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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT 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 1000 Houston, Texas 77046 |
| (Address of principal executive offices) (Zip code) |
Philip A. Taylor 11 Greenway Plaza, Suite 1000 Houston, Texas 77046 |
| (Name and address of agent for service) |
Registrant’s telephone number, including area code: (713) 626-1919
Date of fiscal year end: 4/30
Date of reporting period: 10/31/13
Item 1. Report to Stockholders.
| Semiannual Report to Shareholders | October 31, 2013 |
Invesco Energy Fund
Nasdaq:
A: IENAX n B: IENBX n C: IEFCX n Y: IENYX n Investor: FSTEX n R5: IENIX
| 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 Contracts |
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, 4/30/13 to 10/31/13, at net asset value (NAV). Performance shown does not include applicable contingent deferred sales charges (CDSC) or front-end sales charges, which would have reduced performance.
Class A Shares | 12.29 | % | ||
Class B Shares | 11.88 | |||
Class C Shares | 11.89 | |||
Class Y Shares | 12.43 | |||
Investor Class Shares | 12.28 | |||
Class R5 Shares | 12.50 | |||
S&P 500 Indexq (Broad Market Index) | 11.15 | |||
MSCI World Energy Indexn (Style-Specific Index) | 8.69 | |||
Lipper Natural Resource Funds Index¿ (Peer Group Index) | 14.08 |
Source(s): qInvesco, S&P-Dow Jones via FactSet Research Systems Inc.; nMSCI via FactSet Research Systems Inc.; ¿Lipper Inc.
The S&P 500® Index is an unmanaged index considered representative of the US stock 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 index is computed using the net return, which withholds applicable taxes for non-resident investors.
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) described 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 10/31/13, including maximum applicable sales charges |
| |||
Class A Shares | ||||
Inception (3/28/02) | 11.33 | % | ||
10 Years | 14.01 | |||
5 Years | 9.39 | |||
1 Year | 16.63 | |||
Class B Shares | ||||
Inception (3/28/02) | 11.31 | % | ||
10 Years | 13.99 | |||
5 Years | 9.54 | |||
1 Year | 17.51 | |||
Class C Shares | ||||
Inception (2/14/00) | 12.19 | % | ||
10 Years | 13.82 | |||
5 Years | 9.82 | |||
1 Year | 21.56 | |||
Class Y Shares | ||||
10 Years | 14.82 | % | ||
5 Years | 10.91 | |||
1 Year | 23.74 | |||
Investor Class Shares | ||||
Inception (1/19/84) | 9.85 | % | ||
10 Years | 14.67 | |||
5 Years | 10.64 | |||
1 Year | 23.44 | |||
Class R5 Shares | ||||
Inception (1/31/06) | 5.25 | % | ||
5 Years | 11.08 | |||
1 Year | 23.87 | |||
Average Annual Total Returns As of 9/30/13, the most recent calendar quarter end, including maximum applicable sales charges
|
| |||
Class A Shares | ||||
Inception (3/28/02) | 11.07 | % | ||
10 Years | 13.71 | |||
5 Years | 3.22 | |||
1 Year | 8.51 | |||
Class B Shares | ||||
Inception (3/28/02) | 11.05 | % | ||
10 Years | 13.69 | |||
5 Years | 3.26 | |||
1 Year | 8.95 | |||
Class C Shares | ||||
Inception (2/14/00) | 11.97 | % | ||
10 Years | 13.52 | |||
5 Years | 3.61 | |||
1 Year | 12.94 | |||
Class Y Shares | ||||
10 Years | 14.51 | % | ||
5 Years | 4.65 | |||
1 Year | 15.10 | |||
Investor Class Shares | ||||
Inception (1/19/84) | 9.74 | % | ||
10 Years | 14.36 | |||
5 Years | 4.39 | |||
1 Year | 14.81 | |||
Class R5 Shares | ||||
Inception (1/31/06) | 4.81 | % | ||
5 Years | 4.81 | |||
1 Year | 15.23 | |||
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.
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 Class R5 shares was 1.16%, 1.91%, 1.91%, 0.91%, 1.16% and 0.79%, 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 Class R5 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
Bruce Crockett | Dear Fellow Shareholders: The Invesco Funds Board has worked on a variety of issues over the last several months, and I’d like to take this opportunity to discuss two that affect you and our fellow fund shareholders. The first issue on which your Board has been working is our annual review of the funds’ advisory and sub-advisory contracts with Invesco Advisers and its affiliates. This annual review focuses on the nature and quality of the services Invesco provides as adviser to the Invesco Funds and the reasonableness of the fees that it charges for those services. Each year, we spend months reviewing detailed information, including information from many independent sources. I’m pleased to report that the Board determined in June that renewing the investment advisory agreement and the sub-advisory contracts with Invesco Advisers and its affiliates would serve the best interests of each fund and its shareholders. | |
The second area of focus to highlight is the Board’s efforts to ensure that we provide a lineup of funds that allow financial advisers to build portfolios that meet shareholders’ changing financial needs and goals.
The members of your Board have worked with Invesco Advisers to provide more income-generating options in the Invesco Funds lineup to help shareholders potentially meet their income needs. Your Board recently approved changes to three existing equity mutual funds, increasing their focus on generating income while also seeking to provide long-term growth of capital.
Be assured that your Board will continue working on behalf of fund shareholders, keeping your needs and interests uppermost in our minds.
As always, please contact me at bruce@brucecrockett.com with any questions or concerns you may have. On behalf of the Board, we look forward to continuing to represent your interests and serving your needs.
Sincerely,
Bruce L. Crockett
Independent Chair
Invesco Funds Board of Trustees
Philip Taylor | Dear Shareholders: Enclosed in this semiannual report, you’ll find performance data for your Fund, a complete list of your Fund’s investments as of the close of the reporting period and other important information. I hope you find this report of interest. Our website, invesco.com/us, provides fund-specific as well as more general information from many of Invesco’s investment professionals. You’ll find in-depth articles, video clips and audio commentaries – and, of course, you also can access information about your Invesco account whenever it’s convenient for you. At Invesco, all of our people and all of our resources are dedicated to helping investors achieve their financial objectives. It’s a philosophy we call Intentional Investing, and it guides the way we: n Manage investments – Our dedicated investment professionals search the world for the best opportunities, and each investment team follows a clear, disciplined process to build portfolios and mitigate risk. | |
| n | Provide choices – We offer multiple investment strategies, allowing you and your financial adviser to build a portfolio that’s purpose-built for your needs. |
| n | Connect with you – We’re committed to giving you the expert insights you need to make informed investing decisions, and we are well-equipped to provide high-quality support for investors and advisers. |
For questions about your account, feel free to contact an Invesco client services representative at 800 959 4246. For Invesco-related questions or comments, please email me directly at phil@invesco.com.
All of us at Invesco look forward to serving your investment management needs for many years to come. Thank you for investing with us.
Sincerely,
Philip Taylor
Senior Managing Director, Invesco Ltd.
4 Invesco Energy Fund
Schedule of Investments(a)
October 31, 2013
(Unaudited)
| Shares | Value | |||||||
Common Stocks & Other Equity Interests–94.92% |
| |||||||
| Diversified Chemicals–1.46% | ||||||||
Dow Chemical Co. (The) | 484,936 | $ | 19,140,424 | |||||
| Integrated Oil & Gas–25.52% | ||||||||
BG Group PLC (United Kingdom) | 1,284,927 | 26,174,937 | ||||||
BP PLC–ADR (United Kingdom) | 633,358 | 29,451,147 | ||||||
Cenovus Energy Inc. (Canada)(b) | 866,619 | 25,750,870 | ||||||
Chevron Corp. | 548,799 | 65,833,928 | ||||||
Exxon Mobil Corp. | 510,304 | 45,733,444 | ||||||
Galp Energia, SGPS, S.A. (Portugal) | 630,663 | 10,698,207 | ||||||
Occidental Petroleum Corp. | 744,502 | 71,531,752 | ||||||
Royal Dutch Shell PLC–ADR (United Kingdom) | 286,669 | 19,109,355 | ||||||
Suncor Energy, Inc. (Canada) | 1,086,571 | 39,487,987 | ||||||
| 333,771,627 | ||||||||
| Oil & Gas Drilling–4.72% | ||||||||
Ensco PLC–Class A | 606,610 | 34,971,067 | ||||||
Helmerich & Payne, Inc. | 345,853 | 26,820,900 | ||||||
| 61,791,967 | ||||||||
| Oil & Gas Equipment & Services–22.98% | ||||||||
Cameron International Corp.(c) | 709,625 | 38,930,027 | ||||||
Halliburton Co. | 1,040,259 | 55,164,935 | ||||||
National Oilwell Varco Inc. | 339,553 | 27,564,913 | ||||||
Oceaneering International, Inc. | 159,145 | 13,667,373 | ||||||
Schlumberger Ltd. | 662,507 | 62,090,156 | ||||||
Superior Energy Services, Inc.(c) | 498,164 | 13,365,740 | ||||||
Tidewater Inc. | 434,529 | 26,167,336 | ||||||
Weatherford International Ltd.(c) | 3,868,627 | 63,600,228 | ||||||
| 300,550,708 | ||||||||
| Oil & Gas Exploration & Production–36.78% | ||||||||
Anadarko Petroleum Corp. | 696,558 | 66,375,012 | ||||||
Apache Corp. | 658,537 | 58,478,086 | ||||||
Cabot Oil & Gas Corp. | 343,350 | 12,127,122 | ||||||
Canadian Natural Resources | 1,034,779 | 32,841,777 | ||||||
Cobalt International Energy, Inc.(c) | 301,874 | 7,006,496 | ||||||
Concho Resources Inc.(c) | 319,111 | 35,296,868 | ||||||
| Shares | Value | |||||||
| Oil & Gas Exploration & Production–(continued) | ||||||||
Devon Energy Corp. | 646,379 | $ | 40,864,080 | |||||
EOG Resources, Inc. | 246,997 | 44,064,265 | ||||||
EQT Corp. | 177,366 | 15,184,303 | ||||||
Marathon Oil Corp. | 991,796 | 34,970,727 | ||||||
Midstates Petroleum Co. Inc.(b)(c) | 2,382,057 | 13,434,801 | ||||||
Noble Energy, Inc. | 386,596 | 28,967,638 | ||||||
Range Resources Corp. | 170,096 | 12,877,968 | ||||||
Southwestern Energy Co.(c) | 572,860 | 21,321,849 | ||||||
Ultra Petroleum Corp.(b)(c) | 885,707 | 16,261,581 | ||||||
Whiting Petroleum Corp.(c) | 613,301 | 41,023,704 | ||||||
| 481,096,277 | ||||||||
| Oil & Gas Refining & Marketing–3.46% | ||||||||
Marathon Petroleum Corp. | 241,171 | 17,282,314 | ||||||
Phillips 66 | 434,996 | 28,026,792 | ||||||
| 45,309,106 | ||||||||
Total Common Stocks & Other |
| 1,241,660,109 | ||||||
Money Market Funds–5.26% |
| |||||||
Liquid Assets Portfolio–Institutional Class(d) | 34,390,976 | 34,390,976 | ||||||
Premier Portfolio– | 34,390,977 | 34,390,977 | ||||||
Total Money Market Funds |
| 68,781,953 | ||||||
TOTAL INVESTMENTS (excluding investments purchased with cash collateral from securities on loan)–100.18% (Cost $979,236,246) |
| 1,310,442,062 | ||||||
Investments Purchased with Cash Collateral from Securities on Loan |
| |||||||
Money Market Funds–1.94% |
| |||||||
Liquid Assets Portfolio–Institutional Class (Cost $25,328,216)(d)(e) | 25,328,216 | 25,328,216 | ||||||
TOTAL INVESTMENTS–102.12% |
| 1,335,770,278 | ||||||
OTHER ASSETS LESS LIABILITIES–(2.12)% |
| (27,712,291 | ) | |||||
NET ASSETS–100.00% |
| $ | 1,308,057,987 | |||||
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, 2013. |
| (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 1I. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
5 Invesco Energy Fund
Portfolio Composition
By industry, based on Net Assets
as of October 31, 2013
Oil & Gas Exploration & Production | 36.8 | % | ||
Integrated Oil & Gas | 25.5 | |||
Oil & Gas Equipment & Services | 23.0 | |||
Oil & Gas Drilling | 4.7 | |||
Oil & Gas Refining & Marketing | 3.5 | |||
Diversified Chemicals | 1.4 | |||
Money Market Funds Plus Other Assets Less Liabilities | 5.1 |
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, 2013
(Unaudited)
Assets: |
| |||
Investments, at value (Cost $910,454,293)* | $ | 1,241,660,109 | ||
Investments in affiliated money market funds, at value and cost | 94,110,169 | |||
Total investments, at value (Cost $1,004,564,462) | 1,335,770,278 | |||
Receivable for: | ||||
Fund shares sold | 3,000,690 | |||
Dividends | 197,254 | |||
Investment for trustee deferred compensation and retirement plans | 65,387 | |||
Other assets | 57,965 | |||
Total assets | 1,339,091,574 | |||
Liabilities: |
| |||
Payable for: | ||||
Fund shares reacquired | 4,320,719 | |||
Collateral upon return of securities loaned | 25,328,216 | |||
Accrued fees to affiliates | 1,033,153 | |||
Accrued trustees’ and officers’ fees and benefits | 3,544 | |||
Accrued other operating expenses | 83,202 | |||
Trustee deferred compensation and retirement plans | 264,753 | |||
Total liabilities | 31,033,587 | |||
Net assets applicable to shares outstanding | $ | 1,308,057,987 | ||
Net assets consist of: |
| |||
Shares of beneficial interest | $ | 971,371,710 | ||
Undistributed net investment income | 3,599,466 | |||
Undistributed net realized gain | 1,880,628 | |||
Net unrealized appreciation | 331,206,183 | |||
| $ | 1,308,057,987 | |||
Net Assets: |
| |||
Class A | $ | 621,631,816 | ||
Class B | $ | 43,786,509 | ||
Class C | $ | 170,696,208 | ||
Class Y | $ | 58,476,611 | ||
Investor Class | $ | 384,994,092 | ||
Class R5 | $ | 28,472,751 | ||
Shares outstanding, $0.01 par value per share, |
| |||
Class A | 13,661,157 | |||
Class B | 1,068,436 | |||
Class C | 4,268,800 | |||
Class Y | 1,277,864 | |||
Investor Class | 8,490,986 | |||
Class R5 | 609,670 | |||
Class A: | ||||
Net asset value per share | $ | 45.50 | ||
Maximum offering price per share | ||||
(Net asset value of $45.50 ¸ 94.50%) | $ | 48.15 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 40.98 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 39.99 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 45.76 | ||
Investor Class: | ||||
Net asset value and offering price per share | $ | 45.34 | ||
Class R5: | ||||
Net asset value and offering price per share | $ | 46.70 | ||
| * | At October 31, 2013, securities with an aggregate value of $24,595,577 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, 2013
(Unaudited)
Investment income: |
| |||
Dividends (net of foreign withholding taxes of $242,967) | $ | 9,583,840 | ||
Dividends from affiliated money market funds (includes securities lending income of $89,483) | 100,127 | |||
Total investment income | 9,683,967 | |||
Expenses: | ||||
Advisory fees | 4,086,272 | |||
Administrative services fees | 161,348 | |||
Custodian fees | 29,199 | |||
Distribution fees: | ||||
Class A | 770,161 | |||
Class B | 241,092 | |||
Class C | 846,181 | |||
Investor Class | 471,259 | |||
Transfer agent fees — A, B, C, Y and Investor | 1,298,709 | |||
Transfer agent fees — R5 | 12,893 | |||
Trustees’ and officers’ fees and benefits | 48,436 | |||
Other | 152,288 | |||
Total expenses | 8,117,838 | |||
Less: Fees waived and expense offset arrangement(s) | (23,471 | ) | ||
Net expenses | 8,094,367 | |||
Net investment income | 1,589,600 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain (loss) from: | ||||
Investment securities | 36,258,465 | |||
Foreign currencies | (10,054 | ) | ||
| 36,248,411 | ||||
Change in net unrealized appreciation of: | ||||
Investment securities | 110,077,865 | |||
Foreign currencies | 6,413 | |||
| 110,084,278 | ||||
Net realized and unrealized gain | 146,332,689 | |||
Net increase in net assets resulting from operations | $ | 147,922,289 | ||
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, 2013 and the year ended April 30, 2013
(Unaudited)
| October 31, 2013 | April 30, 2013 | |||||||
Operations: |
| |||||||
Net investment income | $ | 1,589,600 | $ | 3,383,959 | ||||
Net realized gain | 36,248,411 | 8,185,488 | ||||||
Change in net unrealized appreciation | 110,084,278 | 21,622,477 | ||||||
Net increase in net assets resulting from operations | 147,922,289 | 33,191,924 | ||||||
Share transactions–net: | ||||||||
Class A | (68,765,894 | ) | (120,237,028 | ) | ||||
Class B | (11,754,636 | ) | (24,331,767 | ) | ||||
Class C | (13,121,515 | ) | (40,623,146 | ) | ||||
Class Y | (3,388,188 | ) | (19,758,938 | ) | ||||
Investor Class | (22,484,918 | ) | (74,607,820 | ) | ||||
Class R5 | 735,900 | 3,296,806 | ||||||
Net increase (decrease) in net assets resulting from share transactions | (118,779,251 | ) | (276,261,893 | ) | ||||
Net increase (decrease) in net assets | 29,143,038 | (243,069,969 | ) | |||||
Net assets: | ||||||||
Beginning of period | 1,278,914,949 | 1,521,984,918 | ||||||
End of period (includes undistributed net investment income of $3,599,466 and $2,009,866, respectively) | $ | 1,308,057,987 | $ | 1,278,914,949 | ||||
Notes to Financial Statements
October 31, 2013
(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 ten 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 Class R5. On September 24, 2012, Institutional Class shares were renamed Class R5 shares. 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 Class R5 shares are sold at net asset value. Effective November 30, 2010, new or additional investments in Class B shares are no longer permitted. Existing shareholders of Class B shares may continue to reinvest dividends and capital gains distributions in Class B shares until they convert to Class A shares. Also, shareholders in Class B shares will be able to exchange those shares for Class B shares of other Invesco Funds offering such shares until they convert to Class A shares. Generally, Class B shares will automatically convert to Class A shares on or about the month-end, which is at least eight years after the date of purchase. Redemption of Class B shares prior to the conversion date will be subject to a CDSC.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
| A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. |
A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. 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.
9 Invesco Energy Fund
Debt obligations (including convertible bonds) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual trading characteristics and other market data. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Foreign securities’ (including foreign exchange contracts) prices 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 the Adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities’ prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
| B. | Securities Transactions and Investment Income — Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund’s net asset value and, accordingly, they reduce the Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
| C. | Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
| D. | Distributions — Distributions from income and net realized capital gain, if any, are generally declared and paid annually and recorded on the ex-dividend date. The Fund may elect to treat a portion of the proceeds from redemptions as distributions for federal income tax purposes. |
| E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (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 Class R5 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. |
10 Invesco Energy Fund
| G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
| H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements, that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
| I. | 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 failed to return the securities. Upon the failure of the borrower to return the securities, collateral may be liquidated and the securities may be purchased on the open market to replace the loaned securities. The Fund could experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to any loss on the collateral invested. Dividends received on cash collateral investments for securities lending transactions, which are net of compensation to counterparties, is included in Dividends from affiliated money market funds on the Statement of Operations. The aggregate value of securities out on loan is shown as a footnote on the Statement of Assets and Liabilities, if any. |
| J. | Foreign Currency Translations — Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. |
The Fund may invest in foreign securities which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable.
| K. | Foreign Currency Contracts — The Fund may enter into foreign currency contracts to manage or minimize currency or exchange rate risk. The Fund may also enter into foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to “lock in” the U.S. dollar price of that security. A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The use of foreign currency contracts does not eliminate fluctuations in the price of the underlying securities the Fund owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statement of Operations. The primary risks associated with foreign currency contracts include failure of the counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities. |
| L. | 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.
11 Invesco Energy 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).
The Adviser has contractually agreed, through at least June 30, 2014, 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 Class R5 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, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on June 30, 2014. The fee waiver agreement cannot be terminated during its term. 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, 2014, 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, 2013, the Adviser waived advisory fees of $21,612.
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, 2013, 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, 2013, 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 Class R5 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, 2013, expenses incurred under the Plan are shown in the Statement of Operations as Distribution fees.
Front-end sales commissions and CDSC (collectively, the “sales charges”) are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the six months ended October 31, 2013, IDI advised the Fund that IDI retained $42,939 in front-end sales commissions from the sale of Class A shares and $184, $30,326 and $2,978 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
12 Invesco Energy 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, 2013. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 1,298,897,134 | $ | 36,873,144 | $ | — | $ | 1,335,770,278 | ||||||||
NOTE 4—Expense Offset Arrangement(s)
The expense offset arrangements are comprised of transfer agency credits which result from balances in demand deposit accounts used by the transfer agent for clearing shareholder transactions. For the six months ended October 31, 2013, the Fund received credits from these arrangements, which resulted in the reduction of the Fund’s total expenses of $1,859.
NOTE 5—Trustees’ and Officers’ Fees and Benefits
Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees’ and Officers’ Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 6—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 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 GAAP. 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. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in 8 tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
13 Invesco Energy Fund
The Fund had a capital loss carryforward as of April 30, 2013, which expires as follows:
| Capital Loss Carryforward* | ||||||||||||
| Expiration | Short-Term | Long-Term | Total | |||||||||
April 30, 2018 | $ | 18,311,213 | $ | — | $ | 18,311,213 | ||||||
Not subject to expiration | 4,703,771 | — | 4,703,771 | |||||||||
| $ | 23,014,984 | $ | — | $ | 23,014,984 | |||||||
| * | 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, 2013 was $66,760,920 and $217,992,931, 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 | $ | 338,005,348 | ||
Aggregate unrealized (depreciation) of investment securities | (12,052,923 | ) | ||
Net unrealized appreciation of investment securities | $ | 325,952,425 | ||
Cost of investments for tax purposes is $1,009,817,853.
NOTE 9—Share Information
| Summary of Share Activity | ||||||||||||||||
| Six months ended October 31, 2013(a) | Year ended April 30, 2013 | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Class A | 1,072,251 | $ | 46,101,021 | 3,466,046 | $ | 132,651,907 | ||||||||||
Class B | 15,526 | 606,597 | 33,992 | 1,160,280 | ||||||||||||
Class C | 178,181 | 6,745,994 | 459,310 | 15,461,294 | ||||||||||||
Class Y | 205,590 | 8,860,114 | 537,792 | 20,325,514 | ||||||||||||
Investor Class | 466,265 | 19,957,895 | 1,601,961 | 61,059,919 | ||||||||||||
Class R5 | 134,326 | 5,999,891 | 520,942 | 20,023,673 | ||||||||||||
Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||
Class A | 154,861 | 6,679,282 | 222,281 | 8,527,717 | ||||||||||||
Class B | (171,695 | ) | (6,679,282 | ) | (245,147 | ) | (8,527,717 | ) | ||||||||
Reacquired: | ||||||||||||||||
Class A | (2,862,843 | ) | (121,546,197 | ) | (6,937,707 | ) | (261,416,652 | ) | ||||||||
Class B | (146,916 | ) | (5,681,951 | ) | (497,562 | ) | (16,964,330 | ) | ||||||||
Class C | (525,181 | ) | (19,867,509 | ) | (1,685,634 | ) | (56,084,440 | ) | ||||||||
Class Y | (283,949 | ) | (12,248,301 | ) | (1,078,646 | ) | (40,084,452 | ) | ||||||||
Investor Class | (990,209 | ) | (42,442,813 | ) | (3,605,150 | ) | (135,667,739 | ) | ||||||||
Class R5 | (119,473 | ) | (5,263,992 | ) | (428,441 | ) | (16,726,867 | ) | ||||||||
Net increase (decrease) in share activity | (2,873,266 | ) | $ | (118,779,251 | ) | (7,635,963 | ) | $ | (276,261,893 | ) | ||||||
| (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. |
14 Invesco Energy Fund
NOTE 10—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
| Net asset value, beginning of period | Net investment income (loss)(a) | Net gains (losses) on securities (both realized and unrealized) | Total from investment operations | Dividends from net investment income | Distributions from net realized gains | Total distributions | Net asset value, end of period | Total return(b) | Net assets, end of period (000’s omitted) | Ratio of expenses to average net assets with fee waivers and/or expenses absorbed | Ratio of expenses to average net assets without fee waivers and/or expenses absorbed | Ratio of net investment income (loss) to average net assets | Portfolio turnover(c) | |||||||||||||||||||||||||||||||||||||||||||
Class A |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | $ | 40.52 | $ | 0.08 | $ | 4.90 | $ | 4.98 | $ | — | $ | — | $ | — | $ | 45.50 | 12.29 | % | $ | 621,632 | 1.15 | %(d) | 1.15 | %(d) | 0.35 | %(d) | 5 | % | ||||||||||||||||||||||||||||
Year ended 04/30/13 | 39.00 | 0.14 | 1.38 | 1.52 | — | — | — | 40.52 | 3.90 | 619,826 | 1.15 | 1.16 | 0.37 | 56 | ||||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 47.26 | 0.01 | (8.27 | ) | (8.26 | ) | — | — | — | 39.00 | (17.48 | ) | 723,304 | 1.12 | 1.13 | 0.03 | 61 | |||||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||
Class B |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | 36.63 | (0.08 | ) | 4.43 | 4.35 | — | — | — | 40.98 | 11.88 | 43,787 | 1.90 | (d) | 1.90 | (d) | (0.40 | )(d) | 5 | ||||||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 35.52 | (0.13 | ) | 1.24 | 1.11 | — | — | — | 36.63 | 3.12 | 50,241 | 1.90 | 1.91 | (0.38 | ) | 56 | ||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 43.37 | (0.26 | ) | (7.59 | ) | (7.85 | ) | — | — | — | 35.52 | (18.10 | ) | 73,896 | 1.87 | 1.88 | (0.72 | ) | 61 | |||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||
Class C |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | 35.74 | (0.08 | ) | 4.33 | 4.25 | — | — | — | 39.99 | 11.89 | 170,696 | 1.90 | (d) | 1.90 | (d) | (0.40 | )(d) | 5 | ||||||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 34.66 | (0.13 | ) | 1.21 | 1.08 | — | — | — | 35.74 | 3.12 | 164,978 | 1.90 | 1.91 | (0.38 | ) | 56 | ||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 42.32 | (0.26 | ) | (7.40 | ) | (7.66 | ) | — | — | — | 34.66 | (18.10 | ) | 202,489 | 1.87 | 1.88 | (0.72 | ) | 61 | |||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||
Class Y |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | 40.70 | 0.13 | 4.93 | 5.06 | — | — | — | 45.76 | 12.43 | 58,477 | 0.90 | (d) | 0.90 | (d) | 0.60 | (d) | 5 | |||||||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 39.07 | 0.23 | 1.40 | 1.63 | — | — | — | 40.70 | 4.17 | 55,196 | 0.90 | 0.91 | 0.62 | 56 | ||||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 47.23 | 0.11 | (8.27 | ) | (8.16 | ) | — | — | — | 39.07 | (17.28 | ) | 74,126 | 0.87 | 0.88 | 0.28 | 61 | |||||||||||||||||||||||||||||||||||||||
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 10/31/13 | 40.38 | 0.08 | 4.88 | 4.96 | — | — | — | 45.34 | 12.28 | 384,994 | 1.15 | (d) | 1.15 | (d) | 0.35 | (d) | 5 | |||||||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 38.86 | 0.14 | 1.38 | 1.52 | — | — | — | 40.38 | 3.91 | 363,981 | 1.15 | 1.16 | 0.37 | 56 | ||||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 47.09 | 0.01 | (8.24 | ) | (8.23 | ) | — | — | — | 38.86 | (17.48 | ) | 428,174 | 1.12 | 1.13 | 0.03 | 61 | |||||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||
Class R5 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | 41.51 | 0.16 | 5.03 | 5.19 | — | — | — | 46.70 | 12.50 | 28,473 | 0.79 | (d) | 0.79 | (d) | 0.71 | (d) | 5 | |||||||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 39.81 | 0.29 | 1.41 | 1.70 | — | — | — | 41.51 | 4.27 | 24,693 | 0.78 | 0.79 | 0.74 | 56 | ||||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 48.07 | 0.16 | (8.42 | ) | (8.26 | ) | — | — | — | 39.81 | (17.18 | ) | 19,996 | 0.76 | 0.77 | 0.39 | 61 | |||||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||
| (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) of $611,106, $47,825, $167,857, $56,580, $373,934 and $25,594 for Class A, Class B, Class C, Class Y, Investor Class and Class R5 shares, respectively. |
| (e) | Annualized. |
| (f) | Commencement date of October 03, 2008. |
15 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, 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, 2013 through October 31, 2013.
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 or contingent deferred sales charges on redemptions, 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.
| Class | Beginning Account Value (05/01/13) | ACTUAL | HYPOTHETICAL (5% annual return before expenses) | Annualized Expense Ratio | ||||||||||||||||||||
| Ending Account Value (10/31/13)1 | Expenses Paid During Period2 | Ending Account Value (10/31/13) | Expenses Paid During Period2 | |||||||||||||||||||||
| A | $ | 1,000.00 | $ | 1,122.90 | $ | 6.15 | $ | 1,019.41 | $ | 5.85 | 1.15 | % | ||||||||||||
| B | 1,000.00 | 1,118.80 | 10.15 | 1,015.63 | 9.65 | 1.90 | ||||||||||||||||||
| C | 1,000.00 | 1,118.90 | 10.15 | 1,015.63 | 9.65 | 1.90 | ||||||||||||||||||
| Y | 1,000.00 | 1,124.30 | 4.82 | 1,020.67 | 4.58 | 0.90 | ||||||||||||||||||
| Investor | 1,000.00 | 1,122.80 | 6.15 | 1,019.41 | 5.85 | 1.15 | ||||||||||||||||||
| R5 | 1,000.00 | 1,125.00 | 4.23 | 1,021.22 | 4.02 | 0.79 | ||||||||||||||||||
| 1 | The actual ending account value is based on the actual total return of the Fund for the period May 1, 2013 through October 31, 2013, 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. |
16 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 Invesco Energy Fund’s (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 17-19, 2013, the Board as a whole, and the disinterested or “independent” Trustees, who comprise 75% 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, 2013. The Board determined that the continuation of 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 payable to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is primarily responsible for overseeing the management of a number of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned Invesco Funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies, limitations and investment risks of these funds. The Sub-Committees meet regularly and at designated contract renewal meetings each year to conduct a review of the performance, fees, expenses and other matters related to their assigned Invesco Funds. Each Sub-Committee recommends to the Investments Committee, which in turn recommends to the full Board, whether and on what terms to approve the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Trustees receive comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and Lipper Inc. (Lipper), an
independent provider of investment company data. The Trustees also receive an independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. The independent Trustees are assisted in their annual evaluation of the Fund’s investment advisory agreement by the Senior Officer and by independent legal counsel. In addition to meetings with Invesco Advisers and fund counsel, the independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in separate sessions with the Senior Officer and with independent legal counsel.
In evaluating the fairness and reasonableness of compensation under the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Trustees recognized that the advisory fee rates for the Invesco Funds are, in many cases, the result of years of review and negotiation between the Trustees and Invesco Advisers as well as advisory fees previously approved by different predecessor boards. 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. The Trustees’ review and conclusions are based on the comprehensive consideration of all information presented to them and are not the result of any single determinative factor. Moreover, one Trustee may have weighed a particular piece of information or factor differently than another Trustee.
The discussion below serves as the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 19, 2013, and may not reflect consideration of factors that became known to the Board after that date, including, for example, changes to the Fund’s performance, advisory fees, expense limitations and/or fee waivers.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
| A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under
the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers, with whom the Sub-Committees met during the year. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s consideration of Invesco Advisers’ 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 benefits of reapproving an existing relationship and the greater uncertainty that may be associated with entering into a new relationship. The Board also considered non-advisory services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution and legal and compliance. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services provided by the Affiliated Sub-Advisers under the sub-advisory contracts and the credentials and experience of the officers and employees of the Affiliated Sub-Advisers who provide these services. The Board noted that the Affiliated Sub-Advisers have offices and personnel that are located in financial centers around the world. As a result, the Affiliated Sub-Advisers can provide research and investment analysis on the markets and economies of various countries in which the Fund may invest, make recommendations regarding securities and assist with security trades. The Board concluded that the sub-advisory contracts benefit the Fund and its shareholders by permitting Invesco Advisers to use the resources and talents of the Affiliated Sub-Advisers in managing the Fund. The Board concluded that the nature, extent and quality of the services provided by the Affiliated Sub-Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s sub-advisory contracts.
| B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement as well as the sub-advisory contracts for the Fund, as Invesco Canada Ltd. 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
17 Invesco Energy Fund
that performance of Class A shares of the Fund was in the fifth quintile of the performance universe for the one and three year periods and the second quintile for the five year period (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board noted that performance of Class A shares of the Fund was below the performance of the Index for the one and three year periods and above the performance of the Index for the five year period. The Trustees noted that Invesco Canada Ltd. and a portfolio manager from the Affiliated Sub-Adviser began managing the assets of the Fund in February 2013. The Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
| C. | Advisory and Sub-Advisory Fees |
The Board compared the Fund’s contractual management fee rate to the contractual management fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the contractual management fee rate for Class A shares of the Fund was below the median contractual management fee rate of funds in the expense group. The Board noted that the term “contractual management fee” may include both advisory and certain administrative services fees and that Invesco does not charge the Invesco Funds for the administrative services included in the term as defined by Lipper. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using each fund’s contractual management fee schedule (including any applicable breakpoints) as reported in the most recent prospectus or statement of additional information for each fund in the expense group.
The Board also compared the Fund’s effective advisory fee rate (the advisory fee rate after advisory fee waivers and before other expense limitations/waivers) to the effective advisory fee rates of the Canadian fund advised by Invesco Advisers and its affiliates with investment strategies comparable to those of the Fund. The Board noted that the effective advisory fee rate of the Canadian Fund is above the Funds’ rate. The Board noted that Invesco Advisers and its affiliates do not advise any other funds or client accounts with investment strategies comparable to those of the Fund.
The Board also considered the services provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the fees payable by Invesco Advisers and the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board noted that Invesco Advisers retains overall responsibility for, and provides services to, sub-advised Invesco Funds, including oversight of the Affiliated Sub-Advisers as well as the additional services described herein other than day-to-day portfolio management. The Board also noted that the sub-advisory fees are not paid directly by the Fund, but rather, are payable by Invesco Advisers to the Affiliated Sub-Advisers.
Based upon the information and considerations described above, the Board concluded that compensation payable to Invesco Advisers and the Affiliated Sub-Advisers is fair and reasonable.
| D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule and was assisted in this review by a report from the Senior Officer. The Board also noted that the Fund shares directly in economies of scale through lower fees charged by third party service providers based on the combined size of the Invesco Funds and other clients advised by Invesco Advisers.
| E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the profitability of Invesco Advisers and its affiliates in providing these services for the year ended December 31, 2012. The Board received information from Invesco Advisers about the methodology used to prepare the profitability information. The Board considered the profitability of Invesco Advisers in managing the Fund and the Invesco Funds. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its subsidiaries provide to the Invesco Funds and the Fund. The Board did not deem the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund to be excessive given the nature, quality and extent of the services provided to the Invesco Funds. The Board received and accepted information from Invesco Advisers demonstrating that Invesco Advisers and each Affiliated Sub-Adviser are financially sound and have the resources necessary to perform their obligations under the investment advisory agreement and sub-advisory contracts.
| F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund, including the fees received for their provision of transfer agency and distribution services to the Fund. The Board considered comparative information regarding fees charged for these services, including information provided by Lipper and other independent sources. The Board considered the performance of Invesco Advisers and its affiliates in providing these services and the organizational structure employed to provide these services. The Board also considered that these services are provided to the Fund pursuant to written contracts that are reviewed and approved on an annual basis by the Board; that the services are required for the operation of the Fund; that Invesco Advisers and its affiliates can provide services, the
nature and quality of which are at least equal to those provided by others offering the same or similar services; and that the fees for such services are fair and reasonable in light of the usual and customary charges by others for services of the same nature and quality.
The Board considered the benefits realized by Invesco Advisers and the Affiliated Sub-Advisers as a result of portfolio brokerage transactions executed through “soft dollar” arrangements. The Board noted that soft dollar arrangements shift the payment obligation for research services from Invesco Advisers and the Affiliated Sub-Advisers to the Invesco Funds and that the research received may be used with other clients of Invesco Advisers and may reduce Invesco Advisers’ and the Affiliated Sub-Advisers’ expenses. The Board also considered periodic reports from the Chief Compliance Officer of the Invesco Funds demonstrating that these arrangements are consistent with regulatory requirements. The Board did not deem the soft dollar arrangements to be inappropriate.
The Board considered that the Fund’s uninvested cash and cash collateral from any securities lending arrangements may be invested in money market funds advised by Invesco Advisers pursuant to procedures approved by the Board. The Board noted that Invesco Advisers receives advisory fees from these affiliated money market funds attributable to such investments, although Invesco Advisers has contractually agreed to waive through varying periods the advisory fees payable by the Invesco Funds. The waiver is in an amount equal to 100% of the net advisory fee Invesco Advisers receives from the affiliated money market funds with respect to the Fund’s investment in the affiliated money market funds of uninvested cash, but not cash collateral. The Board concluded that the Fund’s investment of uninvested cash and cash collateral from any securities lending arrangements in the affiliated money market funds is in the best interests of the Fund and its shareholders.
The Board also considered use of an affiliated broker to execute certain trades for the Fund to among other things, control information leakage, and were advised that such trades are executed in compliance with rules under the Investment Company Act of 1940, as amended.
18 Invesco Energy Fund
Invesco mailing information
Send general correspondence to Invesco Investment Services, Inc., P.O. Box 219078, Kansas City, MO 64121-9078.
Invesco privacy policy
You share personal and financial information with us that is necessary for your transactions and your account records. We take very seriously the obligation to keep that information confidential and private.
Invesco collects nonpublic personal information about you from account applications or other forms you complete and from your transactions with us or our affiliates. We do not disclose information about you or our former customers to service providers or other third parties except to the extent necessary to service your account and in other limited circumstances as permitted by law. For example, we use this information to facilitate the delivery of transaction confirmations, financial reports, prospectuses and tax forms.
Even within Invesco, only people involved in the servicing of your accounts and compliance monitoring have access to your information. To ensure the highest level of confidentiality and security, Invesco maintains physical, electronic and procedural safeguards that meet or exceed federal standards. Special measures, such as data encryption and authentication, apply to your communications with us on our website. More detail is available to you at invesco.com/privacy.
Important notice regarding delivery of security holder documents
To reduce Fund expenses, only one copy of most shareholder documents may be mailed to shareholders with multiple accounts at the same address (Householding). Mailing of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact Invesco Investment Services, Inc. at 800 959 4246 or contact your financial institution. We will begin sending you individual copies for each account within 30 days after receiving your request.
Fund holdings and proxy voting information
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is available at invesco.com/completeqtrholdings. Shareholders can also look up the Fund’s Forms N-Q on the SEC website at sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are shown below.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov.
Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
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SEC file numbers: 811-03826 and 002-85905 | I-ENE-SAR-1 | Invesco Distributors, Inc. |
| Semiannual Report to Shareholders | October 31, 2013 |
Invesco Gold & Precious Metals Fund
Nasdaq:
A: IGDAX n B: IGDBX n C: IGDCX n Y: IGDYX n Investor: FGLDX
| 2 | Fund Performance |
| 4 | Letters to Shareholders |
| 5 | Schedule of Investments |
| 6 | Financial Statements |
| 8 | Notes to Financial Statements |
| 14 | Financial Highlights |
| 15 | Fund Expenses |
| 16 | Approval of Investment Advisory and Sub-Advisory Contracts |
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, 4/30/13 to 10/31/13, at net asset value (NAV). Performance shown does not include applicable contingent deferred sales charges (CDSC) or front-end sales charges, which would have reduced performance.
Class A Shares | -12.13 | % | ||
Class B Shares | -12.79 | |||
Class C Shares | -12.68 | |||
Class Y Shares | -12.32 | |||
Investor Class Shares | -12.41 | |||
S&P 500 Indexq (Broad Market Index) | 11.15 | |||
Philadelphia Gold & Silver Index (price-only)n (Style-Specific Index) | -13.07 | |||
Lipper Precious Metals Equity Funds Indexn (Peer Group Index) | -12.61 |
Source(s): qInvesco, S&P-Dow Jones via FactSet Research Systems Inc.; nLipper Inc.
The S&P 500® Index is an unmanaged index considered representative of the US 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 mining gold and silver.
The Lipper Precious Metals Equity 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) described 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 10/31/13, including maximum applicable sales charges
|
| |||
Class A Shares | ||||
Inception (3/28/02) | 8.10 | % | ||
10 Years | 4.64 | |||
5 Years | 7.07 | |||
1 Year | -46.81 | |||
Class B Shares | ||||
Inception (3/28/02) | 8.21 | % | ||
10 Years | 4.63 | |||
5 Years | 7.14 | |||
1 Year | -46.97 | |||
Class C Shares | ||||
Inception (2/14/00) | 9.37 | % | ||
10 Years | 4.46 | |||
5 Years | 7.46 | |||
1 Year | -44.76 | |||
Class Y Shares | ||||
10 Years | 5.38 | % | ||
5 Years | 8.48 | |||
1 Year | -43.76 | |||
Investor Class Shares | ||||
Inception (1/19/84) | 0.60 | % | ||
10 Years | 5.25 | |||
5 Years | 8.26 | |||
1 Year | -43.90 | |||
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.
The total annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date
Average Annual Total Returns |
| |||
As of 9/30/13, the most recent calendar quarter end, including maximum applicable sales charges |
| |||
Class A Shares | ||||
Inception (3/28/02) | 8.18 | % | ||
10 Years | 5.78 | |||
5 Years | -1.89 | |||
1 Year | -47.72 | |||
Class B Shares | ||||
Inception (3/28/02) | 8.29 | % | ||
10 Years | 5.77 | |||
5 Years | -1.87 | |||
1 Year | -47.86 | |||
Class C Shares | ||||
Inception (2/14/00) | 9.45 | % | ||
10 Years | 5.57 | |||
5 Years | -1.57 | |||
1 Year | -45.74 | |||
Class Y Shares | ||||
10 Years | 6.54 | % | ||
5 Years | -0.54 | |||
1 Year | -44.60 | |||
Investor Class Shares | ||||
Inception (1/19/84) | 0.62 | % | ||
10 Years | 6.40 | |||
5 Years | -0.79 | |||
1 Year | -44.74 | |||
of this report for Class A, Class B, Class C, Class Y and Investor Class shares was 1.34%, 2.09%, 2.09%, 1.09% and 1.34%, 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.
3 Invesco Gold & Precious Metals Fund
Letters to Shareholders
Bruce Crockett | Dear Fellow Shareholders: The Invesco Funds Board has worked on a variety of issues over the last several months, and I’d like to take this opportunity to discuss two that affect you and our fellow fund shareholders. The first issue on which your Board has been working is our annual review of the funds’ advisory and sub-advisory contracts with Invesco Advisers and its affiliates. This annual review focuses on the nature and quality of the services Invesco provides as adviser to the Invesco Funds and the reasonableness of the fees that it charges for those services. Each year, we spend months reviewing detailed information, including information from many independent sources. I’m pleased to report that the Board determined in June that renewing the investment advisory agreement and the sub-advisory contracts with Invesco Advisers and its affiliates would serve the best interests of each fund and its shareholders. | |
The second area of focus to highlight is the Board’s efforts to ensure that we provide a lineup of funds that allow financial advisers to build portfolios that meet shareholders’ changing financial needs and goals.
The members of your Board have worked with Invesco Advisers to provide more income-generating options in the Invesco Funds lineup to help shareholders potentially meet their income needs. Your Board recently approved changes to three existing equity mutual funds, increasing their focus on generating income while also seeking to provide long-term growth of capital.
Be assured that your Board will continue working on behalf of fund shareholders, keeping your needs and interests uppermost in our minds.
As always, please contact me at bruce@brucecrockett.com with any questions or concerns you may have. On behalf of the Board, we look forward to continuing to represent your interests and serving your needs.
Sincerely,
Bruce L. Crockett
Independent Chair
Invesco Funds Board of Trustees
Philip Taylor | Dear Shareholders: Enclosed in this semiannual report, you’ll find performance data for your Fund, a complete list of your Fund’s investments as of the close of the reporting period and other important information. I hope you find this report of interest. Our website, invesco.com/us, provides fund-specific as well as more general information from many of Invesco’s investment professionals. You’ll find in-depth articles, video clips and audio commentaries – and, of course, you also can access information about your Invesco account whenever it’s convenient for you. At Invesco, all of our people and all of our resources are dedicated to helping investors achieve their financial objectives. It’s a philosophy we call Intentional Investing, and it guides the way we: n Manage investments – Our dedicated investment professionals search the world for the |
| n | Provide choices – We offer multiple investment strategies, allowing you and your financial adviser to build a portfolio that’s purpose-built for your needs. |
| n | Connect with you – We���re committed to giving you the expert insights you need to make informed investing decisions, and we are well-equipped to provide high-quality support for investors and advisers. |
For questions about your account, feel free to contact an Invesco client services representative at 800 959 4246. For Invesco-related questions or comments, please email me directly at phil@invesco.com.
All of us at Invesco look forward to serving your investment management needs for many years to come. Thank you for investing with us.
Sincerely,
Philip Taylor
Senior Managing Director, Invesco Ltd.
4 Invesco Gold & Precious Metals Fund
Schedule of Investments
October 31, 2013
(Unaudited)
| Shares | Value | |||||||
Common Stocks & Other Equity Interests–96.86% |
| |||||||
| Brazil–4.67% | ||||||||
Yamana Gold Inc. | 1,402,301 | $ | 13,924,849 | |||||
| Canada–68.01% | ||||||||
Agnico Eagle Mines Ltd. | 499,066 | 14,737,419 | ||||||
Alamos Gold Inc.(a) | 708,825 | 11,292,522 | ||||||
B2Gold Corp.(b) | 3,388,118 | 8,384,178 | ||||||
Barrick Gold Corp. | 354,003 | 6,864,118 | ||||||
Continental Gold Ltd.(b) | 724,862 | 2,746,216 | ||||||
Detour Gold Corp.(b) | 1,276,557 | 10,431,868 | ||||||
Eldorado Gold Corp. | 2,097,117 | 14,140,354 | ||||||
Franco-Nevada Corp. | 341,996 | 15,387,524 | ||||||
Goldcorp, Inc. | 687,747 | 17,489,406 | ||||||
Kinross Gold Corp. | 2,511,396 | 12,766,544 | ||||||
Lydian International, Ltd.(a)(b) | 4,424,329 | 3,394,843 | ||||||
New Gold Inc.(a)(b) | 2,020,207 | 11,858,495 | ||||||
Osisko Mining Corp.(b) | 2,066,929 | 10,090,801 | ||||||
Pan American Silver Corp. | 624,735 | 6,628,438 | ||||||
Pretium Resources Inc.(a)(b) | 364,531 | 1,192,260 | ||||||
Rubicon Minerals Corp.(b) | 3,888,659 | 5,370,870 | ||||||
SEMAFO Inc. | 2,677,987 | 7,269,042 | ||||||
Silver Wheaton Corp. | 586,042 | 13,285,572 | ||||||
Tahoe Resources Inc.(b) | 505,504 | 9,706,685 | ||||||
Torex Gold Resources Inc.(b) | 8,882,116 | 9,882,270 | ||||||
Turquoise Hill Resources Ltd.(a)(b) | 2,050,927 | 9,894,651 | ||||||
| 202,814,076 | ||||||||
| Mali–4.07% | ||||||||
Randgold Resources Ltd.–ADR(a) | 164,172 | 12,132,311 | ||||||
| Mexico–3.01% | ||||||||
Fresnillo PLC | 576,764 | 8,970,743 | ||||||
| Shares | Value | |||||||
| South Africa–0.79% | ||||||||
Gold Fields Ltd.–ADR | 513,310 | $ | 2,361,226 | |||||
| United States–16.31% | ||||||||
Boart Longyear Ltd.(a) | 9,235,359 | 3,753,582 | ||||||
iShares® Gold Trust–ETF(a)(b) | 859,000 | 11,038,150 | ||||||
Newmont Mining Corp. | 458,592 | 12,501,218 | ||||||
SPDR® Gold Trust–ETF(a)(b) | 122,500 | 15,648,150 | ||||||
Stillwater Mining Co.(b) | 523,332 | 5,709,552 | ||||||
| 48,650,652 | ||||||||
Total Common Stocks & Other Equity Interests |
| 288,853,857 | ||||||
Money Market Funds–3.13% |
| |||||||
Liquid Assets Portfolio– | 4,663,024 | 4,663,024 | ||||||
Premier Portfolio–Institutional Class(c) | 4,663,024 | 4,663,024 | ||||||
Total Money Market Funds |
| 9,326,048 | ||||||
TOTAL INVESTMENTS (excluding investments purchased with cash collateral from securities on loan)–99.99% |
| 298,179,905 | ||||||
Investments Purchased with Cash Collateral from Securities on Loan |
| |||||||
Money Market Funds–15.71% |
| |||||||
Liquid Assets Portfolio–Institutional Class (Cost $46,836,089)(c)(d) | 46,836,089 | 46,836,089 | ||||||
TOTAL INVESTMENTS–115.70% |
| 345,015,994 | ||||||
OTHER ASSETS LESS LIABILITIES–(15.70)% |
| (46,811,729 | ) | |||||
NET ASSETS–100.00% |
| $ | 298,204,265 | |||||
Investment Abbreviations:
| ADR | – American Depositary Receipt | |
| ETF | – Exchange-Traded Fund | |
| 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, 2013. |
| (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 1I. |
Portfolio Composition
By industry, based on Net Assets
as of October 31, 2013
Gold | 68.5 | % | ||
Precious Metals & Minerals | 14.9 | |||
Investment Companies–Exchange Traded Funds | 8.9 | |||
Diversified Metals & Mining | 3.3 | |||
Construction & Engineering | 1.3 | |||
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.
5 Invesco Gold & Precious Metals Fund
Statement of Assets and Liabilities
October 31, 2013
(Unaudited)
Assets: |
| |||
Investments, at value (Cost $362,008,302)* | $ | 288,853,857 | ||
Investments in affiliated money market funds, at value and cost | 56,162,137 | |||
Total investments, at value (Cost $418,170,439) | 345,015,994 | |||
Foreign currencies, at value (Cost $4,322) | 5,980 | |||
Receivable for: | ||||
Fund shares sold | 1,213,715 | |||
Dividends | 187,873 | |||
Investment for trustee deferred compensation and retirement plans | 38,504 | |||
Other assets | 38,456 | |||
Total assets | 346,500,522 | |||
Liabilities: |
| |||
Payable for: | ||||
Investments purchased | 619,993 | |||
Fund shares reacquired | 372,203 | |||
Collateral upon return of securities loaned | 46,836,089 | |||
Accrued fees to affiliates | 310,588 | |||
Accrued trustees’ and officers’ fees and benefits | 2,423 | |||
Accrued other operating expenses | 54,592 | |||
Trustee deferred compensation and retirement plans | 100,369 | |||
Total liabilities | 48,296,257 | |||
Net assets applicable to shares outstanding | $ | 298,204,265 | ||
Net assets consist of: |
| |||
Shares of beneficial interest | $ | 475,815,808 | ||
Undistributed net investment income (loss) | (33,661,630 | ) | ||
Undistributed net realized gain (loss) | (70,794,749 | ) | ||
Net unrealized appreciation (depreciation) | (73,155,164 | ) | ||
| $ | 298,204,265 | |||
Net Assets: |
| |||
Class A | $ | 128,345,516 | ||
Class B | $ | 12,290,318 | ||
Class C | $ | 30,841,007 | ||
Class Y | $ | 19,125,061 | ||
Investor Class | $ | 107,602,363 | ||
Shares outstanding, $0.01 par value per share, |
| |||
Class A | 26,867,155 | |||
Class B | 2,688,537 | |||
Class C | 6,312,805 | |||
Class Y | 3,947,934 | |||
Investor Class | 22,402,115 | |||
Class A: | ||||
Net asset value per share | $ | 4.78 | ||
Maximum offering price per share | ||||
(Net asset value of $4.78 ¸ 94.50%) | $ | 5.06 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 4.57 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 4.89 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 4.84 | ||
Investor Class: | ||||
Net asset value and offering price per share | $ | 4.80 | ||
| * | At October 31, 2013, securities with an aggregate value of $44,459,865 were on loan to brokers. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
6 Invesco Gold & Precious Metals Fund
Statement of Operations
For the six months ended October 31, 2013
(Unaudited)
Investment income: |
| |||
Dividends (net of foreign withholding taxes of $206,132) | $ | 1,650,111 | ||
Dividends from affiliated money market funds (includes securities lending income of $60,122) | 63,253 | |||
Total investment income | 1,713,364 | |||
Expenses: | ||||
Advisory fees | 1,143,592 | |||
Administrative services fees | 45,152 | |||
Custodian fees | 23,953 | |||
Distribution fees: | ||||
Class A | 160,027 | |||
Class B | 71,034 | |||
Class C | 161,211 | |||
Investor Class | 141,807 | |||
Transfer agent fees | 532,517 | |||
Trustees’ and officers’ fees and benefits | 21,721 | |||
Other | 125,358 | |||
Total expenses | 2,426,372 | |||
Less: Fees waived and expense offset arrangement(s) | (8,962 | ) | ||
Net expenses | 2,417,410 | |||
Net investment income (loss) | (704,046 | ) | ||
Realized and unrealized gain (loss) from: | ||||
Net realized gain (loss) from: | ||||
Investment securities | (26,827,761 | ) | ||
Foreign currencies | 47,225 | |||
| (26,780,536 | ) | |||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | (13,918,145 | ) | ||
Foreign currencies | (1,233 | ) | ||
| (13,919,378 | ) | |||
Net realized and unrealized gain (loss) | (40,699,914 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | (41,403,960 | ) | |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
7 Invesco Gold & Precious Metals Fund
Statement of Changes in Net Assets
For the six months ended October 31, 2013 and the year ended April 30, 2013
(Unaudited)
October 31, 2013 | April 30, 2013 | |||||||
Operations: | ||||||||
Net investment income (loss) | $ | (704,046 | ) | $ | (1,480,845 | ) | ||
Net realized gain (loss) | (26,780,536 | ) | (38,026,907 | ) | ||||
Change in net unrealized appreciation (depreciation) | (13,919,378 | ) | (98,250,014 | ) | ||||
Net increase (decrease) in net assets resulting from operations | (41,403,960 | ) | (137,757,766 | ) | ||||
Distributions to shareholders from net realized gains: | ||||||||
Class A | — | (3,925,111 | ) | |||||
Class B | — | (562,938 | ) | |||||
Class C | — | (1,055,242 | ) | |||||
Class Y | — | (385,077 | ) | |||||
Investor Class | — | (3,657,066 | ) | |||||
Total distributions from net realized gains | — | (9,585,434 | ) | |||||
Share transactions–net: | ||||||||
Class A | 13,704,864 | (7,251,414 | ) | |||||
Class B | (2,510,977 | ) | (7,338,493 | ) | ||||
Class C | 563,340 | 276,979 | ||||||
Class Y | 3,517,821 | 4,509,038 | ||||||
Investor Class | (1,406,834 | ) | (8,126,848 | ) | ||||
Net increase (decrease) in net assets resulting from share transactions | 13,868,214 | (17,930,738 | ) | |||||
Net increase (decrease) in net assets | (27,535,746 | ) | (165,273,938 | ) | ||||
Net assets: | ||||||||
Beginning of period | 325,740,011 | 491,013,949 | ||||||
End of period (includes undistributed net investment income (loss) of $(33,661,630) and $(32,957,584), respectively) | $ | 298,204,265 | $ | 325,740,011 | ||||
Notes to Financial Statements
October 31, 2013
(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 ten 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 waived 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 to Class A shares. Also, shareholders in Class B shares will be able to exchange those shares for Class B shares of other Invesco Funds offering such shares until they convert to Class A shares. Generally, Class B shares will automatically convert to Class A shares on or about the month-end, which is at least eight years after the date of purchase. Redemption of Class B shares prior to the conversion date will be subject to a CDSC.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
| A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. |
A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be
8 Invesco Gold & Precious Metals Fund
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 (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual trading characteristics and other market data. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Foreign securities’ (including foreign exchange contracts) prices 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 the Adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities’ prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
| B. | Securities Transactions and Investment Income — Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund’s net asset value and, accordingly, they reduce the Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
| C. | Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
| D. | Distributions — Distributions from income and net realized capital gain, if any, are generally declared and paid annually and recorded on the ex-dividend date. The Fund may elect to treat a portion of the proceeds from redemptions as distributions for federal income tax purposes. |
| E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s |
9 Invesco Gold & Precious Metals Fund
| taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. |
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
| F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
| G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
| H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements, that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
| I. | 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 failed to return the securities. Upon the failure of the borrower to return the securities, collateral may be liquidated and the securities may be purchased on the open market to replace the loaned securities. The Fund could experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to any loss on the collateral invested. Dividends received on cash collateral investments for securities lending transactions, which are net of compensation to counterparties, is included in Dividends from affiliated money market funds on the Statement of Operations. The aggregate value of securities out on loan is shown as a footnote on the Statement of Assets and Liabilities, if any. |
| J. | Foreign Currency Translations — Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. |
The Fund may invest in foreign securities which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable.
| K. | Foreign Currency Contracts — The Fund may enter into foreign currency contracts to manage or minimize currency or exchange rate risk. The Fund may also enter into foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to “lock in” the U.S. dollar price of that security. A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The use of foreign currency contracts does not eliminate fluctuations in the price of the underlying securities the Fund owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statement of Operations. The primary risks associated with foreign currency contracts include failure of the counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities. |
| L. | 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.
10 Invesco Gold & Precious Metals 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).
The Adviser has contractually agreed, through at least June 30, 2014, 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, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on June 30, 2014. The fee waiver agreement cannot be terminated during its term. 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, 2014, 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, 2013, the Adviser waived advisory fees of $7,488.
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, 2013, 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, 2013, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
The Trust has entered into master distribution agreements with Invesco Distributors, Inc. (“IDI”) to serve as the distributor for the Class A, Class B, Class C, Class Y and Investor Class shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund’s Class A, Class B, Class C and Investor Class shares (collectively, the “Plans”). The Fund, pursuant to the Plans, pays IDI compensation at the annual rate of 0.25% of the Fund’s average daily net assets of Class A shares, 1.00% of the average daily net assets of Class B and Class C shares and 0.25% of the average daily net assets of Investor Class shares. Of the Plan payments, up to 0.25% of the average daily net assets of each class of shares may be paid to furnish continuing personal shareholder services to customers who purchase and own shares of such classes. Any amounts not paid as a service fee under the Plans would constitute an asset-based sales charge. Rules of the Financial Industry Regulatory Authority (“FINRA”) impose a cap on the total sales charges, including asset-based sales charges, that may be paid by any class of shares of the Fund. For the six months ended October 31, 2013, 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, 2013, IDI advised the Fund that IDI retained $46,024 in front-end sales commissions from the sale of Class A shares and $13,891, $13,399 and $4,612 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
11 Invesco Gold & Precious Metals 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, 2013. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Brazil | $ | 13,924,849 | $ | — | $ | — | $ | 13,924,849 | ||||||||
Canada | 202,814,076 | — | — | 202,814,076 | ||||||||||||
Mali | 12,132,311 | — | — | 12,132,311 | ||||||||||||
Mexico | — | 8,970,743 | — | 8,970,743 | ||||||||||||
South Africa | 2,361,226 | — | — | 2,361,226 | ||||||||||||
United States | 104,812,789 | — | — | 104,812,789 | ||||||||||||
Total Investments | $ | 336,045,251 | $ | 8,970,743 | $ | — | $ | 345,015,994 | ||||||||
NOTE 4—Expense Offset Arrangement(s)
The expense offset arrangement is comprised of transfer agency credits which result from balances in demand deposit accounts used by the transfer agent for clearing shareholder transactions. For the six months ended October 31, 2013, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $1,474.
NOTE 5—Trustees’ and Officers’ Fees and Benefits
Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees’ and Officers’ Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 6—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 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 GAAP. 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. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in 8 tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will
12 Invesco Gold & Precious Metals Fund
retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund had a capital loss carryforward as of April 30, 2013, which expires as follows:
| Capital Loss Carryforward* | ||||||||||||
| Expiration | Short-Term | Long-Term | Total | |||||||||
Not Subject to expiration | $ | 4,625,448 | $ | 1,875,608 | $ | 6,501,056 | ||||||
| * | 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, 2013 was $44,185,414 and $31,292,727, 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 | $ | 33,299,185 | ||
Aggregate unrealized (depreciation) of investment securities | (133,035,046 | ) | ||
Net unrealized appreciation (depreciation) of investment securities | $ | (99,735,861 | ) | |
Cost of investments for tax purposes is $444,751,855.
NOTE 9—Share Information
| Summary of Share Activity | ||||||||||||||||
| Six months ended October 31, 2013(a) | Year ended April 30, 2013 | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Class A | 8,784,449 | $ | 44,060,108 | 10,290,702 | $ | 75,679,608 | ||||||||||
Class B | 64,348 | 307,137 | 171,317 | 1,165,562 | ||||||||||||
Class C | 1,206,329 | 6,140,762 | 2,236,088 | 17,158,589 | ||||||||||||
Class Y | 2,411,524 | 12,111,243 | 2,447,149 | 17,034,833 | ||||||||||||
Investor Class | 2,643,705 | 13,327,376 | 4,885,301 | 36,002,644 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Class A | — | — | 487,583 | 3,656,873 | ||||||||||||
Class B | — | — | 70,481 | 510,279 | ||||||||||||
Class C | — | — | 127,725 | 987,317 | ||||||||||||
Class Y | — | — | 46,016 | 349,725 | ||||||||||||
Investor Class | — | — | 462,771 | 3,493,925 | ||||||||||||
Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||
Class A | 163,696 | 823,349 | 333,482 | 2,324,382 | ||||||||||||
Class B | (170,710 | ) | (823,349 | ) | (345,410 | ) | (2,324,382 | ) | ||||||||
Reacquired: | ||||||||||||||||
Class A | (6,252,258 | ) | (31,178,593 | ) | (12,498,930 | ) | (88,912,277 | ) | ||||||||
Class B | (420,118 | ) | (1,994,765 | ) | (954,748 | ) | (6,689,952 | ) | ||||||||
Class C | (1,115,462 | ) | (5,577,422 | ) | (2,482,531 | ) | (17,868,927 | ) | ||||||||
Class Y | (1,683,474 | ) | (8,593,422 | ) | (1,833,641 | ) | (12,875,520 | ) | ||||||||
Investor Class | (2,992,191 | ) | (14,734,210 | ) | (6,739,718 | ) | (47,623,417 | ) | ||||||||
Net increase (decrease) in share activity | 2,639,838 | $ | 13,868,214 | (3,296,363 | ) | $ | (17,930,738 | ) | ||||||||
| (a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 25% of the outstanding shares of the Fund. IDI has an agreement with these entities to sell Fund shares. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as securities brokerage, distribution, third party record keeping and account servicing. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
13 Invesco 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.
| Net asset value, beginning of period | Net investment income (loss)(a) | Net gains (losses) on securities (both realized and unrealized) | Total from investment operations | Dividends from net investment income | Distributions from net realized gains | Total distributions | Net asset value, end of period(b) | Total return(c) | Net assets, end of period (000’s omitted) | Ratio of expenses to average net assets with fee waivers and/or expenses absorbed | Ratio of expenses to average net assets without fee waivers and/or expenses absorbed | Ratio of net investment income (loss) to average net assets | Portfolio turnover(d) | |||||||||||||||||||||||||||||||||||||||||||
Class A |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | $ | 5.44 | $ | (0.01 | ) | $ | (0.65 | ) | $ | (0.66 | ) | $ | — | $ | — | $ | — | $ | 4.78 | (12.13 | )% | $ | 128,346 | 1.49 | %(e) | 1.49 | %(e) | (0.36 | )%(e) | 11 | % | |||||||||||||||||||||||||
Year ended 04/30/13 | 7.78 | (0.02 | ) | (2.17 | ) | (2.19 | ) | — | (0.15 | ) | (0.15 | ) | 5.44 | (28.65 | ) | 131,605 | 1.32 | 1.32 | (0.21 | ) | 25 | |||||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 11.22 | (0.04 | ) | (2.69 | ) | (2.73 | ) | (0.23 | ) | (0.48 | ) | (0.71 | ) | 7.78 | (25.24 | ) | 198,717 | 1.27 | 1.27 | (0.39 | ) | 14 | ||||||||||||||||||||||||||||||||||
Year ended 04/30/11 | 8.64 | (0.06 | ) | 2.97 | 2.91 | (0.33 | ) | — | (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 | ) | 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 | ) | 2.13 | 2.07 | (0.14 | ) | — | (0.14 | ) | 7.84 | 34.88 | 157,681 | 1.31 | 1.32 | (0.79 | ) | 3 | ||||||||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 7.77 | (0.01 | ) | (1.82 | ) | (1.83 | ) | (0.03 | ) | — | (0.03 | ) | 5.91 | (23.51 | ) | 97,402 | 1.46 | 1.47 | (0.18 | ) | 39 | |||||||||||||||||||||||||||||||||||
Class B |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | 5.24 | (0.03 | ) | (0.64 | ) | (0.67 | ) | — | — | — | 4.57 | (12.79 | ) | 12,290 | 2.24 | (e) | 2.24 | (e) | (1.11 | )(e) | 11 | |||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 7.54 | (0.07 | ) | (2.08 | ) | (2.15 | ) | — | (0.15 | ) | (0.15 | ) | 5.24 | (29.03 | ) | 16,834 | 2.07 | 2.07 | (0.96 | ) | 25 | |||||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 10.95 | (0.11 | ) | (2.61 | ) | (2.72 | ) | (0.21 | ) | (0.48 | ) | (0.69 | ) | 7.54 | (25.82 | ) | 32,217 | 2.02 | 2.02 | (1.14 | ) | 14 | ||||||||||||||||||||||||||||||||||
Year ended 04/30/11 | 8.46 | (0.13 | ) | 2.89 | 2.76 | (0.27 | ) | — | (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 | ) | 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 | ) | 2.08 | 1.97 | (0.06 | ) | — | (0.06 | ) | 7.68 | 34.07 | 41,467 | 2.06 | 2.07 | (1.54 | ) | 3 | ||||||||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 7.64 | (0.06 | ) | (1.80 | ) | (1.86 | ) | (0.01 | ) | — | (0.01 | ) | 5.77 | (24.22 | ) | 31,584 | 2.21 | 2.22 | (0.93 | ) | 39 | |||||||||||||||||||||||||||||||||||
Class C |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | 5.60 | (0.03 | ) | (0.68 | ) | (0.71 | ) | — | — | — | 4.89 | (12.68 | ) | 30,841 | 2.24 | (e) | 2.24 | (e) | (1.11 | )(e) | 11 | |||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 8.05 | (0.07 | ) | (2.23 | ) | (2.30 | ) | — | (0.15 | ) | (0.15 | ) | 5.60 | (29.05 | ) | 34,820 | 2.07 | 2.07 | (0.96 | ) | 25 | |||||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 11.63 | (0.11 | ) | (2.78 | ) | (2.89 | ) | (0.21 | ) | (0.48 | ) | (0.69 | ) | 8.05 | (25.77 | ) | 51,017 | 2.02 | 2.02 | (1.14 | ) | 14 | ||||||||||||||||||||||||||||||||||
Year ended 04/30/11 | 8.97 | (0.14 | ) | 3.07 | 2.93 | (0.27 | ) | — | (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 | ) | 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 | ) | 2.21 | 2.09 | (0.06 | ) | — | (0.06 | ) | 8.15 | 34.08 | 51,104 | 2.06 | 2.07 | (1.54 | ) | 3 | ||||||||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 8.11 | (0.06 | ) | (1.92 | ) | (1.98 | ) | (0.01 | ) | — | (0.01 | ) | 6.12 | (24.30 | ) | 35,563 | 2.21 | 2.22 | (0.93 | ) | 39 | |||||||||||||||||||||||||||||||||||
Class Y |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | 5.52 | (0.00 | ) | (0.68 | ) | (0.68 | ) | — | — | — | 4.84 | (12.32 | ) | 19,125 | 1.24 | (e) | 1.24 | (e) | (0.11 | )(e) | 11 | |||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 7.86 | (0.00 | ) | (2.19 | ) | (2.19 | ) | — | (0.15 | ) | (0.15 | ) | 5.52 | (28.35 | ) | 17,777 | 1.07 | 1.07 | 0.04 | 25 | ||||||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 11.32 | (0.01 | ) | (2.73 | ) | (2.74 | ) | (0.24 | ) | (0.48 | ) | (0.72 | ) | 7.86 | (25.14 | ) | 20,131 | 1.02 | 1.02 | (0.14 | ) | 14 | ||||||||||||||||||||||||||||||||||
Year ended 04/30/11 | 8.71 | (0.04 | ) | 3.00 | 2.96 | (0.35 | ) | — | (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 | ) | 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 | ) | 2.15 | 2.11 | (0.15 | ) | — | (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 | ) | 0.89 | 0.89 | (0.03 | ) | — | (0.03 | ) | 5.95 | 17.56 | 1,365 | 1.44 | (f) | 1.45 | (f) | (0.16 | )(f) | 39 | ||||||||||||||||||||||||||||||||||||
Investor Class |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | 5.48 | (0.01 | ) | (0.67 | ) | (0.68 | ) | — | — | — | 4.80 | (12.41 | ) | 107,602 | 1.49 | (e) | 1.49 | (e) | (0.36 | )(e) | 11 | |||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 7.83 | (0.02 | ) | (2.18 | ) | (2.20 | ) | — | (0.15 | ) | (0.15 | ) | 5.48 | (28.59 | ) | 124,703 | 1.32 | 1.32 | (0.21 | ) | 25 | |||||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 11.28 | (0.04 | ) | (2.70 | ) | (2.74 | ) | (0.23 | ) | (0.48 | ) | (0.71 | ) | 7.83 | (25.20 | ) | 188,933 | 1.27 | 1.27 | (0.39 | ) | 14 | ||||||||||||||||||||||||||||||||||
Year ended 04/30/11 | 8.69 | (0.06 | ) | 2.98 | 2.92 | (0.33 | ) | — | (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 | ) | 0.81 | 0.80 | – | — | — | 8.69 | 10.14 | 205,022 | 1.29 | (f) | 1.30 | (f) | (0.77 | )(f) | 2 | ||||||||||||||||||||||||||||||||||||||
Year ended 03/31/10 | 5.94 | (0.06 | ) | 2.15 | 2.09 | (0.14 | ) | — | (0.14 | ) | 7.89 | 35.04 | 187,995 | 1.31 | 1.32 | (0.79 | ) | 3 | ||||||||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 7.82 | (0.01 | ) | (1.84 | ) | (1.85 | ) | (0.03 | ) | — | (0.03 | ) | 5.94 | (23.61 | ) | 136,151 | 1.46 | 1.47 | (0.18 | ) | 39 | |||||||||||||||||||||||||||||||||||
| (a) | Calculated using average shares outstanding. |
| (b) | Includes redemption fees added to shares of beneficial interest for Class A, Class B, Class C, Class Y and Investor Class Shares, which were less than $0.005 per share for the fiscal years ended October 31, 2012 and prior. |
| (c) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges and is not annualized for periods less than one year, if applicable. |
| (d) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. |
| (e) | Ratios are annualized and based on average daily net assets (000’s omitted) of $126,978, $14,091, $31,979, $16,903 and $112,521 for Class A, Class B, Class C, Class Y and Investor Class shares, respectively. |
| (f) | Annualized. |
| (g) | Commencement date of October 3, 2008. |
14 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, 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, 2013 through October 31, 2013.
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 or contingent deferred sales charges on redemptions, 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.
| Class | Beginning Account Value (05/01/13) | ACTUAL | HYPOTHETICAL (5% annual return before | Annualized Expense Ratio | ||||||||||||||||||||
| Ending Account Value (10/31/13)1 | Expenses Paid During Period2 | Ending Account Value (10/31/13) | Expenses Paid During Period2 | |||||||||||||||||||||
| A | $ | 1,000.00 | $ | 878.70 | $ | 7.06 | $ | 1,017.69 | $ | 7.58 | 1.49 | % | ||||||||||||
| B | 1,000.00 | 872.10 | 10.57 | 1,013.91 | 11.37 | 2.24 | ||||||||||||||||||
| C | 1,000.00 | 873.20 | 10.58 | 1,013.91 | 11.37 | 2.24 | ||||||||||||||||||
| Y | 1,000.00 | 876.80 | 5.87 | 1,018.95 | 6.31 | 1.24 | ||||||||||||||||||
| Investor | 1,000.00 | 875.90 | 7.05 | 1,017.69 | 7.58 | 1.49 | ||||||||||||||||||
| 1 | The actual ending account value is based on the actual total return of the Fund for the period May 1, 2013 through October 31, 2013, 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. |
15 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 Invesco Gold & Precious Metals Fund’s (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 17-19, 2013, the Board as a whole, and the disinterested or “independent” Trustees, who comprise over 75% 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, 2013. The Board determined that the continuation of 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 payable to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is primarily responsible for overseeing the management of a number of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned Invesco Funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies, limitations and investment risks of these funds. The Sub-Committees meet regularly and at designated contract renewal meetings each year to conduct a review of the performance, fees, expenses and other matters related to their assigned Invesco Funds. Each Sub-Committee recommends to the Investments Committee, which in turn recommends to the full Board, whether and on what terms to approve the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Trustees receive comparative performance and
fee data regarding the Invesco Funds prepared by Invesco Advisers and Lipper Inc. (Lipper), an
independent provider of investment company data. The Trustees also receive an independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. The independent Trustees are assisted in their annual evaluation of the Fund’s investment advisory agreement by the Senior Officer and by independent legal counsel. In addition to meetings with Invesco Advisers and fund counsel, the independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in separate sessions with the Senior Officer and with independent legal counsel.
In evaluating the fairness and reasonableness of compensation under the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Trustees recognized that the advisory fee rates for the Invesco Fund are, in many cases, the result of years of review and negotiation between the Trustees and Invesco Advisers as well as advisory fees previously approved by different predecessor boards. 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. The Trustees’ review and conclusions are based on the comprehensive consideration of all information presented to them and are not the result of any single determinative factor. Moreover, one Trustee may have weighed a particular piece of information or factor differently than another Trustee.
The discussion below serves as the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 19, 2013, and may not reflect consideration of factors that became known to the Board after that date, including, for example, changes to the Fund’s performance, advisory fees, expense limitations and/or fee waivers.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
| A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the
performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers, with whom the Sub-Committees met during the year. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s consideration of Invesco Advisers’ 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 benefits of reapproving an existing relationship and the greater uncertainty that may be associated with entering into a new relationship. The Board also considered non-advisory services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution and legal and compliance. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services provided by the Affiliated Sub-Advisers under the sub-advisory contracts and the credentials and experience of the officers and employees of the Affiliated Sub-Advisers who provide these services. The Board noted that the Affiliated Sub-Advisers have offices and personnel that are located in financial centers around the world. As a result, the Affiliated Sub-Advisers can provide research and investment analysis on the markets and economies of various countries in which the Fund may invest, make recommendations regarding securities and assist with security trades. The Board concluded that the sub-advisory contracts benefit the Fund and its shareholders by permitting Invesco Advisers to use the resources and talents of the Affiliated Sub-Advisers in managing the Fund. The Board concluded that the nature, extent and quality of the services provided by the Affiliated Sub-Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s sub-advisory contracts.
| B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement as well as the sub-advisory contracts for the Fund, as Invesco Canada Ltd. 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 Equity Funds Index. The Board noted that performance of Class A shares of the
16 Invesco Gold & Precious Metals Fund
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 period. The Trustees noted that Invesco Canada Ltd. and a portfolio manager from the Affiliated Sub-Adviser began managing the Fund in February 2013. The Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
| C. | Advisory and Sub-Advisory Fees |
The Board compared the Fund’s contractual management fee rate to the contractual management fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the contractual management fee rate for Class A shares of the Fund was below the median contractual management fee rate of funds in the expense group. The Board noted that the term “contractual management fee” may include both advisory and certain administrative services fees and that Invesco does not charge the Invesco Funds for the administrative services included in the term as defined by Lipper. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using each fund’s contractual management fee schedule (including any applicable breakpoints) as reported in the most recent prospectus or statement of additional information for each fund in the expense group.
The Board also compared the Fund’s effective advisory fee rate (the advisory fee rate after advisory fee rate waivers and before other expense limitations/waivers) to the effective advisory fee rates of other funds advised by Invesco Advisers and its affiliates with investment strategies comparable to those of the Fund. The Board noted that Invesco Advisers sub-advises an off-shore fund with comparable investment strategies, which had an effective advisory fee rate before waivers higher than the Fund’s rate. The Board noted that Invesco Advisers and its affiliates do not advise other funds or client accounts with investment strategies comparable to those of the Fund.
The Board also considered the services provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the fees payable by Invesco Advisers to the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board noted that Invesco Advisers retains overall responsibility for, and provides services to, sub-advised Invesco Funds, including oversight of the Affiliated Sub-Advisers as well as the additional services described herein other than day-to-day portfolio management. The Board also noted that the sub-advisory fees are not paid directly by the Fund, but rather, are payable by Invesco Advisers to the Affiliated Sub-Advisers.
Based upon the information and considerations described above, the Board concluded that the Fund’s compensation payable to Invesco Advisers and the Affiliated Sub-Advisers is fair and reasonable.
| D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule and was assisted in this review by a report from the Senior Officer. The Board also noted that the Fund shares directly in economies of scale through lower fees charged by third party service providers based on the combined size of the Invesco Funds and other clients advised by Invesco Advisers.
| E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the profitability of Invesco Advisers and its affiliates in providing these services for the year ended December 31, 2012. The Board received information from Invesco Advisers about the methodology used to prepare the profitability information. The Board considered the profitability of Invesco Advisers in managing the Fund and the Invesco Funds. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its subsidiaries provide to the Invesco Funds and the Fund. The Board did not deem the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund to be excessive given the nature, quality and extent of the services provided to the Invesco Funds. The Board received and accepted information from Invesco Advisers demonstrating that Invesco Advisers and each Affiliated Sub-Adviser are financially sound and have the resources necessary to perform their obligations under the investment advisory agreement and sub-advisory contracts.
| F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund, including the fees received for their provision of transfer agency and distribution services to the Fund. The Board considered comparative information regarding fees charged for these services, including information provided by Lipper and other independent sources. The Board considered the performance of Invesco Advisers and its affiliates in providing these services and the organizational structure employed to provide these services. The Board also considered that these services are provided to the Fund pursuant to written contracts that are reviewed and approved on an annual basis by the Board; that the services are required for the operation of the Fund; that Invesco Advisers and its affiliates can provide services, the
nature and quality of which are at least equal to those provided by others offering the same or similar services; and that the fees for such services are fair and reasonable in light of the usual and customary charges by others for services of the same nature and quality.
The Board considered the benefits realized by Invesco Advisers and the Affiliated Sub-Advisers as a result of portfolio brokerage transactions executed through “soft dollar” arrangements. The Board noted that soft dollar arrangements shift the payment obligation for research services from Invesco Advisers and the Affiliated Sub-Advisers to the Invesco Funds and that the research received may be used with other clients of Invesco Advisers and may reduce Invesco Advisers’ and the Affiliated Sub-Advisers’ expenses. The Board also considered periodic reports from the Chief Compliance Officer of the Invesco Funds demonstrating that these arrangements are consistent with regulatory requirements. The Board did not deem the soft dollar arrangements to be inappropriate.
The Board considered that the Fund’s uninvested cash and cash collateral from any securities lending arrangements may be invested in money market funds advised by Invesco Advisers pursuant to procedures approved by the Board. The Board noted that Invesco Advisers receives advisory fees from these affiliated money market funds attributable to such investments, although Invesco Advisers has contractually agreed to waive through varying periods the advisory fees payable by the Invesco Funds. The waiver is in an amount equal to 100% of the net advisory fee Invesco Advisers receives from the affiliated money market funds with respect to the Fund’s investment in the affiliated money market funds of uninvested cash, but not cash collateral. The Board concluded that the Fund’s investment of uninvested cash and cash collateral from any securities lending arrangements in the affiliated money market funds is in the best interests of the Fund and its shareholders.
The Board also considered use of an affiliated broker to execute certain trades for the Fund to among other things, control information leakage, and were advised that such trades are executed in compliance with rules under the Investment Company Act of 1940, as amended.
17 Invesco Gold & Precious Metals Fund
Invesco mailing information
Send general correspondence to Invesco Investment Services, Inc., P.O. Box 219078, Kansas City, MO 64121-9078.
Invesco privacy policy
You share personal and financial information with us that is necessary for your transactions and your account records. We take very seriously the obligation to keep that information confidential and private.
Invesco collects nonpublic personal information about you from account applications or other forms you complete and from your transactions with us or our affiliates. We do not disclose information about you or our former customers to service providers or other third parties except to the extent necessary to service your account and in other limited circumstances as permitted by law. For example, we use this information to facilitate the delivery of transaction confirmations, financial reports, prospectuses and tax forms.
Even within Invesco, only people involved in the servicing of your accounts and compliance monitoring have access to your information. To ensure the highest level of confidentiality and security, Invesco maintains physical, electronic and procedural safeguards that meet or exceed federal standards. Special measures, such as data encryption and authentication, apply to your communications with us on our website. More detail is available to you at invesco.com/privacy.
Important notice regarding delivery of security holder documents
To reduce Fund expenses, only one copy of most shareholder documents may be mailed to shareholders with multiple accounts at the same address (Householding). Mailing of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact Invesco Investment Services, Inc. at 800 959 4246 or contact your financial institution. We will begin sending you individual copies for each account within 30 days after receiving your request.
Fund holdings and proxy voting information
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is available at invesco.com/completeqtrholdings. Shareholders can also look up the Fund’s Forms N-Q on the SEC website at sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are shown below.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov.
Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd. |  | |||
SEC file numbers: 811-03826 and 002-85905 | I-GPM-SAR-1 | Invesco Distributors, Inc. |
| Semiannual Report to Shareholders | October 31, 2013 |
Invesco Technology Fund
Nasdaq:
A: ITYAX n B: ITYBX n C: ITHCX n Y: ITYYX n Investor: FTCHX n R5: FTPIX
| 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 Contracts |
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, 4/30/13 to 10/31/13, at net asset value (NAV). Performance shown does not include applicable contingent deferred sales charges (CDSC) or front-end sales charges, which would have reduced performance.
Class A Shares | 13.94 | % | ||
Class B Shares | 13.49 | |||
Class C Shares | 13.52 | |||
Class Y Shares | 14.10 | |||
Investor Class Shares | 14.01 | |||
Class R5 Shares | 14.30 | |||
S&P 500 Indexq (Broad Market Index) | 11.15 | |||
BofA Merrill Lynch 100 Technology Index (price only)n (Style-Specific Index) | 16.10 | |||
Lipper Science & Technology Funds Indexn (Peer Group Index) | 18.89 |
Source(s): qInvesco, S&P-Dow Jones via FactSet Research Systems Inc.; nLipper Inc.
The S&P 500® Index is an unmanaged index considered representative of the US stock market.
The BofA Merrill Lynch 100 Technology Index (price only) is an unmanaged, 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) described 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 10/31/13, including maximum applicable sales charges
|
| |||
Class A Shares | ||||
Inception (3/28/02) | 2.02 | % | ||
10 Years | 4.56 | |||
5 Years | 15.21 | |||
1 Year | 15.20 | |||
Class B Shares | ||||
Inception (3/28/02) | 1.98 | % | ||
10 Years | 4.54 | |||
5 Years | 15.46 | |||
1 Year | 16.00 | |||
Class C Shares | ||||
Inception (2/14/00) | -6.54 | % | ||
10 Years | 4.38 | |||
5 Years | 15.68 | |||
1 Year | 20.01 | |||
Class Y Shares | ||||
10 Years | 5.26 | % | ||
5 Years | 16.81 | |||
1 Year | 22.21 | |||
Investor Class Shares | ||||
Inception (1/19/84) | 9.69 | % | ||
10 Years | 5.16 | |||
5 Years | 16.60 | |||
1 Year | 21.99 | |||
Class R5 Shares | ||||
Inception (12/21/98) | 2.57 | % | ||
10 Years | 5.90 | |||
5 Years | 17.32 | |||
1 Year | 22.64 | |||
Class Y shares incepted on October 3, 2008. Performance shown prior to that date is that of Investor Class shares and includes the 12b-1 fees applicable to Investor Class shares. Investor Class 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
| Average Annual Total Returns | ||||
| As of 9/30/13, the most recent calendar quarter end, including maximum applicable sales charges | ||||
Class A Shares | ||||
Inception (3/28/02) | 1.91 | % | ||
10 Years | 5.52 | |||
5 Years | 10.44 | |||
1 Year | 6.66 | |||
Class B Shares | ||||
Inception (3/28/02) | 1.88 | % | ||
10 Years | 5.50 | |||
5 Years | 10.61 | |||
1 Year | 7.01 | |||
Class C Shares | ||||
Inception (2/14/00) | -6.66 | % | ||
10 Years | 5.35 | |||
5 Years | 10.87 | |||
1 Year | 11.03 | |||
Class Y Shares | ||||
10 Years | 6.22 | % | ||
5 Years | 11.96 | |||
1 Year | 13.15 | |||
Investor Class Shares | ||||
Inception (1/19/84) | 9.67 | % | ||
10 Years | 6.13 | |||
5 Years | 11.76 | |||
1 Year | 12.93 | |||
Class R5 Shares | ||||
Inception (12/21/98) | 2.49 | % | ||
10 Years | 6.87 | |||
5 Years | 12.45 | |||
1 Year | 13.57 | |||
you may have a gain or loss when you sell shares.
The total annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Class A, Class B, Class C, Class Y, Investor Class and Class R5 shares was 1.52%, 2.27%, 2.27%, 1.27%, 1.48% 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 Class R5 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
Bruce Crockett | Dear Fellow Shareholders: The Invesco Funds Board has worked on a variety of issues over the last several months, and I’d like to take this opportunity to discuss two that affect you and our fellow fund shareholders. The first issue on which your Board has been working is our annual review of the funds’ advisory and sub-advisory contracts with Invesco Advisers and its affiliates. This annual review focuses on the nature and quality of the services Invesco provides as adviser to the Invesco Funds and the reasonableness of the fees that it charges for those services. Each year, we spend months reviewing detailed information, including information from many independent sources. I’m pleased to report that the Board determined in June that renewing the investment advisory agreement and the sub-advisory contracts with Invesco Advisers and its affiliates would serve the best interests of each fund and its shareholders. The second area of focus to highlight is the Board’s efforts to ensure that we provide a lineup of | |||
funds that allow financial advisers to build portfolios that meet shareholders’ changing financial needs and goals.
The members of your Board have worked with Invesco Advisers to provide more income-generating options in the Invesco Funds lineup to help shareholders potentially meet their income needs. Your Board recently approved changes to three existing equity mutual funds, increasing their focus on generating income while also seeking to provide long-term growth of capital.
Be assured that your Board will continue working on behalf of fund shareholders, keeping your needs and interests uppermost in our minds.
As always, please contact me at bruce@brucecrockett.com with any questions or concerns you may have. On behalf of the Board, we look forward to continuing to represent your interests and serving your needs.
Sincerely,
Bruce L. Crockett
Independent Chair
Invesco Funds Board of Trustees
Philip Taylor | Dear Shareholders: Enclosed in this semiannual report, you’ll find performance data for your Fund, a complete list of your Fund’s investments as of the close of the reporting period and other important information. I hope you find this report of interest. Our website, invesco.com/us, provides fund-specific as well as more general information from many of Invesco’s investment professionals. You’ll find in-depth articles, video clips and audio commentaries – and, of course, you also can access information about your Invesco account whenever it’s convenient for you. At Invesco, all of our people and all of our resources are dedicated to helping investors achieve their financial objectives. It’s a philosophy we call Intentional Investing, and it guides the way we: n Manage investments - Our dedicated investment professionals search the world for the best opportunities, and each investment team follows a clear, disciplined process to build portfolios and mitigate risk. | |||
| n | Provide choices - We offer multiple investment strategies, allowing you and your financial adviser to build a portfolio that’s purpose-built for your needs. |
| n | Connect with you - We’re committed to giving you the expert insights you need to make informed investing decisions, and we are well-equipped to provide high-quality support for investors and advisers. |
For questions about your account, feel free to contact an Invesco client services representative at 800 959 4246. For Invesco-related questions or comments, please email me directly at phil@invesco.com.
All of us at Invesco look forward to serving your investment management needs for many years to come. Thank you for investing with us.
Sincerely,
Philip Taylor
Senior Managing Director, Invesco Ltd.
4 Invesco Technology Fund
Schedule of Investments(a)
October 31, 2013
(Unaudited)
| Shares | Value | |||||||
Common Stocks & Other Equity Interests–95.21% |
| |||||||
| Application Software–11.96% | ||||||||
Aspen Technology, Inc.(b) | 257,696 | $ | 9,851,718 | |||||
Cadence Design Systems, Inc.(b) | 703,439 | 9,123,604 | ||||||
Citrix Systems, Inc.(b) | 119,710 | 6,797,134 | ||||||
Informatica Corp.(b) | 320,673 | 12,377,978 | ||||||
MicroStrategy Inc.–Class A(b) | 59,921 | 7,309,763 | ||||||
Qlik Technologies Inc.(b) | 103,705 | 2,627,885 | ||||||
Salesforce.com, Inc.(b) | 368,013 | 19,637,173 | ||||||
SolarWinds, Inc.(b) | 96,347 | 3,486,798 | ||||||
SS&C Techonologies Holdings, Inc.(b) | 289,264 | 11,368,075 | ||||||
| 82,580,128 | ||||||||
| Communications Equipment–13.24% | ||||||||
ARRIS Group Inc.(b) | 660,940 | 11,804,388 | ||||||
Ciena Corp.(b) | 162,877 | 3,790,148 | ||||||
Cisco Systems, Inc. | 561,344 | 12,630,240 | ||||||
F5 Networks, Inc.(b) | 151,435 | 12,343,467 | ||||||
Finisar Corp.(b) | 232,037 | 5,339,171 | ||||||
JDS Uniphase Corp.(b) | 688,734 | 9,015,528 | ||||||
Juniper Networks, Inc.(b) | 171,582 | 3,198,289 | ||||||
QUALCOMM, Inc. | 461,190 | 32,038,869 | ||||||
Telefonaktiebolaget LM Ericsson– | 105,558 | 1,265,641 | ||||||
| 91,425,741 | ||||||||
| Computer Hardware–7.73% | ||||||||
Apple Inc. | 80,082 | 41,830,833 | ||||||
Cray, Inc.(b) | 257,576 | 5,759,399 | ||||||
Hewlett-Packard Co. | 236,862 | 5,772,327 | ||||||
| 53,362,559 | ||||||||
| Computer Storage & Peripherals–2.25% | ||||||||
EMC Corp. | 645,716 | 15,542,384 | ||||||
| Data Processing & Outsourced Services–8.59% | ||||||||
Alliance Data Systems Corp.(b)(c) | 83,865 | 19,881,037 | ||||||
MasterCard, Inc.–Class A | 39,200 | 28,110,320 | ||||||
Visa Inc.–Class A | 57,623 | 11,332,715 | ||||||
| 59,324,072 | ||||||||
| Electronic Manufacturing Services–2.79% | ||||||||
Jabil Circuit, Inc. | 383,241 | 7,994,407 | ||||||
Sanmina Corp.(b) | 775,152 | 11,286,213 | ||||||
| 19,280,620 | ||||||||
| Internet Retail–4.29% | ||||||||
Amazon.com, Inc.(b) | 35,384 | 12,880,838 | ||||||
Priceline.com Inc.(b) | 12,660 | 13,341,488 | ||||||
RetailMeNot, Inc.(b) | 104,904 | 3,421,968 | ||||||
| 29,644,294 | ||||||||
| Shares | Value | |||||||
| Internet Software & Services–13.42% | ||||||||
eBay Inc.(b) | 114,098 | $ | 6,014,106 | |||||
Facebook Inc.–Class A(b) | 422,594 | 21,239,574 | ||||||
Google Inc.–Class A(b) | 39,026 | 40,219,415 | ||||||
Millennial Media Inc.(b)(c) | 351,965 | 2,474,314 | ||||||
ValueClick, Inc.(b) | 281,104 | 5,400,008 | ||||||
VeriSign, Inc.(b) | 226,779 | 12,309,564 | ||||||
Web.com Group Inc.(b) | 187,250 | 5,046,387 | ||||||
| 92,703,368 | ||||||||
| IT Consulting & Other Services–2.57% | ||||||||
Accenture PLC–Class A | 82,325 | 6,050,888 | ||||||
International Business Machines Corp. | 65,487 | 11,735,925 | ||||||
| 17,786,813 | ||||||||
| Other Diversified Financial Services–0.30% | ||||||||
BlueStream Ventures L.P. | — | 2,061,488 | ||||||
| Semiconductor Equipment–2.70% | ||||||||
Applied Materials, Inc. | 605,501 | 10,808,193 | ||||||
Teradyne, Inc.(b)(c) | 287,521 | 5,028,742 | ||||||
Veeco Instruments Inc.(b) | 95,359 | 2,785,437 | ||||||
| 18,622,372 | ||||||||
| Semiconductors–15.96% | ||||||||
Altera Corp. | 379,565 | 12,753,384 | ||||||
ARM Holdings PLC–ADR (United Kingdom) | 53,751 | 2,536,510 | ||||||
Avago Technologies Ltd. | 195,589 | 8,885,608 | ||||||
Cree, Inc.(b) | 127,563 | 7,749,452 | ||||||
Cypress Semiconductor Corp.(b) | 446,372 | 4,142,332 | ||||||
Diodes Inc.(b) | 123,582 | 2,993,156 | ||||||
Fairchild Semiconductor International, Inc.(b) | 509,394 | 6,454,022 | ||||||
Intermolecular Inc.(b) | 437,354 | 2,536,653 | ||||||
Lattice Semiconductor Corp.(b) | 687,896 | 3,528,907 | ||||||
Microsemi Corp.(b) | 549,120 | 13,799,386 | ||||||
NXP Semiconductors | 325,837 | 13,724,254 | ||||||
ON Semiconductor Corp.(b) | 1,221,676 | 8,625,033 | ||||||
Semtech Corp.(b) | 228,625 | 7,112,524 | ||||||
Skyworks Solutions, Inc.(b) | 328,712 | 8,474,195 | ||||||
Texas Instruments Inc. | 164,398 | 6,917,868 | ||||||
| 110,233,284 | ||||||||
| Systems Software–9.41% | ||||||||
Check Point Software Technologies Ltd. (Israel)(b) | 95,304 | 5,529,538 | ||||||
CommVault Systems, Inc.(b) | 84,197 | 6,574,102 | ||||||
Fortinet Inc.(b) | 415,164 | 8,348,948 | ||||||
Infoblox, Inc.(b) | 92,845 | 4,126,960 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
5 Invesco Technology Fund
| Shares | Value | |||||||
| Systems Software–(continued) | ||||||||
MICROS Systems, Inc.(b) | 88,195 | $ | 4,784,579 | |||||
Microsoft Corp. | 472,387 | 16,698,880 | ||||||
Oracle Corp. | 241,740 | 8,098,290 | ||||||
Red Hat, Inc.(b) | 65,462 | 2,832,541 | ||||||
Symantec Corp. | 352,924 | 8,025,492 | ||||||
| 65,019,330 | ||||||||
Total Common Stocks & Other |
| 657,586,453 | ||||||
Money Market Funds–4.44% |
| |||||||
Liquid Assets Portfolio– | 15,344,963 | 15,344,963 | ||||||
Premier Portfolio– | 15,344,964 | 15,344,964 | ||||||
Total Money Market Funds |
| 30,689,927 | ||||||
TOTAL INVESTMENTS (excluding investments purchased with cash collateral from securities on loan)–99.65% (Cost $482,012,347) |
| 688,276,380 | ||||||
| Shares | Value | |||||||
Investments Purchased with Cash Collateral from Securities on Loan |
| |||||||
Money Market Funds–1.55% |
| |||||||
Liquid Assets Portfolio–Institutional Class (Cost $10,707,395)(f)(g) | 10,707,395 | $ | 10,707,395 | |||||
TOTAL INVESTMENTS–101.20% (Cost $492,719,742) |
| 698,983,775 | ||||||
OTHER ASSETS LESS LIABILITIES–(1.20)% |
| (8,282,498 | ) | |||||
NET ASSETS–100.00% |
| $ | 690,701,277 | |||||
Investment Abbreviations:
| ADR | – American Depositary Receipt |
Notes to Schedule of Investments:
| (a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. |
| (b) | Non-income producing security. |
| (c) | All or a portion of this security was out on loan at October 31, 2013. |
| (d) | The Fund has a 10.29% ownership of BlueStream Ventures L.P. (“BlueStream”) and has a remaining commitment of $829,416 to purchase additional interests in BlueStream, which is subject to the terms of the partnership agreement. BlueStream may be considered an affiliated company. Security is considered venture capital. The value of this security as of October 31, 2013 represented less than 1% of the Fund’s Net Assets. See Note 4. |
| (e) | Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended (the “1933 Act”). 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, 2013 represented less than 1% of the Fund’s Net Assets. |
| (f) | The money market fund and the Fund are affiliated by having the same investment adviser. |
| (g) | The security has been segregated to satisfy the commitment to return the cash collateral received in securities lending transactions upon the borrower’s return of the securities loaned. See Note 1I. |
Portfolio Composition
By sector, based on Net Assets
as of October 31, 2013
Information Technology | 90.6 | % | ||
Consumer Discretionary | 4.3 | |||
Financials | 0.3 | |||
Money Market Funds Plus Other Assets Less Liabilities | 4.8 |
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, 2013
(Unaudited)
Assets: |
| |||
Investments, at value (Cost $429,410,584)* | $ | 655,524,965 | ||
Investments in affiliates, at value (Cost $63,309,158) | 43,458,810 | |||
Total investments, at value (Cost $492,719,742) | 698,983,775 | |||
Foreign currencies, at value (Cost $18,585) | 19,797 | |||
Receivable for: | ||||
Investments sold | 3,387,280 | |||
Fund shares sold | 123,837 | |||
Dividends | 150,427 | |||
Investment for trustee deferred compensation and retirement plans | 96,461 | |||
Fund expenses absorbed | 17,801 | |||
Other assets | 31,741 | |||
Total assets | 702,811,119 | |||
Liabilities: |
| |||
Payable for: | ||||
Investments purchased | 17,480 | |||
Fund shares reacquired | 345,936 | |||
Collateral upon return of securities loaned | 10,707,395 | |||
Accrued fees to affiliates | 715,216 | |||
Accrued trustees’ and officers’ fees and benefits | 2,580 | |||
Accrued other operating expenses | 85,070 | |||
Trustee deferred compensation and retirement plans | 236,165 | |||
Total liabilities | 12,109,842 | |||
Net assets applicable to shares outstanding | $ | 690,701,277 | ||
Net assets consist of: |
| |||
Shares of beneficial interest | $ | 409,313,721 | ||
Undistributed net investment income | 12,288,013 | |||
Undistributed net realized gain | 62,834,298 | |||
Net unrealized appreciation | 206,265,245 | |||
| $ | 690,701,277 | |||
Net Assets: |
| |||
Class A | $ | 274,748,488 | ||
Class B | $ | 14,426,520 | ||
Class C | $ | 27,094,549 | ||
Class Y | $ | 4,554,842 | ||
Investor Class | $ | 368,529,274 | ||
Class R5 | $ | 1,347,604 | ||
Shares outstanding, $0.01 par value per share, |
| |||
Class A | 7,048,145 | |||
Class B | 401,479 | |||
Class C | 775,550 | |||
Class Y | 116,799 | |||
Investor Class | 9,517,700 | |||
Class R5 | 31,570 | |||
Class A: | ||||
Net asset value per share | $ | 38.98 | ||
Maximum offering price per share | ||||
(Net asset value of $38.98 ¸ 94.50%) | $ | 41.25 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 35.93 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 34.94 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 39.00 | ||
Investor Class: | ||||
Net asset value and offering price per share | $ | 38.72 | ||
Class R5: | ||||
Net asset value and offering price per share | $ | 42.69 | ||
| * | At October 31, 2013, securities with an aggregate value of $10,485,791 were on loan to brokers. |
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, 2013
(Unaudited)
Investment income: |
| |||
Dividends | $ | 2,396,849 | ||
Dividends from affiliates (includes securities lending income of $11,921) | 18,334 | |||
Total investment income | 2,415,183 | |||
Expenses: | ||||
Advisory fees | 2,384,609 | |||
Administrative services fees | 90,738 | |||
Custodian fees | 9,844 | |||
Distribution fees: | ||||
Class A | 336,405 | |||
Class B | 75,700 | |||
Class C | 132,220 | |||
Investor Class | 219,702 | |||
Transfer agent fees — A, B, C, Y and Investor | 1,434,961 | |||
Transfer agent fees — R5 | 594 | |||
Trustees’ and officers’ fees and benefits | 31,966 | |||
Other | 180,850 | |||
Total expenses | 4,897,589 | |||
Less: Fees waived and expense offset arrangement(s) | (20,140 | ) | ||
Net expenses | 4,877,449 | |||
Net investment income (loss) | (2,462,266 | ) | ||
Realized and unrealized gain from: | ||||
Net realized gain from investment securities (includes net gains (losses) from securities sold to affiliates of $(273,285)) | 23,115,562 | |||
Change in net unrealized appreciation of: | ||||
Investment securities | 67,182,498 | |||
Foreign currencies | 77 | |||
| 67,182,575 | ||||
Net realized and unrealized gain | 90,298,137 | |||
Net increase in net assets resulting from operations | $ | 87,835,871 | ||
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, 2013 and the year ended April 30, 2013
(Unaudited)
| October 31, 2013 | April 30, 2013 | |||||||
Operations: |
| |||||||
Net investment income (loss) | $ | (2,462,266 | ) | $ | (4,952,189 | ) | ||
Net realized gain | 23,115,562 | 40,612,537 | ||||||
Change in net unrealized appreciation (depreciation) | 67,182,575 | (75,013,687 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 87,835,871 | (39,353,339 | ) | |||||
Distributions to shareholders from net investment income: | ||||||||
Class A | — | (2,067,821 | ) | |||||
Class Y | — | (42,036 | ) | |||||
Investor Class | — | (2,898,473 | ) | |||||
Class R5 | — | (13,124 | ) | |||||
Total distributions from net investment income | — | (5,021,454 | ) | |||||
Distributions to shareholders from net realized gains: | ||||||||
Class A | — | (8,145,590 | ) | |||||
Class B | — | (584,187 | ) | |||||
Class C | — | (859,569 | ) | |||||
Class Y | — | (122,937 | ) | |||||
Investor Class | — | (10,962,625 | ) | |||||
Class R5 | — | (26,741 | ) | |||||
Total distributions from net realized gains | — | (20,701,649 | ) | |||||
Share transactions–net: | ||||||||
Class A | (12,972,835 | ) | (33,413,046 | ) | ||||
Class B | (2,463,045 | ) | (6,807,369 | ) | ||||
Class C | (936,218 | ) | (4,406,481 | ) | ||||
Class Y | 307,798 | (823,612 | ) | |||||
Investor Class | (20,958,200 | ) | (37,814,964 | ) | ||||
Class R5 | (16,244 | ) | 239,100 | |||||
Net increase (decrease) in net assets resulting from share transactions | (37,038,744 | ) | (83,026,372 | ) | ||||
Net increase (decrease) in net assets | 50,797,127 | (148,102,814 | ) | |||||
Net assets: | ||||||||
Beginning of period | 639,904,150 | 788,006,964 | ||||||
End of period (includes undistributed net investment income of $12,288,013 and $14,750,279, respectively) | $ | 690,701,277 | $ | 639,904,150 | ||||
Notes to Financial Statements
October 31, 2013
(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 ten 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 Class R5. 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 Class R5 shares are sold at net asset value. Effective November 30, 2010, new or additional investments in Class B shares are no longer permitted. Existing shareholders of Class B shares may continue to reinvest dividends and capital gains distributions in Class B shares until they convert to Class A shares. Also, shareholders in Class B shares will be able to exchange those shares for Class B shares of other Invesco Funds offering such shares until they convert to Class A shares. Generally, Class B shares will automatically convert to Class A shares on or
9 Invesco Technology Fund
about the month-end, which is at least eight years after the date of purchase. Redemption of Class B shares prior to the conversion date will be subject to a CDSC.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
| A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. |
A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”).
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
Debt obligations (including convertible bonds) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual trading characteristics and other market data. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Foreign securities’ (including foreign exchange contracts) prices 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 the Adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities’ prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became 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, |
10 Invesco Technology Fund
| the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
| D. | Distributions — Distributions from income and net realized capital gain, if any, are generally declared and paid annually and recorded on the ex-dividend date. The Fund may elect to treat a portion of the proceeds from redemptions as distributions for federal income tax purposes. |
| E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (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 Class R5 are charged to such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses relating to all other classes are allocated among those classes based on relative net assets. All other expenses are allocated among the classes based on relative net assets. |
| G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
| H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements, that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
| I. | 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 failed 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 associated with foreign currency contracts include failure of the counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities. |
| L. | 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.
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 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).
The Adviser has contractually agreed, through at least June 30, 2014, 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 above) of Class A, Class B, Class C, Class Y, Investor Class and Class R5 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, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on June 30, 2014. The fee waiver agreement cannot be terminated during its term. 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, 2014, 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, 2013, the Adviser waived advisory fees of $14,804.
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, 2013, 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, 2013, 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 Class R5 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, 2013, 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, 2013, IDI advised the Fund that IDI retained $14,359 in front-end sales commissions from the sale of Class A shares and $64, $4,369 and $1,472 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
12 Invesco Technology 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, 2013. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 696,922,287 | $ | — | $ | 2,061,488 | $ | 698,983,775 | ||||||||
NOTE 4—Investments in Other Affiliates
The 1940 Act 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 1940 Act) of that issuer. The following is a summary of the investments in other affiliates for the six months ended October 31, 2013.
Value 04/30/13 | Purchases at Cost | Proceeds from Sales | Change in Unrealized Appreciation (Depreciation) | Realized Gain (Loss) | Value 10/31/13 | Interest/ Dividend Income | ||||||||||||||||||||||
BlueStream Ventures L.P. | $ | 2,283,037 | $ | — | $ | — | $ | (221,549 | ) | $ | — | $ | 2,061,488 | $ | — | |||||||||||||
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, 2013, the Fund engaged in securities sales of $3,787,172, which resulted in net realized gains (losses) of $(273,285).
NOTE 6—Expense Offset Arrangement(s)
The expense offset arrangement is comprised of transfer agency credits which result from balances in demand deposit accounts used by the transfer agent for clearing shareholder transactions. For the six months ended October 31, 2013, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $5,336.
NOTE 7—Trustees’ and Officers’ Fees and Benefits
Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees’ and Officers’ Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 8—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
13 Invesco Technology Fund
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 GAAP. 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. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in 8 tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund did not have a capital loss carryforward as of April 30, 2013.
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, 2013 was $130,498,137 and $172,901,542, 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 | $ | 254,409,940 | ||
Aggregate unrealized (depreciation) of investment securities | (32,833,037 | ) | ||
Net unrealized appreciation of investment securities | $ | 221,576,903 | ||
Cost of investments for tax purposes is $477,406,872.
NOTE 11—Share Information
| Summary of Share Activity | ||||||||||||||||
| Six months ended October 31, 2013(a) | Year ended April 30, 2013 | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Class A | 250,828 | $ | 9,335,160 | 535,960 | $ | 18,362,198 | ||||||||||
Class B | 10,989 | 377,296 | 13,200 | 423,511 | ||||||||||||
Class C | 44,166 | 1,459,728 | 107,731 | 3,345,300 | ||||||||||||
Class Y | 20,874 | 779,967 | 30,394 | 1,043,683 | ||||||||||||
Investor Class | 164,877 | 6,036,012 | 464,516 | 15,778,210 | ||||||||||||
Class R5 | 2,040 | 82,745 | 9,456 | 355,326 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Class A | — | — | 291,058 | 9,558,339 | ||||||||||||
Class B | — | — | 18,524 | 564,438 | ||||||||||||
Class C | — | — | 27,577 | 817,094 | ||||||||||||
Class Y | — | — | 4,128 | 135,265 | ||||||||||||
Investor Class | — | — | 407,803 | 13,290,299 | ||||||||||||
Class R5 | — | — | 1,101 | 39,357 | ||||||||||||
Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||
Class A | 44,396 | 1,638,686 | 126,496 | 4,332,002 | ||||||||||||
Class B | (48,081 | ) | (1,638,686 | ) | (136,661 | ) | (4,332,002 | ) | ||||||||
Reacquired: | ||||||||||||||||
Class A | (646,619 | ) | (23,946,681 | ) | (1,922,529 | ) | (65,665,585 | ) | ||||||||
Class B | (34,856 | ) | (1,201,655 | ) | (109,439 | ) | (3,463,316 | ) | ||||||||
Class C | (72,094 | ) | (2,395,946 | ) | (277,034 | ) | (8,568,875 | ) | ||||||||
Class Y | (12,850 | ) | (472,169 | ) | (58,080 | ) | (2,002,560 | ) | ||||||||
Investor Class | (731,618 | ) | (26,994,212 | ) | (1,959,156 | ) | (66,883,473 | ) | ||||||||
Class R5 | (2,445 | ) | (98,989 | ) | (4,134 | ) | (155,583 | ) | ||||||||
Net increase (decrease) in share activity | (1,010,393 | ) | $ | (37,038,744 | ) | (2,429,089 | ) | $ | (83,026,372 | ) | ||||||
| (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. |
14 Invesco Technology Fund
NOTE 12—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
| Net asset value, beginning of period | Net investment income (loss)(a) | Net gains (losses) on securities (both realized and unrealized) | Total from investment operations | Dividends from net investment income | Distributions from net realized gains | Total distributions | Net asset value, end of period | Total return(b) | Net assets, end of period (000’s omitted) | Ratio of expenses to average net assets with fee waivers and/or expenses absorbed | Ratio of expenses to average net assets without fee waivers and/or expenses absorbed | Ratio of net investment income (loss) to average net assets | Portfolio turnover(c) | |||||||||||||||||||||||||||||||||||||||||||
Class A |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | $ | 34.19 | $ | (0.14 | ) | $ | 4.93 | $ | 4.79 | $ | — | $ | — | $ | — | $ | 38.98 | 14.01 | % | $ | 274,748 | 1.47 | %(d) | 1.47 | %(d) | (0.76 | )%(d) | 20 | % | |||||||||||||||||||||||||||
Year ended 04/30/13 | 37.33 | (0.24 | )(e) | (1.57 | )(f) | (1.81 | ) | (0.27 | ) | (1.06 | ) | (1.33 | ) | 34.19 | (4.70 | )(f) | 253,013 | 1.52 | 1.52 | (0.70 | )(e) | 41 | ||||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 35.86 | (0.36 | ) | 1.83 | 1.47 | — | — | — | 37.33 | 4.10 | 312,389 | 1.55 | 1.56 | (1.06 | ) | 48 | ||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/11 | 28.53 | (0.22 | ) | 7.55 | (g) | 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 | (h) | 1.66 | (h) | (1.56 | )(h) | 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 | )(i) | (7.81 | )(f) | (7.81 | ) | — | — | — | 17.77 | (30.53 | )(f) | 122,823 | 1.55 | 1.83 | (0.02 | )(i) | 68 | |||||||||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | 31.64 | (0.26 | ) | 4.55 | 4.29 | — | — | — | 35.93 | 13.56 | 14,427 | 2.22 | (d) | 2.22 | (d) | (1.51 | )(d) | 20 | ||||||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 34.61 | (0.46 | )(e) | (1.45 | )(f) | (1.91 | ) | — | (1.06 | ) | (1.06 | ) | 31.64 | (5.39 | )(f) | 14,979 | 2.27 | 2.27 | (1.45 | )(e) | 41 | |||||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 33.47 | (0.57 | ) | 1.71 | 1.14 | — | — | — | 34.61 | 3.41 | 23,803 | 2.30 | 2.31 | (1.81 | ) | 48 | ||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/11 | 26.83 | (0.41 | ) | 7.05 | (g) | 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 | (h) | 2.41 | (h) | (2.31 | )(h) | 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 | )(i) | (7.43 | )(f) | (7.59 | ) | — | — | — | 16.84 | (31.07 | )(f) | 16,952 | 2.30 | 2.58 | (0.77 | )(i) | 68 | |||||||||||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | 30.76 | (0.25 | ) | 4.43 | 4.18 | — | — | — | 34.94 | 13.59 | 27,095 | 2.22 | (d) | 2.22 | (d) | (1.51 | )(d) | 20 | ||||||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 33.68 | (0.45 | )(e) | (1.41 | )(f) | (1.86 | ) | — | (1.06 | ) | (1.06 | ) | 30.76 | (5.39 | )(f) | 24,716 | 2.27 | 2.27 | (1.45 | )(e) | 41 | |||||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 32.58 | (0.55 | ) | 1.65 | 1.10 | — | — | — | 33.68 | 3.38 | 31,836 | 2.30 | 2.31 | (1.81 | ) | 48 | ||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/11 | 26.12 | (0.41 | ) | 6.87 | (g) | 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 | (h) | 2.41 | (h) | (2.31 | )(h) | 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 | )(i) | (7.22 | )(f) | (7.38 | ) | — | — | — | 16.40 | (31.03 | )(f) | 9,340 | 2.30 | 2.58 | (0.77 | )(i) | 68 | |||||||||||||||||||||||||||||||||||||
Class Y | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | 34.16 | (0.09 | ) | 4.93 | 4.84 | — | — | — | 39.00 | 14.17 | 4,555 | 1.22 | (d) | 1.22 | (d) | (0.51 | )(d) | 20 | ||||||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 37.31 | (0.16 | )(e) | (1.57 | )(f) | (1.73 | ) | (0.36 | ) | (1.06 | ) | (1.42 | ) | 34.16 | (4.46 | )(f) | 3,716 | 1.27 | 1.27 | (0.45 | )(e) | 41 | ||||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 35.74 | (0.27 | ) | 1.84 | 1.57 | — | — | — | 37.31 | 4.39 | 4,937 | 1.30 | 1.31 | (0.81 | ) | 48 | ||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/11 | 28.37 | (0.14 | ) | 7.51 | (g) | 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 | (h) | 1.41 | (h) | (1.31 | )(h) | 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(j) | 20.92 | 0.02 | (i) | (3.31 | )(f) | (3.29 | ) | — | — | — | 17.63 | (15.73 | )(f) | 541 | 1.30 | (h) | 1.86 | (h) | 0.23 | (h)(i) | 68 | |||||||||||||||||||||||||||||||||||
Investor Class | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | 33.94 | (0.11 | ) | 4.89 | 4.78 | — | — | — | 38.72 | 14.08 | (k) | 368,529 | 1.34 | (d)(k) | 1.34 | (d)(k) | (0.63 | )(d)(k) | 20 | |||||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 37.06 | (0.22 | )(e) | (1.56 | )(f) | (1.78 | ) | (0.28 | ) | (1.06 | ) | (1.34 | ) | 33.94 | (4.64 | )(f)(k) | 342,287 | 1.48 | (k) | 1.48 | (k) | (0.66 | )(e)(k) | 41 | ||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 35.58 | (0.35 | ) | 1.83 | 1.48 | — | — | — | 37.06 | 4.16 | 414,003 | 1.52 | 1.53 | (1.03 | ) | 48 | ||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/11 | 28.29 | (0.19 | ) | 7.48 | (g) | 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 | (h) | 1.65 | (h) | (1.55 | )(h) | 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 | )(i) | (7.74 | )(f) | (7.74 | ) | — | — | — | 17.61 | (30.53 | )(f) | 262,730 | 1.53 | 1.81 | 0.00 | (i) | 68 | |||||||||||||||||||||||||||||||||||||
Class R5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | 37.33 | (0.03 | ) | 5.39 | 5.36 | — | — | — | 42.69 | 14.36 | 1,348 | 0.89 | (d) | 0.89 | (d) | (0.18 | )(d) | 20 | ||||||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 40.64 | (0.03 | )(e) | (1.70 | )(f) | (1.73 | ) | (0.52 | ) | (1.06 | ) | (1.58 | ) | 37.33 | (4.08 | )(f) | 1,194 | 0.89 | 0.89 | (0.07 | )(e) | 41 | ||||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 38.77 | (0.14 | ) | 2.01 | 1.87 | — | — | — | 40.64 | 4.82 | 1,038 | 0.88 | 0.89 | (0.39 | ) | 48 | ||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/11 | 30.64 | (0.02 | ) | 8.15 | (g) | 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 | (h) | 0.90 | (h) | (0.80 | )(h) | 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 | (i) | (8.26 | )(f) | (8.14 | ) | — | — | — | 18.93 | (30.07 | )(f) | 346 | 0.90 | 0.91 | 0.63 | (i) | 68 | |||||||||||||||||||||||||||||||||||||
| (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 year ended April 30, 2012, the portfolio turnover calculation excludes the value of securities purchased of $90,282,548 and sold of $44,478,217 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 $266,930, $15,017, $26,228, $4,090, $360,357 and $1,277 for Class A, Class B, Class C, Class Y, Investor Class, and Class R5 shares, respectively. |
| (e) | Net investment income (loss) per share and the ratio of net investment income (loss) to average net assets includes significant dividends received during the period. Net investment income (loss) per share and the ratio of net investment income (loss) to average net assets excluding the significant dividends are $(0.34) and (1.00)%, $(0.56) and (1.75)%, $(0.54) and (1.75)%, $(0.26) and (0.75)%, $(0.33) and (0.96)% and $(0.14) and (0.37)% for Class A, Class B, Class C, Class Y, Investor Class and Class R5 shares, respectively. |
| (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 for the year ended April 30, 2013 would have been $(1.74), $(1.62), $(1.58), $(1.74), $(1.73) and $(1.87) for Class A, Class B, Class C, Class Y, Investor Class and Class R5 shares, respectively and total returns would have been lower. Net gains (losses) on securities (both realized and unrealized) per share for the year ended March 31, 2009 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 Class R5 shares, respectively and total returns would have been lower. |
| (g) | Net gains (losses) on securities (both realized and unrealized) include 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 the 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 Class R5 shares, respectively. |
| (h) | Annualized. |
| (i) | 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 Class R5 shares, respectively. |
| (j) | Commencement date of October 3, 2008 for Class Y 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 0.12% and 0.20% for the six months ended October 31, 2013 and the year ended April 30, 2013, respectively. |
15 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, 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, 2013 through October 31, 2013.
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 or contingent deferred sales charges on redemptions, 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.
| Class | Beginning Account Value (05/01/13) | ACTUAL | HYPOTHETICAL (5% annual return before expenses) | Annualized Expense Ratio | ||||||||||||||||||||
| Ending Account Value (10/31/13)1 | Expenses Paid During Period2 | Ending Account Value (10/31/13) | Expenses Paid During Period2 | |||||||||||||||||||||
| A | $ | 1,000.00 | $ | 1,139.40 | $ | 7.93 | $ | 1,017.80 | $ | 7.48 | 1.47 | % | ||||||||||||
| B | 1,000.00 | 1,134.90 | 11.95 | 1,014.01 | 11.27 | 2.22 | ||||||||||||||||||
| C | 1,000.00 | 1,135.20 | 11.95 | 1,014.01 | 11.27 | 2.22 | ||||||||||||||||||
| Y | 1,000.00 | 1,141.00 | 6.58 | 1,019.06 | 6.21 | 1.22 | ||||||||||||||||||
| Investor | 1,000.00 | 1,140.10 | 7.23 | 1,018.45 | 6.82 | 1.34 | ||||||||||||||||||
| R5 | 1,000.00 | 1,143.00 | 4.81 | 1,020.72 | 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, 2013 through October 31, 2013, 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. |
16 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 Invesco Technology Fund’s (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 17-19, 2013, the Board as a whole, and the disinterested or “independent” Trustees, who comprise over 75% 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, 2013. The Board determined that the continuation of 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 payable to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is primarily responsible for overseeing the management of a number of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned Invesco Funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies, limitations and investment risks of these funds. The Sub-Committees meet regularly and at designated contract renewal meetings each year to conduct a review of the performance, fees, expenses and other matters related to their assigned Invesco Funds. Each Sub-Committee recommends to the Investments Committee, which in turn recommends to the full Board, whether and on what terms to approve the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Trustees receive comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and Lipper Inc. (Lipper), and
independent provider of investment company data. The Trustees also receive an independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. The independent Trustees are assisted in their annual evaluation of the Fund’s investment advisory agreement by the Senior Officer and by independent legal counsel. In addition to meetings with Invesco Advisers and fund counsel, the independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in separate sessions with the Senior Officer and with independent legal counsel.
In evaluating the fairness and reasonableness of compensation under the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Trustees recognized that the advisory fee rates for the Invesco Funds are, in many cases, the result of years of review and negotiation between the Trustees and Invesco Advisers as well as advisory fees previously approved by different predecessor boards. 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. The Trustees’ review and conclusions are based on the comprehensive consideration of all information presented to them and are not the result of any single determinative factor. Moreover, one Trustee may have weighed a particular piece of information or factor differently than another Trustee.
The discussion below serves as the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 19, 2013, and may not reflect consideration of factors that became known to the Board after that date, including, for example, changes to the Fund’s performance, advisory fees, expense limitations and/or fee waivers.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
| A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the
performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers, with whom the Sub-Committees met during the year. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s consideration of Invesco Advisers’ 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 benefits of reapproving an existing relationship and the greater uncertainty that may be associated with entering into a new relationship. The Board also considered non-advisory services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution and legal and compliance. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services that may be 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 may invest, make recommendations regarding securities and assist with security trades. 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 that may be provided by the Affiliated Sub-Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s sub-advisory contracts.
| B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
The Board compared the Fund’s performance during the past one, three and five calendar years to the performance of funds in the Lipper performance universe and against the Lipper
17 Invesco Technology Fund
Science & Technology 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 and the third quintile for the three and five year periods (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board noted that performance of Class A shares of the Fund was below the performance of the Index for the one year period and above the performance of the Index for the three and five year periods. The Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
| C. | Advisory and Sub-Advisory Fees |
The Board compared the Fund’s contractual management fee rate to the contractual management fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the contractual management fee rate for Class A shares of the Fund was below the median contractual management fee rate of funds in the expense group. The Board noted that the term “contractual management fee” may include both advisory and certain administrative services fees and that Invesco does not charge the Invesco Funds for the administrative services included in the term as defined by Lipper. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using each fund’s contractual management fee schedule (including any applicable breakpoints) as reported in the most recent prospectus or statement of additional information for each fund in the expense group.
The Board also compared the Fund’s effective advisory fee rate (the advisory fee rate after advisory fee waivers and before other expense limitations/waivers) to the effective 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 advisory fee rate was below the effective advisory fee rate of one mutual fund and above the rate of one mutual fund advised by Invesco Advisers with comparable investment strategies. The Board noted that Invesco Advisers sub-advises an off-shore fund with comparable investment strategies, which had an effective advisory fee rate higher than the Fund’s rate.
Other than the funds described above, the Board noted that Invesco Advisers and its affiliates do not advise other funds or client accounts with investment strategies comparable to those of the Fund.
The Board also considered the services that may be provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the fees payable by Invesco Advisers to the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board also noted that the sub-advisory fees are not paid directly by the Fund, but rather, are payable by Invesco Advisers to the Affiliated Sub-Advisers.
Based upon the information and considerations described above, the Board concluded that the compensation payable to Invesco Advisers and the Affiliated Sub-Advisers is fair and reasonable.
| D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule and was assisted in this review by a report from the Senior Officer. The Board also noted that the Fund shares directly in economies of scale through lower fees charged by third party service providers based on the combined size of the Invesco Funds and other clients advised by Invesco Advisers.
| E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the profitability of Invesco Advisers and its affiliates in providing these services for the year ended December 31, 2012. The Board received information from Invesco Advisers about the methodology used to prepare the profitability information. The Board considered the profitability of Invesco Advisers in managing the Fund and the Invesco Funds. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its subsidiaries provide to the Invesco Funds and the Fund. The Board did not deem the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund to be excessive given the nature, quality and extent of the services provided to the Invesco Funds. The Board received and accepted information from Invesco Advisers demonstrating that Invesco Advisers and each Affiliated Sub-Adviser are financially sound and have the resources necessary to perform their obligations under the investment advisory agreement and sub-advisory contracts.
| F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund, including the fees received for their provision of transfer agency and distribution services to the Fund. The Board considered comparative information regarding fees charged for these services, including information provided by Lipper and other independent sources. The Board considered the performance of Invesco Advisers and its affiliates in providing these services and the organizational structure employed to provide these services. The Board also considered that these services are provided to the Fund pursuant to written contracts that are reviewed and approved on an annual basis by the Board; that the services are required for the operation of the Fund; that Invesco Advisers and its affiliates can provide services, the
nature and quality of which are at least equal to those provided by others offering the same or similar services; and that the fees for such services are fair and reasonable in light of the usual and customary charges by others for services of the same nature and quality.
The Board considered the benefits realized by Invesco Advisers and the Affiliated Sub-Advisers as a result of portfolio brokerage transactions executed through “soft dollar” arrangements. The Board noted that soft dollar arrangements shift the payment obligation for research services from Invesco Advisers and the Affiliated Sub-Advisers to the Invesco Funds and that the research received may be used with other clients of Invesco Advisers and may reduce Invesco Advisers’ and the Affiliated Sub-Advisers’ expenses. The Board also considered periodic reports from the Chief Compliance Officer of the Invesco Funds demonstrating that these arrangements are consistent with regulatory requirements. The Board did not deem the soft dollar arrangements to be inappropriate.
The Board considered that the Fund’s uninvested cash and cash collateral from any securities lending arrangements may be invested in money market funds advised by Invesco Advisers pursuant to procedures approved by the Board. The Board noted that Invesco Advisers receives advisory fees from these affiliated money market funds attributable to such investments, although Invesco Advisers has contractually agreed to waive through varying periods the advisory fees payable by the Invesco Funds. The waiver is in an amount equal to 100% of the net advisory fee Invesco Advisers receives from the affiliated money market funds with respect to the Fund’s investment in the affiliated money market funds of uninvested cash, but not cash collateral. The Board concluded that the Fund’s investment of uninvested cash and cash collateral from any securities lending arrangements in the affiliated money market funds is in the best interests of the Fund and its shareholders.
The Board also considered use of an affiliated broker to execute certain trades for the Fund to among other things, control information leakage, and were advised that such trades are executed in compliance with rules under the Investment Company Act of 1940, as amended.
18 Invesco Technology Fund
Invesco mailing information
Send general correspondence to Invesco Investment Services, Inc., P.O. Box 219078, Kansas City, MO 64121-9078.
Invesco privacy policy
You share personal and financial information with us that is necessary for your transactions and your account records. We take very seriously the obligation to keep that information confidential and private.
Invesco collects nonpublic personal information about you from account applications or other forms you complete and from your transactions with us or our affiliates. We do not disclose information about you or our former customers to service providers or other third parties except to the extent necessary to service your account and in other limited circumstances as permitted by law. For example, we use this information to facilitate the delivery of transaction confirmations, financial reports, prospectuses and tax forms.
Even within Invesco, only people involved in the servicing of your accounts and compliance monitoring have access to your information. To ensure the highest level of confidentiality and security, Invesco maintains physical, electronic and procedural safeguards that meet or exceed federal standards. Special measures, such as data encryption and authentication, apply to your communications with us on our website. More detail is available to you at invesco.com/privacy.
Important notice regarding delivery of security holder documents
To reduce Fund expenses, only one copy of most shareholder documents may be mailed to shareholders with multiple accounts at the same address (Householding). Mailing of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact Invesco Investment Services, Inc. at 800 959 4246 or contact your financial institution. We will begin sending you individual copies for each account within 30 days after receiving your request.
Fund holdings and proxy voting information
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is available at invesco.com/completeqtrholdings. Shareholders can also look up the Fund’s Forms N-Q on the SEC website at sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are shown below.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov.
Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd. |  | |
SEC file numbers: 811-03826 and 002-85905 | I-TEC-SAR-1 | Invesco Distributors, Inc. |
| Semiannual Report to Shareholders | October 31, 2013 |
Invesco Technology Sector Fund
Nasdaq:
A: IFOAX n B: IFOBX n C: IFOCX n Y: IFODX
| 2 | Fund Performance |
| 3 | Letters to Shareholders |
| 4 | Schedule of Investments |
| 6 | Financial Statements |
| 8 | Notes to Financial Statements |
| 14 | Financial Highlights |
| 15 | Fund Expenses |
| 16 | Approval of Investment Advisory and Sub-Advisory Contracts |
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, 4/30/13 to 10/31/13, 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 | 14.15 | % | ||
Class B Shares | 13.72 | |||
Class C Shares | 13.81 | |||
Class Y Shares | 14.34 | |||
S&P 500 Indexq (Broad Market Index) | 11.15 | |||
Bank of America Merrill Lynch 100 Technology Index (price only)n | 16.10 | |||
Lipper Science & Technology Funds Indexn (Peer Group Index) | 18.89 |
Source(s): qInvesco, S&P-Dow Jones via FactSet Research Systems Inc.; nLipper Inc.
The S&P 500® Index is an unmanaged index considered representative of the US stock market.
The Bank of America Merrill Lynch 100 Technology Index (price only) is an unmanaged, 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) described 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.
Effective June 1, 2010, Class A, Class B, Class C and Class I shares of the predecessor fund, Morgan Stanley Technology Fund, advised by Morgan Stanley Investment Advisors Inc. were reorganized into Class A, Class B, Class C and Class Y shares, respectively, of Invesco Technology Sector Fund. Returns shown above for Class A, Class B, Class C and Class Y shares are blended returns of the predecessor fund and Invesco Technology Sector Fund. Share class returns will differ from the predecessor fund because of different expenses.
The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Please visit invesco.com/performance for the most recent month-end performance. Performance figures reflect reinvested distributions, changes in net asset value and the effect of the maximum sales charge unless otherwise stated. Performance figures do not reflect deduction of taxes a shareholder would pay on Fund distributions or sale of
Fund shares. Investment return and principal value will fluctuate so that you may have a gain or loss when you sell shares.
The total annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Class A, Class B, Class C and Class Y shares was 1.83%, 2.58%, 2.58% and 1.58%, 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.
Average Annual Total Returns As of 10/31/13, including maximum applicable sales charges |
| |||
Class A Shares | ||||
Inception (7/28/97) | 3.55 | % | ||
10 Years | 2.59 | |||
5 Years | 11.80 | |||
1 Year | 14.82 | |||
Class B Shares | ||||
Inception (11/28/95) | 4.05 | % | ||
10 Years | 2.52 | |||
5 Years | 11.95 | |||
1 Year | 15.56 | |||
Class C Shares | ||||
Inception (7/28/97) | 3.13 | % | ||
10 Years | 2.37 | |||
5 Years | 12.22 | |||
1 Year | 19.66 | |||
Class Y Shares | ||||
Inception (7/28/97) | 4.15 | % | ||
10 Years | 3.39 | |||
5 Years | 13.34 | |||
1 Year | 21.86 | |||
Average Annual Total Returns As of 9/30/13, the most recent calendar quarter end, including maximum applicable sales charges |
| |||
Class A Shares | ||||
Inception (7/28/97) | 3.48 | % | ||
10 Years | 3.58 | |||
5 Years | 7.72 | |||
1 Year | 6.45 | |||
Class B Shares | ||||
Inception (11/28/95) | 3.99 | % | ||
10 Years | 3.50 | |||
5 Years | 7.80 | |||
1 Year | 6.86 | |||
Class C Shares | ||||
Inception (7/28/97) | 3.07 | % | ||
10 Years | 3.36 | |||
5 Years | 8.12 | |||
1 Year | 10.86 | |||
Class Y Shares | ||||
Inception (7/28/97) | 4.09 | % | ||
10 Years | 4.41 | |||
5 Years | 9.21 | |||
1 Year | 12.99 | |||
The performance of the Fund’s share classes will differ primarily due to different sales charge structures and class expenses.
2 Invesco Technology Sector Fund
Letters to Shareholders
Bruce Crockett | Dear Fellow Shareholders: The Invesco Funds Board has worked on a variety of issues over the last several months, and I’d like to take this opportunity to discuss two that affect you and our fellow fund shareholders. The first issue on which your Board has been working is our annual review of the funds’ advisory and sub-advisory contracts with Invesco Advisers and its affiliates. This annual review focuses on the nature and quality of the services Invesco provides as adviser to the Invesco Funds and the reasonableness of the fees that it charges for those services. Each year, we spend months reviewing detailed information, including information from many independent sources. I’m pleased to report that the Board determined in June that renewing the investment advisory agreement and the sub-advisory contracts with Invesco Advisers and its affiliates would serve the best interests of each fund and its shareholders. | |
The second area of focus to highlight is the Board’s efforts to ensure that we provide a lineup of funds that allow financial advisers to build portfolios that meet shareholders’ changing financial needs and goals.
The members of your Board have worked with Invesco Advisers to provide more income-generating options in the Invesco Funds lineup to help shareholders potentially meet their income needs. Your Board recently approved changes to three existing equity mutual funds, increasing their focus on generating income while also seeking to provide long-term growth of capital.
Be assured that your Board will continue working on behalf of fund shareholders, keeping your needs and interests uppermost in our minds.
As always, please contact me at bruce@brucecrockett.com with any questions or concerns you may have. On behalf of the Board, we look forward to continuing to represent your interests and serving your needs.
Sincerely,
Bruce L. Crockett
Independent Chair
Invesco Funds Board of Trustees
Philip Taylor | Dear Shareholders: Enclosed in this semiannual report, you’ll find performance data for your Fund, a complete list of your Fund’s investments as of the close of the reporting period and other important information. I hope you find this report of interest. Our website, invesco.com/us, provides fund-specific as well as more general information from many of Invesco’s investment professionals. You’ll find in-depth articles, video clips and audio commentaries – and, of course, you also can access information about your Invesco account whenever it’s convenient for you. At Invesco, all of our people and all of our resources are dedicated to helping investors achieve their financial objectives. It’s a philosophy we call Intentional Investing, and it guides the way we: n Manage investments – Our dedicated investment professionals search the world for the best opportunities, and each investment team follows a clear, disciplined process to build portfolios and mitigate risk. | |
| n | Provide choices – We offer multiple investment strategies, allowing you and your financial adviser to build a portfolio that’s purpose-built for your needs. |
| n | Connect with you – We’re committed to giving you the expert insights you need to make informed investing decisions, and we are well-equipped to provide high-quality support for investors and advisers. |
For questions about your account, feel free to contact an Invesco client services representative at 800 959 4246. For Invesco-related questions or comments, please email me directly at phil@invesco.com.
All of us at Invesco look forward to serving your investment management needs for many years to come. Thank you for investing with us.
Sincerely,
Philip Taylor
Senior Managing Director, Invesco Ltd.
3 Invesco Technology Sector Fund
Schedule of Investments(a)
October 31, 2013
(Unaudited)
| Shares | Value | |||||||
Common Stocks & Other Equity Interests–95.36% |
| |||||||
| Application Software–11.96% | ||||||||
Aspen Technology, Inc.(b) | 35,648 | $ | 1,362,823 | |||||
Cadence Design Systems, Inc.(b) | 97,404 | 1,263,330 | ||||||
Citrix Systems, Inc.(b) | 16,599 | 942,491 | ||||||
Informatica Corp.(b) | 43,963 | 1,696,972 | ||||||
MicroStrategy Inc.–Class A(b) | 8,756 | 1,068,144 | ||||||
Qlik Technologies Inc.(b) | 14,467 | 366,594 | ||||||
Salesforce.com, Inc.(b) | 50,575 | 2,698,682 | ||||||
SolarWinds, Inc.(b) | 13,935 | 504,308 | ||||||
SS&C Techonologies Holdings, Inc.(b) | 41,030 | 1,612,479 | ||||||
| 11,515,823 | ||||||||
| Communications Equipment–13.41% | ||||||||
ARRIS Group Inc.(b) | 92,700 | 1,655,622 | ||||||
Ciena Corp.(b) | 24,111 | 561,063 | ||||||
Cisco Systems, Inc. | 79,115 | 1,780,087 | ||||||
F5 Networks, Inc.(b) | 22,002 | 1,793,383 | ||||||
Finisar Corp.(b) | 33,797 | 777,669 | ||||||
JDS Uniphase Corp.(b) | 95,343 | 1,248,040 | ||||||
Juniper Networks, Inc.(b) | 24,576 | 458,097 | ||||||
QUALCOMM, Inc. | 64,103 | 4,453,235 | ||||||
Telefonaktiebolaget LM Ericsson– | 15,395 | 184,586 | ||||||
| 12,911,782 | ||||||||
| Computer Hardware–7.79% | ||||||||
Apple Inc. | 11,251 | 5,876,960 | ||||||
Cray, Inc.(b) | 36,548 | 817,213 | ||||||
Hewlett-Packard Co. | 33,163 | 808,183 | ||||||
| 7,502,356 | ||||||||
| Computer Storage & Peripherals–2.28% | ||||||||
EMC Corp. | 90,987 | 2,190,057 | ||||||
| Data Processing & Outsourced Services–8.57% | ||||||||
Alliance Data Systems Corp.(b)(c) | 11,733 | 2,781,425 | ||||||
MasterCard, Inc.–Class A | 5,404 | 3,875,209 | ||||||
Visa Inc.–Class A | 8,111 | 1,595,190 | ||||||
| 8,251,824 | ||||||||
| Electronic Manufacturing Services–2.80% | ||||||||
Jabil Circuit, Inc. | 53,400 | 1,113,924 | ||||||
Sanmina Corp.(b) | 108,327 | 1,577,241 | ||||||
| 2,691,165 | ||||||||
| Internet Retail–4.28% | ||||||||
Amazon.com, Inc.(b) | 4,837 | 1,760,813 | ||||||
Priceline.com Inc.(b) | 1,779 | 1,874,764 | ||||||
RetailMeNot, Inc.(b) | 14,960 | 487,995 | ||||||
| 4,123,572 | ||||||||
| Shares | Value | |||||||
| Internet Software & Services–13.43% | ||||||||
eBay Inc.(b) | 16,131 | $ | 850,265 | |||||
Facebook Inc.–Class A(b) | 58,964 | 2,963,531 | ||||||
Google Inc.–Class A(b) | 5,447 | 5,613,569 | ||||||
Millennial Media Inc.(b)(c) | 49,658 | 349,096 | ||||||
ValueClick, Inc.(b) | 37,646 | 723,180 | ||||||
VeriSign, Inc.(b) | 31,245 | 1,695,978 | ||||||
Web.com Group Inc.(b) | 27,377 | 737,810 | ||||||
| 12,933,429 | ||||||||
| IT Consulting & Other Services–2.53% | ||||||||
Accenture PLC–Class A | 11,539 | 848,116 | ||||||
International Business Machines Corp. | 8,833 | 1,582,962 | ||||||
| 2,431,078 | ||||||||
| Semiconductor Equipment–2.70% | ||||||||
Applied Materials, Inc. | 84,289 | 1,504,559 | ||||||
Teradyne, Inc.(b)(c) | 39,519 | 691,187 | ||||||
Veeco Instruments Inc.(b) | 13,609 | 397,519 | ||||||
| 2,593,265 | ||||||||
| Semiconductors–15.99% | ||||||||
Altera Corp. | 53,440 | 1,795,584 | ||||||
ARM Holdings PLC–ADR (United Kingdom) | 8,365 | 394,744 | ||||||
Avago Technologies Ltd. | 27,335 | 1,241,829 | ||||||
Cree, Inc.(b) | 17,922 | 1,088,762 | ||||||
Cypress Semiconductor Corp.(b) | 63,704 | 591,173 | ||||||
Diodes Inc.(b) | 16,933 | 410,117 | ||||||
Fairchild Semiconductor International, Inc.(b) | 70,111 | 888,306 | ||||||
Intermolecular Inc.(b) | 61,119 | 354,490 | ||||||
Lattice Semiconductor Corp.(b) | 96,619 | 495,656 | ||||||
Microsemi Corp.(b) | 77,149 | 1,938,755 | ||||||
NXP Semiconductors N.V. (Netherlands)(b) | 44,236 | 1,863,220 | ||||||
ON Semiconductor Corp.(b) | 168,392 | 1,188,848 | ||||||
Semtech Corp.(b) | 31,884 | 991,911 | ||||||
Skyworks Solutions, Inc.(b) | 47,526 | 1,225,220 | ||||||
Texas Instruments Inc. | 22,077 | 929,000 | ||||||
| 15,397,615 | ||||||||
| Systems Software–9.62% | ||||||||
Check Point Software Technologies Ltd. (Israel)(b) | 13,408 | 777,932 | ||||||
CommVault Systems, Inc.(b) | 12,124 | 946,642 | ||||||
Fortinet Inc.(b) | 59,744 | 1,201,452 | ||||||
Infoblox, Inc.(b) | 13,343 | 593,096 | ||||||
MICROS Systems, Inc.(b) | 12,844 | 696,787 | ||||||
Microsoft Corp. | 67,584 | 2,389,094 | ||||||
Oracle Corp. | 33,553 | 1,124,026 | ||||||
Red Hat, Inc.(b) | 9,532 | 412,450 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
4 Invesco Technology Sector Fund
| Shares | Value | |||||||
| Systems Software–(continued) | ||||||||
Symantec Corp. | 49,411 | $ | 1,123,606 | |||||
| 9,265,085 | ||||||||
Total Common Stocks & Other |
| 91,807,051 | ||||||
Money Market Funds–4.53% |
| |||||||
Liquid Assets Portfolio– | 2,179,017 | 2,179,017 | ||||||
Premier Portfolio–Institutional Class(d) | 2,179,016 | 2,179,016 | ||||||
Total Money Market Funds |
| 4,358,033 | ||||||
TOTAL INVESTMENTS (excluding investments purchased with cash collateral from securities on loan)–99.89% |
| 96,165,084 | ||||||
| Shares | Value | |||||||
Investments Purchased with Cash |
| |||||||
Money Market Funds–3.00% |
| |||||||
Liquid Assets Portfolio–Institutional Class | 2,890,760 | $ | 2,890,760 | |||||
TOTAL INVESTMENTS–102.89% |
| 99,055,844 | ||||||
OTHER ASSETS LESS LIABILITIES–(2.89)% |
| (2,777,601 | ) | |||||
NET ASSETS–100.00% |
| $ | 96,278,243 | |||||
Investment Abbreviations:
| ADR | – American Depositary Receipt |
Notes to Schedule of Investments:
| (a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. |
| (b) | Non-income producing security. |
| (c) | All or a portion of this security was out on loan at October 31, 2013. |
| (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. |
Portfolio Composition
By sector, based on Net Assets
as of October 31, 2013
Information Technology | 91.1 | % | ||
Consumer Discretionary | 4.3 | |||
Money Market Funds Plus Other Assets Less Liabilities | 4.6 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
5 Invesco Technology Sector Fund
Statement of Assets and Liabilities
October 31, 2013
(Unaudited)
Assets: |
| |||
Investments, at value (Cost $70,138,019)* | $ | 91,807,051 | ||
Investments in affiliated money market funds, at value and cost | 7,248,793 | |||
Total investments, at value (Cost $77,386,812) | 99,055,844 | |||
Foreign currencies, at value (Cost $30) | 32 | |||
Receivable for: | ||||
Investments sold | 468,608 | |||
Fund shares sold | 52,249 | |||
Dividends | 20,749 | |||
Investment for trustee deferred compensation and retirement plans | 16,186 | |||
Other assets | 29,574 | |||
Total assets | 99,643,242 | |||
Liabilities: |
| |||
Payable for: | ||||
Investments purchased | 2,293 | |||
Fund shares reacquired | 128,865 | |||
Collateral upon return of securities loaned | 2,890,760 | |||
Accrued fees to affiliates | 274,979 | |||
Accrued trustees’ and officers’ fees and benefits | 1,905 | |||
Accrued other operating expenses | 41,856 | |||
Trustee deferred compensation and retirement plans | 24,341 | |||
Total liabilities | 3,364,999 | |||
Net assets applicable to shares outstanding | $ | 96,278,243 | ||
Net assets consist of: |
| |||
Shares of beneficial interest | $ | 108,500,221 | ||
Undistributed net investment income (loss) | (984,922 | ) | ||
Undistributed net realized gain (loss) | (32,906,090 | ) | ||
Net unrealized appreciation | 21,669,034 | |||
| $ | 96,278,243 | |||
Net Assets: |
| |||
Class A | $ | 85,289,583 | ||
Class B | $ | 2,101,564 | ||
Class C | $ | 8,187,755 | ||
Class Y | $ | 699,341 | ||
Shares outstanding, $0.01 par value per share, |
| |||
Class A | 6,223,130 | |||
Class B | 174,766 | |||
Class C | 680,745 | |||
Class Y | 49,016 | |||
Class A: | ||||
Net asset value per share | $ | 13.71 | ||
Maximum offering price per share | ||||
(Net asset value of $13.71 ¸ 94.50%) | $ | 14.51 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 12.03 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 12.03 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 14.27 | ||
| * | At October 31, 2013, securities with an aggregate value of $2,841,642 were on loan to brokers. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
6 Invesco Technology Sector Fund
Statement of Operations
For the six months ended October 31, 2013
(Unaudited)
Investment income: |
| |||
Dividends | $ | 342,159 | ||
Dividends from affiliated money market funds (includes securities lending income of $1,137) | 1,879 | |||
Total investment income | 344,038 | |||
Expenses: | ||||
Advisory fees | 321,796 | |||
Administrative services fees | 25,205 | |||
Custodian fees | 4,137 | |||
Distribution fees: | ||||
Class A | 104,834 | |||
Class B | 11,684 | |||
Class C | 38,997 | |||
Transfer agent fees | 246,018 | |||
Trustees’ and officers’ fees and benefits | 12,962 | |||
Other | 97,669 | |||
Total expenses | 863,302 | |||
Less: Fees waived and expense offset arrangement(s) | (1,789 | ) | ||
Net expenses | 861,513 | |||
Net investment income (loss) | (517,475 | ) | ||
Realized and unrealized gain from: | ||||
Net realized gain from investment securities (includes net gains from securities sold to affiliates of $50,131) | 5,347,182 | |||
Change in net unrealized appreciation of investment securities | 7,657,675 | |||
Net realized and unrealized gain | 13,004,857 | |||
Net increase in net assets resulting from operations | $ | 12,487,382 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
7 Invesco Technology Sector Fund
Statement of Changes in Net Assets
For the six months ended October 31, 2013 and the year ended April 30, 2013
(Unaudited)
| October 31, 2013 | April 30, 2013 | |||||||
Operations: |
| |||||||
Net investment income (loss) | $ | (517,475 | ) | $ | (1,075,951 | ) | ||
Net realized gain | 5,347,182 | 6,270,201 | ||||||
Change in net unrealized appreciation (depreciation) | 7,657,675 | (10,827,340 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 12,487,382 | (5,633,090 | ) | |||||
Share transactions–net: | ||||||||
Class A | (6,636,569 | ) | (13,766,752 | ) | ||||
Class B | (605,589 | ) | (1,643,341 | ) | ||||
Class C | (691,218 | ) | (1,366,677 | ) | ||||
Class Y | (21,030 | ) | 87,569 | |||||
Net increase (decrease ) in net assets resulting from share transactions | (7,954,406 | ) | (16,689,201 | ) | ||||
Net increase (decrease ) in net assets | 4,532,976 | (22,322,291 | ) | |||||
Net assets: | ||||||||
Beginning of period | 91,745,267 | 114,067,558 | ||||||
End of period (includes undistributed net investment income (loss) of $(984,922) and $(467,447), respectively) | $ | 96,278,243 | $ | 91,745,267 | ||||
Notes to Financial Statements
October 31, 2013
(Unaudited)
NOTE 1—Significant Accounting Policies
Invesco Technology Sector Fund (the “Fund”) is a series portfolio of AIM Sector Funds (Invesco Sector Funds) (the “Trust”). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end series management investment company consisting of ten 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 four different classes of shares: Class A, Class B, Class C and Class Y. Class A shares are sold with a front-end sales charge unless certain waiver criteria are met and under certain circumstances load waived shares may be subject to contingent deferred sales charges (“CDSC”). Class C shares are sold with a CDSC. Class Y shares are sold at net asset value. Effective November 30, 2010, new or additional investments in Class B shares are no longer permitted. Existing shareholders of Class B shares may continue to reinvest dividends and capital gains distributions in Class B shares until they convert to Class A shares. Also, shareholders in Class B shares will be able to exchange those shares for Class B shares of other Invesco Funds offering such shares until they convert to Class A shares. Generally, Class B shares will automatically convert to Class A shares on or about the month-end, which is at least eight years after the date of purchase. Redemption of Class B shares prior to the conversion date will be subject to a CDSC.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
| A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. |
A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. 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 (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual
8 Invesco Technology Sector Fund
trading characteristics and other market data. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Foreign securities’ (including foreign exchange contracts) prices 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 the Adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities’ prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
| B. | Securities Transactions and Investment Income — Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund’s net asset value and, accordingly, they reduce the Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
| C. | Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
| D. | Distributions — Distributions from income and net realized capital gain, if any, are generally declared and paid annually and recorded on the ex-dividend date. The Fund may elect to treat a portion of the proceeds from redemptions as distributions for federal income tax purposes. |
| E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (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. |
9 Invesco Technology Sector Fund
| H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements, that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
| I. | 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 failed to return the securities. Upon the failure of the borrower to return the securities, collateral may be liquidated and the securities may be purchased on the open market to replace the loaned securities. The Fund could experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to any loss on the collateral invested. Dividends received on cash collateral investments for securities lending transactions, which are net of compensation to counterparties, is included in Dividends from affiliated money market funds on the Statement of Operations. The aggregate value of securities out on loan is shown as a footnote on the Statement of Assets and Liabilities, if any. |
| J. | Foreign Currency Translations — Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. |
The Fund may invest in foreign securities which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable.
| K. | Foreign Currency Contracts — The Fund may enter into foreign currency contracts to manage or minimize currency or exchange rate risk. The Fund may also enter into foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to “lock in” the U.S. dollar price of that security. A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The use of foreign currency contracts does not eliminate fluctuations in the price of the underlying securities the Fund owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statement of Operations. The primary risks associated with foreign currency contracts include failure of the counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities. |
| L. | 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.
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser based on the annual rate of the Fund’s average daily net assets as follows:
| Average Daily Net Assets | Rate | |||||
First $500 million | 0 | .67% | ||||
Next $2.5 billion | 0 | .645% | ||||
Over $3 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).
10 Invesco Technology Sector Fund
The Adviser has contractually agreed, through at least June 30, 2014, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Class A, Class B, Class C and Class Y shares to 2.00%, 2.75%, 2.75% and 1.75%, respectively, of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on June 30, 2014. The fee waiver agreement cannot be terminated during its term. 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, 2014, 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, 2013, the Adviser waived advisory fees of $1,652.
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, 2013, 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, 2013, the expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
Shares of the Fund are distributed by Invesco Distributors, Inc. (“IDI”), an affiliate of the Adviser. The Fund has adopted a Plan of Distribution (the “Plan”) pursuant to Rule 12b-1 under the 1940 Act. The Plan provides that the Fund will reimburse IDI for distribution related expenses that IDI incurs up to a maximum of the following annual rates: (1) Class A — up to 0.25% of the average daily net assets of Class A shares; (2) Class B — up to 1.00% of the average daily net assets of Class B shares; and (3) Class C — up to 1.00% of the average daily net assets of Class C shares.
In the case of Class B shares, provided that the Plan continues in effect, any cumulative expenses incurred by IDI, but not yet reimbursed to IDI, may be recovered through the payment of future distribution fees from the Fund pursuant to the Plan and contingent deferred sales charges paid by investors upon redemption of Class B shares.
For the six months ended October 31, 2013, 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, 2013, IDI advised the Fund that IDI retained $384 in front-end sales commissions from the sale of Class A shares and $993 and $33 from Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
| Level 1 — | Prices are determined using quoted prices in an active market for identical assets. |
| Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
| Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
As of October 31, 2013, all of the securities in this Fund were valued based on Level 1 inputs (see the Schedule of Investments for security categories). 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.
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, 2013, the Fund engaged in securities sales of $522,810, which resulted in net realized gains of $50,131.
11 Invesco Technology Sector Fund
NOTE 5—Expense Offset Arrangement(s)
The expense offset arrangement is comprised of transfer agency credits which result from balances in demand deposit accounts used by the transfer agent for clearing shareholder transactions. For the six months ended October 31, 2013, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $137.
NOTE 6—Trustees’ and Officers’ Fees and Benefits
Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees’ and Officers’ Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 7—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 8—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 GAAP. 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. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in 8 tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund has a capital loss carryforward as of April 30, 2013 which expires as follows:
| Capital Loss Carryforward* | ||||||||||||
| Expiration | Short-Term | Long-Term | Total | |||||||||
April 30, 2014 | $ | 12,249,742 | $ | — | $ | 12,249,742 | ||||||
April 30, 2016 | 12,866,974 | — | 12,866,974 | |||||||||
April 30, 2018 | 13,022,537 | — | 13,022,537 | |||||||||
| $ | 38,139,253 | $ | — | $ | 38,139,253 | |||||||
| * | 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, 2013 was $18,743,593 and $27,930,677, 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 | $ | 23,886,866 | ||
Aggregate unrealized (depreciation) of investment securities | (2,331,854 | ) | ||
Net unrealized appreciation of investment securities | $ | 21,555,012 | ||
Cost of investments for tax purposes is $77,500,832.
12 Invesco Technology Sector Fund
NOTE 10—Share Information
| Summary of Share Activity | ||||||||||||||||
| Six months ended October 31, 2013(a) | Year ended April 30, 2013 | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Class A | 42,156 | $ | 549,308 | 104,151 | $ | 1,228,065 | ||||||||||
Class B | 332 | 3,912 | 2,181 | 23,904 | ||||||||||||
Class C | 11,878 | 138,785 | 5,966 | 62,716 | ||||||||||||
Class Y | 11,088 | 149,483 | 35,593 | 435,744 | ||||||||||||
Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||
Class A | 32,607 | 422,017 | 95,637 | 1,124,145 | ||||||||||||
Class B | (37,094 | ) | (422,017 | ) | (108,171 | ) | (1,124,145 | ) | ||||||||
Reacquired: | ||||||||||||||||
Class A | (584,404 | ) | (7,607,894 | ) | (1,363,725 | ) | (16,118,962 | ) | ||||||||
Class B | (16,132 | ) | (187,484 | ) | (51,972 | ) | (543,100 | ) | ||||||||
Class C | (72,367 | ) | (830,003 | ) | (136,674 | ) | (1,429,393 | ) | ||||||||
Class Y | (12,500 | ) | (170,513 | ) | (28,062 | ) | (348,175 | ) | ||||||||
Net increase (decrease) in share activity | (624,436 | ) | $ | (7,954,406 | ) | (1,445,076 | ) | $ | (16,689,201 | ) | ||||||
| (a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 75% of the outstanding shares of the Fund. IDI has an agreement with these entities to sell Fund shares. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as securities brokerage, distribution, third party record keeping and account servicing. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
13 Invesco Technology Sector Fund
NOTE 11—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
| Net asset value, beginning of period | Net investment income (loss)(a) | Net gains (losses) on securities (both realized and unrealized) | Total from investment operations | Net asset value, end of period | Total return(b) | Net assets, end of period (000’s omitted) | Ratio of expenses to average net assets with fee waivers and/or expenses absorbed | Ratio of expenses to average net assets without fee waivers and/or expenses absorbed | Ratio of net investment income (loss) to average net assets | Portfolio turnover(c) | ||||||||||||||||||||||||||||||||||
Class A |
| |||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | $ | 12.01 | $ | (0.07 | ) | $ | 1.77 | $ | 1.70 | $ | 13.71 | 14.15 | % | $ | 85,290 | 1.72 | %(d) | 1.72 | %(d) | (1.00 | )%(d) | 20 | % | |||||||||||||||||||||
Year ended 04/30/13 | 12.59 | (0.12 | )(e) | (0.46 | )(f) | (0.58 | ) | 12.01 | (4.61 | )(f) | 80,866 | 1.82 | 1.83 | (1.00 | )(e) | 43 | ||||||||||||||||||||||||||||
One month ended 04/30/12 | 12.97 | (0.01 | ) | (0.37 | ) | (0.38 | ) | 12.59 | (2.93 | ) | 99,453 | 1.71 | (g) | 1.71 | (g) | (1.34 | )(g) | 4 | ||||||||||||||||||||||||||
Year ended 03/31/12 | 11.70 | (0.15 | ) | 1.42 | (f) | 1.27 | 12.97 | 10.85 | (f) | 103,068 | 1.81 | 1.82 | �� | (1.29 | ) | 38 | ||||||||||||||||||||||||||||
Year ended 03/31/11 | 10.27 | (0.11 | ) | 1.54 | 1.43 | 11.70 | 13.92 | 106,661 | 1.70 | 1.70 | (1.08 | ) | 214 | |||||||||||||||||||||||||||||||
Year ended 03/31/10 | 7.12 | (0.11 | ) | 3.26 | 3.15 | 10.27 | 44.24 | 106,337 | 1.92 | (h) | 1.92 | (h) | (1.23 | )(h) | 113 | |||||||||||||||||||||||||||||
Year ended 03/31/09 | 10.32 | (0.11 | ) | (3.09 | ) | (3.20 | ) | 7.12 | (31.01 | ) | 78,705 | 2.00 | (h) | 2.00 | (h) | (1.32 | )(h) | 81 | ||||||||||||||||||||||||||
Class B |
| |||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | 10.58 | (0.10 | ) | 1.55 | 1.45 | 12.03 | 13.71 | 2,102 | 2.47 | (d) | 2.47 | (d) | (1.75 | )(d) | 20 | |||||||||||||||||||||||||||||
Year ended 04/30/13 | 11.18 | (0.18 | )(e) | (0.42 | )(f) | (0.60 | ) | 10.58 | (5.37 | )(f) | 2,408 | 2.57 | 2.58 | (1.75 | )(e) | 43 | ||||||||||||||||||||||||||||
One month ended 04/30/12 | 11.52 | (0.02 | ) | (0.32 | ) | (0.34 | ) | 11.18 | (2.95 | ) | 4,309 | 2.46 | (g) | 2.46 | (g) | (2.09 | )(g) | 4 | ||||||||||||||||||||||||||
Year ended 03/31/12 | 10.47 | (0.20 | ) | 1.25 | (f) | 1.05 | 11.52 | 10.03 | (f) | 4,626 | 2.56 | 2.57 | (2.04 | ) | 38 | |||||||||||||||||||||||||||||
Year ended 03/31/11 | 9.26 | (0.17 | ) | 1.38 | 1.21 | 10.47 | 13.07 | 8,418 | 2.45 | 2.45 | (1.83 | ) | 214 | |||||||||||||||||||||||||||||||
Year ended 03/31/10 | 6.47 | (0.16 | ) | 2.95 | 2.79 | 9.26 | 43.12 | 14,261 | 2.67 | (h) | 2.67 | (h) | (1.98 | )(h) | 113 | |||||||||||||||||||||||||||||
Year ended 03/31/09 | 9.45 | (0.17 | ) | (2.81 | ) | (2.98 | ) | 6.47 | (31.53 | ) | 19,556 | 2.75 | (h) | 2.75 | (h) | (2.07 | )(h) | 81 | ||||||||||||||||||||||||||
Class C |
| |||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | 10.58 | (0.10 | ) | 1.55 | 1.45 | 12.03 | 13.71 | (i) | 8,188 | 2.43 | (d)(i) | 2.43 | (d)(i) | (1.71 | )(d)(i) | 20 | ||||||||||||||||||||||||||||
Year ended 04/30/13 | 11.18 | (0.18 | )(e) | (0.42 | )(f) | (0.60 | ) | 10.58 | (5.37 | )(f) | 7,841 | 2.57 | 2.58 | (1.75 | )(e) | 43 | ||||||||||||||||||||||||||||
One month ended 04/30/12 | 11.52 | (0.02 | ) | (0.32 | ) | (0.34 | ) | 11.18 | (2.95 | ) | 9,745 | 2.46 | (g) | 2.46 | (g) | (2.09 | )(g) | 4 | ||||||||||||||||||||||||||
Year ended 03/31/12 | 10.46 | (0.20 | ) | 1.26 | (f) | 1.06 | 11.52 | 10.13 | (f) | 10,152 | 2.54 | 2.55 | (2.02 | ) | 38 | |||||||||||||||||||||||||||||
Year ended 03/31/11 | 9.25 | (0.17 | ) | 1.38 | 1.21 | 10.46 | 13.08 | 10,794 | 2.45 | 2.45 | (1.83 | ) | 214 | |||||||||||||||||||||||||||||||
Year ended 03/31/10 | 6.46 | (0.16 | ) | 2.95 | 2.79 | 9.25 | 43.19 | 10,981 | 2.67 | (h) | 2.67 | (h) | (1.98 | )(h) | 113 | |||||||||||||||||||||||||||||
Year ended 03/31/09 | 9.44 | (0.17 | ) | (2.81 | ) | (2.98 | ) | 6.46 | (31.57 | ) | 8,927 | 2.75 | (h) | 2.75 | (h) | (2.07 | )(h) | 81 | ||||||||||||||||||||||||||
Class Y |
| |||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | 12.49 | (0.05 | ) | 1.83 | 1.78 | 14.27 | 14.25 | 699 | 1.47 | (d) | 1.47 | (d) | (0.75 | )(d) | 20 | |||||||||||||||||||||||||||||
Year ended 04/30/13 | 13.06 | (0.09 | )(e) | (0.48 | )(f) | (0.57 | ) | 12.49 | (4.36 | )(f) | 630 | 1.57 | 1.58 | (0.75 | )(e) | 43 | ||||||||||||||||||||||||||||
One month ended 04/30/12 | 13.45 | (0.01 | ) | (0.38 | ) | (0.39 | ) | 13.06 | (2.90 | ) | 560 | 1.46 | (g) | 1.46 | (g) | (1.09 | )(g) | 4 | ||||||||||||||||||||||||||
Year ended 03/31/12 | 12.10 | (0.12 | ) | 1.47 | (f) | 1.35 | 13.45 | 11.16 | (f) | 555 | 1.56 | 1.57 | (1.04 | ) | 38 | |||||||||||||||||||||||||||||
Year ended 03/31/11 | 10.59 | (0.09 | ) | 1.60 | 1.51 | 12.10 | 14.26 | 369 | 1.45 | 1.45 | (0.83 | ) | 214 | |||||||||||||||||||||||||||||||
Year ended 03/31/10 | 7.33 | (0.09 | ) | 3.35 | 3.26 | 10.59 | 44.47 | 312 | 1.67 | (h) | 1.67 | (h) | (0.98 | )(h) | 113 | |||||||||||||||||||||||||||||
Year ended 03/31/09 | 10.60 | (0.09 | ) | (3.18 | ) | (3.27 | ) | 7.33 | (30.85 | ) | 218 | 1.75 | (h) | 1.75 | (h) | (1.07 | )(h) | 81 | ||||||||||||||||||||||||||
| (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 $84,153, $2,318, $8,112 and $692 for Class A, Class B, Class C and Class Y shares, respectively. |
| (e) | Net investment income (loss) per share and the ratio of net investment income (loss) to average net assets include significant dividends received during the period. Net investment income (loss) per share and the ratio of net investment income (loss) to average net assets excluding the significant dividends are $(0.15) and (1.30)%, $(0.21) and (2.05)%, $(0.21) and (2.05)% and $(0.13) and (1.05)%, for Class A, Class B, Class C and Class Y shares, respectively. |
| (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 for the year ended April 30, 2013 would have been $(0.55), $(0.51), $(0.51) and $(0.57) for Class A, Class B, Class C and Class Y shares, respectively and total returns would have been lower. Net gains (losses) on securities (both realized and unrealized) per share for the year ended March 31, 2012 would have been $1.29, $1.12, $1.13 and $1.34 for Class A, Class B, Class C and Class Y shares, respectively and total returns would have been lower. |
| (g) | Annualized. |
| (h) | The ratios reflect the rebate of certain Fund expenses in connection with investments in a Morgan Stanley affiliate during the period. The effect of the rebate on the ratios was less than 0.005% for the years ended March 31, 2010 and 2009, respectively. |
| (i) | The total return, ratio of expenses to average net assets and ratio of net investment income (loss) to average net assets reflect actual 12b-1 fees of 0.96% for the six months ended October 31, 2013. |
14 Invesco Technology Sector Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments or contingent deferred sales charges on redemptions, 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, 2013 through October 31, 2013.
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 or contingent deferred sales charges on redemptions, 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.
| Class | Beginning Account Value (05/01/13) | ACTUAL | HYPOTHETICAL (5% annual return before | Annualized Expense Ratio | ||||||||||||||||||||
| Ending Account Value (10/31/13)1 | Expenses Paid During Period2 | Ending Account Value (10/31/13) | Expenses Paid During Period2 | |||||||||||||||||||||
| A | $ | 1,000.00 | $ | 1,141.50 | $ | 9.28 | $ | 1,016.53 | $ | 8.74 | 1.72 | % | ||||||||||||
| B | 1,000.00 | 1,137.20 | 13.31 | 1,012.75 | 12.53 | 2.47 | ||||||||||||||||||
| C | 1,000.00 | 1,138.10 | 13.10 | 1,012.96 | 12.33 | 2.43 | ||||||||||||||||||
| Y | 1,000.00 | 1,143.40 | 7.94 | 1,017.80 | 7.48 | 1.47 | ||||||||||||||||||
| 1 | The actual ending account value is based on the actual total return of the Fund for the period May 1, 2013 through October 31, 2013, 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. |
15 Invesco Technology Sector Fund
Approval of Investment Advisory and Sub-Advisory Contracts
The Board of Trustees (the Board) of AIM Sector Funds (Invesco Sector Funds) is required under the Investment Company Act of 1940, as amended, to approve annually the renewal of Invesco Technology Sector Fund’s (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 17-19, 2013, the Board as a whole, and the disinterested or “independent” Trustees, who comprise over 75% 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, 2013. The Board determined that the continuation 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 payable to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is primarily responsible for overseeing the management of a number of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned Invesco Funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies, limitations and investment risks of these funds. The Sub-Committees meet regularly and at designated contract renewal meetings each year to conduct a review of the performance, fees, expenses and other matters related to their assigned Invesco Funds. Each Sub-Committee recommends to the Investments Committee, which in turn recommends to the full Board, whether and on what terms to approve the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Trustees receive comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and Lipper Inc. (Lipper), an
independent provider of investment company data. The Trustees also receive an independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. The independent Trustees are assisted in their annual evaluation of the Fund’s investment advisory agreement by the Senior Officer and by independent legal counsel. In addition to meetings with Invesco Advisers and fund counsel, the independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in separate sessions with the Senior Officer and with independent legal counsel.
In evaluating the fairness and reasonableness of compensation under the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Trustees recognized that the advisory fee rates for the Invesco Funds are, in many cases, the result of years of review and negotiation between the Trustees and Invesco Advisers as well as advisory fees previously approved by different predecessor boards. 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. The Trustees’ review and conclusions are based on the comprehensive consideration of all information presented to them and are not the result of any single determinative factor. Moreover, one Trustee may have weighed a particular piece of information or factor differently than another Trustee.
The discussion below serves as the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 19, 2013, and may not reflect consideration of factors that became known to the Board after that date, including, for example, changes to the Fund’s performance, advisory fees, expense limitations and/or fee waivers.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
| A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the
performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers, with whom the Sub-Committees met during the year. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s consideration of Invesco Advisers’ 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 benefits of reapproving an existing relationship and the greater uncertainty that may be associated with entering into a new relationship. The Board also considered non-advisory services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution and legal and compliance. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services that may be 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 may invest, make recommendations regarding securities and assist with security trades. 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 that may be provided by the Affiliated Sub-Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s sub-advisory contracts.
| B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
The Board compared the Fund’s performance during the past one, three and five calendar years to the performance of funds in the Lipper performance universe and against the Lipper
16 Invesco Technology Sector Fund
Science & Technology Funds Index. The Board noted that performance of Class A shares of the Fund was in the fourth quintile of the performance universe for the one and three year periods and the fifth quintile for the five year period (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board noted that performance of Class A shares of the Fund was below the performance of the Index for the one, three and five year periods. The Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
| C. | Advisory and Sub-Advisory Fees |
The Board compared the Fund’s contractual management fee rate to the contractual management fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the contractual management fee rate for Class A shares of the Fund was below the median contractual management fee rate of funds in the expense group. The Board noted that the term “contractual management fee” may include both advisory and certain administrative services fees and that Invesco does not charge the Invesco Funds for the administrative services included in the term as defined by Lipper. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using each fund’s contractual management fee schedule (including any applicable breakpoints) as reported in the most recent prospectus or statement of additional information for each fund in the expense group.
The Board also compared the Fund’s effective advisory fee rate (the advisory fee rate after advisory fee waivers and before other expense limitations/waivers) to the effective advisory fee rates of other mutual funds advised by Invesco Advisers and its affiliates with investment advisory strategies comparable to those of the Fund. The Board noted that the Fund’s effective advisory fee rate was below the effective fee rate of the two mutual funds advised by Invesco Advisers with comparable investment strategies. The Board noted that Invesco Advisers sub-advises an off-shore fund with comparable investment strategies, which had an effective advisory fee rate higher than the Fund’s.
Other than the mutual funds described above, the Board noted that Invesco Advisers and its affiliates do not advise other funds or client accounts with investment strategies comparable to those of the Fund.
The Board also considered the services that may be provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the fees payable by Invesco Advisers to the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board also noted that the sub-advisory fees are not paid directly by the Fund, but rather, are payable by Invesco Advisers to the Affiliated Sub-Advisers.
Based upon the information and considerations described above, the Board
concluded that the compensation payable to Invesco Advisers and the Affiliated Sub-Advisers is fair and reasonable.
| D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule and was assisted in this review by a report from the Senior Officer. The Board also noted that the Fund shares directly in economies of scale through lower fees charged by third party service providers based on the combined size of the Invesco Funds and other clients advised by Invesco Advisers.
| E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the profitability of Invesco Advisers and its affiliates in providing these services for the year ended December 31, 2012. The Board received information from Invesco Advisers about the methodology used to prepare the profitability information. The Board considered the profitability of Invesco Advisers in managing the Fund and the Invesco Funds. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its subsidiaries provide to the Invesco Funds and the Fund. The Board did not deem the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund to be excessive given the nature, quality and extent of the services provided to the Invesco Funds. The Board received and accepted information from Invesco Advisers demonstrating that Invesco Advisers and each Affiliated Sub-Adviser are financially sound and have the resources necessary to perform their obligations under the investment advisory agreement and sub-advisory contracts.
| F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund, including the fees received for their provision of transfer agency and distribution services to the Fund. The Board considered comparative information regarding fees charged for these services, including information provided by Lipper and other independent sources. The Board considered the performance of Invesco Advisers and its affiliates in providing these services and the organizational structure employed to provide these services. The Board also considered that these services are provided to the Fund pursuant to written contracts that are reviewed and approved on an annual basis by the Board; that the services are required for the operation of the Fund; that Invesco Advisers and its affiliates can provide services, the nature and quality of which are at least equal to those provided by others offering the same or
similar services; and that the fees for such services are fair and reasonable in light of the usual and customary charges by others for services of the same nature and quality.
The Board considered the benefits realized by Invesco Advisers and the Affiliated Sub-Advisers as a result of portfolio brokerage transactions executed through “soft dollar” arrangements. The Board noted that soft dollar arrangements shift the payment obligation for research services from Invesco Advisers and the Affiliated Sub-Advisers to the Invesco Funds and that the research received may be used with other clients of Invesco Advisers and may reduce Invesco Advisers’ and the Affiliated Sub-Advisers’ expenses. The Board also considered periodic reports from the Chief Compliance Officer of the Invesco Funds demonstrating that these arrangements are consistent with regulatory requirements. The Board did not deem the soft dollar arrangements to be inappropriate.
The Board considered that the Fund’s uninvested cash and cash collateral from any securities lending arrangements may be invested in money market funds advised by Invesco Advisers pursuant to procedures approved by the Board. The Board noted that Invesco Advisers receives advisory fees from these affiliated money market funds attributable to such investments, although Invesco Advisers has contractually agreed to waive through varying periods the advisory fees payable by the Invesco Funds. The waiver is in an amount equal to 100% of the net advisory fee Invesco Advisers receives from the affiliated money market funds with respect to the Fund’s investment in the affiliated money market funds of uninvested cash, but not cash collateral. The Board concluded that the Fund’s investment of uninvested cash and cash collateral from any securities lending arrangements in the affiliated money market funds is in the best interests of the Fund and its shareholders.
The Board also considered use of an affiliated broker to execute certain trades for the Fund to among other things, control information leakage, and were advised that such trades are executed in compliance with rules under the Investment Company Act of 1940, as amended.
17 Invesco Technology Sector Fund
Invesco mailing information
Send general correspondence to Invesco Investment Services, Inc., P.O. Box 219078, Kansas City, MO 64121-9078.
Invesco privacy policy
You share personal and financial information with us that is necessary for your transactions and your account records. We take very seriously the obligation to keep that information confidential and private.
Invesco collects nonpublic personal information about you from account applications or other forms you complete and from your transactions with us or our affiliates. We do not disclose information about you or our former customers to service providers or other third parties except to the extent necessary to service your account and in other limited circumstances as permitted by law. For example, we use this information to facilitate the delivery of transaction confirmations, financial reports, prospectuses and tax forms.
Even within Invesco, only people involved in the servicing of your accounts and compliance monitoring have access to your information. To ensure the highest level of confidentiality and security, Invesco maintains physical, electronic and procedural safeguards that meet or exceed federal standards. Special measures, such as data encryption and authentication, apply to your communications with us on our website. More detail is available to you at invesco.com/privacy.
Important notice regarding delivery of security holder documents
To reduce Fund expenses, only one copy of most shareholder documents may be mailed to shareholders with multiple accounts at the same address (Householding). Mailing of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact Invesco Investment Services, Inc. at 800 959 4246 or contact your financial institution. We will begin sending you individual copies for each account within 30 days after receiving your request.
Fund holdings and proxy voting information
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is available at invesco.com/completeqtrholdings. Shareholders can also look up the Fund’s Forms N-Q on the SEC website at sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are shown below.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov.
Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd. |  |
SEC file numbers: 811-03826 and 002-85905 | MS-TECH-SAR-1 | Invesco Distributors, Inc. |
| Semiannual Report to Shareholders | October 31, 2013 |
Invesco Dividend Income Fund
Nasdaq:
A: IAUTX n B: IBUTX n C: IUTCX n Y: IAUYX n Investor: FSTUX
n R5: FSIUX n R6 IFUTX
| 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 Contracts |
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, 4/30/13 to 10/31/13, 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 | 4.19 | % | ||
Class B Shares | 3.85 | |||
Class C Shares | 3.77 | |||
Class Y Shares | 4.35 | |||
Investor Class Shares | 4.23 | |||
Class R5 Shares | 4.32 | |||
Class R6 Shares | 4.33 | |||
S&P 500 Indexq (Broad Market Index) | 11.15 | |||
Dow Jones U.S. Select Dividend Indexn (Style-Specific Index) | 8.57 | |||
Russell 1000 Value Index¨ (Style-Specific Index) | 10.30 | |||
Lipper Equity Income Indexp (Peer-Group Index) | 8.66 |
Source(s): qInvesco, S&P-Dow Jones via FactSet ResearchSystems Inc.; nDow Jones via
FactSet Research Systems Inc.;
¨Invesco, Russell via FactSet Research Systems Inc.; pLipper Inc.
The S&P 500® Index is an unmanaged index considered representative of the US stock market.
The Dow Jones U.S. Select Dividend™ Index represents the country’s leading stocks by dividend yield.
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 Equity Income Index is an unmanaged index considered representative of equity income funds tracked by Lipper.
The Fund is not managed to track the performance of any particular index, including the index(es) described 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 Dividend Income Fund
Average Annual Total Returns |
| |||
As of 10/31/13, including maximum applicable sales charges
|
| |||
Class A Shares | ||||
Inception (3/28/02) | 7.60 | % | ||
10 Years | 9.95 | |||
5 Years | 10.04 | |||
1 Year | 8.48 | |||
Class B Shares | ||||
Inception (3/28/02) | 7.58 | % | ||
10 Years | 9.94 | |||
5 Years | 10.20 | |||
1 Year | 8.94 | |||
Class C Shares | ||||
Inception (2/14/00) | 1.88 | % | ||
10 Years | 9.77 | |||
5 Years | 10.47 | |||
1 Year | 12.97 | |||
Class Y Shares | ||||
10 Years | 10.74 | % | ||
5 Years | 11.58 | |||
1 Year | 15.11 | |||
Investor Class Shares | ||||
Inception (6/2/86) | 8.38 | % | ||
10 Years | 10.60 | |||
5 Years | 11.30 | |||
1 Year | 14.87 | |||
Class R5 Shares | ||||
Inception (10/25/05) | 7.88 | % | ||
5 Years | 11.82 | |||
1 Year | 15.15 | |||
Class R6 Shares | ||||
10 Years | 10.64 | % | ||
5 Years | 11.37 | |||
1 Year | 15.16 | |||
Class Y shares incepted on October 3, 2008. Performance shown prior to that date is that of Investor Class shares and includes the 12b-1 fees applicable to Investor Class shares. Investor Class share performance reflects any applicable fee waivers or expense reimbursements.
Class R6 shares incepted on September 24, 2012. Performance shown prior to that date is that of Class A shares and includes the 12b-1 fees applicable to Class A shares. Class A share performance reflects any applicable fee waivers or expense reimbursements.
The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Please visit invesco.com/performance for the
| Average Annual Total Returns | ||||
As of 9/30/13, the most recent calendar quarter end, including maximum applicable sales charges |
| |||
Class A Shares | ||||
Inception (3/28/02) | 7.28 | % | ||
10 Years | 9.64 | |||
5 Years | 6.35 | |||
1 Year | 5.61 | |||
Class B Shares | ||||
Inception (3/28/02) | 7.26 | % | ||
10 Years | 9.62 | |||
5 Years | 6.44 | |||
1 Year | 5.91 | |||
Class C Shares | ||||
Inception (2/14/00) | 1.59 | % | ||
10 Years | 9.44 | |||
5 Years | 6.76 | |||
1 Year | 9.90 | |||
Class Y Shares | ||||
10 Years | 10.42 | % | ||
5 Years | 7.84 | |||
1 Year | 12.10 | |||
Investor Class Shares | ||||
Inception (6/2/86) | 8.24 | % | ||
10 Years | 10.28 | |||
5 Years | 7.56 | |||
1 Year | 11.69 | |||
Class R5 Shares | ||||
Inception (10/25/05) | 7.42 | % | ||
5 Years | 8.09 | |||
1 Year | 12.11 | |||
Class R6 Shares | ||||
10 Years | 10.31 | % | ||
5 Years | 7.63 | |||
1 Year | 12.12 | |||
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 of this report for Class A, Class B, Class C, Class Y, Investor Class, Class R5 and Class R6 shares was 1.10%, 1.85%, 1.85%, 0.85%, 1.10%, 0.85% and 0.85%, 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, Class R5 and Class R6 shares was 1.34%, 2.09%, 2.09%, 1.09%, 1.34%, 0.88% 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. 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, Class R5 and Class R6 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 August 31, 2014. See current prospectus for more information. |
3 Invesco Dividend Income Fund
Letters to Shareholders
Bruce Crockett | Dear Fellow Shareholders: The Invesco Funds Board has worked on a variety of issues over the last several months, and I’d like to take this opportunity to discuss two that affect you and our fellow fund shareholders. The first issue on which your Board has been working is our annual review of the funds’ advisory and sub-advisory contracts with Invesco Advisers and its affiliates. This annual review focuses on the nature and quality of the services Invesco provides as adviser to the Invesco Funds and the reasonableness of the fees that it charges for those services. Each year, we spend months reviewing detailed information, including information from many independent sources. I’m pleased to report that the Board determined in June that renewing the investment advisory agreement and the sub-advisory contracts with Invesco Advisers and its affiliates would serve the best interests of each fund and its shareholders. The second area of focus to highlight is the Board’s efforts to ensure that we provide a | |
lineup of funds that allow financial advisers to build portfolios that meet shareholders’ changing financial needs and goals.
The members of your Board have worked with Invesco Advisers to provide more income-generating options in the Invesco Funds lineup to help shareholders potentially meet their income needs. Your Board recently approved changes to three existing equity mutual funds, increasing their focus on generating income while also seeking to provide long-term growth of capital.
Be assured that your Board will continue working on behalf of fund shareholders, keeping your needs and interests uppermost in our minds.
As always, please contact me at bruce@brucecrockett.com with any questions or concerns you may have. On behalf of the Board, we look forward to continuing to represent your interests and serving your needs.
Sincerely,
Bruce L. Crockett
Independent Chair
Invesco Funds Board of Trustees
Philip Taylor
| Dear Shareholders: Enclosed in this semiannual report, you’ll find performance data for your Fund, a complete list of your Fund’s investments as of the close of the reporting period and other important information. I hope you find this report of interest. Our website, invesco.com/us, provides fund-specific as well as more general information from many of Invesco’s investment professionals. You’ll find in-depth articles, video clips and audio commentaries – and, of course, you also can access information about your Invesco account whenever it’s convenient for you. At Invesco, all of our people and all of our resources are dedicated to helping investors achieve their financial objectives. It’s a philosophy we call Intentional Investing, and it guides the way we: n Manage investments – Our dedicated investment professionals search the world for the | |
| n | Provide choices – We offer multiple investment strategies, allowing you and your financial adviser to build a portfolio that’s purpose-built for your needs. |
| n | Connect with you – We’re committed to giving you the expert insights you need to make informed investing decisions, and we are well-equipped to provide high-quality support for investors and advisers. |
For questions about your account, feel free to contact an Invesco client services representative at 800 959 4246. For Invesco-related questions or comments, please email me directly at phil@invesco.com.
All of us at Invesco look forward to serving your investment management needs for many years to come. Thank you for investing with us.
Sincerely,
Philip Taylor
Senior Managing Director, Invesco Ltd.
4 Invesco Dividend Income Fund
Schedule of Investments(a)
October 31, 2013
(Unaudited)
| Shares | Value | |||||||
Common Stocks–94.45% |
| |||||||
| Aerospace & Defense–5.96% | ||||||||
General Dynamics Corp. | 81,989 | $ | 7,102,707 | |||||
Lockheed Martin Corp. | 143,223 | 19,097,355 | ||||||
| 26,200,062 | ||||||||
| Air Freight & Logistics–1.29% | ||||||||
United Parcel Service, Inc.–Class B | 57,504 | 5,649,193 | ||||||
| Asset Management & Custody Banks–2.72% | ||||||||
Federated Investors, Inc.–Class B | 440,332 | 11,941,804 | ||||||
| Auto Parts & Equipment–1.19% | ||||||||
Johnson Controls, Inc. | 113,501 | 5,238,071 | ||||||
| Drug Retail–1.74% | ||||||||
Walgreen Co. | 129,223 | 7,655,170 | ||||||
| Electric Utilities–11.59% | ||||||||
American Electric Power Co., Inc. | 87,326 | 4,090,350 | ||||||
Duke Energy Corp. | 182,757 | 13,109,160 | ||||||
Exelon Corp. | 152,779 | 4,360,313 | ||||||
Pepco Holdings, Inc. | 645,816 | 12,451,332 | ||||||
Pinnacle West Capital Corp. | 128,965 | 7,225,909 | ||||||
Portland General Electric Co. | 182,807 | 5,246,561 | ||||||
Xcel Energy, Inc. | 154,349 | 4,454,512 | ||||||
| 50,938,137 | ||||||||
| Food Distributors–2.27% | ||||||||
Sysco Corp. | 307,964 | 9,959,556 | ||||||
| Gas Utilities–2.81% | ||||||||
AGL Resources Inc. | 257,441 | 12,321,126 | ||||||
| General Merchandise Stores–1.68% | ||||||||
Target Corp. | 114,119 | 7,393,770 | ||||||
| Heavy Electrical Equipment–0.86% | ||||||||
ABB Ltd. (Switzerland) | 148,760 | 3,788,468 | ||||||
| Household Products–3.75% | ||||||||
Kimberly-Clark Corp. | 72,994 | 7,883,352 | ||||||
Procter & Gamble Co. (The) | 106,294 | 8,583,240 | ||||||
| 16,466,592 | ||||||||
| Integrated Oil & Gas–5.31% | ||||||||
Exxon Mobil Corp. | 36,751 | 3,293,625 | ||||||
Royal Dutch Shell PLC–Class B (United Kingdom) | 210,958 | 7,290,396 | ||||||
Total S.A. (France) | 207,709 | 12,739,060 | ||||||
| 23,323,081 | ||||||||
| Integrated Telecommunication Services–7.47% | ||||||||
AT&T Inc. | 279,098 | 10,103,348 | ||||||
CenturyLink Inc. | 308,519 | 10,446,453 | ||||||
| Shares | Value | |||||||
| Integrated Telecommunication Services–(continued) | ||||||||
Deutsche Telekom AG (Germany) | 282,278 | $ | 4,445,687 | |||||
Verizon Communications Inc. | 154,781 | 7,817,988 | ||||||
| 32,813,476 | ||||||||
| Life & Health Insurance–1.17% | ||||||||
Prudential Financial, Inc. | 63,388 | 5,159,149 | ||||||
| Multi-Utilities–10.44% | ||||||||
CMS Energy Corp. | 168,165 | 4,617,811 | ||||||
Dominion Resources, Inc. | 114,728 | 7,313,910 | ||||||
DTE Energy Co. | 92,274 | 6,379,824 | ||||||
National Grid PLC (United Kingdom) | 533,109 | 6,716,329 | ||||||
Public Service Enterprise Group Inc. | 269,423 | 9,025,670 | ||||||
Sempra Energy | 50,107 | 4,566,752 | ||||||
TECO Energy, Inc. | 423,115 | 7,264,885 | ||||||
| 45,885,181 | ||||||||
| Packaged Foods & Meats–8.47% | ||||||||
Campbell Soup Co. | 241,424 | 10,277,420 | ||||||
General Mills, Inc. | 235,527 | 11,875,271 | ||||||
Kraft Foods Group, Inc. | 277,256 | 15,077,181 | ||||||
| 37,229,872 | ||||||||
| Paper Packaging–2.95% | ||||||||
Avery Dennison Corp. | 79,484 | 3,745,286 | ||||||
Sonoco Products Co. | 227,001 | 9,225,321 | ||||||
| 12,970,607 | ||||||||
| Pharmaceuticals–6.97% | ||||||||
Eli Lilly & Co. | 180,394 | 8,987,229 | ||||||
Johnson & Johnson | 153,387 | 14,205,170 | ||||||
Merck & Co., Inc. | 165,082 | 7,443,548 | ||||||
| 30,635,947 | ||||||||
| Property & Casualty Insurance–1.03% | ||||||||
Travelers Cos., Inc. (The) | 52,357 | 4,518,409 | ||||||
| Regional Banks–3.67% | ||||||||
Cullen/Frost Bankers, Inc. | 121,991 | 8,635,743 | ||||||
M&T Bank Corp. | 66,477 | 7,480,657 | ||||||
| 16,116,400 | ||||||||
| Restaurants–0.64% | ||||||||
Darden Restaurants, Inc. | 54,117 | 2,788,649 | ||||||
| Semiconductors–3.71% | ||||||||
Linear Technology Corp. | 176,003 | 7,240,764 | ||||||
Microchip Technology Inc. | 210,446 | 9,040,760 | ||||||
| 16,281,524 | ||||||||
| Soft Drinks–1.75% | ||||||||
Coca-Cola Co. (The) | 194,363 | 7,690,944 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
5 Invesco Dividend Income Fund
| Shares | Value | |||||||
| Tobacco–5.01% | ||||||||
Altria Group, Inc. | 364,593 | $ | 13,573,797 | |||||
Philip Morris International Inc. | 94,516 | 8,423,266 | ||||||
| 21,997,063 | ||||||||
Total Common Stocks (Cost $346,209,999) | 414,962,251 | |||||||
Money Market Funds–5.39% |
| |||||||
Liquid Assets Portfolio–Institutional | 11,844,242 | 11,844,242 | ||||||
Premier Portfolio–Institutional Class(b) | 11,844,243 | 11,844,243 | ||||||
Total Money Market Funds (Cost $23,688,485) | 23,688,485 | |||||||
TOTAL INVESTMENTS–99.84% (Cost $369,898,484) | 438,650,736 | |||||||
OTHER ASSETS LESS LIABILITIES–0.16% | 716,104 | |||||||
NET ASSETS–100.00% | $ | 439,366,840 | ||||||
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) | The money market fund and the Fund are affiliated by having the same investment adviser. |
Portfolio Composition
By sector, based on Net Assets
as of October 31, 2013
Utilities | 24.8 | % | ||
Consumer Staples | 23.0 | |||
Industrials | 9.0 | |||
Financials | 8.6 | |||
Telecommunication Services | 7.5 | |||
Health Care | 7.0 | |||
Energy | 5.3 | |||
Information Technology | 3.7 | |||
Consumer Discretionary | 3.5 | |||
Materials | 2.1 | |||
Money Market Funds Plus Other Assets Less Liabilities | 5.5 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
6 Invesco Dividend Income Fund
Statement of Assets and Liabilities
October 31, 2013
(Unaudited)
Assets: |
| |||
Investments, at value (Cost $346,209,999) | $ | 414,962,251 | ||
Investments in affiliated money market funds, at value and cost | 23,688,485 | |||
Total investments, at value (Cost $369,898,484) | 438,650,736 | |||
Receivable for: | ||||
Fund shares sold | 835,912 | |||
Dividends | 591,991 | |||
Foreign currency contracts outstanding | 7,019 | |||
Investment for trustee deferred compensation and retirement plans | 73,933 | |||
Other assets | 59,469 | |||
Total assets | 440,219,060 | |||
Liabilities: |
| |||
Payable for: | ||||
Investments purchased | 206,484 | |||
Fund shares reacquired | 220,741 | |||
Accrued fees to affiliates | 249,074 | |||
Accrued trustees’ and officers’ fees and benefits | 2,539 | |||
Accrued other operating expenses | 34,033 | |||
Trustee deferred compensation and retirement plans | 139,349 | |||
Total liabilities | 852,220 | |||
Net assets applicable to shares outstanding | $ | 439,366,840 | ||
Net assets consist of: |
| |||
Shares of beneficial interest | $ | 364,991,672 | ||
Undistributed net investment income | 88,688 | |||
Undistributed net realized gain | 5,529,603 | |||
Net unrealized appreciation | 68,756,877 | |||
| $ | 439,366,840 | |||
Net Assets: |
| |||
Class A | $ | 290,135,316 | ||
Class B | $ | 13,320,621 | ||
Class C | $ | 33,497,328 | ||
Class Y | $ | 8,622,670 | ||
Investor Class | $ | 66,288,390 | ||
Class R5 | $ | 658,745 | ||
Class R6 | $ | 26,843,770 | ||
Shares outstanding, $0.01 par value per share, |
| |||
Class A | 15,663,506 | |||
Class B | 717,112 | |||
Class C | 1,787,253 | |||
Class Y | 461,386 | |||
Investor Class | 3,547,508 | |||
Class R5 | 35,548 | |||
Class R6 | 1,447,884 | |||
Class A: | ||||
Net asset value per share | $ | 18.52 | ||
Maximum offering price per share | ||||
(Net asset value of $18.52 ¸ 94.50%) | $ | 19.60 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 18.58 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 18.74 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 18.69 | ||
Investor Class: | ||||
Net asset value and offering price per share | $ | 18.69 | ||
Class R5: | ||||
Net asset value and offering price per share | $ | 18.53 | ||
Class R6: | ||||
Net asset value and offering price per share | $ | 18.54 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
7 Invesco Dividend Income Fund
Statement of Operations
For the six months ended October 31, 2013
(Unaudited)
Investment income: |
| |||
Dividends (net of foreign withholding taxes of $73,735) | $ | 7,156,535 | ||
Dividends from affiliated money market funds | 8,660 | |||
Total investment income | 7,165,195 | |||
Expenses: | ||||
Advisory fees | 1,525,349 | |||
Administrative services fees | 62,854 | |||
Custodian fees | 5,489 | |||
Distribution fees: | ||||
Class A | 342,366 | |||
Class B | 71,588 | |||
Class C | 151,930 | |||
Investor Class | 82,254 | |||
Transfer agent fees — A, B, C, Y and Investor | 391,451 | |||
Transfer agent fees — R5 | 147 | |||
Transfer agent fees — R6 | 388 | |||
Trustees’ and officers’ fees and benefits | 21,638 | |||
Other | 109,192 | |||
Total expenses | 2,764,646 | |||
Less: Fees waived, expenses reimbursed and expense offset arrangement(s) | (374,436 | ) | ||
Net expenses | 2,390,210 | |||
Net investment income | 4,774,985 | |||
Realized and unrealized gain from: | ||||
Net realized gain (loss) from: | ||||
Investment securities | 843,193 | |||
Foreign currencies | 1,062 | |||
Foreign currency contracts | (306,422 | ) | ||
| 537,833 | ||||
Change in net unrealized appreciation of: | ||||
Investment securities | 12,013,955 | |||
Foreign currencies | 3,534 | |||
Foreign currency contracts | 69,430 | |||
| 12,086,919 | ||||
Net realized and unrealized gain | 12,624,752 | |||
Net increase in net assets resulting from operations | $ | 17,399,737 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
8 Invesco Dividend Income Fund
Statement of Changes in Net Assets
For the six months ended October 31, 2013 and the year ended April 30, 2013
(Unaudited)
October 31, 2013 | April 30, 2013 | |||||||
Operations: |
| |||||||
Net investment income | $ | 4,774,985 | $ | 10,289,535 | ||||
Net realized gain | 537,833 | 40,979,803 | ||||||
Change in net unrealized appreciation | 12,086,919 | 5,430,459 | ||||||
Net increase in net assets resulting from operations | 17,399,737 | 56,699,797 | ||||||
Distributions to shareholders from net investment income: | ||||||||
Class A | (3,728,449 | ) | (7,323,571 | ) | ||||
Class B | (142,224 | ) | (363,781 | ) | ||||
Class C | (301,387 | ) | (583,225 | ) | ||||
Class Y | (80,190 | ) | (190,042 | ) | ||||
Investor Class | (893,398 | ) | (1,913,528 | ) | ||||
Class R5 | (10,172 | ) | (154,290 | ) | ||||
Class R6 | (368,790 | ) | (183,969 | ) | ||||
Total distributions from net investment income | (5,524,610 | ) | (10,712,406 | ) | ||||
Distributions to shareholders from net realized gains: | ||||||||
Class A | — | (14,828,315 | ) | |||||
Class B | — | (957,458 | ) | |||||
Class C | — | (1,515,413 | ) | |||||
Class Y | — | (301,604 | ) | |||||
Investor Class | — | (3,755,312 | ) | |||||
Class R5 | — | (44,675 | ) | |||||
Class R6 | — | (602,241 | ) | |||||
Total distributions from net realized gains | — | (22,005,018 | ) | |||||
Share transactions–net: | ||||||||
Class A | 20,024,246 | 5,174,782 | ||||||
Class B | (2,147,060 | ) | (4,584,230 | ) | ||||
Class C | 4,809,838 | (460,100 | ) | |||||
Class Y | 3,196,841 | (854,033 | ) | |||||
Investor Class | (2,629,616 | ) | 426,966 | |||||
Class R5 | (38,259 | ) | (8,332,612 | ) | ||||
Class R6 | 4,954,950 | 20,713,129 | ||||||
Net increase in net assets resulting from share transactions | 28,170,940 | 12,083,902 | ||||||
Net increase in net assets | 40,046,067 | 36,066,275 | ||||||
Net assets: | ||||||||
Beginning of period | 399,320,773 | 363,254,498 | ||||||
End of period (includes undistributed net investment income of $88,688 and $838,313, respectively) | $ | 439,366,840 | $ | 399,320,773 | ||||
Notes to Financial Statements
October 31, 2013
(Unaudited)
NOTE 1—Significant Accounting Policies
Invesco Dividend Income 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 ten 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.
9 Invesco Dividend Income Fund
The Fund’s investment objective is current income and long-term growth of capital.
The Fund currently consists of seven different classes of shares: Class A, Class B, Class C, Class Y, Investor Class, Class R5 and Class R6. 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, Class R5 and Class R6 shares are sold at net asset value. Effective November 30, 2010, new or additional investments in Class B shares are no longer permitted. Existing shareholders of Class B shares may continue to reinvest dividends and capital gains distributions in Class B shares until they convert to Class A shares. Also, shareholders in Class B shares will be able to exchange those shares for Class B shares of other Invesco Funds offering such shares until they convert to Class A shares. Generally, Class B shares will automatically convert to Class A shares on or about the month-end, which is at least eight years after the date of purchase. Redemption of Class B shares prior to the conversion date will be subject to a CDSC.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
| A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. |
A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. 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 (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual trading characteristics and other market data. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Foreign securities’ (including foreign exchange contracts) prices 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 the Adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities’ prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became 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
10 Invesco Dividend Income Fund
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, if any, are declared and paid monthly. Distributions from net realized capital gain, if any, are generally declared and paid annually and recorded on the ex-dividend date. The Fund may elect to treat a portion of the proceeds from redemptions as distributions for federal income tax purposes. |
| E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (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 Class R5 and Class R6 are allocated to each share class based on relative net assets. Sub-accounting fees attributable to Class R5 are charged to the operations of the class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses relating to all other classes are allocated among those classes based on relative net assets. All other expenses are allocated among the classes based on relative net assets. |
| G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
| H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements, that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
| I. | 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 Dividend Income Fund
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser based on the annual rate of the Fund’s average daily net assets as follows:
| Average Daily Net Assets | Rate | |||||
First $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, 2014, 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, Class R5 and Class R6 shares to 1.10%, 1.85%, 1.85%, 0.85% , 1.10%, 0.85% and 0.85%, respectively, of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on August 31, 2014. The fee waiver agreement cannot be terminated during its term. To the extent that the annualized expense ratio does not exceed the expense limitation, the Adviser will retain its ability to be reimbursed prior to the end of each fiscal year.
Further, the Adviser has contractually agreed, through at least June 30, 2014, 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, 2013, the Adviser waived advisory fees of $19,582 and reimbursed class level expenses of $248,385, $12,984, $27,556, $4,856, $59,675 and $75 of Class A, Class B, Class C, Class Y, Investor Class and Class R5 shares, respectively.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco for certain administrative costs incurred in providing accounting services to the Fund. For the six months ended October 31, 2013, 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, 2013, 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, Class R5 and Class R6 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, 2013, expenses incurred under the Plan are shown in the Statement of Operations as Distribution fees.
Front-end sales commissions and CDSC (collectively, the “sales charges”) are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the six months ended October 31, 2013, IDI advised the Fund that IDI retained $83,060 in front-end sales commissions from the sale of Class A shares and $2,539, $7,795 and $1,283 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders.
For the six months ended October 31, 2013, the Fund incurred $8 in brokerage commissions with Invesco Capital Markets, Inc., an affiliate of the Adviser and IDI, for portfolio transactions executed behalf of the fund.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
12 Invesco Dividend Income Fund
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
| Level 1 — | Prices are determined using quoted prices in an active market for identical assets. |
| Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
| Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of October 31, 2013. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 408,116,483 | $ | 30,534,253 | $ | — | $ | 438,650,736 | ||||||||
Foreign Currency Contracts* | — | 7,019 | — | 7,019 | ||||||||||||
Total Investments | $ | 408,116,483 | $ | 30,541,272 | $ | — | $ | 438,657,755 | ||||||||
| * | Unrealized appreciation. |
NOTE 4—Derivative Investments
Value of Derivative Investments at Period-End
The table below summarizes the value of the Fund’s derivative investments, detailed by primary risk exposure, held as of October 31, 2013:
| Value | ||||||||
| Risk Exposure/Derivative Type | Assets | Liabilities | ||||||
Currency risk | ||||||||
Foreign currency contracts(a) | $ | 7,019 | $ | — | ||||
| (a) | Values are disclosed on the Statement of Assets and Liabilities under the Foreign currency contracts outstanding. |
Effect of Derivative Investments for the six months ended October 31, 2013
The table below summarizes the gains (losses) on derivative investments, detailed by primary risk exposure, recognized in earnings during the period:
| Location of Gain (Loss) on Statement of Operations | ||||
Foreign Currency Contracts* | ||||
Realized Gain (Loss) | ||||
Currency risk | $ | (306,422 | ) | |
Change in Unrealized Appreciation | ||||
Currency risk | 69,430 | |||
Total | $ | (236,992 | ) | |
| * | The average notional value of foreign currency contracts outstanding during the period was $6,831,287. |
| Open Foreign Currency Contracts | ||||||||||||||||||||||||||
Settlement Date | Counterparty | Contract to | Notional Value | Unrealized Appreciation | ||||||||||||||||||||||
| Deliver | Receive | |||||||||||||||||||||||||
12/16/13 | Citibank Capital | EUR | 3,240,652 | USD | 4,403,269 | $ | 4,400,327 | $ | 2,942 | |||||||||||||||||
12/16/13 | Deutsche Bank | EUR | 2,896,535 | USD | 3,937,144 | 3,933,067 | 4,077 | |||||||||||||||||||
Total foreign currency contracts | $ | 7,019 | ||||||||||||||||||||||||
Currency Abbreviations:
| EUR | – Euro | |
| USD | – U.S. Dollar |
13 Invesco Dividend Income Fund
Offsetting Assets and Liabilities
Effective with the beginning of the Fund’s fiscal year, the Fund has adopted Accounting Standards Update No. 2011-11, Disclosures about Offsetting Assets and Liabilities, which was subsequently clarified in FASB ASU 2013-01 “Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities”. This update is intended to enhance disclosures about financial instruments and derivative instruments that are subject to offsetting on the Statement of Assets and Liabilities and to enable investors to better understand the effect of those arrangements on its financial position. In order for an arrangement to be eligible for netting, the Fund must have a basis to conclude that such netting arrangements are legally enforceable. The Fund enters into netting agreements and collateral agreements in an attempt to reduce the Fund’s counterparty credit risk by providing for a single net settlement with a counterparty of all financial transactions covered by the agreement in an event of default as defined under such agreement.
There were no derivative instruments subject to a netting agreement for which the Fund is not currently netting. The following tables present derivative instruments that are either subject to an enforceable netting agreement or offset by collateral arrangements as of October 31, 2013.
| Assets: | ||||||||||||||||||||||||
| Gross amounts presented in Statement of Assets & Liabilities | Gross amounts offset in Statement of Assets & Liabilities | Net amounts of assets presented in the Statement of Assets and Liabilities | Collateral Received | |||||||||||||||||||||
| Counterparty | Financial Instruments | Cash | Net Amount | |||||||||||||||||||||
Citibank Capital | $ | 2,942 | $ | — | $ | 2,942 | $ | — | $ | — | $ | 2,942 | ||||||||||||
Deutsche Bank | 4,077 | — | 4,077 | — | — | 4,077 | ||||||||||||||||||
Total | $ | 7,019 | $ | — | $ | 7,019 | $ | — | $ | — | $ | 7,019 | ||||||||||||
NOTE 5—Expense Offset Arrangement(s)
The expense offset arrangement is comprised of transfer agency credits which result from balances in demand deposit accounts used by the transfer agent for clearing shareholder transactions. For the six months ended October 31, 2013, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $1,323.
NOTE 6—Trustees’ and Officers’ Fees and Benefits
Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees’ and Officers’ Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 7—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 8—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 GAAP. 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. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in 8 tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund did not have a capital loss carryforward as of April 30, 2013.
14 Invesco Dividend Income Fund
NOTE 9—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the six months ended October 31, 2013 was $35,148,281 and $6,099,667, respectively. Cost of investments on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end.
| Unrealized Appreciation (Depreciation) of Investment Securities on a Tax Basis | ||||
Aggregate unrealized appreciation of investment securities | $ | 71,517,701 | ||
Aggregate unrealized (depreciation) of investment securities | (2,768,301 | ) | ||
Net unrealized appreciation of investment securities | $ | 68,749,400 | ||
Cost of investments for tax purposes is $369,901,336.
NOTE 10—Share Information
| Summary of Share Activity | ||||||||||||||||
| Six months ended October 31, 2013(a) | Year ended April 30, 2013 | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Class A | 2,196,884 | $ | 38,748,668 | 1,897,891 | $ | 33,071,615 | ||||||||||
Class B | 30,245 | 544,811 | 42,841 | 744,442 | ||||||||||||
Class C | 456,584 | 8,326,527 | 412,236 | 7,207,142 | ||||||||||||
Class Y | 328,877 | 5,898,608 | 344,217 | 6,070,802 | ||||||||||||
Investor Class | 121,929 | 2,214,561 | 506,211 | 8,923,571 | ||||||||||||
Class R5 | 2,232 | 40,555 | 42,665 | 744,315 | ||||||||||||
Class R6(b) | 280,951 | 5,043,031 | 1,140,531 | 20,188,345 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Class A | 180,528 | 3,252,749 | 1,185,890 | 20,145,501 | ||||||||||||
Class B | 7,203 | 130,129 | 71,975 | 1,223,836 | ||||||||||||
Class C | 14,326 | 261,328 | 110,209 | 1,890,089 | ||||||||||||
Class Y | 3,409 | 62,223 | 24,046 | 412,641 | ||||||||||||
Investor Class | 45,882 | 833,846 | 311,372 | 5,336,153 | ||||||||||||
Class R5 | 563 | 10,154 | 11,325 | 194,719 | ||||||||||||
Class R6 | 20,442 | 368,790 | 46,360 | 786,210 | ||||||||||||
Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||
Class A | 44,396 | 1,627,684 | 174,895 | 3,029,061 | ||||||||||||
Class B | (48,081 | ) | (1,627,684 | ) | (174,469 | ) | (3,029,061 | ) | ||||||||
Reacquired: | ||||||||||||||||
Class A | (1,314,971 | ) | (23,604,855 | ) | (2,943,961 | ) | (51,071,395 | ) | ||||||||
Class B | (107,696 | ) | (1,194,316 | ) | (202,356 | ) | (3,523,447 | ) | ||||||||
Class C | (207,771 | ) | (3,778,017 | ) | (547,916 | ) | (9,557,331 | ) | ||||||||
Class Y | (153,986 | ) | (2,763,990 | ) | (414,502 | ) | (7,337,476 | ) | ||||||||
Investor Class | (312,856 | ) | (5,678,023 | ) | (798,837 | ) | (13,832,758 | ) | ||||||||
Class R5 | (4,986 | ) | (88,968 | ) | (529,235 | ) | (9,271,646 | ) | ||||||||
Class R6 | (25,493 | ) | (456,871 | ) | (14,907 | ) | (261,426 | ) | ||||||||
Net increase in share activity | 1,558,611 | $ | 28,170,940 | 696,481 | $ | 12,083,902 | ||||||||||
| (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. Also, 6% of the outstanding shares of the Fund are owned by affiliated mutual funds. Affiliated mutual funds are mutual funds that are advised by Invesco. |
| (b) | Commencement date of September 24, 2012. |
15 Invesco Dividend Income Fund
NOTE 11—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
| Net asset value, beginning of period | Net investment income (loss)(a) | Net gains (losses) on securities (both realized and unrealized) | Total from investment operations | Dividends from net investment income | Distributions from net realized gains | Total distributions | Net asset value, end of period | Total return(b) | Net assets, end of period (000’s omitted) | Ratio of expenses to average net assets with fee waivers and/or expenses absorbed | Ratio of expenses to average net assets without fee waivers and/or expenses absorbed | Ratio of net investment income (loss) to average net assets | Portfolio turnover(c) | |||||||||||||||||||||||||||||||||||||||||||
Class A |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | $ | 18.02 | $ | 0.22 | $ | 0.53 | $ | 0.75 | $ | (0.25 | ) | $ | — | $ | (0.25 | ) | $ | 18.52 | 4.19 | % | $ | 290,135 | 1.09 | %(d) | 1.28 | %(d) | 2.36 | %(d) | 2 | % | ||||||||||||||||||||||||||
Year ended 04/30/13 | 16.93 | 0.50 | 2.21 | 2.71 | (0.52 | ) | (1.10 | ) | (1.62 | ) | 18.02 | 16.83 | 262,332 | 1.26 | 1.34 | 2.87 | 66 | |||||||||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 16.18 | 0.43 | 0.73 | 1.16 | (0.41 | ) | — | (0.41 | ) | 16.93 | 7.31 | 241,103 | 1.32 | 1.37 | 2.66 | 14 | ||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/11 | 14.28 | 0.40 | 1.87 | 2.27 | (0.37 | ) | — | (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 | 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 | 2.43 | 2.77 | (0.34 | ) | — | (0.34 | ) | 14.00 | 24.06 | 129,685 | 1.53 | 1.54 | 2.58 | 14 | ||||||||||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 17.89 | 0.35 | (6.29 | )(f) | (5.94 | ) | (0.38 | ) | — | (0.38 | ) | 11.57 | (33.56 | )(f) | 118,328 | 1.48 | 1.50 | 2.26 | 5 | |||||||||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | 18.07 | 0.15 | 0.54 | 0.69 | (0.18 | ) | — | (0.18 | ) | 18.58 | 3.85 | 13,321 | 1.84 | (d) | 2.03 | (d) | 1.61 | (d) | 2 | |||||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 16.97 | 0.37 | 2.21 | 2.58 | (0.38 | ) | (1.10 | ) | (1.48 | ) | 18.07 | 15.92 | 15,099 | 2.01 | 2.09 | 2.12 | 66 | |||||||||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 16.22 | 0.31 | 0.73 | 1.04 | (0.29 | ) | — | (0.29 | ) | 16.97 | 6.50 | 18,620 | 2.07 | 2.12 | 1.91 | 14 | ||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/11 | 14.31 | 0.29 | 1.88 | 2.17 | (0.26 | ) | — | (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 | ) | 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 | 2.44 | 2.68 | (0.24 | ) | — | (0.24 | ) | 14.04 | 23.19 | 15,828 | 2.28 | 2.29 | 1.83 | 14 | ||||||||||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 17.95 | 0.24 | (6.32 | )(f) | (6.08 | ) | (0.27 | ) | — | (0.27 | ) | 11.60 | (34.12 | )(f) | 18,254 | 2.23 | 2.25 | 1.51 | 5 | |||||||||||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | 18.24 | 0.15 | 0.53 | 0.68 | (0.18 | ) | — | (0.18 | ) | 18.74 | 3.77 | 33,497 | 1.84 | (d) | 2.03 | (d) | 1.61 | (d) | 2 | |||||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 17.11 | 0.37 | 2.24 | 2.61 | (0.38 | ) | (1.10 | ) | (1.48 | ) | 18.24 | 15.99 | 27,793 | 2.01 | 2.09 | 2.12 | 66 | |||||||||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 16.36 | 0.31 | 0.73 | 1.04 | (0.29 | ) | — | (0.29 | ) | 17.11 | 6.46 | 26,511 | 2.07 | 2.12 | 1.91 | 14 | ||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/11 | 14.43 | 0.30 | 1.90 | 2.20 | (0.27 | ) | — | (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 | ) | 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 | 2.45 | 2.70 | (0.25 | ) | — | (0.25 | ) | 14.15 | 23.09 | 12,723 | 2.28 | 2.29 | 1.83 | 14 | ||||||||||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 18.09 | 0.24 | (6.36 | )(f) | (6.12 | ) | (0.27 | ) | — | (0.27 | ) | 11.70 | (34.06 | )(f) | 11,817 | 2.23 | 2.25 | 1.51 | 5 | |||||||||||||||||||||||||||||||||||||
Class Y | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | 18.18 | 0.24 | 0.54 | 0.78 | (0.27 | ) | — | (0.27 | ) | 18.69 | 4.35 | 8,623 | 0.84 | (d) | 1.03 | (d) | 2.61 | (d) | 2 | |||||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 17.07 | 0.54 | 2.24 | 2.78 | (0.57 | ) | (1.10 | ) | (1.67 | ) | 18.18 | 17.16 | 5,146 | 1.01 | 1.09 | 3.12 | 66 | |||||||||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 16.32 | 0.48 | 0.73 | 1.21 | (0.46 | ) | — | (0.46 | ) | 17.07 | 7.54 | 5,622 | 1.07 | 1.12 | 2.91 | 14 | ||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/11 | 14.40 | 0.44 | 1.89 | 2.33 | (0.41 | ) | — | (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 | 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 | 2.43 | 2.82 | (0.38 | ) | — | (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 | (2.77 | )(f) | (2.62 | ) | (0.22 | ) | — | (0.22 | ) | 11.67 | (18.13 | )(f) | 300 | 1.46 | (e) | 1.47 | (e) | 2.28 | (e) | 5 | ||||||||||||||||||||||||||||||||||
Investor Class | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | 18.18 | 0.22 | 0.54 | 0.76 | (0.25 | ) | — | (0.25 | ) | 18.69 | 4.23 | 66,288 | 1.09 | (d) | 1.28 | (d) | 2.36 | (d) | 2 | |||||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 17.07 | 0.50 | 2.23 | 2.73 | (0.52 | ) | (1.10 | ) | (1.62 | ) | 18.18 | 16.84 | 67,130 | 1.26 | 1.34 | 2.87 | 66 | |||||||||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 16.32 | 0.44 | 0.73 | 1.17 | (0.42 | ) | — | (0.42 | ) | 17.07 | 7.28 | 62,707 | 1.32 | 1.37 | 2.66 | 14 | ||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/11 | 14.40 | 0.41 | 1.89 | 2.30 | (0.38 | ) | — | (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 | 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 | 2.44 | 2.79 | (0.35 | ) | — | (0.35 | ) | 14.11 | 23.96 | 59,381 | 1.53 | 1.54 | 2.58 | 14 | ||||||||||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 18.04 | 0.35 | (6.34 | )(f) | (5.99 | ) | (0.38 | ) | — | (0.38 | ) | 11.67 | (33.54 | )(f) | 53,227 | 1.48 | 1.50 | 2.26 | 5 | |||||||||||||||||||||||||||||||||||||
Class R5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | 18.03 | 0.24 | 0.53 | 0.77 | (0.27 | ) | — | (0.27 | ) | 18.53 | 4.32 | 659 | 0.84 | (d) | 0.87 | (d) | 2.61 | (d) | 2 | |||||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 16.94 | 0.56 | 2.22 | 2.78 | (0.59 | ) | (1.10 | ) | (1.69 | ) | 18.03 | 17.32 | 680 | 0.87 | 0.88 | 3.26 | 66 | |||||||||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 16.19 | 0.51 | 0.72 | 1.23 | (0.48 | ) | — | (0.48 | ) | 16.94 | 7.77 | 8,692 | 0.85 | 0.86 | 3.13 | 14 | ||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/11 | 14.28 | 0.48 | 1.88 | 2.36 | (0.45 | ) | — | (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 | 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 | 2.43 | 2.85 | (0.42 | ) | — | (0.42 | ) | 14.00 | 24.75 | 9,934 | 0.97 | 0.98 | 3.14 | 14 | ||||||||||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 17.89 | 0.42 | (6.29 | )(f) | (5.87 | ) | (0.45 | ) | — | (0.45 | ) | 11.57 | (33.24 | )(f) | 9,228 | 1.00 | 1.01 | 2.74 | 5 | |||||||||||||||||||||||||||||||||||||
Class R6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | 18.04 | 0.24 | 0.53 | 0.77 | (0.27 | ) | — | (0.27 | ) | 18.54 | 4.33 | 26,844 | 0.82 | (d) | 0.83 | (d) | 2.63 | (d) | 2 | |||||||||||||||||||||||||||||||||||||
Year ended 04/30/13(g) | 17.55 | 0.34 | 1.58 | 1.92 | (0.33 | ) | (1.10 | ) | (1.43 | ) | 18.04 | 11.58 | 21,141 | 0.89 | (e) | 0.89 | (e) | 3.24 | (e) | 66 | ||||||||||||||||||||||||||||||||||||
| (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 year ending April 30, 2012, 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. |
| (d) | Ratios are annualized and based on average daily net assets (000’s) of $271,660, $14,201, $30,138, $5,311, $65,267, $680 and $24,409 for Class A, Class B, Class C, Class Y, Investor Class, Class R5 and Class R6 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 Class R5 shares respectively and total returns would have been lower. |
| (g) | Commencement date of October 3, 2008 for Class Y shares and September 24, 2012 for Class R6 shares. |
16 Invesco Dividend Income Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments or contingent deferred sales charges on redemptions, 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, 2013 through October 31, 2013.
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 or contingent deferred sales charges on redemptions, 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.
| Class | Beginning Account Value (05/01/13) | ACTUAL | HYPOTHETICAL (5% annual return before expenses) | Annualized Expense Ratio | ||||||||||||||||||||
Ending Account Value (10/31/13)1 | Expenses Paid During Period2 | Ending Account Value (10/31/13) | Expenses Paid During Period2 | |||||||||||||||||||||
A | $ | 1,000.00 | $ | 1,041.90 | $ | 5.61 | $ | 1,019.71 | $ | 5.55 | 1.09 | % | ||||||||||||
B | 1,000.00 | 1,038.50 | 9.45 | 1,015.93 | 9.35 | 1.84 | ||||||||||||||||||
C | 1,000.00 | 1,037.70 | 9.45 | 1,015.93 | 9.35 | 1.84 | ||||||||||||||||||
Y | 1,000.00 | 1,043.50 | 4.33 | 1,020.97 | 4.28 | 0.84 | ||||||||||||||||||
Investor | 1,000.00 | 1,042.30 | 5.61 | 1,019.71 | 5.55 | 1.09 | ||||||||||||||||||
R5 | 1,000.00 | 1,043.20 | 4.33 | 1,020.97 | 4.28 | 0.84 | ||||||||||||||||||
R6 | 1,000.00 | 1,043.30 | 4.22 | 1,021.07 | 4.18 | 0.82 | ||||||||||||||||||
| 1 | The actual ending account value is based on the actual total return of the Fund for the period May 1, 2013 through October 31, 2013, 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 Dividend Income 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 Invesco Dividend Income Fund’s formerly known as 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 17-19, 2013, the Board as a whole, and the disinterested or “independent” Trustees, who comprise over 75% 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, 2013. The Board determined that continuation of 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 payable to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is primarily responsible for overseeing the management of a number of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned Invesco Funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies, limitations and investment risks of these funds. The Sub-Committees meet regularly and at designated contract renewal meetings each year to conduct a review of the performance, fees, expenses and other matters related to their assigned Invesco Funds. Each Sub-Committee recommends to the Investments Committee, which in turn recommends to the full Board, whether and on what terms to approve the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Trustees receive comparative performance and fee data regarding the Invesco Funds prepared
by Invesco Advisers and Lipper Inc. (Lipper), an independent provider of investment company data. The Trustees also receive an independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. The independent Trustees are assisted in their annual evaluation of the Fund’s investment advisory agreement by the Senior Officer and by independent legal counsel. In addition to meetings with Invesco Advisers and fund counsel, the independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in separate sessions with the Senior Officer and with independent legal counsel.
In evaluating the fairness and reasonableness of compensation under the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Trustees recognized that the advisory fee rates for the Invesco Funds are, in many cases, the result of years of review and negotiation between the Trustees and Invesco Advisers as well as advisory fees previously approved by different predecessor boards. 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. The Trustees’ review and conclusions are based on the comprehensive consideration of all information presented to them and are not the result of any single determinative factor. Moreover, one Trustee may have weighed a particular piece of information or factor differently than another Trustee.
The discussion below serves as the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 19, 2013, and may not reflect consideration of factors that became known to the Board after that date, including, for example, changes to the Fund’s performance, advisory fees, expense limitations and/or fee waivers.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
| A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under
the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers, with whom the Sub-Committees met during the year. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s consideration of Invesco Advisers’ 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 benefits of reapproving an existing relationship and the greater uncertainty that may be associated with entering into a new relationship. The Board also considered non-advisory services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution and legal and compliance. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services that may be 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 may invest, make recommendations regarding securities and assist with security trades. 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 that may be provided by the Affiliated Sub-Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s sub-advisory contracts.
| B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
The Board compared the Fund’s performance during the past one, three and five calendar years to the performance of funds in the Lipper
18 Invesco Dividend Income Fund
performance universe and against the Lipper Utility Funds Index. The Board noted that the performance of Class A shares of the Fund was in the fourth quintile of its 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 the Fund’s performance was below the performance of the Index for the one, three and five year periods. The Trustees also noted that the Fund’s name, investment objective and investment strategies had been changed in December 2012, and the Fund was no longer focused on utilities investments. The Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
| C. | Advisory and Sub-Advisory Fees |
The Board compared the Fund’s contractual management fee rate to the contractual management fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the contractual management fee rate for Class A shares of the Fund was below the median contractual management fee rate of funds in the expense group. The Board noted that the term “contractual management fee” may include both advisory and certain administrative services fees and that Invesco Advisers does not charge the Invesco Funds for the administrative services included in the term as defined by Lipper. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using each fund’s contractual management fee schedule (including any applicable breakpoints) as reported in the most recent prospectus or statement of additional information for each fund in the expense group.
The Board also compared the Fund’s effective advisory fee rate (the advisory fee rate after advisory fee waivers and before other expense limitations/waivers) to the effective 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 advisory fee rate was above the effective advisory fee rate of the other mutual fund with investment strategies comparable to those of the Fund.
Other than the mutual fund described above, the Board noted that Invesco Advisers and its affiliates do not advise other funds or client accounts with investment strategies comparable to those of the Fund.
The Board noted that Invesco Advisers has contractually agreed to limit expenses of the Fund through at least February 14, 2014 in an amount necessary to limit total annual operating expenses to a specified percentage of average daily net assets for each class of the Fund.
The Board also considered the services that may be provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the fees payable by Invesco Advisers to the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board also noted
that the sub-advisory fees are not paid directly by the Fund, but rather, are payable by Invesco Advisers to the Affiliated Sub-Advisers.
Based upon the information and considerations described above, the Board concluded that the compensation payable to Invesco Advisers and the Affiliated Sub-Advisers is fair and reasonable.
| D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule and was assisted in this review by a report from the Senior Officer. The Board also noted that the Fund shares directly in economies of scale through lower fees charged by third party service providers based on the combined size of the Invesco Funds and other clients advised by Invesco Advisers.
| E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the profitability of Invesco Advisers and its affiliates in providing these services for the year ended December 31, 2012. The Board received information from Invesco Advisers about the methodology used to prepare the profitability information. The Board considered the profitability of Invesco Advisers in managing the Fund and the Invesco Funds. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its subsidiaries provide to the Invesco Funds and the Fund. The Board did not deem the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund to be excessive given the nature, quality and extent of the services provided to the Invesco Funds. The Board received and accepted information from Invesco Advisers demonstrating that Invesco Advisers and each Affiliated Sub-Adviser are financially sound and have the resources necessary to perform their obligations under the investment advisory agreement and sub-advisory contracts.
| F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund, including the fees received for their provision of transfer agency and distribution services to the Fund. The Board considered comparative information regarding fees charged for these services, including information provided by Lipper and other independent sources. The Board considered the performance of Invesco Advisers and its affiliates in providing these services and the organizational structure employed to provide these services. The Board also considered that these services are provided to the Fund pursuant to written contracts that are reviewed and approved on an annual basis by
the Board; that the services are required for the operation of the Fund; that Invesco Advisers and its affiliates can provide services, the nature and quality of which are at least equal to those provided by others offering the same or similar services; and that the fees for such services are fair and reasonable in light of the usual and customary charges by others for services of the same nature and quality.
The Board considered the benefits realized by Invesco Advisers and the Affiliated Sub-Advisers as a result of portfolio brokerage transactions executed through “soft dollar” arrangements. The Board noted that soft dollar arrangements shift the payment obligation for research services from Invesco Advisers and the Affiliated Sub-Advisers to the Invesco Funds and that the research received may be used with other clients of Invesco Advisers and may reduce Invesco Advisers’ and the Affiliated Sub-Advisers’ expenses. The Board also considered periodic reports from the Chief Compliance Officer of the Invesco Funds demonstrating that these arrangements are consistent with regulatory requirements. The Board did not deem the soft dollar arrangements to be inappropriate.
The Board considered that the Fund’s uninvested cash and cash collateral from any securities lending arrangements may be invested in money market funds advised by Invesco Advisers pursuant to procedures approved by the Board. The Board noted that Invesco Advisers receives advisory fees from these affiliated money market funds attributable to such investments, although Invesco Advisers has contractually agreed to waive through varying periods the advisory fees payable by the Invesco Funds. The waiver is in an amount equal to 100% of the net advisory fee Invesco Advisers receives from the affiliated money market funds with respect to the Fund’s investment in the affiliated money market funds of uninvested cash, but not cash collateral. The Board concluded that the Fund’s investment of uninvested cash and cash collateral from any securities lending arrangements in the affiliated money market funds is in the best interests of the Fund and its shareholders.
The Board also considered use of an affiliated broker to execute certain trades for the Fund to among other things, control information leakage, and were advised that such trades are executed in compliance with rules under the Investment Company Act of 1940, as amended.
19 Invesco Dividend Income Fund
Invesco mailing information
Send general correspondence to Invesco Investment Services, Inc., P.O. Box 219078, Kansas City, MO 64121-9078.
Invesco privacy policy
You share personal and financial information with us that is necessary for your transactions and your account records. We take very seriously the obligation to keep that information confidential and private.
Invesco collects nonpublic personal information about you from account applications or other forms you complete and from your transactions with us or our affiliates. We do not disclose information about you or our former customers to service providers or other third parties except to the extent necessary to service your account and in other limited circumstances as permitted by law. For example, we use this information to facilitate the delivery of transaction confirmations, financial reports, prospectuses and tax forms.
Even within Invesco, only people involved in the servicing of your accounts and compliance monitoring have access to your information. To ensure the highest level of confidentiality and security, Invesco maintains physical, electronic and procedural safeguards that meet or exceed federal standards. Special measures, such as data encryption and authentication, apply to your communications with us on our website. More detail is available to you at invesco.com/privacy.
Important notice regarding delivery of security holder documents
To reduce Fund expenses, only one copy of most shareholder documents may be mailed to shareholders with multiple accounts at the same address (Householding). Mailing of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact Invesco Investment Services, Inc. at 800 959 4246 or contact your financial institution. We will begin sending you individual copies for each account within 30 days after receiving your request.
Fund holdings and proxy voting information
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is available at invesco.com/completeqtrholdings. Shareholders can also look up the Fund’s Forms N-Q on the SEC website at sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are shown below.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov.
Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd. |  |
SEC file numbers: 811-03826 and 002-85905 | I-DIVI-SAR-1 | Invesco Distributors, Inc. |
| Semiannual Report to Shareholders | October 31, 2013 |
Invesco American Value Fund
Nasdaq:
A: MSAVX n B: MGAVX n C: MSVCX n R: MSARX n Y: MSAIX
n R5: MSAJX n R6: MSAFX
| 2 | Fund Performance |
| 4 | Letters to Shareholders |
| 5 | Schedule of Investments |
| 7 | Financial Statements |
| 9 | Notes to Financial Statements |
| 15 | Financial Highlights |
| 17 | Fund Expenses |
| 18 | Approval of Investment Advisory and Sub-Advisory Contracts |
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, 4/30/13 to 10/31/13, at net asset value (NAV). Performance shown does not include applicable contingent deferred sales charges (CDSC) or front-end sales charges, which would have reduced performance.
Class A Shares | 13.87% | |||
Class B Shares | 13.88 | |||
Class C Shares | 13.47 | |||
Class R Shares | 13.74 | |||
Class Y Shares | 14.02 | |||
Class R5 Shares | 14.11 | |||
Class R6 Shares | 14.16 | |||
S&P 500 Indexq (Broad Market Index) | 11.15 | |||
Russell Midcap Value Indexn (Style-Specific Index) | 11.31 | |||
Lipper Mid-Cap Value Funds Index¿ (Peer Group Index) | 13.51 |
Source(s): qInvesco, S&P-Dow Jones via FactSet Research Systems Inc.;
nInvesco, Russell via FactSet Research Systems Inc.; ¿Lipper Inc.
The S&P 500® Index is an unmanaged index considered representative of the US 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) described 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 American Value Fund
Average Annual Total Returns As of 10/31/13, including maximum applicable sales charges
|
| |||
Class A Shares | ||||
| ||||
Inception (10/18/93) | 9.80% | |||
| ||||
10 Years | 9.68 | |||
| ||||
5 Years | 17.01 | |||
| ||||
1 Year | 23.97 | |||
| ||||
Class B Shares | ||||
| ||||
Inception (8/1/95) | 9.80% | |||
| ||||
10 Years | 10.02 | |||
| ||||
5 Years | 18.06 | |||
| ||||
1 Year | 26.20 | |||
| ||||
Class C Shares | ||||
| ||||
Inception (10/18/93) | 9.32% | |||
| ||||
10 Years | 9.49 | |||
| ||||
5 Years | 17.49 | |||
| ||||
1 Year | 29.24 | |||
| ||||
Class R Shares | ||||
| ||||
Inception (3/20/07) | 7.05% | |||
| ||||
5 Years | 18.05 | |||
| ||||
1 Year | 30.89 | |||
| ||||
Class Y Shares | ||||
| ||||
Inception (2/7/06) | 8.99% | |||
| ||||
5 Years | 18.64 | |||
| ||||
1 Year | 31.52 | |||
| ||||
Class R5 Shares | ||||
| ||||
10 Years | 10.46% | |||
| ||||
5 Years | 18.67 | |||
| ||||
1 Year | 31.69 | |||
| ||||
Class R6 Shares | ||||
| ||||
10 Years | 10.36% | |||
| ||||
5 Years | 18.45 | |||
| ||||
1 Year | 31.77 | |||
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 (renamed Invesco 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 American Value Fund. Share class returns will differ from the predecessor fund because of different expenses.
Class R5 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
Average Annual Total Returns As of 9/30/13, the most recent calendar quarter end, including maximum applicable sales charges
|
| |||
Class A Shares | ||||
| ||||
Inception (10/18/93) | 9.66% | |||
| ||||
10 Years | 10.19 | |||
| ||||
5 Years | 10.96 | |||
| ||||
1 Year | 20.55 | |||
| ||||
Class B Shares | ||||
| ||||
Inception (8/1/95) | 9.65% | |||
| ||||
10 Years | 10.51 | |||
| ||||
5 Years | 11.90 | |||
| ||||
1 Year | 22.57 | |||
| ||||
Class C Shares | ||||
| ||||
Inception (10/18/93) | 9.18% | |||
| ||||
10 Years | 9.99 | |||
| ||||
5 Years | 11.41 | |||
| ||||
1 Year | 25.61 | |||
| ||||
Class R Shares | ||||
| ||||
Inception (3/20/07) | 6.61% | |||
| ||||
5 Years | 11.93 | |||
| ||||
1 Year | 27.23 | |||
| ||||
Class Y Shares | ||||
| ||||
Inception (2/7/06) | 8.62% | |||
| ||||
5 Years | 12.49 | |||
| ||||
1 Year | 27.88 | |||
| ||||
Class R5 Shares | ||||
| ||||
10 Years | 10.97% | |||
| ||||
5 Years | 12.53 | |||
| ||||
1 Year | 28.04 | |||
| ||||
Class R6 Shares | ||||
| ||||
10 Years | 10.86% | |||
| ||||
5 Years | 12.32 | |||
| ||||
1 Year | 28.10 | |||
A share performance reflects any applicable fee waivers or expense reimbursements.
Class R6 shares incepted on September 24, 2012. Performance shown prior to that date is that of the Fund’s and 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, Class R5 and Class R6 shares was 1.23%, 1.23%, 1.98%, 1.48%, 0.98%, 0.87% and 0.78%, 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, Class R5 and Class R6 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 American Value Fund
Letters to Shareholders
 Bruce Crockett | Dear Fellow Shareholders: The Invesco Funds Board has worked on a variety of issues over the last several months, and I’d like to take this opportunity to discuss two that affect you and our fellow fund shareholders. The first issue on which your Board has been working is our annual review of the funds’ advisory and sub-advisory contracts with Invesco Advisers and its affiliates. This annual review focuses on the nature and quality of the services Invesco provides as adviser to the Invesco Funds and the reasonableness of the fees that it charges for those services. Each year, we spend months reviewing detailed information, including information from many independent sources. I’m pleased to report that the Board determined in June that renewing the investment advisory agreement and the sub-advisory contracts with Invesco Advisers and its affiliates would serve the best interests of each fund and its shareholders. |
The second area of focus to highlight is the Board’s efforts to ensure that we provide a lineup of funds that allow financial advisers to build portfolios that meet shareholders’ changing financial needs and goals.
The members of your Board have worked with Invesco Advisers to provide more income-generating options in the Invesco Funds lineup to help shareholders potentially meet their income needs. Your Board recently approved changes to three existing equity mutual funds, increasing their focus on generating income while also seeking to provide long-term growth of capital.
Be assured that your Board will continue working on behalf of fund shareholders, keeping your needs and interests uppermost in our minds.
As always, please contact me at bruce@brucecrockett.com with any questions or concerns you may have. On behalf of the Board, we look forward to continuing to represent your interests and serving your needs.
Sincerely,
Bruce L. Crockett
Independent Chair
Invesco Funds Board of Trustees
 Philip Taylor | Dear Shareholders: Enclosed in this semiannual report, you’ll find performance data for your Fund, a complete list of your Fund’s investments as of the close of the reporting period and other important information. I hope you find this report of interest. Our website, invesco.com/us, provides fund-specific as well as more general information from many of Invesco’s investment professionals. You’ll find in-depth articles, video clips and audio commentaries – and, of course, you also can access information about your Invesco account whenever it’s convenient for you. At Invesco, all of our people and all of our resources are dedicated to helping investors achieve their financial objectives. It’s a philosophy we call Intentional Investing, and it guides the way we: n Manage investments - Our dedicated investment professionals search the world for the |
| n | Provide choices - We offer multiple investment strategies, allowing you and your financial adviser to build a portfolio that’s purpose-built for your needs. |
| n | Connect with you - We’re committed to giving you the expert insights you need to make informed investing decisions, and we are well-equipped to provide high-quality support for investors and advisers. |
For questions about your account, feel free to contact an Invesco client services representative at 800 959 4246. For Invesco-related questions or comments, please email me directly at phil@invesco.com.
All of us at Invesco look forward to serving your investment management needs for many years to come. Thank you for investing with us.
Sincerely,
Philip Taylor
Senior Managing Director, Invesco Ltd.
4 Invesco American Value Fund
Schedule of Investments(a)
October 31, 2013
(Unaudited)
| Shares | Value | |||||||
Common Stocks–91.89% |
| |||||||
| Aerospace & Defense–0.65% | ||||||||
Textron Inc. | 374,480 | $ | 10,781,279 | |||||
| Alternative Carriers–2.70% | ||||||||
tw telecom inc.(b) | 1,413,204 | 44,544,190 | ||||||
| Apparel Retail–4.89% | ||||||||
Ascena Retail Group, Inc.(b) | 2,210,183 | 43,739,521 | ||||||
Express, Inc.(b) | 1,590,190 | 36,908,310 | ||||||
| 80,647,831 | ||||||||
| Application Software–1.18% | ||||||||
Cadence Design Systems, Inc.(b) | 1,498,748 | 19,438,762 | ||||||
| Asset Management & Custody Banks–2.04% | ||||||||
Northern Trust Corp. | 597,664 | 33,720,203 | ||||||
| Auto Parts & Equipment–2.81% | ||||||||
Johnson Controls, Inc. | 1,004,344 | 46,350,476 | ||||||
| Automotive Retail–1.90% | ||||||||
Advance Auto Parts, Inc. | 315,274 | 31,268,875 | ||||||
| Computer Hardware–1.27% | ||||||||
Diebold, Inc. | 700,794 | 20,995,788 | ||||||
| Construction & Engineering–2.16% | ||||||||
Foster Wheeler AG (Switzerland)(b) | 1,319,162 | 35,604,182 | ||||||
| Data Processing & Outsourced Services–0.70% | ||||||||
Fidelity National Information Services, Inc. | 236,770 | 11,542,538 | ||||||
| Diversified Banks–2.47% | ||||||||
Comerica Inc. | 939,172 | 40,666,148 | ||||||
| Electric Utilities–1.91% | ||||||||
Edison International | 643,979 | 31,574,290 | ||||||
| Electronic Manufacturing Services–1.62% | ||||||||
Flextronics International | 3,387,512 | 26,727,470 | ||||||
| Gas Utilities–1.13% | ||||||||
ONEOK, Inc. | 329,003 | 18,588,669 | ||||||
| General Merchandise Stores–1.30% | ||||||||
Family Dollar Stores, Inc. | 310,639 | 21,396,814 | ||||||
| Health Care Equipment–1.74% | ||||||||
CareFusion Corp.(b) | 739,256 | 28,660,955 | ||||||
| Health Care Facilities–6.10% | ||||||||
Brookdale Senior Living Inc.(b) | 1,090,552 | 29,532,148 | ||||||
HealthSouth Corp. | 1,266,779 | 44,476,611 | ||||||
Universal Health Services, Inc.–Class B | 330,384 | 26,615,735 | ||||||
| 100,624,494 | ||||||||
| Shares | Value | |||||||
| Heavy Electrical Equipment–2.14% | ||||||||
Babcock & Wilcox Co. (The) | 1,097,351 | $ | 35,345,676 | |||||
| Housewares & Specialties–2.91% | ||||||||
Newell Rubbermaid Inc. | 1,618,705 | 47,962,229 | ||||||
| Human Resource & Employment Services–2.09% | ||||||||
Robert Half International, Inc. | 892,582 | 34,391,184 | ||||||
| Industrial Machinery–5.78% | ||||||||
Ingersoll-Rand PLC(b) | 611,762 | 41,312,288 | ||||||
Snap-on Inc. | 519,281 | 54,041,574 | ||||||
| 95,353,862 | ||||||||
| Insurance Brokers–4.66% | ||||||||
Marsh & McLennan Cos., Inc. | 1,030,514 | 47,197,541 | ||||||
Willis Group Holdings PLC | 657,158 | 29,618,111 | ||||||
| 76,815,652 | ||||||||
| Investment Banking & Brokerage–1.91% | ||||||||
Stifel Financial Corp.(b) | 768,901 | 31,486,496 | ||||||
| Life Sciences Tools & Services–1.41% | ||||||||
PerkinElmer, Inc. | 612,393 | 23,295,430 | ||||||
| Multi-Utilities–2.47% | ||||||||
CenterPoint Energy, Inc. | 1,653,008 | 40,663,997 | ||||||
| Oil & Gas Drilling–2.17% | ||||||||
Noble Corp. | 948,792 | 35,769,458 | ||||||
| Oil & Gas Exploration & Production–2.01% | ||||||||
Newfield Exploration Co.(b) | 1,090,048 | 33,191,962 | ||||||
| Oil & Gas Storage & Transportation–2.66% | ||||||||
Williams Cos., Inc. (The) | 1,230,053 | 43,925,193 | ||||||
| Packaged Foods & Meats–3.33% | ||||||||
ConAgra Foods, Inc. | 1,725,239 | 54,879,853 | ||||||
| Paper Packaging–4.56% | ||||||||
Sealed Air Corp. | 1,407,675 | 42,483,631 | ||||||
Sonoco Products Co. | 806,067 | 32,758,563 | ||||||
| 75,242,194 | ||||||||
| Personal Products–0.78% | ||||||||
Avon Products, Inc. | 737,012 | 12,897,710 | ||||||
| Property & Casualty Insurance–2.86% | ||||||||
ACE Ltd. | 493,915 | 47,139,248 | ||||||
| Real Estate Operating Companies–2.84% | ||||||||
Forest City Enterprises, Inc.–Class A(b) | 2,315,250 | 46,906,965 | ||||||
| Regional Banks–4.81% | ||||||||
BB&T Corp. | 1,085,503 | 36,874,537 | ||||||
Texas Capital Bancshares, Inc.(b) | 131,520 | 6,845,616 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
5 Invesco American Value Fund
| Shares | Value | |||||||
| Regional Banks–(continued) | ||||||||
Wintrust Financial Corp. | 819,787 | $ | 35,668,932 | |||||
| 79,389,085 | ||||||||
| Specialty Chemicals–2.78% | ||||||||
W.R. Grace & Co.(b) | 499,384 | 45,773,537 | ||||||
| Trucking–3.15% | ||||||||
Swift Transportation Co.(b) | 994,789 | 21,676,452 | ||||||
Werner Enterprises, Inc. | 1,308,841 | 30,312,758 | ||||||
| 51,989,210 | ||||||||
Total Common Stocks |
| 1,515,551,905 | ||||||
| Shares | Value | |||||||
Money Market Funds–7.03% |
| |||||||
Liquid Assets Portfolio– | 57,926,539 | $ | 57,926,539 | |||||
Premier Portfolio– | 57,926,539 | 57,926,539 | ||||||
Total Money Market Funds |
| 115,853,078 | ||||||
TOTAL INVESTMENTS–98.92% |
| 1,631,404,983 | ||||||
OTHER ASSETS LESS LIABILITIES–1.08% |
| 17,834,377 | ||||||
NET ASSETS–100.00% |
| $ | 1,649,239,360 | |||||
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. |
Portfolio Composition
By sector, based on Net Assets
as of October 31, 2013
Financials | 21.6 | % | ||
Industrials | 16.0 | |||
Consumer Discretionary | 13.8 | |||
Health Care | 9.3 | |||
Materials | 7.3 | |||
Energy | 6.8 | |||
Utilities | 5.5 | |||
Information Technology | 4.8 | |||
Consumer Staples | 4.1 | |||
Telecommunication Services | 2.7 | |||
Money Market Funds Plus Other Assets Less Liabilities | 8.1 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
6 Invesco American Value Fund
Statement of Assets and Liabilities
October 31, 2013
(Unaudited)
Assets: | ||||
Investments, at value (Cost $1,176,319,903) | $ | 1,515,551,905 | ||
Investments in affiliated money market funds, at value and cost | 115,853,078 | |||
Total investments, at value (Cost $1,292,172,981) | 1,631,404,983 | |||
Receivable for: | ||||
Investments sold | 22,264,603 | |||
Fund shares sold | 3,409,110 | |||
Dividends | 990,191 | |||
Investment for trustee deferred compensation and retirement plans | 61,248 | |||
Other assets | 81,920 | |||
Total assets | 1,658,212,055 | |||
Liabilities: | ||||
Payable for: | ||||
Investments purchased | 6,502,075 | |||
Fund shares reacquired | 1,248,057 | |||
Accrued fees to affiliates | 1,028,057 | |||
Accrued trustees’ and officers’ fees and benefits | 3,833 | |||
Accrued other operating expenses | 25,215 | |||
Trustee deferred compensation and retirement plans | 165,458 | |||
Total liabilities | 8,972,695 | |||
Net assets applicable to shares outstanding | $ | 1,649,239,360 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 1,198,015,141 | ||
Undistributed net investment income | (192,381 | ) | ||
Undistributed net realized gain | 112,184,598 | |||
Net unrealized appreciation | 339,232,002 | |||
| $ | 1,649,239,360 | |||
Net Assets: |
| |||
Class A | $ | 961,442,787 | ||
Class B | $ | 37,063,138 | ||
Class C | $ | 104,024,966 | ||
Class R | $ | 56,992,812 | ||
Class Y | $ | 386,247,943 | ||
Class R5 | $ | 39,755,416 | ||
Class R6 | $ | 63,712,298 | ||
Shares outstanding, $0.01 par value per share, |
| |||
Class A | 23,663,142 | |||
Class B | 1,001,344 | |||
Class C | 2,866,587 | |||
Class R | 1,403,796 | |||
Class Y | 9,472,462 | |||
Class R5 | 974,728 | |||
Class R6 | 1,562,127 | |||
Class A: | ||||
Net asset value per share | $ | 40.63 | ||
Maximum offering price per share | ||||
(Net asset value of $40.63 ¸ 94.50%) | $ | 42.99 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 37.01 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 36.29 | ||
Class R: | ||||
Net asset value and offering price per share | $ | 40.60 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 40.78 | ||
Class R5: | ||||
Net asset value and offering price per share | $ | 40.79 | ||
Class R6: | ||||
Net asset value and offering price per share | $ | 40.79 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
7 Invesco American Value Fund
Statement of Operations
For the six months ended October 31, 2013
(Unaudited)
Investment income: |
| |||
Dividends | $ | 10,080,365 | ||
Dividends from affiliated money market funds | 29,385 | |||
Interest | 109,604 | |||
Total investment income | 10,219,354 | |||
Expenses: | ||||
Advisory fees | 5,328,696 | |||
Administrative services fees | 190,279 | |||
Custodian fees | 18,510 | |||
Distribution fees: | ||||
Class A | 1,130,377 | |||
Class B | 46,932 | |||
Class C | 455,480 | |||
Class R | 137,731 | |||
Transfer agent fees — A, B, C, R and Y | 1,415,377 | |||
Transfer agent fees — R5 | 15,934 | |||
Transfer agent fees — R6 | 2,061 | |||
Trustees’ and officers’ fees and benefits | 49,369 | |||
Other | 186,765 | |||
Total expenses | 8,977,511 | |||
Less: Fees waived and expense offset arrangement(s) | (70,674 | ) | ||
Net expenses | 8,906,837 | |||
Net investment income | 1,312,517 | |||
Realized and unrealized gain from: | ||||
Net realized gain from investment securities (includes net gains from securities sold to affiliates of $252,317) | 81,384,718 | |||
Change in net unrealized appreciation of investment securities | 114,325,620 | |||
Net realized and unrealized gain | 195,710,338 | |||
Net increase in net assets resulting from operations | $ | 197,022,855 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
8 Invesco American Value Fund
Statement of Changes in Net Assets
For the six months ended October 31, 2013 and the year ended April 30, 2013
(Unaudited)
| October 31, 2013 | April 30, 2013 | |||||||
Operations: | ||||||||
Net investment income | $ | 1,312,517 | $ | 6,856,602 | ||||
Net realized gain | 81,384,718 | 95,435,689 | ||||||
Change in net unrealized appreciation | 114,325,620 | 96,750,899 | ||||||
Net increase in net assets resulting from operations | 197,022,855 | 199,043,190 | ||||||
Distributions to shareholders from net investment income: | ||||||||
Class A | (2,247,117 | ) | (3,822,291 | ) | ||||
Class B | (92,320 | ) | (195,689 | ) | ||||
Class C | (59,002 | ) | — | |||||
Class R | (67,746 | ) | (138,193 | ) | ||||
Class Y | (1,259,227 | ) | (2,146,482 | ) | ||||
Class R5 | (140,904 | ) | (203,300 | ) | ||||
Class R6 | (271,883 | ) | (127,345 | ) | ||||
Total distributions from net investment income | (4,138,199 | ) | (6,633,300 | ) | ||||
Share transactions–net: | ||||||||
Class A | 1,197,047 | 30,057,143 | ||||||
Class B | (4,399,129 | ) | (12,181,227 | ) | ||||
Class C | 3,460,888 | 800,155 | ||||||
Class R | (8,166,528 | ) | 12,849,721 | |||||
Class Y | 56,970,404 | (20,335,981 | ) | |||||
Class R5 | 9,118,961 | 10,347,634 | ||||||
Class R6 | 2,715,631 | 52,695,698 | ||||||
Net increase in net assets resulting from share transactions | 60,897,274 | 74,233,143 | ||||||
Net increase in net assets | 253,781,930 | 266,643,033 | ||||||
Net assets: | ||||||||
Beginning of period | 1,395,457,430 | 1,128,814,397 | ||||||
End of period (includes undistributed net investment income of $(192,381) and $2,633,301, respectively) | $ | 1,649,239,360 | $ | 1,395,457,430 | ||||
Notes to Financial Statements
October 31, 2013
(Unaudited)
NOTE 1—Significant Accounting Policies
Invesco 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 ten separate portfolios, each authorized to issue an unlimited number of shares of beneficial interest. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class.
The Fund’s investment objective is total return through growth of capital and current income.
The Fund currently consists of seven different classes of shares: Class A, Class B, Class C, Class R, Class Y, Class R5 and Class R6. 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, Class R5 and Class R6 shares are sold at net asset value. Effective November 30, 2010, new or additional investments in Class B shares are no longer permitted. Existing shareholders of Class B shares may continue to reinvest dividends and capital gains distributions in Class B shares until they convert to Class A shares. Also, shareholders in Class B shares will be able to exchange those shares for Class B shares of other Invesco Funds offering such shares until they convert to Class A shares. Generally, Class B shares will automatically convert to Class A shares on or about the month-end, which is at least eight years after the date of purchase. Redemption of Class B shares prior to the conversion date will be subject to a CDSC.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
| A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. |
A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular
9 Invesco American Value Fund
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 (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual trading characteristics and other market data. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Foreign securities’ (including foreign exchange contracts) prices 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 the Adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities’ prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became 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. |
10 Invesco American Value Fund
| D. | Distributions — Distributions from income, if any, are declared and paid quarterly and are recorded on the ex-dividend date. Distributions from net realized capital gain, if any, are generally declared and paid annually and recorded on the ex-dividend date. The Fund may elect to treat a portion of the proceeds from redemptions as distributions for federal income tax purposes. |
| E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (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 Class R5 and Class R6 are allocated to each share class based on relative net assets. Sub-accounting fees attributable to Class R5 are charged to the operations of the class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses relating to all other classes are allocated among those classes based on relative net assets. All other expenses are allocated among the classes based on relative net assets. Prior to June 1, 2010, incremental transfer agency fees which were unique to each class of shares were charged to the operations of such class. |
| G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
| H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements, that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser based on the annual rate of the Fund’s average daily net assets as follows:
| Average Daily Net Assets | Rate | |||||
First $500 million | 0 | .72% | ||||
Next $535 million | 0 | .715% | ||||
Next $31.965 billion | 0 | .65% | ||||
Over $33 billion | 0 | .64% | ||||
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Sub-Adviser(s).
Effective July 1, 2013, the Adviser has contractually agreed, through at least June 30, 2014, 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, Class R5 and Class R6 shares to 2.00%, 2.75%, 2.75%, 2.25%, 1.75%, 1.75% and 1.75%, respectively, of average daily net assets. Prior to July 1, 2013, 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 waivers and/or expense reimbursements (excluding certain items discussed below) of Class A, Class B, Class C, Class R, Class Y, Class R5 and Class R6 shares to 1.25%, 2.00%, 2.00%, 1.50%, 1.00%, 1.00% and 1.00%, respectively. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on June 30, 2014. The fee waiver agreement cannot be terminated during its term. 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, 2014, 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, 2013, the Adviser waived advisory fees of $69,177.
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, 2013, 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
11 Invesco American Value Fund
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, 2013, 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, 2013, 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, 2013, IDI advised the Fund that IDI retained $227,115 in front-end sales commissions from the sale of Class A shares and $4,130, $8,704 and $4,045 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders.
For the six months ended October 31, 2013, the Fund incurred $8,716 in brokerage commissions with Invesco Capital Markets, Inc., an affiliate of the Adviser and IDI, for portfolio transactions executed behalf of the fund.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
| Level 1 — | Prices are determined using quoted prices in an active market for identical assets. |
| Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
| Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
As of October 31, 2013, all of the securities in this Fund were valued based on Level 1 inputs (see the Schedule of Investments for security categories). 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.
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, 2013, the Fund engaged in securities sales of $981,174, which resulted in net realized gains of $252,317.
NOTE 5—Expense Offset Arrangement(s)
The expense offset arrangement is comprised of transfer agency credits which result from balances in demand deposit accounts used by the transfer agent for clearing shareholder transactions. For the six months ended October 31, 2013, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $1,497.
12 Invesco American Value 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.
NOTE 7—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 8—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 GAAP. 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. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in 8 tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund had a capital loss carryforward as of April 30, 2013, which expires as follows:
| Capital Loss Carryforward* | ||||||||||||
| Expiration | Short-Term | Long-Term | Total | |||||||||
April 30, 2018 | $ | 7,404,225 | $ | — | $ | 7,404,225 | ||||||
| * | Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. To the extent that unrealized gains as of May 23, 2011, the date of the reorganizations of Invesco Mid-Cap Value Fund and Invesco Mid Cap Basic Value Fund, into the Fund and April 30, 2012, the date of reorganization of Invesco U.S. Mid Cap Value Fund into the Fund are realized on securities held in each fund at such dates of reorganizations, the capital loss carryforward may be further limited for up to five years from the dates of the reorganizations. |
NOTE 9—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the six months ended October 31, 2013 was $347,402,960 and $331,909,475, 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 | $ | 356,812,661 | ||
Aggregate unrealized (depreciation) of investment securities | (18,363,704 | ) | ||
Net unrealized appreciation of investment securities | $ | 338,448,957 | ||
Cost of investments for tax purposes is $1,292,956,026.
13 Invesco American Value Fund
NOTE 10—Share Information
| Summary of Share Activity | ||||||||||||||||
| Six months ended October 31, 2013(a) | Year ended April 30, 2013 | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Class A | 3,127,701 | $ | 119,606,802 | 6,488,372 | $ | 207,332,373 | ||||||||||
Class B | 32,000 | 1,101,184 | 63,716 | 1,836,571 | ||||||||||||
Class C | 341,079 | 11,710,970 | 584,850 | 16,698,836 | ||||||||||||
Class R | 334,994 | 12,849,382 | 1,166,238 | 36,616,619 | ||||||||||||
Class Y | 2,440,109 | 92,354,035 | 3,391,951 | 106,167,612 | ||||||||||||
Class R5 | 319,731 | 12,331,854 | 906,901 | 28,244,327 | ||||||||||||
Class R6(b) | 177,221 | 6,819,664 | 1,513,542 | 53,487,755 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Class A | 55,343 | 2,091,408 | 111,067 | 3,562,021 | ||||||||||||
Class B | 2,561 | 88,096 | 6,446 | 187,405 | ||||||||||||
Class C | 1,527 | 54,056 | — | — | ||||||||||||
Class R | 1,798 | 67,746 | 4,263 | 138,084 | ||||||||||||
Class Y | 29,888 | 1,137,556 | 61,957 | 1,976,545 | ||||||||||||
Class R5 | 3,698 | 140,788 | 6,175 | 197,236 | ||||||||||||
Class R6 | 7,161 | 271,826 | 3,595 | 127,291 | ||||||||||||
Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||
Class A | 84,011 | 3,238,118 | 251,090 | 7,959,533 | ||||||||||||
Class B | (92,222 | ) | (3,238,118 | ) | (275,606 | ) | (7,959,533 | ) | ||||||||
Reacquired: | ||||||||||||||||
Class A | (3,271,245 | ) | (123,739,281 | ) | (5,868,014 | ) | (188,796,784 | ) | ||||||||
Class B | (67,960 | ) | (2,350,291 | ) | (215,332 | ) | (6,245,670 | ) | ||||||||
Class C | (242,661 | ) | (8,304,138 | ) | (563,396 | ) | (15,898,681 | ) | ||||||||
Class R | (558,227 | ) | (21,083,656 | ) | (733,839 | ) | (23,904,982 | ) | ||||||||
Class Y | (952,827 | ) | (36,521,187 | ) | (3,861,727 | ) | (128,480,138 | ) | ||||||||
Class R5 | (87,253 | ) | (3,353,681 | ) | (572,318 | ) | (18,093,929 | ) | ||||||||
Class R6 | (113,397 | ) | (4,375,859 | ) | (25,995 | ) | (919,348 | ) | ||||||||
Net increase in share activity | 1,573,030 | $ | 60,897,274 | 2,443,936 | $ | 74,233,143 | ||||||||||
| (a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 36% 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 September 24, 2012. |
14 Invesco American Value Fund
NOTE 11—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
| Net asset value, beginning of period | Net investment income (loss)(a) | Net gains on securities | Total from investment operations | Dividends from net Investment income | Distributions from net realized gains | Total distributions | Net asset value, end of period | Total return | Net assets, end of period (000’s omitted) | Ratio of expenses to average net assets with fee waivers and/or expenses absorbed | Ratio of expenses to average net assets without fee waivers and/or expenses absorbed | Ratio of net investment income (loss) to average net assets | Portfolio turnover(b) | |||||||||||||||||||||||||||||||||||||||||||
Class A |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | $ | 35.77 | $ | 0.03 | $ | 4.93 | $ | 4.96 | $ | (0.10 | ) | $ | — | $ | (0.10 | ) | $ | 40.63 | 13.87 | %(c) | $ | 961,443 | 1.19 | %(d) | 1.20 | %(d) | 0.14 | %(d) | 24 | % | ||||||||||||||||||||||||||
Year ended 04/30/13 | 30.90 | 0.17 | 4.86 | 5.03 | (0.16 | ) | — | (0.16 | ) | 35.77 | 16.35 | (c) | 846,516 | 1.22 | 1.23 | 0.54 | 28 | |||||||||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 29.86 | 0.14 | 0.98 | 1.12 | (0.08 | ) | — | (0.08 | ) | 30.90 | 3.80 | (c) | 700,857 | 1.31 | 1.32 | 0.52 | 30 | |||||||||||||||||||||||||||||||||||||||
Ten months ended 04/30/11 | 22.22 | 0.07 | 7.61 | 7.68 | (0.04 | ) | — | (0.04 | ) | 29.86 | 34.57 | (c) | 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 | (c) | 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 | ||||||||||||||||||||||||||||||||||||
Class B |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | 32.58 | 0.03 | 4.49 | 4.52 | (0.09 | ) | — | (0.09 | ) | 37.01 | 13.88 | (c)(g) | 37,063 | 1.19 | (d)(g) | 1.20 | (d)(g) | 0.14 | (d)(g) | 24 | ||||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 28.15 | 0.16 | 4.42 | 4.58 | (0.15 | ) | — | (0.15 | ) | 32.58 | 16.33 | (c)(g) | 36,720 | 1.22 | (g) | 1.23 | (g) | 0.54 | (g) | 28 | ||||||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 27.19 | 0.14 | 0.90 | 1.04 | (0.08 | ) | — | (0.08 | ) | 28.15 | 3.84 | (c)(g) | 43,561 | 1.27 | (g) | 1.28 | (g) | 0.56 | (g) | 30 | ||||||||||||||||||||||||||||||||||||
Ten months ended 04/30/11 | 20.23 | 0.04 | 6.93 | 6.97 | (0.01 | ) | — | (0.01 | ) | 27.19 | 34.45 | (c)(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 | (c)(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 | |||||||||||||||||||||||||||||||||
Class C |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | 32.00 | (0.10 | ) | 4.41 | 4.31 | (0.02 | ) | — | (0.02 | ) | 36.29 | 13.47 | (c)(j) | 104,025 | 1.88 | (d)(j) | 1.89 | (d)(j) | (0.55 | )(d)(j) | 24 | |||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 27.70 | (0.06 | ) | 4.36 | 4.30 | — | — | — | 32.00 | 15.52 | (c) | 88,519 | 1.97 | 1.98 | (0.21 | ) | 28 | |||||||||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 26.89 | (0.05 | ) | 0.86 | 0.81 | — | — | — | 27.70 | 3.01 | (c)(j) | 76,053 | 2.03 | (j) | 2.04 | (j) | (0.20 | )(j) | 30 | |||||||||||||||||||||||||||||||||||||
Ten months ended 04/30/11 | 20.11 | (0.07 | ) | 6.85 | 6.78 | — | — | — | 26.89 | 33.72 | (c)(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 | (c) | 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 | |||||||||||||||||||||||||||||||||||
Class R |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | 35.74 | (0.02 | ) | 4.93 | 4.91 | (0.05 | ) | — | (0.05 | ) | 40.60 | 13.74 | (c) | 56,993 | 1.44 | (d) | 1.45 | (d) | (0.11 | )(d) | 24 | |||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 30.87 | 0.10 | 4.86 | 4.96 | (0.09 | ) | — | (0.09 | ) | 35.74 | 16.08 | (c) | 58,086 | 1.47 | 1.48 | 0.29 | 28 | |||||||||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 29.84 | 0.08 | 0.97 | 1.05 | (0.02 | ) | — | (0.02 | ) | 30.87 | 3.51 | (c) | 36,695 | 1.56 | 1.57 | 0.27 | 30 | |||||||||||||||||||||||||||||||||||||||
Ten months ended 04/30/11 | 22.23 | 0.02 | 7.59 | 7.61 | (0.00 | ) | — | (0.00 | ) | 29.84 | 34.24 | (c) | 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 | (c) | 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 | ||||||||||||||||||||||||||||||||||||
Class Y |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | 35.90 | 0.08 | 4.94 | 5.02 | (0.14 | ) | — | (0.14 | ) | 40.78 | 14.02 | (c) | 386,248 | 0.94 | (d) | 0.95 | (d) | 0.39 | (d) | 24 | ||||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 31.01 | 0.25 | 4.88 | 5.13 | (0.24 | ) | — | (0.24 | ) | 35.90 | 16.65 | (c) | 285,560 | 0.97 | 0.98 | 0.79 | 28 | |||||||||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 29.98 | 0.21 | 0.97 | 1.18 | (0.15 | ) | — | (0.15 | ) | 31.01 | 4.01 | (c) | 259,308 | 1.06 | 1.07 | 0.77 | 30 | |||||||||||||||||||||||||||||||||||||||
Ten months ended 04/30/11 | 22.31 | 0.13 | 7.63 | 7.76 | (0.09 | ) | — | (0.09 | ) | 29.98 | 34.81 | (c) | 37,488 | 1.01 | (e) | 1.02 | (e) | 0.59 | (e) | 28 | ||||||||||||||||||||||||||||||||||||
Year ended 06/30/10(m) | 17.50 | 0.17 | 4.81 | 4.98 | �� | (0.17 | ) | — | (0.17 | ) | 22.31 | 28.47 | (c) | 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 | )(n) | 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 | )(n) | 6,909 | 1.02 | 1.02 | 0.67 | 65 | ||||||||||||||||||||||||||||||||||||
Class R5 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | 35.91 | 0.10 | 4.95 | 5.05 | (0.17 | ) | — | (0.17 | ) | 40.79 | 14.08 | (c) | 39,755 | 0.84 | (d) | 0.85 | (d) | 0.49 | (d) | 24 | ||||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 31.02 | 0.29 | 4.89 | 5.18 | (0.29 | ) | — | (0.29 | ) | 35.91 | 16.81 | (c) | 26,519 | 0.86 | 0.87 | 0.90 | 28 | |||||||||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 29.98 | 0.28 | 0.97 | 1.25 | (0.21 | ) | — | (0.21 | ) | 31.02 | 4.26 | (c) | 12,340 | 0.87 | 0.88 | 0.96 | 30 | |||||||||||||||||||||||||||||||||||||||
Ten months ended 04/30/11 | 22.31 | 0.15 | 7.64 | 7.79 | (0.12 | ) | — | (0.12 | ) | 29.98 | 34.98 | (c) | 24 | 0.79 | (e) | 0.80 | (e) | 0.81 | (e) | 28 | ||||||||||||||||||||||||||||||||||||
Year ended 06/30/10(o) | 23.19 | 0.03 | (0.88 | ) | (0.85 | ) | (0.03 | ) | — | (0.03 | ) | 22.31 | (3.69 | )(c) | 2,592 | 0.62 | (e) | 0.62 | (e) | 1.37 | (e) | 50 | ||||||||||||||||||||||||||||||||||
Class R6 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | 35.90 | 0.11 | 4.96 | 5.07 | (0.18 | ) | — | (0.18 | ) | 40.79 | 14.16 | (c) | 63,712 | 0.75 | (d) | 0.76 | (d) | 0.58 | (d) | 24 | ||||||||||||||||||||||||||||||||||||
Year ended 04/30/13(o) | 31.40 | 0.22 | 4.45 | 4.67 | (0.17 | ) | — | (0.17 | ) | 35.90 | 14.92 | (c) | 53,538 | 0.75 | (e) | 0.76 | (e) | 1.01 | (e) | 28 | ||||||||||||||||||||||||||||||||||||
| (a) | Calculated using average shares outstanding. |
| (b) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. For the year ended April 30, 2012, the portfolio turnover calculation excludes the value of securities purchased of $397,951,008 and sold of $108,111,947 in the effort to realign the Fund’s portfolio holdings after the reorganization of Invesco Mid-Cap Value Fund, Invesco Mid Cap Basic Value Fund and Invesco U.S. Mid Cap 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, if applicable. |
| (d) | Ratios are annualized and based on average daily net assets (000’s omitted) of $896,929, $37,240, $95,789, $54,643, $343,036, $32,808 and $58,441 for Class A, Class B, Class C, Class R, Class Y, Class R5 and Class R6 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 0.25%, 0.25%, 0.21%, 0.37% and 0.49% for the six months ended October 31, 2013, years ended April 30, 2013, 2012, the ten months ended April 30, 2011 and the year ended June 30, 2010, respectively. |
| (h) | Assumes reinvestment of all distributions for the period and does not include payment of the maximum CDSC of 5%, charged on certain redemptions made within one year of purchase and declining to 0% after the fifth year. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to 1% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. |
15 Invesco American Value Fund
| (i) | The Total return, Ratio of expenses to average net assets and Ratio of net investment income (loss) to average net assets reflect actual 12b-1 fees of less than 1%. |
| (j) | The Total return, Ratio of expenses to average net assets and Ratio of net investment income (loss) to average net assets reflect actual 12b-1 fees of 0.94%, 0.97% and 0.96% for the six months ended October 31, 2013, year ended April 30, 2012 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) | On June 1, 2010, Class I shares of Van Kampen American Value Fund were reorganized into Class Y shares. |
| (n) | Assumes reinvestment of all distributions for the period. These returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption on Fund shares. |
| (o) | Commencement date of June 1, 2010 and September 24, 2012 for Class R5 and Class R6 shares, respectively. |
16 Invesco 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, 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, 2013 through October 31, 2013.
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 or contingent deferred sales charges on redemptions, 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.
| Class | Beginning Account Value (05/01/13) | ACTUAL | HYPOTHETICAL (5% annual return before expenses) | Annualized Expense Ratio | ||||||||||||||||||||
| Ending Account Value (10/31/13)1 | Expenses Paid During Period2 | Ending Account Value (10/31/13) | Expenses Paid During Period2 | |||||||||||||||||||||
| A | $ | 1,000.00 | $ | 1,138.70 | $ | 6.41 | $ | 1,019.21 | $ | 6.06 | 1.19 | % | ||||||||||||
| B | 1,000.00 | 1,138.80 | 6.42 | 1,019.21 | 6.06 | 1.19 | ||||||||||||||||||
| C | 1,000.00 | 1,134.70 | 10.12 | 1,015.73 | 9.55 | 1.88 | ||||||||||||||||||
| R | 1,000.00 | 1,137.40 | 7.76 | 1,017.95 | 7.32 | 1.44 | ||||||||||||||||||
| Y | 1,000.00 | 1,140.20 | 5.07 | 1,020.47 | 4.79 | 0.94 | ||||||||||||||||||
| R5 | 1,000.00 | 1,141.10 | 4.53 | 1,020.97 | 4.28 | 0.84 | ||||||||||||||||||
| R6 | 1,000.00 | 1,141.60 | 4.05 | 1,021.42 | 3.82 | 0.75 | ||||||||||||||||||
| 1 | The actual ending account value is based on the actual total return of the Fund for the period May 1, 2013 through October 31, 2013, 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 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 Invesco American Value Fund’s (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 17-19, 2013, the Board as a whole, and the disinterested or “independent” Trustees, who comprise over 75% 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, 2013. The Board determined that continuation of 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 payable to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is primarily responsible for overseeing the management of a number of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned Invesco Funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies, limitations and investment risks of these funds. The Sub-Committees meet regularly and at designated contract renewal meetings each year to conduct a review of the performance, fees, expenses and other matters related to their assigned Invesco Funds. Each Sub-Committee recommends to the Investments Committee, which in turn recommends to the full Board, whether and on what terms to approve the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Trustees receive comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and Lipper Inc. (Lipper), an
independent provider of investment company data. The Trustees also receive an independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. The independent Trustees are assisted in their annual evaluation of the Fund’s investment advisory agreement by the Senior Officer and by independent legal counsel. In addition to meetings with Invesco Advisers and fund counsel, the independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in separate sessions with the Senior Officer and with independent legal counsel.
In evaluating the fairness and reasonableness of compensation under the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Trustees recognized that the advisory fee rates for the Invesco Funds are, in many cases, the result of years of review and negotiation between the Trustees and Invesco Advisers as well as advisory fees previously approved by different predecessor boards. 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. The Trustees’ review and conclusions are based on the comprehensive consideration of all information presented to them and are not the result of any single determinative factor. Moreover, one Trustee may have weighed a particular piece of information or factor differently than another Trustee.
The discussion below serves as the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 19, 2013, and may not reflect consideration of factors that became known to the Board after that date, including, for example, changes to the Fund’s performance, advisory fees, expense limitations and/or fee waivers.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
| A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the
performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers, with whom the Sub-Committees met during the year. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s consideration of Invesco Advisers’ 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 benefits of reapproving an existing relationship and the greater uncertainty that may be associated with entering into a new relationship. The Board also considered non-advisory services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution and legal and compliance. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services that may be 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 may invest, make recommendations regarding securities and assist with security trades. 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 that may be provided by the Affiliated Sub-Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s sub-advisory contracts.
| B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
The Board compared the Fund’s performance during the past one, three and five calendar years to the performance of funds in the Lipper performance universe and against the Lipper
18 Invesco American Value Fund
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 and five year periods and the first 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 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. The Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
| C. | Advisory and Sub-Advisory Fees |
The Board compared the Fund’s contractual management fee rate to the contractual management fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the contractual management fee rate for Class A shares of the Fund was below the median contractual management fee rate of funds in the expense group. The Board noted that the term “contractual management fee” may include both advisory and certain administrative services fees and that Invesco Advisers does not charge the Invesco Funds for the administrative services included in the term as defined by Lipper. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using each fund’s contractual management fee schedule (including any applicable breakpoints) as reported in the most recent prospectus or statement of additional information for each fund in the expense group.
The Board also compared the Fund’s effective advisory fee rate (the advisory fee rate after advisory fee waivers and before other expense limitations/waivers) to the effective 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 advisory fee rate was below the effective advisory fee rate of one other mutual fund and below the total account level fees of two mutual funds with investment strategies comparable to those of the Fund advised or 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 advise other mutual funds or client accounts with investment strategies comparable to those of the Fund.
The Board also considered the services that may be provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the fees payable by Invesco Advisers to the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board also noted that the sub-advisory fees are not paid directly by the Fund, but rather, are payable to the Affiliated Sub-Advisers.
Based upon the information and considerations described above, the Board concluded that the compensation payable to Invesco Advisers and the Affiliated Sub-Advisers is fair and reasonable.
| D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule and [was assisted in their review by a report from the Senior Officer. The Board also noted that the Fund shares directly in economies of scale through lower fees charged by third party service providers based on the combined size of the Invesco Funds and other clients advised by Invesco Advisers.
| E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the profitability of Invesco Advisers and its affiliates in providing these services for the year ended December 31, 2012. The Board received information from Invesco Advisers about the methodology used to prepare the profitability information. The Board considered the profitability of Invesco Advisers in managing the Fund and the Invesco Funds. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its subsidiaries provide to the Invesco Funds and the Fund. The Board did not deem the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund to be excessive given the nature, quality and extent of the services provided to the Invesco Funds. The Board received and accepted information from Invesco Advisers demonstrating that Invesco Advisers and each Affiliated Sub-Adviser are financially sound and have the resources necessary to perform their obligations under the investment advisory agreement and sub-advisory contracts.
| F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund, including the fees received for their provision of transfer agency and distribution services to the Fund. The Board considered comparative information regarding fees charged for these services, including information provided by Lipper and other independent sources. The Board considered the performance of Invesco Advisers and its affiliates in providing these services and the organizational structure employed to provide these services. The Board also considered that these services are provided to the Fund pursuant to written contracts that are reviewed and approved on an annual basis by the Board; that the services are required for the operation of the Fund; that Invesco Advisers and its affiliates can provide services, the
nature and quality of which are at least equal to those provided by others offering the same or similar services; and that the fees for such services are fair and reasonable in light of the usual and customary charges by others for services of the same nature and quality.
The Board considered the benefits realized by Invesco Advisers and the Affiliated Sub-Advisers as a result of portfolio brokerage transactions executed through “soft dollar” arrangements. The Board noted that soft dollar arrangements shift the payment obligation for research services from Invesco Advisers and the Affiliated Sub-Advisers to the Invesco Funds and that the research received may be used with other clients of Invesco Advisers and may reduce Invesco Advisers’ and the Affiliated Sub-Advisers’ expenses. The Board also considered periodic reports from the Chief Compliance Officer of the Invesco Funds demonstrating that these arrangements are consistent with regulatory requirements. The Board did not deem the soft dollar arrangements to be inappropriate.
The Board considered that the Fund’s uninvested cash and cash collateral from any securities lending arrangements may be invested in money market funds advised by Invesco Advisers pursuant to procedures approved by the Board. The Board noted that Invesco Advisers receives advisory fees from these affiliated money market funds attributable to such investments, although Invesco Advisers has contractually agreed to waive through varying periods the advisory fees payable by the Invesco Funds. The waiver is in an amount equal to 100% of the net advisory fee Invesco Advisers receives from the affiliated money market funds with respect to the Fund’s investment in the affiliated money market funds of uninvested cash, but not cash collateral. The Board concluded that the Fund’s investment of uninvested cash and cash collateral from any securities lending arrangements in the affiliated money market funds is in the best interests of the Fund and its shareholders.
The Board also considered use of an affiliated broker to execute certain trades for the Fund to among other things, control information leakage, and were advised that such trades are executed in compliance with rules under the Investment Company Act of 1940, as amended.
19 Invesco American Value Fund
Invesco mailing information
Send general correspondence to Invesco Investment Services, Inc., P.O. Box 219078, Kansas City, MO 64121-9078.
Invesco privacy policy
You share personal and financial information with us that is necessary for your transactions and your account records. We take very seriously the obligation to keep that information confidential and private.
Invesco collects nonpublic personal information about you from account applications or other forms you complete and from your transactions with us or our affiliates. We do not disclose information about you or our former customers to service providers or other third parties except to the extent necessary to service your account and in other limited circumstances as permitted by law. For example, we use this information to facilitate the delivery of transaction confirmations, financial reports, prospectuses and tax forms.
Even within Invesco, only people involved in the servicing of your accounts and compliance monitoring have access to your information. To ensure the highest level of confidentiality and security, Invesco maintains physical, electronic and procedural safeguards that meet or exceed federal standards. Special measures, such as data encryption and authentication, apply to your communications with us on our website. More detail is available to you at invesco.com/privacy.
Important notice regarding delivery of security holder documents
To reduce Fund expenses, only one copy of most shareholder documents may be mailed to shareholders with multiple accounts at the same address (Householding). Mailing of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact Invesco Investment Services, Inc. at 800 959 4246 or contact your financial institution. We will begin sending you individual copies for each account within 30 days after receiving your request.
Fund holdings and proxy voting information
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is available at invesco.com/completeqtrholdings. Shareholders can also look up the Fund’s Forms N-Q on the SEC website at sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are shown below.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov.
Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
|  |
| SEC file numbers: 811-03826 and 002-85905 | VK-AMVA-SAR-1 | Invesco Distributors, Inc. |
| Semiannual Report to Shareholders | October 31, 2013 |
Invesco Comstock Fund
Nasdaq:
A: ACSTX n B: ACSWX n C: ACSYX n R: ACSRX n Y: ACSDX
n R5: ACSHX n R6: ICSFX
| 2 | Fund Performance |
| 4 | Letters to Shareholders |
| 5 | Schedule of Investments |
| 7 | Financial Statements |
| 9 | Notes to Financial Statements |
| 17 | Financial Highlights |
| 18 | Fund Expenses |
| 19 | Approval of Investment Advisory and Sub-Advisory Contracts |
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, 4/30/13 to 10/31/13, 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 | 11.70 | % | ||
Class B Shares | 11.59 | |||
Class C Shares | 11.28 | |||
Class R Shares | 11.61 | |||
Class Y Shares | 11.84 | |||
Class R5 Shares | 11.93 | |||
Class R6 Shares | 11.88 | |||
S&P 500 Indexq (Broad Market Index) | 11.15 | |||
Russell 1000 Value Indexn (Style-Specific Index) | 10.30 | |||
Lipper Large-Cap Value Funds Index¿ (Peer Group Index) | 11.34 |
Source(s): qInvesco, S&P-Dow Jones via FactSet Research Systems Inc.;
nInvesco, Russell via FactSet Research Systems Inc.; ¿Lipper Inc.
The S&P 500® Index is an unmanaged index considered representative of the US 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) described 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 Comstock Fund
| Average Annual Total Returns | ||||
As of 10/31/13, including maximum applicable sales charges
|
| |||
Class A Shares | ||||
Inception (10/7/68) | 10.97 | % | ||
10 Years | 7.32 | |||
5 Years | 14.46 | |||
1 Year | 23.25 | |||
Class B Shares | ||||
Inception (10/19/92) | 10.07 | % | ||
10 Years | 7.60 | |||
5 Years | 15.45 | |||
1 Year | 25.03 | |||
Class C Shares | ||||
Inception (10/26/93) | 9.41 | % | ||
10 Years | 7.12 | |||
5 Years | 14.90 | |||
1 Year | 28.49 | |||
Class R Shares | ||||
Inception (10/1/02) | 9.54 | % | ||
10 Years | 7.66 | |||
5 Years | 15.48 | |||
1 Year | 30.20 | |||
Class Y Shares | ||||
Inception (10/29/04) | 7.22 | % | ||
5 Years | 16.05 | |||
1 Year | 30.78 | |||
Class R5 Shares | ||||
10 Years | 8.07 | % | ||
5 Years | 16.07 | |||
1 Year | 30.98 | |||
Class R6 Shares | ||||
10 Years | 7.98 | % | ||
5 Years | 15.88 | |||
1 Year | 30.96 | |||
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 (renamed Invesco 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 Comstock Fund. Share class returns will differ from the predecessor fund because of different expenses.
Class R5 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
| Average Annual Total Returns | ||||
| As of 9/30/13, the most recent calendar quarter end, including maximum applicable sales charges | ||||
Class A Shares | ||||
Inception (10/7/68) | 10.89 | % | ||
10 Years | 7.29 | |||
5 Years | 9.29 | |||
1 Year | 18.76 | |||
Class B Shares | ||||
Inception (10/19/92) | 9.90 | % | ||
10 Years | 7.56 | |||
5 Years | 10.16 | |||
1 Year | 20.11 | |||
Class C Shares | ||||
Inception (10/26/93) | 9.23 | % | ||
10 Years | 7.08 | |||
5 Years | 9.69 | |||
1 Year | 23.63 | |||
Class R Shares | ||||
Inception (10/1/02) | 9.21 | % | ||
10 Years | 7.61 | |||
5 Years | 10.25 | |||
1 Year | 25.33 | |||
Class Y Shares | ||||
Inception (10/29/04) | 6.80 | % | ||
5 Years | 10.82 | |||
1 Year | 25.96 | |||
Class R5 Shares | ||||
10 Years | 8.03 | % | ||
5 Years | 10.81 | |||
1 Year | 26.03 | |||
Class R6 Shares | ||||
10 Years | 7.95 | % | ||
5 Years | 10.64 | |||
1 Year | 26.13 | |||
fees applicable to Class A shares. Class A share performance reflects any applicable fee waivers or expense reimbursements.
Class R6 shares incepted on September 24, 2012. Performance shown prior to that date is that of the Fund’s and 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, Class R5 and Class R6 shares was 0.86%, 0.98%, 1.61%, 1.11%, 0.61%, 0.49% and 0.41%, 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, Class R5 and Class R6 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 Comstock Fund
Letters to Shareholders
Bruce Crockett | Dear Fellow Shareholders: The Invesco Funds Board has worked on a variety of issues over the last several months, and I’d like to take this opportunity to discuss two that affect you and our fellow fund shareholders. The first issue on which your Board has been working is our annual review of the funds’ advisory and sub-advisory contracts with Invesco Advisers and its affiliates. This annual review focuses on the nature and quality of the services Invesco provides as adviser to the Invesco Funds and the reasonableness of the fees that it charges for those services. Each year, we spend months reviewing detailed information, including information from many independent sources. I’m pleased to report that the Board determined in June that renewing the investment advisory agreement and the sub-advisory contracts with Invesco Advisers and its affiliates would serve the best interests of each fund and its shareholders. | |
The second area of focus to highlight is the Board’s efforts to ensure that we provide a lineup of funds that allow financial advisers to build portfolios that meet shareholders’ changing financial needs and goals.
The members of your Board have worked with Invesco Advisers to provide more income-generating options in the Invesco Funds lineup to help shareholders potentially meet their income needs. Your Board recently approved changes to three existing equity mutual funds, increasing their focus on generating income while also seeking to provide long-term growth of capital.
Be assured that your Board will continue working on behalf of fund shareholders, keeping your needs and interests uppermost in our minds.
As always, please contact me at bruce@brucecrockett.com with any questions or concerns you may have. On behalf of the Board, we look forward to continuing to represent your interests and serving your needs.
Sincerely,
Bruce L. Crockett
Independent Chair
Invesco Funds Board of Trustees
Philip Taylor | Dear Shareholders: Enclosed in this semiannual report, you’ll find performance data for your Fund, a complete list of your Fund’s investments as of the close of the reporting period and other important information. I hope you find this report of interest. Our website, invesco.com/us, provides fund-specific as well as more general information from many of Invesco’s investment professionals. You’ll find in-depth articles, video clips and audio commentaries – and, of course, you also can access information about your Invesco account whenever it’s convenient for you. At Invesco, all of our people and all of our resources are dedicated to helping investors achieve their financial objectives. It’s a philosophy we call Intentional Investing, and it guides the way we: n Manage investments – Our dedicated investment professionals search the world for the best opportunities, and each investment team follows a clear, disciplined process to build portfolios and mitigate risk. | |
| n | Provide choices – We offer multiple investment strategies, allowing you and your financial adviser to build a portfolio that’s purpose-built for your needs. |
| n | Connect with you – We’re committed to giving you the expert insights you need to make informed investing decisions, and we are well-equipped to provide high-quality support for investors and advisers. |
For questions about your account, feel free to contact an Invesco client services representative at 800 959 4246. For Invesco-related questions or comments, please email me directly at phil@invesco.com.
All of us at Invesco look forward to serving your investment management needs for many years to come. Thank you for investing with us.
Sincerely,
Philip Taylor
Senior Managing Director, Invesco Ltd.
4 Invesco Comstock Fund
Schedule of Investments(a)
October 31, 2013
(Unaudited)
| Shares | Value | |||||||
Common Stocks & Other Equity Interests–94.59% |
| |||||||
| Aerospace & Defense–1.65% | ||||||||
Honeywell International Inc. | 982,924 | $ | 85,248,998 | |||||
Textron Inc. | 3,387,991 | 97,540,261 | ||||||
| 182,789,259 | ||||||||
| Agricultural Products–0.46% | ||||||||
Archer-Daniels-Midland Co. | 1,231,879 | 50,383,851 | ||||||
| Aluminum–0.89% | ||||||||
Alcoa Inc. | 10,656,029 | 98,781,389 | ||||||
| Application Software–0.51% | ||||||||
Autodesk, Inc.(b) | 1,401,003 | 55,914,030 | ||||||
| Asset Management & Custody Banks–2.91% | ||||||||
Bank of New York Mellon Corp. (The) | 7,428,749 | 236,234,218 | ||||||
State Street Corp. | 1,223,694 | 85,744,239 | ||||||
| 321,978,457 | ||||||||
| Auto Parts & Equipment–1.07% | ||||||||
Johnson Controls, Inc. | 2,561,674 | 118,221,255 | ||||||
| Automobile Manufacturers–2.08% | ||||||||
General Motors Co.(b) | 6,208,545 | 229,405,738 | ||||||
| Automotive Retail–0.06% | ||||||||
Murphy USA Inc.(b) | 151,648 | 6,153,876 | ||||||
| Cable & Satellite–3.67% | ||||||||
Comcast Corp.–Class A | 3,791,730 | 180,410,513 | ||||||
Time Warner Cable Inc. | 1,872,241 | 224,949,756 | ||||||
| 405,360,269 | ||||||||
| Communications Equipment–0.97% | ||||||||
Cisco Systems, Inc. | 4,781,250 | 107,578,125 | ||||||
| Computer Hardware–1.99% | ||||||||
Hewlett-Packard Co. | 9,030,998 | 220,085,421 | ||||||
| Department Stores–0.89% | ||||||||
Kohl’s Corp. | 1,737,085 | 98,666,428 | ||||||
| Diversified Banks–2.60% | ||||||||
U.S. Bancorp | 1,438,188 | 53,730,704 | ||||||
Wells Fargo & Co. | 5,466,256 | 233,354,468 | ||||||
| 287,085,172 | ||||||||
| Drug Retail–1.51% | ||||||||
CVS Caremark Corp. | 2,673,364 | 166,443,643 | ||||||
| Electric Utilities–1.75% | ||||||||
FirstEnergy Corp. | 1,690,018 | 64,000,982 | ||||||
PPL Corp. | 4,242,484 | 129,947,285 | ||||||
| 193,948,267 | ||||||||
| Electrical Components & Equipment–1.19% | ||||||||
Emerson Electric Co. | 1,972,621 | 132,106,428 | ||||||
| Electronic Components–1.31% | ||||||||
Corning Inc. | 8,483,979 | 144,991,201 | ||||||
| Shares | Value | |||||||
| General Merchandise Stores–0.70% | ||||||||
Target Corp. | 1,193,704 | $ | 77,340,082 | |||||
| Health Care Distributors–0.91% | ||||||||
Cardinal Health, Inc. | 1,721,782 | 100,999,732 | ||||||
| Health Care Services–0.42% | ||||||||
Express Scripts Holding Co.(b) | 737,365 | 46,100,060 | ||||||
| Hotels, Resorts & Cruise Lines–1.38% | ||||||||
Carnival Corp. | 4,411,051 | 152,842,917 | ||||||
| Housewares & Specialties–0.63% | ||||||||
Newell Rubbermaid Inc. | 2,336,441 | 69,228,747 | ||||||
| Industrial Conglomerates–2.02% | ||||||||
General Electric Co. | 8,554,190 | 223,606,527 | ||||||
| Industrial Machinery–1.63% | ||||||||
Ingersoll-Rand PLC(b) | 2,661,863 | 179,755,608 | ||||||
| Integrated Oil & Gas–8.53% | ||||||||
BP PLC–ADR (United Kingdom) | 4,826,424 | 224,428,716 | ||||||
Chevron Corp. | 1,058,733 | 127,005,611 | ||||||
Murphy Oil Corp. | 2,453,772 | 148,011,527 | ||||||
Occidental Petroleum Corp. | 1,392,482 | 133,789,670 | ||||||
Royal Dutch Shell PLC–ADR (United Kingdom) | 2,785,968 | 185,712,627 | ||||||
Suncor Energy, Inc. (Canada) | 3,395,436 | 123,424,099 | ||||||
| 942,372,250 | ||||||||
| Integrated Telecommunication Services–1.04% | ||||||||
AT&T Inc. | 1,262,581 | 45,705,432 | ||||||
Verizon Communications Inc. | 1,369,693 | 69,183,194 | ||||||
| 114,888,626 | ||||||||
| Internet Software & Services–2.07% | ||||||||
eBay Inc.(b) | 2,849,653 | 150,205,209 | ||||||
Yahoo! Inc.(b) | 2,384,317 | 78,515,559 | ||||||
| 228,720,768 | ||||||||
| Investment Banking & Brokerage–2.50% | ||||||||
Goldman Sachs Group, Inc. (The) | 669,883 | 107,757,379 | ||||||
Morgan Stanley | 5,868,383 | 168,598,644 | ||||||
| 276,356,023 | ||||||||
| Life & Health Insurance–1.86% | ||||||||
Aflac, Inc. | 1,119,434 | 72,740,821 | ||||||
MetLife, Inc. | 2,803,663 | 132,641,297 | ||||||
| 205,382,118 | ||||||||
| Managed Health Care–2.92% | ||||||||
UnitedHealth Group Inc. | 2,939,796 | 200,670,475 | ||||||
WellPoint, Inc. | 1,444,041 | 122,454,677 | ||||||
| 323,125,152 | ||||||||
| Movies & Entertainment–5.04% | ||||||||
Time Warner Inc. | 1,175,599 | 80,810,675 | ||||||
Twenty-First Century Fox, Inc.–Class B | 4,860,975 | 165,273,150 | ||||||
Viacom Inc.–Class B | 3,307,185 | 275,455,439 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
5 Invesco Comstock Fund
| Shares | Value | |||||||
| Movies & Entertainment–(continued) | ||||||||
Vivendi S.A. (France) | 1,390,311 | $ | 35,243,101 | |||||
| 556,782,365 | ||||||||
| Oil & Gas Drilling–0.41% | ||||||||
Noble Corp. | 1,211,991 | 45,692,061 | ||||||
| Oil & Gas Equipment & Services–4.77% | ||||||||
Halliburton Co. | 4,697,023 | 249,083,129 | ||||||
Weatherford International Ltd.(b) | 16,926,004 | 278,263,506 | ||||||
| 527,346,635 | ||||||||
| Oil & Gas Exploration & Production–1.19% | ||||||||
QEP Resources Inc. | 3,995,870 | 132,103,462 | ||||||
| Other Diversified Financial Services–8.31% | ||||||||
Bank of America Corp. | 11,935,479 | 166,619,287 | ||||||
Citigroup Inc. | 8,715,960 | 425,164,529 | ||||||
JPMorgan Chase & Co. | 6,348,161 | 327,184,218 | ||||||
| 918,968,034 | ||||||||
| Packaged Foods & Meats–3.50% | ||||||||
ConAgra Foods, Inc. | 3,973,951 | 126,411,382 | ||||||
Mondelez International Inc.–Class A | 2,985,414 | 100,429,327 | ||||||
Tyson Foods, Inc.–Class A | 2,477,884 | 68,563,050 | ||||||
Unilever N.V.–New York Shares (Netherlands) | 2,295,017 | 91,158,075 | ||||||
| 386,561,834 | ||||||||
| Paper Products–1.02% | ||||||||
International Paper Co. | 2,536,240 | 113,141,666 | ||||||
| Pharmaceuticals–9.85% | ||||||||
Bristol-Myers Squibb Co. | 3,140,157 | 164,921,046 | ||||||
GlaxoSmithKline PLC–ADR (United Kingdom) | 2,015,222 | 106,061,134 | ||||||
Merck & Co., Inc. | 4,723,802 | 212,996,232 | ||||||
Novartis AG (Switzerland) | 2,079,847 | 161,215,368 | ||||||
Pfizer Inc. | 6,356,920 | 195,030,306 | ||||||
| Shares | Value | |||||||
| Pharmaceuticals–(continued) | ||||||||
Roche Holding AG– | 1,511,080 | $ | 104,793,549 | |||||
Sanofi–ADR (France) | 2,695,297 | 144,144,483 | ||||||
| 1,089,162,118 | ||||||||
| Property & Casualty Insurance–2.27% | ||||||||
Allstate Corp. (The) | 3,922,690 | 208,137,931 | ||||||
Travelers Cos., Inc. (The) | 491,075 | 42,379,773 | ||||||
| 250,517,704 | ||||||||
| Regional Banks–2.50% | ||||||||
Fifth Third Bancorp | 5,886,899 | 112,027,688 | ||||||
PNC Financial Services Group, | 2,227,534 | 163,790,575 | ||||||
| 275,818,263 | ||||||||
| Semiconductors–0.60% | ||||||||
Intel Corp. | 2,731,283 | 66,725,244 | ||||||
| Systems Software–2.08% | ||||||||
Microsoft Corp. | 6,505,673 | 229,975,540 | ||||||
| Wireless Telecommunication Services–0.93% | ||||||||
Vodafone Group PLC–ADR (United Kingdom) | 2,785,528 | 102,563,141 | ||||||
Total Common Stocks & Other Equity Interests |
| 10,455,969,486 | ||||||
Money Market Funds–5.37% |
| |||||||
Liquid Assets Portfolio–Institutional Class(c) | 296,777,934 | 296,777,934 | ||||||
Premier Portfolio– | 296,777,935 | 296,777,935 | ||||||
Total Money Market Funds |
| 593,555,869 | ||||||
TOTAL INVESTMENTS–99.96% |
| 11,049,525,355 | ||||||
OTHER ASSETS LESS LIABILITIES–0.04% |
| 4,228,968 | ||||||
NET ASSETS–100.00% |
| $ | 11,053,754,323 | |||||
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. |
Portfolio Composition
By sector, based on Net Assets
as of October 31, 2013
Financials | 22.9 | % | ||
Consumer Discretionary | 15.5 | |||
Energy | 14.9 | |||
Health Care | 14.1 | |||
Information Technology | 9.5 | |||
Industrials | 6.5 | |||
Consumer Staples | 5.5 | |||
Telecommunication Services | 2.0 | |||
Materials | 1.9 | |||
Utilities | 1.8 | |||
Money Market Funds Plus Other Assets Less Liabilities | 5.4 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
6 Invesco Comstock Fund
Statement of Assets and Liabilities
October 31, 2013
(Unaudited)
Assets: |
| |||
Investments, at value (Cost $8,024,974,688) | $ | 10,455,969,486 | ||
Investments in affiliated money market funds, at value and cost | 593,555,869 | |||
Total investments, at value (Cost $8,618,530,557) | 11,049,525,355 | |||
Foreign currencies, at value (Cost $82) | 82 | |||
Receivable for: | ||||
Investments sold | 25,426,584 | |||
Fund shares sold | 13,891,556 | |||
Dividends | 8,498,115 | |||
Investment for trustee deferred compensation and retirement plans | 171,602 | |||
Other assets | 156,042 | |||
Total assets | 11,097,669,336 | |||
Liabilities: |
| |||
Payable for: | ||||
Investments purchased | 12,366,944 | |||
Fund shares reacquired | 18,681,952 | |||
Foreign currency contracts outstanding | 4,821,894 | |||
Accrued fees to affiliates | 6,627,227 | |||
Accrued trustees’ and officers’ fees and benefits | 12,600 | |||
Accrued other operating expenses | 583,231 | |||
Trustee deferred compensation and retirement plans | 821,165 | |||
Total liabilities | 43,915,013 | |||
Net assets applicable to shares outstanding | $ | 11,053,754,323 | ||
Net assets consist of: |
| |||
Shares of beneficial interest | $ | 9,315,728,172 | ||
Undistributed net investment income | 22,537,706 | |||
Undistributed net realized gain (loss) | (710,703,999 | ) | ||
Net unrealized appreciation | 2,426,192,444 | |||
| $ | 11,053,754,323 | |||
Net Assets: |
| |||
Class A | $ | 6,751,474,033 | ||
Class B | $ | 214,469,564 | ||
Class C | $ | 532,445,349 | ||
Class R | $ | 282,028,378 | ||
Class Y | $ | 2,497,875,895 | ||
Class R5 | $ | 544,216,827 | ||
Class R6 | $ | 231,244,277 | ||
Shares outstanding, $0.01 par value per share, |
| |||
Class A | 300,435,581 | |||
Class B | 9,546,200 | |||
Class C | 23,703,539 | |||
Class R | 12,552,240 | |||
Class Y | 111,142,934 | |||
Class R5 | 24,221,670 | |||
Class R6 | 10,294,124 | |||
Class A: | ||||
Net asset value per share | $ | 22.47 | ||
Maximum offering price per share | ||||
(Net asset value of $22.47 ¸ 94.50%) | $ | 23.78 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 22.47 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 22.46 | ||
Class R: | ||||
Net asset value and offering price per share | $ | 22.47 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 22.47 | ||
Class R5: | ||||
Net asset value and offering price per share | $ | 22.47 | ||
Class R6: | ||||
Net asset value and offering price per share | $ | 22.46 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
7 Invesco Comstock Fund
Statement of Operations
For the six months ended October 31, 2013
(Unaudited)
Investment income: |
| |||
Dividends (net of foreign withholding taxes of $1,640,769) | $ | 106,346,879 | ||
Dividends from affiliated money market funds | 156,844 | |||
Total investment income | 106,503,723 | |||
Expenses: | ||||
Advisory fees | 19,842,154 | |||
Administrative services fees | 399,085 | |||
Custodian fees | 140,818 | |||
Distribution fees: | ||||
Class A | 8,114,369 | |||
Class B | 630,660 | |||
Class C | 2,534,540 | |||
Class R | 646,869 | |||
Transfer agent fees — A, B, C, R and Y | 8,173,905 | |||
Transfer agent fees — R5 | 214,948 | |||
Transfer agent fees — R6 | 5,146 | |||
Trustees’ and officers’ fees and benefits | 278,816 | |||
Other | 660,340 | |||
Total expenses | 41,641,650 | |||
Less: Fees waived and expense offset arrangement(s) | (358,103 | ) | ||
Net expenses | 41,283,547 | |||
Net investment income | 65,220,176 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain (loss) from: | ||||
Investment securities (includes net gains from securities sold to affiliates of $370,205) | 156,389,241 | |||
Foreign currencies | (48,529 | ) | ||
Foreign currency contracts | (30,498,569 | ) | ||
| 125,842,143 | ||||
Change in net unrealized appreciation of: | ||||
Investment securities | 955,713,727 | |||
Foreign currencies | 17,420 | |||
Foreign currency contracts | 341,132 | |||
| 956,072,279 | ||||
Net realized and unrealized gain | 1,081,914,422 | |||
Net increase in net assets resulting from operations | $ | 1,147,134,598 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
8 Invesco Comstock Fund
Statement of Changes in Net Assets
For the six months ended October 31, 2013 and the year ended April 30, 2013
(Unaudited)
| October 31, 2013 | April 30, 2013 | |||||||
Operations: | ||||||||
Net investment income | $ | 65,220,176 | $ | 138,779,686 | ||||
Net realized gain | 125,842,143 | 508,621,051 | ||||||
Change in net unrealized appreciation | 956,072,279 | 1,071,967,542 | ||||||
Net increase in net assets resulting from operations | 1,147,134,598 | 1,719,368,279 | ||||||
Distributions to shareholders from net investment income: | ||||||||
Class A | (42,001,607 | ) | (83,504,096 | ) | ||||
Class B | (1,067,650 | ) | (3,962,755 | ) | ||||
Class C | (1,388,814 | ) | (3,465,883 | ) | ||||
Class R | (1,358,918 | ) | (2,508,829 | ) | ||||
Class Y | (17,516,228 | ) | (34,671,348 | ) | ||||
Class R5 | (3,683,087 | ) | (7,159,413 | ) | ||||
Class R6 | (1,912,276 | ) | (1,435,018 | ) | ||||
Total distributions from net investment income | (68,928,580 | ) | (136,707,342 | ) | ||||
Share transactions–net: | ||||||||
Class A | 48,962,374 | (433,257,931 | ) | |||||
Class B | (58,577,218 | ) | (142,261,515 | ) | ||||
Class C | 10,453,853 | (57,062,036 | ) | |||||
Class R | 35,739,118 | (7,138,539 | ) | |||||
Class Y | 105,713,347 | (320,594,954 | ) | |||||
Class R5 | 98,344,758 | (67,864,490 | ) | |||||
Class R6 | 62,325,443 | 128,219,143 | ||||||
Net increase (decrease) in net assets resulting from share transactions | 302,961,675 | (899,960,322 | ) | |||||
Net increase in net assets | 1,381,167,693 | 682,700,615 | ||||||
Net assets: | ||||||||
Beginning of period | 9,672,586,630 | 8,989,886,015 | ||||||
End of period (includes undistributed net investment income of $22,537,706 and $26,246,110, respectively) | $ | 11,053,754,323 | $ | 9,672,586,630 | ||||
Notes to Financial Statements
October 31, 2013
(Unaudited)
NOTE 1—Significant Accounting Policies
Invesco 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 ten separate portfolios, each authorized to issue an unlimited number of shares of beneficial interest. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class.
The Fund’s investment objective is total return through growth of capital and current income.
The Fund currently consists of seven different classes of shares: Class A, Class B, Class C, Class R, Class Y, Class R5 and Class R6. 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, Class R5 and Class R6 shares are sold at net asset value. Effective November 30, 2010, new or additional investments in Class B shares are no longer permitted. Existing shareholders of Class B shares may continue to reinvest dividends and capital gains distributions in Class B shares until they convert to Class A shares. Also, shareholders in Class B shares will be able to exchange those shares for Class B shares of other Invesco Funds offering such shares until they convert to Class A shares. Generally, Class B shares will automatically convert to Class A shares on or about the month-end, which is at least eight years after the date of purchase. Redemption of Class B shares prior to the conversion date will be subject to a CDSC.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
| A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. |
A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular
9 Invesco Comstock Fund
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 (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual trading characteristics and other market data. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Foreign securities’ (including foreign exchange contracts) prices 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 the Adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities’ prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
| B. | Securities Transactions and Investment Income — Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund’s net asset value and, accordingly, they reduce the Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
| C. | Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
| D. | Distributions — Distributions from income and net realized capital gain, if any, are generally declared and paid annually and recorded on the ex-dividend date. The Fund may elect to treat a portion of the proceeds from redemptions as distributions for federal income tax purposes. |
10 Invesco Comstock Fund
| E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (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 Class R5 and Class R6 are allocated to each share class based on relative net assets. Sub-accounting fees attributable to Class R5 are charged to the operations of the class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses relating to all other classes are allocated among those classes based on relative net assets. All other expenses are allocated among the classes based on relative net assets. Prior to June 1, 2010, incremental transfer agency fees which were unique to each class of shares were charged to the operations of such class. |
| G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
| H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements, that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
| I. | Foreign Currency Translations — Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. |
The Fund may invest in foreign securities which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable.
| J. | Foreign Currency Contracts — The Fund may enter into foreign currency contracts to manage or minimize currency or exchange rate risk. The Fund may also enter into foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to “lock in” the U.S. dollar price of that security. A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The use of foreign currency contracts does not eliminate fluctuations in the price of the underlying securities the Fund owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statement of Operations. The primary risks associated with foreign currency contracts include failure of the counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities. |
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser based on the annual rate of the Fund’s average daily net assets as follows:
| Average Daily Net Assets | Rate | |||
First $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).
11 Invesco Comstock Fund
The Adviser has contractually agreed, through at least June 30, 2014, 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, Class R5 and Class R6 shares to 2.00%, 2.75%, 2.75%, 2.25%, 1.75%, 1.75% and 1.75% respectively, of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on June 30, 2014. The fee waiver agreement cannot be terminated during its term. 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, 2014, 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, 2013, the Adviser waived advisory fees of $352,502.
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, 2013, 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, 2013, 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, 2013, 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, 2013, IDI advised the Fund that IDI retained $497,896 in front-end sales commissions from the sale of Class A shares and $11,768, $45,432 and $7,698 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
| Level 1 — | Prices are determined using quoted prices in an active market for identical assets. |
| Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
| Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of October 31, 2013. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 10,748,273,337 | $ | 301,252,018 | $ | — | $ | 11,049,525,355 | ||||||||
Foreign Currency Contracts* | — | (4,821,894 | ) | — | (4,821,894 | ) | ||||||||||
Total Investments | $ | 10,748,273,337 | $ | 296,430,124 | $ | — | $ | 11,044,703,461 | ||||||||
| * | Unrealized appreciation (depreciation). |
12 Invesco Comstock Fund
NOTE 4—Derivative Investments
Value of Derivative Investments at Period-End
The table below summarizes the value of the Fund’s derivative investments, detailed by primary risk exposure, held as of October 31, 2013:
| Value | ||||||||
| Risk Exposure/Derivative Type | Assets | Liabilities | ||||||
Currency risk | ||||||||
Foreign currency contracts(a) | $ | 471,315 | | $ | (5,293,209 | ) | ||
| (a) | Values are disclosed on the Statement of Assets and Liabilities under the caption Foreign currency contracts outstanding. |
Effect of Derivative Investments for the six months ended October 31, 2013
The table below summarizes the gains (losses) on derivative investments, detailed by primary risk exposure, recognized in earnings during the period:
| Location of Gain (Loss) on Statement of Operations | ||||
| Foreign Currency Contracts* | ||||
Realized Gain (Loss) | ||||
Currency risk | $ | (30,498,569 | ) | |
Change in Unrealized Appreciation | ||||
Currency risk | 341,132 | |||
Total | $ | (30,157,437 | ) | |
| * | The average notional value of foreign currency contracts outstanding during the period was $918,345,388. |
| Open Foreign Currency Contracts | ||||||||||||||||||||||||||
Settlement
| Counterparty | Contract to | Notional Value | Unrealized Appreciation (Depreciation) | ||||||||||||||||||||||
| Deliver | Receive | |||||||||||||||||||||||||
11/15/2013 | CIBC N.A. | CAD | 106,755,766 | USD | 102,822,794 | $ | 102,351,479 | $ | 471,315 | |||||||||||||||||
11/15/2013 | State Street Bank and Trust Co. | CHF | 65,306,170 | USD | 71,418,134 | 71,981,163 | (563,029 | ) | ||||||||||||||||||
11/15/2013 | Bank of New York | CHF | 66,217,870 | USD | 72,397,741 | 72,986,049 | (588,308 | ) | ||||||||||||||||||
11/15/2013 | Citibank N.A. | CHF | 66,217,880 | USD | 72,383,112 | 72,986,060 | (602,948 | ) | ||||||||||||||||||
11/15/2013 | CIBC N.A. | EUR | 60,590,488 | USD | 81,730,509 | 82,267,916 | (537,407 | ) | ||||||||||||||||||
11/15/2013 | Bank of New York | EUR | 60,590,488 | USD | 81,791,706 | 82,267,917 | (476,211 | ) | ||||||||||||||||||
11/15/2013 | State Street Bank and Trust Co. | EUR | 60,590,487 | USD | 81,810,487 | 82,267,915 | (457,428 | ) | ||||||||||||||||||
11/15/2013 | Citibank N.A. | EUR | 87,493,951 | USD | 118,074,399 | 118,796,618 | (722,219 | ) | ||||||||||||||||||
11/15/2013 | State Street Bank and Trust Co. | GBP | 57,093,290 | USD | 91,196,254 | 91,528,965 | (332,711 | ) | ||||||||||||||||||
11/15/2013 | Citibank N.A. | GBP | 52,957,650 | USD | 84,563,040 | 84,898,924 | (335,884 | ) | ||||||||||||||||||
11/15/2013 | CIBC N.A. | GBP | 52,957,620 | USD | 84,525,657 | 84,898,876 | (373,219 | ) | ||||||||||||||||||
11/15/2013 | Bank of New York | GBP | 52,957,660 | USD | 84,595,095 | 84,898,940 | (303,845 | ) | ||||||||||||||||||
Total open foreign currency contracts | $ | (4,821,894 | ) | |||||||||||||||||||||||
Currency Abbreviations:
| CAD | – Canadian Dollar | |
| GBP | – British Pound Sterling | |
| CHF | – Swiss Franc |
| USD | – U.S. Dollar | |
| EUR | – Euro |
Offsetting Assets and Liabilities
Effective with the beginning of the Fund’s fiscal year, the Fund has adopted Accounting Standards Update (“ASU”) No. 2011-11, Disclosures about Offsetting Assets and Liabilities, which was subsequently clarified in Financial Accounting Standards Board ASU 2013-01 “Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities”. This update is intended to enhance disclosures about financial instruments and derivative instruments that are subject to offsetting on the Statement of Assets and Liabilities and to enable investors to better understand the effect of those arrangements on its financial position. In order for an arrangement to be eligible for netting, the Fund must have a basis to conclude that such netting arrangements are legally enforceable. The Funds enter into netting agreements and collateral agreements in an attempt to reduce the Fund’s counterparty credit risk by providing for a single net settlement with a counterparty of all financial transactions covered by the agreement in an event of default as defined under such agreement.
13 Invesco Comstock Fund
There were no derivative instruments subject to a netting agreement for which the Fund is not currently netting. The following tables present derivative instruments that are either subject to an enforceable netting agreement or offset by collateral arrangements as of October 31, 2013.
| Assets: | ||||||||||||||||||||||||
| Gross amounts presented in Statement of Assets & Liabilities | Gross amounts offset in Statement of Assets & Liabilities | Net amounts of assets presented in the Statement of Assets and Liabilities | Collateral Received | |||||||||||||||||||||
| Counterparty | Financial Instruments | Cash | Net Amount | |||||||||||||||||||||
CIBC N.A. | $ | 471,315 | $ | (471,315 | ) | $ | — | $ | — | $ | — | $ | — | |||||||||||
| Liabilities: | ||||||||||||||||||||||||
| Gross amounts presented in Statement of Assets & Liabilities | Gross amounts offset in Statement of Assets & Liabilities | Net amounts of liabilities presented in the Statement of Assets and Liabilities | Collateral Pledged | |||||||||||||||||||||
| Counterparty | Financial Instruments | Cash | Net Amount | |||||||||||||||||||||
Bank of New York | $ | 1,368,364 | $ | — | $ | 1,368,364 | $ | — | $ | — | $ | 1,368,364 | ||||||||||||
CIBC N.A. | 910,626 | (471,315 | ) | 439,311 | — | — | 439,311 | |||||||||||||||||
Citibank N.A. | 1,661,051 | — | 1,661,051 | — | — | 1,661,051 | ||||||||||||||||||
State Street Bank and Trust Co. | 1,353,168 | — | 1,353,168 | — | — | 1,353,168 | ||||||||||||||||||
Total | $ | 5,293,209 | $ | (471,315 | ) | $ | 4,821,894 | $ | — | $ | — | $ | 4,821,894 | |||||||||||
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, 2013, the Fund engaged in securities sales of $706,089, which resulted in net realized gains of $370,205.
NOTE 6—Expense Offset Arrangement(s)
The expense offset arrangement is comprised of transfer agency credits which result from balances in demand deposit accounts used by the transfer agent for clearing shareholder transactions. For the six months ended October 31, 2013, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $5,601.
NOTE 7—Trustees’ and Officers’ Fees and Benefits
Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees’ and Officers’ Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 8—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 9—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 GAAP. 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. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in 8 tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
14 Invesco Comstock Fund
The Fund had a capital loss carryforward as of April 30, 2013, which expires as follows:
| Capital Loss Carryforward* | ||||||||||||
| Expiration | Short-Term | Long-Term | Total | |||||||||
April 30, 2017 | $ | 823,271,437 | $ | — | $ | 823,271,437 | ||||||
April 30, 2018 | 8,704,738 | — | 8,704,738 | |||||||||
Total capital loss carryforward | $ | 831,976,175 | $ | — | $ | 831,976,175 | ||||||
| * | Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. To the extent that unrealized gains as of May 23, 2011, the date of reorganizations of Invesco Large Cap Basic Value Fund and Invesco Value II Fund and December 19, 2011, the date of reorganization of Invesco Value Fund into the Fund are realized on securities held in each fund at such dates of reorganizations, the capital loss carryforward may be further limited for up to five years from the dates of the reorganizations. |
NOTE 10—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the six months ended October 31, 2013 was $723,929,895 and $531,803,076, 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 | $ | 2,760,768,317 | ||
Aggregate unrealized (depreciation) of investment securities | (339,659,080 | ) | ||
Net unrealized appreciation of investment securities | $ | 2,421,109,237 | ||
Cost of investments for tax purposes is $8,628,416,118.
15 Invesco Comstock Fund
NOTE 11—Share Information
| Summary of Share Activity | ||||||||||||||||
| Six months ended October 31, 2013(a) | Year ended April 30, 2013 | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Class A | 26,054,370 | $ | 558,788,967 | 28,354,606 | $ | 509,828,054 | ||||||||||
Class B | 118,980 | 2,545,887 | 143,151 | 2,553,384 | ||||||||||||
Class C | 1,970,440 | 42,376,144 | 1,426,339 | 25,880,300 | ||||||||||||
Class R | 3,991,642 | 85,705,473 | 4,357,115 | 78,208,878 | ||||||||||||
Class Y | 20,794,050 | 448,493,479 | 26,160,421 | 463,679,469 | ||||||||||||
Class R5 | 6,253,954 | 134,965,168 | 7,779,805 | 137,210,242 | ||||||||||||
Class R6(b) | 6,129,129 | 131,372,133 | 9,312,883 | 165,064,469 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Class A | 1,888,719 | 40,126,155 | 4,492,477 | 79,105,801 | ||||||||||||
Class B | 48,608 | 1,045,168 | 219,159 | 3,778,268 | ||||||||||||
Class C | 61,334 | 1,303,004 | 179,046 | 3,139,068 | ||||||||||||
Class R | 63,925 | 1,358,880 | 141,889 | 2,492,487 | ||||||||||||
Class Y | 805,184 | 17,104,577 | 1,920,856 | 33,741,238 | ||||||||||||
Class R5 | 173,273 | 3,682,944 | 404,643 | 7,093,115 | ||||||||||||
Class R6 | 90,274 | 1,912,276 | 77,812 | 1,435,018 | ||||||||||||
Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||
Class A | 2,008,392 | 43,051,858 | 5,642,919 | 101,141,273 | ||||||||||||
Class B | (2,009,053 | ) | (43,051,858 | ) | (5,645,296 | ) | (101,141,273 | ) | ||||||||
Reacquired: | ||||||||||||||||
Class A | (27,570,839 | ) | (593,004,606 | ) | (63,691,543 | ) | (1,123,333,059 | ) | ||||||||
Class B | (890,618 | ) | (19,116,415 | ) | (2,711,012 | ) | (47,451,894 | ) | ||||||||
Class C | (1,549,395 | ) | (33,225,295 | ) | (4,902,931 | ) | (86,081,404 | ) | ||||||||
Class R | (2,392,753 | ) | (51,325,235 | ) | (4,932,584 | ) | (87,839,904 | ) | ||||||||
Class Y | (16,723,849 | ) | (359,884,709 | ) | (47,953,400 | ) | (818,015,661 | ) | ||||||||
Class R5 | (1,881,579 | ) | (40,303,354 | ) | (11,982,079 | ) | (212,167,847 | ) | ||||||||
Class R6 | (3,276,259 | ) | (70,958,966 | ) | (2,039,715 | ) | (38,280,344 | ) | ||||||||
Net increase (decrease) in share activity | 14,157,929 | $ | 302,961,675 | (53,245,439 | ) | $ | (899,960,322 | ) | ||||||||
| (a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 30% 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 September 24, 2012. |
16 Invesco Comstock Fund
NOTE 12—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
| Net asset value, beginning of period | Net investment income(a) | Net gains (losses) on securities (both realized and unrealized) | Total from investment operations | Dividends from net investment income | Distributions from net realized gains | Total distributions | Net asset value, end of period | Total return | Net assets, end of period (000’s omitted) | Ratio of expenses to average net assets with fee waivers and/or expenses absorbed | Ratio of expenses to average net assets without fee waivers and/or expenses absorbed | Ratio of net investment income to average net assets | Portfolio turnover(b) | |||||||||||||||||||||||||||||||||||||||||||
Class A |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | $ | 20.25 | $ | 0.13 | $ | 2.23 | $ | 2.36 | $ | (0.14 | ) | $ | — | $ | (0.14 | ) | $ | 22.47 | 11.70 | %(c) | $ | 6,751,474 | 0.81 | %(d) | 0.82 | %(d) | 1.22 | %(d) | 5 | % | ||||||||||||||||||||||||||
Year ended 04/30/13 | 16.93 | 0.27 | 3.32 | 3.59 | (0.27 | ) | — | (0.27 | ) | 20.25 | 21.46 | (c) | 6,034,792 | 0.86 | 0.86 | 1.56 | 12 | |||||||||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 17.20 | 0.25 | (0.30 | ) | (0.05 | ) | (0.22 | ) | — | (0.22 | ) | 16.93 | (0.19 | )(c) | 5,473,149 | 0.88 | 0.88 | 1.55 | 17 | |||||||||||||||||||||||||||||||||||||
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 | (e) | 0.84 | (e) | 1.18 | (e) | 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 | (f) | 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 | )(f) | 5,798,794 | 0.84 | 0.84 | 2.16 | 19 | ||||||||||||||||||||||||||||||||||||
Class B |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | 20.23 | 0.10 | 2.24 | 2.34 | (0.10 | ) | — | (0.10 | ) | 22.47 | 11.59 | (c)(g) | 214,470 | 1.10 | (d)(g) | 1.11 | (d)(g) | 0.93 | (d)(g) | 5 | ||||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 16.93 | 0.23 | 3.30 | 3.53 | (0.23 | ) | — | (0.23 | ) | 20.23 | 21.11 | (c) | 248,404 | 1.09 | 1.61 | 1.33 | 12 | |||||||||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 17.20 | 0.25 | (0.30 | ) | (0.05 | ) | (0.22 | ) | — | (0.22 | ) | 16.93 | (0.19 | )(c)(g) | 343,166 | 0.88 | (g) | 0.88 | (g) | 1.55 | (g) | 17 | ||||||||||||||||||||||||||||||||||
Four months ended 04/30/11 | 15.73 | 0.06 | 1.46 | 1.52 | (0.05 | ) | — | (0.05 | ) | 17.20 | 9.71 | (c)(g) | 526,168 | 0.84 | (e)(g) | 0.84 | (e)(g) | 1.18 | (e)(g) | 10 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/10 | 13.81 | 0.20 | 1.93 | 2.13 | (0.21 | ) | — | (0.21 | ) | 15.73 | 15.60 | (c)(g) | 547,060 | 0.86 | (g) | 0.86 | (g) | 1.39 | (g) | 18 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/09 | 10.85 | 0.19 | 2.95 | 3.14 | (0.18 | ) | — | (0.18 | ) | 13.81 | 29.45 | (f)(g) | 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 | )(f)(g) | 906,301 | 0.84 | (g) | 0.84 | (g) | 2.16 | (g) | 19 | |||||||||||||||||||||||||||||||||
Class C |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | 20.24 | 0.05 | 2.23 | 2.28 | (0.06 | ) | — | (0.06 | ) | 22.46 | 11.28 | (c) | 532,445 | 1.56 | (d) | 1.57 | (d) | 0.47 | (d) | 5 | ||||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 16.93 | 0.14 | 3.31 | 3.45 | (0.14 | ) | — | (0.14 | ) | 20.24 | 20.52 | (c) | 469,962 | 1.61 | 1.61 | 0.81 | 12 | |||||||||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 17.20 | 0.13 | (0.30 | ) | (0.17 | ) | (0.10 | ) | — | (0.10 | ) | 16.93 | (0.94 | )(c) | 448,866 | 1.63 | 1.63 | 0.80 | 17 | |||||||||||||||||||||||||||||||||||||
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 | (e) | 1.59 | (e) | 0.43 | (e) | 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 | (f) | 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 | )(f) | 544,631 | 1.59 | 1.59 | 1.41 | 19 | ||||||||||||||||||||||||||||||||||||
Class R |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | 20.24 | 0.10 | 2.24 | 2.34 | (0.11 | ) | — | (0.11 | ) | 22.47 | 11.61 | (c) | 282,028 | 1.06 | (d) | 1.07 | (d) | 0.97 | (d) | 5 | ||||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 16.93 | 0.23 | 3.31 | 3.54 | (0.23 | ) | — | (0.23 | ) | 20.24 | 21.11 | (c) | 220,443 | 1.11 | 1.11 | 1.31 | 12 | |||||||||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 17.19 | 0.20 | (0.28 | ) | (0.08 | ) | (0.18 | ) | — | (0.18 | ) | 16.93 | (0.38 | )(c) | 191,685 | 1.13 | 1.13 | 1.30 | 17 | |||||||||||||||||||||||||||||||||||||
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 | (e) | 1.09 | (e) | 0.93 | (e) | 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 | (f) | 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 | )(f) | 130,746 | 1.09 | 1.09 | 1.91 | 19 | ||||||||||||||||||||||||||||||||||||
Class Y(h) |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | 20.25 | 0.16 | 2.23 | 2.39 | (0.17 | ) | — | (0.17 | ) | 22.47 | 11.84 | (c) | 2,497,876 | 0.56 | (d) | 0.57 | (d) | 1.47 | (d) | 5 | ||||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 16.93 | 0.32 | 3.31 | 3.63 | (0.31 | ) | — | (0.31 | ) | 20.25 | 21.76 | (c) | 2,151,816 | 0.61 | 0.61 | 1.81 | 12 | |||||||||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 17.20 | 0.28 | (0.29 | ) | (0.01 | ) | (0.26 | ) | — | (0.26 | ) | 16.93 | 0.06 | (c) | 2,135,728 | 0.63 | 0.63 | 1.80 | 17 | |||||||||||||||||||||||||||||||||||||
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 | (e) | 0.59 | (e) | 1.43 | (e) | 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 | (f) | 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 | )(f) | 896,154 | 0.59 | 0.59 | 2.41 | 19 | ||||||||||||||||||||||||||||||||||||
Class R5 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | 20.24 | 0.16 | 2.24 | 2.40 | (0.17 | ) | — | (0.17 | ) | 22.47 | 11.93 | (c) | 544,217 | 0.49 | (d) | 0.50 | (d) | 1.54 | (d) | 5 | ||||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 16.93 | 0.34 | 3.31 | 3.65 | (0.34 | ) | — | (0.34 | ) | 20.24 | 21.85 | (c) | 398,311 | 0.49 | 0.49 | 1.93 | 12 | |||||||||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 17.19 | 0.31 | (0.28 | ) | 0.03 | (0.29 | ) | — | (0.29 | ) | 16.93 | 0.33 | (c) | 397,292 | 0.44 | 0.44 | 1.99 | 17 | ||||||||||||||||||||||||||||||||||||||
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 | (e) | 0.36 | (e) | 1.66 | (e) | 10 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/10(i) | 13.33 | 0.14 | 2.44 | 2.58 | (0.19 | ) | — | (0.19 | ) | 15.72 | 19.53 | (c) | 164,600 | 0.49 | (e) | 0.49 | (e) | 1.68 | (e) | 18 | ||||||||||||||||||||||||||||||||||||
Class R6 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | 20.25 | 0.18 | 2.21 | 2.39 | (0.18 | ) | — | (0.18 | ) | 22.46 | 11.88 | (c) | 231,244 | 0.40 | (d) | 0.41 | (d) | 1.63 | (d) | 5 | ||||||||||||||||||||||||||||||||||||
Year ended 04/30/13(i) | 17.67 | 0.22 | 2.54 | 2.76 | (0.18 | ) | — | (0.18 | ) | 20.25 | 15.73 | (c) | 148,859 | 0.41 | (e) | 0.41 | (e) | 2.01 | (e) | 12 | ||||||||||||||||||||||||||||||||||||
| (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 April 30, 2012, the portfolio turnover calculation excludes the value of securities purchased of $279,205,287 and sold of $89,253,686 in the effort to realign the Fund’s portfolio holdings after the reorganization of Invesco Large Cap Basic Value Fund, Invesco Value Fund and Invesco Value II into the Fund. |
| (c) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges and is not annualized for periods less than one year, if applicable. |
| (d) | Ratios are annualized and based on average daily net assets (000’s omitted) of $6,454,065, $234,134, $502,776, $256,638, $2,276,085, $460,806 and $204,294 for Class A, Class B, Class C, Class R, Class Y, Class R5 and Class R6 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) | 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 0.53% for the six months ended October 31, 2013, 0.25% for the year ended April 30, 2012, the four months ended April 30, 2011 and the year ended December 31, 2010 and reflect actual 12b-1 fees of less than 1.00% for the years ended December 31, 2009 and 2008. |
| (h) | On June 1, 2010, the Fund’s former Class I shares were reorganized into Class Y shares. |
| (i) | Commencement date of June 1, 2010 and September 24, 2012 for Class R5 shares and Class R6 shares, respectively. |
17 Invesco 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, 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, 2013 through October 31, 2013.
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 or contingent deferred sales charges on redemptions, 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.
| Class | Beginning Account Value (05/01/13) | ACTUAL | HYPOTHETICAL (5% annual return before expenses) | Annualized Expense Ratio3 | ||||||||||||||||||||
| Ending Account Value (10/31/13)1 | Expenses Paid During Period2,3 | Ending Account Value (10/31/13) | Expenses Paid During Period2,3 | |||||||||||||||||||||
| A | $ | 1,000.00 | $ | 1,117.00 | $ | 4.32 | $ | 1,021.12 | $ | 4.13 | 0.81 | % | ||||||||||||
| B | 1,000.00 | 1,115.90 | 5.87 | 1,019.66 | 5.60 | 1.10 | ||||||||||||||||||
| C | 1,000.00 | 1,112.80 | 8.31 | 1,017.34 | 7.93 | 1.56 | ||||||||||||||||||
| R | 1,000.00 | 1,116.10 | 5.65 | 1,019.86 | 5.40 | 1.06 | ||||||||||||||||||
| Y | 1,000.00 | 1,118.40 | 2.99 | 1,022.38 | 2.85 | 0.56 | ||||||||||||||||||
| R5 | 1,000.00 | 1,119.30 | 2.62 | 1,022.74 | 2.50 | 0.49 | ||||||||||||||||||
| R6 | 1,000.00 | 1,118.80 | 2.14 | 1,023.19 | 2.04 | 0.40 | ||||||||||||||||||
| 1 | The actual ending account value is based on the actual total return of the Fund for the period May 1, 2013 through October 31, 2013, 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. |
| 3 | The annualized expense ratio for Class B shares has been restated to reflect a decrease in Rule 12b-1 fees, effective July 1, 2013. The annualized expense ratio for Class B shares restated as if this change had been in effect throughout the entire most recent fiscal year is 0.81% The actual and hypothetical expenses paid for Class B shares restated as if the changes discussed previously had been in effect throughout the entire most recent fiscal half year are $4.32 and $ 4.13, respectively. |
18 Invesco 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 Invesco Comstock Fund’s (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 17-19, 2013, the Board as a whole, and the disinterested or “independent” Trustees, who comprise over 75% 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, 2013. The Board determined that continuation of 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 payable to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is primarily responsible for overseeing the management of a number of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned Invesco Funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies, limitations and investment risks of these funds. The Sub-Committees meet regularly and at designated contract renewal meetings each year to conduct a review of the performance, fees, expenses and other matters related to their assigned Invesco Funds. Each Sub-Committee recommends to the Investments Committee, which in turn recommends to the full Board, whether and on what terms to approve the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Trustees receive comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and Lipper Inc. (Lipper), an
independent provider of investment company data. The Trustees also receive an independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. The independent Trustees are assisted in their annual evaluation of the Fund’s investment advisory agreement by the Senior Officer and by independent legal counsel. In addition to meetings with Invesco Advisers and fund counsel, the independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in separate sessions with the Senior Officer and with independent legal counsel.
In evaluating the fairness and reasonableness of compensation under the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Trustees recognized that the advisory fee rates for the Invesco Funds are, in many cases, the result of years of review and negotiation between the Trustees and Invesco Advisers as well as advisory fees previously approved by different predecessor boards. 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. The Trustees’ review and conclusions are based on the comprehensive consideration of all information presented to them and are not the result of any single determinative factor. Moreover, one Trustee may have weighed a particular piece of information or factor differently than another Trustee.
The discussion below serves as the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 19, 2013, and may not reflect consideration of factors that became known to the Board after that date, including, for example, changes to the Fund’s performance, advisory fees, expense limitations and/or fee waivers.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
| A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the
performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers, with whom the Sub-Committees met during the year. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s consideration of Invesco Advisers’ 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 benefits of reapproving an existing relationship and the greater uncertainty that may be associated with entering into a new relationship. The Board also considered non-advisory services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution and legal and compliance. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services that may be 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 may invest, make recommendations regarding securities and assist with security trades. 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 that may be provided by the Affiliated Sub-Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s sub-advisory contracts.
| B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
The Board compared the Fund’s performance during the past one, three and five calendar years to the performance of funds in the Lipper performance universe and against the Lipper
19 Invesco Comstock Fund
Large-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. The Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
| C. | Advisory and Sub-Advisory Fees |
The Board compared the Fund’s contractual management 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 management fee rate for Class A shares of the Fund was below the median contractual management fee rate of funds in the expense group. The Board noted that the term “Contractual management fee” may include both advisory and certain administrative services fees and that Invesco Advisers does not charge the Invesco Funds for the administrative services included in the term as defined by Lipper. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes each fund’s contractual management fee schedule (including any applicable breakpoints) as reported in the most recent prospectus or statement of additional information for each fund in the expense group.
The Board also compared the Fund’s effective advisory fee rate (the advisory fee rate after advisory fee waivers and before other expense limitations/waivers) to the effective 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 advisory fee rate was below the effective advisory fee rate of one mutual fund with comparable investment strategies and below the total account level fee of nine 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 noted that Invesco Advisers and its affiliates do not advise other client accounts with investment strategies comparable to those of the Fund.
The Board also considered the services that may be provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the fees payable by Invesco Advisers to the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board also noted that the sub-advisory fees are not paid directly by the Fund, but rather, are payable by Invesco Advisers to the Affiliated Sub-Advisers.
Based upon the information and considerations described above, the Board concluded that the compensation payable to
Invesco Advisers and the Affiliated Sub-Advisers is fair and reasonable.
| D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule and was assisted in their review by a report from the Senior Officer. The Board also noted that the Fund shares directly in economies of scale through lower fees charged by third party service providers based on the combined size of the Invesco Funds and other clients advised by Invesco Advisers.
| E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the profitability of Invesco Advisers and its affiliates in providing these services for the year ended December 31, 2012. The Board received information from Invesco Advisers about the methodology used to prepare the profitability information. The Board considered the profitability of Invesco Advisers in managing the Fund and the Invesco Funds. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its subsidiaries provide to the Invesco Funds and the Fund. The Board did not deem the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund to be excessive given the nature, quality and extent of the services provided to the Invesco Funds. The Board received and accepted information from Invesco Advisers demonstrating that Invesco Advisers and each affiliated Sub-Advisor are financially sound and have the resources necessary to perform their obligations under the investment advisory agreement and sub-advisory contracts.
| F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund, including the fees received for their provision of transfer agency and distribution services to the Fund. The Board considered comparative information regarding fees charged for these services, including information provided by Lipper and other independent sources. The Board considered the performance of Invesco Advisers and its affiliates in providing these services and the organizational structure employed to provide these services. The Board also considered that these services are provided to the Fund pursuant to written contracts that are reviewed and approved on an annual basis by the Board; that the services are required for the operation of the Fund; that Invesco Advisers and its affiliates can provide services, the nature and quality of which are at least equal to those provided by others offering the same or similar services; and that the fees for such
services are fair and reasonable in light of the usual and customary charges by others for services of the same nature and quality.
The Board considered the benefits realized by Invesco Advisers and the Affiliated Sub-Advisers as a result of portfolio brokerage transactions executed through “soft dollar” arrangements. The Board noted that soft dollar arrangements shift the payment obligation for research services from Invesco Advisers and the Affiliated Sub-Advisers to the Invesco Funds and that the research received may be used with other clients of Invesco Advisers and may reduce Invesco Advisers’ and the Affiliated Sub-Advisers’ expenses. The Board also considered periodic reports from the Chief Compliance Officer of the Invesco Funds demonstrating that these arrangements are consistent with regulatory requirements. The Board did not deem the soft dollar arrangements to be inappropriate.
The Board considered that the Fund’s uninvested cash and cash collateral from any securities lending arrangements may be invested in money market funds advised by Invesco Advisers pursuant to procedures approved by the Board. The Board noted that Invesco Advisers receives advisory fees from these affiliated money market funds attributable to such investments, although Invesco Advisers has contractually agreed to waive through varying periods the advisory fees payable by the Invesco Funds. The waiver is in an amount equal to 100% of the net advisory fee Invesco Advisers receives from the affiliated money market funds with respect to the Fund’s investment in the affiliated money market funds of uninvested cash, but not cash collateral. The Board concluded that the Fund’s investment of uninvested cash and cash collateral from any securities lending arrangements in the affiliated money market funds is in the best interests of the Fund and its shareholders.
The Board also considered use of an affiliated broker to execute certain trades for the Fund to among other things, control information leakage, and were advised that such trades are executed in compliance with rules under the Investment Company Act of 1940, as amended.
20 Invesco Comstock Fund
Invesco mailing information
Send general correspondence to Invesco Investment Services, Inc., P.O. Box 219078, Kansas City, MO 64121-9078.
Invesco privacy policy
You share personal and financial information with us that is necessary for your transactions and your account records. We take very seriously the obligation to keep that information confidential and private.
Invesco collects nonpublic personal information about you from account applications or other forms you complete and from your transactions with us or our affiliates. We do not disclose information about you or our former customers to service providers or other third parties except to the extent necessary to service your account and in other limited circumstances as permitted by law. For example, we use this information to facilitate the delivery of transaction confirmations, financial reports, prospectuses and tax forms.
Even within Invesco, only people involved in the servicing of your accounts and compliance monitoring have access to your information. To ensure the highest level of confidentiality and security, Invesco maintains physical, electronic and procedural safeguards that meet or exceed federal standards. Special measures, such as data encryption and authentication, apply to your communications with us on our website. More detail is available to you at invesco.com/privacy.
Important notice regarding delivery of security holder documents
To reduce Fund expenses, only one copy of most shareholder documents may be mailed to shareholders with multiple accounts at the same address (Householding). Mailing of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact Invesco Investment Services, Inc. at 800 959 4246 or contact your financial institution. We will begin sending you individual copies for each account within 30 days after receiving your request.
Fund holdings and proxy voting information
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is available at invesco.com/completeqtrholdings. Shareholders can also look up the Fund’s Forms N-Q on the SEC website at sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are shown below.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov.
Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
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SEC file numbers: 811-03826 and 002-85905 | VK-COM-SAR-1 | Invesco Distributors, Inc. |
Semiannual Report to Shareholders October 31, 2013 | ||
Invesco Mid Cap Growth Fund
Nasdaq:
A: VGRAX n B: VGRBX n C: VGRCX n R: VGRRX n Y: VGRDX
n R5: VGRJX n R6: VGRFX
| 2 | Fund Performance |
| 4 | Letters to Shareholders |
| 5 | Schedule of Investments |
| 8 | Financial Statements |
| 10 | Notes to Financial Statements |
| 17 | Financial Highlights |
| 19 | Fund Expenses |
| 20 | Approval of Investment Advisory and Sub-Advisory Contracts |
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, 4/30/13 to 10/31/13, 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 | 17.31 | % | ||
Class B Shares | 17.31 | |||
Class C Shares | 16.89 | |||
Class R Shares | 17.15 | |||
Class Y Shares | 17.43 | |||
Class R5 Shares | 17.54 | |||
Class R6 Shares* | 17.45 | |||
S&P 500 Indexq (Broad Market Index) | 11.15 | |||
Russell Midcap Growth Indexn (Style-Specific Index) | 13.75 | |||
Lipper Mid-Cap Growth Funds Index¿ (Peer Group Index) | 15.34 | |||
| Source(s): qInvesco, S&P-Dow Jones via FactSet Research Systems Inc.; | ||||
| nInvesco, Russell via FactSet Research Systems Inc.; ¿Lipper Inc. | ||||
| *Share class 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 US 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) described 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 Mid Cap Growth Fund
Average Annual Total Returns |
| |||
As of 10/31/13, including maximum applicable sales charges
|
| |||
Class A Shares | ||||
Inception (12/27/95) | 11.99 | % | ||
10 Years | 9.76 | |||
5 Years | 17.62 | |||
1 Year | 27.61 | |||
Class B Shares | ||||
Inception (12/27/95) | 12.00 | % | ||
10 Years | 9.94 | |||
5 Years | 18.65 | |||
1 Year | 30.05 | |||
Class C Shares | ||||
Inception (12/27/95) | 11.54 | % | ||
10 Years | 9.55 | |||
5 Years | 18.09 | |||
1 Year | 33.10 | |||
Class R Shares | ||||
Inception (7/11/08) | 9.61 | % | ||
5 Years | 18.67 | |||
1 Year | 34.74 | |||
Class Y Shares | ||||
Inception (8/12/05) | 8.96 | % | ||
5 Years | 19.26 | |||
1 Year | 35.36 | |||
Class R5 Shares | ||||
10 Years | 10.51 | % | ||
5 Years | 19.25 | |||
1 Year | 35.63 | |||
Class R6 Shares | ||||
10 Years | 10.39 | % | ||
5 Years | 18.99 | |||
1 Year | 35.19 | |||
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 (renamed Invesco Mid Cap Growth). 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 Mid Cap Growth Fund. Share class returns will differ from the predecessor fund because of different expenses.
Class R5 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
Average Annual Total Returns |
| |||
| As of 9/30/13, the most recent calendar quarter end, including maximum applicable sales charges | ||||
Class A Shares | ||||
Inception (12/27/95) | 11.82 | % | ||
10 Years | 10.23 | |||
5 Years | 12.13 | |||
1 Year | 19.77 | |||
Class B Shares | ||||
Inception (12/27/95) | 11.83 | % | ||
10 Years | 10.41 | |||
5 Years | 13.01 | |||
1 Year | 21.76 | |||
Class C Shares | ||||
Inception (12/27/95) | 11.38 | % | ||
10 Years | 10.03 | |||
5 Years | 12.56 | |||
1 Year | 24.88 | |||
Class R Shares | ||||
Inception (7/11/08) | 9.04 | % | ||
5 Years | 13.12 | |||
1 Year | 26.46 | |||
Class Y Shares | ||||
Inception (8/12/05) | 8.58 | % | ||
5 Years | 13.67 | |||
1 Year | 27.06 | |||
Class R5 Shares | ||||
10 Years | 10.99 | % | ||
5 Years | 13.67 | |||
1 Year | 27.30 | |||
Class R6 Shares | ||||
10 Years | 10.86 | % | ||
5 Years | 13.42 | |||
1 Year | 26.86 | |||
A share performance reflects any applicable fee waivers or expense reimbursements.
Class R6 shares incepted on July 15, 2013. Performance shown prior to that date is that of the 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 net annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Class A, Class B, Class C, Class R, Class Y, Class R5 and Class R6 shares was 1.15%, 1.15%, 1.90%, 1.40%, 0.90%, 0.84% and 0.75%, respectively.1 The total annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Class A, Class B, Class C, Class R, Class Y, Class R5 and Class R6 shares was 1.28%, 1.28%, 2.03%, 1.53%, 1.03%, 0.84% and 0.75%, 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, Class R5 and Class R6 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 July 31, 2015. See current prospectus for more information. |
3 Invesco Mid Cap Growth Fund
Letters to Shareholders
 Bruce Crockett | Dear Fellow Shareholders: The Invesco Funds Board has worked on a variety of issues over the last several months, and I’d like to take this opportunity to discuss two that affect you and our fellow fund shareholders. The first issue on which your Board has been working is our annual review of the funds’ advisory and sub-advisory contracts with Invesco Advisers and its affiliates. This annual review focuses on the nature and quality of the services Invesco provides as adviser to the Invesco Funds and the reasonableness of the fees that it charges for those services. Each year, we spend months reviewing detailed information, including information from many independent sources. I’m pleased to report that the Board determined in June that renewing the investment advisory agreement and the sub-advisory contracts with Invesco Advisers and its affiliates would serve the best interests of each fund and its shareholders. |
The second area of focus to highlight is the Board’s efforts to ensure that we provide a lineup of funds that allow financial advisers to build portfolios that meet shareholders’ changing financial needs and goals.
The members of your Board have worked with Invesco Advisers to provide more income-generating options in the Invesco Funds lineup to help shareholders potentially meet their income needs. Your Board recently approved changes to three existing equity mutual funds, increasing their focus on generating income while also seeking to provide long-term growth of capital.
Be assured that your Board will continue working on behalf of fund shareholders, keeping your needs and interests uppermost in our minds.
As always, please contact me at bruce@brucecrockett.com with any questions or concerns you may have. On behalf of the Board, we look forward to continuing to represent your interests and serving your needs.
Sincerely,
Bruce L. Crockett
Independent Chair
Invesco Funds Board of Trustees
 Philip Taylor | Dear Shareholders: Enclosed in this semiannual report, you’ll find performance data for your Fund, a complete list of your Fund’s investments as of the close of the reporting period and other important information. I hope you find this report of interest. Our website, invesco.com/us, provides fund-specific as well as more general information from many of Invesco’s investment professionals. You’ll find in-depth articles, video clips and audio commentaries – and, of course, you also can access information about your Invesco account whenever it’s convenient for you. At Invesco, all of our people and all of our resources are dedicated to helping investors achieve their financial objectives. It’s a philosophy we call Intentional Investing, and it guides the way we: n Manage investments – Our dedicated investment professionals search the world for the |
| n | Provide choices – We offer multiple investment strategies, allowing you and your financial adviser to build a portfolio that’s purpose-built for your needs. |
| n | Connect with you – We’re committed to giving you the expert insights you need to make informed investing decisions, and we are well-equipped to provide high-quality support for investors and advisers. |
For questions about your account, feel free to contact an Invesco client services representative at 800 959 4246. For Invesco-related questions or comments, please email me directly at phil@invesco.com.
All of us at Invesco look forward to serving your investment management needs for many years to come. Thank you for investing with us.
Sincerely,
Philip Taylor
Senior Managing Director, Invesco Ltd.
4 Invesco Mid Cap Growth Fund
Schedule of Investments(a)
October 31, 2013
(Unaudited)
| Shares | Value | |||||||
Common Stocks & Other Equity Interests–99.26% |
| |||||||
| Aerospace & Defense–1.53% | ||||||||
B/E Aerospace, Inc.(b) | 547,601 | $ | 44,443,297 | |||||
| Airlines–0.58% | ||||||||
Alaska Air Group, Inc. | 236,538 | 16,713,775 | ||||||
| Apparel Retail–1.41% | ||||||||
Ross Stores, Inc. | 530,651 | 41,045,855 | ||||||
| Apparel, Accessories & Luxury Goods–3.49% | ||||||||
Michael Kors Holdings Ltd.(b) | 493,548 | 37,978,519 | ||||||
PVH Corp. | 280,398 | 34,929,179 | ||||||
Under Armour, Inc.–Class A(b)(c) | 352,428 | 28,599,532 | ||||||
| 101,507,230 | ||||||||
| Application Software–3.98% | ||||||||
Aspen Technology, Inc.(b) | 1,109,421 | 42,413,165 | ||||||
Cadence Design Systems, Inc.(b) | 2,841,245 | 36,850,948 | ||||||
Salesforce.com, Inc.(b) | 682,790 | 36,433,674 | ||||||
| 115,697,787 | ||||||||
| Asset Management & Custody Banks–2.27% | ||||||||
Affiliated Managers Group, Inc.(b) | 333,597 | 65,865,392 | ||||||
| Automobile Manufacturers–1.08% | ||||||||
Tesla Motors, Inc.(b) | 195,319 | 31,239,321 | ||||||
| Automotive Retail–1.57% | ||||||||
O’Reilly Automotive, Inc.(b) | 368,876 | 45,670,538 | ||||||
| Biotechnology–3.51% | ||||||||
Alexion Pharmaceuticals, Inc.(b) | 299,279 | 36,796,353 | ||||||
BioMarin Pharmaceutical Inc.(b) | 526,184 | 33,054,879 | ||||||
Medivation Inc.(b) | 535,537 | 32,057,245 | ||||||
| 101,908,477 | ||||||||
| Broadcasting–1.62% | ||||||||
Discovery Communications, Inc.–Class A(b) | 528,059 | 46,955,006 | ||||||
| Building Products–2.79% | ||||||||
A.O. Smith Corp. | 749,719 | 38,722,986 | ||||||
Lennox International Inc. | 540,535 | 42,194,162 | ||||||
| 80,917,148 | ||||||||
| Casinos & Gaming–1.93% | ||||||||
Wynn Resorts Ltd. | 336,765 | 55,987,181 | ||||||
| Commodity Chemicals–0.96% | ||||||||
LyondellBasell Industries N.V.–Class A | 372,901 | 27,818,415 | ||||||
| Communications Equipment–0.90% | ||||||||
F5 Networks, Inc.(b) | 319,862 | 26,071,952 | ||||||
| Computer & Electronics Retail–1.83% | ||||||||
Best Buy Co., Inc. | 1,244,778 | 53,276,498 | ||||||
| Shares | Value | |||||||
| Construction & Engineering–2.36% | ||||||||
Foster Wheeler AG (Switzerland)(b) | 1,257,683 | $ | 33,944,864 | |||||
MasTec Inc.(b)(c) | 1,079,650 | 34,516,411 | ||||||
| 68,461,275 | ||||||||
| Construction & Farm Machinery & Heavy Trucks–1.09% | ||||||||
Cummins Inc. | 250,284 | 31,791,074 | ||||||
| Consumer Electronics–1.55% | ||||||||
Harman International Industries, Inc. | 554,496 | 44,925,266 | ||||||
| Consumer Finance–1.54% | ||||||||
Discover Financial Services | 862,828 | 44,763,517 | ||||||
| Data Processing & Outsourced Services–2.63% | ||||||||
Alliance Data Systems Corp.(b)(c) | 203,660 | 48,279,640 | ||||||
Vanitv, Inc.–Class A(b) | 1,024,277 | 28,167,617 | ||||||
| 76,447,257 | ||||||||
| Distillers & Vintners–1.43% | ||||||||
Constellation Brands, Inc.–Class A(b) | 637,790 | 41,647,687 | ||||||
| Diversified Chemicals–2.45% | ||||||||
PPG Industries, Inc. | 389,887 | 71,185,568 | ||||||
| Diversified Support Services–0.86% | ||||||||
KAR Auction Services Inc. | 840,635 | 24,983,672 | ||||||
| Electrical Components & Equipment–1.96% | ||||||||
AMETEK, Inc. | 1,187,237 | 56,785,546 | ||||||
| Electronic Components–1.78% | ||||||||
Amphenol Corp.–Class A | 642,381 | 51,576,771 | ||||||
| Environmental & Facilities Services–1.06% | ||||||||
Waste Connections, Inc. | 723,356 | 30,916,235 | ||||||
| Food Retail–2.00% | ||||||||
Sprouts Farmers Market, Inc.(b)(c) | 319,045 | 14,695,213 | ||||||
Whole Foods Market, Inc. | 689,490 | 43,527,503 | ||||||
| 58,222,716 | ||||||||
| Health Care Equipment–0.82% | ||||||||
Thoratec Corp.(b) | 554,266 | 23,938,749 | ||||||
| Health Care Facilities–1.55% | ||||||||
Universal Health Services, Inc.–Class B | 557,027 | 44,874,095 | ||||||
| Health Care Services–2.69% | ||||||||
Catamaran Corp.(b) | 840,081 | 39,450,204 | ||||||
Omnicare, Inc. | 703,923 | 38,821,353 | ||||||
| 78,271,557 | ||||||||
| Health Care Technology–0.50% | ||||||||
HMS Holdings Corp.(b) | 689,642 | 14,572,135 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
5 Invesco Mid Cap Growth Fund
| Shares | Value | |||||||
| Homefurnishing Retail–1.09% | ||||||||
Restoration Hardware Holdings Inc.(b)(c) | 455,429 | $ | 31,761,618 | |||||
| Household Appliances–1.09% | ||||||||
Whirlpool Corp. | 217,227 | 31,717,314 | ||||||
| Household Products–1.01% | ||||||||
Church & Dwight Co., Inc. | 449,856 | 29,308,118 | ||||||
| Housewares & Specialties–1.46% | ||||||||
Jarden Corp.(b) | 766,855 | 42,453,093 | ||||||
| Human Resource & Employment Services–0.84% | ||||||||
Towers Watson & Co.–Class A | 213,410 | 24,501,602 | ||||||
| Industrial Machinery–2.77% | ||||||||
Flowserve Corp. | 710,205 | 49,337,942 | ||||||
Pentair Ltd. | 464,581 | 31,168,739 | ||||||
| 80,506,681 | ||||||||
| Internet Retail–0.56% | ||||||||
Netflix Inc.(b) | 50,747 | 16,364,893 | ||||||
| Internet Software & Services–1.28% | ||||||||
LinkedIn Corp.–Class A(b) | 166,032 | 37,136,377 | ||||||
| IT Consulting & Other Services–0.97% | ||||||||
Gartner, Inc.(b) | 480,200 | 28,307,790 | ||||||
| Leisure Products–1.08% | ||||||||
Brunswick Corp. | 694,992 | 31,364,989 | ||||||
| Movies & Entertainment–1.64% | ||||||||
Cinemark Holdings, Inc. | 1,448,348 | 47,520,298 | ||||||
| Oil & Gas Equipment & Services–1.98% | ||||||||
Baker Hughes Inc. | 498,209 | 28,940,961 | ||||||
Dresser-Rand Group, Inc.(b) | 471,060 | 28,626,316 | ||||||
| 57,567,277 | ||||||||
| Oil & Gas Exploration & Production–3.37% | ||||||||
EQT Corp. | 447,855 | 38,340,866 | ||||||
Gulfport Energy Corp.(b) | 652,578 | 38,299,803 | ||||||
Pioneer Natural Resources Co. | 104,406 | 21,380,261 | ||||||
| 98,020,930 | ||||||||
| Packaged Foods & Meats–1.14% | ||||||||
Mead Johnson Nutrition Co. | 404,195 | 33,006,564 | ||||||
| Paper Packaging–1.13% | ||||||||
Sealed Air Corp. | 1,086,543 | 32,791,868 | ||||||
| Pharmaceuticals–2.83% | ||||||||
Actavis PLC(b) | 99,074 | 15,314,859 | ||||||
Mallinckrodt PLC(b) | 740,785 | 31,120,378 | ||||||
Shire PLC–ADR (Ireland) | 268,592 | 35,749,595 | ||||||
| 82,184,832 | ||||||||
| Railroads–1.46% | ||||||||
Kansas City Southern | 348,314 | 42,327,117 | ||||||
| Shares | Value | |||||||
| Regional Banks–1.31% | ||||||||
First Republic Bank | 746,395 | $ | 38,118,393 | |||||
| Research & Consulting Services–1.67% | ||||||||
Verisk Analytics, Inc.–Class A(b) | 709,590 | 48,621,107 | ||||||
| Restaurants–0.72% | ||||||||
Panera Bread Co.–Class A(b) | 132,769 | 20,966,880 | ||||||
| Semiconductor Equipment–0.70% | ||||||||
Applied Materials, Inc. | 1,130,889 | 20,186,369 | ||||||
| Semiconductors–3.12% | ||||||||
Altera Corp. | 456,844 | 15,349,958 | ||||||
Cavium Inc.(b) | 722,120 | 29,108,657 | ||||||
NXP Semiconductors N.V. (Netherlands)(b) | 1,093,973 | 46,078,143 | ||||||
| 90,536,758 | ||||||||
| Specialized Finance–1.01% | ||||||||
IntercontinentalExchange Group Inc.(b)(c) | 152,573 | 29,405,394 | ||||||
| Specialty Stores–3.19% | ||||||||
Dick’s Sporting Goods, Inc. | 903,031 | 48,050,279 | ||||||
Tractor Supply Co. | 624,951 | 44,590,254 | ||||||
| 92,640,533 | ||||||||
| Steel–1.05% | ||||||||
Nucor Corp. | 590,119 | 30,550,461 | ||||||
| Systems Software–0.68% | ||||||||
Infoblox, Inc.(b) | 446,003 | 19,824,833 | ||||||
| Trading Companies & Distributors–0.80% | ||||||||
Fastenal Co. | 466,937 | 23,253,463 | ||||||
| Trucking–1.24% | ||||||||
J.B. Hunt Transport Services, Inc. | 478,606 | 35,909,808 | ||||||
| Wireless Telecommunication Services–2.35% | ||||||||
NII Holdings Inc.(b)(c) | 3,556,073 | 12,232,891 | ||||||
SBA Communications Corp.–Class A(b) | 640,627 | 56,035,644 | ||||||
| 68,268,535 | ||||||||
Total Common Stocks & Other Equity Interests |
| 2,883,604,887 | ||||||
Money Market Funds–1.09% |
| |||||||
Liquid Assets Portfolio–Institutional Class(d) | 15,866,680 | 15,866,680 | ||||||
Premier Portfolio–Institutional Class(d) | 15,866,680 | 15,866,680 | ||||||
Total Money Market Funds | 31,733,360 | |||||||
TOTAL INVESTMENTS (excluding investments purchased with cash collateral from securities on loan)–100.35% |
| 2,915,338,247 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
6 Invesco Mid Cap Growth Fund
| Shares | Value | |||||||
Investments Purchased with Cash Collateral from Securities on Loan |
| |||||||
Money Market Funds–2.52% |
| |||||||
Liquid Assets Portfolio–Institutional Class | 73,074,125 | $ | 73,074,125 | |||||
TOTAL INVESTMENTS–102.87% | 2,988,412,372 | |||||||
OTHER ASSETS LESS LIABILITIES–(2.87)% |
| (83,270,709 | ) | |||||
NET ASSETS–100.00% | $ | 2,905,141,663 | ||||||
Investment Abbreviations:
ADR – American Depositary Receipt
Notes to Schedule of Investments:
| (a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. |
| (b) | Non-income producing security. |
| (c) | All or a portion of this security was out on loan at October 31, 2013. |
| (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. |
Portfolio Composition
By sector, based on Net Assets
as of October 31, 2013
Consumer Discretionary | 25.3 | % | ||
Industrials | 19.3 | |||
Information Technology | 16.0 | |||
Health Care | 11.9 | |||
Financials | 7.8 | |||
Consumer Staples | 5.6 | |||
Materials | 5.6 | |||
Energy | 5.4 | |||
Telecommunication Services | 2.4 | |||
Money Market Funds Plus Other Assets Less Liabilities | 0.7 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
7 Invesco Mid Cap Growth Fund
Statement of Assets and Liabilities
October 31, 2013
(Unaudited)
Assets: |
| |||
Investments, at value (Cost $2,182,216,767)* | $ | 2,883,604,887 | ||
Investments in affiliated money market funds, at value and cost | 104,807,485 | |||
Total investments, at value (Cost $2,287,024,252) | 2,988,412,372 | |||
Receivable for: | ||||
Investments sold | 30,903,720 | |||
Fund shares sold | 1,506,667 | |||
Dividends | 698,138 | |||
Investment for trustee deferred compensation and retirement plans | 219,339 | |||
Other assets | 922,493 | |||
Total assets | 3,022,662,729 | |||
Liabilities: |
| |||
Payable for: | ||||
Investments purchased | 36,976,942 | |||
Fund shares reacquired | 4,571,151 | |||
Collateral upon return of securities loaned | 73,074,125 | |||
Accrued fees to affiliates | 2,141,326 | |||
Accrued trustees’ and officers’ fees and benefits | 4,337 | |||
Accrued other operating expenses | 52,221 | |||
Trustee deferred compensation and retirement plans | 700,964 | |||
Total liabilities | 117,521,066 | |||
Net assets applicable to shares outstanding | $ | 2,905,141,663 | ||
Net assets consist of: |
| |||
Shares of beneficial interest | $ | 2,119,678,733 | ||
Undistributed net investment income (loss) | (12,660,493 | ) | ||
Undistributed net realized gain | 96,735,303 | |||
Net unrealized appreciation | 701,388,120 | |||
| $ | 2,905,141,663 | |||
Net Assets: |
| |||
Class A | $ | 2,356,508,382 | ||
Class B | $ | 113,744,491 | ||
Class C | $ | 167,897,343 | ||
Class R | $ | 37,003,225 | ||
Class Y | $ | 71,520,266 | ||
Class R5 | $ | 77,855,646 | ||
Class R6 | $ | 80,612,310 | ||
Shares outstanding, $0.01 par value per share, |
| |||
Class A | 64,610,283 | |||
Class B | 3,586,849 | |||
Class C | 5,500,780 | |||
Class R | 1,028,240 | |||
Class Y | 1,916,198 | |||
Class R5 | 2,078,259 | |||
Class R6 | 2,151,643 | |||
Class A: | ||||
Net asset value per share | $ | 36.47 | ||
Maximum offering price per share | ||||
(Net asset value of $36.47 ¸ 94.50%) | $ | 38.59 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 31.71 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 30.52 | ||
Class R: | ||||
Net asset value and offering price per share | $ | 35.99 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 37.32 | ||
Class R5: | ||||
Net asset value and offering price per share | $ | 37.46 | ||
Class R6: | ||||
Net asset value and offering price per share | $ | 37.47 | ||
| * | At October 31, 2013, securities with an aggregate value of $71,442,879 were on loan to brokers. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
8 Invesco Mid Cap Growth Fund
Statement of Operations
For the six months ended October 31, 2013
(Unaudited)
Investment income: |
| |||
Dividends (net of foreign withholding taxes of $17,373) | $ | 8,073,542 | ||
Dividends from affiliated money market funds (includes securities lending income of $172,971) | 180,640 | |||
Total investment income | 8,254,182 | |||
Expenses: | ||||
Advisory fees | 8,317,658 | |||
Administrative services fees | 248,504 | |||
Custodian fees | 11,190 | |||
Distribution fees: | ||||
Class A | 2,481,418 | |||
Class B | 139,950 | |||
Class C | 723,847 | |||
Class R | 86,962 | |||
Transfer agent fees — A, B, C, R and Y | 2,763,663 | |||
Transfer agent fees — R5 | 32,405 | |||
Transfer agent fees — R6 | 427 | |||
Trustees’ and officers’ fees and benefits | 75,460 | |||
Other | 156,779 | |||
Total expenses | 15,038,263 | |||
Less: Fees waived, expenses reimbursed and expense offset arrangement(s) | (362,213 | ) | ||
Net expenses | 14,676,050 | |||
Net investment income (loss) | (6,421,868 | ) | ||
Realized and unrealized gain from: | ||||
Net realized gain from investment securities (includes net gains from securities sold to affiliates of $160,048) | 258,097,624 | |||
Change in net unrealized appreciation of investment securities | 122,755,640 | |||
Net realized and unrealized gain | 380,853,264 | |||
Net increase in net assets resulting from operations | $ | 374,431,396 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
9 Invesco Mid Cap Growth Fund
Statement of Changes in Net Assets
For the six months ended October 31, 2013 and the year ended April 30, 2013
(Unaudited)
| October 31, 2013 | April 30, 2013 | |||||||
Operations: |
| |||||||
Net investment income (loss) | $ | (6,421,868 | ) | $ | (2,732,495 | ) | ||
Net realized gain | 258,097,624 | 63,191,829 | ||||||
Change in net unrealized appreciation | 122,755,640 | 152,822,036 | ||||||
Net increase in net assets resulting from operations | 374,431,396 | 213,281,370 | ||||||
Share transactions–net: | ||||||||
Class A | 560,253,074 | 119,347,551 | ||||||
Class B | (10,413,666 | ) | (14,849,599 | ) | ||||
Class C | 10,068,136 | 23,210,936 | ||||||
Class R | 168,310 | 10,559,171 | ||||||
Class Y | 13,830,073 | (9,365,584 | ) | |||||
Class R5 | 48,476,211 | 14,216,234 | ||||||
Class R6 | 75,854,088 | — | ||||||
Net increase in net assets resulting from share transactions | 698,236,226 | 143,118,709 | ||||||
Net increase in net assets | 1,072,667,622 | 356,400,079 | ||||||
Net assets: | ||||||||
Beginning of period | 1,832,474,041 | 1,476,073,962 | ||||||
End of period (includes undistributed net investment income (loss) of $(12,660,493) and $(6,238,625), respectively) | $ | 2,905,141,663 | $ | 1,832,474,041 | ||||
Notes to Financial Statements
October 31, 2013
(Unaudited)
NOTE 1—Significant Accounting Policies
Invesco 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 ten 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.
The Fund currently consists of seven different classes of shares: Class A, Class B, Class C, Class R, Class Y, Class R5 and Class R6. On July 15, 2013, the Fund began offering Class R6 shares. 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, Class R5 and Class R6 shares are sold at net asset value. Effective November 30, 2010, new or additional investments in Class B shares are no longer permitted. Existing shareholders of Class B shares may continue to reinvest dividends and capital gains distributions in Class B shares until they convert to Class A shares. Also, shareholders in Class B shares will be able to exchange those shares for Class B shares of other Invesco Funds offering such shares until they convert to Class A shares. Generally, Class B shares will automatically convert to Class A shares on or about the month-end, which is at least eight years after the date of purchase. Redemption of Class B shares prior to the conversion date will be subject to a CDSC.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
| A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. |
A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. 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.
10 Invesco Mid Cap Growth Fund
Debt obligations (including convertible bonds) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual trading characteristics and other market data. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Foreign securities’ (including foreign exchange contracts) prices 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 the Adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities’ prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
| B. | Securities Transactions and Investment Income — Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund’s net asset value and, accordingly, they reduce the Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
| C. | Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
| D. | Distributions — Distributions from income and net realized capital gain, if any, are generally declared and paid annually and recorded on the ex-dividend date. The Fund may elect to treat a portion of the proceeds from redemptions as distributions for federal income tax purposes. |
| E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (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 Class R5 and Class R6 are allocated to each share class based on relative net assets. Sub-accounting fees attributable to Class R5 are charged to the operations of the class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses relating to all other classes are allocated among those classes based |
11 Invesco Mid Cap Growth Fund
| on relative net assets. All other expenses are allocated among the classes based on relative net assets. Prior to June 1, 2010, incremental transfer agency fees which were unique to each class of shares were charged to the operations of such class. |
| G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
| H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements, that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
| I. | 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 failed to return the securities. Upon the failure of the borrower to return the securities, collateral may be liquidated and the securities may be purchased on the open market to replace the loaned securities. The Fund could experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to any loss on the collateral invested. Dividends received on cash collateral investments for securities lending transactions, which are net of compensation to counterparties, is included in Dividends from affiliated money market funds on the Statement of Operations. The aggregate value of securities out on loan is shown as a footnote on the Statement of Assets and Liabilities, if any. |
| 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. |
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser based on the annual rate of the Fund’s average daily net assets as follows:
| Average Daily Net Assets | Rate | |||
First $500 million | 0.75% | |||
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
12 Invesco Mid Cap Growth Fund
Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Sub-Adviser(s).
Effective July 15, 2013, the Adviser has contractually agreed, through at least July 31, 2015, 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 above) of Class A, Class B, Class C, Class R, Class Y, Class R5 and Class R6 shares to 1.15%, 1.90%, 1.90%, 1.40%, 0.90%, 0.90% and 0.90%, respectively, of average daily net assets. Prior to July 15, 2013, 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 Class R5 shares to 2.00%, 2.75%, 2.75%, 2.25%, 1.75% and 1.75%, respectively, of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco amends or continues the fee waiver agreement, it will terminate on July 31, 2015. The fee waiver agreement cannot be terminated during its term. To the extent that the annualized expense ratio does not exceed the expense limitation, the Adviser will retain its ability to be reimbursed prior to the end of each fiscal year.
Further, the Adviser has contractually agreed, through at least June 30, 2014, 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, 2013, the Adviser waived advisory fees of $17,272 and reimbursed class level expenses of $286,780, $16,174, $22,045, $5,025, and $8,793 of Class A, Class B, Class C, Class R and Class Y shares, respectively.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco for certain administrative costs incurred in providing accounting services to the Fund. For the six months ended October 31, 2013, 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, 2013, 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, 2013, 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, 2013, IDI advised the Fund that IDI retained $88,924 in front-end sales commissions from the sale of Class A shares and $110, $23,217 and $1,573 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders.
For the six months ended October 31, 2013, the Fund incurred $9,117 in brokerage commissions with Invesco Capital Markets, Inc., an affiliate of the Adviser and IDI, for portfolio transactions executed on behalf of the Fund.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
| Level 1 — | Prices are determined using quoted prices in an active market for identical assets. |
| Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
| Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
13 Invesco Mid Cap Growth Fund
As of October 31, 2013, all of the securities in this Fund were valued based on Level 1 inputs (see the Schedule of Investments for security categories). 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.
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, 2013, the Fund engaged in securities purchases of $1,366,398 and securities sales of $4,632,210, which resulted in net realized gains of $160,048.
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, 2013, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $6,124.
NOTE 6—Trustees’ and Officers’ Fees and Benefits
Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees’ and Officers’ Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 7—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 8—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 GAAP. 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. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in 8 tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund had a capital loss carryforward as of April 30, 2013, which expires as follows:
| Capital Loss Carryforward* | ||||||||||||
| Expiration | Short-Term | Long-Term | Total | |||||||||
April 30, 2017 | $ | 139,640,351 | $ | — | $ | 139,640,351 | ||||||
| * | Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. To the extent that unrealized gains as of June 11, 2012, the date of reorganization of Invesco Capital Development Fund into the Fund, are realized on securities held in each fund at such date of reorganization, the capital loss carryforward may be further limited for up to five years from the date of the reorganization. |
14 Invesco Mid Cap Growth Fund
NOTE 9—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the six months ended October 31, 2013 was $1,125,287,234 and $993,321,483, 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 | $ | 742,683,229 | ||
Aggregate unrealized (depreciation) of investment securities | (42,242,507 | ) | ||
Net unrealized appreciation of investment securities | $ | 700,440,722 | ||
Cost of investments for tax purposes is $2,287,971,650.
NOTE 10—Share Information
| Summary of Share Activity | ||||||||||||||||
| Six months ended October 31, 2013(a) | Year ended April 30, 2013 | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Class A | 3,006,155 | $ | 102,048,575 | 3,767,489 | $ | 105,499,274 | ||||||||||
Class B | 21,393 | 649,591 | 31,585 | 780,304 | ||||||||||||
Class C | �� | 213,423 | 6,147,166 | 357,022 | 8,499,564 | |||||||||||
Class R | 102,333 | 3,452,632 | 222,149 | 6,127,960 | ||||||||||||
Class Y | 225,490 | 7,744,498 | 522,239 | 14,741,599 | ||||||||||||
Class R5 | 214,830 | 7,460,419 | 294,948 | 8,415,361 | ||||||||||||
Class R6(b) | 913,549 | 33,163,995 | — | — | ||||||||||||
Issued in connection with acquisitions:(c)(d) | ||||||||||||||||
Class A | 19,732,915 | 664,347,737 | 16,448,346 | 428,914,181 | ||||||||||||
Class B | 207,446 | 6,075,090 | 1,150,727 | 26,095,316 | ||||||||||||
Class C | 576,247 | 16,273,578 | 2,165,559 | 47,714,113 | ||||||||||||
Class R | 73,859 | 2,455,383 | 888,909 | 22,949,747 | ||||||||||||
Class Y | 370,038 | 12,741,282 | 236,389 | 6,285,183 | ||||||||||||
Class R5 | 2,256,389 | 77,957,730 | 464,820 | 12,375,874 | ||||||||||||
Class R6 | 1,365,854 | 47,184,427 | — | — | ||||||||||||
Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||
Class A | 268,615 | 9,087,814 | 766,845 | 21,613,810 | ||||||||||||
Class B | (308,970 | ) | (9,087,814 | ) | (881,590 | ) | (21,613,810 | ) | ||||||||
Reacquired: | ||||||||||||||||
Class A | (6,385,093 | ) | (215,231,052 | ) | (15,601,418 | ) | (436,679,714 | ) | ||||||||
Class B | (276,163 | ) | (8,050,533 | ) | (829,640 | ) | (20,111,409 | ) | ||||||||
Class C | (439,858 | ) | (12,352,608 | ) | (1,401,771 | ) | (33,002,741 | ) | ||||||||
Class R | (170,547 | ) | (5,739,705 | ) | (665,177 | ) | (18,518,536 | ) | ||||||||
Class Y | (193,572 | ) | (6,655,707 | ) | (1,070,405 | ) | (30,392,366 | ) | ||||||||
Class R5 | (1,016,696 | ) | (36,941,938 | ) | (228,481 | ) | (6,575,001 | ) | ||||||||
Class R6 | (127,760 | ) | (4,494,334 | ) | — | — | ||||||||||
Net increase in share activity | 20,629,877 | $ | 698,236,226 | 6,638,545 | $ | 143,118,709 | ||||||||||
| (a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 23% 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 July 15, 2013. |
| (c) | As of the opening of business on July 15, 2013, the Fund acquired all the net assets of Invesco Dynamics Fund (the “Target Fund”) pursuant to a plan of reorganization approved by the Trustees of the Fund on December 6, 2012 and by the shareholders of the Target Fund on April 24, 2013. The acquisition was accomplished by a tax-free exchange of 24,582,749 shares of the Fund for 29,596,460 shares outstanding of the Target Fund as of the close of business on July 12, 2013. Each class of the Target Fund was exchanged for the like class of shares of the Fund based on the relative net asset value of the Target Fund to the net asset value of the Fund at the close of business on July 12, 2013. The Target Fund’s net assets at that date of $827,035,227, including $197,905,378 of unrealized appreciation, were combined with those of the Fund. The net assets of the Fund immediately before the acquisition were $1,952,684,708 and $2,779,719,934 immediately after the acquisition. |
15 Invesco Mid Cap Growth Fund
| The pro forma results of operations for the six months ended October 31, 2013 assuming the reorganization had been completed on May 1, 2013, the beginning of the annual reporting period, are as follows: |
Net investment income (loss) | $ | (6,823,913 | ) | |
Net realized/unrealized gains | 469,819,773 | |||
Change in net assets resulting from operations | $ | 462,995,860 |
| The combined investment portfolios have been managed as a single integrated portfolio since the acquisition was completed; it is not practicable to separate the amounts of revenue and earnings of the Target Fund that has been included in the Fund’s Statement of Operations since July 15, 2013. |
| (d) | As of the opening of business on June 11, 2012, the Fund acquired all the net assets of Invesco Capital Development Fund (the “Target Fund”) pursuant to a plan of reorganization approved by the Trustees of the Fund on November 30, 2011 and by the shareholders of the Target Fund on April 30, 2012. The acquisition was accomplished by a tax-free exchange of 21,354,750 shares of the Fund for 35,123,891 shares outstanding of the Target Fund as of the close of business on June 8, 2012. Each class of the Target Fund was exchanged for the like class of shares of the Fund based on the relative net asset value of the Target Fund to the net asset value of the Fund at the close of business on June 8, 2012. The Target Fund’s net assets at that date of $544,334,414, including $67,690,735 of unrealized appreciation, were combined with those of the Fund. The net assets of the Fund immediately before the acquisition were $1,347,144,886 and $1,891,479,300 immediately after the acquisition. |
| The pro forma results of operations for the year ended April 30, 2013 assuming the reorganization had been completed on May 1, 2012, the beginning of the annual reporting period, are as follows: |
Net investment income (loss) | $ | (3,027,751 | ) | |
Net realized/unrealized gains | 215,315,866 | |||
Change in net assets resulting from operations | $ | 212,288,115 |
| The combined investment portfolios have been managed as a single integrated portfolio since the acquisition was completed; it is not practicable to separate the amounts of revenue and earnings of the Target Fund that has been included in the Fund’s Statement of Operations since June 11, 2012. |
16 Invesco 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.
| Net asset value, beginning of period | Net investment income (loss)(a) | Net gains (losses) on securities (both realized and unrealized) | Total from investment operations | Distributions from net realized gains | Net asset value, end of period | Total return | Net assets, end of period (000’s omitted) | Ratio of expenses to average net assets with fee waivers and/or expenses absorbed | Ratio of expenses to average net assets without fee waivers and/or expenses absorbed | Ratio of net investment income (loss) to average net assets | Portfolio turnover(b) | |||||||||||||||||||||||||||||||||||||
Class A |
| |||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | $ | 31.09 | $ | (0.09 | ) | $ | 5.47 | $ | 5.38 | $ | — | $ | 36.47 | 17.31 | %(c) | $ | 2,356,508 | 1.18 | %(d) | 1.21 | %(d) | (0.50 | )%(d) | 51 | % | |||||||||||||||||||||||
Year ended 04/30/13 | 28.15 | (0.03 | )(e) | 2.97 | 2.94 | — | 31.09 | 10.44 | (c) | 1,491,997 | 1.29 | 1.29 | (0.11 | )(e) | 88 | |||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 33.15 | (0.16 | ) | (2.82 | ) | (2.98 | ) | (2.02 | ) | 28.15 | (8.37 | )(c) | 1,199,482 | 1.31 | 1.31 | (0.57 | ) | 109 | ||||||||||||||||||||||||||||||
One month ended 04/30/11 | 31.79 | (0.03 | ) | 1.39 | 1.36 | — | 33.15 | 4.28 | (c) | 1,539,895 | 1.28 | (f) | 1.28 | (f) | (1.10 | )(f) | 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 | (g) | 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 | )(h) | 14.37 | (42.02 | )(g) | 848,832 | 1.19 | 1.40 | (0.58 | ) | 29 | ||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | 27.03 | (0.07 | ) | 4.75 | 4.68 | — | 31.71 | 17.31 | (c)(i) | 113,744 | 1.18 | (d)(i) | 1.21 | (d)(i) | (0.50 | )(d)(i) | 51 | |||||||||||||||||||||||||||||||
Year ended 04/30/13 | 24.47 | (0.03 | )(e) | 2.59 | 2.56 | — | 27.03 | 10.46 | (c)(i) | 106,586 | 1.29 | (i) | 1.29 | (i) | (0.11 | )(e)(i) | 88 | |||||||||||||||||||||||||||||||
Year ended 04/30/12 | 29.11 | (0.11 | ) | (2.51 | ) | (2.62 | ) | (2.02 | ) | 24.47 | (8.29 | )(c)(i) | 109,449 | 1.21 | (i) | 1.21 | (i) | (0.47 | )(i) | 109 | ||||||||||||||||||||||||||||
One month ended 04/30/11 | 27.91 | (0.03 | ) | 1.23 | 1.20 | — | 29.11 | 4.30 | (c)(j) | 167,947 | 1.35 | (f)(j) | 1.35 | (f)(j) | (1.17 | )(f)(j) | 21 | |||||||||||||||||||||||||||||||
Year ended 03/31/11 | 21.69 | (0.20 | ) | 6.42 | 6.22 | — | 27.91 | 28.68 | (c)(j) | 165,822 | 1.53 | (j) | 1.53 | (j) | (0.85 | )(j) | 162 | |||||||||||||||||||||||||||||||
Year ended 03/31/10 | 12.68 | (0.13 | ) | 9.14 | 9.01 | — | 21.69 | 71.06 | (k)(l) | 224,558 | 1.50 | (k) | 1.57 | (k) | (0.74 | )(k) | 25 | |||||||||||||||||||||||||||||||
Year ended 03/31/09 | 22.24 | (0.16 | ) | (9.24 | ) | (9.40 | ) | (0.16 | )(h) | 12.68 | (42.24 | )(k)(l) | 168,132 | 1.58 | (k) | 1.81 | (k) | (0.94 | )(k) | 29 | ||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | 26.11 | (0.17 | ) | 4.58 | 4.41 | — | 30.52 | 16.89 | (c) | 167,897 | 1.88 | (d) | 1.91 | (d) | (1.20 | )(d) | 51 | |||||||||||||||||||||||||||||||
Year ended 04/30/13 | 23.82 | (0.20 | )(e) | 2.49 | 2.29 | — | 26.11 | 9.62 | (c) | 134,484 | 2.04 | 2.04 | (0.86 | )(e) | 88 | |||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 28.63 | (0.32 | ) | (2.47 | ) | (2.79 | ) | (2.02 | ) | 23.82 | (9.06 | )(c) | 95,998 | 2.06 | 2.06 | (1.32 | ) | 109 | ||||||||||||||||||||||||||||||
One month ended 04/30/11 | 27.47 | (0.04 | ) | 1.20 | 1.16 | — | 28.63 | 4.22 | (c) | 132,885 | 2.03 | (f) | 2.03 | (f) | (1.85 | )(f) | 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 | (m) | 112,608 | 1.99 | 2.06 | (1.24 | ) | 25 | |||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 22.19 | (0.23 | ) | (9.20 | ) | (9.43 | ) | (0.16 | )(h) | 12.60 | (42.47 | )(m) | 69,522 | 1.94 | 2.15 | (1.33 | ) | 29 | ||||||||||||||||||||||||||||||
Class R | ||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | 30.72 | (0.13 | ) | 5.40 | 5.27 | — | 35.99 | 17.15 | (c) | 37,003 | 1.43 | (d) | 1.46 | (d) | (0.75 | )(d) | 51 | |||||||||||||||||||||||||||||||
Year ended 04/30/13 | 27.88 | (0.10 | )(e) | 2.94 | 2.84 | — | 30.72 | 10.19 | (c) | 31,410 | 1.54 | 1.54 | (0.36 | )(e) | 88 | |||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 32.94 | (0.23 | ) | (2.81 | ) | (3.04 | ) | (2.02 | ) | 27.88 | (8.62 | )(c) | 16,080 | 1.56 | 1.56 | (0.82 | ) | 109 | ||||||||||||||||||||||||||||||
One month ended 04/30/11 | 31.59 | (0.04 | ) | 1.39 | 1.35 | — | 32.94 | 4.27 | (c) | 12,443 | 1.53 | (f) | 1.53 | (f) | (1.35 | )(f) | 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 | (n) | 4,118 | 1.49 | 1.56 | (0.96 | ) | 25 | |||||||||||||||||||||||||||||||||
Period ended 03/31/09(o) | 24.15 | (0.08 | ) | (9.56 | ) | (9.64 | ) | (0.16 | ) | 14.35 | (39.89 | )(n)(p) | 99 | 1.44 | (f) | 1.76 | (f) | (0.66 | )(f) | 29 | ||||||||||||||||||||||||||||
Class Y | ||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | 31.78 | (0.04 | ) | 5.58 | 5.54 | — | 37.32 | 17.43 | (c) | 71,520 | 0.93 | (d) | 0.96 | (d) | (0.25 | )(d) | 51 | |||||||||||||||||||||||||||||||
Year ended 04/30/13 | 28.70 | 0.04 | (e) | 3.04 | 3.08 | — | 31.78 | 10.73 | (c) | 48,115 | 1.04 | 1.04 | 0.14 | (e) | 88 | |||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 33.66 | (0.09 | ) | (2.85 | ) | (2.94 | ) | (2.02 | ) | 28.70 | (8.12 | )(c) | 52,408 | 1.06 | 1.06 | (0.32 | ) | 109 | ||||||||||||||||||||||||||||||
One month ended 04/30/11 | 32.27 | (0.02 | ) | 1.41 | 1.39 | — | 33.66 | 4.31 | (c) | 46,867 | 1.03 | (f) | 1.03 | (f) | (0.85 | )(f) | 21 | |||||||||||||||||||||||||||||||
Year ended 03/31/11(q) | 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 | (r) | 143,273 | 0.99 | 1.06 | (0.24 | ) | 25 | |||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 25.26 | (0.06 | ) | (10.52 | ) | (10.58 | ) | (0.16 | )(h) | 14.52 | (41.86 | )(r) | 84,681 | 0.94 | 1.15 | (0.31 | ) | 29 | ||||||||||||||||||||||||||||||
Class R5 | ||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | 31.87 | (0.03 | ) | 5.62 | 5.59 | — | 37.46 | 17.54 | (c) | 77,856 | 0.82 | (d) | 0.82 | (d) | (0.14 | )(d) | 51 | |||||||||||||||||||||||||||||||
Year ended 04/30/13 | 28.73 | 0.10 | (e) | 3.04 | 3.14 | — | 31.87 | 10.93 | (c) | 19,881 | 0.84 | 0.84 | 0.34 | (e) | 88 | |||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 33.64 | (0.03 | ) | (2.86 | ) | (2.89 | ) | (2.02 | ) | 28.73 | (7.97 | )(c) | 2,656 | 0.85 | 0.85 | (0.11 | ) | 109 | ||||||||||||||||||||||||||||||
One month ended 04/30/11 | 32.24 | (0.02 | ) | 1.42 | 1.40 | — | 33.64 | 4.34 | (c) | 14 | 0.85 | (f) | 0.85 | (f) | (0.67 | )(f) | 21 | |||||||||||||||||||||||||||||||
Period ended 03/31/11(o) | 24.57 | (0.05 | ) | 7.72 | 7.67 | — | 32.24 | 31.22 | (c) | 13 | 0.82 | (f) | 0.82 | (f) | (0.26 | )(f) | 162 | |||||||||||||||||||||||||||||||
Class R6 | ||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13(o) | 34.55 | (0.01 | ) | 2.93 | 2.92 | — | 37.47 | 8.45 | (c) | 80,612 | 0.72 | (d) | 0.72 | (d) | (0.06 | )(d) | 51 | |||||||||||||||||||||||||||||||
| (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 six months ended October 31, 2013 and the year ended April 30, 2013, the portfolio turnover calculation excludes the value of securities purchased of $641,584,142 and $463,100,189 and sold of $274,784,240 and $427,869,406 in the effort to realign the Fund’s portfolio holdings after the reorganization of Invesco Dynamics Fund and Invesco Capital Development Fund, respectively, into the Fund. |
| (c) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges and is not annualized for periods less than one year, if applicable. |
| (d) | Ratios are annualized and based on average daily net assets (000’s omitted) of $1,968,952, $111,047, $151,351, $34,501, $60,369, $64,293 and $53,422 for Class A, Class B, Class C, Class R, Class Y, Class R5 and Class R6 shares, respectively. |
| (e) | Net investment income (loss) per share and the ratio of net investment income (loss) to average net assets include special cash dividends received during the period. Net investment income (loss) per share and the ratio of net investment income (loss) to average net assets excluding the special dividends are $(0.18) and (0.63)%, $(0.15) and (0.63)%, $(0.32) and (1.38)%, $(0.24) and (0.88)%, $(0.11) and (0.38)% and $(0.05) and (0.18)% for Class A, Class B, Class C, Class R, Class Y and Class R5 shares, respectively. |
| (f) | Annualized. |
| (g) | Assumes reinvestment of all distributions for the period and does not include payment of the maximum sales charge of 5.75% or contingent deferred sales charge (CDSC). On purchases of $1 million or more, a CDSC of 1% may be imposed on certain redemptions made within eighteen months of purchase. If the sales charges were included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to 0.25% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. |
| (h) | Includes return of capital distributions of less than $0.01. |
| (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%, 0.25% and 0.15% for the six months ended October 31, 2013 and the years ended April 30, 2013 and 2012, respectively. |
17 Invesco Mid Cap Growth Fund
| (j) | The Total return, Ratio of expenses to average net assets and Ratio of net investment income (loss) to average net assets reflect actual 12b-1 fees of 0.32% and 0.49% for the one month ended April 30, 2011 and the year ended March 31, 2011, respectively. |
| (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 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. |
| (m) | 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. |
| (n) | 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. |
| (o) | Commencement date of July 11, 2008, June 1, 2010 and July 15, 2013 for Class R, Class R5 and Class R6 shares, respectively. |
| (p) | Non-annualized. |
| (q) | On June 1, 2010, the Fund’s former Class I shares were reorganized into Class Y shares. |
| (r) | 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. |
18 Invesco 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, 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 R6 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, 2013 through October 31, 2013. The actual ending account value and expenses of the Class R6 shares in the example below are based on an investment of $1,000 invested as of close of business July 15, 2013 (commencement date) and held through October 31, 2013.
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 July 15, 2013 through October 31, 2013 for the Class R6 shares). Because the actual ending account value and expense information in the example is not based upon a six month period for the Class R6 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 or contingent deferred sales charges on redemptions, 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.
| Class | Beginning Account Value (05/01/13) | ACTUAL | HYPOTHETICAL (5% annual return before expenses) | Annualized Expense Ratio | ||||||||||||||||||||
Ending Account Value (10/31/13)1 | Expenses Paid During Period2 | Ending Account Value (10/31/13) | Expenses Paid During Period2 | |||||||||||||||||||||
| A | $ | 1,000.00 | $ | 1,173.10 | $ | 6.45 | $ | 1,019.20 | $ | 5.99 | 1.18 | % | ||||||||||||
| B | 1,000.00 | 1,173.10 | 6.45 | 1,019.20 | 5.99 | 1.18 | ||||||||||||||||||
| C | 1,000.00 | 1,168.90 | 10.25 | 1,015.69 | 9.53 | 1.88 | ||||||||||||||||||
| R | 1,000.00 | 1,171.50 | 7.81 | 1,017.95 | 7.25 | 1.43 | ||||||||||||||||||
| Y | 1,000.00 | 1,174.30 | 5.08 | 1,020.46 | 4.72 | 0.93 | ||||||||||||||||||
| R5 | 1,000.00 | 1,175.40 | 4.48 | 1,021.01 | 4.17 | 0.82 | ||||||||||||||||||
| R6 | 1,000.00 | 1,084.50 | 2.30 | 1,021.52 | 3.66 | 0.72 | ||||||||||||||||||
| 1 | The actual ending account value is based on the actual total return of the Fund for the period May 1, 2013, through October 31, 2013 (as of close of business July 15, 2013, through October 31, 2013 for the Class R6 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 | Actual 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. For the Class R6 shares actual expenses are equal to the annualized expense ratio indicated above multiplied by the average account value over the period, multiplied by 112 (as of close of business July 15, 2013, through October 31, 2013)/365. Because the Class R6 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 184/365 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 R6 shares of the Fund and other funds because such data is based on a full six month period. |
19 Invesco 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 Invesco Mid Cap Growth Fund’s (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 17-19, 2013, the Board as a whole, and the disinterested or “independent” Trustees, who comprise over 75% 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, 2013. The Board determined that continuation of 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 payable to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is primarily responsible for overseeing the management of a number of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned Invesco Funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies, limitations and investment risks of these funds. The Sub-Committees meet regularly and at designated contract renewal meetings each year to conduct a review of the performance, fees, expenses and other matters related to their assigned Invesco Funds. Each Sub-Committee recommends to the Investments Committee, which in turn recommends to the full Board, whether and on what terms to approve the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Trustees receive comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and Lipper Inc. (Lipper), an independent provider of investment company data. The Trustees also receive an independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of
his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. The independent Trustees are assisted in their annual evaluation of the Fund’s investment advisory agreement by the Senior Officer and by independent legal counsel. In addition to meetings with Invesco Advisers and fund counsel, the independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in separate sessions with the Senior Officer and with independent legal counsel.
In evaluating the fairness and reasonableness of compensation under the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Trustees recognized that the advisory fee rates for the Invesco Funds are, in many cases, the result of years of review and negotiation between the Trustees and Invesco Advisers as well as advisory fees previously approved by different predecessor boards. 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. The Trustees’ review and conclusions are based on the comprehensive consideration of all information presented to them and are not the result of any single determinative factor. Moreover, one Trustee may have weighed a particular piece of information or factor differently than another Trustee.
The discussion below serves as the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 19, 2013, and may not reflect consideration of factors that became known to the Board after that date, including, for example, changes to the Fund’s performance, advisory fees, expense limitations and/or fee waivers.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
| A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers, with whom the Sub-Committees met during the year. The Board’s
review of the qualifications of Invesco Advisers to provide advisory services included the Board’s consideration of Invesco Advisers’ 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 benefits of reapproving an existing relationship and the greater uncertainty that may be associated with entering into a new relationship. The Board also considered non-advisory services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution and legal and compliance. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services that may be 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 may invest, make recommendations regarding securities and assist with security trades. 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 that may be provided by the Affiliated Sub-Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s sub-advisory contracts.
| B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
The Board compared the Fund’s performance during the past one, three and five calendar years to the performance of funds in the Lipper performance universe and against the Lipper Mid-Cap Growth Funds Index. The Board noted that performance of Class A shares of the Fund was in the fourth quintile of the performance universe for the one year period, the fifth 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 Class A shares of the Fund was
20 Invesco Mid Cap Growth Fund
below the performance of the Index for the one, three and five year periods. Invesco Advisers noted that abrupt market changes have created a challenging environment for the trend driven process employed by the portfolio management team leading to a high probability of relative underperformance. The Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
| C. | Advisory and Sub-Advisory Fees |
The Board compared the Fund’s contractual management fee rate to the contractual management fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the contractual management fee rate for Class A shares of the Fund was below the median contractual management fee rate of funds in the expense group. The Board noted that the term “contractual management fee” may include both advisory and certain administrative services fees and that Invesco does not charge the Invesco Funds for the administrative services included in the term as defined by Lipper. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using each fund’s contractual management fee schedule (including any applicable breakpoints) as reported in the most recent prospectus or statement of additional information for each fund in the expense group.
The Board also compared the Fund’s effective advisory fee rate (the advisory fee rate after advisory fee waivers and before other expense limitations/waivers) to the effective 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 advisory fee rate was below the effective advisory fee rate of one mutual fund and above the rate of one mutual fund which will be reorganizing into the Fund after July 1, 2013.
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. Invesco Advisers reviewed with the Board the significantly greater scope of services it provides to the Invesco Funds relative to certain 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 fee rates charged by the Affiliated Sub-Advisers to manage the Invesco Funds and to manage other client accounts tended to be more
comparable, reflecting a more comparable scope of services. The Board concluded that the aggregate services provided to the Invesco Funds were sufficiently different from those provided to institutional clients, and the Board did not place significant weight on these fee comparisons.
The Board also considered the services that may be provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the fees payable by Invesco Advisers to the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board also noted that the sub-advisory fees are not paid directly by the Fund, but rather, are payable by Invesco Advisers to the Affiliated Sub-Advisers.
Based upon the information and considerations described above, the Board concluded that the compensation payable to Invesco Advisers and the Affiliated Sub-Advisers is fair and reasonable.
| D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule and was assisted in this review by a report from the Senior Officer. The Board also noted that the Fund shares directly in economies of scale through lower fees charged by third party service providers based on the combined size of the Invesco Funds and other clients advised by Invesco Advisers.
| E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the profitability of Invesco Advisers and its affiliates in providing these services for the year ended December 31, 2012. The Board received information from Invesco Advisers about the methodology used to prepare the profitability information. The Board considered the profitability of Invesco Advisers in managing the Fund and the Invesco Funds. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its subsidiaries provide to the Invesco Funds and the Fund. The Board did not deem the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund to be excessive given the nature, quality and extent of the services provided to the Invesco Funds. The Board received and accepted information from Invesco Advisers demonstrating that Invesco Advisers and each Affiliated Sub-Adviser are financially sound and have the resources necessary to perform their obligations under the investment advisory agreement and sub-advisory contracts.
| F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund, including the fees received for their provision of transfer agency and distribution services to the Fund. The Board considered comparative information regarding fees charged for these services, including information provided by Lipper and other
independent sources. The Board considered the performance of Invesco Advisers and its affiliates in providing these services and the organizational structure employed to provide these services. The Board also considered that these services are provided to the Fund pursuant to written contracts that are reviewed and approved on an annual basis by the Board; that the services are required for the operation of the Fund; that Invesco Advisers and its affiliates can provide services, the nature and quality of which are at least equal to those provided by others offering the same or similar services; and that the fees for such services are fair and reasonable in light of the usual and customary charges by others for services of the same nature and quality.
The Board considered the benefits realized by Invesco Advisers and the Affiliated Sub-Advisers as a result of portfolio brokerage transactions executed through “soft dollar” arrangements. The Board noted that soft dollar arrangements shift the payment obligation for research services from Invesco Advisers and the Affiliated Sub-Advisers to the Invesco Funds and that the research received may be used with other clients of Invesco Advisers and may reduce Invesco Advisers’ and the Affiliated Sub-Advisers’ expenses. The Board also considered periodic reports from the Chief Compliance Officer of the Invesco Funds demonstrating that these arrangements are consistent with regulatory requirements. The Board did not deem the soft dollar arrangements to be inappropriate.
The Board considered that the Fund’s uninvested cash and cash collateral from any securities lending arrangements may be invested in money market funds advised by Invesco Advisers pursuant to procedures approved by the Board. The Board noted that Invesco Advisers receives advisory fees from these affiliated money market funds attributable to such investments, although Invesco Advisers has contractually agreed to waive through varying periods the advisory fees payable by the Invesco Funds. The waiver is in an amount equal to 100% of the net advisory fee Invesco Advisers receives from the affiliated money market funds with respect to the Fund’s investment in the affiliated money market funds of uninvested cash, but not cash collateral. The Board concluded that the Fund’s investment of uninvested cash and cash collateral from any securities lending arrangements in the affiliated money market funds is in the best interests of the Fund and its shareholders.
The Board also considered use of an affiliated broker to execute certain trades for the Fund to among other things, control information leakage, and were advised that such trades are executed in compliance with rules under the Investment Company Act of 1940, as amended.
21 Invesco Mid Cap Growth Fund
Invesco mailing information
Send general correspondence to Invesco Investment Services, Inc., P.O. Box 219078, Kansas City, MO 64121-9078.
Invesco privacy policy
You share personal and financial information with us that is necessary for your transactions and your account records. We take very seriously the obligation to keep that information confidential and private.
Invesco collects nonpublic personal information about you from account applications or other forms you complete and from your transactions with us or our affiliates. We do not disclose information about you or our former customers to service providers or other third parties except to the extent necessary to service your account and in other limited circumstances as permitted by law. For example, we use this information to facilitate the delivery of transaction confirmations, financial reports, prospectuses and tax forms.
Even within Invesco, only people involved in the servicing of your accounts and compliance monitoring have access to your information. To ensure the highest level of confidentiality and security, Invesco maintains physical, electronic and procedural safeguards that meet or exceed federal standards. Special measures, such as data encryption and authentication, apply to your communications with us on our website. More detail is available to you at invesco.com/privacy.
Important notice regarding delivery of security holder documents
To reduce Fund expenses, only one copy of most shareholder documents may be mailed to shareholders with multiple accounts at the same address (Householding). Mailing of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact Invesco Investment Services, Inc. at 800 959 4246 or contact your financial institution. We will begin sending you individual copies for each account within 30 days after receiving your request.
Fund holdings and proxy voting information
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is available at invesco.com/completeqtrholdings. Shareholders can also look up the Fund’s Forms N-Q on the SEC website at sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are shown below.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov.
Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd. |  |
SEC file numbers: 811-03826 and 002-85905 | VK-MCG-SAR-1 | Invesco Distributors, Inc. |
| Semiannual Report to Shareholders | October 31, 2013 |
Invesco Small Cap Value Fund
Nasdaq:
A: VSCAX n B: VSMBX n C: VSMCX n Y: VSMIX
| 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 Contracts |
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, 4/30/13 to 10/31/13, at net asset value (NAV). Performance shown does not include applicable contingent deferred sales charges (CDSC) or front-end sales charges, which would have reduced performance.
| ||
Class A Shares | 18.08% | |||
| ||||
Class B Shares | 17.66 | |||
| ||||
Class C Shares | 17.59 | |||
| ||||
Class Y Shares | 18.25 | |||
| ||||
S&P 500 Indexq (Broad Market Index) | 11.15 | |||
| ||||
Russell 2000 Value Indexn (Style-Specific Index) | 13.94 | |||
| ||||
Lipper Small-Cap Value Funds Index¨ (Peer Group Index) | 15.42 | |||
| ||||
Source(s): | qInvesco, S&P-Dow Jones via FactSet Research Systems Inc.; nInvesco, Russell via FactSet Research Systems Inc.; ¨Lipper Inc. | |
The S&P 500® Index is an unmanaged index considered representative of the US 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) described 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 Small Cap Value Fund
Average Annual Total Returns As of 10/31/13, including maximum applicable sales charges
|
| |||
Class A Shares | ||||
| ||||
Inception (6/21/99) | 11.08% | |||
| ||||
10 Years | 11.54 | |||
| ||||
5 Years | 18.90 | |||
| ||||
1 Year | 37.09 | |||
| ||||
Class B Shares | ||||
| ||||
Inception (6/21/99) | 11.04% | |||
| ||||
10 Years | 11.73 | |||
| ||||
5 Years | 19.53 | |||
| ||||
1 Year | 39.04 | |||
| ||||
Class C Shares | ||||
| ||||
Inception (6/21/99) | 10.68% | |||
| ||||
10 Years | 11.35 | |||
| ||||
5 Years | 19.35 | |||
| ||||
1 Year | 42.97 | |||
| ||||
Class Y Shares | ||||
| ||||
Inception (8/12/05) | 11.10% | |||
| ||||
5 Years | 20.56 | |||
| ||||
1 Year | 45.44 | |||
Average Annual Total Returns As of 9/30/13, the most recent calendar quarter end, including maximum applicable sales charges
|
| |||
Class A Shares | ||||
| ||||
Inception (6/21/99) | 10.92% | |||
| ||||
10 Years | 11.83 | |||
| ||||
5 Years | 13.25 | |||
| ||||
1 Year | 29.83 | |||
| ||||
Class B Shares | ||||
| ||||
Inception (6/21/99) | 10.89% | |||
| ||||
10 Years | 12.02 | |||
| ||||
5 Years | 13.80 | |||
| ||||
1 Year | 31.32 | |||
| ||||
Class C Shares | ||||
| ||||
Inception (6/21/99) | 10.53% | |||
| ||||
10 Years | 11.64 | |||
| ||||
5 Years | 13.67 | |||
| ||||
1 Year | 35.31 | |||
| ||||
Class Y Shares | ||||
| ||||
Inception (8/12/05) | 10.82% | |||
| ||||
5 Years | 14.82 | |||
| ||||
1 Year | 37.79 | |||
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 on Class B shares, performance would have been lower.
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 (renamed Invesco 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 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 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 1.15%, 1.90%, 1.90% and 0.90%, 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.
3 Invesco Small Cap Value Fund
Letters to Shareholders
 Bruce Crockett | Dear Fellow Shareholders: The Invesco Funds Board has worked on a variety of issues over the last several months, and I’d like to take this opportunity to discuss two that affect you and our fellow fund shareholders. The first issue on which your Board has been working is our annual review of the funds’ advisory and sub-advisory contracts with Invesco Advisers and its affiliates. This annual review focuses on the nature and quality of the services Invesco provides as adviser to the Invesco Funds and the reasonableness of the fees that it charges for those services. Each year, we spend months reviewing detailed information, including information from many independent sources. I’m pleased to report that the Board determined in June that renewing the investment advisory agreement and the sub-advisory contracts with Invesco Advisers and its affiliates would serve the best interests of each fund and its shareholders. |
The second area of focus to highlight is the Board’s efforts to ensure that we provide a lineup of funds that allow financial advisers to build portfolios that meet shareholders’ changing financial needs and goals.
The members of your Board have worked with Invesco Advisers to provide more income-generating options in the Invesco Funds lineup to help shareholders potentially meet their income needs. Your Board recently approved changes to three existing equity mutual funds, increasing their focus on generating income while also seeking to provide long-term growth of capital.
Be assured that your Board will continue working on behalf of fund shareholders, keeping your needs and interests uppermost in our minds.
As always, please contact me at bruce@brucecrockett.com with any questions or concerns you may have. On behalf of the Board, we look forward to continuing to represent your interests and serving your needs.
Sincerely,
Bruce L. Crockett
Independent Chair
Invesco Funds Board of Trustees
 Philip Taylor | Dear Shareholders: Enclosed in this semiannual report, you’ll find performance data for your Fund, a complete list of your Fund’s investments as of the close of the reporting period and other important information. I hope you find this report of interest. Our website, invesco.com/us, provides fund-specific as well as more general information from many of Invesco’s investment professionals. You’ll find in-depth articles, video clips and audio commentaries – and, of course, you also can access information about your Invesco account whenever it’s convenient for you. At Invesco, all of our people and all of our resources are dedicated to helping investors achieve their financial objectives. It’s a philosophy we call Intentional Investing, and it guides the way we: n Manage investments – Our dedicated investment professionals search the world for the |
| n | Provide choices – We offer multiple investment strategies, allowing you and your financial adviser to build a portfolio that’s purpose-built for your needs. |
| n | Connect with you – We’re committed to giving you the expert insights you need to make informed investing decisions, and we are well-equipped to provide high-quality support for investors and advisers. |
For questions about your account, feel free to contact an Invesco client services representative at 800 959 4246. For Invesco-related questions or comments, please email me directly at phil@invesco.com.
All of us at Invesco look forward to serving your investment management needs for many years to come. Thank you for investing with us.
Sincerely,
Philip Taylor
Senior Managing Director, Invesco Ltd.
4 Invesco Small Cap Value Fund
Schedule of Investments(a)
October 31, 2013
(Unaudited)
| Shares | Value | |||||||
Common Stocks & Other Equity Interests–96.18% |
| |||||||
| Air Freight & Logistics–1.84% | ||||||||
UTi Worldwide, Inc. | 3,683,600 | $ | 55,990,720 | |||||
| Apparel Retail–6.13% | ||||||||
Abercrombie & Fitch Co.–Class A | 3,189,100 | 119,527,468 | ||||||
Guess?, Inc. | 2,146,800 | 67,087,500 | ||||||
| 186,614,968 | ||||||||
| Apparel, Accessories & Luxury Goods–1.49% | ||||||||
Quiksilver, Inc.(b) | 5,454,792 | 45,383,869 | ||||||
| Auto Parts & Equipment–2.40% | ||||||||
Faurecia (France)(b) | 1,547,200 | 45,153,801 | ||||||
Modine Manufacturing Co.(b) | 2,101,548 | 27,992,619 | ||||||
| 73,146,420 | ||||||||
| Construction & Engineering–1.46% | ||||||||
Aegion Corp.(b)(c) | 2,172,486 | 44,535,963 | ||||||
| Construction & Farm Machinery & Heavy Trucks–3.25% | ||||||||
Terex Corp.(b) | 1,502,400 | 52,508,880 | ||||||
WABCO Holdings Inc.(b) | 541,500 | 46,395,720 | ||||||
| 98,904,600 | ||||||||
| Consumer Electronics–2.92% | ||||||||
Harman International Industries, Inc. | 1,098,559 | 89,005,250 | ||||||
| Data Processing & Outsourced Services–1.46% | ||||||||
Broadridge Financial Solutions Inc. | 1,266,700 | 44,537,172 | ||||||
| Department Stores–1.02% | ||||||||
J. C. Penney Co., Inc.(b) | 4,144,496 | 31,083,720 | ||||||
| Diversified Metals & Mining–0.85% | ||||||||
Globe Specialty Metals Inc. | 1,470,400 | 25,790,816 | ||||||
| Electronic Components–3.06% | ||||||||
Belden Inc. | 1,308,853 | 88,033,453 | ||||||
Rogers Corp.(b) | 85,062 | 5,185,379 | ||||||
| 93,218,832 | ||||||||
| Electronic Equipment & Instruments–0.94% | ||||||||
FLIR Systems, Inc. | 1,006,300 | 28,659,424 | ||||||
| Electronic Manufacturing Services–6.94% | ||||||||
Flextronics International Ltd. (Singapore)(b) | 7,308,500 | 57,664,065 | ||||||
Jabil Circuit, Inc. | 2,400,600 | 50,076,516 | ||||||
KEMET Corp.(b)(c) | 3,744,102 | 21,229,058 | ||||||
Methode Electronics, Inc. | 1,066,089 | 27,270,557 | ||||||
Sanmina Corp.(b) | 3,797,060 | 55,285,194 | ||||||
| 211,525,390 | ||||||||
| Health Care Equipment–1.05% | ||||||||
Integra LifeSciences Holdings Corp.(b) | 700,400 | 32,064,312 | ||||||
| Shares | Value | |||||||
| Health Care Facilities–2.91% | ||||||||
Brookdale Senior Living Inc.(b) | 2,154,700 | $ | 58,349,276 | |||||
Universal Health Services, Inc.–Class B | 377,900 | 30,443,624 | ||||||
| 88,792,900 | ||||||||
| Health Care Services–0.71% | ||||||||
AMN Healthcare Services, Inc.(b) | 883,181 | 10,951,445 | ||||||
ExamWorks Group Inc.(b) | 418,145 | 10,809,048 | ||||||
| 21,760,493 | ||||||||
| Health Care Supplies–3.16% | ||||||||
Alere, Inc.(b) | 2,851,023 | 96,165,006 | ||||||
| Human Resource & Employment Services–3.06% | ||||||||
Manpower, Inc. | 1,192,873 | 93,163,381 | ||||||
| Industrial Conglomerates–1.16% | ||||||||
McDermott International, Inc.(b) | 4,990,900 | 35,285,663 | ||||||
| Industrial Machinery–1.33% | ||||||||
Briggs & Stratton Corp. | 1,584,700 | 29,063,398 | ||||||
ESCO Technologies Inc. | 319,695 | 11,534,596 | ||||||
| 40,597,994 | ||||||||
| Investment Banking & Brokerage–5.59% | ||||||||
E*TRADE Financial Corp.(b) | 5,461,200 | 92,348,892 | ||||||
FBR & Co.(b) | 32,123 | 851,259 | ||||||
LPL Financial Holdings, Inc. | 1,892,400 | 77,096,376 | ||||||
| 170,296,527 | ||||||||
| IT Consulting & Other Services–2.53% | ||||||||
CIBER, Inc.(b)(c) | 6,751,300 | 21,941,725 | ||||||
iGATE Corp.(b) | 1,732,830 | 55,173,307 | ||||||
| 77,115,032 | ||||||||
| Leisure Products–1.83% | ||||||||
Callaway Golf Co.(c) | 4,772,338 | 40,230,809 | ||||||
JAKKS Pacific, Inc.(c) | 2,423,100 | 15,604,764 | ||||||
| 55,835,573 | ||||||||
| Life & Health Insurance–2.15% | ||||||||
CNO Financial Group, Inc. | 4,201,888 | 65,465,415 | ||||||
| Life Sciences Tools & Services–1.30% | ||||||||
PerkinElmer, Inc. | 1,039,400 | 39,538,776 | ||||||
| Office Services & Supplies–0.97% | ||||||||
ACCO Brands Corp.(b) | 5,042,712 | 29,499,865 | ||||||
| Oil & Gas Equipment & Services–2.28% | ||||||||
Global Geophysical Services, Inc.(b) | 1,634,500 | 3,906,455 | ||||||
ION Geophysical Corp.(b) | 6,114,743 | 28,372,408 | ||||||
Superior Energy Services, Inc.(b) | 1,386,080 | 37,188,526 | ||||||
| 69,467,389 | ||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
5 Invesco Small Cap Value Fund
| Shares | Value | |||||||
| Oil & Gas Exploration & Production–1.88% | ||||||||
Goodrich Petroleum Corp.(b)(c) | 2,445,612 | $ | 57,202,865 | |||||
| Paper Packaging–2.63% | ||||||||
Sealed Air Corp. | 2,651,273 | 80,015,419 | ||||||
| Property & Casualty Insurance–0.19% | ||||||||
Argo Group International Holdings, Ltd. | 141,574 | 5,943,277 | ||||||
| Regional Banks–6.49% | ||||||||
Capital Bank Financial Corp.–Class A(b) | 38,277 | 850,515 | ||||||
First Horizon National Corp. | 5,922,967 | 63,079,599 | ||||||
First Niagara Financial Group, Inc. | 5,115,812 | 56,427,406 | ||||||
Zions Bancorp. | 2,724,000 | 77,279,880 | ||||||
| 197,637,400 | ||||||||
| Reinsurance–2.68% | ||||||||
Reinsurance Group of America, Inc. | 412,494 | 29,361,323 | ||||||
Validus Holdings, Ltd. (Bermuda) | 1,320,400 | 52,129,392 | ||||||
| 81,490,715 | ||||||||
| Research & Consulting Services–3.06% | ||||||||
Dun & Bradstreet Corp. (The) | 504,100 | 54,841,039 | ||||||
Resources Connection Inc.(c) | 3,019,514 | 38,528,999 | ||||||
| 93,370,038 | ||||||||
| Semiconductor Equipment–1.62% | ||||||||
Brooks Automation, Inc. | 1,606,500 | 15,486,660 | ||||||
Lam Research Corp.(b) | 622,917 | 33,780,789 | ||||||
| 49,267,449 | ||||||||
| Semiconductors–7.22% | ||||||||
Fairchild Semiconductor International, Inc.(b) | 3,545,300 | 44,918,951 | ||||||
| Shares | Value | |||||||
| Semiconductors–(continued) | ||||||||
Lattice Semiconductor Corp.(b)(c) | 10,928,800 | $ | 56,064,744 | |||||
Micrel, Inc. | 1,236,700 | 11,377,640 | ||||||
Microsemi Corp.(b) | 1,562,543 | 39,266,706 | ||||||
ON Semiconductor Corp.(b) | 9,656,700 | 68,176,302 | ||||||
| 219,804,343 | ||||||||
| Specialized Finance–1.87% | ||||||||
NASDAQ OMX Group, Inc. (The) | 1,610,100 | 57,045,843 | ||||||
| Steel–2.26% | ||||||||
Allegheny Technologies, Inc. | 2,082,800 | 68,940,680 | ||||||
| Technology Distributors–0.98% | ||||||||
CDW Corp.(b) | 1,352,174 | 29,734,306 | ||||||
| Trading Companies & Distributors–1.51% | ||||||||
AerCap Holdings N.V.(b) | 2,267,470 | 46,006,966 | ||||||
Total Common Stocks & Other Equity Interests |
| 2,929,904,771 | ||||||
Money Market Funds–2.92% |
| |||||||
Liquid Assets Portfolio–Institutional Class(d) | 44,397,692 | 44,397,692 | ||||||
Premier Portfolio–Institutional | 44,397,691 | 44,397,691 | ||||||
Total Money Market Funds |
| 88,795,383 | ||||||
TOTAL INVESTMENTS–99.10% |
| 3,018,700,154 | ||||||
OTHER ASSETS LESS LIABILITIES–0.90% |
| 27,412,748 | ||||||
NET ASSETS–100.00% |
| $ | 3,046,112,902 | |||||
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, 2013 was $295,338,927, which represented 9.70% 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. |
Portfolio Composition
By sector, based on Net Assets
as of October 31, 2013
Information Technology | 21.9 | % | ||
Industrials | 20.5 | |||
Financials | 19.0 | |||
Consumer Discretionary | 15.8 | |||
Health Care | 9.1 | |||
Materials | 5.7 | |||
Energy | 4.2 | |||
Money Market Funds Plus Other Assets Less Liabilities | 3.8 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
6 Invesco Small Cap Value Fund
Statement of Assets and Liabilities
October 31, 2013
(Unaudited)
Assets: |
| |||
Investments, at value (Cost $1,887,919,650) | $ | 2,634,565,844 | ||
Investments in affiliates, at value (Cost $348,043,874) | 384,134,310 | |||
Total investments, at value (Cost $2,235,963,524) | 3,018,700,154 | |||
Foreign currencies, at value (Cost $345,681) | 296,961 | |||
Receivable for: | ||||
Investments sold | 43,896,487 | |||
Fund shares sold | 23,175,221 | |||
Dividends | 76,787 | |||
Investment for trustee deferred compensation and retirement plans | 55,033 | |||
Other assets | 71,979 | |||
Total assets | 3,086,272,622 | |||
Liabilities: |
| |||
Payable for: | ||||
Investments purchased | 7,539,806 | |||
Fund shares reacquired | 30,061,352 | |||
Accrued fees to affiliates | 2,226,338 | |||
Accrued trustees’ and officers’ fees and benefits | 5,259 | |||
Accrued other operating expenses | 103,233 | |||
Trustee deferred compensation and retirement plans | 223,732 | |||
Total liabilities | 40,159,720 | |||
Net assets applicable to shares outstanding | $ | 3,046,112,902 | ||
Net assets consist of: |
| |||
Shares of beneficial interest | $ | 2,017,823,952 | ||
Undistributed net investment income (loss) | (4,219,532 | ) | ||
Undistributed net realized gain | 249,759,207 | |||
Net unrealized appreciation | 782,749,275 | |||
| $ | 3,046,112,902 | |||
Net Assets: |
| |||
Class A | $ | 1,684,426,093 | ||
Class B | $ | 29,967,041 | ||
Class C | $ | 155,910,313 | ||
Class Y | $ | 1,175,809,455 | ||
Shares outstanding, $0.01 par value per share, |
| |||
Class A | 76,977,659 | |||
Class B | 1,567,684 | |||
Class C | 8,359,098 | |||
Class Y | 52,615,405 | |||
Class A: | ||||
Net asset value per share | $ | 21.88 | ||
Maximum offering price per share | ||||
(Net asset value of $21.88 ¸ 94.50%) | $ | 23.15 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 19.12 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 18.65 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 22.35 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
7 Invesco Small Cap Value Fund
Statement of Operations
For the six months ended October 31, 2013
(Unaudited)
Investment income: |
| |||
Dividends | $ | 10,413,254 | ||
Dividends from affiliates | 512,831 | |||
Total investment income | 10,926,085 | |||
Expenses: | ||||
Advisory fees | 9,039,131 | |||
Administrative services fees | 268,744 | |||
Custodian fees | 33,602 | |||
Distribution fees: | ||||
Class A | 2,034,010 | |||
Class B | 150,606 | |||
Class C | 758,629 | |||
Transfer agent fees | 2,486,776 | |||
Trustees’ and officers’ fees and benefits | 80,957 | |||
Other | 209,878 | |||
Total expenses | 15,062,333 | |||
Less: Fees waived and expense offset arrangement(s) | (74,323 | ) | ||
Net expenses | 14,988,010 | |||
Net investment income (loss) | (4,061,925 | ) | ||
Realized and unrealized gain (loss) from: | ||||
Net realized gain (loss) from: | ||||
Investment securities (includes net gains from securities sold to affiliates of $52,881) | 234,492,056 | |||
Foreign currencies | (20,592 | ) | ||
| 234,471,464 | ||||
Change in net unrealized appreciation of: | ||||
Investment securities | 227,774,645 | |||
Foreign currencies | 12,645 | |||
| 227,787,290 | ||||
Net realized and unrealized gain | 462,258,754 | |||
Net increase in net assets resulting from operations | $ | 458,196,829 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
8 Invesco Small Cap Value Fund
Statement of Changes in Net Assets
For the six months ended October 31, 2013 and the year ended April 30, 2013
(Unaudited)
October 31, 2013 | April 30, 2013 | |||||||
Operations: |
| |||||||
Net investment income (loss) | $ | (4,061,925 | ) | $ | (2,426,873 | ) | ||
Net realized gain | 234,471,464 | 175,168,734 | ||||||
Change in net unrealized appreciation | 227,787,290 | 239,394,669 | ||||||
Net increase in net assets resulting from operations | 458,196,829 | 412,136,530 | ||||||
Distributions to shareholders from net realized gains: | ||||||||
Class A | — | (166,908,714 | ) | |||||
Class B | — | (4,213,950 | ) | |||||
Class C | — | (19,034,069 | ) | |||||
Class Y | — | (94,863,994 | ) | |||||
Total distributions from net realized gains | — | (285,020,727 | ) | |||||
Share transactions–net: | ||||||||
Class A | (31,522,753 | ) | 53,796,586 | |||||
Class B | (3,233,197 | ) | (6,498,630 | ) | ||||
Class C | (6,469,748 | ) | (5,623,331 | ) | ||||
Class Y | 123,024,375 | 91,959,557 | ||||||
Net increase in net assets resulting from share transactions | 81,798,677 | 133,634,182 | ||||||
Net increase in net assets | 539,995,506 | 260,749,985 | ||||||
Net assets: | ||||||||
Beginning of period | 2,506,117,396 | 2,245,367,411 | ||||||
End of period (includes undistributed net investment income (loss) of $(4,219,532) and $(157,607), respectively) | $ | 3,046,112,902 | $ | 2,506,117,396 | ||||
Notes to Financial Statements
October 31, 2013
(Unaudited)
NOTE 1—Significant Accounting Policies
Invesco 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 ten 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 four different classes of shares: Class A, Class B, Class C and Class Y. Class A shares are sold with a front-end sales charge unless certain waiver criteria are met and under certain circumstances load waived shares may be subject to contingent deferred sales charges (“CDSC”). Class C shares are sold with a CDSC. Class Y shares are sold at net asset value. Effective November 30, 2010, new or additional investments in Class B shares are no longer permitted. Existing shareholders of Class B shares may continue to reinvest dividends and capital gains distributions in Class B shares until they convert to Class A shares. Also, shareholders in Class B shares will be able to exchange those shares for Class B shares of other Invesco Funds offering such shares until they convert to Class A shares. Generally, Class B shares will automatically convert to Class A shares on or about the month-end, which is at least eight years after the date of purchase. Redemption of Class B shares prior to the conversion date will be subject to a CDSC.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
| A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. |
A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. 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
9 Invesco Small Cap Value Fund
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 (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual trading characteristics and other market data. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Foreign securities’ (including foreign exchange contracts) prices 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 the Adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities’ prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
| B. | Securities Transactions and Investment Income — Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund’s net asset value and, accordingly, they reduce the Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
| C. | Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
| D. | Distributions — Distributions from income and net realized capital gain, if any, are generally declared and paid annually and recorded on the ex-dividend date. The Fund may elect to treat a portion of the proceeds from redemptions as distributions for federal income tax purposes. |
| E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (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. |
10 Invesco Small Cap Value Fund
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
| F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. Prior to June 1, 2010, incremental transfer agency fees which were unique to each class of shares were charged to the operations of such class. |
| G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
| H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements, that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
| I. | Foreign Currency Translations — Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. |
The Fund may invest in foreign securities which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable.
| J. | Foreign Currency Contracts — The Fund may enter into foreign currency contracts to manage or minimize currency or exchange rate risk. The Fund may also enter into foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to “lock in” the U.S. dollar price of that security. A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The use of foreign currency contracts does not eliminate fluctuations in the price of the underlying securities the Fund owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statement of Operations. The primary risks associated with foreign currency contracts include failure of the counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities. |
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser based on the annual rate of the Fund’s average daily net assets as follows:
| Average Daily Net Assets | Rate | |||||
First $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).
The Adviser has contractually agreed, through at least June 30, 2014, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waivers and/or expense reimbursements (excluding certain items discussed below) of Class A, Class B, Class C, and Class Y shares to 2.00%, 2.75%, 2.75% and 1.75%, respectively, of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco amends or continues the fee waiver agreement, it will terminate on June 30, 2014. The fee waiver agreement cannot be terminated during its term. To the extent that the annualized expense ratio does not exceed the expense limitation, the Adviser will retain its ability to be reimbursed prior to the end of each fiscal year.
11 Invesco Small Cap Value Fund
Further, the Adviser has contractually agreed, through at least June 30, 2014, 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, 2013, the Adviser waived advisory fees of $73,494.
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, 2013, 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, 2013, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
Shares of the Fund are distributed by Invesco Distributors, Inc. (“IDI”). The Fund has adopted a distribution plan pursuant to Rule 12b-1 under the 1940 Act, and a service plan (collectively, the “Plans”) for Class A shares, Class B shares and Class C shares to compensate IDI for the sale, distribution, shareholder servicing and maintenance of shareholder accounts for these shares. Under the Plans, the Fund will incur annual fees of up to 0.25% of Class A average daily net assets and up to 1.00% each of Class B and Class C average daily net assets.
With respect to Class B and Class C shares, the Fund is authorized to reimburse in future years any distribution related expenses that exceed the maximum annual reimbursement rate for such class, so long as such reimbursement does not cause the Fund to exceed the Class B and Class C maximum annual reimbursement rate, respectively. With respect to Class A shares, distribution related expenses that exceed the maximum annual reimbursement rate for such class are not carried forward to future years and the Fund will not reimburse IDI for any such expenses.
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, 2013, IDI advised the Fund that IDI retained $14,362 in front-end sales commissions from the sale of Class A shares and $5, $7,743 and $2,391 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
| Level 1 — | Prices are determined using quoted prices in an active market for identical assets. |
| Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
| Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of October 31, 2013. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 2,973,546,353 | $ | 45,153,801 | $ | — | $ | 3,018,700,154 | ||||||||
12 Invesco Small Cap Value Fund
NOTE 4—Investments in Other Affiliates
The 1940 Act 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 1940 Act) of that issuer. The following is a summary of the investments in other affiliates for the six months ended October 31, 2013.
Value 04/30/13 | Purchases at Cost | Proceeds from Sales | Change in Unrealized Appreciation (Depreciation) | Realized Gain | Value 10/31/13 | Interest/ Dividend Income | ||||||||||||||||||||||
Aegion Corp. | $ | 45,752,555 | $ | — | $ | — | $ | (1,216,592 | ) | $ | — | $ | 44,535,963 | $ | — | |||||||||||||
AMN Healthcare Services, Inc.(a) | 51,501,285 | — | (43,321,257 | ) | (18,364,137 | ) | 21,135,554 | 10,951,445 | — | |||||||||||||||||||
Callaway Golf Co. | 25,380,987 | 6,509,860 | — | 8,339,962 | — | 40,230,809 | 87,579 | |||||||||||||||||||||
CIBER, Inc. | 28,760,538 | — | — | (6,818,813 | ) | — | 21,941,725 | — | ||||||||||||||||||||
FBR & Co.(a) | 15,351,356 | — | (19,985,410 | ) | (4,863,272 | ) | 10,348,585 | 851,259 | — | |||||||||||||||||||
Goodrich Petroleum Corp. | 31,890,780 | — | — | 25,312,085 | — | 57,202,865 | — | |||||||||||||||||||||
JAKKS Pacific, Inc. | — | 16,659,499 | — | (1,054,735 | ) | — | 15,604,764 | — | ||||||||||||||||||||
KEMET Corp. | 14,852,943 | 6,059,100 | — | 317,015 | — | 21,229,058 | — | |||||||||||||||||||||
Lattice Semiconductor Corp. | 50,818,920 | — | — | 5,245,824 | — | 56,064,744 | — | |||||||||||||||||||||
Methode Electronics, Inc.(a) | 36,479,112 | — | (32,209,191 | ) | 5,927,522 | 17,073,114 | 27,270,557 | 228,899 | ||||||||||||||||||||
Resources Connection Inc. | 34,301,679 | — | — | 4,227,320 | — | 38,528,999 | 392,537 | |||||||||||||||||||||
Sanmina Corp.(a) | 66,259,972 | — | (23,511,196 | ) | 5,683,762 | 6,852,656 | 55,285,194 | — | ||||||||||||||||||||
Total | $ | 401,350,127 | $ | 29,228,459 | $ | (119,027,054 | ) | $ | 22,735,941 | $ | 55,409,909 | $ | 389,697,382 | $ | 709,015 | |||||||||||||
| (a) | As of October 31, 2013, this security is no longer considered an affiliated of the fund. |
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, 2013, the Fund engaged in securities purchases of $11,311,610 and securities sales of $158,545, which resulted in net realized gains of $52,881.
NOTE 6—Expense Offset Arrangement(s)
The expense offset arrangement is comprised of transfer agency credits which result from balances in demand deposit accounts used by the transfer agent for clearing shareholder transactions. For the six months ended October 31, 2013, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $829.
NOTE 7—Trustees’ and Officers’ Fees and Benefits
Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees’ and Officers’ Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 8—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 9—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 GAAP. 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.
13 Invesco Small Cap Value 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. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in 8 tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforward with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund had a capital loss carryforward as of April 30, 2013, which expires as follows:
| Capital Loss Carryforward* | ||||||||||||
| Expiration | Short-Term | Long-Term | Total | |||||||||
April 30, 2017 | $ | 2,010,044 | $ | — | $ | 2,010,044 | ||||||
| * | Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. To the extent that unrealized gains as of May 23, 2011, the date of reorganization of Invesco Special Value Fund, Invesco U.S. Small Cap Value Fund and Invesco U.S. Small-Mid Cap Value Fund (the “Target Funds”) into the Fund, are realized on securities held in each fund at such date of reorganization, the capital loss carryforward may be further limited for up to five years from the date of the reorganization. |
NOTE 10—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the six months ended October 31, 2013 was $588,894,739 and $533,993,943, 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 | $ | 844,355,588 | ||
Aggregate unrealized (depreciation) of investment securities | (68,664,340 | ) | ||
Net unrealized appreciation of investment securities | $ | 775,691,248 | ||
Cost of investments for tax purposes is $2,243,008,906.
NOTE 11—Share Information
| Summary of Share Activity | ||||||||||||||||
| Six months ended October 31, 2013(a) | Year ended April 30, 2013 | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Class A | 9,587,452 | $ | 197,736,974 | 15,727,724 | $ | 276,682,663 | ||||||||||
Class B | 20,824 | 373,586 | 20,194 | 315,878 | ||||||||||||
Class C | 300,534 | 5,286,566 | 450,135 | 6,836,291 | ||||||||||||
Class Y | 11,109,552 | 235,425,997 | 11,231,155 | 201,965,012 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Class A | — | — | 10,027,140 | 155,922,027 | ||||||||||||
Class B | — | — | 284,420 | 3,888,017 | ||||||||||||
Class C | — | — | 1,340,015 | 17,875,804 | ||||||||||||
Class Y | — | — | 5,742,916 | 90,967,796 | ||||||||||||
Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||
Class A | 80,122 | 1,634,679 | 338,255 | 5,805,598 | ||||||||||||
Class B | (91,552 | ) | (1,634,679 | ) | (378,133 | ) | (5,805,598 | ) | ||||||||
Reacquired: | ||||||||||||||||
Class A | (11,145,196 | ) | (230,894,406 | ) | (22,156,478 | ) | (384,613,702 | ) | ||||||||
Class B | (109,660 | ) | (1,972,104 | ) | (314,321 | ) | (4,896,927 | ) | ||||||||
Class C | (668,452 | ) | (11,756,314 | ) | (2,008,422 | ) | (30,335,426 | ) | ||||||||
Class Y | (5,329,218 | ) | (112,401,622 | ) | (11,323,825 | ) | (200,973,251 | ) | ||||||||
Net increase in share activity | 3,754,406 | $ | 81,798,677 | 8,980,775 | $ | 133,634,182 | ||||||||||
| (a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 32% 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. |
14 Invesco 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.
| Net asset value, beginning of period | Net investment income (loss)(a) | Net gains on securities | Total from investment operations | Dividends from net investment income | Distributions from net realized gains | Total distributions | Net asset value, end of period(b) | Total return | Net assets, end of period (000’s omitted) | Ratio of expenses to average net assets with fee waivers and/or expenses absorbed | Ratio of expenses to average net assets without fee waivers and/or expenses absorbed | Ratio of net investment income (loss) to average net assets | Portfolio turnover(c) | |||||||||||||||||||||||||||||||||||||||||||
Class A |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | $ | 18.53 | $ | (0.03 | ) | $ | 3.38 | $ | 3.35 | $ | — | $ | — | $ | — | $ | 21.88 | 18.08 | %(d) | $ | 1,684,426 | 1.09 | %(e) | 1.10 | %(e) | (0.32 | )%(e) | 20 | % | |||||||||||||||||||||||||||
Year ended 04/30/13 | 17.80 | (0.02 | )(f) | 3.17 | 3.15 | — | (2.42 | ) | �� | (2.42 | ) | 18.53 | 20.27 | (d) | 1,454,001 | 1.12 | 1.15 | (0.13 | )(f) | 35 | ||||||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 19.71 | (0.04 | ) | (0.75 | ) | (0.79 | ) | — | (1.12 | ) | (1.12 | ) | 17.80 | (3.18 | )(d) | 1,326,668 | 1.03 | 1.17 | (0.24 | ) | 50 | |||||||||||||||||||||||||||||||||||
One month ended 04/30/11 | 19.17 | (0.01 | ) | 0.55 | 0.54 | — | — | — | 19.71 | 2.82 | (d) | 1,067,286 | 1.33 | (g) | 1.36 | (g) | (0.84 | )(g) | 5 | |||||||||||||||||||||||||||||||||||||
Year ended 03/31/11 | 16.06 | (0.03 | ) | 3.75 | 3.72 | — | (0.61 | ) | (0.61 | ) | 19.17 | 23.46 | (d) | 1,045,598 | 1.19 | 1.18 | (0.19 | ) | 67 | |||||||||||||||||||||||||||||||||||||
Year ended 03/31/10 | 9.56 | (0.05 | ) | 6.55 | 6.50 | (0.00 | )(h) | — | (0.00 | )(h) | 16.06 | 68.04 | (i) | 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 | )(i) | 225,016 | 1.34 | 1.34 | 0.40 | 63 | ||||||||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | 16.25 | (0.10 | ) | 2.97 | 2.87 | — | — | — | 19.12 | 17.66 | (d) | 29,967 | 1.84 | (e) | 1.85 | (e) | (1.07 | )(e) | 20 | |||||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 16.01 | (0.13 | )(f) | 2.79 | 2.66 | — | (2.42 | ) | (2.42 | ) | 16.25 | 19.44 | (d) | 28,408 | 1.81 | 1.90 | (0.82 | )(f) | 35 | |||||||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 17.91 | (0.08 | ) | (0.70 | ) | (0.78 | ) | — | (1.12 | ) | (1.12 | ) | 16.01 | (3.45 | )(d) | 34,194 | 1.33 | 1.81 | (0.54 | ) | 50 | |||||||||||||||||||||||||||||||||||
One month ended 04/30/11 | 17.42 | (0.01 | ) | 0.50 | 0.49 | — | — | — | 17.91 | 2.81 | (d)(j) | 40,226 | 1.33 | (g)(j) | 1.36 | (g)(j) | (0.84 | )(g)(j) | 5 | |||||||||||||||||||||||||||||||||||||
Year ended 03/31/11 | 14.69 | (0.09 | ) | 3.43 | 3.34 | — | (0.61 | ) | (0.61 | ) | 17.42 | 23.07 | (d)(j) | 40,485 | 1.57 | (j) | 1.56 | (j) | (0.57 | )(j) | 67 | |||||||||||||||||||||||||||||||||||
Year ended 03/31/10 | 8.77 | (0.09 | ) | 6.01 | 5.92 | — | — | — | 14.69 | 67.50 | (k)(l) | 49,140 | 1.62 | (l) | 1.62 | (l) | (0.78 | )(l) | 28 | |||||||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 13.24 | 0.02 | (4.44 | ) | (4.42 | ) | (0.01 | ) | (0.04 | ) | (0.05 | ) | 8.77 | (33.39 | )(k)(l) | 37,961 | 1.51 | (l) | 1.51 | (l) | 0.16 | (l) | 63 | |||||||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | 15.86 | (0.10 | ) | 2.89 | 2.79 | — | — | — | 18.65 | 17.59 | (d) | 155,910 | 1.84 | (e) | 1.85 | (e) | (1.07 | )(e) | 20 | |||||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 15.69 | (0.13 | )(f) | 2.72 | 2.59 | — | (2.42 | ) | (2.42 | ) | 15.86 | 19.39 | (d) | 138,382 | 1.87 | 1.90 | (0.88 | )(f) | 35 | |||||||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 17.65 | (0.15 | ) | (0.69 | ) | (0.84 | ) | — | (1.12 | ) | (1.12 | ) | 15.69 | (3.85 | )(d) | 140,342 | 1.76 | 1.90 | (0.97 | ) | 50 | |||||||||||||||||||||||||||||||||||
One month ended 04/30/11 | 17.17 | (0.02 | ) | 0.50 | 0.48 | — | — | — | 17.65 | 2.80 | (d) | 148,624 | 2.08 | (g) | 2.11 | (g) | (1.59 | )(g) | 5 | |||||||||||||||||||||||||||||||||||||
Year ended 03/31/11 | 14.55 | (0.14 | ) | 3.37 | 3.23 | — | (0.61 | ) | (0.61 | ) | 17.17 | 22.52 | (d) | 146,633 | 1.94 | 1.93 | (0.94 | ) | 67 | |||||||||||||||||||||||||||||||||||||
Year ended 03/31/10 | 8.72 | (0.14 | ) | 5.97 | 5.83 | — | — | — | 14.55 | 66.86 | (m) | 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 | )(m) | 50,495 | 2.10 | 2.10 | (0.36 | ) | 63 | |||||||||||||||||||||||||||||||||||
Class Y(n) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | 18.90 | (0.01 | ) | 3.46 | 3.45 | — | — | — | 22.35 | 18.25 | (d) | 1,175,809 | 0.84 | (e) | 0.85 | (e) | (0.07 | )(e) | 20 | |||||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 18.07 | 0.02 | (f) | 3.23 | 3.25 | — | (2.42 | ) | (2.42 | ) | 18.90 | 20.54 | (d) | 885,327 | 0.87 | 0.90 | 0.12 | (f) | 35 | |||||||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 19.94 | 0.00 | (0.75 | ) | (0.75 | ) | — | (1.12 | ) | (1.12 | ) | 18.07 | (2.93 | )(d) | 744,163 | 0.78 | 0.92 | 0.01 | 50 | |||||||||||||||||||||||||||||||||||||
One month ended 04/30/11 | 19.38 | (0.01 | ) | 0.57 | 0.56 | — | — | — | 19.94 | 2.89 | (d) | 192,429 | 1.08 | (g) | 1.11 | (g) | (0.59 | )(g) | 5 | |||||||||||||||||||||||||||||||||||||
Year ended 03/31/11 | 16.19 | 0.01 | 3.79 | 3.80 | — | (0.61 | ) | (0.61 | ) | 19.38 | 23.77 | (d) | 178,627 | 0.94 | 0.93 | 0.06 | 67 | |||||||||||||||||||||||||||||||||||||||
Year ended 03/31/10 | 9.63 | (0.02 | ) | 6.61 | 6.59 | (0.03 | ) | — | (0.03 | ) | 16.19 | 68.43 | (o) | 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 | )(o) | 32,407 | 1.09 | 1.09 | 0.63 | 63 | ||||||||||||||||||||||||||||||||||||
| (a) | Calculated using average shares outstanding. |
| (b) | Includes redemption fees added to shares of beneficial interest which were less than $0.005 per share, for fiscal years ended April 30, 2013 and prior. |
| (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 April 30, 2012, the portfolio turnover calculation excludes the value of securities purchased of $983,090,206 and sold of $586,342,254 in the effort to realign the Fund’s portfolio holdings after the reorganization of the Target Funds into the Fund. |
| (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 $1,613,943, $29,876, $150,408 and $1,037,368 for Class A, Class B, Class C and Class Y shares, respectively. |
| (f) | Net investment income (loss) per share and the ratio of net investment income (loss) to average net assets include significant dividends received during the period. Net investment income (loss) per share and the ratio of net investment income (loss) to average net assets excluding the special dividends are $(0.06) and (0.35)%, $(0.17) and (1.04)%, $(0.17) and (1.10)% and $(0.02) and (0.10)% for Class A, Class B, Class C and Class Y shares, respectively. |
| (g) | Annualized. |
| (h) | Amount is less than $0.01 per share. |
| (i) | 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. |
| (j) | The total return, ratio of expenses to average net assets and ratio of net investment income (loss) to average net assets reflect actual 12b-1 fees of 0.25% and 0.63% for the period April 1, 2011 to April 30, 2011 and the year ended March 31, 2011, respectively. |
| (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) | 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%. |
| (m) | 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. |
| (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. |
15 Invesco 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, 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, 2013 through October 31, 2013.
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 or contingent deferred sales charges on redemptions, 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.
| Class | Beginning Account Value (05/01/13) | ACTUAL | HYPOTHETICAL (5% annual return before | Annualized Expense Ratio | ||||||||||||||||||||
| Ending Account Value (10/31/13)1 | Expenses Paid During Period2 | Ending Account Value (10/31/13) | Expenses Paid During Period2 | |||||||||||||||||||||
| A | $ | 1,000.00 | $ | 1,180.80 | $ | 5.99 | $ | 1,019.71 | $ | 5.55 | 1.09 | % | ||||||||||||
| B | 1,000.00 | 1,176.60 | 10.09 | 1,015.93 | 9.35 | 1.84 | ||||||||||||||||||
| C | 1,000.00 | 1,175.90 | 10.09 | 1,015.93 | 9.35 | 1.84 | ||||||||||||||||||
| Y | 1,000.00 | 1,182.50 | 4.62 | 1,020.97 | 4.28 | 0.84 | ||||||||||||||||||
| 1 | The actual ending account value is based on the actual total return of the Fund for the period May 1, 2013 through October 31, 2013, 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. |
16 Invesco 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 Invesco Small Cap Value Fund’s (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 17-19, 2013, the Board as a whole, and the disinterested or “independent” Trustees, who comprise over 75% 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, 2013. The Board determined that continuation of 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 payable to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is primarily responsible for overseeing the management of a number of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned Invesco Funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies, limitations and investment risks of these funds. The Sub-Committees meet regularly and at designated contract renewal meetings each year to conduct a review of the performance, fees, expenses and other matters related to their assigned Invesco Funds. Each Sub-Committee recommends to the Investments Committee, which in turn recommends to the full Board, whether and on what terms to approve the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Trustees receive comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and Lipper Inc. (Lipper), an
independent provider of investment company data. The Trustees also receive an independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. The independent Trustees are assisted in their annual evaluation of the Fund’s investment advisory agreement by the Senior Officer and by independent legal counsel. In addition to meetings with Invesco Advisers and fund counsel, the independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in separate sessions with the Senior Officer and with independent legal counsel.
In evaluating the fairness and reasonableness of compensation under the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Trustees recognized that the advisory fee rates for the Invesco Funds are, in many cases, the result of years of review and negotiation between the Trustees and Invesco Advisers as well as advisory fees previously approved by different predecessor boards. 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. The Trustees’ review and conclusions are based on the comprehensive consideration of all information presented to them and are not the result of any single determinative factor. Moreover, one Trustee may have weighed a particular piece of information or factor differently than another Trustee.
The discussion below serves as the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 19, 2013, and may not reflect consideration of factors that became known to the Board after that date, including, for example, changes to the Fund’s performance, advisory fees, expense limitations and/or fee waivers.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
| A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under
the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers, with whom the Sub-Committees met during the year. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s consideration of Invesco Advisers’ 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 benefits of reapproving an existing relationship and the greater uncertainty that may be associated with entering into a new relationship. The Board also considered non-advisory services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution and legal and compliance. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services that may be 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 may invest, make recommendations regarding securities and assist with security trades. 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 that may be provided by the Affiliated Sub-Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s sub-advisory contracts.
| B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
The Board compared the Fund’s performance during the past one, three and five calendar years to the performance of funds in the Lipper
17 Invesco Small Cap Value Fund
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. The Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
| C. | Advisory and Sub-Advisory Fees |
The Board compared the Fund’s contractual management fee rate to the contractual management fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the contractual management fee rate for Class A shares of the Fund was below the median contractual management fee rate of funds in the expense group. The Board noted that the term “contractual management fee” may include both advisory and certain administrative services fees and that Invesco Advisers does not charge the Invesco Funds for the administrative services included in the term as defined by Lipper. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using each fund’s contractual management fee schedule (including any applicable breakpoints) as reported in the most recent prospectus or statement of additional information for each fund in the expense group.
The Board noted that Invesco Advisers and the Affiliated Sub-Advisers do not manage other mutual funds in a manner substantially similar to the management of the Fund.
The Board considered the fees charged by Invesco Advisers and the Affiliated Sub-Advisers to one client account 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. Invesco Advisers reviewed with the Board the significantly greater scope of services it provides to the Invesco Funds relative to certain 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 fee rates charged by the Affiliated Sub-Advisers to manage the Invesco Funds and to manage other client accounts tended to be more comparable, reflecting a
more comparable scope of services. The Board concluded that the aggregate services provided to the Invesco Funds were sufficiently different from those provided to institutional clients, and the Board did not place significant weight on these fee comparisons.
The Board also considered the services that may be provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the fees payable by Invesco Advisers to the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board also noted that the sub-advisory fees are not paid directly by the Fund, but rather, are payable by Invesco Advisers to the Affiliated Sub-Advisers.
Based upon the information and considerations described above, the Board concluded that the compensation payable to Invesco Advisers and the Affiliated Sub-Advisers is fair and reasonable.
| D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule and was assisted in this review by a report from the Senior Officer. The Board also noted that the Fund shares directly in economies of scale through lower fees charged by third party service providers based on the combined size of the Invesco Funds and other clients advised by Invesco Advisers.
| E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the profitability of Invesco Advisers and its affiliates in providing these services for the year ended December 31, 2012. The Board received information from Invesco Advisers about the methodology used to prepare the profitability information. The Board considered the profitability of Invesco Advisers in managing the Fund and the Invesco Funds. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its subsidiaries provide to the Invesco Funds and the Fund. The Board did not deem the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund to be excessive given the nature, quality and extent of the services provided to the Invesco Funds. The Board received and accepted information from Invesco Advisers demonstrating that Invesco Advisers and each Affiliated Sub-Adviser are financially sound and have the resources necessary to perform their obligations under the investment advisory agreement and sub-advisory contracts.
| F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund, including the fees received for their provision of transfer
agency and distribution services to the Fund. The Board considered comparative information regarding fees charged for these services, including information provided by Lipper and other independent sources. The Board considered the performance of Invesco Advisers and its affiliates in providing these services and the organizational structure employed to provide these services. The Board also considered that these services are provided to the Fund pursuant to written contracts that are reviewed and approved on an annual basis by the Board; that the services are required for the operation of the Fund; that Invesco Advisers and its affiliates can provide services, the nature and quality of which are at least equal to those provided by others offering the same or similar services; and that the fees for such services are fair and reasonable in light of the usual and customary charges by others for services of the same nature and quality.
The Board considered the benefits realized by Invesco Advisers and the Affiliated Sub-Advisers as a result of portfolio brokerage transactions executed through “soft dollar” arrangements. The Board noted that soft dollar arrangements shift the payment obligation for research services from Invesco Advisers and the Affiliated Sub-Advisers to the Invesco Funds and that the research received may be used with other clients of Invesco Advisers and may reduce Invesco Advisers’ and the Affiliated Sub-Advisers’ expenses. The Board also considered periodic reports from the Chief Compliance Officer of the Invesco Funds demonstrating that these arrangements are consistent with regulatory requirements. The Board did not deem the soft dollar arrangements to be inappropriate.
The Board considered that the Fund’s uninvested cash and cash collateral from any securities lending arrangements may be invested in money market funds advised by Invesco Advisers pursuant to procedures approved by the Board. The Board noted that Invesco Advisers receives advisory fees from these affiliated money market funds attributable to such investments, although Invesco Advisers has contractually agreed to waive through varying periods the advisory fees payable by the Invesco Funds. The waiver is in an amount equal to 100% of the net advisory fee Invesco Advisers receives from the affiliated money market funds with respect to the Fund’s investment in the affiliated money market funds of uninvested cash, but not cash collateral. The Board concluded that the Fund’s investment of uninvested cash and cash collateral from any securities lending arrangements in the affiliated money market funds is in the best interests of the Fund and its shareholders.
The Board also considered use of an affiliated broker to execute certain trades for the Fund to among other things, control information leakage, and were advised that such trades are executed in compliance with rules under the Investment Company Act of 1940, as amended.
18 Invesco Small Cap Value Fund
Invesco mailing information
Send general correspondence to Invesco Investment Services, Inc., P.O. Box 219078, Kansas City, MO 64121-9078.
Invesco privacy policy
You share personal and financial information with us that is necessary for your transactions and your account records. We take very seriously the obligation to keep that information confidential and private.
Invesco collects nonpublic personal information about you from account applications or other forms you complete and from your transactions with us or our affiliates. We do not disclose information about you or our former customers to service providers or other third parties except to the extent necessary to service your account and in other limited circumstances as permitted by law. For example, we use this information to facilitate the delivery of transaction confirmations, financial reports, prospectuses and tax forms.
Even within Invesco, only people involved in the servicing of your accounts and compliance monitoring have access to your information. To ensure the highest level of confidentiality and security, Invesco maintains physical, electronic and procedural safeguards that meet or exceed federal standards. Special measures, such as data encryption and authentication, apply to your communications with us on our website. More detail is available to you at invesco.com/privacy.
Important notice regarding delivery of security holder documents
To reduce Fund expenses, only one copy of most shareholder documents may be mailed to shareholders with multiple accounts at the same address (Householding). Mailing of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact Invesco Investment Services, Inc. at 800 959 4246 or contact your financial institution. We will begin sending you individual copies for each account within 30 days after receiving your request.
Fund holdings and proxy voting information
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is available at invesco.com/completeqtrholdings. Shareholders can also look up the Fund’s Forms N-Q on the SEC website at sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are shown below.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov.
Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
|
|
| SEC file numbers: 811-03826 and 002-85905 | VK-SCV-SAR-1 | Invesco Distributors, Inc. |
| Semiannual Report to Shareholders | October 31, 2013 |
Invesco Value Opportunities Fund
Nasdaq:
A: VVOAX n B: VVOBX n C: VVOCX n R: VVORX n Y: VVOIX
n R5: VVONX
| 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 Contracts |
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, 4/30/13 to 10/31/13, 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 | 11.20 | % | ||
Class B Shares | 11.20 | |||
Class C Shares | 10.71 | |||
Class R Shares | 10.97 | |||
Class Y Shares | 11.31 | |||
Class R5 Shares | 11.34 | |||
S&P 500 Indexq (Broad Market Index) | 11.15 | |||
Russell 3000 Value Indexn (Style-Specific Index) | 10.58 | |||
Lipper Multi-Cap Value Funds Index¿ (Peer Group Index) | 12.64 |
Source(s): qInvesco, S&P-Dow Jones via FactSet Research Systems Inc.;
nInvesco, Russell via FactSet Research Systems Inc.; ¿Lipper Inc.
The S&P 500® Index is an unmanaged index considered representative of the US stock market.
The Russell 3000® Value Index is an unmanaged index considered representative of US value stocks. The Russell 3000 Value Index is a trademark/service mark of the Frank Russell Co. Russell® is a trademark of the Frank Russell Co.
The Lipper Multi-Cap Value Funds Index is an unmanaged index considered representative of multicap value funds tracked by Lipper.
The Fund is not managed to track the performance of any particular index, including the index(es) described 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 Value Opportunities Fund
Average Annual Total Returns |
| |||
As of 10/31/13, including maximum applicable sales charges
|
| |||
Class A Shares | ||||
Inception (6/25/01) | 4.66 | % | ||
10 Years | 5.68 | |||
5 Years | 13.38 | |||
1 Year | 19.71 | |||
Class B Shares | ||||
Inception (6/25/01) | 4.62 | % | ||
10 Years | 5.72 | |||
5 Years | 14.05 | |||
1 Year | 21.73 | |||
Class C Shares | ||||
Inception (6/25/01) | 4.37 | % | ||
10 Years | 5.53 | |||
5 Years | 13.86 | |||
1 Year | 24.66 | |||
Class R Shares | ||||
10 Years | 6.01 | % | ||
5 Years | 14.39 | |||
1 Year | 26.27 | |||
Class Y Shares | ||||
Inception (3/23/05) | 4.92 | % | ||
5 Years | 14.93 | |||
1 Year | 26.93 | |||
Class R5 Shares | ||||
10 Years | 6.42 | % | ||
5 Years | 15.00 | |||
1 Year | 27.34 | |||
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 (renamed Invesco 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 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 Fund’s and 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 9/30/13, the most recent calendar quarter end, including maximum applicable sales charges | ||||
Class A Shares | ||||
Inception (6/25/01) | 4.33 | % | ||
10 Years | 5.61 | |||
5 Years | 8.16 | |||
1 Year | 14.15 | |||
Class B Shares | ||||
Inception (6/25/01) | 4.30 | % | ||
10 Years | 5.64 | |||
5 Years | 8.72 | |||
1 Year | 15.81 | |||
Class C Shares | ||||
Inception (6/25/01) | 4.05 | % | ||
10 Years | 5.47 | |||
5 Years | 8.62 | |||
1 Year | 18.91 | |||
Class R Shares | ||||
10 Years | 5.95 | % | ||
5 Years | 9.11 | |||
1 Year | 20.56 | |||
Class Y Shares | ||||
Inception (3/23/05) | 4.44 | % | ||
5 Years | 9.63 | |||
1 Year | 21.01 | |||
Class R5 Shares | ||||
10 Years | 6.35 | % | ||
5 Years | 9.67 | |||
1 Year | 21.43 | |||
Class R5 shares incepted on May 23, 2011. Performance shown prior to that date is that of the Fund’s and 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 Class R5 shares was 1.27%, 1.27%, 1.97%, 1.52%, 1.02% and 0.74%, 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 Class R5 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 Value Opportunities Fund
Letters to Shareholders
Bruce Crockett | Dear Fellow Shareholders: The Invesco Funds Board has worked on a variety of issues over the last several months, and I’d like to take this opportunity to discuss two that affect you and our fellow fund shareholders. The first issue on which your Board has been working is our annual review of the funds’ advisory and sub-advisory contracts with Invesco Advisers and its affiliates. This annual review focuses on the nature and quality of the services Invesco provides as adviser to the Invesco Funds and the reasonableness of the fees that it charges for those services. Each year, we spend months reviewing detailed information, including information from many independent sources. I’m pleased to report that the Board determined in June that renewing the investment advisory agreement and the sub-advisory contracts with Invesco Advisers and its affiliates would serve the best interests of each fund and its shareholders. |
The second area of focus to highlight is the Board’s efforts to ensure that we provide a lineup of funds that allow financial advisers to build portfolios that meet shareholders’ changing financial needs and goals.
The members of your Board have worked with Invesco Advisers to provide more income-generating options in the Invesco Funds lineup to help shareholders potentially meet their income needs. Your Board recently approved changes to three existing equity mutual funds, increasing their focus on generating income while also seeking to provide long-term growth of capital.
Be assured that your Board will continue working on behalf of fund shareholders, keeping your needs and interests uppermost in our minds.
As always, please contact me at bruce@brucecrockett.com with any questions or concerns you may have. On behalf of the Board, we look forward to continuing to represent your interests and serving your needs.
Sincerely,
Bruce L. Crockett
Independent Chair
Invesco Funds Board of Trustees
Philip Taylor | Dear Shareholders: Enclosed in this semiannual report, you’ll find performance data for your Fund, a complete list of your Fund’s investments as of the close of the reporting period and other important information. I hope you find this report of interest. Our website, invesco.com/us, provides fund-specific as well as more general information from many of Invesco’s investment professionals. You’ll find in-depth articles, video clips and audio commentaries – and, of course, you also can access information about your Invesco account whenever it’s convenient for you. At Invesco, all of our people and all of our resources are dedicated to helping investors achieve their financial objectives. It’s a philosophy we call Intentional Investing, and it guides the way we: n Manage investments – Our dedicated investment professionals search the world for the best opportunities, and each investment team follows a clear, disciplined process to build portfolios and mitigate risk. |
| n | Provide choices – We offer multiple investment strategies, allowing you and your financial adviser to build a portfolio that’s purpose-built for your needs. |
| n | Connect with you – We’re committed to giving you the expert insights you need to make informed investing decisions, and we are well-equipped to provide high-quality support for investors and advisers. |
For questions about your account, feel free to contact an Invesco client services representative at 800 959 4246. For Invesco-related questions or comments, please email me directly at phil@invesco.com.
All of us at Invesco look forward to serving your investment management needs for many years to come. Thank you for investing with us.
Sincerely,
Philip Taylor
Senior Managing Director, Invesco Ltd.
4 Invesco Value Opportunities Fund
Schedule of Investments(a)
October 31, 2013
(Unaudited)
| Shares | Value | |||||||
Common Stocks & Other Equity Interests–91.18% |
| |||||||
| Advertising–3.40% | ||||||||
Omnicom Group Inc. | 489,455 | $ | 33,336,780 | |||||
| Apparel Retail–1.09% | ||||||||
Vera Bradley, Inc.(b)(c) | 482,300 | 10,682,945 | ||||||
| Asset Management & Custody Banks–1.60% | ||||||||
Bank of New York Mellon Corp. (The) | 495,220 | 15,747,996 | ||||||
| Automobile Manufacturers–1.40% | ||||||||
Renault S.A. (France) | 157,763 | 13,789,589 | ||||||
| Cable & Satellite–2.28% | ||||||||
Time Warner Cable Inc. | 186,102 | 22,360,155 | ||||||
| Coal & Consumable Fuels–2.08% | ||||||||
Peabody Energy Corp. | 1,047,029 | 20,396,125 | ||||||
| Computer Hardware–3.31% | ||||||||
Apple Inc. | 26,163 | 13,666,243 | ||||||
Hewlett-Packard Co. | 770,861 | 18,785,883 | ||||||
| 32,452,126 | ||||||||
| Department Stores–4.21% | ||||||||
Macy’s, Inc. | 515,672 | 23,777,636 | ||||||
Nordstrom, Inc. | 289,300 | 17,493,971 | ||||||
| 41,271,607 | ||||||||
| Diversified Banks–6.70% | ||||||||
Comerica Inc. | 278,435 | 12,056,235 | ||||||
U.S. Bancorp | 382,638 | 14,295,356 | ||||||
Wells Fargo & Co. | 922,825 | 39,395,399 | ||||||
| 65,746,990 | ||||||||
| Electronic Components–1.43% | ||||||||
Corning Inc. | 818,700 | 13,991,583 | ||||||
| Food Retail–1.94% | ||||||||
Kroger Co. (The) | 444,372 | 19,036,897 | ||||||
| General Merchandise Stores–1.39% | ||||||||
Target Corp. | 210,842 | 13,660,453 | ||||||
| Household Products–1.66% | ||||||||
Procter & Gamble Co. (The) | 201,660 | 16,284,045 | ||||||
| Industrial Conglomerates–2.13% | ||||||||
General Electric Co. | 799,845 | 20,907,948 | ||||||
| Integrated Oil & Gas–13.86% | ||||||||
Chevron Corp. | 289,929 | 34,779,883 | ||||||
Exxon Mobil Corp. | 134,482 | 12,052,277 | ||||||
Petroleo Brasileiro S.A.–ADR (Brazil) | 1,530,541 | 26,677,329 | ||||||
Royal Dutch Shell PLC–ADR (United Kingdom) | 565,888 | 37,722,094 | ||||||
Total S.A.–ADR (France) | 405,500 | 24,808,490 | ||||||
| 136,040,073 | ||||||||
| Shares | Value | |||||||
| Investment Banking & Brokerage–3.58% | ||||||||
Goldman Sachs Group, Inc. (The) | 92,287 | $ | 14,845,287 | |||||
Morgan Stanley | 707,620 | 20,329,922 | ||||||
| 35,175,209 | ||||||||
| Life & Health Insurance–5.53% | ||||||||
Aflac, Inc. | 237,700 | 15,445,746 | ||||||
MetLife, Inc. | 382,000 | 18,072,420 | ||||||
Unum Group | 652,374 | 20,706,351 | ||||||
| 54,224,517 | ||||||||
| Managed Health Care–4.29% | ||||||||
UnitedHealth Group Inc. | 358,443 | 24,467,319 | ||||||
WellPoint, Inc. | 207,658 | 17,609,399 | ||||||
| 42,076,718 | ||||||||
| Marine–0.52% | ||||||||
Diana Shipping Inc. (Greece)(c) | 449,614 | 5,098,623 | ||||||
| Oil & Gas Drilling–1.00% | ||||||||
Noble Corp. | 260,277 | 9,812,443 | ||||||
| Other Diversified Financial Services–10.58% | ||||||||
Bank of America Corp. | 1,513,866 | 21,133,569 | ||||||
Citigroup Inc. | 598,821 | 29,210,488 | ||||||
ING US Inc. | 46,701 | 1,448,665 | ||||||
JPMorgan Chase & Co. | 1,008,664 | 51,986,543 | ||||||
| 103,779,265 | ||||||||
| Pharmaceuticals–4.51% | ||||||||
Bristol-Myers Squibb Co. | 274,105 | 14,395,995 | ||||||
Novartis AG (Switzerland) | 212,300 | 16,456,029 | ||||||
Pfizer Inc. | 437,400 | 13,419,432 | ||||||
| 44,271,456 | ||||||||
| Property & Casualty Insurance–7.42% | ||||||||
Allied World Assurance Co. Holdings AG | 118,501 | 12,832,473 | ||||||
Allstate Corp. (The) | 467,319 | 24,795,946 | ||||||
Aspen Insurance Holdings Ltd. | 576,324 | 22,482,399 | ||||||
Chubb Corp. (The) | 138,280 | 12,732,823 | ||||||
| 72,843,641 | ||||||||
| Steel–1.31% | ||||||||
POSCO–ADR (South Korea) | 172,104 | 12,814,864 | ||||||
| Systems Software–1.52% | ||||||||
Oracle Corp. | 444,800 | 14,900,800 | ||||||
| Technology Distributors–1.08% | ||||||||
CDW Corp.(c) | 484,019 | 10,643,578 | ||||||
| Wireless Telecommunication Services–1.36% | ||||||||
Vodafone Group PLC–ADR (United Kingdom) | 363,189 | 13,372,619 | ||||||
Total Common Stocks & Other Equity Interests |
| 894,719,045 | ||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
5 Invesco Value Opportunities Fund
| Shares | Value | |||||||
Money Market Funds–8.69% | ||||||||
Liquid Assets Portfolio–Institutional Class(d) | 42,620,970 | $ | 42,620,970 | |||||
Premier Portfolio–Institutional | 42,620,970 | 42,620,970 | ||||||
Total Money Market Funds |
| 85,241,940 | ||||||
TOTAL INVESTMENTS (excluding investments purchased with cash collateral from securities on loan)–99.87% |
| 979,960,985 | ||||||
Investments Purchased with Cash |
| |||||||
Money Market Funds–0.85% |
| |||||||
Liquid Asset Portfolio–Institutional Class (Cost $8,312,338)(d)(e) | 8,312,338 | 8,312,338 | ||||||
TOTAL INVESTMENTS–100.72% |
| 988,273,323 | ||||||
OTHER ASSETS LESS LIABILITIES–(0.72)% |
| (7,054,128 | ) | |||||
NET ASSETS–100.00% |
| $ | 981,219,195 | |||||
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, 2013. |
| (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 1I. |
Portfolio Composition
By sector, based on Net Assets
as of October 31, 2013
Financials | 35.4 | % | ||
Energy | 16.9 | |||
Consumer Discretionary | 13.8 | |||
Health Care | 8.8 | |||
Information Technology | 7.3 | |||
Consumer Staples | 3.6 | |||
Industrials | 2.7 | |||
Telecommunication Services | 1.4 | |||
Materials | 1.3 | |||
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 Value Opportunities Fund
Statement of Assets and Liabilities
October 31, 2013
(Unaudited)
Assets: |
| |||
Investments, at value (Cost $666,280,750)* | $ | 894,719,045 | ||
Investments in affiliated money market funds, at value and cost | 93,554,278 | |||
Total investments, at value (Cost $759,835,028) | 988,273,323 | |||
Foreign currencies, at value (Cost $1,516,495) | 1,494,046 | |||
Receivable for: | ||||
Investments sold | 1,412,564 | |||
Fund shares sold | 262,904 | |||
Dividends | 436,684 | |||
Investment for trustee deferred compensation and retirement plans | 116,045 | |||
Other assets | 37,858 | |||
Total assets | 992,033,424 | |||
Liabilities: |
| |||
Payable for: | ||||
Fund shares reacquired | 1,023,050 | |||
Collateral upon return of securities loaned | 8,312,338 | |||
Accrued fees to affiliates | 838,523 | |||
Accrued trustees’ and officers’ fees and benefits | 3,093 | |||
Accrued other operating expenses | 82,889 | |||
Trustee deferred compensation and retirement plans | 554,336 | |||
Total liabilities | 10,814,229 | |||
Net assets applicable to shares outstanding | $ | 981,219,195 | ||
Net assets consist of: |
| |||
Shares of beneficial interest | $ | 926,252,014 | ||
Undistributed net investment income | 13,618,859 | |||
Undistributed net realized gain (loss) | (187,067,525 | ) | ||
Net unrealized appreciation | 228,415,847 | |||
| $ | 981,219,195 | |||
Net Assets: |
| |||
Class A | $ | 786,088,269 | ||
Class B | $ | 48,275,515 | ||
Class C | $ | 107,944,779 | ||
Class R | $ | 21,973,783 | ||
Class Y | $ | 14,600,660 | ||
Class R5 | $ | 2,336,189 | ||
Shares outstanding, $0.01 par value per share, |
| |||
Class A | 59,114,872 | |||
Class B | 3,682,611 | |||
Class C | 8,351,743 | |||
Class R | 1,657,824 | |||
Class Y | 1,098,726 | |||
Class R5 | 174,983 | |||
Class A: | ||||
Net asset value per share | $ | 13.30 | ||
Maximum offering price per share | ||||
(Net asset value of $13.30 ¸ 94.50%) | $ | 14.07 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 13.11 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 12.92 | ||
Class R: | ||||
Net asset value and offering price per share | $ | 13.25 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 13.29 | ||
Class R5: | ||||
Net asset value and offering price per share | $ | 13.35 | ||
| * | At October 31, 2013, securities with an aggregate value of $8,005,143 were on loan to brokers. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
7 Invesco Value Opportunities Fund
Statement of Operations
For the six months ended October 31, 2013
(Unaudited)
Investment income: |
| |||
Dividends (net of foreign withholding taxes of $392,914) | $ | 10,621,234 | ||
Dividends from affiliated money market funds (includes securities lending income of $406,259) | 431,270 | |||
Total investment income | 11,052,504 | |||
Expenses: | ||||
Advisory fees | 3,228,158 | |||
Administrative services fees | 124,345 | |||
Custodian fees | 12,741 | |||
Distribution fees: | ||||
Class A | 972,148 | |||
Class B | 63,092 | |||
Class C | 515,832 | |||
Class R | 53,076 | |||
Transfer agent Fees — A, B, C, R and Y | 1,324,644 | |||
Transfer agent fees — R5 | 881 | |||
Trustees’ and officers’ fees and benefits | 36,496 | |||
Other | 155,388 | |||
Total expenses | 6,486,801 | |||
Less: Fees waived and expense offset arrangement(s) | (63,018 | ) | ||
Net expenses | 6,423,783 | |||
Net investment income | 4,628,721 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain (loss) from: | ||||
Investment securities | 53,689,033 | |||
Foreign currencies | (310,891 | ) | ||
| 53,378,142 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | 42,936,326 | |||
Foreign currencies | (34,926 | ) | ||
| 42,901,400 | ||||
Net realized and unrealized gain | 96,279,542 | |||
Net increase in net assets resulting from operations | $ | 100,908,263 | ||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
8 Invesco Value Opportunities Fund
Statement of Changes in Net Assets
For the six months ended October 31, 2013 and the year ended April 30, 2013
(Unaudited)
| October 31, 2013 | April 30, 2013 | |||||||
Operations: |
| |||||||
Net investment income | $ | 4,628,721 | $ | 9,631,581 | ||||
Net realized gain | 53,378,142 | 102,972,347 | ||||||
Change in net unrealized appreciation | 42,901,400 | 36,710,476 | ||||||
Net increase in net assets resulting from operations | 100,908,263 | 149,314,404 | ||||||
Distributions to shareholders from net investment income: | ||||||||
Class A | — | (6,676,577 | ) | |||||
Class B | — | (547,171 | ) | |||||
Class C | — | (254,252 | ) | |||||
Class R | — | (132,803 | ) | |||||
Class Y | — | (136,277 | ) | |||||
Class R5 | — | (60,144 | ) | |||||
Total distributions from net investment income | — | (7,807,224 | ) | |||||
Distributions to shareholders from net realized gains: | ||||||||
Class A | — | (727,999 | ) | |||||
Class B | — | (58,455 | ) | |||||
Class C | — | (102,626 | ) | |||||
Class R | — | (19,447 | ) | |||||
Class Y | — | (11,754 | ) | |||||
Class R5 | — | (4,039 | ) | |||||
Total distributions from net realized gains | — | (924,320 | ) | |||||
Share transactions–net: | ||||||||
Class A | (44,824,094 | ) | (102,431,631 | ) | ||||
Class B | (7,966,056 | ) | (24,998,015 | ) | ||||
Class C | (4,510,945 | ) | (15,114,419 | ) | ||||
Class R | (475,852 | ) | (2,329,511 | ) | ||||
Class Y | 352,769 | (455,051 | ) | |||||
Class R5 | 77,179 | (2,376,165 | ) | |||||
Net increase (decrease) in net assets resulting from share transactions | (57,346,999 | ) | (147,704,792 | ) | ||||
Net increase (decrease) in net assets | 43,561,264 | (7,121,932 | ) | |||||
Net assets: | ||||||||
Beginning of period | 937,657,931 | 944,779,863 | ||||||
End of period (includes undistributed net investment income of $13,618,859 and $8,990,138, respectively) | $ | 981,219,195 | $ | 937,657,931 | ||||
Notes to Financial Statements
October 31, 2013
(Unaudited)
NOTE 1—Significant Accounting Policies
Invesco 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 ten separate portfolios, each authorized to issue an unlimited number of shares of beneficial interest. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class.
The Fund’s investment objective is total return through growth of capital and current income.
The Fund currently consists of six different classes of shares: Class A, Class B, Class C, Class R, Class Y and Class R5. 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 a contingent deferred sales charge (“CDSC”). Class C shares are sold with a CDSC. Class R, Class Y and Class R5 shares are sold at net asset value. Effective
9 Invesco Value Opportunities Fund
November 30, 2010, new or additional investments in Class B shares are no longer permitted. Existing shareholders of Class B shares may continue to reinvest dividends and capital gains distributions in Class B shares until they convert to Class A shares. Also, shareholders in Class B shares will be able to exchange those shares for Class B shares of other Invesco Funds offering such shares until they convert to Class A shares. Generally, Class B shares will automatically convert to Class A shares on or about the month-end, which is at least eight years after the date of purchase. Redemption of Class B shares prior to the conversion date will be subject to a CDSC.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
| A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. |
A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. 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 (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual trading characteristics and other market data. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Foreign securities’ (including foreign exchange contracts) prices 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 the Adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities’ prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became 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.
10 Invesco Value Opportunities Fund
| C. | Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
| D. | Distributions — Distributions from income and net realized capital gain, if any, are generally declared and paid annually and recorded on the ex-dividend date. The Fund may elect to treat a portion of the proceeds from redemptions as distributions for federal income tax purposes. |
| E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (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 Class R5 are charged to such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses relating to all other classes are allocated among those classes based on relative net assets. All other expenses are allocated among the classes based on relative net assets. Prior to June 1, 2010, incremental transfer agency fees which were unique to each class of shares were charged to the operations of such class. |
| G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
| H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements, that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
| I. | 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 failed to return the securities. Upon the failure of the borrower to return the securities, collateral may be liquidated and the securities may be purchased on the open market to replace the loaned securities. The Fund could experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to any loss on the collateral invested. Dividends received on cash collateral investments for securities lending transactions, which are net of compensation to counterparties, is included in Dividends from affiliated money market funds on the Statement of Operations. The aggregate value of securities out on loan is shown as a footnote on the Statement of Assets and Liabilities, if any. |
| 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 |
11 Invesco Value Opportunities Fund
| difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statement of Operations. The primary risks associated with foreign currency contracts include failure of the counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities. |
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser based on the annual rate of the Fund’s average daily net assets as follows:
| Average Daily Net Assets | Rate | |||||
First $250 million | 0 | .695% | ||||
Next $250 million | 0 | .67% | ||||
Next $500 million | 0 | .645% | ||||
Next $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% | ||||
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, 2014, 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 above) of Class A, Class B, Class C, Class R, Class Y and Class R5 shares to 2.00%, 2.75%, 2.75%, 2.25%, 1.75% and 1.75%, respectively, of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on June 30, 2014. The fee waiver agreement cannot be terminated during its term. 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, 2014, 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, 2013, the Adviser waived advisory fees of $59,553.
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, 2013, 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, 2013, 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, 2013, 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, 2013, IDI advised the Fund that IDI retained $23,419 in front-end sales commissions from the sale of Class A shares and $19, $14,065 and $1,267 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders.
12 Invesco Value Opportunities Fund
For the six months ended October 31, 2013, the Fund incurred $732 in brokerage commissions with Invesco Capital Markets, Inc., an affiliate of the Adviser and IDI, for portfolio transactions executed on behalf of the Fund.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
| Level 1 — | Prices are determined using quoted prices in an active market for identical assets. |
| Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
| Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of October 31, 2013. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 958,027,705 | $ | 30,245,618 | $ | — | $ | 988,273,323 | ||||||||
NOTE 4—Expense Offset Arrangement(s)
The expense offset arrangement is comprised of transfer agency credits which result from balances in demand deposit accounts used by the transfer agent for clearing shareholder transactions. For the six months ended October 31, 2013, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $3,465.
NOTE 5—Trustees’ and Officers’ Fees and Benefits
Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees’ and Officers’ Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 6—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 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 GAAP. 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. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in 8 tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryfowards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
13 Invesco Value Opportunities Fund
The Fund had a capital loss carryforward as of April 30, 2013, which expires as follows:
| Capital Loss Carryforward* | ||||||||||||
| Expiration | Short-Term | Long-Term | Total | |||||||||
April 30, 2017 | $ | 232,459,406 | $ | — | $ | 232,459,406 | ||||||
| * | Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. To the extent that unrealized gains as of May 23, 2011, the date of reorganization of Invesco Basic Value Fund into the Fund, are realized on securities held in each fund at such date of reorganization, the capital loss carryforward may be further limited for up to five years from the date of 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, 2013 was $71,777,027 and $123,718,979, 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 | $ | 259,909,343 | ||
Aggregate unrealized (depreciation) of investment securities | (39,457,310 | ) | ||
Net unrealized appreciation of investment securities | $ | 220,452,033 | ||
Cost of investments for tax purposes is $767,821,290.
NOTE 9—Share Information
| Summary of Share Activity | ||||||||||||||||
| Six months ended October 31, 2013(a) | Year ended April 30, 2013 | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Class A | 1,447,418 | $ | 18,361,150 | 2,582,920 | $ | 27,932,294 | ||||||||||
Class B | 38,539 | 485,941 | 106,701 | 1,108,180 | ||||||||||||
Class C | 246,753 | 3,058,435 | 415,540 | 4,333,405 | ||||||||||||
Class R | 144,287 | 1,821,517 | 279,577 | 3,006,330 | ||||||||||||
Class Y | 146,354 | 1,865,484 | 208,198 | 2,256,693 | ||||||||||||
Class R5 | 18,964 | 244,860 | 10,809 | 118,998 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Class A | — | — | 663,265 | 6,964,285 | ||||||||||||
Class B | — | — | 56,942 | 589,348 | ||||||||||||
Class C | — | — | 32,513 | 333,901 | ||||||||||||
Class R | — | — | 14,514 | 152,250 | ||||||||||||
Class Y | — | — | 12,746 | 133,446 | ||||||||||||
Class R5 | — | — | 6,102 | 64,074 | ||||||||||||
Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||
Class A | 414,656 | 5,262,595 | 1,612,976 | 17,025,303 | ||||||||||||
Class B | (420,656 | ) | (5,262,595 | ) | (1,635,311 | ) | (17,025,303 | ) | ||||||||
Reacquired: | ||||||||||||||||
Class A | (5,405,543 | ) | (68,447,839 | ) | (14,529,395 | ) | (154,353,513 | ) | ||||||||
Class B | (255,730 | ) | (3,189,402 | ) | (899,252 | ) | (9,670,240 | ) | ||||||||
Class C | (613,121 | ) | (7,569,380 | ) | (1,922,187 | ) | (19,781,725 | ) | ||||||||
Class R | (183,791 | ) | (2,297,369 | ) | (515,239 | ) | (5,488,091 | ) | ||||||||
Class Y | (119,233 | ) | (1,512,715 | ) | (267,409 | ) | (2,845,190 | ) | ||||||||
Class R5 | (13,202 | ) | (167,681 | ) | (241,524 | ) | (2,559,237 | ) | ||||||||
Net increase (decrease) in share activity | (4,554,305 | ) | $ | (57,346,999 | ) | (14,007,514 | ) | $ | (147,704,792 | ) | ||||||
| (a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 23% 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. |
14 Invesco Value Opportunities Fund
NOTE 10—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
| Net asset value, beginning of period | Net investment income (loss)(a) | Net gains (losses) on securities (both realized and unrealized) | Total from investment operations | Dividends from net investment income | Distributions from net realized gains | Total distributions | Net asset value, end of period | Total return | Net assets, end of period (000’s omitted) | Ratio of expenses to average net assets with fee waivers and/or expenses absorbed | Ratio of expenses to average net assets without fee waivers and/or expenses absorbed | Ratio of net investment income (loss) to average net assets | Portfolio turnover(b) | |||||||||||||||||||||||||||||||||||||||||||
Class A |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | $ | 11.97 | $ | 0.07 | $ | 1.26 | $ | 1.33 | $ | — | $ | — | $ | — | $ | 13.30 | 11.11 | %(c) | $ | 786,088 | 1.24 | %(d) | 1.25 | %(d) | 1.03 | %(d) | 8 | % | ||||||||||||||||||||||||||||
Year ended 04/30/13 | 10.24 | 0.12 | 1.72 | 1.84 | (0.10 | ) | (0.01 | ) | (0.11 | ) | 11.97 | 18.15 | (c) | 749,819 | 1.26 | 1.27 | 1.14 | 15 | ||||||||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 10.18 | 0.09 | (0.03 | ) | 0.06 | (0.00 | ) | — | (0.00 | ) | 10.24 | 0.60 | (c) | 740,384 | 1.40 | 1.40 | 0.92 | 46 | ||||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | 11.80 | 0.07 | 1.24 | 1.31 | — | — | — | 13.11 | 11.10 | (c)(g) | 48,276 | 1.24 | (d)(g) | 1.25 | (d)(g) | 1.03 | (d)(g) | 8 | ||||||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 10.09 | 0.12 | 1.70 | 1.82 | (0.10 | ) | (0.01 | ) | (0.11 | ) | 11.80 | 18.25 | (c)(g) | 50,968 | 1.26 | (g) | 1.27 | (g) | 1.14 | (g) | 15 | |||||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 10.04 | 0.09 | (0.04 | ) | 0.05 | — | — | — | 10.09 | 0.50 | (c)(g) | 67,547 | 1.38 | (g) | 1.38 | (g) | 0.94 | (g) | 46 | |||||||||||||||||||||||||||||||||||||
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)(g) | 7,392 | 1.99 | (g) | 2.04 | (g) | 0.11 | (g) | 80 | ||||||||||||||||||||||||||||||||||||||
Year ended 03/31/10 | 5.73 | (0.00 | ) | 3.06 | 3.06 | — | — | — | 8.79 | 53.40 | (f) | 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 | )(f) | 9,097 | 2.17 | 2.17 | 0.34 | 34 | |||||||||||||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | 11.67 | 0.02 | 1.23 | 1.25 | — | — | — | 12.92 | 10.71 | (c)(g) | 107,945 | 1.97 | (d)(g) | 1.98 | (d)(g) | 0.30 | (d)(g) | 8 | ||||||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 9.99 | 0.05 | 1.67 | 1.72 | (0.03 | ) | (0.01 | ) | (0.04 | ) | 11.67 | 17.26 | (c)(g) | 101,772 | 1.96 | (g) | 1.97 | (g) | 0.44 | (g) | 15 | |||||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 10.00 | 0.02 | (0.03 | ) | (0.01 | ) | — | — | — | 9.99 | (0.10 | )(c)(g) | 101,785 | 2.11 | (g) | 2.11 | (g) | 0.21 | (g) | 46 | ||||||||||||||||||||||||||||||||||||
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)(g) | 8,033 | 2.06 | (g) | 2.11 | (g) | 0.04 | (g) | 80 | ||||||||||||||||||||||||||||||||||||
Year ended 03/31/10 | 5.73 | 0.00 | 3.06 | 3.06 | (0.02 | ) | — | (0.02 | ) | 8.77 | 53.42 | (f)(g) | 9,337 | 2.18 | (g) | 2.18 | (g) | (0.02 | )(g) | 13 | ||||||||||||||||||||||||||||||||||||
Year ended 03/31/09 | 9.55 | 0.03 | (3.84 | ) | (3.81 | ) | (0.01 | ) | — | (0.01 | ) | 5.73 | (39.90 | )(f)(g) | 7,791 | 2.10 | (g) | 2.10 | (g) | 0.43 | (g) | 34 | ||||||||||||||||||||||||||||||||||
Class R | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | 11.94 | 0.05 | 1.26 | 1.31 | — | — | — | 13.25 | 10.97 | (c) | 21,974 | 1.49 | (d) | 1.50 | (d) | 0.78 | (d) | 8 | ||||||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 10.22 | 0.09 | 1.72 | 1.81 | (0.08 | ) | (0.01 | ) | (0.09 | ) | 11.94 | 17.80 | (c) | 20,272 | 1.51 | 1.52 | 0.89 | 15 | ||||||||||||||||||||||||||||||||||||||
Year ended 04/30/12(h) | 9.89 | 0.07 | 0.26 | 0.33 | (0.00 | ) | — | (0.00 | ) | 10.22 | 3.35 | (c) | 19,599 | 1.65 | (e) | 1.65 | (e) | 0.67 | (e) | 46 | ||||||||||||||||||||||||||||||||||||
Class Y(i) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | 11.94 | 0.08 | 1.27 | 1.35 | — | — | — | 13.29 | 11.31 | (c) | 14,601 | 0.99 | (d) | 1.00 | (d) | 1.28 | (d) | 8 | ||||||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 10.22 | 0.15 | 1.71 | 1.86 | (0.13 | ) | (0.01 | ) | (0.14 | ) | 11.94 | 18.39 | (c) | 12,799 | 1.01 | 1.02 | 1.39 | 15 | ||||||||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 10.14 | 0.11 | (0.03 | ) | 0.08 | (0.00 | ) | — | (0.00 | ) | 10.22 | 0.80 | (c) | 11,424 | 1.15 | 1.15 | 1.17 | 46 | ||||||||||||||||||||||||||||||||||||||
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 | (f) | 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 | )(f) | 35,805 | 1.17 | 1.17 | 1.41 | 34 | |||||||||||||||||||||||||||||||||||||
Class R5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/13 | 11.99 | 0.09 | 1.27 | 1.36 | — | — | — | 13.35 | 11.34 | (c) | 2,336 | 0.80 | (d) | 0.81 | (d) | 1.47 | (d) | 8 | ||||||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 10.26 | 0.18 | 1.73 | 1.91 | (0.17 | ) | (0.01 | ) | (0.18 | ) | 11.99 | 18.82 | (c) | 2,029 | 0.73 | 0.74 | 1.67 | 15 | ||||||||||||||||||||||||||||||||||||||
Year ended 04/30/12(h) | 9.85 | 0.14 | 0.27 | 0.41 | (0.00 | ) | — | (0.00 | ) | 10.26 | 4.18 | (c) | 4,040 | 0.81 | (e) | 0.81 | (e) | 1.51 | (e) | 46 | ||||||||||||||||||||||||||||||||||||
| (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 April 30, 2012, the portfolio turnover calculation excludes the value of securities purchased of $846,280,438 and sold of $257,706,685 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, if applicable. |
| (d) | Ratios are annualized and based on average daily net assets (000’s omitted) of $771,378, $50,062, $105,435, $21,057, $13,631 and $2,186 for Class A, Class B, Class C, Class R, Class Y and Class R5 shares, respectively. |
| (e) | Annualized. |
| (f) | Assumes reinvestment of all distributions for the period for all classes. Does not include payment of the maximum sales charge of 5.75% or contingent deferred sales charge (“CDSC”) on Class A shares, maximum CDSC of 5% on Class B shares or maximum CDSC of 1% on Class C shares. On purchases of $1 million or more, a CDSC of 1% may be imposed on certain redemptions of Class A shares 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% on Class A shares and up to 1% on Class B and Class C shares. Does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares for either class. |
| (g) | The total return, ratio of expenses to average net assets and ratio of net investment income (loss) to average net assets reflect actual 12b-1 fees of 0.25% for Class B shares and 0.97% for Class C shares for the six months ended October 31, 2013, 0.25% for Class B shares and 0.95% for Class C shares for the year ended April 30, 2013, 0.23% for Class B shares and 0.96% for Class C shares for the year ended April 30, 2012, 0.31% for Class B shares and 0.92% for Class C shares for the period April 1, 2011 to April 30, 2011, 0.82% for Class B shares and 0.89% for Class C shares for the year ended March 31, 2011 and less than 1% for Class C shares for the years ended March 31, 2010 and 2009. |
| (h) | Commencement date of May 23, 2011. |
| (i) | On June 1, 2010, the Fund’s former Class I shares were reorganized into Class Y shares. |
15 Invesco 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, 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, 2013 through October 31, 2013.
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 or contingent deferred sales charges on redemptions, 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.
| Class | Beginning Account Value (05/01/13) | ACTUAL | HYPOTHETICAL (5% annual return before expenses) | Annualized Expense Ratio | ||||||||||||||||||||
Ending Account Value (10/31/13)1 | Expenses Paid During Period2 | Ending Account Value (10/31/13) | Expenses Paid During Period2 | |||||||||||||||||||||
| A | $ | 1,000.00 | $ | 1,112.00 | $ | 6.60 | $ | 1,018.95 | $ | 6.31 | 1.24 | % | ||||||||||||
| B | 1,000.00 | 1,112.00 | 6.60 | 1,018.95 | 6.31 | 1.24 | ||||||||||||||||||
| C | 1,000.00 | 1,107.10 | 10.46 | 1,015.27 | 10.01 | 1.97 | ||||||||||||||||||
| R | 1,000.00 | 1,109.70 | 7.92 | 1, 017.69 | 7.58 | 1.49 | ||||||||||||||||||
| Y | 1,000.00 | 1,113.10 | 5.27 | 1,020.21 | 5.04 | 0.99 | ||||||||||||||||||
| R5 | 1,000.00 | 1,113.40 | 4.26 | 1,021.17 | 4.08 | 0.80 | ||||||||||||||||||
| 1 | The actual ending account value is based on the actual total return of the Fund for the period May 1, 2013 through October 31, 2013, 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. |
16 Invesco 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 Invesco Value Opportunities Fund’s (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 17-19, 2013, the Board as a whole, and the disinterested or “independent” Trustees, who comprise over 75% 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, 2013. The Board determined that continuation of 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 payable to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is primarily responsible for overseeing the management of a number of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned Invesco Funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies, limitations and investment risks of these funds. The Sub-Committees meet regularly and at designated contract renewal meetings each year to conduct a review of the performance, fees, expenses and other matters related to their assigned Invesco Funds. Each Sub-Committee recommends to the Investments Committee, which in turn recommends to the full Board, whether and on what terms to approve the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Trustees receive comparative performance and
fee data regarding the Invesco Funds prepared by Invesco Advisers and Lipper Inc. (Lipper), an
independent provider of investment company data. The Trustees also receive an independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. The independent Trustees are assisted in their annual evaluation of the Fund’s investment advisory agreement by the Senior Officer and by independent legal counsel. In addition to meetings with Invesco Advisers and fund counsel, the independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in separate sessions with the Senior Officer and with independent legal counsel.
In evaluating the fairness and reasonableness of compensation under the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Trustees recognized that the advisory fee rates for the Invesco Funds are, in many cases, the result of years of review and negotiation between the Trustees and Invesco Advisers as well as advisory fees previously approved by different predecessor boards. 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. The Trustees’ review and conclusions are based on the comprehensive consideration of all information presented to them and are not the result of any single determinative factor. Moreover, one Trustee may have weighed a particular piece of information or factor differently than another Trustee.
The discussion below serves as the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 19, 2013, and may not reflect consideration of factors that became known to the Board after that date, including, for example, changes to the Fund’s performance, advisory fees, expense limitations and/or fee waivers.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
| A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the
performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers, with whom the Sub-Committees met during the year. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s consideration of Invesco Advisers’ 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 benefits of reapproving an existing relationship and the greater uncertainty that may be associated with entering into a new relationship. The Board also considered non-advisory services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution and legal and compliance. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services that may be 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 may invest, make recommendations regarding securities and assist with security trades. 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 that may be provided by the Affiliated Sub-Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s sub-advisory contracts.
| B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
The Board compared the Fund’s performance during the past one, three and five calendar years to the performance of funds in the Lipper performance universe and against the Lipper
17 Invesco Value Opportunities Fund
Multi-Cap Value Funds Index. The Board noted that performance of Class A shares of the Fund was in the second quintile of the performance universe for the one year period and the fourth quintile for the three and five year periods (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board noted that performance of Class A shares of the Fund was above the performance of the Index for the one year period and below the performance of the Index for the three and five year periods. The Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
| C. | Advisory and Sub-Advisory Fees |
The Board compared the Fund’s contractual management fee rate to the contractual management fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the contractual management fee rate for Class A shares of the Fund was below the median contractual management fee rate of funds in the expense group. The Board noted that the term “contractual management fee” may include both advisory and certain administrative services fees and that Invesco Advisers does not charge the Invesco Funds for the administrative services included in the term as defined by Lipper. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using each fund’s contractual management fee schedule (including any applicable breakpoints) as reported in the most recent prospectus or statement of additional information for each fund in the expense group.
The Board also compared the Fund’s effective advisory fee rate (the advisory fee rate after advisory fee waivers and before other expense limitations/waivers) to the effective 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 advisory fee rate was below the effective advisory fee rate of one mutual fund with investment strategies comparable to those of the Fund.
Other than the mutual fund described above, the Board noted that Invesco Advisers and its affiliates do not advise other funds or client accounts with investment strategies comparable to those of the Fund.
The Board also considered the services that may be provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the fees payable by Invesco Advisers to the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board also noted that the sub-advisory fees are not paid directly by the Fund, but rather, are payable by Invesco Advisers to the Affiliated Sub-Advisers.
Based upon the information and considerations described above, the Board concluded that the compensation payable to Invesco Advisers and the Affiliated Sub-Advisers is fair and reasonable.
| D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule and was assisted in this review by a report from the Senior Officer. The Board also noted that the Fund shares directly in economies of scale through lower fees charged by third party service providers based on the combined size of the Invesco Funds and other clients advised by Invesco Advisers.
| E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the profitability of Invesco Advisers and its affiliates in providing these services for the year ended December 31, 2012. The Board received information from Invesco Advisers about the methodology used to prepare the profitability information. The Board considered the profitability of Invesco Advisers in managing the Fund and the Invesco Funds. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its subsidiaries provide to the Invesco Funds and the Fund. The Board did not deem the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund to be excessive given the nature, quality and extent of the services provided to the Invesco Funds. The Board received and accepted information from Invesco Advisers demonstrating that Invesco Advisers and each Affiliated Sub-Adviser are financially sound and have the resources necessary to perform their obligations under the investment advisory agreement and sub-advisory contracts.
| F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund, including the fees received for their provision of transfer agency and distribution services to the Fund. The Board considered comparative information regarding fees charged for these services, including information provided by Lipper and other independent sources. The Board considered the performance of Invesco Advisers and its affiliates in providing these services and the organizational structure employed to provide these services. The Board also considered that these services are provided to the Fund pursuant to written contracts that are reviewed and approved on an annual basis by the Board; that the services are required for the operation of the Fund; that Invesco Advisers and its affiliates can provide services, the nature and quality of which are at least equal to those provided by others offering the same or similar services; and that the fees for such services are fair and reasonable in light of the
usual and customary charges by others for services of the same nature and quality.
The Board considered the benefits realized by Invesco Advisers and the Affiliated Sub-Advisers as a result of portfolio brokerage transactions executed through “soft dollar” arrangements. The Board noted that soft dollar arrangements shift the payment obligation for research services from Invesco Advisers and the Affiliated Sub-Advisers to the Invesco Funds and that the research received may be used with other clients of Invesco Advisers and may reduce Invesco Advisers’ and the Affiliated Sub-Advisers’ expenses. The Board also considered periodic reports from the Chief Compliance Officer of the Invesco Funds demonstrating that these arrangements are consistent with regulatory requirements. The Board did not deem the soft dollar arrangements to be inappropriate.
The Board considered that the Fund’s uninvested cash and cash collateral from any securities lending arrangements may be invested in money market funds advised by Invesco Advisers pursuant to procedures approved by the Board. The Board noted that Invesco Advisers receives advisory fees from these affiliated money market funds attributable to such investments, although Invesco Advisers has contractually agreed to waive through varying periods the advisory fees payable by the Invesco Funds. The waiver is in an amount equal to 100% of the net advisory fee Invesco Advisers receives from the affiliated money market funds with respect to the Fund’s investment in the affiliated money market funds of uninvested cash, but not cash collateral. The Board concluded that the Fund’s investment of uninvested cash and cash collateral from any securities lending arrangements in the affiliated money market funds is in the best interests of the Fund and its shareholders.
The Board also considered use of an affiliated broker to execute certain trades for the Fund to among other things, control information leakage, and were advised that such trades are executed in compliance with rules under the Investment Company Act of 1940, as amended.
18 Invesco Value Opportunities Fund
Invesco mailing information
Send general correspondence to Invesco Investment Services, Inc., P.O. Box 219078, Kansas City, MO 64121-9078.
Invesco privacy policy
You share personal and financial information with us that is necessary for your transactions and your account records. We take very seriously the obligation to keep that information confidential and private.
Invesco collects nonpublic personal information about you from account applications or other forms you complete and from your transactions with us or our affiliates. We do not disclose information about you or our former customers to service providers or other third parties except to the extent necessary to service your account and in other limited circumstances as permitted by law. For example, we use this information to facilitate the delivery of transaction confirmations, financial reports, prospectuses and tax forms.
Even within Invesco, only people involved in the servicing of your accounts and compliance monitoring have access to your information. To ensure the highest level of confidentiality and security, Invesco maintains physical, electronic and procedural safeguards that meet or exceed federal standards. Special measures, such as data encryption and authentication, apply to your communications with us on our website. More detail is available to you at invesco.com/privacy.
Important notice regarding delivery of security holder documents
To reduce Fund expenses, only one copy of most shareholder documents may be mailed to shareholders with multiple accounts at the same address (Householding). Mailing of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact Invesco Investment Services, Inc. at 800 959 4246 or contact your financial institution. We will begin sending you individual copies for each account within 30 days after receiving your request.
Fund holdings and proxy voting information
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is available at invesco.com/completeqtrholdings. Shareholders can also look up the Fund’s Forms N-Q on the SEC website at sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are shown below.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov.
Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd. |  |
SEC file numbers: 811-03826 and 002-85905 | VK-VOPP-SAR-1 | Invesco Distributors, Inc. |
| ITEM 2. | CODE OF ETHICS. |
There were no amendments to the Code of Ethics (the “Code”) that applies to the Registrant’s Principal Executive Officer (“PEO”) and Principal Financial Officer (“PFO”) during the period covered by the report. The Registrant did not grant any waivers, including implicit waivers, from any provisions of the Code to the PEO or PFO during the period covered by this report.
| ITEM 3. | AUDIT COMMITTEE FINANCIAL EXPERT. |
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 November 19, 2013 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 November 19, 2013, 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, 2014 | |
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, 2014 | |
| By: | /s/ Sheri Morris | |
| Sheri Morris | ||
| Principal Financial Officer | ||
| Date: | January 9, 2014 | |
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. | |