Growth Funds Index is an unmanaged index considered representative of mid-cap growth 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.
2 Invesco Van Kampen Mid Cap Growth Fund
Average Annual Total Returns
As of 10/31/11, including maximum applicable sales charges
Class A Shares | ||||||||
Inception (12/27/95) | 11.17 | % | ||||||
10 | Years | 6.65 | ||||||
5 | Years | 3.44 | ||||||
1 | Year | -3.42 | ||||||
Class B Shares | ||||||||
Inception (12/27/95) | 11.18 | % | ||||||
10 | Years | 6.71 | ||||||
5 | Years | 3.93 | ||||||
1 | Year | -2.88 | ||||||
Class C Shares | ||||||||
Inception (12/27/95) | 10.77 | % | ||||||
10 | Years | 6.46 | ||||||
5 | Years | 3.84 | ||||||
1 | Year | 0.48 | ||||||
Class R Shares | ||||||||
Inception (7/11/08) | 4.61 | % | ||||||
1 | Year | 1.95 | ||||||
Class Y Shares | ||||||||
Inception (8/12/05) | 5.92 | % | ||||||
5 | Years | 4.89 | ||||||
1 | Year | 2.49 | ||||||
Institutional Class Shares | ||||||||
10 | Years | 7.30 | % | |||||
5 | Years | 4.70 | ||||||
1 | Year | 2.71 |
Effective June 1, 2010, Class A, Class B, Class C, Class R and Class I shares of the predecessor fund, Van Kampen Mid Cap Growth Fund, advised by Van Kampen Asset Management were reorganized into Class A, Class B, Class C, Class R and Class Y shares, respectively, of Invesco Van Kampen Mid Cap Growth Fund. Returns shown above for Class A, Class B, Class C, Class R and Class Y shares are blended returns of the predecessor fund and Invesco Van Kampen Mid Cap Growth Fund. Share class returns will differ from the predecessor fund because of different expenses.
Institutional Class shares incepted on June 1, 2010. Performance shown prior to that date is that of the predecessor fund’s Class A shares and includes the 12b-1 fees applicable to Class A shares. Class A share performance reflects any applicable fee waivers or expense reimbursements.
Average Annual Total Returns
As of 9/30/11, the most recent calendar quarter-end, including maximum applicable sales charges
Class A Shares | ||||||||
Incept | ion (12/27/95) | 10.33 | % | |||||
10 | Years | 5.82 | ||||||
5 | Years | 1.60 | ||||||
1 | Year | -12.13 | ||||||
Class B Shares | ||||||||
Inception (12/27/95) | 10.34 | % | ||||||
10 | Years | 5.87 | ||||||
5 | Years | 2.06 | ||||||
1 | Year | -11.75 | ||||||
Class C Shares | ||||||||
Inception (12/27/95) | 9.94 | % | ||||||
10 | Years | 5.63 | ||||||
5 | Years | 2.00 | ||||||
1 | Year | -8.61 | ||||||
Class R Shares | ||||||||
Inception (7/11/08) | 0.67 | % | ||||||
1 | Year | -7.19 | ||||||
Class Y Shares | ||||||||
Inception (8/12/05) | 3.81 | % | ||||||
5 | Years | 3.03 | ||||||
1 | Year | -6.72 | ||||||
Institutional Class Shares | ||||||||
10 | Years | 6.45 | % | |||||
5 | Years | 2.83 | ||||||
1 | Year | -6.76 |
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, Class R, Class Y and Institutional Class shares was 1.29%, 1.36%, 2.04%, 1.54%, 1.04% and 0.82%,
respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.
Class A share performance reflects the maximum 5.50% sales charge, and Class B and Class C share performance reflects the applicable contingent deferred sales charge (CDSC) for the period involved. For shares purchased prior to June 1, 2010, the CDSC on Class B shares declines from 5% at the time of purchase to 0% at the beginning of the sixth year. For shares purchased on or after June 1, 2010, the CDSC on Class B shares declines from 5% at the time of purchase to 0% at the beginning of the seventh year. The CDSC on Class C shares is 1% for the first year after purchase. Class R, Class Y and Institutional Class shares do not have a front-end sales charge or a CDSC; therefore, performance is at net asset value.
The performance of the Fund’s share classes will differ primarily due to different sales charge structures and class expenses.
3 Invesco Van Kampen Mid Cap Growth Fund
Letters to Shareholders
![(PHOTO OF BRUCE CROCKETT)](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8576503.jpg)
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,
![-s- Bruce L. Crockett](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8576504.gif)
Bruce L. Crockett
Independent Chair, Invesco Funds Board of Trustees
Independent Chair, Invesco Funds Board of Trustees
![(PHOTO OF PHILIP TAYLOR)](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8576505.jpg)
Philip Taylor
Dear Shareholders:
Enclosed is important information about your Fund and its performance. I encourage you to read this report to learn more about your Fund’s short- and long-term performance.
The start of a new year is always a good time to catch up with your financial adviser. Looking ahead to the new year and evaluating your individual situation, your financial adviser can provide valuable insight into whether your investments are still appropriate for your individual needs, goals and risk tolerance. This may provide reassurance in times of economic uncertainty and market volatility such as we saw in 2011 — and are likely to see again in 2012.
On our website, invesco.com/us, we provide timely market updates and commentary from many of our fund managers and other investment professionals. Also on our website, you 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.
Across our broad array of investment products, 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 — meaning 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,
![-s- Philip Taylor](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8576506.gif)
Philip Taylor
Senior Managing Director, Invesco Ltd.
Senior Managing Director, Invesco Ltd.
4 Invesco Van Kampen Mid Cap Growth Fund
Schedule of Investments(a)
October 31, 2011
(Unaudited)
Shares | Value | |||||||
Common Stocks–96.52% | ||||||||
Advertising–0.00% | ||||||||
Interpublic Group of Cos., Inc. (The) | 2,193 | $ | 20,790 | |||||
Air Freight & Logistics–1.48% | ||||||||
C.H. Robinson Worldwide, Inc. | 312,971 | 21,729,577 | ||||||
Apparel Retail–2.63% | ||||||||
Abercrombie & Fitch Co.–Class A | 518,995 | 38,613,228 | ||||||
Apparel, Accessories & Luxury Goods–1.69% | ||||||||
Coach, Inc. | 382,505 | 24,889,600 | ||||||
Application Software–1.40% | ||||||||
Citrix Systems, Inc.(b) | 281,504 | 20,501,936 | ||||||
Asset Management & Custody Banks–0.94% | ||||||||
Affiliated Managers Group, Inc.(b) | 148,967 | 13,795,834 | ||||||
Auto Parts & Equipment–3.46% | ||||||||
BorgWarner, Inc.(b) | 310,844 | 23,776,457 | ||||||
Gentex Corp. | 900,165 | 27,112,970 | ||||||
50,889,427 | ||||||||
Automobile Manufacturers–0.75% | ||||||||
Tesla Motors, Inc.(b)(c) | 375,094 | 11,016,511 | ||||||
Biotechnology–2.18% | ||||||||
BioMarin Pharmaceutical Inc.(b) | 509,580 | 17,381,774 | ||||||
United Therapeutics Corp.(b) | 334,474 | 14,626,548 | ||||||
32,008,322 | ||||||||
Broadcasting–1.98% | ||||||||
Discovery Communications, Inc.–Class A(b) | 669,737 | 29,106,770 | ||||||
Communications Equipment–1.66% | ||||||||
F5 Networks, Inc.(b) | 133,880 | 13,916,826 | ||||||
Juniper Networks, Inc.(b) | 50,620 | 1,238,671 | ||||||
Sycamore Networks, Inc. | 483,057 | 9,284,356 | ||||||
24,439,853 | ||||||||
Construction & Engineering–0.45% | ||||||||
MasTec Inc.(b) | 303,852 | 6,569,280 | ||||||
Construction & Farm Machinery & Heavy Trucks–2.61% | ||||||||
AGCO Corp.(b) | 456,159 | 19,993,449 | ||||||
Navistar International Corp.(b) | 437,252 | 18,395,192 | ||||||
38,388,641 | ||||||||
Consumer Finance–1.49% | ||||||||
Discover Financial Services | 928,431 | 21,873,834 | ||||||
Electrical Components & Equipment–1.45% | ||||||||
Cooper Industries PLC (Ireland) | 406,026 | 21,300,124 | ||||||
Electronic Components–2.08% | ||||||||
Amphenol Corp.–Class A | 643,651 | 30,566,986 | ||||||
Fertilizers & Agricultural Chemicals–1.61% | ||||||||
Intrepid Potash, Inc.(b) | 852,351 | 23,720,928 | ||||||
Footwear–2.74% | ||||||||
Crocs, Inc.(b) | 747,740 | 13,212,566 | ||||||
Deckers Outdoor Corp.(b) | 234,022 | 26,968,695 | ||||||
40,181,261 | ||||||||
General Merchandise Stores–1.49% | ||||||||
Dollar Tree, Inc.(b) | 272,938 | 21,824,122 | ||||||
Health Care Equipment–1.30% | ||||||||
CareFusion Corp.(b) | 744,953 | 19,070,797 | ||||||
Health Care Facilities–2.52% | ||||||||
Brookdale Senior Living Inc.(b) | 690,253 | 11,444,395 | ||||||
Universal Health Services, Inc.–Class B | 640,611 | 25,605,221 | ||||||
37,049,616 | ||||||||
Health Care Services–3.90% | ||||||||
DaVita, Inc.(b) | 425,020 | 29,751,400 | ||||||
Express Scripts, Inc.(b) | 479,430 | 21,924,334 | ||||||
HMS Holdings Corp.(b) | 228,347 | 5,580,801 | ||||||
57,256,535 | ||||||||
Health Care Technology–1.44% | ||||||||
Allscripts Healthcare Solutions, Inc.(b) | 1,104,277 | 21,146,905 | ||||||
Hotels, Resorts & Cruise Lines–1.57% | ||||||||
Starwood Hotels & Resorts Worldwide, Inc. | 461,507 | 23,126,116 | ||||||
Household Products–1.81% | ||||||||
Church & Dwight Co., Inc. | 602,028 | 26,597,597 | ||||||
Human Resource & Employment Services–1.33% | ||||||||
Robert Half International, Inc. | 740,532 | 19,572,261 | ||||||
Industrial Gases–2.16% | ||||||||
Airgas, Inc. | 459,176 | 31,660,185 | ||||||
Industrial Machinery–3.20% | ||||||||
Flowserve Corp. | 215,247 | 19,951,245 | ||||||
Gardner Denver Inc. | 349,458 | 27,023,587 | ||||||
46,974,832 | ||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
5 Invesco Van Kampen Mid Cap Growth Fund
Shares | Value | |||||||
Internet Retail–1.20% | ||||||||
Shutterfly, Inc.(b)(c) | 424,576 | $ | 17,692,082 | |||||
Internet Software & Services–1.23% | ||||||||
Equinix, Inc.(b) | 188,366 | 18,085,020 | ||||||
IT Consulting & Other Services–2.33% | ||||||||
Cognizant Technology Solutions Corp.–Class A(b) | 275,288 | 20,027,202 | ||||||
Gartner, Inc.(b) | 369,752 | 14,242,847 | ||||||
34,270,049 | ||||||||
Life Sciences Tools & Services–0.29% | ||||||||
Illumina, Inc.(b) | 139,658 | 4,276,328 | ||||||
Managed Health Care–3.29% | ||||||||
Aetna Inc. | 775,409 | 30,830,262 | ||||||
Cigna Corp. | 394,842 | 17,507,294 | ||||||
48,337,556 | ||||||||
Movies & Entertainment–1.36% | ||||||||
Cinemark Holdings, Inc. | 969,799 | 20,045,745 | ||||||
Oil & Gas Drilling–1.05% | ||||||||
Patterson-UTI Energy, Inc. | 760,599 | 15,455,372 | ||||||
Oil & Gas Equipment & Services–4.65% | ||||||||
Cameron International Corp.(b) | 689,061 | 33,860,458 | ||||||
Complete Production Services, Inc.(b) | 278,313 | 9,128,666 | ||||||
Key Energy Services, Inc.(b) | 791,252 | 10,230,888 | ||||||
Weatherford International Ltd.(b) | 973,584 | 15,090,552 | ||||||
68,310,564 | ||||||||
Oil & Gas Exploration & Production–3.52% | ||||||||
Cabot Oil & Gas Corp. | 342,688 | 26,633,711 | ||||||
Whiting Petroleum Corp.(b) | 537,683 | 25,029,144 | ||||||
51,662,855 | ||||||||
Packaged Foods & Meats–2.36% | ||||||||
Green Mountain Coffee Roasters, Inc.(b)(c) | 249,850 | 16,245,247 | ||||||
H.J. Heinz Co. | 344,858 | 18,429,211 | ||||||
34,674,458 | ||||||||
Railroads–2.11% | ||||||||
Kansas City Southern(b) | 490,651 | 30,994,424 | ||||||
Restaurants–1.52% | ||||||||
Panera Bread Co.–Class A(b) | 166,912 | 22,314,465 | ||||||
Semiconductor Equipment–2.93% | ||||||||
KLA-Tencor Corp. | 456,360 | 21,489,992 | ||||||
Lam Research Corp.(b) | 502,350 | 21,596,027 | ||||||
43,086,019 | ||||||||
Semiconductors–2.69% | ||||||||
Avago Technologies Ltd. (Singapore) | 547,716 | 18,496,369 | ||||||
Linear Technology Corp. | 648,315 | 20,947,058 | ||||||
39,443,427 | ||||||||
Specialized Consumer Services–0.54% | ||||||||
Coinstar, Inc.(b)(c) | 164,620 | 7,858,959 | ||||||
Specialty Chemicals–2.41% | ||||||||
Albemarle Corp. | 383,797 | 20,452,542 | ||||||
LyondellBasell Industries N.V.–Class A (Netherlands) | 453,159 | 14,890,805 | ||||||
35,343,347 | ||||||||
Specialty Stores–5.20% | ||||||||
Dick’s Sporting Goods, Inc.(b) | 674,966 | 26,384,421 | ||||||
PetSmart, Inc. | 536,822 | 25,203,793 | ||||||
Ulta Salon, Cosmetics & Fragrance, Inc.(b) | 368,713 | 24,810,698 | ||||||
76,398,912 | ||||||||
Systems Software–1.01% | ||||||||
Check Point Software Technologies Ltd. (Israel)(b) | 256,437 | 14,778,464 | ||||||
Technology Distributors–1.07% | ||||||||
Avnet, Inc.(b) | 517,870 | 15,696,640 | ||||||
Trucking–1.50% | ||||||||
J.B. Hunt Transport Services, Inc. | 518,997 | 21,958,763 | ||||||
Wireless Telecommunication Services–2.94% | ||||||||
NII Holdings Inc.(b) | 705,625 | 16,603,356 | ||||||
SBA Communications Corp.–Class A(b) | 696,368 | 26,524,657 | ||||||
43,128,013 | ||||||||
Total Common Stocks (Cost $1,378,090,425) | 1,417,703,330 | |||||||
Money Market Funds–3.96% | ||||||||
Liquid Assets Portfolio–Institutional Class(d) | 29,078,193 | 29,078,193 | ||||||
Premier Portfolio–Institutional Class(d) | 29,078,193 | 29,078,193 | ||||||
Total Money Market Funds (Cost $58,156,386) | 58,156,386 | |||||||
TOTAL INVESTMENTS (excluding investments purchased with cash collateral from securities on loan)–100.48% (Cost $1,436,246,811) | 1,475,859,716 | |||||||
Investments Purchased with Cash Collateral from Securities on Loan | ||||||||
Money Market Funds–1.68% | ||||||||
Liquid Assets Portfolio–Institutional Class (Cost $24,727,128)(d)(e) | 24,727,128 | 24,727,128 | ||||||
TOTAL INVESTMENTS–102.16% (Cost $1,460,973,939) | 1,500,586,844 | |||||||
OTHER ASSETS LESS LIABILITIES–(2.16)% | (31,780,463 | ) | ||||||
NET ASSETS–100.00% | $ | 1,468,806,381 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
6 Invesco Van Kampen Mid Cap Growth Fund
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. | |
(b) | Non-income producing security. | |
(c) | All or a portion of this security was out on loan at October 31, 2011. | |
(d) | The money market fund and the Fund are affiliated by having the same investment adviser. | |
(e) | The security has been segregated to satisfy the commitment to return the cash collateral received in securities lending transactions upon the borrower’s return of the securities loaned. See Note 1I. |
By sector, based on Net Assets
as of October 31, 2011
Consumer Discretionary | 26.2 | % | ||
Information Technology | 16.4 | |||
Health Care | 14.9 | |||
Industrials | 14.1 | |||
Energy | 9.2 | |||
Materials | 6.2 | |||
Consumer Staples | 4.2 | |||
Telecommunication Services | 2.9 | |||
Financials | 2.4 | |||
Money Market Funds Plus Other Assets Less Liabilities | 3.5 | |||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
7 Invesco Van Kampen Mid Cap Growth Fund
Statement of Assets and Liabilities
October 31, 2011
(Unaudited)
| ||||
Assets: | ||||
Investments, at value (Cost $1,378,090,425)* | $ | 1,417,703,330 | ||
Investments in affiliated money market funds, at value and cost | 82,883,514 | |||
Total investments, at value (Cost $1,460,973,939) | 1,500,586,844 | |||
Receivable for: | ||||
Investments sold | 10,834,313 | |||
Fund shares sold | 1,431,239 | |||
Dividends | 77,237 | |||
Investment for trustee deferred compensation and retirement plans | 6,076 | |||
Other assets | 30,149 | |||
Total assets | 1,512,965,858 | |||
Liabilities: | ||||
Payable for: | ||||
Investments purchased | 14,912,575 | |||
Fund shares reacquired | 2,969,129 | |||
Collateral upon return of securities loaned | 24,727,128 | |||
Accrued fees to affiliates | 1,330,015 | |||
Accrued other operating expenses | 185,845 | |||
Trustee deferred compensation and retirement plans | 34,785 | |||
Total liabilities | 44,159,477 | |||
Net assets applicable to shares outstanding | $ | 1,468,806,381 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 1,412,724,453 | ||
Undistributed net investment income (loss) | (6,846,749 | ) | ||
Undistributed net realized gain | 23,315,772 | |||
Unrealized appreciation | 39,612,905 | |||
$ | 1,468,806,381 | |||
Net Assets: | ||||
Class A | $ | 1,186,617,420 | ||
Class B | $ | 119,727,530 | ||
Class C | $ | 101,496,317 | ||
Class R | $ | 12,388,128 | ||
Class Y | $ | 47,193,855 | ||
Institutional Class | $ | 1,383,131 | ||
Shares outstanding, $0.01 par value per share, with an unlimited number of shares authorized: | ||||
Class A | 42,487,764 | |||
Class B | 4,882,700 | |||
Class C | 4,224,422 | |||
Class R | 447,000 | |||
Class Y | 1,661,699 | |||
Institutional Class | 48,700 | |||
Class A: | ||||
Net asset value per share | $ | 27.93 | ||
Maximum offering price per share (Net asset value of $27.93 divided by 94.50%) | $ | 29.56 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 24.52 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 24.03 | ||
Class R: | ||||
Net asset value and offering price per share | $ | 27.71 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 28.40 | ||
Institutional Class: | ||||
Net asset value and offering price per share | $ | 28.40 | ||
* | At October 31, 2011, securities with an aggregate value of $23,374,590 were on loan to brokers. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
8 Invesco Van Kampen Mid Cap Growth Fund
Statement of Operations
For the six months ended October 31, 2011
(Unaudited)
Investment income: | ||||
Dividends (net of foreign withholding taxes of $21,816) | $ | 3,871,614 | ||
Dividends from affiliated money market funds (includes securities lending income of $27,139) | 38,741 | |||
Total investment income | 3,910,355 | |||
Expenses: | ||||
Advisory fees | 5,586,555 | |||
Administrative services fees | 204,737 | |||
Custodian fees | 12,206 | |||
Distribution fees: | ||||
Class A | 1,625,687 | |||
Class B | 172,043 | |||
Class C | 548,111 | |||
Class R | 30,257 | |||
Transfer agent fees — A, B, C, R and Y | 2,474,984 | |||
Transfer agent fees — Institutional | 109 | |||
Trustees’ and officers’ fees and benefits | 35,845 | |||
Other | 82,953 | |||
Total expenses | 10,773,487 | |||
Less: Fees waived and expense offset arrangement(s) | (40,025 | ) | ||
Net expenses | 10,733,462 | |||
Net investment income (loss) | (6,823,107 | ) | ||
Realized and unrealized gain (loss) from: | ||||
Net realized gain (loss) from investment securities (includes net gains from securities sold to affiliates of $3,678,915) | (49,740,959 | ) | ||
Change in net unrealized appreciation (depreciation) of investment securities | (237,829,002 | ) | ||
Net realized and unrealized gain (loss) | (287,569,961 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | (294,393,068 | ) | |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
9 Invesco Van Kampen Mid Cap Growth Fund
Statement of Changes in Net Assets
For the six months ended October 31, 2011, the period April 1, 2011 through April 30, 2011 and the year ended March 31, 2011
(Unaudited)
Six months ended | One month ended | Year ended | ||||||||||
October 31, | April 30, | March 31, | ||||||||||
2011 | 2011 | 2011 | ||||||||||
Operations: | ||||||||||||
Net investment income (loss) | $ | (6,823,107 | ) | $ | (1,742,066 | ) | $ | (11,841,576 | ) | |||
Net realized gain (loss) | (49,740,959 | ) | 50,575,686 | 474,030,387 | ||||||||
Change in net unrealized appreciation (depreciation) | (237,829,002 | ) | 29,306,615 | (26,578,193 | ) | |||||||
Net increase (decrease) in net assets resulting from operations | (294,393,068 | ) | 78,140,235 | 435,610,618 | ||||||||
Share transactions–net: | ||||||||||||
Class A | (114,349,709 | ) | (9,283,118 | ) | (297,781,417 | ) | ||||||
Class B | (22,640,037 | ) | (4,902,612 | ) | (108,856,610 | ) | ||||||
Class C | (10,789,411 | ) | (1,044,676 | ) | (13,107,629 | ) | ||||||
Class R | 2,162,139 | 193,567 | 5,636,014 | |||||||||
Class Y | 7,554,235 | 2,978,168 | (109,778,400 | ) | ||||||||
Institutional Class | 1,212,457 | — | (3,596,781 | ) | ||||||||
Net increase (decrease) in net assets resulting from share transactions | (136,850,326 | ) | (12,058,671 | ) | (527,484,823 | ) | ||||||
Net increase (decrease) in net assets | (431,243,394 | ) | 66,081,564 | (91,874,205 | ) | |||||||
Net assets: | ||||||||||||
Beginning of period | 1,900,049,775 | 1,833,968,211 | 1,925,842,416 | |||||||||
End of period (includes undistributed net investment income (loss) of $(6,846,749), $(23,642) and $(21,219), respectively) | $ | 1,468,806,381 | $ | 1,900,049,775 | $ | 1,833,968,211 | ||||||
Notes to Financial Statements
October 31, 2011
(Unaudited)
NOTE 1—Significant Accounting Policies
Invesco Van Kampen Mid Cap Growth 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.
Prior to June 1, 2010, the Fund operated as Van Kampen Mid Cap Growth Fund (the “Acquired Fund”), an investment portfolio of Van Kampen Equity Trust. The Acquired Fund was reorganized on June 1, 2010 (the “Reorganization Date”) through the transfer of all of its assets and liabilities to the Fund (the “Reorganization”).
Upon closing of the Reorganization, holders of the Acquired Fund’s Class A, Class B, Class C, Class R and Class I shares received Class A, Class B, Class C, Class R and Class Y shares, respectively, of the Fund.
Information for the Acquired Fund’s Class I shares prior to the Reorganization is included with Class Y shares of the Fund throughout this report.
On April 30, 2011, the Fund’s fiscal year-end changed from March 31 to April 30.
The Fund’s investment objective is to seek capital growth.
The Fund currently consists of six different classes of shares: Class A, Class B, Class C, Class R, Class Y and Institutional Class. Class A shares are sold with a front-end sales charge unless certain waiver criteria are met and under certain circumstances load waived shares may be subject to contingent deferred sales charges (“CDSC”). Class C shares are sold with a CDSC. Class R, Class Y and Institutional Class shares are sold at net asset value. Effective November 30, 2010, new or additional investments in Class B shares are no longer permitted. Existing shareholders of Class B shares may continue to reinvest dividends and capital gains distributions in Class B shares until they convert. Also, shareholders in Class B shares will be able to exchange those shares for Class B shares of other Invesco Funds offering such shares until they convert. Generally, Class B shares will automatically convert to Class A shares on or about the month-end which is at least eight years after the date of purchase. Redemption of Class B shares prior to conversion date will be subject to a CDSC.
10 Invesco Van Kampen Mid Cap Growth Fund
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. | |
A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”). | ||
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded. | ||
Debt obligations (including convertible bonds) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Debt securities are subject to interest rate and credit risks. In addition, all debt securities involve some risk of default with respect to interest and/or principal payments. | ||
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trade is not the current value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and 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 |
11 Invesco Van Kampen Mid Cap Growth Fund
and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. | ||
D. | Distributions — Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to treat a portion of the proceeds from redemptions as distributions for federal income tax purposes. | |
E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. | |
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period. | ||
F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund are charged to the operations of such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses attributable to the Institutional Class are charged to such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses relating to all other classes are allocated among those classes based on relative net assets. All other expenses are allocated among the classes based on relative net assets. Prior to the Reorganization, incremental transfer agency fees which are unique to each class of shares of the Acquired Fund were charged to the operations of such class. | |
G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. | |
H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. | |
I. | 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. | |
J. | Foreign Currency Translations — Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. | |
The Fund may invest in foreign securities which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. | ||
K. | Foreign Currency Contracts — The Fund may enter into foreign currency contracts to manage or minimize currency or exchange rate risk. The Fund may also enter into foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to “lock in” the U.S. dollar price of that security. A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The use of foreign currency contracts does not eliminate fluctuations in the price of the underlying securities the Fund owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statement of Operations. The primary risks |
12 Invesco Van Kampen Mid Cap Growth Fund
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 | .75% | ||
Next $500 million | 0 | .70% | ||
Over $1 billion | 0 | .65% | ||
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, Class R, Class Y and Institutional Class shares to 1.40%, 2.15%, 2.15%, 1.65%, 1.15% and 1.15%, respectively, of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless the Board of Trustees and Invesco mutually agree to amend or continue the fee waiver agreement, it will terminate on June 30, 2012. The Adviser did not waive fees and/or reimburse expenses during the period under this 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 October 31, 2011, the Adviser waived advisory fees of $38,310.
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 October 31, 2011, expenses incurred under the agreement are shown in the Statement of Operations as administrative services fees.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (“IIS”) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. IIS may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. All fees payable by IIS to intermediaries that provide omnibus account services or sub-accounting are charged back to the Fund, subject to certain limitations approved by the Trust’s Board of Trustees. For the six months ended October 31, 2011, expenses incurred under the agreement are shown in the Statement of Operations as transfer agent fees.
Shares of the Fund are distributed by Invesco Distributors, Inc. (“IDI”). The Fund has adopted a distribution plan pursuant to Rule 12b-1 under the 1940 Act, and a service plan (collectively, the “Plans”) for Class A shares, Class B shares, Class C shares and Class R shares to compensate IDI for the sale, distribution, shareholder servicing and maintenance of shareholder accounts for these shares. Under the Plans, the Fund will incur annual fees of up to 0.25% of Class A average daily net assets, up to 1.00% each of Class B and Class C average daily net assets and up to 0.50% of Class R average daily net assets.
With respect to Class B and Class C shares, the Fund is authorized to reimburse in future years any distribution related expenses that exceed the maximum annual reimbursement rate for such class, so long as such reimbursement does not cause the Fund to exceed the Class B and Class C maximum annual reimbursement rate, respectively. With respect to Class A shares, distribution related expenses that exceed the maximum annual reimbursement rate for such class are not carried forward to future years and the Fund will not reimburse IDI for any such expenses.
For the six months ended October 31, 2011, expenses incurred under these agreements are shown in the Statement of Operations as distribution fees.
Front-end sales commissions and CDSC (collectively, the “sales charges”) are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the six months ended October 31, 2011, IDI advised the Fund that IDI retained $84,182 in front-end sales commissions from the sale of Class A shares and $1,175, $75,030 and $2,317 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
13 Invesco Van Kampen Mid Cap Growth Fund
(Level 3) generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
Level 1 — | Prices are determined using quoted prices in an active market for identical assets. | |
Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. | |
Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of October 31, 2011. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
During the six months ended October 31, 2011, there were no significant transfers between investment levels.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 1,500,586,844 | $ | — | $ | — | $ | 1,500,586,844 | ||||||||
NOTE 4—Security Transactions with Affiliated Funds
The Fund is permitted to purchase or sell securities from or to certain other Invesco Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment adviser (or affiliated investment advisers), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, for the six months ended October 31, 2011, the Fund engaged in securities purchases of $1,619,171 and securities sales of $21,311,053, which resulted in net realized gains of $3,678,915.
NOTE 5—Expense Offset Arrangement(s)
The expense offset arrangement is comprised of transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions. For the six months ended October 31, 2011, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $1,715.
NOTE 6—Trustees’ and Officers’ Fees and Benefits
“Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and “Trustees’ and Officers’ Fees and Benefits” also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. “Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
During the six months ended October 31, 2011, the Fund paid legal fees of $1,986 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A partner of that firm is a Trustee of the Trust.
NOTE 7—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 8—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.
14 Invesco Van Kampen Mid Cap Growth Fund
The Fund had a capital loss carryforward as of April 30, 2011, which expires as follows:
Capital Loss | ||||
Expiration | Carryforward* | |||
April 30, 2016 | $ | 31,689,462 | ||
* | Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. |
NOTE 9—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the six months ended October 31, 2011 was $933,139,833 and $1,080,594,870, 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 | $ | 115,746,148 | ||
Aggregate unrealized (depreciation) of investment securities | (78,350,871 | ) | ||
Net unrealized appreciation of investment securities | $ | 37,395,277 | ||
Cost of investments for tax purposes is $1,463,191,567. |
NOTE 10—Share Information
Summary of Share Activity | ||||||||||||||||||||||||
Six months ended | One month ended | Year ended | ||||||||||||||||||||||
October 31, 2011(a) | April 30, 2011 | March 31, 2011 | ||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||
Sold: | ||||||||||||||||||||||||
Class A | 2,801,660 | $ | 80,989,851 | 623,028 | $ | 19,990,379 | 10,192,879 | $ | 280,117,192 | |||||||||||||||
Class B | 40,149 | 1,010,604 | 10,915 | 305,642 | 803,937 | 18,197,823 | ||||||||||||||||||
Class C | 322,425 | 7,886,998 | 44,323 | 1,219,970 | 706,566 | 16,745,538 | ||||||||||||||||||
Class R | 148,763 | 4,364,663 | 9,054 | 289,233 | 295,109 | 8,161,464 | ||||||||||||||||||
Class Y | 592,010 | 16,850,723 | 114,986 | 3,730,838 | 1,618,803 | 43,462,222 | ||||||||||||||||||
Institutional Class | 50,190 | 1,265,046 | — | — | 1,466,561 | 34,445,733 | ||||||||||||||||||
Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||||||||||
Class A | 421,898 | 12,333,199 | 98,227 | 3,243,207 | 902,573 | 24,809,978 | ||||||||||||||||||
Class B | (480,590 | ) | (12,333,199 | ) | (111,882 | ) | (3,243,207 | ) | (1,027,289 | ) | (24,809,978 | ) | ||||||||||||
Reacquired: | ||||||||||||||||||||||||
Class A | (7,184,530 | ) | (207,672,759 | ) | (1,013,549 | ) | (32,516,704 | ) | (22,827,450 | ) | (602,708,587 | ) | ||||||||||||
Class B | (446,880 | ) | (11,317,442 | ) | (69,814 | ) | (1,965,047 | ) | (4,189,140 | ) | (102,244,455 | ) | ||||||||||||
Class C | (739,554 | ) | (18,676,409 | ) | (82,017 | ) | (2,264,646 | ) | (1,276,284 | ) | (29,853,167 | ) | ||||||||||||
Class R | (79,512 | ) | (2,202,524 | ) | (2,980 | ) | (95,666 | ) | (91,171 | ) | (2,525,450 | ) | ||||||||||||
Class Y | (322,583 | ) | (9,296,488 | ) | (23,242 | ) | (752,670 | ) | (6,058,529 | ) | (153,240,622 | ) | ||||||||||||
Institutional Class | (1,900 | ) | (52,589 | ) | — | — | (1,466,151 | ) | (38,042,514 | ) | ||||||||||||||
Net increase (decrease) in share activity | $ | (4,878,454 | ) | $ | (136,850,326 | ) | (402,951 | ) | $ | (12,058,671 | ) | (20,949,586 | ) | $ | (527,484,823 | ) | ||||||||
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 35% of the outstanding shares of the Fund. IDI has an agreement with these entities to sell Fund shares. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as securities brokerage, distribution, third party record keeping and account servicing. The Fund has no knowledge as to whether all or any portion of these shares owned of record by these entities are also owned beneficially. |
15 Invesco Van Kampen Mid Cap Growth Fund
NOTE 11—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Ratio of | Ratio of | |||||||||||||||||||||||||||||||||||||||||||||||||||
Net gains | expenses | expenses | ||||||||||||||||||||||||||||||||||||||||||||||||||
(losses) on | to average | to average net | Ratio of net | |||||||||||||||||||||||||||||||||||||||||||||||||
Net asset | Net | securities | Distributions | net assets | assets without | investment | ||||||||||||||||||||||||||||||||||||||||||||||
value, | investment | (both | Total from | from net | Net asset | Net assets, | with fee waivers | fee waivers | income (loss) | |||||||||||||||||||||||||||||||||||||||||||
beginning | income | realized and | investment | realized | Total | value, end | Total | end of period | and/or expenses | and/or expenses | to average | Portfolio | ||||||||||||||||||||||||||||||||||||||||
of period | (loss)(a) | unrealized) | operations | gains | Distributions | of period | Return | (000s omitted) | absorbed | absorbed | net assets | turnover(b) | ||||||||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | $ | 33.15 | $ | (0.12 | ) | $ | (5.10 | ) | $ | (5.22 | ) | $ | — | $ | — | $ | 27.93 | (15.75 | )%(c) | $ | 1,186,617 | 1.30 | %(d) | 1.30 | %(d) | (0.81 | )%(d) | 58 | % | |||||||||||||||||||||||
One month ended 04/30/11 | 31.79 | (0.03 | ) | 1.39 | 1.36 | — | — | 33.15 | 4.28 | (c) | 1,539,895 | 1.28 | (e) | 1.28 | (e) | (1.10 | )(e) | 21 | ||||||||||||||||||||||||||||||||||
Year ended 03/31/11 | 24.65 | (0.16 | ) | 7.30 | 7.14 | — | — | 31.79 | 28.97 | (c) | 1,485,888 | 1.29 | 1.29 | (0.61 | ) | 162 | ||||||||||||||||||||||||||||||||||||
Year ended 03/31/10 | 14.37 | (0.10 | ) | 10.38 | 10.28 | — | — | 24.65 | 71.54 | (f) | 1,441,286 | 1.24 | 1.31 | (0.49 | ) | 25 | ||||||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 25.07 | (0.11 | ) | (10.43 | ) | (10.54 | ) | (0.16 | ) | (0.16 | )(g) | 14.37 | (42.02 | )(f) | 848,832 | 1.19 | 1.40 | (0.58 | ) | 29 | ||||||||||||||||||||||||||||||||
Year ended 03/31/08 | 26.68 | (0.03 | ) | 1.48 | 1.45 | (3.06 | ) | (3.06 | ) | 25.07 | 3.87 | (f) | 1,154,865 | 1.21 | 1.21 | (0.09 | ) | 60 | ||||||||||||||||||||||||||||||||||
Year ended 03/31/07 | 27.26 | (0.06 | ) | 0.85 | 0.79 | (1.37 | ) | (1.37 | ) | 26.68 | 2.99 | (f) | 1,025,386 | 1.26 | 1.26 | (0.25 | ) | 61 | ||||||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | 29.11 | (0.10 | ) | (4.49 | ) | (4.59 | ) | — | — | 24.52 | (15.77 | )(c) | 119,728 | 1.30 | (d) | 1.30 | (d) | (0.81 | )(d) | 58 | ||||||||||||||||||||||||||||||||
One month ended 04/30/11 | 27.91 | (0.03 | ) | 1.23 | 1.20 | — | — | 29.11 | 4.30 | (c)(h) | 167,947 | 1.35 | (e)(h) | 1.35 | (e)(h) | (1.17 | )(e)(h) | 21 | ||||||||||||||||||||||||||||||||||
Year ended 03/31/11 | 21.69 | (0.20 | ) | 6.42 | 6.22 | — | — | 27.91 | 28.68 | (c)(i) | 165,822 | 1.53 | (i) | 1.53 | (i) | (0.85 | )(i) | 162 | ||||||||||||||||||||||||||||||||||
Year ended 03/31/10 | 12.68 | (0.13 | ) | 9.14 | 9.01 | — | — | 21.69 | 71.06 | (j)(k) | 224,558 | 1.50 | (j) | 1.57 | (j) | (0.74 | )(j) | 25 | ||||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 22.24 | (0.16 | ) | (9.24 | ) | (9.40 | ) | (0.16 | ) | (0.16 | )(g) | 12.68 | (42.24 | )(j)(k) | 168,132 | 1.58 | (j) | 1.81 | (j) | (0.94 | )(j) | 29 | ||||||||||||||||||||||||||||||
Year ended 03/31/08 | 24.07 | (0.16 | ) | 1.39 | 1.23 | (3.06 | ) | (3.06 | ) | 22.24 | 3.36 | (j)(k) | 164,016 | 1.73 | (j) | 1.73 | (j) | (0.60 | )(j) | 60 | ||||||||||||||||||||||||||||||||
Year ended 03/31/07 | 24.92 | (0.24 | ) | 0.76 | 0.52 | (1.37 | ) | (1.37 | ) | 24.07 | 2.18 | (k) | 175,041 | 2.02 | 2.02 | (1.02 | ) | 61 | ||||||||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | 28.63 | (0.20 | ) | (4.40 | ) | (4.60 | ) | — | — | 24.03 | (16.07 | )(c) | 101,496 | 2.05 | (d) | 2.05 | (d) | (1.56 | )(d) | 58 | ||||||||||||||||||||||||||||||||
One month ended 04/30/11 | 27.47 | (0.04 | ) | 1.20 | 1.16 | — | — | 28.63 | 4.22 | (c) | 132,885 | 2.03 | (e) | 2.03 | (e) | (1.85 | )(e) | 21 | ||||||||||||||||||||||||||||||||||
Year ended 03/31/11 | 21.45 | (0.32 | ) | 6.34 | 6.02 | — | — | 27.47 | 28.07 | (c) | 128,536 | 2.04 | 2.04 | (1.36 | ) | 162 | ||||||||||||||||||||||||||||||||||||
Year ended 03/31/10 | 12.60 | (0.23 | ) | 9.08 | 8.85 | — | — | 21.45 | 70.24 | (l) | 112,608 | 1.99 | 2.06 | (1.24 | ) | 25 | ||||||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 22.19 | (0.23 | ) | (9.20 | ) | (9.43 | ) | (0.16 | ) | (0.16 | )(g) | 12.60 | (42.47 | )(l) | 69,522 | 1.94 | 2.15 | (1.33 | ) | 29 | ||||||||||||||||||||||||||||||||
Year ended 03/31/08 | 24.08 | (0.22 | ) | 1.39 | 1.17 | (3.06 | ) | (3.06 | ) | 22.19 | 3.10 | (l) | 103,250 | 1.97 | 1.97 | (0.84 | ) | 60 | ||||||||||||||||||||||||||||||||||
Year ended 03/31/07 | 24.92 | (0.24 | ) | 0.77 | 0.53 | (1.37 | ) | (1.37 | ) | 24.08 | 2.22 | (l) | 91,174 | 2.02 | 2.02 | (1.01 | ) | 61 | ||||||||||||||||||||||||||||||||||
Class R | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | 32.94 | (0.15 | ) | (5.08 | ) | (5.23 | ) | — | — | 27.71 | (15.88 | )(c) | 12,388 | 1.55 | (d) | 1.55 | (d) | (1.06 | )(d) | 58 | ||||||||||||||||||||||||||||||||
One month ended 04/30/11 | 31.59 | (0.04 | ) | 1.39 | 1.35 | — | — | 32.94 | 4.27 | (c) | 12,443 | 1.53 | (e) | 1.53 | (e) | (1.35 | )(e) | 21 | ||||||||||||||||||||||||||||||||||
Year ended 03/31/11 | 24.55 | (0.24 | ) | 7.28 | 7.04 | — | — | 31.59 | 28.68 | (c) | 11,742 | 1.54 | 1.54 | (0.86 | ) | 162 | ||||||||||||||||||||||||||||||||||||
Year ended 03/31/10 | 14.35 | (0.22 | ) | 10.42 | 10.20 | — | — | 24.55 | 71.08 | (m) | 4,118 | 1.49 | 1.56 | (0.96 | ) | 25 | ||||||||||||||||||||||||||||||||||||
Period ended 03/31/09(n) | 24.15 | (0.08 | ) | (9.56 | ) | (9.64 | ) | (0.16 | ) | (0.16 | ) | 14.35 | (39.89 | )(m)(o) | 99 | 1.44 | (e) | 1.76 | (e) | (0.66 | )(e) | 29 | ||||||||||||||||||||||||||||||
Class Y(p) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | 33.66 | (0.08 | ) | (5.18 | ) | (5.26 | ) | — | — | 28.40 | (15.63 | )(c) | 47,194 | 1.05 | (d) | 1.05 | (d) | (0.56 | )(d) | 58 | ||||||||||||||||||||||||||||||||
One month ended 04/30/11 | 32.27 | (0.02 | ) | 1.41 | 1.39 | — | — | 33.66 | 4.31 | (c) | 46,867 | 1.03 | (e) | 1.03 | (e) | (0.85 | )(e) | 21 | ||||||||||||||||||||||||||||||||||
Year ended 03/31/11 | 24.96 | (0.09 | ) | 7.40 | 7.31 | — | — | 32.27 | 29.29 | (c) | 41,968 | 1.04 | 1.04 | (0.36 | ) | 162 | ||||||||||||||||||||||||||||||||||||
Year ended 03/31/10 | 14.52 | (0.05 | ) | 10.49 | 10.44 | — | — | 24.96 | 71.90 | (q) | 143,273 | 0.99 | 1.06 | (0.24 | ) | 25 | ||||||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 25.26 | (0.06 | ) | (10.52 | ) | (10.58 | ) | (0.16 | ) | (0.16 | )(g) | 14.52 | (41.86 | )(q) | 84,681 | 0.94 | 1.15 | (0.31 | ) | 29 | ||||||||||||||||||||||||||||||||
Year ended 03/31/08 | 26.80 | 0.04 | 1.48 | 1.52 | (3.06 | ) | (3.06 | ) | 25.26 | 4.12 | (q) | 89,448 | 0.98 | 0.98 | 0.14 | 60 | ||||||||||||||||||||||||||||||||||||
Year ended 03/31/07 | 27.30 | 0.01 | 0.86 | 0.87 | (1.37 | ) | (1.37 | ) | 26.80 | 3.28 | (q) | 10,240 | 1.02 | 1.02 | 0.05 | 61 | ||||||||||||||||||||||||||||||||||||
Institutional Class | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | 33.64 | (0.05 | ) | (5.19 | ) | (5.24 | ) | — | — | 28.40 | (15.58 | )(c) | 1,383 | 0.84 | (d) | 0.84 | (d) | (0.35 | )(d) | 58 | ||||||||||||||||||||||||||||||||
One month ended 04/30/11 | 32.24 | (0.02 | ) | 1.42 | 1.40 | — | — | 33.64 | 4.34 | (c) | 14 | 0.85 | (e) | 0.85 | (e) | (0.67 | )(e) | 21 | ||||||||||||||||||||||||||||||||||
Period ended 03/31/11(n) | 24.57 | (0.05 | ) | 7.72 | 7.67 | — | — | 32.24 | 31.22 | (c) | 13 | 0.82 | (e) | 0.82 | (e) | (0.26 | )(e) | 162 | ||||||||||||||||||||||||||||||||||
(a) | Calculated using average shares outstanding. | |
(b) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. | |
(c) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges and is not annualized for periods less than one year, if applicable. | |
(d) | Ratios are annualized and based on average daily net assets (000’s omitted) of $1,293,481, $136,867, $109,027, $12,037, $42,585 and $217 for Class A, Class B, Class C, Class R, Class Y and Institutional Class shares, respectively. | |
(e) | Annualized. | |
(f) | Assumes reinvestment of all distributions for the period and does not include payment of the maximum sales charge of 5.75% or contingent deferred sales charge (CDSC). On purchases of $1 million or more, a CDSC of 1% may be imposed on certain redemptions made within eighteen months of purchase. If the sales charges were included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to 0.25% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. | |
(g) | Includes return of capital distributions of less than $0.01. | |
(h) | The total return, ratio of expenses to average net assets and ratio of net investment income (loss) to average net assets reflect actual 12b-1 fees of 0.32%. | |
(i) | The total return, ratio of expenses to average net assets and ratio of net investment income (loss) to average net assets reflect actual 12b-1 fees of 0.49%. | |
(j) | The Total return, Ratio of expenses to average net assets and Ratio of net investment income (loss) to average net assets reflect actual 12b-1 fees of less than 1%. | |
(k) | Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 5%, charged on certain redemptions made within one year of purchase and declining to 0% after the fifth year. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to 1% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. | |
(l) | Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 1%, charged on certain redemptions made within one year of purchase. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to 1% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. | |
(m) | Assumes reinvestment of all distributions for the period. These returns include combined Rule 12b-1 fees and service fees of up to 0.50% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption on Fund shares. | |
(n) | Commencement date of July 11, 2008 and June 1, 2010 for Class R Shares and Institutional Class Shares, respectively. | |
(o) | Non-Annualized. | |
(p) | On June 1, 2010, the Fund’s former Class I shares were reorganized into Class Y shares. | |
(q) | Assumes reinvestment of all distributions for the period. These returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption on Fund shares. |
16 Invesco Van Kampen Mid Cap Growth Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments or contingent deferred sales charges on redemptions, and redemption fees, if any; and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period May 1, 2011 through October 31, 2011.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the hypothetical information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
HYPOTHETICAL | ||||||||||||||||||||||||||||||
(5% annual return before | ||||||||||||||||||||||||||||||
ACTUAL | expenses) | |||||||||||||||||||||||||||||
Beginning | Ending | Expenses | Ending | Expenses | Annualized | |||||||||||||||||||||||||
Account Value | Account Value | Paid During | Account Value | Paid During | Expense | |||||||||||||||||||||||||
Class | (05/01/11) | (10/31/11)1 | Period2 | (10/31/11) | Period2 | Ratio | ||||||||||||||||||||||||
A | $ | 1,000.00 | $ | 842.30 | $ | 6.02 | $ | 1,018.60 | $ | 6.60 | 1.30 | % | ||||||||||||||||||
B | 1,000.00 | 842.00 | 6.02 | 1,018.60 | 6.60 | 1.30 | ||||||||||||||||||||||||
C | 1,000.00 | 839.00 | 9.48 | 1,014.83 | 10.38 | 2.05 | ||||||||||||||||||||||||
R | 1,000.00 | 841.20 | 7.17 | 1,017.34 | 7.86 | 1.55 | ||||||||||||||||||||||||
Y | 1,000.00 | 843.50 | 4.87 | 1,019.86 | 5.33 | 1.05 | ||||||||||||||||||||||||
Institutional | 1,000.00 | 844.20 | 4.22 | 1,020.91 | 4.27 | 0.84 | ||||||||||||||||||||||||
1 | The actual ending account value is based on the actual total return of the Fund for the period May 1, 2011 through October 31, 2011, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund’s expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/366 to reflect the most recent fiscal half year. |
17 Invesco Van Kampen Mid Cap Growth 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 Van Kampen Mid Cap Growth Fund (the Fund) investment advisory agreement with Invesco Advisers, Inc. (Invesco Advisers) and the Master Intergroup Sub-Advisory Contract for Mutual Funds (the sub-advisory contracts) with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers). During contract renewal meetings held on June 14-15, 2011, the Board as a whole, and the disinterested or “independent” Trustees, who comprise 80% of the Board, voting separately, approved the continuance of the Fund’s investment advisory agreement and the sub-advisory contracts for another year, effective July 1, 2011. In doing so, the Board considered the process that it follows in reviewing and approving the Fund’s investment advisory agreement and sub-advisory contracts and the information that it is provided. The Board determined that the Fund’s investment advisory agreement and the sub-advisory contracts are in the best interests of the Fund and its shareholders and the compensation to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is responsible for overseeing the management of a number of the series portfolios of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies and limitations and investment risks of these funds. The Sub-Committees meet regularly and at designated contract renewal meetings each year to conduct a review of the performance, fees, expenses and other matters related to their assigned Invesco Funds. Each Sub-Committee recommends to the Investments Committee, which in turn recommends to the full Board, whether to approve the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Trustees receive comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and an independent company, Lipper, Inc. (Lipper). The Trustees also receive an independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. The independent Trustees are assisted in their annual evaluation of the Fund’s investment advisory agreement by the Senior Officer and by independent legal counsel. The independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in private sessions with the Senior Officer and counsel.
In evaluating the fairness and reasonableness of the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Trustees also considered information provided in connection with fund acquisitions approved by the Trustees to rationalize the Invesco Funds product range following the acquisition of the retail mutual fund business of Morgan Stanley (the Morgan Stanley Transaction). The Trustees recognized that the advisory fees for the Invesco Funds include advisory fees that are the result of years of review and negotiation between the Trustees and Invesco Advisers as well as advisory fees inherited from Morgan Stanley and Van Kampen funds acquired in the Morgan Stanley Transaction. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these same arrangements throughout the year and in prior years. One Trustee may have weighed a particular piece of information differently than another Trustee.
The discussion below serves as the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 15, 2011, and may not reflect consideration of factors that became known to the Board after that date, including, for example, changes to the Fund’s performance, advisory fees, expense limitations and/or fee waivers.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers, with whom the Board met during the year. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s consideration of Invesco Advisers’ performance and investment process oversight, independent credit analysis and investment risk management.
In determining whether to continue the Fund’s investment advisory agreement, the Board considered the prior relationship between Invesco Advisers and the Fund, as well as the Board’s knowledge of Invesco Advisers’ operations, and concluded that it is beneficial to maintain the current relationship, in part, because of such knowledge. The Board also considered services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution and legal and compliance. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and the advisory services are provided in accordance with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services provided by the Affiliated Sub-Advisers under the sub-advisory contracts and the credentials and experience of the officers and employees of the Affiliated Sub-Advisers who provide these services. The Board noted that the Affiliated Sub-Advisers have offices and personnel that are located in financial centers around the world. As a result, the Affiliated Sub-Advisers can provide research and investment analysis on the markets and economies of various countries in which the Fund invests and make recommendations on securities of companies located in such countries. The Board concluded that the sub-advisory contracts benefit the Fund and its shareholders by permitting Invesco Advisers to use the resources and talents of the Affiliated Sub-Advisers in managing the Fund. The Board concluded that the nature, extent and quality of the services provided by the Affiliated Sub-Advisers are appropriate and satisfactory and in accordance with the terms of the Fund’s sub-advisory contracts.
18 Invesco Van Kampen Mid Cap Growth Fund
B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
The Board compared the Fund’s performance during the past one, three and five calendar years to the performance of funds in the Lipper performance universe and against the Lipper Mid-Cap Growth Funds Index. The Board noted that performance of Class A shares of the Fund was in the third quintile of the performance universe for the one year period, the second quintile for the three year period and the first quintile for the five year period (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board noted that performance of Class A shares of the Fund was above the performance of the Index for the one, 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 rates of two mutual funds and above the rate of one mutual fund.
Other than the mutual funds described above, the Board noted that Invesco Advisers and the Affiliated Sub-Advisers do not manage other mutual funds or client accounts in a manner substantially similar to the management of the Fund.
The Board noted that Invesco Advisers has contractually agreed to waive fees and/or limit expenses of the Fund through at least June 30, 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.
19 Invesco Van Kampen Mid Cap Growth Fund
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Invesco mailing information
Send general correspondence to Invesco Investment Services, Inc., P.O. Box 219078, Kansas City, MO 64121-9078.
Invesco privacy policy
You share personal and financial information with us that is necessary for your transactions and your account records. We take very seriously the obligation to keep that information confidential and private.
Invesco collects nonpublic personal information about you from account applications or other forms you complete and from your transactions with us or our affiliates. We do not disclose information about you or our former customers to service providers or other third parties except to the extent necessary to service your account and in other limited circumstances as permitted by law. For example, we use this information to facilitate the delivery of transaction confirmations, financial reports, prospectuses and tax forms.
Even within Invesco, only people involved in the servicing of your accounts and compliance monitoring have access to your information. To ensure the highest level of confidentiality and security, Invesco maintains physical, electronic and procedural safeguards that meet or exceed federal standards. Special measures, such as data encryption and authentication, apply to your communications with us on our website. More detail is available to you at invesco.com/privacy.
Important notice regarding delivery of security holder documents
To reduce Fund expenses, only one copy of most shareholder documents may be mailed to shareholders with multiple accounts at the same address (Householding). Mailing of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact Invesco Investment Services, Inc. at 800 959 4246 or contact your financial institution. We will begin sending you individual copies for each account within 30 days after receiving your request.
Fund holdings and proxy voting information
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is available at invesco.com/completeqtrholdings. Shareholders can also look up the Fund’s Forms N-Q on the SEC website at sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-03826 and 002-85905.
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Information regarding how the Fund voted proxies related to its portfolio securities during the 12 months ended June 30, 2011, is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov.
Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the U.S. distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
VK-MCG-SAR-1 Invesco Distributors, Inc.
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Invesco Van Kampen Small Cap Value Fund
Semiannual Report to Shareholders § October 31, 2011
Nasdaq:
A: VSCAX § B: VSMBX § C: VSMCX § Y: VSMIX §
Semiannual Report to Shareholders § October 31, 2011
Nasdaq:
A: VSCAX § B: VSMBX § C: VSMCX § Y: VSMIX §
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2 | Fund Performance | |
4 | Letters to Shareholders | |
5 | Schedule of Investments | |
8 | Financial Statements | |
10 | Notes to Financial Statements | |
16 | Financial Highlights | |
17 | Fund Expenses | |
18 | 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, 4/30/11 to 10/31/11, at net asset value (NAV). Performance shown does not include applicable contingent deferred sales charges (CDSC) or front-end sales charges, which would have reduced performance.
Class A Shares | -14.71 | % | ||
Class B Shares | -14.79 | |||
Class C Shares | -15.01 | |||
Class Y Shares | -14.54 | |||
S&P 500 Index▼ (Broad Market Index) | -7.12 | |||
Russell 2000 Value Index▼ (Style-Specific Index) | -13.94 | |||
Lipper Small-Cap Value Funds Index▼ (Peer Group Index) | -13.47 | |||
Source(s): ▼Lipper Inc. |
The Fund recently adopted a three-tier benchmark structure to compare its performance to broad market, style-specific and peer group market measures. | ||
The S&P 500® Index is an unmanaged index considered representative of the U.S. stock market. | ||
The Russell 2000® Value Index is an unmanaged index considered representative of small-cap value stocks. The Russell 2000 Value Index is a trademark/service mark of the Frank Russell Co. Russell® is a trademark of the Frank Russell Co. | ||
The Lipper Small-Cap Value Funds Index is an unmanaged index considered representative of small-cap value 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. |
2 | Invesco Van Kampen Small Cap Value Fund |
Average Annual Total Returns | ||||
As of 10/31/11, including maximum applicable sales charges | ||||
Class A Shares | ||||
Inception (6/21/99) | 8.71 | % | ||
10 Years | 8.42 | |||
5 Years | 2.83 | |||
1 Year | -0.07 | |||
Class B Shares | ||||
Inception (6/21/99) | 8.67 | % | ||
10 Years | 8.50 | |||
5 Years | 3.35 | |||
1 Year | 0.65 | |||
Class C Shares | ||||
Inception (6/21/99) | 8.39 | % | ||
10 Years | 8.22 | |||
5 Years | 3.23 | |||
1 Year | 4.01 | |||
Class Y Shares | ||||
Inception (8/12/05) | 6.36 | % | ||
5 Years | 4.26 | |||
1 Year | 6.08 |
Effective June 1, 2010, Class A, Class B, Class C and Class I shares of the predecessor fund, Van Kampen Small Cap Value Fund, advised by Van Kampen Asset Management were reorganized into Class A, Class B, Class C and Class Y shares, respectively, of Invesco Van Kampen Small Cap Value Fund. Returns shown above for Class A, Class B, Class C and Class Y shares are blended returns of the predecessor fund and Invesco Van Kampen Small Cap Value 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 net annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date
Average Annual Total Returns | ||||
As of 9/30/11, the most recent calendar quarter-end, including maximum applicable sales charges | ||||
Class A Shares | ||||
Inception (6/21/99) | 7.16 | % | ||
10 Years | 6.68 | |||
5 Years | 0.13 | |||
1 Year | -13.96 | |||
Class B Shares | ||||
Inception (6/21/99) | 7.12 | % | ||
10 Years | 6.77 | |||
5 Years | 0.64 | |||
1 Year | -13.41 | |||
Class C Shares | ||||
Inception (6/21/99) | 6.85 | % | ||
10 Years | 6.50 | |||
5 Years | 0.52 | |||
1 Year | -10.43 | |||
Class Y Shares | ||||
Inception (8/12/05) | 3.31 | % | ||
5 Years | 1.53 | |||
1 Year | -8.65 |
of this report for Class A, Class B, Class C and Class Y shares was 1.03%, 1.40%, 1.78% and 0.78%, respectively.1,2 The total annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Class A, Class B, Class C and Class Y shares was 1.13%, 1.88%, 1.88% and 0.88%, respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.
Class A share performance reflects the maximum 5.50% sales charge, and Class B and Class C share performance reflects the applicable contingent deferred sales charge (CDSC) for the period involved. For shares purchased prior to June 1, 2010, the CDSC on Class B shares declines from 5% at the time of purchase to 0% at the beginning of the sixth year. For shares purchased on or after June 1, 2010, the CDSC on Class B shares declines from 5% at the time of purchase to 0% at the beginning of the seventh year. The CDSC on Class C shares is 1% for the first year after purchase. Class Y shares do not have a front-end sales charge or a CDSC; therefore, performance is at net asset value.
The performance of the Fund’s share classes will differ primarily due
to different sales charge structures and class expenses.
Had the adviser not waived fees and/ or expenses on Class B shares, performance would have been lower.
A redemption fee of 2% is imposed on certain redemptions or exchanges out of the Fund within 31 days of purchase. Exceptions to the redemption fee are listed in the Fund’s prospectus. Effective January 1, 2012, after the close of the reporting period, the Fund will eliminate the redemption fee, if applicable, assessed on shares of the Fund redeemed or exchanged within 31 days of purchase.
1 | Total annual Fund operating expenses after any contractual fee waivers and/or expense reimbursements by the adviser in effect through at least June 30, 2012. See current prospectus for more information. | |
2 | Total annual Fund operating expenses after any contractual fee waivers by the distributor in effect through at least June 30, 2012. See current prospectus for more information. |
3 | Invesco Van Kampen Small Cap Value Fund |
Letters to Shareholders
![(PHOTO OF BRUCE CROCKETT)](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8577403.jpg)
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,
![-s- Bruce L. Crockett](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8577404.gif)
Bruce L. Crockett
Independent Chair, Invesco Funds Board of Trustees
Independent Chair, Invesco Funds Board of Trustees
![(PHOTO OF PHILIP TAYLOR)](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8577405.jpg)
Philip Taylor
Dear Shareholders:
Enclosed is important information about your Fund and its performance. I encourage you to read this report to learn more about your Fund’s short- and long-term performance.
The start of a new year is always a good time to catch up with your financial adviser. Looking ahead to the new year and evaluating your individual situation, your financial adviser can provide valuable insight into whether your investments are still appropriate for your individual needs, goals and risk tolerance. This may provide reassurance in times of economic uncertainty and market volatility such as we saw in 2011 – and are likely to see again in 2012.
On our website, invesco.com/us, we provide timely market updates and commentary from many of our fund managers and other investment professionals. Also on our website, you 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.
Across our broad array of investment products, 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 – meaning 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,
![-s- Philip Taylor](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8577406.gif)
Philip Taylor
Senior Managing Director, Invesco Ltd.
Senior Managing Director, Invesco Ltd.
4 | Invesco Van Kampen Small Cap Value Fund |
Schedule of Investments(a)
October 31, 2011
(Unaudited)
Shares | Value | |||||||
Common Stocks–96.90% | ||||||||
Aerospace & Defense–4.32% | ||||||||
AAR Corp. | 1,630,698 | $ | 32,499,811 | |||||
AerCap Holdings N.V. (Netherlands)(b) | 5,168,177 | 61,294,579 | ||||||
93,794,390 | ||||||||
Air Freight & Logistics–1.84% | ||||||||
Forward Air Corp. | 208,700 | 6,834,925 | ||||||
UTI Worldwide, Inc. | 2,258,300 | 32,993,763 | ||||||
39,828,688 | ||||||||
Apparel, Accessories & Luxury Goods–4.30% | ||||||||
Jones Group Inc. (The) | 2,657,600 | 29,685,392 | ||||||
Liz Claiborne, Inc.(b)(c) | 6,757,300 | 54,125,973 | ||||||
Maidenform Brands, Inc.(b) | 384,425 | 9,449,166 | ||||||
93,260,531 | ||||||||
Asset Management & Custody Banks–1.34% | ||||||||
Janus Capital Group Inc. | 4,449,000 | 29,185,440 | ||||||
Building Products–1.69% | ||||||||
A.O. Smith Corp. | 331,400 | 12,314,824 | ||||||
Masco Corp. | 2,541,300 | 24,396,480 | ||||||
36,711,304 | ||||||||
Computer Storage & Peripherals–2.21% | ||||||||
Synaptics Inc.(b) | 1,421,800 | 48,042,622 | ||||||
Construction & Engineering–1.55% | ||||||||
Aegion Corp.(b) | 1,522,552 | 22,518,544 | ||||||
Orion Marine Group, Inc.(b)(c) | 1,642,992 | 11,155,916 | ||||||
33,674,460 | ||||||||
Construction & Farm Machinery & Heavy Trucks–4.53% | ||||||||
Terex Corp.(b) | 2,482,400 | 41,307,136 | ||||||
WABCO Holdings Inc.(b) | 1,134,800 | 56,978,308 | ||||||
98,285,444 | ||||||||
Construction Materials–0.88% | ||||||||
Eagle Materials Inc. | 927,800 | 19,094,124 | ||||||
Consumer Electronics–3.57% | ||||||||
Harman International Industries, Inc. | 1,796,341 | 77,530,078 | ||||||
Data Processing & Outsourced Services–2.99% | ||||||||
Alliance Data Systems Corp.(b) | 61,100 | 6,259,084 | ||||||
Euronet Worldwide, Inc.(b) | 1,815,100 | 35,158,487 | ||||||
Heartland Payment Systems, Inc. | 1,083,746 | 23,582,313 | ||||||
64,999,884 | ||||||||
Education Services–1.10% | ||||||||
Grand Canyon Education, Inc.(b) | 1,459,409 | 23,802,961 | ||||||
Electrical Components & Equipment–2.89% | ||||||||
Belden Inc. | 1,943,153 | 62,724,979 | ||||||
Electronic Components–1.44% | ||||||||
Rogers Corp.(b) | 726,264 | 31,352,817 | ||||||
Electronic Equipment & Instruments–0.51% | ||||||||
Checkpoint Systems, Inc.(b) | 829,286 | 10,988,039 | ||||||
Electronic Manufacturing Services–5.52% | ||||||||
Jabil Circuit, Inc. | 2,810,400 | 57,781,824 | ||||||
Methode Electronics, Inc.(c) | 2,560,881 | 23,790,584 | ||||||
Sanmina- SCI Corp.(b)(c) | 4,351,444 | 38,336,222 | ||||||
119,908,630 | ||||||||
Gas Utilities–1.01% | ||||||||
UGI Corp. | 763,600 | 21,892,412 | ||||||
Health Care Facilities–3.53% | ||||||||
HealthSouth Corp.(b) | 646,500 | 11,417,190 | ||||||
Select Medical Holdings Corp.(b) | 4,454,289 | 38,752,314 | ||||||
VCA Antech, Inc.(b) | 1,305,800 | 26,533,856 | ||||||
76,703,360 | ||||||||
Health Care Services–0.80% | ||||||||
AMN Healthcare Services, Inc.(b)(c) | 3,660,244 | 17,349,557 | ||||||
Health Care Supplies–3.58% | ||||||||
Alere, Inc.(b) | 1,438,885 | 37,497,343 | ||||||
Cooper Cos., Inc. (The) | 579,665 | 40,170,785 | ||||||
77,668,128 | ||||||||
Home Entertainment Software–0.66% | ||||||||
THQ Inc.(b)(c) | 6,715,718 | 14,304,479 | ||||||
Homebuilding–3.00% | ||||||||
PulteGroup Inc.(b) | 6,950,100 | 36,001,518 | ||||||
Ryland Group, Inc. (The) | 2,153,453 | 29,071,615 | ||||||
65,073,133 | ||||||||
Industrial Machinery–1.51% | ||||||||
Snap-On Inc. | 609,100 | 32,690,397 | ||||||
Investment Banking & Brokerage–0.57% | ||||||||
FBR Capital Markets Corp.(b)(c) | 5,981,300 | 12,441,104 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
5 Invesco Van Kampen Small Cap Value Fund
Shares | Value | |||||||
IT Consulting & Other Services–3.75% | ||||||||
Acxiom Corp.(b) | 2,615,531 | $ | 34,498,854 | |||||
CIBER, Inc.(b)(c) | 5,531,700 | 19,250,316 | ||||||
MAXIMUS, Inc. | 685,830 | 27,666,382 | ||||||
81,415,552 | ||||||||
Life & Health Insurance–1.53% | ||||||||
CNO Financial Group, Inc.(b) | 5,298,188 | 33,113,675 | ||||||
Life Sciences Tools & Services–0.40% | ||||||||
Bio-Rad Laboratories, Inc.–Class A(b) | 88,031 | 8,763,486 | ||||||
Managed Health Care–0.31% | ||||||||
Triple-S Management Corp.–Class B (Puerto Rico)(b) | 354,500 | 6,735,500 | ||||||
Office Services & Supplies–2.82% | ||||||||
Acco Brands Corp.(b)(c) | 5,618,113 | 38,596,436 | ||||||
Interface, Inc.–Class A | 1,734,161 | 22,613,460 | ||||||
61,209,896 | ||||||||
Oil & Gas Equipment & Services–4.19% | ||||||||
Global Geophysical Services, Inc.(b) | 1,053,000 | 10,045,620 | ||||||
ION Geophysical Corp.(b) | 4,939,400 | 37,638,228 | ||||||
Superior Energy Services, Inc.(b) | 1,539,880 | 43,301,426 | ||||||
90,985,274 | ||||||||
Oil & Gas Exploration & Production–1.16% | ||||||||
Goodrich Petroleum Corp.(b) | 1,582,100 | 25,076,285 | ||||||
Paper Packaging–1.50% | ||||||||
Sealed Air Corp. | 1,834,900 | 32,661,220 | ||||||
Property & Casualty Insurance–4.27% | ||||||||
AmTrust Financial Services, Inc. | 1,844,284 | 46,807,928 | ||||||
Argo Group International Holdings, Ltd. (Bermuda) | 955,000 | 28,831,450 | ||||||
Employers Holdings, Inc. | 1,054,502 | 17,104,022 | ||||||
92,743,400 | ||||||||
Real Estate Development–0.25% | ||||||||
Forestar Group, Inc.(b) | 420,151 | 5,461,963 | ||||||
Regional Banks–3.93% | ||||||||
TCF Financial Corp. | 3,897,200 | 41,466,208 | ||||||
Zions Bancorp. | 2,524,900 | 43,832,264 | ||||||
85,298,472 | ||||||||
Reinsurance–5.18% | ||||||||
Alterra Capital Holdings Ltd. | 838,740 | 18,183,883 | ||||||
Platinum Underwriters Holdings, Ltd. (Bermuda) | 1,075,500 | 37,244,565 | ||||||
Reinsurance Group of America, Inc. | 418,000 | 21,832,140 | ||||||
Transatlantic Holdings, Inc. | 676,700 | 35,215,468 | ||||||
112,476,056 | ||||||||
Research & Consulting Services–1.30% | ||||||||
Resources Connection Inc.(c) | 2,542,614 | 28,197,589 | ||||||
Restaurants–2.22% | ||||||||
Denny’s Corp.(b) | 4,494,850 | 16,181,460 | ||||||
Sonic Corp.(b)(c) | 4,326,422 | 32,058,787 | ||||||
48,240,247 | ||||||||
Semiconductor Equipment–2.93% | ||||||||
Brooks Automation, Inc. | 2,035,026 | 21,266,022 | ||||||
Novellus Systems, Inc.(b) | 1,225,100 | 42,327,205 | ||||||
63,593,227 | ||||||||
Semiconductors–1.57% | ||||||||
Microsemi Corp.(b) | 1,850,000 | 34,151,000 | ||||||
Specialized Consumer Services–2.08% | ||||||||
H&R Block, Inc. | 2,958,000 | 45,227,820 | ||||||
Specialty Chemicals–0.92% | ||||||||
Zep, Inc.(c) | 1,308,428 | 19,940,443 | ||||||
Trading Companies & Distributors–1.25% | ||||||||
Watsco, Inc. | 438,600 | 27,044,076 | ||||||
Total Common Stocks (Cost $1,921,680,073) | 2,103,642,142 | |||||||
Money Market Funds–3.33% | ||||||||
Liquid Assets Portfolio–Institutional Class(d) | 36,138,296 | 36,138,296 | ||||||
Premier Portfolio–Institutional Class(d) | 36,138,296 | 36,138,296 | ||||||
Total Money Market Funds (Cost $72,276,592) | 72,276,592 | |||||||
TOTAL INVESTMENTS–100.23% (Cost $1,993,956,665) | 2,175,918,734 | |||||||
OTHER ASSETS LESS LIABILITIES–(0.23)% | (4,986,798 | ) | ||||||
NET ASSETS–100.00% | $ | 2,170,931,936 | ||||||
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) | Affiliated company during the period. The Investment Company Act of 1940 defines affiliates as those companies in which a fund holds 5% or more of the outstanding voting securities. The Fund has not owned enough of the outstanding voting securities of the issuer to have control (as defined in the Investment Company Act of 1940) of that issuer. The aggregate value of these securities as of October 31, 2011 was $309,547,406, which represented 14.26% of the Fund’s Net Assets. See Note 4. | |
(d) | The money market fund and the Fund are affiliated by having the same investment adviser. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
6 Invesco Van Kampen Small Cap Value Fund
Portfolio Composition
By sector, based on Net Assets
as of October 31, 2011
Information Technology | 21.6 | % | ||
Industrials | 21.1 | |||
Consumer Discretionary | 18.9 | |||
Financials | 17.1 | |||
Health Care | 8.6 | |||
Energy | 5.3 | |||
Materials | 3.3 | |||
Utilities | 1.0 | |||
Money Market Funds Plus Other Assets Less Liabilities | 3.1 | |||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
7 Invesco Van Kampen Small Cap Value Fund
Statement of Assets and Liabilities
October 31, 2011
(Unaudited)
Assets: | ||||
Investments, at value (Cost $1,571,316,594) | $ | 1,794,094,736 | ||
Investments in affiliates, at value (Cost $422,640,071) | 381,823,998 | |||
Total investments, at value (Cost $1,993,956,665) | 2,175,918,734 | |||
Receivable for: | ||||
Investments sold | 4,876,060 | |||
Fund shares sold | 1,523,184 | |||
Dividends | 981,943 | |||
Fund expenses absorbed | 12,719 | |||
Investment for trustee deferred compensation and retirement plans | 15,028 | |||
Other assets | 69,033 | |||
Total assets | 2,183,396,701 | |||
Liabilities: | ||||
Payable for: | ||||
Investments purchased | 3,490,536 | |||
Fund shares reacquired | 6,484,323 | |||
Accrued fees to affiliates | 1,860,490 | |||
Accrued other operating expenses | 574,171 | |||
Trustee deferred compensation and retirement plans | 55,245 | |||
Total liabilities | 12,464,765 | |||
Net assets applicable to shares outstanding | $ | 2,170,931,936 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 1,834,612,271 | ||
Undistributed net investment income (loss) | (2,307,654 | ) | ||
Undistributed net realized gain | 156,665,250 | |||
Unrealized appreciation | 181,962,069 | |||
$ | 2,170,931,936 | |||
Net Assets: | ||||
Class A | $ | 1,302,206,337 | ||
Class B | $ | 41,445,076 | ||
Class C | $ | 144,352,936 | ||
Class Y | $ | 682,927,587 | ||
Shares outstanding, $0.01 par value per share, with an unlimited number of shares authorized: | ||||
Class A | 77,406,135 | |||
Class B | 2,714,407 | |||
Class C | 9,617,160 | |||
Class Y | 40,085,979 | |||
Class A: | ||||
Net asset value per share | $ | 16.82 | ||
Maximum offering price per share | ||||
(Net asset value of $16.82 divided by 94.50%) | $ | 17.80 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 15.27 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 15.01 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 17.04 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
8 Invesco Van Kampen Small Cap Value Fund
Statement of Operations
For the six months ended October 31, 2011
(Unaudited)
Investment income: | ||||
Dividends | $ | 8,180,086 | ||
Dividends from affiliates | 711,597 | |||
Total investment income | 8,891,683 | |||
Expenses: | ||||
Advisory fees | 6,979,455 | |||
Administrative services fees | 232,882 | |||
Custodian fees | 30,149 | |||
Distribution fees: | ||||
Class A | 1,665,086 | |||
Class B | 190,600 | |||
Class C | 773,265 | |||
Transfer agent fees | 2,621,182 | |||
Trustees’ and officers’ fees and benefits | 43,305 | |||
Other | 202,688 | |||
Total expenses | 12,738,612 | |||
Less: Fees waived and expense offset arrangement(s) | (1,555,245 | ) | ||
Net expenses | 11,183,367 | |||
Net investment income (loss) | (2,291,684 | ) | ||
Realized and unrealized gain (loss) from: | ||||
Net realized gain from investment securities (includes net gains from securities sold to affiliates of $1,230,014) | 108,590,900 | |||
Change in net unrealized appreciation (depreciation) of investment securities | (485,571,494 | ) | ||
Net realized and unrealized gain (loss) | (376,980,594 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | (379,272,278 | ) | |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
9 Invesco Van Kampen Small Cap Value Fund
Statement of Changes in Net Assets
For the six months ended October 31, 2011, the period April 1, 2011 through April 30, 2011 and year ended March 31, 2011
(Unaudited)
Six months ended | One month ended | Year ended | ||||||||||
October 31, | April 30, | March 31, | ||||||||||
2011 | 2011 | 2011 | ||||||||||
Operations: | ||||||||||||
Net investment income (loss) | $ | (2,291,684 | ) | $ | (1,026,774 | ) | $ | (2,874,589 | ) | |||
Net realized gain | 108,590,900 | 18,399,924 | 101,125,792 | |||||||||
Change in net unrealized appreciation (depreciation) | (485,571,494 | ) | 22,917,071 | 154,919,814 | ||||||||
Net increase (decrease) in net assets resulting from operations | (379,272,278 | ) | 40,290,221 | 253,171,017 | ||||||||
Distributions to shareholders from net realized gains: | ||||||||||||
Class A | — | — | (30,666,764 | ) | ||||||||
Class B | — | — | (1,521,239 | ) | ||||||||
Class C | — | — | (5,006,116 | ) | ||||||||
Class Y | — | — | (5,451,254 | ) | ||||||||
Total distributions from net realized gains | — | — | (42,645,373 | ) | ||||||||
Share transactions–net: | ||||||||||||
Class A | 466,267,245 | (8,004,987 | ) | 213,801,699 | ||||||||
Class B | 9,365,495 | (1,396,299 | ) | (15,304,348 | ) | |||||||
Class C | 23,604,155 | (2,058,199 | ) | 15,292,070 | ||||||||
Class Y | 602,401,696 | 8,392,186 | 23,278,951 | |||||||||
Net increase (decrease) in net assets resulting from share transactions | 1,101,638,591 | (3,067,299 | ) | 237,068,372 | ||||||||
Net increase in net assets | 722,366,313 | 37,222,922 | 447,594,016 | |||||||||
Net assets: | ||||||||||||
Beginning of period | 1,448,565,623 | 1,411,342,701 | 963,748,685 | |||||||||
End of period (includes undistributed net investment income (loss) of $(2,307,655), $(15,970) and $(14,350), respectively) | $ | 2,170,931,936 | $ | 1,448,565,623 | $ | 1,411,342,701 | ||||||
Notes to Financial Statements
October 31, 2011
(Unaudited)
NOTE 1—Significant Accounting Policies
Invesco Van Kampen Small Cap Value 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 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.
10 Invesco Van Kampen Small Cap Value Fund
A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. | |
A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”). | ||
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded. | ||
Debt obligations (including convertible bonds) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Debt securities are subject to interest rate and credit risks. In addition, all debt securities involve some risk of default with respect to interest and/or principal payments. | ||
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trade is not the current value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and 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. |
11 Invesco Van Kampen Small Cap Value Fund
D. | Distributions — Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to treat a portion of the proceeds from redemptions as distributions for federal income tax purposes. | |
E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. | |
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period. | ||
F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. Prior to the Reorganization, incremental transfer agency fees which are unique to each class of shares of the Acquired Fund were charged to the operations of such class. | |
G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. | |
H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. | |
I. | Redemption Fees — The Fund has a 2% redemption fee that is to be retained by the Fund to offset transaction costs and other expenses associated with short-term redemptions and exchanges. The fee, subject to certain exceptions, is imposed on certain redemptions or exchanges of shares within 31 days of purchase. The redemption fee is recorded as an increase in shareholder capital and is allocated among the share classes based on the relative net assets of each class. Effective January 1, 2012, the Fund will eliminate the 2% redemption fee, if applicable, assessed on shares of the Fund redeemed or exchanged within 31 days of purchase. |
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 $500 million | 0 | .645% | ||
Over $1 billion | 0 | .62% | ||
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Sub-Adviser(s). | ||
Effective May 23, 2011, the Adviser has contractually agreed, through at least June 30, 2012, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Class A, Class B, Class C, and Class Y shares to 1.03%, 1.40% (after Rule 12b-1 fee limit), 1.78%, and 0.78%, respectively, of average daily net assets. Prior to May 23, 2011, the Adviser has contractually agreed to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Class A, Class B, Class C, and Class Y shares to 1.34%, 2.09% (after Rule 12b-1 fee limit), 2.09%, and 1.09%, respectively, of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless the Board of Trustees and Invesco mutually agree to amend or continue the fee waiver agreement, it will terminate on June 30, 2012. | ||
Further, the Adviser has contractually agreed, through at least June 30, 2012, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds. | ||
For the six months ended October 31, 2011, the Adviser waived advisory fees of $1,478,152. | ||
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 October 31, 2011, expenses incurred under the agreement are shown in the Statement of Operations as administrative services fees. |
12 Invesco Van Kampen Small Cap Value Fund
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (“IIS”) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. IIS may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. All fees payable by IIS to intermediaries that provide omnibus account services or sub-accounting are charged back to the Fund, subject to certain limitations approved by the Trust’s Board of Trustees. For the six months ended October 31, 2011, expenses incurred under the agreement are shown in the Statement of Operations as transfer agent fees. | ||
Shares of the Fund are distributed by Invesco Distributors, Inc. (“IDI”). The Fund has adopted a distribution plan pursuant to Rule 12b-1 under the 1940 Act, and a service plan (collectively, the “Plans”) for Class A shares, Class B shares and Class C shares to compensate IDI for the sale, distribution, shareholder servicing and maintenance of shareholder accounts for these shares. Under the Plans, the Fund will incur annual fees of up to 0.25% of Class A average daily net assets and up to 1.00% each of Class B and Class C average daily net assets. | ||
Effective May 23, 2011, IDI has contractually agreed to limit Rule 12b-1 plan fees on Class B to 0.62% of average daily net assets, through at least June 30, 2012. | ||
With respect to Class B and Class C shares, the Fund is authorized to reimburse in future years any distribution related expenses that exceed the maximum annual reimbursement rate for such class, so long as such reimbursement does not cause the Fund to exceed the Class B and Class C maximum annual reimbursement rate, respectively. With respect to Class A shares, distribution related expenses that exceed the maximum annual reimbursement rate for such class are not carried forward to future years and the Fund will not reimburse IDI for any such expenses. | ||
Expenses under the Plans before fee waivers are shown as distribution fees in the Statement of Operations as distribution fees. For the six months ended October 31, 2011, 12b-1 fees for Class B shares were $115,282 after fee waivers of $75,318. | ||
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 October 31, 2011, IDI advised the Fund that IDI retained $12,979 in front-end sales commissions from the sale of Class A shares and $6,803, $24,327 and $8,968 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders. | ||
Certain officers and trustees of the Trust are officers and directors of the Adviser, Invesco Ltd., IIS and/or IDI. |
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3) generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
Level 1 — | Prices are determined using quoted prices in an active market for identical assets. | |
Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. | |
Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of October 31, 2011. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
During the six months ended October 31, 2011, there were no significant transfers between investment levels.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 2,175,918,734 | $ | — | $ | — | $ | 2,175,918,734 | ||||||||
NOTE 4—Investments in Other Affiliates
The Investment Company Act of 1940 defines affiliates as those issuances in which a fund holds 5% or more of the outstanding voting securities. The Fund has not owned enough of the outstanding voting securities of the issuer to have control (as defined in the Investment Company Act of 1940) of that issuer. The following is a summary of the investments in affiliates for the six months ended October 31, 2011.
13 Invesco Van Kampen Small Cap Value Fund
Change in | ||||||||||||||||||||||||||||
Unrealized | ||||||||||||||||||||||||||||
Value | Purchases | Proceeds | Appreciation | Realized | Value | Dividend | ||||||||||||||||||||||
04/30/11 | at Cost | from Sales | (Depreciation) | Gain (Loss) | 10/31/11 | Income | ||||||||||||||||||||||
ACCO Brands Corp. | $ | 28,735,007 | $ | 17,925,869 | $ | — | $ | (8,064,440 | ) | $ | — | $ | 38,596,436 | $ | — | |||||||||||||
AMN Healthcare Services, Inc. | 8,025,382 | 19,110,008 | — | (9,785,833 | ) | — | 17,349,557 | — | ||||||||||||||||||||
CIBER, Inc. | — | 19,635,438 | — | (385,122 | ) | — | 19,250,316 | — | ||||||||||||||||||||
FBR Capital Markets Corp. | 10,036,800 | 11,350,588 | — | (8,946,284 | ) | — | 12,441,104 | — | ||||||||||||||||||||
Liz Claiborne, Inc. | 36,954,379 | 29,285,257 | (33,475,102 | ) | 13,943,497 | 7,417,942 | 54,125,973 | — | ||||||||||||||||||||
Methode Electronics, Inc. | 16,222,154 | 11,222,594 | — | (3,654,164 | ) | — | 23,790,584 | 358,523 | ||||||||||||||||||||
Orion Marine Group, Inc. | 9,046,745 | 9,461,959 | — | (7,352,788 | ) | — | 11,155,916 | — | ||||||||||||||||||||
Resources Connection, Inc. | 14,303,646 | 21,359,121 | — | (7,465,178 | ) | — | 28,197,589 | 211,155 | ||||||||||||||||||||
Sanmina- SCI Corp. | 19,325,108 | 29,122,592 | — | (10,111,478 | ) | — | 38,336,222 | — | ||||||||||||||||||||
Sonic Corp. | 25,807,593 | 18,802,448 | — | (12,551,254 | ) | — | 32,058,787 | — | ||||||||||||||||||||
THQ, Inc. | — | 24,950,657 | — | (10,646,178 | ) | — | 14,304,479 | — | ||||||||||||||||||||
Zep, Inc. | 14,280,229 | 9,228,554 | (1,554,988 | ) | (1,690,818 | ) | (322,534 | ) | 19,940,443 | 112,244 | ||||||||||||||||||
Total | $ | 182,737,043 | $ | 221,455,085 | $ | (35,030,090 | ) | $ | (66,710,040 | ) | $ | 7,095,408 | $ | 309,547,406 | $ | 681,922 | ||||||||||||
NOTE 5—Security Transactions with Affiliated Funds
The Fund is permitted to purchase or sell securities from or to certain other Invesco Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment adviser (or affiliated investment advisers), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, for the six months ended October 31, 2011, the Fund engaged in securities purchases of $11,393,786 and securities sales of $4,524,634, which resulted in net realized gains of $1,230,014.
NOTE 6—Expense Offset Arrangement(s)
The expense offset arrangements are comprised of (1) transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions and (2) custodian credits which result from periodic overnight cash balances at the custodian. For the six months ended October 31, 2011, the Fund received credits from these arrangements, which resulted in the reduction of the Fund’s total expenses of $1,775.
NOTE 7—Trustees’ and Officers’ Fees and Benefits
“Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and “Trustees’ and Officers’ Fees and Benefits” also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. “Trustees’ and Officers’ Fees and Benefits” include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
During the six months ended October 31, 2011, the Fund paid legal fees of $1,858 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A partner of that firm is a Trustee of the Trust.
NOTE 8—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 9—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.
The Fund did not have a capital loss carryforward as of April 30, 2011.
14 Invesco Van Kampen Small Cap Value Fund
NOTE 10—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the six months ended October 31, 2011 was $372,270,958 and $325,652,669, 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 | $ | 338,023,939 | ||
Aggregate unrealized (depreciation) of investment securities | (159,426,060 | ) | ||
Net unrealized appreciation of investment securities | $ | 178,597,879 | ||
Cost of investments for tax purposes is $1,997,320,855. |
NOTE 11—Share Information
Summary of Share Activity | ||||||||||||||||||||||||
Six months ended | One month ended | Year ended | ||||||||||||||||||||||
October 31, 2011(a) | April 30, 2011 | March 31, 2011 | ||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||
Sold: | ||||||||||||||||||||||||
Class A | 10,874,341 | $ | 188,296,863 | 1,315,045 | $ | 25,233,222 | 28,909,954 | $ | 483,429,596 | |||||||||||||||
Class B | — | — | 3,205 | 55,394 | 462,662 | 6,841,904 | ||||||||||||||||||
Class C | 310,158 | 4,426,841 | 67,067 | 1,149,714 | 2,650,688 | 39,891,283 | ||||||||||||||||||
Class Y(b) | 4,108,030 | 73,648,894 | 668,712 | 12,934,920 | 9,894,690 | 165,142,963 | ||||||||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||||||||||
Class A | — | — | — | — | 1,603,901 | 28,613,600 | ||||||||||||||||||
Class B | — | — | — | — | 88,839 | 1,440,077 | ||||||||||||||||||
Class C | — | — | — | — | 295,178 | 4,728,753 | ||||||||||||||||||
Class Y(b) | — | — | — | — | 287,477 | 5,180,323 | ||||||||||||||||||
Issued in connection with acquisitions:(c) | ||||||||||||||||||||||||
Class A | 28,565,022 | 546,905,635 | — | — | — | — | ||||||||||||||||||
Class B | 1,395,411 | 24,277,773 | — | — | — | — | ||||||||||||||||||
Class C | 2,655,889 | 45,515,921 | — | — | — | — | ||||||||||||||||||
Class Y | 34,418,470 | 666,710,807 | — | — | — | — | ||||||||||||||||||
Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||||||||||
Class A | 535,665 | 9,162,821 | 41,460 | 816,315 | 581,832 | 9,661,325 | ||||||||||||||||||
Class B | (589,862 | ) | (9,162,821 | ) | (45,657 | ) | (816,315 | ) | (638,208 | ) | (9,661,325 | ) | ||||||||||||
Reacquired:(d) | ||||||||||||||||||||||||
Class A | (16,711,638 | ) | (278,098,074 | ) | (1,770,998 | ) | (34,054,524 | ) | (18,638,960 | ) | (307,902,822 | ) | ||||||||||||
Class B | (336,828 | )) | (5,749,457 | ) | (36,524 | ) | (635,378 | ) | (933,978 | ) | (13,925,004 | ) | ||||||||||||
Class C | (1,768,275 | ) | (26,338,607 | ) | (186,223 | ) | (3,207,913 | ) | (1,958,635 | ) | (29,327,966 | ) | ||||||||||||
Class Y(b) | (8,093,016 | ) | (137,958,005 | ) | (234,161 | ) | (4,542,734 | ) | (8,919,305 | ) | (147,044,335 | ) | ||||||||||||
Net increase (decrease) in share activity | 55,363,367 | $ | 1,101,638,591 | (178,074 | ) | $ | (3,067,299 | ) | 13,686,135 | $ | 237,068,372 | |||||||||||||
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 27% of the outstanding shares of the Fund. IDI has an agreement with these entities to sell Fund shares. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as securities brokerage, distribution, third party record keeping and account servicing. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. | |
(b) | On June 1, 2010, the Fund’s former Class I shares were reorganized into Class Y shares. | |
(c) | As of the open of business on May 23, 2011, the Fund acquired all the net assets of Invesco Special Value Fund, Invesco Small — Mid Special Value Fund, Invesco U.S. Small Cap Value Fund and Invesco U.S. Small/Mid Cap Value Fund pursuant to a plan of reorganization approved by the Trustees of the Fund on November 10, 2010 and by the shareholders of Invesco Special Value Fund, Invesco Small — Mid Special Value Fund, Invesco U.S. Small Cap Value Fund and Invesco U.S. Small/Mid Cap Value Fund on April 14, 2011. The acquisition was accomplished by a tax-free exchange of 67,034,792 shares of the Fund for 28,177,350, 7,763,887, 29,315,528 and 1,571,735 shares outstanding of Invesco Special Value Fund, Invesco Small — Mid Special Value Fund, Invesco U.S. Small Cap Value Fund and Invesco U.S. Small/Mid Cap Value Fund as of the close of business on May 20, 2011. Each class of Invesco Special Value Fund, Invesco Small — Mid Special Value Fund, Invesco U.S. Small Cap Value Fund and Invesco U.S. Small/Mid Cap Value Fund was exchanged for the like class of shares of the Fund based on the relative net asset value of Invesco Special Value Fund, Invesco Small — Mid Special Value Fund, Invesco U.S. Small Cap Value Fund and Invesco U.S. Small/Mid Cap Value Fund to the net asset value of the Fund on the close of business, May 20, 2011. Invesco Special Value Fund, Invesco Small — Mid Special Value Fund, Invesco U.S. Small Cap Value Fund and Invesco U.S. Small/Mid Cap Value Fund net assets at that date of $390,180,913, $94,779,328, $783,803,191 and 14,646,704 including $314,608,982 of unrealized appreciation, was combined with those of the Fund. The net assets of the Fund immediately before the acquisition were $1,450,891,862. The net assets of the Fund immediately following the acquisition were $2,734,301,998. | |
(d) | Net of redemption fees of $47,058 and $8,934 allocated among the classes based on relative net assets of each class for the period ended October 31, 2011 and the period April 1, 2011 through April 30, 2011, respectively. |
15 Invesco Van Kampen Small Cap Value Fund
NOTE 12—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Ratio of | Ratio of | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
expenses | expenses | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net gains | to average | to average net | Ratio of net | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset | Net | (losses) on | Dividends | Distributions | net assets | assets without | investment | |||||||||||||||||||||||||||||||||||||||||||||||||
value, | investment | securities (both | Total from | from net | from net | Net asset | Net assets, | with fee waivers | fee waivers | income (loss) | ||||||||||||||||||||||||||||||||||||||||||||||
beginning | income | realized and | investment | investment | realized | Total | value, end | Total | end of period | and/or expenses | and/or expenses | to average | Portfolio | |||||||||||||||||||||||||||||||||||||||||||
of period | (loss)(a) | unrealized) | operations | income | gains | Distributions | of period | Return | (000s omitted) | absorbed | absorbed | net assets | turnover(b) | |||||||||||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | $ | 19.71 | $ | (0.02 | ) | $ | (2.87 | ) | $ | (2.89 | ) | $ | — | $ | — | $ | — | $ | 16.82 | (c) | (14.66 | )%(d) | $ | 1,302,206 | 1.04 | %(e) | 1.17 | %(e) | (0.23 | )%(e) | 26 | % | ||||||||||||||||||||||||
One month ended 04/30/11 | 19.17 | (0.01 | ) | 0.55 | 0.54 | — | — | — | 19.71 | (c) | 2.82 | (d) | 1,067,286 | 1.33 | (f) | 1.36 | (f) | (0.84 | )(f) | 5 | ||||||||||||||||||||||||||||||||||||
Year ended 03/31/11 | 16.06 | (0.03 | ) | 3.75 | 3.72 | — | (0.61 | ) | (0.61 | ) | 19.17 | (c) | 23.46 | (d) | 1,045,598 | 1.18 | 1.19 | (0.19 | ) | 67 | ||||||||||||||||||||||||||||||||||||
Year ended 03/31/10 | 9.56 | (0.05 | ) | 6.55 | 6.50 | (0.00 | )(g) | — | (0.00 | )(g) | 16.06 | 68.04 | (h) | 675,936 | 1.25 | 1.25 | (0.38 | ) | 28 | |||||||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 14.41 | 0.05 | (4.83 | ) | (4.78 | ) | (0.03 | ) | (0.04 | ) | (0.07 | ) | 9.56 | (33.21 | )(h) | 225,016 | 1.34 | 1.34 | 0.40 | 63 | ||||||||||||||||||||||||||||||||||||
Year ended 03/31/08 | 17.57 | (0.03 | ) | (1.49 | ) | (1.52 | ) | — | (1.64 | ) | (1.64 | ) | 14.41 | (9.31 | )(h) | 248,178 | 1.29 | 1.29 | (0.21 | ) | 46 | |||||||||||||||||||||||||||||||||||
Year ended 03/31/07 | 18.23 | (0.03 | ) | 2.91 | 2.88 | — | (3.54 | ) | (3.54 | ) | 17.57 | 16.70 | (h) | 192,729 | 1.32 | 1.32 | (0.16 | ) | 53 | |||||||||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | 17.91 | (0.04 | ) | (2.60 | ) | (2.64 | ) | — | — | — | 15.27 | (c) | (14.74 | )(d) | 41,445 | 1.28 | (e) | 1.73 | (e) | (0.47 | )(e) | 26 | ||||||||||||||||||||||||||||||||||
One month ended 04/30/11 | 17.42 | (0.01 | ) | 0.50 | 0.49 | — | — | — | 17.91 | (c) | 2.81 | (d)(i) | 40,226 | 1.33 | (f)(i) | 1.36 | (f)(i) | (0.84 | )(f)(i) | 5 | ||||||||||||||||||||||||||||||||||||
Year ended 03/31/11 | 14.69 | (0.09 | ) | 3.43 | 3.34 | — | (0.61 | ) | (0.61 | ) | 17.42 | (c) | 23.07 | (d)(i) | 40,485 | 1.56 | (i) | 1.57 | (i) | (0.57 | )(i) | 67 | ||||||||||||||||||||||||||||||||||
Year ended 03/31/10 | 8.77 | (0.09 | ) | 6.01 | 5.92 | — | — | — | 14.69 | 67.50 | (j)(k) | 49,140 | 1.62 | (k) | 1.62 | (k) | (0.78 | )(k) | 28 | |||||||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 13.24 | 0.02 | (4.44 | ) | (4.42 | ) | (0.01 | ) | (0.04 | ) | (0.05 | ) | 8.77 | (33.39 | )(j)(k) | 37,961 | 1.51 | (k) | 1.51 | (k) | 0.16 | (k) | 63 | |||||||||||||||||||||||||||||||||
Year ended 03/31/08 | 16.35 | (0.11 | ) | (1.36 | ) | (1.47 | ) | — | (1.64 | ) | (1.64 | ) | 13.24 | (9.64 | )(j)(k) | 78,649 | 1.73 | (k) | 1.73 | (k) | (0.68 | )(k) | 46 | |||||||||||||||||||||||||||||||||
Year ended 03/31/07 | 17.30 | (0.16 | ) | 2.75 | 2.59 | — | (3.54 | ) | (3.54 | ) | 16.35 | 15.81 | (j) | 115,090 | 2.08 | 2.08 | (0.92 | ) | 53 | |||||||||||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | 17.65 | (0.07 | ) | (2.57 | ) | (2.64 | ) | — | — | — | 15.01 | (c) | (14.96 | )(d) | 144,353 | 1.79 | (e) | 1.92 | (e) | (0.98 | )(e) | 26 | ||||||||||||||||||||||||||||||||||
One month ended 04/30/11 | 17.17 | (0.02 | ) | 0.50 | 0.48 | — | — | — | 17.65 | (c) | 2.80 | (d) | 148,624 | 2.08 | (f) | 2.11 | (f) | (1.59 | )(f) | 5 | ||||||||||||||||||||||||||||||||||||
Year ended 03/31/11 | 14.55 | (0.14 | ) | 3.37 | 3.23 | — | (0.61 | ) | (0.61 | ) | 17.17 | (c) | 22.52 | (d) | 146,633 | 1.93 | 1.94 | (0.94 | ) | 67 | ||||||||||||||||||||||||||||||||||||
Year ended 03/31/10 | 8.72 | (0.14 | ) | 5.97 | 5.83 | — | — | — | 14.55 | 66.86 | (l) | 109,871 | 2.00 | 2.00 | (1.14 | ) | 28 | |||||||||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 13.23 | (0.04 | ) | (4.43 | ) | (4.47 | ) | — | (0.04 | ) | (0.04 | ) | 8.72 | (33.76 | )(l) | 50,495 | 2.10 | 2.10 | (0.36 | ) | 63 | |||||||||||||||||||||||||||||||||||
Year ended 03/31/08 | 16.38 | (0.15 | ) | (1.36 | ) | (1.51 | ) | — | (1.64 | ) | (1.64 | ) | 13.23 | (9.95 | )(l) | 64,492 | 2.04 | 2.04 | (0.95 | ) | 46 | |||||||||||||||||||||||||||||||||||
Year ended 03/31/07 | 17.33 | (0.16 | ) | 2.75 | 2.59 | — | (3.54 | ) | (3.54 | ) | 16.38 | 15.78 | (k)(l) | 42,704 | 2.07 | (k) | 2.07 | (k) | (0.91 | )(k) | 53 | |||||||||||||||||||||||||||||||||||
Class Y(m) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | 19.94 | 0.00 | (2.90 | ) | (2.90 | ) | — | — | — | 17.04 | (c) | (14.54 | )(d) | 682,928 | 0.79 | (e) | 0.92 | (e) | 0.02 | (e) | 26 | |||||||||||||||||||||||||||||||||||
One month ended 04/30/11 | 19.38 | (0.01 | ) | 0.57 | 0.56 | — | — | — | 19.94 | (c) | 2.89 | (d) | 192,429 | 1.08 | (f) | 1.11 | (f) | (0.59 | )(f) | 5 | ||||||||||||||||||||||||||||||||||||
Year ended 03/31/11 | 16.19 | 0.01 | 3.79 | 3.80 | — | (0.61 | ) | (0.61 | ) | 19.38 | (c) | 23.77 | (d) | 178,627 | 0.93 | 0.94 | 0.06 | 67 | ||||||||||||||||||||||||||||||||||||||
Year ended 03/31/10 | 9.63 | (0.02 | ) | 6.61 | 6.59 | (0.03 | ) | — | (0.03 | ) | 16.19 | 68.43 | (n) | 128,802 | 1.00 | 1.00 | (0.13 | ) | 28 | |||||||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 14.53 | 0.08 | (4.88 | ) | (4.80 | ) | (0.06 | ) | (0.04 | ) | (0.10 | ) | 9.63 | (33.09 | )(n) | 32,407 | 1.09 | 1.09 | 0.63 | 63 | ||||||||||||||||||||||||||||||||||||
Year ended 03/31/08 | 17.66 | 0.02 | (1.51 | ) | (1.49 | ) | — | (1.64 | ) | (1.64 | ) | 14.53 | (9.03 | )(n) | 34,486 | 1.06 | 1.06 | 0.12 | 46 | |||||||||||||||||||||||||||||||||||||
Year ended 03/31/07 | 18.26 | 0.01 | 2.93 | 2.94 | — | (3.54 | ) | (3.54 | ) | 17.66 | 16.96 | (n) | 8,846 | 1.07 | 1.07 | 0.08 | 53 | |||||||||||||||||||||||||||||||||||||||
(a) | Calculated using average shares outstanding. | |
(b) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. For the period ended October 31, 2011, the portfolio turnover calculation excludes the value of securities purchased of $983,090,206 and sold of $280,948,732 in the effort to realign the Fund’s portfolio holdings after the reorganization of Invesco Special Value Fund, Invesco Small — Mid Special Value Fund, Invesco U.S. Small Cap Value Fund and Invesco U.S. Small/Mid Cap Value Fund into the Fund. | |
(c) | Includes redemption fees added to shares of beneficial interest which were less than $0.005 per share. | |
(d) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges and is not annualized for periods less than one year, if applicable. | |
(e) | Ratios are annualized and based on average daily net assets (000’s omitted) of $1,324,829, $47,144, $153,813 and $652,931 for Class A, Class B, Class C and Class Y, respectively. | |
(f) | Annualized. | |
(g) | Amount is less than $0.01 per share. | |
(h) | Assumes reinvestment of all distributions for the period and does not include payment of the maximum sales charge of 5.75% or contingent deferred sales charge (CDSC). On purchases of $1 million or more, a CDSC of 1% may be imposed on certain redemptions made within eighteen months of purchase. If the sales charges were included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to 0.25% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. | |
(i) | The total return, ratio of expenses to average net assets and ratio of net investment income (loss) to average net assets reflect actual 12b-1 fees of 0.25% and 0.63% for the period April 1, 2011 to April 30, 2011 and the year ended March 31, 2011, respectively. | |
(j) | Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 5%, charged on certain redemptions made within one year of purchase and declining to 0% after the fifth year. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to 1% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. | |
(k) | The Total return, Ratio of expenses to average net assets and Ratio of net investment income (loss) to average net assets reflect actual 12b-1 fees of less than 1%. | |
(l) | Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 1%, charged on certain redemptions made within one year of purchase. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to 1% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. | |
(m) | On June 1, 2010, the Fund’s former Class I shares were reorganized into Class Y shares. | |
(n) | Assumes reinvestment of all distributions for the period. These returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption on Fund shares. |
16 Invesco Van Kampen Small Cap Value 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 May 1, 2011 through October 31, 2011.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the hypothetical information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
HYPOTHETICAL | ||||||||||||||||||||||||||||||
ACTUAL | (5% annual return before expenses) | |||||||||||||||||||||||||||||
Beginning | Ending | Expenses | Ending | Expenses | Annualized | |||||||||||||||||||||||||
Account Value | Account Value | Paid During | Account Value | Paid During | Expense | |||||||||||||||||||||||||
Class | (05/01/11) | (10/31/11)1 | Period2,4 | (10/31/11) | Period2,5 | Ratio3 | ||||||||||||||||||||||||
A | $ | 1,000.00 | $ | 852.90 | $ | 4.84 | $ | 1,019.91 | $ | 5.28 | 1.04 | % | ||||||||||||||||||
B | 1,000.00 | 852.10 | 5.96 | 1,018.70 | 6.50 | 1.28 | ||||||||||||||||||||||||
C | 1,000.00 | 849.90 | 8.32 | 1,016.14 | 9.07 | 1.79 | ||||||||||||||||||||||||
Y | 1,000.00 | 854.60 | 3.68 | 1,021.17 | 4.01 | 0.79 | ||||||||||||||||||||||||
1 | The actual ending account value is based on the actual total return of the Fund for the period May 1, 2011 through October 31, 2011, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund’s expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/366 to reflect the most recent fiscal half year. |
3 | Effective May 23, 2011, the Fund’s adviser has contractually agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit Total Annual Fund Operating Expense of Class A, Class B, Class C and Class Y shares to 1.03%, 1.40%, 1.78% and 0.78% of average daily net assets, respectively. The annualized expense ratios restated as if these agreements had been in effect throughout the entire most recent fiscal half year are 1.03%, 1.27%, 1.78% and 0.78% for Class A, Class B, Class C and Class Y shares, respectively. |
4 | The actual expenses paid restated as if the changes discussed above had been in effect throughout the entire most recent fiscal half year are $4.80, $5.91, $8.28 and $3.64 for Class A, Class B, Class C and Class Y shares, respectively. |
5 | The hypothetical expenses paid restated as if the changes discussed above had been in effect throughout the entire most recent fiscal half year are $5.23, $6.44, $9.02 and $3.96 for Class A, Class B, Class C and Class Y shares, respectively. |
17 Invesco Van Kampen Small Cap Value 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 Van Kampen Small Cap Value Fund (the Fund) investment advisory agreement with Invesco Advisers, Inc. (Invesco Advisers) and the Master Intergroup Sub-Advisory Contract for Mutual Funds (the sub-advisory contracts) with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers). During contract renewal meetings held on June 14-15, 2011, the Board as a whole, and the disinterested or “independent” Trustees, who comprise 80% of the Board, voting separately, approved the continuance of the Fund’s investment advisory agreement and the sub-advisory contracts for another year, effective July 1, 2011. In doing so, the Board considered the process that it follows in reviewing and approving the Fund’s investment advisory agreement and sub-advisory contracts and the information that it is provided. The Board determined that the Fund’s investment advisory agreement and the sub-advisory contracts are in the best interests of the Fund and its shareholders and the compensation to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is responsible for overseeing the management of a number of the series portfolios of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies and limitations and investment risks of these funds. The Sub-Committees meet regularly and at designated contract renewal meetings each year to conduct a review of the performance, fees, expenses and other matters related to their assigned Invesco Funds. Each Sub-Committee recommends to the Investments Committee, which in turn recommends to the full Board, whether to approve the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Trustees receive comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and an independent company, Lipper, Inc. (Lipper). The Trustees also receive an independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. The independent Trustees are assisted in their annual evaluation of the Fund’s investment advisory agreement by the Senior Officer and by independent legal counsel. The independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in private sessions with the Senior Officer and counsel.
In evaluating the fairness and reasonableness of the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Trustees also considered information provided in connection with fund acquisitions approved by the Trustees to rationalize the Invesco Funds product range following the acquisition of the retail mutual fund business of Morgan Stanley (the Morgan Stanley Transaction). The Trustees recognized that the advisory fees for the Invesco Funds include advisory fees that are the result of years of review and negotiation between the Trustees and Invesco Advisers as well as advisory fees inherited from Morgan Stanley and Van Kampen funds acquired in the Morgan Stanley Transaction. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these same arrangements throughout the year and in prior years. One Trustee may have weighed a particular piece of information differently than another Trustee.
The discussion below serves as the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 15, 2011, and may not reflect consideration of factors that became known to the Board after that date, including, for example, changes to the Fund’s performance, advisory fees, expense limitations and/or fee waivers.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers, with whom the Board met during the year. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s consideration of Invesco Advisers’ performance and investment process oversight, independent credit analysis and investment risk management.
In determining whether to continue the Fund’s investment advisory agreement, the Board considered the prior relationship between Invesco Advisers and the Fund, as well as the Board’s knowledge of Invesco Advisers’ operations, and concluded that it is beneficial to maintain the current relationship, in part, because of such knowledge. The Board also considered services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution and legal and compliance. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and the advisory services are provided in accordance with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services provided by the Affiliated Sub-Advisers under the sub-advisory contracts and the credentials and experience of the officers and employees of the Affiliated Sub-Advisers who provide these services. The Board noted that the Affiliated Sub-Advisers have offices and personnel that are located in financial centers around the world. As a result, the Affiliated Sub-Advisers can provide research and investment analysis on the markets and economies of various countries in which the Fund invests and make recommendations on securities of companies located in such countries. The Board concluded that the sub-advisory contracts benefit the Fund and its shareholders by permitting Invesco Advisers to use the resources and talents of the Affiliated Sub-Advisers in managing the Fund. The Board concluded that the
18 Invesco Van Kampen Small Cap Value Fund
nature, extent and quality of the services provided by the Affiliated Sub-Advisers are appropriate and satisfactory and in accordance with the terms of the Fund’s sub-advisory contracts.
B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
The Board compared the Fund’s performance during the past one, three and five calendar years to the performance of funds in the Lipper performance universe and against the Lipper Small Cap Value Funds Index. The Board noted that performance of Class A shares of the Fund was in the first quintile of the performance universe for the one, three and five year periods (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board noted that performance of Class A shares of the Fund was above the performance of the Index for the one, three and five year periods. Although the independent written evaluation of the Fund’s Senior Officer only considered Fund performance through the most recent calendar year, the Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
C. | Advisory and Sub-Advisory Fees and Fee Waivers |
The Board compared the Fund’s contractual advisory fee rate to the contractual advisory fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the contractual advisory fee rate for Class A shares of the Fund was below the median contractual advisory fee rate of funds in the expense group. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using audited financial data from the most recent annual report of each fund in the expense group that was publicly available as of the end of the past calendar year and including only one fund per investment adviser. The Board noted that comparative data is as of varying dates, which may affect the comparability of data during times of market volatility.
The Board 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.
19 Invesco Van Kampen Small Cap Value Fund
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Invesco mailing information
Send general correspondence to Invesco Investment Services, Inc., P.O. Box 219078, Kansas City, MO 64121-9078.
Invesco privacy policy
You share personal and financial information with us that is necessary for your transactions and your account records. We take very seriously the obligation to keep that information confidential and private.
Invesco collects nonpublic personal information about you from account applications or other forms you complete and from your transactions with us or our affiliates. We do not disclose information about you or our former customers to service providers or other third parties except to the extent necessary to service your account and in other limited circumstances as permitted by law. For example, we use this information to facilitate the delivery of transaction confirmations, financial reports, prospectuses and tax forms.
Even within Invesco, only people involved in the servicing of your accounts and compliance monitoring have access to your information. To ensure the highest level of confidentiality and security, Invesco maintains physical, electronic and procedural safeguards that meet or exceed federal standards. Special measures, such as data encryption and authentication, apply to your communications with us on our website. More detail is available to you at invesco.com/privacy.
Important notice regarding delivery of security holder documents
To reduce Fund expenses, only one copy of most shareholder documents may be mailed to shareholders with multiple accounts at the same address (Householding). Mailing of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact Invesco Investment Services, Inc. at 800 959 4246 or contact your financial institution. We will begin sending you individual copies for each account within 30 days after receiving your request.
Fund holdings and proxy voting information
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is available at invesco.com/completeqtrholdings. Shareholders can also look up the Fund’s Forms N-Q on the SEC website at sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-03826 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.
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VK-SCV-SAR-1 | Invesco Distributors, Inc. |
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Invesco Van Kampen Value Opportunities Fund
Semiannual Report to Shareholders § October 31, 2011
Nasdaq:
A: VVOAX § B: VVOBX § C: VVOCX § R: VVORX § Y: VVOIX § Institutional: VVONX
Semiannual Report to Shareholders § October 31, 2011
Nasdaq:
A: VVOAX § B: VVOBX § C: VVOCX § R: VVORX § Y: VVOIX § Institutional: VVONX
![(IMAGE)](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8579202.gif)
2 | Fund Performance | |
4 | Letters to Shareholders | |
5 | Schedule of Investments | |
7 | Financial Statements | |
9 | Notes to Financial Statements | |
16 | Financial Highlights | |
17 | Fund Expenses | |
18 | 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, 4/30/11 to 10/31/11, at net asset value (NAV). Performance shown does not include applicable contingent deferred sales charges (CDSC) or front-end sales charges, which would have reduced performance.
Class A Shares | -11.00 | % | ||
Class B Shares | -11.06 | |||
Class C Shares | -11.30 | |||
Class R Shares* | -11.11 | |||
Class Y Shares | -10.95 | |||
Institutional Class Shares* | -10.74 | |||
S&P 500 Index▼ (Broad Market Index) | -7.12 | |||
Russell 1000 Value Index▼ (Style-Specific Index) | -9.49 | |||
Lipper Large-Cap Value Funds Index▼ (Peer Group Index) | -10.49 | |||
Source(s): ▼Lipper Inc. | ||
* | Share classes incepted during the reporting period. See page 3 for a detailed explanation of Fund performance. |
The S&P 500® Index is an unmanaged index considered representative of the U.S. stock market.
The Russell 1000® Value Index is an unmanaged index considered representative of large-cap value stocks. The Russell Midcap Value Index is a trademark/service mark of the Frank Russell Co. Russell® is a trademark of the Frank Russell Co.
The Lipper Large-Cap Value Funds Index is an unmanaged index considered representative of large-cap value 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.
2 Invesco Van Kampen Value Opportunities Fund
Average Annual Total Returns
As of 10/31/11, including maximum applicable sales charges
Class A Shares | ||||||||
Inception (6/25/01) | 1.63 | % | ||||||
10 | Years | 2.85 | ||||||
5 | Years | -4.68 | ||||||
1 | Year | -3.59 | ||||||
Class B Shares | ||||||||
Inception (6/25/01) | 1.59 | % | ||||||
10 | Years | 2.81 | ||||||
5 | Years | -4.55 | ||||||
1 | Year | -3.18 | ||||||
Class C Shares | ||||||||
Inception (6/25/01) | 1.45 | % | ||||||
10 | Years | 2.69 | ||||||
5 | Years | -4.28 | ||||||
1 | Year | 0.32 | ||||||
Class R Shares | ||||||||
10 | Years | 3.18 | % | |||||
5 | Years | -3.84 | ||||||
1 | Year | 1.75 | ||||||
Class Y Shares | ||||||||
Inception (3/23/05) | 0.20 | % | ||||||
5 | Years | -3.38 | ||||||
1 | Year | 2.30 | ||||||
Institutional Class Shares | ||||||||
10 | Years | 3.47 | % | |||||
5 | Years | -3.54 | ||||||
1 | Year | 2.30 | ||||||
Effective June 1, 2010, Class A, Class B, Class C and Class I shares of the predecessor fund, Van Kampen Value Opportunities Fund, advised by Van Kampen Asset Management were reorganized into Class A, Class B, Class C and Class Y shares, respectively, of Invesco Van Kampen Value Opportunities Fund. Returns shown above for Class A, Class B, Class C and Class Y shares are blended returns of the predecessor fund and Invesco Van Kampen Value Opportunities Fund. Share class returns will differ from the predecessor fund because of different expenses.
Class R shares incepted on May 23, 2011. Performance shown prior to that date is that of the predecessor fund’s Class A shares, restated to reflect the higher 12b-1 fees applicable to Class R shares. Class A share performance reflects any applicable fee waivers or expense reimbursements.
Average Annual Total Returns
As of 9/30/11, the most recent calendar quarter-end, including maximum applicable sales charges
Class A Shares | ||||||||
Inception (6/25/01) | 0.49 | % | ||||||
10 | Years | 2.03 | ||||||
5 | Years | -6.53 | ||||||
1 | Year | -11.81 | ||||||
Class B Shares | ||||||||
Inception (6/25/01) | 0.46 | % | ||||||
10 | Years | 1.98 | ||||||
5 | Years | -6.42 | ||||||
1 | Year | -11.57 | ||||||
Class C Shares | ||||||||
Inception (6/25/01) | 0.32 | % | ||||||
10 | Years | 1.87 | ||||||
5 | Years | -6.12 | ||||||
1 | Year | -8.04 | ||||||
Class R Shares | ||||||||
10 | Years | 2.35 | % | |||||
5 | Years | -5.71 | ||||||
1 | Year | -6.92 | ||||||
Class Y Shares | ||||||||
Inception (3/23/05) | -1.58 | % | ||||||
5 | Years | -5.26 | ||||||
1 | Year | -6.42 | ||||||
Institutional Class Shares | ||||||||
10 | Years | 2.63 | % | |||||
5 | Years | -5.43 | ||||||
1 | Year | -6.51 | ||||||
Institutional Class shares incepted on May 23, 2011. Performance shown prior to that date is that of the predecessor fund’s Class A shares and includes the 12b-1 fees applicable to Class A shares. Class A share performance reflects any applicable fee waivers or expense reimbursements.
The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Please visit invesco.com/performance for the most recent month-end performance. Performance figures reflect reinvested distributions, changes in net asset value and the effect of the maximum sales charge unless otherwise stated. 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, Class R, Class Y and Institutional Class shares was 1.37%, 1.43%, 2.04%, 1.62%, 1.12% and 0.86%, respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.
Class A share performance reflects the maximum 5.50% sales charge, and Class B and Class C share performance reflects the applicable contingent deferred sales charge (CDSC) for the period involved. For shares purchased prior to June 1, 2010, the CDSC on Class B shares declines from 5% at the time of purchase to 0% at the beginning of the sixth year. For shares purchased on or after June 1, 2010, the CDSC on Class B shares declines from 5% at the time of purchase to 0% at the beginning of the seventh year. The CDSC on Class C shares is 1% for the first year after purchase. Class R, Class Y and Institutional Class shares do not have a front-end sales charge or a CDSC; therefore, performance is at net asset value.
The performance of the Fund’s share classes will differ primarily due to different sales charge structures and class expenses.
3 Invesco Van Kampen Value Opportunities Fund
Letters to Shareholders
![(PHOTO OF BRUCE CROCKETT)](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8579203.jpg)
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,
![-s- Bruce L. Crockett](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8579204.gif)
Bruce L. Crockett
Independent Chair, Invesco Funds Board of Trustees
Independent Chair, Invesco Funds Board of Trustees
![(PHOTO OF PHILIP TAYLOR)](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8579205.jpg)
Philip Taylor
Dear Shareholders:
Enclosed is important information about your Fund and its performance. I encourage you to read this report to learn more about your Fund’s short- and long-term performance.
The start of a new year is always a good time to catch up with your financial adviser. Looking ahead to the new year and evaluating your individual situation, your financial adviser can provide valuable insight into whether your investments are still appropriate for your individual needs, goals and risk tolerance. This may provide reassurance in times of economic uncertainty and market volatility such as we saw in 2011 – and are likely to see again in 2012.
On our website, invesco.com/us, we provide timely market updates and commentary from many of our fund managers and other investment professionals. Also on our website, you 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.
Across our broad array of investment products, 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 – meaning 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,
![-s- Philip Taylor](https://capedge.com/proxy/N-CSRS/0000950123-12-000485/h85763h8579206.gif)
Philip Taylor
Senior Managing Director, Invesco Ltd.
Senior Managing Director, Invesco Ltd.
4 Invesco Van Kampen Value Opportunities Fund
Schedule of Investments(a)
October 31, 2011
(Unaudited)
Shares | Value | |||||||
Common Stocks & Other Equity Interests–99.07% | ||||||||
Advertising–5.82% | ||||||||
Omnicom Group, Inc. | 1,211,516 | $ | 53,888,232 | |||||
Aerospace & Defense–1.74% | ||||||||
Honeywell International Inc. | 307,165 | 16,095,446 | ||||||
Asset Management & Custody Banks–1.78% | ||||||||
Bank of New York Mellon Corp. (The) | 773,979 | 16,470,273 | ||||||
Automobile Manufacturers–1.94% | ||||||||
Renault S.A. (France) | 431,228 | 17,983,281 | ||||||
Brewers–3.70% | ||||||||
Molson Coors Brewing Co., Class B | 810,538 | 34,318,179 | ||||||
Cable & Satellite–6.33% | ||||||||
Comcast Corp., Class A | 833,678 | 19,549,749 | ||||||
Time Warner Cable Inc. | 613,834 | 39,095,088 | ||||||
58,644,837 | ||||||||
Computer Hardware–6.12% | ||||||||
Apple Inc.(b) | 52,977 | 21,444,030 | ||||||
Dell Inc.(b) | 794,063 | 12,554,136 | ||||||
Hewlett-Packard Co. | 853,156 | 22,702,481 | ||||||
56,700,647 | ||||||||
Data Processing & Outsourced Services–1.01% | ||||||||
Western Union Co. (The) | 537,247 | 9,385,705 | ||||||
Department Stores–3.58% | ||||||||
Macy’s, Inc. | 1,085,158 | 33,129,874 | ||||||
Diversified Banks–5.55% | ||||||||
Comerica Inc. | 367,563 | 9,391,235 | ||||||
U.S. Bancorp | 609,485 | 15,596,721 | ||||||
Wells Fargo & Co. | 1,021,344 | 26,463,023 | ||||||
51,450,979 | ||||||||
General Merchandise Stores–2.15% | ||||||||
Target Corp. | 363,394 | 19,895,822 | ||||||
Homebuilding–1.33% | ||||||||
Ryland Group, Inc. (The) | 909,858 | 12,283,083 | ||||||
Household Products–2.99% | ||||||||
Procter & Gamble Co. (The) | 432,659 | 27,685,849 | ||||||
Hypermarkets & Super Centers–3.28% | ||||||||
Wal-Mart Stores, Inc. | 535,713 | 30,385,641 | ||||||
Industrial Conglomerates–1.60% | ||||||||
General Electric Co. | 885,237 | 14,792,310 | ||||||
Integrated Oil & Gas–13.14% | ||||||||
Chevron Corp. | 387,310 | 40,686,916 | ||||||
Exxon Mobil Corp. | 244,324 | 19,079,261 | ||||||
Petroleo Brasileiro S.A.–ADR (Brazil) | 658,547 | 17,787,354 | ||||||
Royal Dutch Shell PLC–ADR (United Kingdom) | 623,131 | 44,186,219 | ||||||
121,739,750 | ||||||||
Investment Banking & Brokerage–2.69% | ||||||||
Goldman Sachs Group, Inc. (The) | 101,622 | 11,132,690 | ||||||
Morgan Stanley | 783,161 | 13,814,960 | ||||||
24,947,650 | ||||||||
Life & Health Insurance–1.59% | ||||||||
MetLife, Inc. | 419,039 | 14,733,411 | ||||||
Managed Health Care–2.05% | ||||||||
UnitedHealth Group Inc. | 396,709 | 19,038,065 | ||||||
Oil & Gas Drilling–1.12% | ||||||||
Noble Corp.(b) | 288,062 | 10,352,948 | ||||||
Other Diversified Financial Services–7.26% | ||||||||
Bank of America Corp. | 1,675,478 | 11,443,515 | ||||||
Citigroup Inc. | 566,442 | 17,893,903 | ||||||
JPMorgan Chase & Co. | 1,089,657 | 37,876,477 | ||||||
67,213,895 | ||||||||
Pharmaceuticals–4.12% | ||||||||
Bristol-Myers Squibb Co. | 423,007 | 13,362,791 | ||||||
Pfizer Inc. | 1,290,088 | 24,847,095 | �� | |||||
38,209,886 | ||||||||
Property & Casualty Insurance–14.68% | ||||||||
Allied World Assurance Co. Holdings AG (Switzerland) | 295,393 | 17,162,333 | ||||||
Allstate Corp. (The) | 748,520 | 19,716,017 | ||||||
Aspen Insurance Holdings Ltd. | 925,688 | 24,521,475 | ||||||
Chubb Corp. (The) | 859,348 | 57,619,283 | ||||||
Travelers Cos., Inc. (The) | 291,782 | 17,025,480 | ||||||
136,044,588 | ||||||||
Steel–1.28% | ||||||||
POSCO–ADR (South Korea) | 138,248 | 11,878,268 | ||||||
Wireless Telecommunication Services–2.22% | ||||||||
Vodafone Group PLC–ADR (United Kingdom) | 740,003 | 20,601,684 | ||||||
Total Common Stocks & Other Equity Interests (Cost $836,811,667) | 917,870,303 | |||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
5 Invesco Van Kampen Value Opportunities Fund
Shares | Value | |||||||
Money Market Funds–1.23% | ||||||||
Liquid Assets Portfolio–Institutional Class(c) | 5,687,242 | $ | 5,687,242 | |||||
Premier Portfolio–Institutional Class(c) | 5,687,242 | 5,687,242 | ||||||
Total Money Market Funds (Cost $11,374,484) | 11,374,484 | |||||||
TOTAL INVESTMENTS–100.30% (Cost $848,186,151) | 929,244,787 | |||||||
OTHER ASSETS LESS LIABILITIES–(0.30)% | (2,808,942 | ) | ||||||
NET ASSETS–100.00% | $ | 926,435,845 | ||||||
Investment Abbreviations:
ADR | – American Depositary Receipt |
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. | |
(b) | Non-income producing security. | |
(c) | The money market fund and the Fund are affiliated by having the same investment adviser. |
By sector, based on Net Assets
as of October 31, 2011
Financials | 33.6 | % | ||
Consumer Discretionary | 21.1 | |||
Energy | 14.3 | |||
Consumer Staples | 10.0 | |||
Information Technology | 7.1 | |||
Health Care | 6.2 | |||
Industrials | 3.3 | |||
Telecommunication Services | 2.2 | |||
Materials | 1.3 | |||
Money Market Funds Plus Other Assets Less Liabilities | 0.9 | |||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
6 Invesco Van Kampen Value Opportunities Fund
Statement of Assets and Liabilities
October 31, 2011
(Unaudited)
Assets: | ||||
Investments, at value (Cost $836,811,667) | $ | 917,870,303 | ||
Investments in affiliated money market funds, at value and cost | 11,374,484 | |||
Total investments, at value (Cost $848,186,151) | 929,244,787 | |||
Foreign currencies, at value (Cost $123,262) | 124,272 | |||
Receivable for: | ||||
Fund shares sold | 177,809 | |||
Dividends | 514,448 | |||
Investment for trustee deferred compensation and retirement plans | 91,961 | |||
Other assets | 42,050 | |||
Total assets | 930,195,327 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares reacquired | 2,041,565 | |||
Accrued fees to affiliates | 907,382 | |||
Accrued other operating expenses | 297,897 | |||
Trustee deferred compensation and retirement plans | 512,638 | |||
Total liabilities | 3,759,482 | |||
Net assets applicable to shares outstanding | $ | 926,435,845 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 874,100,177 | ||
Undistributed net investment income | 3,080,964 | |||
Undistributed net realized gain (loss) | (31,804,942 | ) | ||
Unrealized appreciation | 81,059,646 | |||
$ | 926,435,845 | |||
Net Assets: | ||||
Class A | $ | 712,815,071 | ||
Class B | $ | 80,023,763 | ||
Class C | $ | 100,523,833 | ||
Class R | $ | 18,003,726 | ||
Class Y | $ | 11,621,113 | ||
Institutional Class | $ | 3,448,339 | ||
Shares outstanding, $0.01 par value per share, with an unlimited number of shares authorized: | ||||
Class A | 78,714,804 | |||
Class B | 8,964,117 | |||
Class C | 11,339,994 | |||
Class R | 1,989,620 | |||
Class Y | 1,287,268 | |||
Institutional Class | 381,195 | |||
Class A: | ||||
Net asset value per share | $ | 9.06 | ||
Maximum offering price per share (Net asset value of $9.06 ¸ 94.50%) | $ | 9.59 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 8.93 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 8.86 | ||
Class R: | ||||
Net asset value and offering price per share | $ | 9.05 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 9.03 | ||
Institutional Class: | ||||
Net asset value and offering price per share | $ | 9.05 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
7 Invesco Van Kampen Value Opportunities Fund
Statement of Operations
For the six months ended October 31, 2011
(Unaudited)
Investment income: | ||||
Dividends (net of foreign withholding taxes of $210,751) | $ | 9,487,680 | ||
Dividends from affiliated money market funds | 6,470 | |||
Total investment income | 9,494,150 | |||
Expenses: | ||||
Advisory fees | 2,894,023 | |||
Administrative services fees | 125,233 | |||
Custodian fees | 12,573 | |||
Distribution fees: | ||||
Class A | 828,542 | |||
Class B | 100,878 | |||
Class C | 460,776 | |||
Class R | 40,367 | |||
Transfer Agent Fees — A, B, C, R and Y | 1,826,678 | |||
Transfer agent fees — Institutional | 2,600 | |||
Trustees’ and officers’ fees and benefits | 23,925 | |||
Other | 195,992 | |||
Total expenses | 6,511,587 | |||
Less: Fees waived, expenses reimbursed and expense offset arrangement(s) | (30,095 | ) | ||
Net expenses | 6,481,492 | |||
Net investment income | 3,012,658 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain from: | ||||
Investment securities | 28,404,317 | |||
Foreign currencies | 5,373 | |||
28,409,690 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | (128,598,615 | ) | ||
Foreign currencies | 3,057 | |||
(128,595,558 | ) | |||
Net realized and unrealized gain (loss) | (100,185,868 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | (97,173,210 | ) | |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
8 Invesco Van Kampen Value Opportunities Fund
Statement of Changes in Net Assets
For the six months ended October 31, 2011, the period April 1 through April 30, 2011 and the year ended March 31, 2011
(Unaudited)
Six months ended | One month ended | Year ended | ||||||||||
October 31, | April 30, | March 31, | ||||||||||
2011 | 2011 | 2011 | ||||||||||
Operations: | ||||||||||||
Net investment income (loss) | $ | 3,012,658 | $ | (30,445 | ) | $ | 500,713 | |||||
Net realized gain | 28,409,690 | 562,759 | 3,333,466 | |||||||||
Change in net unrealized appreciation (depreciation) | (128,595,558 | ) | 765,545 | 639,142 | ||||||||
Net increase (decrease) in net assets resulting from operations | (97,173,210 | ) | 1,297,859 | 4,473,321 | ||||||||
Distributions to shareholders from net investment income: | ||||||||||||
Class A | — | — | (428,216 | ) | ||||||||
Class C | — | — | (5,018 | ) | ||||||||
Class Y | — | — | (58,989 | ) | ||||||||
Total distributions from net investment income | — | — | (492,223 | ) | ||||||||
Share transactions–net: | ||||||||||||
Class A | 740,690,206 | (420,284 | ) | (14,378,002 | ) | |||||||
Class B | 82,395,851 | (210,154 | ) | (2,052,927 | ) | |||||||
Class C | 103,690,196 | (169,064 | ) | (2,140,953 | ) | |||||||
Class R | 19,771,473 | — | — | |||||||||
Class Y | 8,286,329 | (28,744 | ) | (43,797,772 | ) | |||||||
Institutional Class | 4,269,472 | — | — | |||||||||
Net increase (decrease) in net assets resulting from share transactions | 959,103,527 | (828,246 | ) | (62,369,654 | ) | |||||||
Net increase (decrease) in net assets | 861,930,317 | 469,613 | (58,388,556 | ) | ||||||||
Net assets: | ||||||||||||
Beginning of period | 64,505,528 | 64,035,915 | 122,424,471 | |||||||||
End of period (includes undistributed net investment income of $3,080,964, $68,306 and $65,125, respectively) | $ | 926,435,845 | $ | 64,505,528 | $ | 64,035,915 | ||||||
Notes to Financial Statements
October 31, 2011
(Unaudited)
NOTE 1—Significant Accounting Policies
Invesco Van Kampen Value Opportunities 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 capital growth and income.
The Fund currently consists of six different classes of shares: Class A, Class B, Class C, Class R, Class Y and Institutional Class. Class A shares are sold with a front-end sales charge unless certain waiver criteria are met and under certain circumstances load waived shares may be subject to contingent deferred sales charges (“CDSC”). Class C shares are sold with a CDSC. Class R, Class Y and Institutional Class shares are sold at net asset value. Effective November 30, 2010, new or additional investments in Class B shares are no longer permitted. Existing shareholders of Class B shares may continue to reinvest dividends and capital gains distributions in Class B shares until they convert. Also, shareholders in Class B shares will be able to exchange those shares for Class B shares of other Invesco Funds offering such shares until they convert. Generally, Class B shares will automatically convert to Class A shares on or about the month-end which is at least eight years after the date of purchase. Redemption of Class B shares prior to conversion date will be subject to a CDSC.
9 Invesco Van Kampen Value Opportunities Fund
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. | |
A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”). | ||
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded. | ||
Debt obligations (including convertible bonds) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Debt securities are subject to interest rate and credit risks. In addition, all debt securities involve some risk of default with respect to interest and/or principal payments. | ||
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trade is not the current value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and 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 |
10 Invesco Van Kampen Value Opportunities Fund
and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. | ||
D. | Distributions — Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to treat a portion of the proceeds from redemptions as distributions for federal income tax purposes. | |
E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. | |
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period. | ||
F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. Prior to the Reorganization, incremental transfer agency fees which are unique to each class of shares of the Acquired Fund were charged to the operations of such class. | |
G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. | |
H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. | |
I. | Foreign Currency Translations — Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. | |
The Fund may invest in foreign securities which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. | ||
J. | Foreign Currency Contracts — The Fund may enter into foreign currency contracts to manage or minimize currency or exchange rate risk. The Fund may also enter into foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to “lock in” the U.S. dollar price of that security. A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The use of foreign currency contracts does not eliminate fluctuations in the price of the underlying securities the Fund owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statement of Operations. The primary risks associated with foreign currency contracts include failure of the counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities. |
11 Invesco Van Kampen Value Opportunities Fund
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Effective May 23, 2011, 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 $250 million | 0 | .695% | ||
Next $250 million | 0 | .67% | ||
Next $500 million | 0 | .645% | ||
Next $1.5 billion | 0 | .62% | ||
Next $2.5 billion | 0 | .595% | ||
Next $2.5 billion | 0 | .57% | ||
Next $2.5 billion | 0 | .545% | ||
Over $10 billion | 0 | .52% | ||
Prior to May 23, 2011, the Fund paid 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 | .75% | ||
Next $500 million | 0 | .70% | ||
Over $1 billion | 0 | .65% | ||
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, Class R, Class Y and Institutional Class shares to 1.41%, 2.16%, 2.16%, 1.66%, 1.16% and 1.16%, respectively, of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless the Board of Trustees and Invesco mutually agree to amend or continue the fee waiver agreement, it will terminate on June 30, 2012.
Further, the Adviser has contractually agreed, through at least June 30, 2012, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the six months ended October 31, 2011, the Adviser waived advisory fees of $11,001 and reimbursed class level expenses of $15,225 for Class A, Class B, Class C, Class R, Class Y and Investor Class shares in proportion to the relative net assets of such classes.
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 October 31, 2011, expenses incurred under the agreement are shown in the Statement of Operations as administrative services fees.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (“IIS”) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. IIS may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. All fees payable by IIS to intermediaries that provide omnibus account services or sub-accounting are charged back to the Fund, subject to certain limitations approved by the Trust’s Board of Trustees. For the six months ended October 31, 2011, expenses incurred under the agreement are shown in the Statement of Operations as transfer agent fees.
Shares of the Fund are distributed by Invesco Distributors, Inc. (“IDI”). The Fund has adopted a distribution plan pursuant to Rule 12b-1 under the 1940 Act, and a service plan (collectively, the “Plans”) for Class A, Class B, Class C and Class R shares to compensate IDI for the sale, distribution, shareholder servicing and maintenance of shareholder accounts for these shares. Under the Plans, the Fund will incur annual fees of up to 0.25% of Class A average daily net assets, up to 1.00% each of Class B and Class C average daily net assets and up to 0.50% of Class R average daily net assets.
With respect to Class B and Class C shares, the Fund is authorized to reimburse in future years any distribution related expenses that exceed the maximum annual reimbursement rate for such class, so long as such reimbursement does not cause the Fund to exceed the Class B and Class C maximum annual reimbursement rate, respectively. With respect to Class A shares, distribution related expenses that exceed the maximum annual reimbursement rate for such class are not carried forward to future years and the Fund will not reimburse IDI for any such expenses.
For the six months ended October 31, 2011, expenses incurred under these agreements are shown in the Statement of Operations as distribution fees.
Front-end sales commissions and CDSC (collectively, the “sales charges”) are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the six months ended October 31, 2011, IDI advised the Fund that IDI retained $23,076 in front-end sales commissions from the sale of Class A shares and $4, $33,725 and $1,232 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.
12 Invesco Van Kampen Value Opportunities Fund
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3) generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
Level 1 — | Prices are determined using quoted prices in an active market for identical assets. | |
Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. | |
Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of October 31, 2011. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
During the six months ended October 31, 2011, there were no significant transfers between investment levels.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 911,261,506 | $ | 17,983,281 | $ | — | $ | 929,244,787 | ||||||||
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 October 31, 2011, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $3,869.
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 October 31, 2011, the Fund paid legal fees of $909 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.
13 Invesco Van Kampen Value Opportunities Fund
The Fund had a capital loss carryforward as of April 30, 2011, which expires as follows:
Capital Loss | ||||
Expiration | Carryforward* | |||
April 30, 2016 | $ | 46,573,323 | ||
April 30, 2017 | 13,630,436 | |||
Total capital loss carryforward | $ | 60,203,759 | ||
* | Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. To the extent that unrealized gains of May 23, 2011, the date of the reorganization of Invesco Basic Value Fund, into the Fund are realized on securities held in the Fund at such date of reorganization, the capital loss carryforward may be further limited for up to five years from the date of the reorganization. |
NOTE 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 October 31, 2011 was $61,650,645 and $22,515,966, respectively. Cost of investments on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed Federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investment Securities on a Tax Basis | ||||
Aggregate unrealized appreciation of investment securities | $ | 161,432,428 | ||
Aggregate unrealized (depreciation) of investment securities | (80,384,666 | ) | ||
Net unrealized appreciation of investment securities | $ | 81,047,762 | ||
Cost of investments for tax purposes is $848,197,025. |
14 Invesco Van Kampen Value Opportunities Fund
NOTE 9—Share Information
Summary of Share Activity | ||||||||||||||||||||||||
Six months ended | One month ended | Year ended | ||||||||||||||||||||||
October 31, 2011(a) | April 30, 2011 | March 31, 2011 | ||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||
Sold: | ||||||||||||||||||||||||
Class A | 1,743,288 | $ | 15,082,815 | 32,560 | $ | 325,446 | 389,146 | $ | 3,553,178 | |||||||||||||||
Class B | 59,160 | 948,986 | 1,590 | 15,675 | 33,412 | 288,919 | ||||||||||||||||||
Class C | 178,848 | 2,061,990 | 3,403 | 33,523 | 57,077 | 499,158 | ||||||||||||||||||
Class R(b) | 197,803 | 1,829,320 | — | — | — | — | ||||||||||||||||||
Class Y | 96,602 | 817,594 | 2,219 | 22,066 | 1,346,579 | 11,555,073 | ||||||||||||||||||
Institutional Class(b) | 26,013 | 162,274 | — | — | — | — | ||||||||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||||||||||
Class A | — | — | — | — | 42,206 | 393,786 | ||||||||||||||||||
Class C | — | — | — | — | 506 | 4,648 | ||||||||||||||||||
Class Y | — | — | — | — | 5,909 | 54,837 | ||||||||||||||||||
Issued in connection with acquisitions:(c) | ||||||||||||||||||||||||
Class A | 81,789,030 | 808,828,507 | — | — | — | — | ||||||||||||||||||
Class B | 10,498,963 | 102,352,547 | — | — | — | — | ||||||||||||||||||
Class C | 11,653,261 | 113,178,199 | — | — | — | — | ||||||||||||||||||
Class R(b) | 2,088,804 | 20,662,849 | — | — | — | — | ||||||||||||||||||
Class Y | 1,124,328 | 11,072,165 | — | — | — | — | ||||||||||||||||||
Institutional Class(b) | 915,800 | 9,022,329 | — | — | — | — | ||||||||||||||||||
Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||||||||||
Class A | 1,354,128 | 12,433,240 | 10,772 | 109,116 | 69,693 | 634,358 | ||||||||||||||||||
Class B | (1,373,213 | ) | (12,433,240 | ) | (10,923 | ) | (109,116 | ) | (70,977 | ) | (634,358 | ) | ||||||||||||
Reacquired: | ||||||||||||||||||||||||
Class A | (10,525,564 | ) | (95,654,356 | ) | (85,435 | ) | (854,846 | ) | (2,133,967 | ) | (18,959,324 | ) | ||||||||||||
Class B | (950,894 | ) | (8,472,442 | ) | (11,848 | ) | (116,713 | ) | (192,402 | ) | (1,707,488 | ) | ||||||||||||
Class C | (1,294,273 | ) | (11,549,993 | ) | (20,681 | ) | (202,587 | ) | (302,241 | ) | (2,644,759 | ) | ||||||||||||
Class R(b) | (296,987 | ) | (2,720,696 | ) | — | — | — | — | ||||||||||||||||
Class Y | (409,727 | ) | (3,603,430 | ) | (5,123 | ) | (50,810 | ) | (6,518,129 | ) | (55,407,682 | ) | ||||||||||||
Institutional Class(b) | (560,618 | ) | (4,915,131 | ) | — | — | — | — | ||||||||||||||||
Net increase (decrease) in share activity | 96,314,752 | $ | 959,103,527 | (83,466 | ) | $ | (828,246 | ) | (7,273,188 | ) | $ | (62,369,654 | ) | |||||||||||
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 22% of the outstanding shares of the Fund. IDI has an agreement with these entities to sell Fund shares. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as securities brokerage, distribution, third party record keeping and account servicing. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. | |
(b) | Commencement date of May 20, 2011. | |
(c) | As of the open of business on May 23, 2011 the Fund acquired all the net assets of Invesco Basic Value Fund pursuant to a plan of reorganization approved by the Trustees of the Fund on November 10, 2011 and by the shareholders of Invesco Basic Value Fund on April 14, 2011. The acquisition was accomplished by a tax-free exchange of 108,070,186 shares of the Fund for 49,783,080 shares outstanding of Invesco Basic Value Fund as of the close of business on May 20, 2011. Each class of Invesco Basic Value Fund was exchanged for the like class of shares of the Fund, based on the relative net asset value of Invesco Basic Value Fund to the net asset value of the Fund at the close of business on May 20, 2011. Invesco Basic Value Fund’s net assets at that date of $1,065,116,596, including $204,658,708 of unrealized appreciation, were combined with those of the Fund. The net assets of the Fund immediately before the acquisition were $62,948,257, and were $1,128,064,853 immediately after the acquisition. |
15 Invesco Van Kampen Value Opportunities 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 | Dividends | Distributions | net assets | assets without | investment | |||||||||||||||||||||||||||||||||||||||||||||||||
value, | investment | (both | Total from | from net | from net | Net asset | Net assets, | with fee waivers | fee waivers | income (loss) | ||||||||||||||||||||||||||||||||||||||||||||||
beginning | income | realized and | investment | investment | realized | Total | value, end | Total | end of period | and/or expenses | and/or expenses | to average | Portfolio | |||||||||||||||||||||||||||||||||||||||||||
of period | (loss)(a) | unrealized) | operations | income | gains | Distributions | of period | Return | (000s omitted) | absorbed | absorbed | net assets | turnover(b) | |||||||||||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | $ | 10.18 | $ | 0.03 | $ | (1.15 | ) | $ | (1.12 | ) | $ | — | $ | — | $ | — | $ | 9.06 | (11.00 | )%(c) | $ | 712,815 | 1.41 | %(d) | 1.42 | %(d) | 0.77 | %(d) | 31 | % | ||||||||||||||||||||||||||
One month ended 04/30/11 | 9.98 | (0.00 | ) | 0.20 | 0.20 | — | — | — | 10.18 | 2.00 | (c) | 44,328 | 1.40 | (e) | 1.98 | (e) | (0.51 | )(e) | 2 | |||||||||||||||||||||||||||||||||||||
Year ended 03/31/11 | 8.95 | 0.06 | 1.06 | 1.12 | (0.09 | ) | — | (0.09 | ) | 9.98 | 12.61 | (c) | 43,855 | 1.42 | 1.47 | 0.68 | 80 | |||||||||||||||||||||||||||||||||||||||
Year ended 03/31/10 | 5.84 | 0.06 | 3.12 | 3.18 | (0.07 | ) | — | (0.07 | ) | 8.95 | 54.55 | (f) | 53,983 | 1.44 | 1.44 | 0.72 | 13 | |||||||||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 9.77 | 0.09 | (3.94 | ) | (3.85 | ) | (0.08 | ) | — | (0.08 | ) | 5.84 | (39.47 | )(f) | 43,175 | 1.41 | 1.41 | 1.11 | 34 | |||||||||||||||||||||||||||||||||||||
Year ended 03/31/08 | 13.11 | 0.09 | (2.29 | ) | (2.20 | ) | (0.07 | ) | (1.07 | ) | (1.14 | ) | 9.77 | (18.06 | )(f) | 112,133 | 1.28 | 1.28 | 0.69 | 54 | ||||||||||||||||||||||||||||||||||||
Year ended 03/31/07 | 12.45 | 0.13 | 1.47 | 1.60 | (0.13 | ) | (0.81 | ) | (0.94 | ) | 13.11 | 13.02 | (f) | 206,306 | 1.28 | 1.28 | 1.05 | 60 | ||||||||||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | 10.04 | 0.03 | (1.14 | ) | (1.11 | ) | — | — | — | 8.93 | (11.06 | )(c)(g) | 80,024 | 1.41 | (d)(g) | 1.42 | (d)(g) | 0.77 | (d)(g) | 31 | ||||||||||||||||||||||||||||||||||||
One month ended 04/30/11 | 9.84 | (0.00 | ) | 0.20 | 0.20 | — | — | — | 10.04 | 2.03 | (c)(g) | 7,331 | 1.46 | (e)(g) | 2.04 | (e)(g) | (0.57 | )(e)(g) | 2 | |||||||||||||||||||||||||||||||||||||
Year ended 03/31/11 | 8.79 | 0.01 | 1.04 | 1.05 | — | — | — | 9.84 | 11.95 | (c)(h) | 7,392 | 1.99 | (h) | 2.04 | (h) | 0.11 | (h) | 80 | ||||||||||||||||||||||||||||||||||||||
Year ended 03/31/10 | 5.73 | — | 3.06 | 3.06 | — | — | — | 8.79 | 53.40 | (i) | 8,629 | 2.19 | 2.19 | (0.03 | ) | 13 | ||||||||||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 9.54 | 0.03 | (3.84 | ) | (3.81 | ) | — | — | — | 5.73 | (39.94 | )(i) | 9,097 | 2.17 | 2.17 | 0.34 | 34 | |||||||||||||||||||||||||||||||||||||||
Year ended 03/31/08 | 12.85 | (0.01 | ) | (2.23 | ) | (2.24 | ) | — | (1.07 | ) | (1.07 | ) | 9.54 | (18.70 | )(i) | 24,583 | 2.04 | 2.04 | (0.05 | ) | 54 | |||||||||||||||||||||||||||||||||||
Year ended 03/31/07 | 12.22 | 0.04 | 1.44 | 1.48 | (0.04 | ) | (0.81 | ) | (0.85 | ) | 12.85 | 12.24 | (i) | 34,441 | 2.04 | 2.04 | 0.30 | 60 | ||||||||||||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | 10.00 | 0.00 | (1.14 | ) | (1.14 | ) | — | — | — | 8.86 | (11.40 | )(c)(g) | 100,524 | 2.14 | (d)(g) | 2.15 | (d)(g) | 0.04 | (d)(g) | 31 | ||||||||||||||||||||||||||||||||||||
One month ended 04/30/11 | 9.80 | (0.01 | ) | 0.21 | 0.20 | — | — | — | 10.00 | 2.04 | (c)(g) | 8,021 | 2.07 | (e)(g) | 2.65 | (e)(g) | (1.18 | )(e)(g) | 2 | |||||||||||||||||||||||||||||||||||||
Year ended 03/31/11 | 8.77 | 0.01 | 1.03 | 1.04 | (0.01 | ) | — | (0.01 | ) | 9.80 | 11.81 | (c)(h) | 8,033 | 2.06 | (h) | 2.11 | (h) | 0.04 | (h) | 80 | ||||||||||||||||||||||||||||||||||||
Year ended 03/31/10 | 5.73 | 0.00 | 3.06 | 3.06 | (0.02 | ) | — | (0.02 | ) | 8.77 | 53.42 | (j)(k) | 9,337 | 2.18 | (k) | 2.18 | (k) | (0.02 | )(k) | 13 | ||||||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 9.55 | 0.03 | (3.84 | ) | (3.81 | ) | (0.01 | ) | — | (0.01 | ) | 5.73 | (39.90 | )(j)(k) | 7,791 | 2.10 | (k) | 2.10 | (k) | 0.43 | (k) | 34 | ||||||||||||||||||||||||||||||||||
Year ended 03/31/08 | 12.86 | 0.00 | (2.24 | ) | (2.24 | ) | — | (1.07 | ) | (1.07 | ) | 9.55 | (18.69 | )(j)(k) | 19,118 | 2.03 | (k) | 2.03 | (k) | (0.04 | )(k) | 54 | ||||||||||||||||||||||||||||||||||
Year ended 03/31/07 | 12.22 | 0.04 | 1.44 | 1.48 | (0.03 | ) | (0.81 | ) | (0.84 | ) | 12.86 | 12.24 | (j) | 30,468 | 2.04 | 2.04 | 0.29 | 60 | ||||||||||||||||||||||||||||||||||||||
Class R | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11(l) | 9.89 | 0.02 | (0.86 | ) | (0.84 | ) | — | — | — | 9.05 | (11.11 | )(c) | 18,004 | 1.66 | (d) | 1.67 | (d) | 0.52 | (d) | 31 | ||||||||||||||||||||||||||||||||||||
Class Y(m) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11 | 10.14 | 0.03 | (1.14 | ) | (1.11 | ) | — | — | — | 9.03 | (10.95 | )(c) | 11,621 | 1.16 | (d) | 1.17 | (d) | 1.02 | (d) | 31 | ||||||||||||||||||||||||||||||||||||
One month ended 04/30/11 | 9.93 | (0.00 | ) | 0.21 | 0.21 | — | — | — | 10.14 | 2.11 | (c) | 4,826 | 1.15 | (e) | 1.73 | (e) | (0.26 | )(e) | 2 | |||||||||||||||||||||||||||||||||||||
Year ended 03/31/11 | 8.94 | 0.08 | 1.05 | 1.13 | (0.14 | ) | — | (0.14 | ) | 9.93 | 12.75 | (c) | 4,757 | 1.17 | 1.22 | 0.93 | 80 | |||||||||||||||||||||||||||||||||||||||
Year ended 03/31/10 | 5.83 | 0.07 | 3.13 | 3.20 | (0.09 | ) | — | (0.09 | ) | 8.94 | 54.98 | (n) | 50,475 | 1.19 | 1.19 | 0.96 | 13 | |||||||||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 9.77 | 0.11 | (3.94 | ) | (3.83 | ) | (0.11 | ) | — | (0.11 | ) | 5.83 | (39.30 | )(n) | 35,805 | 1.17 | 1.17 | 1.41 | 34 | |||||||||||||||||||||||||||||||||||||
Year ended 03/31/08 | 13.13 | 0.11 | (2.28 | ) | (2.17 | ) | (0.12 | ) | (1.07 | ) | (1.19 | ) | 9.77 | (17.91 | )(n) | 50,817 | 1.07 | (o) | 1.07 | (o) | 1.03 | 54 | ||||||||||||||||||||||||||||||||||
Year ended 03/31/07 | 12.46 | 0.17 | 1.46 | 1.63 | (0.15 | ) | (0.81 | ) | (0.96 | ) | 13.13 | 13.28 | (n) | 191 | 1.08 | 1.08 | 1.39 | 60 | ||||||||||||||||||||||||||||||||||||||
Institutional Class | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/11(l) | 9.85 | 0.05 | (0.85 | ) | (0.80 | ) | — | — | — | 9.05 | (10.74 | )(c) | 3,448 | 0.84 | (d) | 0.84 | (d) | 1.34 | (d) | 31 | ||||||||||||||||||||||||||||||||||||
(a) | Calculated using average shares outstanding. | |
(b) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. For the period ended October 31, 2011, the portfolio turnover calculation excludes the value of securities purchased of $846,280,438 and sold of $133,030,927 in the effort to realign the Fund’s portfolio holdings after the reorganization of Invesco Basic Value Fund into the Fund. | |
(c) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges and is not annualized for periods less than one year. | |
(d) | Ratios are annualized and based on average daily net assets (000’s omitted) of $659,232, $79,913, $93,489, $16,059, $11,789 and $5,189 for Class A, Class B, Class C, Class R, Class Y and Institutional Class shares, respectively. | |
(e) | Annualized. | |
(f) | Assumes reinvestment of all distributions for the period and does not include payment of the maximum sales charge of 5.75% or contingent deferred sales charge (CDSC). On purchases of $1 million or more, a CDSC of 1% may be imposed on certain redemptions made within eighteen months of purchase. If the sales charges were included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to 0.25% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. | |
(g) | The total return, ratio of expenses to average net assets and ratio of net investment income (loss) to average net assets reflect actual rule 12b-1 fees of 0.25% for Class B shares and 0.98% for Class C shares for the six months end October 31, 2011 and 0.31% for Class B shares and 0.92% for Class C shares for the period April 1, 2011 to April 30, 2011 respectively. | |
(h) | The total return, ratio of expenses to average net assets and ratio of net investment income (loss) to average net assets reflect actual rule 12b-1 fees of 0.82% for Class B shares and 0.89% for Class C shares for the year ended March 31, 2011. | |
(i) | Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 5%, charged on certain redemptions made within one year of purchase and declining to 0% after the fifth year. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to 1% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. | |
(j) | Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 1%, charged on certain redemptions made within one year of purchase. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to 1% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. | |
(k) | The Total return, Ratio of expenses to average net assets and Ratio of net investment income (loss) to average net assets reflect actual 12b-1 fees of less than 1%. | |
(l) | Commencement date of May 20, 2011. | |
(m) | On June 1, 2010, the Fund’s former Class I shares were reorganized into Class Y shares. | |
(n) | Assumes reinvestment of all distributions for the period. These returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption on Fund shares. | |
(o) | The Ratio of Expenses to Average Net Assets does not reflect credits earned on cash balances. If these credits were reflected as a reduction of expenses, the ration would decrease by 0.01% for the year ended March 31, 2008. |
16 Invesco Van Kampen Value Opportunities Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments or contingent deferred sales charges on redemptions, and redemption fees, if any; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. With the exception of the actual ending account value and expenses of the Class R and Institutional Class shares, the example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period May 1, 2011, through October 31, 2011. The actual ending account value and expenses of the Class R and Institutional Class shares in the example below are based on an investment of $1,000 invested as of close of business May 20, 2011 (commencement date) and held through October 31, 2011.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period (as of close of business May 20, 2011 through October 31, 2011 for the Class R and Institutional Class shares). Because the actual ending account value and expense information in the example is not based upon a six month period for the Class S shares, the ending account value and expense information may not provide a meaningful comparison to mutual funds that provide such information for a full six month period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the hypothetical information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
HYPOTHETICAL | ||||||||||||||||||||||||||||||
ACTUAL | (5% annual return before expenses) | |||||||||||||||||||||||||||||
Beginning | Ending | Expenses | Ending | Expenses | Annualized | |||||||||||||||||||||||||
Account Value | Account Value | Paid During | Account Value | Paid During | Expense | |||||||||||||||||||||||||
Class | (05/01/11) | (10/31/11)1 | Period2 | (10/31/11) | Period2,3 | Ratio | ||||||||||||||||||||||||
A | $ | 1,000.00 | $ | 890.00 | $ | 6.70 | $ | 1,018.05 | $ | 7.15 | 1.41 | % | ||||||||||||||||||
B | 1,000.00 | 889.40 | 6.70 | 1,018.05 | 7.15 | 1.41 | ||||||||||||||||||||||||
C | 1,000.00 | 887.00 | 10.15 | 1,014.38 | 10.84 | 2.14 | ||||||||||||||||||||||||
R | 1,000.00 | 915.10 | 7.17 | 1,016.79 | 8.42 | 1.66 | ||||||||||||||||||||||||
Y | 1,000.00 | 890.50 | 5.51 | 1,019.30 | 5.89 | 1.16 | ||||||||||||||||||||||||
Institutional | 1,000.00 | 918.80 | 3.63 | 1,020.91 | 4.27 | 0.84 | ||||||||||||||||||||||||
1 | The actual ending account value is based on the actual total return of the Funds for the period May 1, 2011, through October 31, 2011 (as of close of business May 20, 2011, through October 31, 2011 for the Class R and Institutional Class shares), after actual expenses and will differ from the hypothetical ending account value which is based on the Fund’s expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to each Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/366 to reflect the most recent fiscal half year. For the Class R and Institutional Class shares actual expenses are equal to the annualized expense ratio indicated above multiplied by the average account value over the period, multiplied by 165 (as of close of business May 20, 2011, through October 31, 2011)/366. Because the Class R and Institutional Class shares have not been in existence for a full six month period, the actual ending account value and expense information shown may not provide a meaningful comparison to fund expense information of classes that show such data for a full six month period and, because the actual ending account value and expense information in the expense example covers a short time period, return and expense data may not be indicative of return and expense data for longer time periods. |
3 | Hypothetical expenses are equal to the annualized expense ratio indicated above multiplied by the average account value over the period, multiplied by 184/366 to reflect a one-half year period. The hypothetical ending account value and expenses may be used to compare ongoing costs of investing in Class R and Institutional Class shares of each Fund and other funds because such data is based on a full six month period. |
17 Invesco Van Kampen Value Opportunities 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 Van Kampen Value Opportunities Fund (the Fund) investment advisory agreement with Invesco Advisers, Inc. (Invesco Advisers) and the Master Intergroup Sub-Advisory Contract for Mutual Funds (the sub-advisory contracts) with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers). During contract renewal meetings held on June 14-15, 2011, the Board as a whole, and the disinterested or “independent” Trustees, who comprise 80% of the Board, voting separately, approved the continuance of the Fund’s investment advisory agreement and the sub-advisory contracts for another year, effective July 1, 2011. In doing so, the Board considered the process that it follows in reviewing and approving the Fund’s investment advisory agreement and sub-advisory contracts and the information that it is provided. The Board determined that the Fund’s investment advisory agreement and the sub-advisory contracts are in the best interests of the Fund and its shareholders and the compensation to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is responsible for overseeing the management of a number of the series portfolios of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies and limitations and investment risks of these funds. The Sub-Committees meet regularly and at designated contract renewal meetings each year to conduct a review of the performance, fees, expenses and other matters related to their assigned Invesco Funds. Each Sub-Committee recommends to the Investments Committee, which in turn recommends to the full Board, whether to approve the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Trustees receive comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and an independent company, Lipper, Inc. (Lipper). The Trustees also receive an independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. The independent Trustees are assisted in their annual evaluation of the Fund’s investment advisory agreement by the Senior Officer and by independent legal counsel. The independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in private sessions with the Senior Officer and counsel.
In evaluating the fairness and reasonableness of the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Trustees also considered information provided in connection with fund acquisitions approved by the Trustees to rationalize the Invesco Funds product range following the acquisition of the retail mutual fund business of Morgan Stanley (the Morgan Stanley Transaction). The Trustees recognized that the advisory fees for the Invesco Funds include advisory fees that are the result of years of review and negotiation between the Trustees and Invesco Advisers as well as advisory fees inherited from Morgan Stanley and Van Kampen funds acquired in the Morgan Stanley Transaction. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these same arrangements throughout the year and in prior years. One Trustee may have weighed a particular piece of information differently than another Trustee.
The discussion below serves as the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 15, 2011, and may not reflect consideration of factors that became known to the Board after that date, including, for example, changes to the Fund’s performance, advisory fees, expense limitations and/or fee waivers.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers, with whom the Board met during the year. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s consideration of Invesco Advisers’ performance and investment process oversight, independent credit analysis and investment risk management.
In determining whether to continue the Fund’s investment advisory agreement, the Board considered the prior relationship between Invesco Advisers and the Fund, as well as the Board’s knowledge of Invesco Advisers’ operations, and concluded that it is beneficial to maintain the current relationship, in part, because of such knowledge. The Board also considered services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution and legal and compliance. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and the advisory services are provided in accordance with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services provided by the Affiliated Sub-Advisers under the sub-advisory contracts and the credentials and experience of the officers and employees of the Affiliated Sub-Advisers who provide these services. The Board noted that the Affiliated Sub-Advisers have offices and personnel that are located in financial centers around the world. As a result, the Affiliated Sub-Advisers can provide research and investment analysis on the markets and economies of various countries in which the Fund invests and make recommendations on securities of companies located in such countries. The Board concluded that the sub-advisory contracts benefit the Fund and its shareholders by permitting Invesco Advisers to use the resources and talents of the Affiliated Sub-Advisers in managing the Fund. The Board concluded that the nature, extent and quality of the services provided by the Affiliated Sub-Advisers are appropriate and satisfactory and in accordance with the terms of the Fund’s sub-advisory contracts.
B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
The Board compared the Fund’s performance during the past one, three and five calendar years to the performance of funds in the Lipper performance universe and against the Lipper Multi-Cap Value Funds Index. The Board noted that performance of Class A shares of the Fund was in the fourth quintile of the performance universe for the one year period, the third quintile for the three year period and the fifth quintile for the five year period
18 Invesco Van Kampen Value Opportunities Fund
(the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board noted that performance of Class A shares of the Fund was below the performance of the Index for the one, three and five year periods. The Board noted that there had been portfolio manager changes to the Fund in June 2010 and the first quarter of 2011. Invesco Advisers advised the Board that the Fund has historically been more value and larger cap oriented than its peers. 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 with comparable investment strategies.
The Board also considered the fees charged by Invesco Advisers and the Affiliated Sub-Advisers to other client accounts with investment strategies comparable to those of the Fund. The Board noted that Invesco Advisers or the Affiliated Sub-Advisers may charge lower fees to large institutional clients solely for investment management services. Invesco Advisers reviewed with the Board the significantly greater scope of services it provides to the Invesco Funds relative to other client accounts. These additional services include provision of administrative services, officers and office space, oversight of service providers, preparation of annual registration statement updates and financial information and regulatory compliance under the Investment Company Act of 1940, as amended. Invesco Advisers also reviewed generally the higher frequency of shareholder purchases and redemptions in the Invesco Funds relative to the flow of assets for other client accounts. Invesco Advisers advised the Board that advance notice of redemptions is often provided to Invesco Advisers by institutional clients. The Board did note that sub-advisory fees charged by the Affiliated Sub-Advisers to manage the Invesco Funds and to manage other client accounts were often more comparable. The Board concluded that the aggregate services provided to the Invesco Funds were sufficiently different from those provided to institutional clients, and the Board not place significant weight on these fee comparisons.
The Board noted that Invesco Advisers has contractually agreed to waive fees and/or limit expenses of the Fund through at least June 30, 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.
19 Invesco Van Kampen Value Opportunities Fund
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Invesco mailing information
Send general correspondence to Invesco Investment Services, Inc., P.O. Box 219078, Kansas City, MO 64121-9078.
Invesco privacy policy
You share personal and financial information with us that is necessary for your transactions and your account records. We take very seriously the obligation to keep that information confidential and private.
Invesco collects nonpublic personal information about you from account applications or other forms you complete and from your transactions with us or our affiliates. We do not disclose information about you or our former customers to service providers or other third parties except to the extent necessary to service your account and in other limited circumstances as permitted by law. For example, we use this information to facilitate the delivery of transaction confirmations, financial reports, prospectuses and tax forms.
Even within Invesco, only people involved in the servicing of your accounts and compliance monitoring have access to your information. To ensure the highest level of confidentiality and security, Invesco maintains physical, electronic and procedural safeguards that meet or exceed federal standards. Special measures, such as data encryption and authentication, apply to your communications with us on our website. More detail is available to you at invesco.com/privacy.
Important notice regarding delivery of security holder documents
To reduce Fund expenses, only one copy of most shareholder documents may be mailed to shareholders with multiple accounts at the same address (Householding). Mailing of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact Invesco Investment Services, Inc. at 800 959 4246 or contact your financial institution. We will begin sending you individual copies for each account within 30 days after receiving your request.
Fund holdings and proxy voting information
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is available at invesco.com/completeqtrholdings. Shareholders can also look up the Fund’s Forms N-Q on the SEC website at sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-03826 and 002-85905.
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Information regarding how the Fund voted proxies related to its portfolio securities during the 12 months ended June 30, 2011, is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov.
Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the U.S. distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
VK-VOPP-SAR-1 Invesco Distributors, Inc.
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 December 15, 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 December 15, 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: January 9, 2012
Pursuant to the requirements of the Securities and Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By: | /s/ Philip A. Taylor | |||
Philip A. Taylor | ||||
Principal Executive Officer | ||||
Date: January 9, 2012
By: | /s/ Sheri Morris | |||
Sheri Morris | ||||
Principal Financial Officer | ||||
Date: January 9, 2012
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. |